Sitting of 26 June 1978

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
DEATH OF A MEMBER
Mr. Speaker: I regret to have to inform the House of the death of Joseph Harper, esquire, Member for Pontefract and Castle ford, and I desire, on behalf of the House, to express our sense of the loss we have sustained and our sympathy with the relatives of the honourable Member.
ORAL ANSWERS TO QUESTIONS
  ENERGY

    Oil Exploration Companies
    Mr. Michael Spicerasked the Secretary of State for Energy when next he plans to meet representatives of oil exploration companies.
    The Secretary of State for Energy (Mr. Anthony Wedgwood Bean): The Minister of State and I regularly see representatives of oil exploration companies. Only last week my right hon. Friend saw members of the Association of British Exploration Companies—BRINDEX—which represents the interests of the smaller United Kingdom companies.
    Mr. Spicer: As a result of those meetings, is the Secretary of State better aware that the Government are now putting seriously at risk the future exploration and development of the oil in the North Sea as a result of the unattractive conditions which they are imposing on bidders in the sixth round auctions?
    Mr. Benn: No, I do not accept that at all. I have heard the Opposition say this at every stage over the last three years. Every breath of criticism has been amplified by the Conservative Party as a
    1012
    warning of imminent disaster. It has always been proved false in the past, and it will be proved false in the future.
    Mr. Ioan Evans: When my right hon. Friend meets the exploration companies, presumably he will be meeting the BNOC, which has a first-class record of exploration. Will he encourage it to increase its activities in the years ahead? Will he also ensure when he meets the EEC Ministers that BNOC's activities are not inhibited by developments in energy policy in the EEC?
    Mr. Benn: I am grateful to my hon. Friend. BNOC brought the Thistle field on stream and had a welcome discovery recently. It is a safeguard for our national interest in the development of the North Sea. On the second question, I have made it absolutely clear both to other Ministers in the Community and to the Commission that the British Government regard the continued development of our oil policy as a vital national interest.
    Mr. Viggers: When the right hon. Gentleman meets the oil exploration companies, will lie discuss with them the latest projection by independent oil analysts that the contribution to current account from oil this year will be not £2·7 billion but only £1·5 billion? Will he give his estimate of the reasons for this very disappointing result and estimate the contribution to the shortfall which has been the result of BNOC being five months late in bringing Thistle on stream?
    Mr. Benn: The hon. Gentleman is quite wrong. In bringing the oilfields on stream—that is to say, getting the platforms properly situated and bringing them on stream—there have been technical difficulties and some slippage, but that has nothing whatever to do with BNOC. It has affected many fields apart from the one field, Thistle, which BNOC has brought on stream. I think that the hon. Gentleman is confusing the delays caused by the extremely difficult physical, geographical and climatic conditions with consequences which have flowed from our oil policy.
    Mr. Madden: In view of the severe industrial and economic difficulties which Britain has suffered as a result of membership of the Common Market, can my

    1013
    right hon. Friend give a clear assurance that Britain will retain the benefits from North Sea oil and will not see them go to the Common Market?
    Mr. Benn: I repeat what I said a moment ago. I have read Press reports and know that there are schools of thought in the Community which would like to attack our oil policy. I have made it absolutely clear to the Commission and to member States that this policy, which was developed with an eye to our international obligations, must be maintained and upheld. There should be no doubt in anyone's mind about that.
    Mr. Tom King: May I say how much we on this side of the House welcome the announcement of the discovery of BNOC and welcome any new discovery in the North Sea and the benefit it will bring for the nation? We look for further discoveries in view of the quality of the acreage which has been given to BNOC as an operator. In connection with the sixth round discussions, will the right hon. Gentleman confirm the importance that he attaches to maintaining the confidence and trust relationship between the Department of Energy and the oil companies? In that connection, what comments has he made on the concern expressed to him that allocations of further operatorships to BNOC will not be given until companies have said which they regard as the most promising acreages?
    Mr. Benn: I am grateful for that. Indeed, I think I should place on record that I think it is the first time I remember the hon. Member saying anything about BNOC in a favourable light. I hope that the whole House has noticed this turn in events, coupled with the hon. Gentleman's slightly resentful suggestion that the block in which BNOC found the oil had been specially prepared for it, which is quite untrue.
    We are, as the hon. Gentleman knows very well, in the middle of a bargaining round of negotiations about the sixth round in which I published my proposals and am in receipt of comment. I shall be announcing the decision. As on all the other occasions when we have been engaged in trying to improve our national position, the Opposition of the day have always chosen, for reasons best known to themselves, to espouse every little anxiety
    1014
    and to seek to amplify it in a way which causes one to gain the impression that they do not wish British control over the oil to be extended.

    Energy Commission
    Mr. Macfarlaneasked the Secretary of State for Energy if he is satisfied with the composition and the achievements of the Energy Commission.
    Mr. Benn: The Energy Commission, whose composition was decided after extensive consultations both inside and outside Government, was set up to advise and assist me on the development of an energy strategy for the United Kingdom. I am encouraged by the progress which the Commission has made to date and have at present no plans to alter the membership.
    Mr. Macfarlane: Is it not regrettable that the Secretary of State has chosen to reject the advice of the Select Committee on Science and Technology on this subject? Is it not equally regrettable that neither the United Kingdom Offshore Operators Association nor the Watt Committee on Engineering has been given a place on this very important body? Could it not be that people are right in suggesting that the Secretary of State might on this occasion be guilty of exercising power without responsibility?
    Mr. Benn: I think that the hon. Gentleman is wrong. Two hundred organisations, many of which would like to have been directly represented—I am not saying that the Offshore Operators Association and the Watt Committee on Engineering do not have claims—which had claims of equal interest now receive the documentation of the Energy Commission. The transcripts of the discussions are published. My aim is to combine an effective body with the widest coverage of the discussions that take place. I am very happy that the representations of these committees should be before the Energy Commission, but if it were on the scale and of the size implied by the question there would be a national energy conference every three or four months, and I do not think that that would be effective.
    Mr. Hooley: Is my right hon. Friend satisfied that the Energy Commission is so constituted that it pays sufficient

    1015
    attention to alternative sources of energy such as solar energy, wind and tidal power, as well as being concerned—quite properly—with the major sources such as oil, coal and gas?
    Mr. Benn: That issue was discussed at the first meeting of the Commission and the point was made that my hon. Friend has made. I specially circulated to the Energy Commission the paper that he wrote on the subject because I wanted it to be aware of that line of argument. At the last meeting of the Energy Commission, the transcript of which will shortly be published, there was a long discussion about research and development, including alternative sources. I therefore hope that the Energy Commission, which necessarily reflects our existing energy pattern, will never be allowed to forget the need to develop alternative resources.
    Mr. Gray: Does the Secretary of State accept that there is a danger of a certain amount of frustration occurring within the Energy Commission if it sees itself purely as a talking shop? How does he propose to react to the suggestions put to him by the Commission?
    Mr. Benn: I understand that. The alternative to what is called a "talking shop" or parliament is, of course, a central body that would run all the energy industries in the country—a national fuel authority with a chairman, and power to determine policy. If that were done—it would be the only way to do it—we should eliminate or weaken the statutory responsibility to the House of Commons either of the Minister or of the chairman, so I have to strike a balance.

    Electricity and Gas Grids (Northern Ireland)
    Mr. Powellasked the Secretary of State for Energy if he will make a statement on progress of the detailed studies of the extension of the electricity and gas grids to Northern Ireland.
    The Under-Secretary of State for Energy (Mr. Alex Eadie): For geographical reasons, any direct electricity link between Great Britain and Northern Ireland would have to be developed by the Northern Ireland Electricity Service and the South of Scotland Electricity Board,
    1016
    which are the responsibility respectively of my right hon. Friends the Secretary of State for Northern Ireland and the Secretary of State for Scotland. The proposed natural gas pipeline between Scotland and Northern Ireland is, I understand, one of several options for the future of the Northern Ireland gas industry, contained in the report of a recent study of that industry by the British Gas Corporation. I understand that my right hon. Friend the Secretary of State for Northern Ireland will shortly he considering this matter when consultations with various interested groups have been concluded.
    Mr. Powell: Despite the dispersion of responsibility in this matter amongst different branches of the Government, are the Government aware of the keen interest that is felt in these projects in Northern Ireland, not least on the part of the trade unions, and of the benefit which both projects would confer in the long run upon consumers and production in Great Britain?
    Mr. Eadie: Yes, I am aware of that, but, as I stated in my reply, that responsibility rests with my right hon. Friends the Secretaries of State for Scotland and for Northern Ireland. I am, of course, aware of the interest.
    Mr. Gwilym Roberts: On the similar subject of the exportation of electricity by transwater links of this type, can my hon. Friend tell the House whether there is any further progress in connecting the British grid with the French grid—
    Mr. Speaker: Order. That is a completely separate question. This is a Question concerning Northern Ireland.
    Mr. Biggs-Davison: In view of the vast public expenditure in helping Northern Ireland in its difficulties, and as part of the difficulty is the high charges for gas and electricity, will the Secretary of State consider sitting down with the other Ministers who have been mentioned and consider very carefully the suggestion implicit in the supplementary question asked by the right hon. Member for Down, South (Mr. Powell)?
    Mr. Eadie: If the hon. Gentleman is referring to the British Gas Corporation, that body has no responsibility in this matter. If he is talking about Cabinet discussions, lie will realise that they take

    1017
    place all the time. I said to the right hon. Member for Down, South (Mr. Powell) that we are aware of the position and of the anxieties and of the views being expressed by the bodies referred to by the right hon. Gentleman in his supplementary question.
    Rev. Ian Paisley: Will the hon. Gentleman state whether his Department has had any negotiations with the similar Departments in Northern Ireland? If a natural gas link is not to be available in Northern Ireland, will he consider making coal available to Northern Ireland at the same price as it is available in the rest of the United Kingdom?
    Mr. Eadie: These are matters for my right hon. Friends the Secretaries of State for Scotland and for Northern Ireland. No such proposal as the hon. Gentleman mentioned has come before the Department of Energy.
    Mr. Hardy: Bearing in mind the reference already made to the desirability of these projects and to their very expensive nature, will my hon. Friend note and draw the attention of the Secretaries of State concerned to the fact that only a few weeks ago the two Members and their hon. Friends voted against increasing public expenditure?
    Mr. Eadie: I am sure that my right hon. Friends will be aware of this, but in specific answer to the question I must state that there is anxiety about this matter and I must take cognisance of that anxiety. Both my right hon. Friends are discussing the matter.

    Central Electricity Generating Board
    Mr. Michael Marshallasked the Secretary of State for Energy when he intends next to meet the chairman of the Central Electricity Generating Board.
    Mr. Patrick McNair-Wilsonasked the Secretary of State for Energy when he intends next to meet the chairman of the British Gas Corporation.
    Mr. Mike Thomasasked the Secretary of State for Energy when he plans next to meet the chairman of the Central Electricity Generating Board.
    Mr. Gordon Wilsonasked the Secretary of State for Energy when he
    1018
    will next meet the chairman of the British Gas Corporation.
    Mr. Benn: I meet the chairmen of all the fuel industries regularly as and when necessary.
    Mr. Marshall: When the right hon, Gentleman next meets the chairman, will he take the opportunity of discussing with him the situation following the Government's apparent interest in referring electricity prices to the Price Commission? Will he discuss with the chairman the possibility of getting lower electricity prices and resisting the temptation to argue for higher gas prices?
    Mr. Benn: A statement has been made about electricity prices and gas prices for the current year. There is to be a freeze on gas prices until the end of the financial year of April 1979. The increase in electricity prices has already been announced. Reference of these industries to the Price Commission is a matter for my right hon. Friend the Secretary of State for Prices and Consumer Protection. I have no desire to see energy prices rise more than is necessary to allow the industries to meet their financial requirements.
    Mr. McNair-Wilson: When the Secretary of State meets the chairman of the British Gas Corporation, will he ask him to explain his pricing policy, since prices to domestic gas consumers are being held down whereas industrial consumers are having to pay sharply increased prices? Is it not therefore true that we are acting contrary to the way in which other industrialised nations are operating, and domestic consumer prices are being held down for political reasons?
    Mr. Benn: If I may say so, the hon. Gentleman is completely wrong about this. In the first place, some of the early contracts which were signed by British Gas were highly favourable to industrial consumers in order to provide a long-term based domestic market to launch North Sea gas, and in any case some of these contracts were set at prices to take account of interruptible supply. The British Gas Corporation, which makes an annual report and will shortly do so, explains its policy to the public and to Parliament, and I do not believe that the hon. Gentleman's charges would stand up to one moment's examination.
    Mr. MacFarquhar: When my right hon. Friend next meets the chairman of the CEGB, will he take up with him the question of the refurbishing of power stations? Is he aware that, now that the Government have taken justified steps to protect the industries supplying the new power stations, there is some concern among workers in the industry that power stations may be phased out far in advance of their full life?
    Mr. Benn: I am concerned with the overall energy policy aspects of the CEGB and the other fuel industries. I must not—and I do not wish to—seek to influence their management decisions. Where I am concerned directly is with the fuel burn, and I am now studying possible strategies, one of which would involve the burning of our indigenous coal as a first priority, with imported energy coming as a residual. That is a matter for me, but on the individual details of the refurbishing of particular power stations I have, in effect, to be guided by some of the management knowledge of the industry itself.
    Mr. Budgen: Will the Secretary of State confirm that the main object of his interference in the price of gas is to give continuity of employment to the mining industry and the mining community generally because he believes that to be to the political advantage of the Labour Party?
    Mr. Benn: Hon. Members should sort out the line which they will adopt. A moment ago I was told that I was keeping gas prices down deliberately for electoral purposes. Now I am told that I am inflating them to protect the miners. If only there were some clear line of thinking on energy policy coming from the Opposition, the whole nation would be profoundly grateful.
    Mr. Arthur Lewis: If, when my right hon. Friend meets these various chairmen, they happen to raise with him the burning topic—as suggested in the Press—of their own salaries, will he point out to them that the ordinary member of the public who will have to meet any increase which may be made either through increased prices or through increased taxation feels that a 70 per cent. increase on their already not inconsiderable salaries would be a bit too much
    1020
    to bear for both the public and most of my right hon. and hon. Friends?
    Mr. Benn: I take what my hon. Friend says, but he will know that the salaries of nationalised industry board members, together with other categories of public servants, are handled not by the sponsoring Minister for each industry but under general arrangements arising under other recommendations.

    European Community (Ministers)
    Mr. Arnoldasked the Secretary of State for Energy when he next expects to meet other EEC Energy Ministers; and if he will make a statement.
    Mr. Benn: I expect to meet other EEC Energy Ministers at the next meeting of the Energy Council, the date for which has not been fixed.
    Mr. Arnold: What is the present British negotiating position with regard to the proposals for aid to encourage greater use of Community coal and to help deal with the problem of excess refining capacity? When he next meets his EEC colleagues, will the right hon. Gentleman adopt a more helpful attitude towards these issues than he did at the last meeting of the Energy Council?
    Mr. Benn: The question is—helpful to whom? In the case of coal, the United Kingdom produces overwhelmingly the cheapest coal in Europe, and it is put of the objectives of EEC energy policy that there should be a greater dependence upon indigenous fuels in order to reduce dependence on imports. I have urged, and so has my hon. Friend the Member for Midlothian (Mr. Eadie), at Energy Council meetings the absurdity of putting at risk domestic Community coal production—if I may so put it—and continuing the importation of coal, the price and availability of which cannot be secure.
    The United Kingdom has fewer refineries than has, say, France or Italy, which are not oil producers, and I take the view that, as a country moving soon to be the tenth largest oil producer in the world, we are entitled to expect that we should be able to refine our own oil and make use of it. I have made this absolutely clear. The proposals on refineries made by the Commission were quite unnecessary and unhelpful, and I do not believe that in pointing that out and stressing the need

    1021
    for a sensible coal policy I have done anything other than bring a note of realism into Community energy policy.
    Mr. Ward: As it is now two years since the European Commission recommended great energy saving by the use of diesel power, will my right hon. Friend be able to tell of any progress at this meeting on the question of the development of a British diesel engine car or on the question of a fuel tax which means that diesel will be available at least at the same price as petrol?
    Mr. Benn: As regards energy conservation, we are among the leading countries—if we are not the leading country—in the world in the effort which we have made, but I ask the House to consider this. If somebody has an idea on energy policy, it does not follow that it must be done by the Commission. Member States can do it. Some decisions are best pursued by local authorities. I have been trying to emphasise to my colleagues in Europe and to the Commission that it is one thing to say that we should approach the problem by developing new policies and it is another to say that we should agree to hand over growing areas of our policy for control by the Commission. They are quite separate issues. On conservation we are the leading country in Europe.
    Mr. Biffen: When the Secretary of State next goes to Brussels, will he make some comment upon the Commission's proposal to restrict credit assistance for the offshore oil supplying industry, and will he make quite clear that such proposals will be much resented across a wide spectrum of British political opinion?
    Mr. Benn: I have done so already. Commissioner Vouel came to see me a year ago, and I saw him again in September, and discussions have taken place with Commission officials. There is no doubt whatever that the interest relief grants, which have given employment in Scotland, have come under attack by the Commission, and this is one of a number of areas where the Commission has been seeking to move into the planning of our energy policy. The British Government's view, as expressed by me, is to try to discuss problems but to take a robust
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    line, and I am grateful for the hon. Gentleman's support.

    Coal Demand (Power Stations)
    Mr. Jim Lesterasked the Secretary of State for Energy what recent estimate his Department has made of likely future demand for British coal in (a) United Kingdom power stations and (b) other EEC power stations.
    Mr. Benn: The energy policy Green Paper forecast that coal will retain its major role in electricity generation at least until the end of the century. This is the policy of the Government. Imports of power station coal into the Community are at present about 26 million tonnes a year, of which some 22 million tonnes comes from third countries. This represents the market in which the National Coal Board may compete for a share.
    Mr. Lester: Is not that second figure critical, since it is important for the future well-being of the British coal industry that we establish a share of this market overseas and avoid the peaks and troughs which we have had in the past? Will the Secretary of State take into account that, while we are negotiating a good position for our own coal industry, this entails some give and take on other issues where he is taking a different line? Essentially, we must get this market for our coal, but it entails negotiation, as has happened in other areas—particularly on oil as well.
    Mr. Benn: I think that the hon. Gentleman is absolutely right in saying that as overwhelmingly the largest and cheapest coal producer in the Community, within existing Community energy policy guidelines, which I support, we ought to see an expanded market for British coal within the Community. However, to link with that, as we move towards self-sufficiency, the proposal that we should agree to the control of our refinery policy is quite another matter. That is what it is about, and the House should be under no illusion.
    An attempt was made by the Commission to take control of our refinery policy, by guidelines for throughput and so on, which would have been very damaging to us in another area. I believe that the respect which I owe as now the senior member of the Energy Council of the Community is to advocate sensible policies

    1023
    and to oppose policies which are not sensible. That seems to be the only basis on which we can go forward.
    Mr. Gwilym Roberts: Does my right hon. Friend accept that Britain could make an enormous contribution to EEC energy resources if the British electricity grid could be connected to the European grid? We should therefore be virtually exporting our coal by wire. What progress has been made on negotiations in this area?
    Mr. Benn: I agree with what my hon. Friend has said. We have had discussions about the matter for some time. A statement will be made, but I cannot make it today. There has been a link under the Channel.
    This reminds me of one point. I might make in general, that the amount of cooperation in Europe that now goes on outside the EEC, through bilateral arrangements of that kind, URENCO, or the other co-operative arrangements on energy, far exceeds the degree of work done within the Community itself. This example is a very good one, and I am grateful for my hon. Friend's support.
    Mr. Forman: As coal still has little more than half the total bulk combustion market within the United Kingdom, is it not time the Government did more to use their influence to see whether coal could progressively take a larger share of the rest of the bulk combustion market now occupied by gas and oil respectively?
    Mr. Benn: I agree entirely with the hon. Gentleman. He has been very logical and helpful in his presentation of his energy arguments. I think that he is absolutely right.
    As the House knows, I am disinclined to see—indeed, I am opposed to—the building of more oil-fired stations in this country. In answer to another supplementary question a moment ago, I made the point that it was sensible to look at alternative strategies based upon the burning of indigenous coal that is dug as the base load, with nuclear power. I am having the economics of that examined.
    The recently announced research and development programme, in which we talk about gas and coal, oil from coal and coal for petrochemicals, provides a
    1024
    secure base for our mining industry, which will be the foundation of this country's energy strength long after the gas and oil have run out. Nobody should be in any doubt. It is not merely a matter of electoral votes from the miners, as is suggested; it is the basis of our energy strength for the future. That is what the defence of the coal industry is about.
    Mr. Kelley: Is my right hon. Friend aware that the contribution of coal towards meeting the energy requirements for electricity generation was largely laid down by the European Coal and Steel Community some years ago? To what extent has he intervened in the decisions made since to improve the contribution of British coal to the electricity generation industry?
    Mr. Benn: I have not been very successful—and neither have others, including the Commission, who have advocated this—on the expansion of the coalburn within the Community. I am very disappointed that I have not. But as regards our domestic policy, where the matter is within our own control, there seems to me a very powerful case—particularly if one has a large investment programme in the coal industry, as we have, at £4 billion—for being sure that one's policy caters for the utilisation of that coal as far as possible at the expense of imports, particularly imports of oil.
    Mr. Tom King: Is the Secretary of State aware that we find it impossible to dissociate in our minds the continuing reports of failure to agree on any proposals in the Energy Ministers' meetings from the total lack of good will felt towards him in Europe in these discussions? Do not the significant failure to agree on coal going into Community power stations and the rather serious reports of the CEGB corporate study and its disagreement on future coalburn pose serious concerns for the mining industry?
    Mr. Benn: The hon. Gentleman espouses not only every complaint by an international oil company against British oil policy but every complaint by the Commission or other member States against British policy on oil and energy. There is a strong connection between the two, because if the Commission were to take control of our oil policy the main beneficiary would be the oil companies,

    1025
    as they would no longer be subject to the policy that we have pursued.
    I think that the hon. Gentleman misunderstands the atmosphere and the mood in Brussels. Britain is the major energy producer of the Community, and is seen to be such. We have played a most active part in the Euratom loans, the coking coal arrangements and the JET programme in trying to develop an energy policy that meets the needs of the Community, but we have not on that basis thought it right to transfer responsibility for energy policy from the British Government, answerable to Parliament, to the Commission. That is the only issue between us.

    Coal Imports
    Mr. Joan Evansasked the Secretary of State for Energy what representations he has received regarding coal imports in view of the large stocks of coal in the United Kingdom.
    Mr. Eadie: We have received representations from the National Coal Board, hon. Members and other sources.
    Mr. Evans: I recognise that my hon. Friend is aware of the views of the National Union of Mineworkers. Will he have discussions with my right hon. Friend the Secretary of State, who was in the South Wales coalfield last week? My right hon. Friend heard miners who, although satisfied with many of the Government's attitudes, are still deeply disturbed that while large stocks of coal have been built up in this country we still have contracts under which we are importing coal. Cannot something be done to tackle that problem?
    Mr. Eadie: We are very much aware of the anxieties, not only in South Wales but all over the country, about the importation of coal. We have had a meeting with the bodies concerned. The emphasis was on coking coal. British Steel Corporation representatives were at the meeting, as were my right hon. Friends the Secretaries of State for Industry and for Energy. The decision was that after consultation they would report back. I assure my hon. Friend that we are very much aware of the point he has put.
    Mr. Budgen: In view of the Secretary of State's expressed preference for coal
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    over other forms of energy, should he not take account of the serious possibility that the artificially high price of oil might fall as a consequence of the break-up of the OPEC cartel and that in future we might find cheap oil available? Should not he take account of that in his plans for future energy requirements?
    Mr. Eadie: I do not think that the House would be surprised if I said that I endorsed the remarks of my right hon. Friend about coal. The hon. Gentleman is falling into a very bad habit. We learned before the Israeli-Arab war what happens when the whole Western world is dependent for its energy supplies on outside countries which are to some extent politically unstable. What the hon. Gentleman is suggesting is that we make the errors we said in 1973–74 we would never make. It is no use pulling the blankets over one's head on this issue. Energy is necessary if a country wishes to become an industrial country, and it should preferably be indigenous energy.

    North Sea Oil (Licensing)
    Mr. Dykesasked the Secretary of State for Energy how many oil companies have submitted written comments to his Department in connection with the recent consultative document on the sixth round of North Sea licence applications.
    Mr. Grayasked the Secretary of State for Energy what representations he has so far received in connection with the consultative document on the sixth round of licensing.
    Mr. Benn: I have not received any comments from individual companies on the consultative document about the next round of offshore licensing but a number of organisations have sent me their views. These are being considered and a further announcement will be made later.
    Mr. Dykes: I thank the Secretary of State for his answer. When does he think we shall come to the next stage, when applications are invited? Can he be more explicit on the criteria for financial backing for independent oil companies when they make their applications, going beyond the terms of the consultative document?
    Mr. Benn: I appreciate the hon. Gentleman's interest. If there are genuine confusions in our document—and I do not

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    believe that there are—I shall ensure that they are clarified as soon as possible, but I think that it would be wrong to make a mid-term comment on a consultative document. The House will need to wait until I have assessed the arguments, which I am doing very seriously. I shall be announcing our conclusions upon them, and the dates will flow from them.
    Mr. Gray: Does the Secretary of State accept that one of the worries of many oil companies at the moment relates not directly to the sixth round but to the fact that licences are being granted between rounds to the British National Oil Corporation? Does he also accept that if there is too much intermediate licensing there will be a danger of inhibiting investment in the North Sea? Does he agree that although we have a lot of investment of our own it is essential that we have continuing investment from overseas investors too?
    Mr. Benn: I have never doubted the latter point. Nor has there been any check, by a single day, on the flow of inward investment from the private oil companies, despite the policy we have introduced. The public sector has got only about 24 per cent. of the North Sea under the arrangements I have made. We started from a level which began with the previous Conservative Government's licensing round, which gave nothing to the public sector. To have less than a quarter of the North Sea in the public sector and then to find that every move is denounced as threatening the North Sea can only be read by me and others as indicating that the Conservative Party would rather that there was not a public sector involvement at all. If that is the basis upon which the Conservatives wish to put these issues to the public in due course, that is for them. In the light of the experience of countries in the Middle East and Latin America which were exploited by the oil companies without any regard for the interests of the people living there, I believe that there is a wide welcome for the Government's policy. I wish that the Conservative Party would support it.

    Anthracite
    Mr. Edwin Wainwrightasked the Secretary of State for Energy, in the light of the continuing shortage of anthra-
    1028
    cite coal in the United Kingdom, resulting in that kind of fuel being imported, how many tons have been imported in each of the past three years; and what actions he is taking to help the National Coal Board to produce more anthracite from the British coal mines.
    Mr. Eadie: Imports of anthracite for the past three years were:

    tonnes

    1975

    136,000

    1976

    142,000

    1977

    270,000

    The National Coal Board is doing its best to increase production by all practicable means, including opencast, which provides about half the needs. A new anthracite mine at Betws in South Wales commenced production last month. It is designed to produce half a million tonnes per year at a high level of productivity and should obviate the need for anthracite imports.
    Mr. Wainwright: Is my hon. Friend aware that the quality of imported anthracite is far inferior to that of home-produced anthracite? Will he do more to encourage the National Coal Board to stop importing anthracite by ensuring that the Board has the necessary finance to develop new mines where the anthracite is available?
    Mr. Eadie: We are aware of the complaints about the importation of anthracite, which have been made by many hon. Members. Anthracite is found only in South Wales. I have mentioned the new Betws mine in South Wales, which is the first new mine to be completed there for 10 years. When that is in full production, taking account of opencast and other deep-mine output, it will obviate the need for anthracite imports.

    Coal Exports
    Mr. Gwilym Robertsasked the Secretary of State for Energy if he will make a further statement on coal exports.
    Mr. Tim Smithasked the Secretary of State for Energy what is the current level of exports of coal to the EEC countries.
    Mr. Eadie: Exports of coal during the first four months of 1978 were 656,000 tonnes, almost the whole of which went to EEC countries.
    Mr. Roberts: In view of the magnificent production effort by the miners, which means that we have an increased supply of coal for many years to come, and the disappointing attitude of some of our EEC partners towards our exports, does my hon. Friend agree that there is a need for an urgent programme aimed at refurbishing some of the older coal-generated power stations? Is there not a need to look at the possibility of developing new coal-fired stations in addition to the Drax B proposal?
    Mr. Eadie: My hon. Friend is correct to say that coal is a valuable indigenous asset in that we have been able to identify coal stocks sufficient for the next 300 years. I confirm that our coal is the cheapest within the EEC. We are aware of my hon. Friend's point of view—which has been put by others too—about the refurbishing of coal-fired power stations. However, we have had no such proposals put before us. I understand that the argument is continuing. I can appreciate why my hon. Friend raises this point. It is not just a question of doing the miners a favour. I understand that the plant manufacturing industry wants the work and, hence, the wages.
    Mr. Smith: What is the point of encouraging the miners to produce more coal by way of incentive schemes if the markets for that coal are not available? Would we not be a good deal better off if we were represented at Brussels by an Energy Minister who, although he may not be the senior member of the Council, might be more sensible and less hostile towards the Common Market than the right hon. Gentleman?
    Mr. Eadie: The hon. Gentleman is right on the ball with his first point. There is no use investing in our own coal industry and having such a strong supply of indigenous energy for so many years, with such a skilled labour force, if we do not burn the coal. If the hon. Gentleman had listened to what my right hon. Friend has said, I believe that he would have had cause to amend some of his derogatory views. I do not believe that stationing a Minister in Brussels would solve the problem. My right hon. Friend has articulated the national interest of this country. He has put forward the British viewpoint and explained the contribution that we can make to the EEC. I believe that on
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    reflection the hon. Gentleman will want to amend some of his remarks about my right hon. Friend.
    Several Hon. Members rose—
    Mr. Speaker: Order. I shall call one more hon. Member from either side of the House and allow extra time at the end of Question Time for the Minister of Overseas Development.
    Mr. Pavitt: Will my hon. Friend take steps to inform the British public of the fantastic success of the National Coal Board by way of its exports to China, in particular the multi-purpose arrangement, which will mean millions of pounds being contributed to our economic prosperity?
    Mr. Eadie: I am grateful to my hon. Friend for raising this matter. We are aware that the market for energy exports to that continent is substantial.
    Mr. Hannam: In view of the need to keep coal prices competitive, may I ask why the Secretary of State recently offered the National Union of Mineworkers the power of veto against pit closures? How would that help to keep coal competitive in our modern world?
    Mr. Eadie: I do not believe that that issue is related to the Question. The hon. Gentleman will recall that there was some confusion within the country and even within the mining community about who could take the decision about a pit closure. What my right hon. Friend suggested to the NUM was by way of being a participatory agreement so that it would have a share in the responsibility for pit closures. With that responsibility for pit closures there would be a share in the responsibility for deciding upon new investment.

  OVERSEAS DEVELOPMENT

    Debt Relief and Common Fund
    Mr. Formanasked the Minister of Overseas Development what steps her Department has taken to promote international agreement on debt relief for the poorest developing countries.
    Mr. Tim Rentonasked the Minister of Overseas Development what

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    consideration her Department is now giving to questions of, first, the Common Fund and, secondly, relief of debt of the poorest developing countries.
    The Minister of State for Overseas Development (Mrs. Judith Hart): I expect to announce within the next month how we intend to fulfil the commitment we reached internationally in Geneva last March to seek to adjust the terms of past aid loans, or take other equivalent measures, to benefit the poorest countries.
    I think the United Kingdom made a valuable contribution to the promotion of international agreement at the Geneva UNCTAD conference, which I attended. Since then, we have co-operated in further work within OECD.
    The Government's policy towards the Common Fund takes full account of my Department's views. Questions on this are a matter for my right hon. Friend the Secretary of State for Trade.
    Mr. Forman: With regard to the writing-off of official overseas debt, may I ask whether the Minister has given serious consideration to the United Kingdom acting unilaterally if necessary in this matter, as Canada, Sweden and Holland have done? Does the right hon. Lady accept that she would be better employed directing her attention to these urgent questions than to the sort of subjects she raised in her recent speech in Rome when she talked about extending the concept of intervention and planning from the national to the international level, which is just useless?
    Mrs. Hart: The hon. Gentleman is not perhaps aware that I cover a great many points in a great many speeches. That was one speech which I regarded as being very effective. The hon. Gentleman will know that the action taken by Canada, Switzerland and Sweden has been taken as their contribution to the Conference for International Economic Co-operation Special Action to which we are contributing $115 million through IDA. There is no question of our not acting unilaterally on this matter. We wish that all developed countries would act in this way. We do not have to bear in mind precisely the way in which they are acting to make our decisions.
    Mr. Renton: Will the right hon. Lady tell the House what she means when she
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    says that discussions on the Common Fund are taking full account of her Department's views? Does she not agree that negotiations on this and other commitments made by Commonwealth Heads of Government, following the Paris North-South talks last June, have ground to a faltering halt?
    Mrs. Hart: No, I would not agree at all that they have ground to a faltering halt. When I say that my Department is fully involved in all these discussions, I mean—without revealing anything that I should not reveal—that several Departments are involved in discussions on this matter, although, of course, the Department of Trade is in the lead. There are indications—I think that my right hon. Friend the Secretary of State for Trade would agree—of grounds for optimism in believing that it may be possible to resolve some of the problems, or that at least we may be able to move further forward in the next two or three months on the basis of the discussions which are taking place.
    Mr. James Johnson: Will my right hon. Friend take special note of the unusual and almost unique position of the Sudan in this connection? Is she aware that this is a nation of 18 million to 20 million people whose annual income per head is possibly $90, and yet 30 per cent. of any loans they get is earmarked to pay interest on the debt accumulated by the Sudan? Does my right hon. Friend agree that this is a stable society in North Africa?
    Mrs. Hart: I am sure that my hon. Friend will be glad to know that the position is quite clear. We regard this as an aid measure. We regard it as logical that those countries which have in the past received loans from us—and which therefore are due to repay both capital and interest—but which now receive grants from us could be entitled to retrospective adjustment of the terms. In any country, whether it is the Sudan or any other, what will matter is whether the country is now in receipt of grants from us and has been in receipt of loans in the past.
    Mr. Goodhew: Will the right hon. Lady tell the House whether she has had international agreement to Item 39, Overseas Aid Class 11.8, in the Supply Estimates, which was a grant of £50,000 to

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    the Trades Union Congress? Will she tell us what it was in aid of?
    Mrs. Hart: I think that a separate Question on that would be called for, if I may say so. There is quite a lot of information to be given to the House about it.
    Mr. MacFarquhar: Will my right hon. Friend ensure that in any discussions internationally on debt relief or other aid matters to the poorest countries she is in the fullest possible consultation with the Japanese Government? Will she inform them that, while we welcome their recent decision to double official development assistance in three years rather than five, we hope that it will be on the lines that Mr. McNamara indicated in Tokyo? In particular, will she try to direct Japanese aid efforts to South Asia, where some of the poorest countries are situated?
    Mrs. Hart: I had the opportunity of discussions with the Foreign Minister of Japan when he was here about a month ago, and we discussed these matters in some substance and detail. I hope very much—and particularly in relation to the Summit Meeting in Bonn shortly—that we shall find that the Japanese are very ready to play a full part in the reinvigoration of the economies of the developing countries as a part of the contribution towards ending the world recession. This is absolutely crucial.

    Banaba
    Sir Bernard Braineasked the Minister of Overseas Development to whom the offer of a resources survey, which would enable the Banabans to resume their occupation of Banaba or Ocean Island, was made; what reply she has received to the offer; and by whom the survey is to be carried out.
    The Under-Secretary of State for Overseas Development (Mr. John Tomlinson): Our offer, whose objective would be to provide an assessment of the island's resources for habitation and development, was made to the Gilbert Islands' Government and the Rabi Council of Leaders. They have not yet replied. A decision on who should carry out the survey would be made after a preliminary appraisal.
    Sir B. Braine: I thank the hon. Gentleman for that information. Is he aware
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    that what concerns those in this House who are ashamed of the shabby way in which the Banabans were treated in the past is the absence of any disposition to return their island to them or to provide them with the economic means of rehabilitating it after the exhaustion of the phosphates? Will he bear in mind that there is a new Government in the Gilberts and a new Council of Leaders of the Banabans, and that it behoves the British Government to take some initiative in this matter and not to wait for those people to act?
    Mr. Tomlinson: Obviously I know of the concern of the hon. Gentleman and of many other hon. Members about the position, but we have made the offer and it is because of the changes of Government and the change in the Rabi Council that some delay in response has been caused. But plainly it is impossible for the Government to respond until we have heard their reaction to our offer. That is why we are waiting for it now and look forward to receiving it as soon as possible.
    Mr. Hooleyasked the Minister of Overseas Development what specific proposals she has made for the rehabilitation of Banaba or Ocean Island at the end of phosphate mining.
    Mr. Tomlinson: No specific proposals for the rehabilitation of Banaba have been made.
    Mr. Hooley: Is my hon. Friend aware that, whatever other aspects of this matter may be in doubt, there is no doubt whatever of the absolute determination of the Banaban people to return to their traditional home, and that there is a moral, legal and economic obligation on Her Majesty's Government to facilitate that return in the light of the disgraceful way that these people have been treated over the past 50 years?
    Mr. Tomlinson: Clearly we know what my hon. Friend says, and that is why the proposal has been made. Once the proposal has been accepted by both parties to whom it has been communicated, we have it in mind to send out a representative of the Ministry of Overseas Development, together with a member of the staff of the University of the South Pacific in Fiji, so that they can make an appraisal

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    to assist that very process to which my hon. Friend refers.

    Voluntary Bodies
    Mr. Luceasked the Minister of Overseas Development whether she is satisfied that sufficient encouragement is being given to voluntary bodies which undertake development work overseas.
    Mrs. Hart: Yes, Sir. We give a great deal of encouragement. Our programme of support for the development activities overseas of the voluntary societies is increasing. I would like to see it increase still further.
    Mr. Luce: In view of the Minister's answer, does she accept that one of the great values of the voluntary bodies is that they give the British public a degree of choice and influence over the way in which its money is spent overseas, and that equally these bodies have a particular capacity for identifying projects which really help the people in need in the developing countries? Therefore, can the Minister assure the House that there are no obstacles whatsoever in the way of the expansion of the voluntary bodies? Does she, in particular, propose to expand the joint funding scheme?
    Mrs. Hart: As I know the hon. Gentleman recognises, I introduced the joint funding scheme, and I am very enthusiastic about it. We have to be very careful, however, that we do not, in the joint funding scheme, interfere with the independence of the voluntary agencies. I am sure that he will accept that. Perhaps the best indication I can give him is that in the first year of the scheme we received 20 applications, and that last year we received 144. Expenditure has risen from £25,000 to £700,000. Indeed, of the total applications, 118 have been approved and, apart from some which are in the pipeline, only 26 have been rejected, purely on practical grounds. This indicates that we are fully seized of the desire to encourage them.
    Mr. Pavitt: Has my right hon. Friend been able to make any progress with the vexed problem that faces Voluntary Service Overseas people when they come back and find inadequate employment opportunities? This problem has vexed many of us for a long time. Has my right hon. Friend been able to make any
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    progress in securing, at this time of high unemployment, that when people give up a year or two or their lives, when they are young, to go overseas, they come back to full employment?
    Mrs. Hart: This is obviously a very difficult question, but most of the people involved in the joint funding schemes are not so much VSO volunteers as people employed by the voluntary agencies who tend to have a career working with them and for them. There is a slight difference there. But there are problems concerning the volunteers returning here. I wish that there could be more people going overseas during this period, because it is very valuable to them. It gives them further training and experience, and cannot but help everybody.

    Aid (Conditions)
    Mr. Blakerasked the Minister of Overseas Development whether it is the policy of Her Majesty's Government to attach political conditions to the granting of aid; and, if so, in what circumstances.
    Mrs. Hart: While aid allocation decisions necessarily take into account the state of our political relations with the country concerned, no political conditions are attached to aid granted.
    Mr. Blaker: Are not the Government in a complete muddle about this? How is it that aid has been cut off from Uganda and Chile, whereas it has not been cut off from Ethiopia and Cambodia, according to what the right hon. Lady told the House on 8th May? Does it simply depend on how far Left the regime is?
    Mrs. Hart: The hon. Gentleman has clearly failed to take note of the correction in Hansard, which was of some importance. It was that we do not have an aid programme to Cambodia and have not had an aid programme for some three years. It was a rather important correction in Hansard, as I am sure the hon. Gentleman will agree. We have a minimal programme for Ethiopia which is directed entirely towards completing a water supply project there. It has been very difficult to decide about that. In terms of human rights in all these various countries, one has to take some account of not punishing people twice. A rural water supply to some of the people in the countryside of Ethiopia did not seem to

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    us to be a matter on which we should cut off aid and fail to complete a project to which we are committed. However, it is a very minimal one and we have no new proposals for aid in Ethiopia.
    Mr. Hooley: Will my right hon. Friend therefore resist the importation of political conditions into any renegotiated Lome Convention?
    Mrs. Hart: "Political conditions" is one way of expressing it, although I would not agree with that. What we are concerned about, and clearly what the whole House would be concerned about, is that we would not wish our taxpayers' money to be spent in Uganda, for example. Therefore, we have some claim to have a voice on this within the renegotiations of Lomé.
    Sir Bernard Braine: Is not there a very strong case for attaching just one political condition to the granting of aid, and that is that it is not made available in cases where there are known and gross violations of human rights?
    Mrs. Hart: This, of course, is the phrase which has become accepted and which certainly we accepted—that the gross violation of human rights should be a condition. How one expresses that in terms of aid policy and international discussion becomes a matter of case-by-case decision. Of course, it must be a case-by-case decision, and that is the policy which we tend to pursue.
    Mr. Spriggs: Is my right hon. Friend aware that, when she goes to the Cabinet meetings to discuss increased aid for the poorer nations of the world, all her hon. Friends will give her their fullest support?
    Mrs. Hart: I am sure that they will. To be fair, a considerable number of Conservative Members might do so, although there might be some dissension within their party about the matter. What I am clear about is that our policy is "poorest countries and poorest people". The poorest people in some countries may merit our support even partly in order to induce the progress in economic and social development which will itself lead to an advancement in the securement of human rights.
    Mr. Luce: The Minister still has not answered specifically the supplementary question put by my hon. Friend the Member for Blackpool, South (Mr. Maker). If it is right not to give aid to Chile or Uganda, how can it possibly be right to give official, bilateral taxpayers' money to the Ethiopian regime?
    Mrs. Hart: I think I have explained that, but I shall seek to explain it again. We have a minimal programme. It is for a rural water supply project. It was undertaken some time ago. It is in its last stages. We are entering into no new commitments, but on balance—and these must be questions which one decides on balance—we did not think it right to cut off the completion of that project.

    QUESTIONS TO MINISTERS
    Mrs. Castle: On a point of order, Mr. Speaker. You will be aware that on Energy Questions today we reached only Question No. 11, and that only because two hon. Members with earlier Questions were missing. This meant that urgent and reasonably well placed Questions, such as my own—No. 17—on the need for a new winter fuel rebate scheme were not reached. Are you aware that we are now getting fewer Questions answered than at any time I can remember in my 33 years in the House? Therefore, I ask you to renew your pleas, both to those who ask Questions and to those who answer them, to keep them brisk and brief? Could you also ask Ministers to drop the habit of linking replies to Questions much further down on the Order Paper, as has been done three times this afternoon, thus making it hopeless for many of us to get a chance of having our Questions reached?
    Mr. Speaker: The right hon. Lady will know that 15 Questions were reached on energy, counting the doubling up of Questions which were answered. The trouble is that supplementary questions were as long as her point of order. That is the problem. Today, if I may say so, answers were also long, but not from the Minister for Overseas Development. We were earlier talking about energy matters and that Minister is not now present.

RHODESIA (BRITISH MISSIONARIES)
The Secretary of State for Foreign and Commonwealth Affairs (Dr. David Owen): I will, with permission, Mr. Speaker, make a statement about the appalling tragedy which took place at the Elim Pentecostal Church Mission near Umtali on Friday, 23rd June. I am sure that hon. Members will join me in expressing the deepest sympathy of this House for the families and friends of the twelve people so callously murdered and our admiration for the Christian spirit and courage with which the Church has responded in their decision to stay on in Rhodesia working for conciliation and peace between all the people. We are in close touch with the Pentecostal Church Headquarters and are giving all possible assistance to their members and the families of the murdered missionaries to travel to Rhodesia for the funeral.
The fact that those who have been murdered were concerned solely with working for peace and conciliation between the races is a horrific reminder of the dangers in Rhodesia today and of the escalating level of indiscriminate violence which has been building up now for five years. The House will recall the incident at Gutu a month ago in which at least 50 Africans were killed, and also the killing of the two Salvation Army women. There have sadly been many other incidents involving both black and white Rhodesians.
This latest tragedy confirms the urgent need to bring about by every available means round-table talks to achieve a negotiated settlement which will bring an end to the fighting. We have a joint Anglo-United States team at this moment in Salisbury, and I believe that we are making some progress towards our objective of round-table talks. It is for the leaders of all the parties to respond now in a way that measures up to their overriding responsibility to bring about a nonracial, peaceful and independent Zimbabwe.
Mr. John Davies: Cannot the shock of this ultimate bestiality bring all concerned to their senses? Despite all their protestations, can there be any real doubt that the mounting toll of death and mutilation is the responsibility of the Patriotic Front,
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and none other? Do not the Government realise that by persistently cold-shouldering those leaders, both black and white, who have joined together in the internal settlement, they only encourage those who openly declare that their objective is power by the bayonet, the club and the gun? Will not the Government, even at this late stage, renounce their incomprehensible attitude and offer real support to those who have agreed to reach a peaceful settlement in Rhodesia, realising that only thereby can a negotiated agreement ever be reached?
Dr. Owen: Like the right hon. Member for Knutsford (Mr. Davies), I hope that the shock will make all concerned come to their senses. I do not think there is anyone who can but hope that from this tragedy something will come which will bring about peace. But one must ask the right hon. Gentleman, what more can one do? I do not know whether the right hon. Gentleman is saying that we should unreservedly support the internal settlement or whether we should lift sanctions. He has never said that before. In credit to him, he has come down against that.
I believe he thinks that there should be a warmer relationship. I believe that what is important is that we should keep contacts. That is why I have had in Africa a senior person from the Foreign Office. That is why there has been someone constantly in Salisbury. I believe that it is very important that we should be open to all sides. That is why I have spent many hours since the internal settlement was established talking to the leaders of the internal settlement and why I went to Salisbury myself with Secretary of State Vance.
But if it is argued that we should cut off all links with all the parties, I believe that we would jeopardise our chances gravely—[HON. MEMBERS: "The right hon. Gentleman just said that."] I posed the question. I believe that it would jeopardise our chances gravely. Within the limits of our ability to bring about a peaceful negotiation, I believe that we are right to adopt the attitude that we have adopted ever since the internal settlement was established—neither to condemn it nor to endorse it but to try to widen out the areas of agreement to involve all the parties in Rhodesia.
Mr. John Davies: But cannot the right hon. Gentleman realise that his constant pouring of cold water on the internal settlement and his constant references to its many weaknesses create not just a positive absence of support but a dreadful psychological absence of support? There is a feeling of complete and absolute abandonment by the British Government, and that must be put right.
Dr. Owen: The right hon. Member for Knutsford has not produced anything concrete that we should be doing differently. It is very easy to advocate that we should not be pouring cold water. I have never poured cold water on the settlement—[Horn. MEMBERS: "Oh!"] I thought strongly that Bishop Muzorewa and Mr. Sithole should have the opportunity of going before the United Nations to present their case to the world. I resisted the United Nations condemning out of hand the internal settlement. I have sought to keep open the possibility of widening the areas of agreement.
Unfortunately, there is a question of choosing here. I do not believe that it is in the British interests or in the interests of the people of Rhodesia for us unconditionally to support the internal settlement, as many right hon. and hon. Members on the Opposition Benches seem to think we should do. I believe that if we had done that when it was urged upon me in this House some months ago, Britain's policy now would be totally bankrupt. We would have lost all influence with all the parties. We would have damaged greatly our standing with some of the key African countries whose support is vital if we are to bring about a negotiated settlement. We would have damaged gravely the Commonwealth. We would have lost our friends and allies in Europa and in the United States, who would not have gone with us. And we would have made the great error that British policy has made so often before of changing from its central objective, which in this case must be to achieve a negotiated settlement between all the parties.
Mr. Thorpe: Is the right hon. Gentleman aware that the whole House will share the feeling of horror which he has expressed at these senseless atrocities and will wish to be associated with his expres-
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sions of sympathy to the relatives of those who have been murdered? May I also be associated with the right hon. Gentleman's admiration of the Pentecostal Church and its decision to stay on? Does the right hon. Gentleman regard this as an opportunity for a major diplomatic initiative by Her Majesty's Government involving the President of the United States, the Secretary-General of the United Nations and the five front-line Presidents to obtain a cease-fire, such as was achieved before the Geneva talks as a vital prelude to talks?
Dr. Owen: There is no doubt that if we could achieve a cease-fire before talks it would create a climate for talks. Even if we could achieve some reduction in the level of violence during or before the talks, that would be of great benefit. The House should know that my right hon. Friend the Prime Minister and the President of the United States are in fairly constant contact by varying means with the front-line Presidents, who, I agree with the right hon. Gentleman, have a crucial influence to bring to bear on this issue and who have devoted a great deal of time to persuading the Patriotic Front to adopt a reasonable position and to trying to persuade all the parties to come together in round-table talks. I am grateful to the right hon. Gentleman for what he said about the Pentecostal Church and about the relatives of the people so tragically killed, and I associate myself with his sentiments.
Mr. Hooley: Does my right hon. Friend agree that this tragedy will be the precursor of many similar tragedies unless the Smith regime now finally abandons its futile rebellion and acknowledges the constitutional authority of this Parliament, which is recognised by every other country in the world?
Dr. Owen: I have never shirked from our constitutional responsibilities, though I have often drawn to the attention of the House the fact that it does not, unfortunately, carry with it great power and strength to impose our will. We have to persuade people. But we have a legal responsibility. There have been very many viable policies put forward by successive Governments which would have brought about peace in that country over the past 12 years. Tragically, the opportunity has all too frequently been lost.

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The opportunity still exists for roundtable talks. It is very, very important that they are arranged now before any side feels that it is in a commanding position to impose its will. That would be a solution which would be bound to be resisted fiercely.
Sir D. Walker-Smith: The right hon. Gentleman asked what more could be done and in that context referred to sanctions. Is he not aware that the sole justification for sanctions under the United Nations Charter is a threat to international peace? Is it not transparently clear from these callous murders and torturings that the threat to international peace comes from those who perpetrate them and those who assist and condone them? That being so, will he not raise again in the United Nations the question of sanctions with a view to their early discontinuance?
Dr. Owen: I do not believe, and I am sure that the right hon. Member for Knutsford does not believe, that it would be right to lift sanctions at this stage. The previous Conservative Administration, when facing this question when it put forward proposals to the Rhodesian people, did not feel able to lift sanctions until it was certain that the proposals had won the acceptance of the people as a whole, compatible with the Fifth Principle. I believe that we should stick to that principle.
Mr. MacFarquhar: In the light of the conflicting reports and allegations, can my right hon. Friend say who is supposed to have been responsible for this terrible massacre and whether he believes the reports that Mr. Robert Mugabe said that he would not take part in any roundtable talks?
Dr. Owen: I do not know. I wish I did know. Various allegations have been made. It may be that the truth will come out. It is important that Mr. Mugabe, who has previously not denied sometimes being involved in some incidents, has on this occasion specifically denied any responsibility. I am not aware that he has changed his position which was agreed in Dar es Salaam that he would come to round-table talks. Certainly I believe that all the parties should come.
Mr. Hugh Fraser: In view of what the right hon. Gentleman said, will he send out a mission immediately to investigate the imputations which he has made today? Secondly, relating to the question of the rights and duties of this House, as a sovereign Parliament protecting British subjects and British citizens, surely the time has come for the right hon. Gentleman to make proper protests to those who are harbouring murderers, namely the States of Mozambique and Zambia? That is his duty as a Member of this House.
Dr. Owen: I have made no imputations. I do not know who is responsible for these murders.
Mr. Hugh Fraser: Find out.
Dr. Owen: I do not administer nor do I control Rhodesia. The right hon. Gentleman knows that better than anyone. The question of trying to bring about law and order and a stable peace in that country—
Mr. Fraser: What is the right hon. Gentleman doing, then?
Dr. Owen: —will come only through negotiation. Our history shows that that will have to involve all those who are currently fighting on both sides.
Mr. Faulds: Will my right hon. Friend accept that some of us are relieved that he has hinted that there is a strong possibility that this ghastly attack was made not by forces of the Patriotic Front but, as has happened before, by agents of the Smith regime—
Mr. Ian Lloyd: Disgraceful.
Mr. Faulds: —such as the Selous Scouts, for obvious but obscene propaganda purposes—
Mr. Ian Lloyd: This is disgraceful. You are English-speaking.
Mr. Faulds: —against the African liberation forces?
Dr. Owen: I must say to my hon. Friend, as I said to the right hon. Member for Stafford and Stone (Mr. Fraser), that I have not implied or imputed any such thing. I have not hinted at that. I have said that I do not know. That is the factual position. I do not know.

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But I believe that the House would do well to mirror the example of the Elim Pentecostal Church, which seems to have been able to get strength and succour and to decide to stay in Rhodesia and work for peace and conciliation—not spending its time looking backwards but showing its confidence that that country can reach independence and can have a non-racial society.
Mr. Maurice Macmillan: May I express my own horror at what has happened, and the horror of all of us on this side of the House? May I also remind the right hon. Gentleman that this was predicted by some of us on this side of the House as the sort of incident likely to happen after the Cubans arrived in Angola? Will he accept that this is part of a general attack, of which the attack on Zaire and the rumoured future attack on Namibia are also part, being mounted by enemies of the United Kingdom? Is it not clear evidence that Mr. Mugabe at least is seeking personal power rather than the so-called liberation of Rhodesia? Will the Foreign Secretary, in his future conduct of affairs on behalf of Her Majesty's Government, at least recognise that he is dealing with people whose personal ambitions outweigh their desire to serve the country which they hope to rule, by force if necessary?
Dr. Owen: There is no doubt that Rhodesia has been bedevilled by the inability of the nationalist leaders, even pre-dating UDI, to come together and work for the independence of that country under a united leadership. That has been one of the greatest problems. It has been predictable that this sort of thing would happen. The right hon. Gentleman is not alone in having made such predictions. I have myself predicted that violence would increase and that this sort of incident would take place.
The question of Cuban involvement raises a very serious issue. I believe that Cuban involvement in Africa has been damaging, and that it must be a central part of British foreign policy to avoid that involvement spreading. I believe that there is danger of it. I believe that were Great Britain to avoid the search for a genuine internationally acceptable solution in Rhodesia, it would hasten or at least increase the risk of Cuban influence
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spreading to other countries in Africa than Angola.
Rev. Ian Paisley: Is the Foreign Secretary aware that the Rev. Roy Lynn, murdered with his wife and baby girl of three years of age, was a constituent of mine and that he was born and bred in Cullybackey, Ballymena, in the heart of North Antrim, and that his mother and father continue to reside there?
Will the right hon. Gentleman take it that although Northern Ireland has had its terrible share of such bitter murders, the people of the Province stand aghast at what has happened in Rhodesia? Will he take it from me that his words of praise of the Christian fortitude and forgiveness expressed by the Elim Church will be welcomed on both sides of the House?
Is it not a bitter irony that the Anglican Bishop of the area has had to make it clear that these terrorists are receiving grants from the World Council of Churches and yet are engaged in murdering missionaries from this country? Will the right hon. Gentleman not look at Northern Ireland and realise that such men as these terrorists cannot be negotiated with and must be told that they will have to be rejected from any final political settlement because they engage in such acts of barbarity and crime?
Dr. Owen: I have great sympathy with the hon. Gentleman. I was aware that his constituents were affected, and I am sure that the whole House would wish to extend its sympathy to those relatives and friends who live in his constituency.
I recognise that there is a very difficult dilemma for any of the Churches over what sort of help should be given. They do not supply arms. Nor do the British Government or other Governments supply arms. There has been help for humanitarian purposes, and I have no doubt that sometimes that help has been misdirected, but, like the hon. Gentleman, I think that we must try to draw some comfort from the spirit of Christian fellowship and understanding shown by the Pentecostal Church, which I know operates in his constituency.
On the question of a direct analogy with Northern Ireland, I would only say that in Northern Ireland there have always been free elections and that the

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people of Northern Ireland have repeatedly, fairly and openly, made their views clear about controversial issues through the ballot box. That is not the situation in Rhodesia.
Mr. Robert Hughes: Is my right hon. Friend aware that in all parts of the House there is horror and revulsion at this most recent wanton and senseless act and that our sympathies go to the relatives of those killed. Is he aware that they also go to the relatives of those many black Rhodesians brutally murdered by the Smith regime both inside and outside Rhodesia?
Will my right hon. Friend also understand that that regime in Rhodesia, which has completely frustrated every attempt to achieve a peaceful solution, bears a very heavy responsibility for the toll of both African and white lives in that country? Does my right hon. Friend understand, and cannot the Smith regime understand, that there can be no peaceful settlement in Zimbabwe until Smith goes and the Patriotic Front is involved in direct negotiations?
Dr. Owen: I have no doubt that there have to be direct negotiations, and I believe that they have to involve all parties. I take account of the realities and power structure that exists there, and therefore I believe that these round-table talks have to have representatives of Mr. Smith and that it is probably necessary that Mr. Smith himself attends. I have always recognised that. That is why I have been prepared to go to Rhodesia myself and speak to representatives of the regime and to Mr. Smith. That is why I am still prepared to meet and negotiate a settlement.
Mr. Blaker: Is there not a danger that by giving the impression, as I believe that the right hon. Gentleman has done, that he is leaning against the internal settlement and in favour of the Patriotic Front, he may weaken the internal settlement to such an extent that the Patriotic Front may feel that it is not necessary for it to attend any talks and that its best course is to fight it out?
Dr. Owen: I do not believe that I have given that impression, although it has been assiduously cultivated by some people. I do not believe that it has any substance in fact. It has been the lot of
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Foreign Secretaries through the ages to be attacked for talking to people variously described as guerrillas and terrorists. I believe that it is necessary to do so. I believe that it is necessary to talk to all the people involved, and I shall continue to do so.
Mr. Kelley: Is my right hon. Friend aware that there are three opinions about this appalling situation in Rhodesia? There is the official opinion of the media, printed, oral and pictorial, which has been expressed by several hon. and right hon. Members opposite; there is the idea that there was possibly some connection with the massacre of 17 people in Mozambique who belonged to the alleged guerrilla forces; and there is also the situation developed by my hon. Friend the Member for Warley, East (Mr. Faulds). Is it not advisable, therefore, for my right hon. Friend to undertake a more thorough investigation of what happened in Mozambique a few days before this appalling incident in Rhodesia, and into whether there was connection between the forces of the Smith regime and the engineered incident which has been referred to by hon. Members?
Dr. Owen: I do not believe that any of us has enough information to draw any conclusions as to exactly what happened at Umtali on Friday. My hon. Friend has referred to Mozambique. On 22nd June, it was reported that Rhodesian troops attacked a UNDP experimental station in Manica Province, and that there was the killing of a Belgian couple and other refugees. Again it has been extremely difficult to verify what happened. As is so often the case, there is more than one story, and more than one figure was given for the number of casualties. What all of us must do is to try to look forward from these events to see how we can bring about the peaceful settlement that all of us want. I do not believe that there is any other way than that which I have put to the House.
Mr. William Shelton: The whole House is aware of the Foreign Secretary's determined, indeed obstinate, search to impose what one might call an external settlement. Does he accept that his goal may elude him indefinitely? If that is the case, what does he propose should be done other than his pathetic reiteration of what is an increasingly impossible goal?
Dr. Owen: I have always said that if we are unable to achieve a negotiated settlement and the internal settlement continues, elections are held and it is shown, despite the level of violence, and in the fair judgment of the House, that the settlement does have the support of the people of Rhodesia as a whole and the Fifth Principle has been fairly fulfilled, I should expect the House to act accordingly, leaving the matter to the Fifth Principle. However, that is some months away. In the meantime I believe that the House and the Government should work as hard as is humanly possible to bring about a negotiation between all the parties. In view of the mounting violence that we have heard has been occurring in Rhodesia over the past few weeks, it will be extremely difficult to hold any fair test of opinion.
Mr. Newens: Whoever is responsible for this appalling and inhuman tragedy, is it not a fact that there are likely to be more massacres of both blacks and whites until a settlement is reached that recognises the legitimate rights of the Patriotic Front? Is it not equally a fact that right hon. and hon. Members who continue to attack the Patriotic Front make it more difficult to achieve a just settlement? Does my right hon. Friend agree that they are making it likely that there will be more massacres by continuing to help to put off a proper peaceful settlement?
Dr. Owen: As my hon. Friend knows, I believe that the Patriotic Front has legitimate rights, but so have other nationalist parties and so have the white minority parties. That has always been recognised by my hon. Friend. That is why many people outside the House have always seen the necessity of involving all the parties. I may repeat these words endlessly in answering questions in the House, but it must be recognised, especially by some on the Opposition Benches, that we shall not achieve a settlement by trying to exclude powerful groups of opinion.
Mr. Gow: Bearing in mind that Rhodesia is a British colony and that those who are in danger there are British subjects, does the right hon. Gentleman understand that his answer "I do not know" is extremely offensive to the House? Does he agree that he should
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send a full mission to Salisbury so that we may understand the facts?
Mr. Faulds: How do you know?
Mr. Gow: Secondly, what is the difference between our justified refusal to negotiate with callous terrorist murderers in Northern Ireland and the right hon. Gentleman's willingness to negotiate with callous terrorist murderers in Rhodesia?
Dr. Owen: I do not believe that it is offensive to the House to tell the truth, and that is what I have done in admitting that I do not know the consequences. The hon. Gentleman must appreciate the impracticability of sending a mission to a country which I do not administer and which is currently run by a Government whom we do not control.
I answered the hon. Gentleman's question on Northern Ireland in reply to the hon. Member for Antrim, North (Rev. Ian Paisley). I do not believe that we can draw parallels. Many people throughout the world have tried to draw parallels with what I think are genuine liberation movements and have tried to ascribe them to Northern Ireland. I want to make it clear that I do not believe that those parallels exist. In Northern Ireland there is scope for fair and free elections and referenda to seek the views of the Northern Irish people. In Northern Ireland there is no doubt about the requirements underlying the Fifth Principle. We know what the people of Northern Ireland think, but we do not yet know what the people of Rhodesia think. Our task must be to let them fairly choose to which authority they wish to entrust their future.
Mr. Anderson: Does my right hon. Friend accept that the British public will, on the general issue, applaud his untiring efforts to seek peace in the troubled country of Rhodesia and his refusal to be tied wholeheartedly to a crumbling internal settlement? However, is it not clear so far as can be, that the finger in this incident, this shocking savagery involving British subjects, points at the forces of Mr. Mugabe? Therefore, will my right hon. Friend make representations to Mr. Mugabe and the Mozambique Government on the issue, which has so shocked and revolted British opinion?
Dr. Owen: If I see Mr. Mugabe, I will make representations, as I have done in

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the past, as I have done constantly to all those taking up arms, and will reiterate my strong belief that such actions will not achieve results, especially when we are now making some progress towards a political solution. I assure my hon. Friend that I shall make representations and that I shall continue to strive to bring the parties together. I shall do so on the basis that no one party has a monopoly, no one party has a veto and that all parties will have to compromise. That is necessary if we are to achieve a negotiated setlement.
Mr. Cormack: Does the right hon. Gentleman recognise that many of us are extremely disappointed by the attitude that he has shown this afternoon? Will he do three things? First, conditionally if not unconditionally, will he recognise that there is a new regime in Rhodesia, and will he do what he can to assist it? Secondly, will he unconditionally condemn what has happened and tell the leaders of the Patriotic Front that there is no place for them in any Government if they condone this sort of murderous, barbarous act? Does he accept that they have so acted against black as well as against white? Thirdly, will he send out a mission on the lines of the Pearce Commission to ascertain exactly how the people of Rhodesia feel? If he does not know, will he please find out?
Dr. Owen: It is extremely difficult to get any test of opinion while fighting is going on. I refer the House to the views published by the Churches in this country, many of whom have close links inside Rhodesia and with what is happening, about the feelings concerning the internal settlement and the deteriorating situation. As for conditionally accepting that there is a changed situation, I have already done so. I have refused any claims that I should treat Bishop Muzorewa, Mr. Sithole and Chief Chirau as members of an illegal regime and should ban them from the United Kingdom. I have said that they have entered into an agreement and that I shall treat them exactly the same as I treated them before. I have, therefore, accepted that there is a situation in which they have genuinely striven.
I believe that that is not sufficient to achieve the objectives at which we are all aiming. I do not think that I can make
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it any clearer than that. That is the purpose of the mission that is now in Salisbury—namely, to meet all the parties. The mission has been to Lusaka and Maputo—it will go to Maputo again—to try to find a formula and a measure of agreement that will lead to successful round-table talks. It is no use entering into another Geneva conference ending up in failure as a result of insufficient preparation.
Several Hon. Members rose—
Mr. Speaker: Order. I must tell the House that I propose to call five of the hon. Members who are still standing. There are about 11 hon. Members standing, but if I call five I believe that that will be fair and will get the points of view across.
Mr. Charles Morrison: The right hon. Gentleman has repeated again and again that he neither condemns nor endorses the internal settlement. Is he aware that his damning with faint praise amounts to condemnation in the eyes of those who are opposed to it? Will he even at this late hour give the internal settlement a little more encouragement, partly because it is the only foundation which exists upon which he can build? Secondly, does he think that the ghastly massacre that we have witnessed justifies the sort of support that has been given by his hon. Friends to freedom fighters over the years?
Dr. Owen: We cannot possibly ignore the fact that there are parts of the internal settlement that have been proposed by the British and American Governments and have been advocated in the House. Therefore, it would be wrong for me to condemn the settlement. The final endorsement of any arrangement will have to come from the people of Rhodesia as a whole. That is why successive British Governments have always insisted that it is not for the House to determine whether the arrangement is satisfactory. It is for the House to determine whether it is satisfied that the people of Rhodesia as a whole are satisfied with the arrangement. It is that task that still has to be assessed.
I think that there is evidence that there is a considerable division of opinion within Rhodesia about the internal settlement. I can and do try to avoid what is

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described as pouring cold water on it, or drawing attention to its deficiencies. The criticism that I have made of it has been minimal. I have been criticised for taking that approach. The main reason that I have not criticised it in detail is that in the abesnce of any other agreement that brings black people and white people together, it would be foolish totally to condem it and to throw it away.
Sir J. Eden: Will the right hon. Gentleman take this opportunity to explain to the House exactly what he meant in the statement that he issued over the weekend? Is he aware that in that statement he seemed to imply that, whilst it was wrong to murder missionaries, it would be legitimate to murder those who were backing the internal settlement or who are members of the Administration in Rhodesia? Will he make clear exactly what he meant by that statement?
Secondly, to return to the question posed by my right hon. Friend the Member for Stafford and Stone (Mr. Fraser), what action does he propose to take to protect the lives of British citizens in Rhodesia?
Mr. Robert Hughes: They are all British citizens.
Sir J. Eden: Thirdly, in view of his justifiable comment about the plea for forgiveness on the part of the missionaries concerned, would that he himself would emulate that plea with some degree of humility.
Dr. Owen: On the last point, the right hon. Gentleman must examine his conscience and I will examine mine.
On the question of safeguarding the lives of British citizens, I think that I can do that best only by pursuing the path of a negotiated settlement. All those people who have decided to live in Rhodesia since UDI have done so in the full knowledge of the disapproval and disagreement of the British Government of UDI and all that has followed from it. Some people have gone to Rhodesia as missionaries to work for peace and conciliation.
That brings me to the first point made by the right hon. Gentleman. If he can interpret what I said on Saturday, in the first few minutes of shock after hearing of this incident, as saying that there is
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such a distinction, I do not believe that he has done justice either to the statement or to me. I said that all violence, all killing, is abhorrent. I went on to point out that we have not made statements about every loss of life which has occurred in Rhodesia over the last five years. The House does not have that type of debate. Ministers of the Crown do not issue statements about the loss of life of liberation fighters fighting either inside or outside Rhodesia or, indeed, of Rhodesian defence forces fighting inside or outside the country.
We have pointed out the sheer senselessness of the whole business. Those people were working for peace. I have never said that any form of violence is legitimate. I did not dedicate my life as a doctor, before becoming a politician, to qualifying life as being legitimate or illegitimate. I put that firmly and clearly on the record.
Mr. Ian Lloyd: As the Foreign Secretary has chosen, perhaps rightly, to appeal to our sense of Christian charity and thereby to expose our human frailty, may I appeal to his sense of political reality and thereby expose its frailty? Since in recent years it has become perfectly clear that the dogma of one-man, one-vote has been transformed into that of one-barbarian, one-bayonet, one-baby, will he now suggest what can be done to inject a sense of reality and understanding of African affairs on to the Government Front Bench?
Will he make clear to my constituents and to many others in the country why in his hierarchy of values it is more important to consider and to persuade those extraordinary people who misuse the word "patriotism" and call themselves front-line Presidents than it is to carry with him the electorate of this country who are fed up with the African policies which have been emerging from the Government for many years? Will he now make clear that these people, these barbarians, will not be allowed into this country and that they will not be allowed to set up headquarters in London? Will he show some tangible evidence that this Government—if not this Government, then it is time they went in favour of some other Government—give some support to all the peoples of Rhodesia?
Dr. Owen: The hon. Gentleman is right to call for political reality. In the last analysis we, as politicians, must exercise our political judgment and make decisions on the basis of it. We are sent here to exercise our political judgment and realism, and I will do so.
The hon. Gentleman has always made his views on Rhodesia clear from the moment of the illegal declaration of independence. He has disagreed with his own Front Bench on many occasions and he has been respected for it. He has held a very different view on Southern Africa and on the position over Rhodesia. If fewer Members in the House had adopted the policies and views of the hon. Gentleman and others, I believe that we would have achieved a settlement a great deal earlier.
Mr. Michael Marshall: Is the Foreign Secretary aware that the impotence, of which he spoke this afternoon, will add to the sense of shock and outrage in the country? Will he reconsider the question of trying to establish who are these barbarians? Is he aware that some of my constituents rang me yesterday to ask whether we could get two minutes' silence during the World Cup Final? People are deeply shocked. If he would consider again the question of inquiries, perhaps through the United Nations, at least world opinion might be harnessed in the moral dimension.
Dr. Owen: I understand why people are shocked. If different interpretations of this incident go on, there may be something to be said for asking the United Nations to investigate. That has been done in the past. Certainly it is a move which I should support. I do not believe that we should have an unresolved issue of such severity as this. It might be possible to get agreement, although I think it unlikely, on a commission of inquiry from the United Nations and perhaps the World Council of Churches which would be seen to be fair by all sides. It would certainly need to be that kind of body, which would have and be seen to have impartiality.
Mr. Hastings: Leaving aside the question of the cold water which the Foreign Secretary may have poured on the internal settlement, will he remind the House of one single word or phrase of support or
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encouragement for the internal settlement and for those who have with such difficulty reached agreement in Rhodesia? Have we had one?
Dr. Owen: The hon. Gentleman will find that I have on a number of occasions pointed to those parts of the internal settlement which are fully compatible with the Anglo-American proposals. I have said that we should widen the areas of agreement and have been attacked for saying that. For those reasons, I believe it was right that Bishop Muzorewa and Mr. Sithole should put their case to the world forum at the United Nations. I have constantly seen and urged them that, in the discussions that they were having in the creation of the internal settlement, they should stand out rather more firmly than eventually they did on some of the fundamentals for which they were arguing. Had they held out for some of the things which they wanted, I believe that they would have found it much easier in the internal settlement to carry conviction, force and support inside Rhodesia. But, as is so often tragically the case, the white minority argued for too much and held out for too long. Events and time have moved on and have made it that much harder to achieve what was on offer even a few months before.
Several Hon. Members rose—
Mr. Speaker: Mr. Ronald Bell to make an application under Standing Order No. 9.
Mr. Ronald Bell rose—
Mr. Dykes: On a point of order, Mr. Speaker. I do not wish to question your decision to limit supplementary questions to five, but, in view of the tragedy and horror of this incident, I wonder whether you will consider going on a little longer, because not all the points have been considered regarding how British subjects can in future be protected from such horrors.
Mr. Speaker: Order. I understand the hon. Member's feelings. But there has been a certain repetition in questions as time has proceeded. Were I to break the promise that I made of calling only five Members, I should be in difficulty on another occasion when the House feels deeply, because it will expect me to go on until everyone has been called, which

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the whole House does not require. I am deeply sorry. I had better stick to what tion, namely,
Mr. Ronald Bell: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely.
"the savage and brutal massacre of 12 British subjects, citizens of the United Kingdom and Colonies, at the Vumba mission school and the duty of Her Majesty's Ministers to do immediately what is in their power to prevent the certain repetition of murderous assaults upon British subjects by persons operating from neighbouring territories with which Britain maintains diplomatic relations."
I do not think that I need to contend for the specific nature of this matter. Nor is it even desirable that I should describe or condemn the appalling circumstances which attended that massacre. I do not ask that the House should spend time debating what happened. The importance of this matter is that unless something is done it is all too likely to be repeated in the immediate future.
Every hon. Member knows that almost certainly within the next week or the next few weeks there will be episodes of this character which, unfortunately, correspond with episodes of a similar character which have marked the previous weeks and months.
I shall not seize upon any passing infelicity of language of which the Secretary of State might or might not have been guilty. That would be quite wrong. But the general impression which has emerged from Government statements and from today's answers is that no marked reaction to this episode is contemplated and that no significant change in Government policy is to be expected.
Under the law of this country Rhodesia is a British colony. The Government of Rhodesia is Her Majesty's Government in the United Kingdom. Not only the 12 people who were killed in those terrible circumstances last week but all the people of Rhodesia are British subjects, citizens of the United Kingdom and Colonies. One recognises the practical difficulty of the British Government in controlling events inside Rhodesia. But I draw attention to the British Government's power to control
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events in those bordering States from which all these murderous assaults come and with which we have formal diplomatic relations. All of them, without exception, are the recipients of considerable aid from the British Government out of the Consolidated Fund of this kingdom.
The matter which I wish to see debated immediately, to prevent imminent repetition of these appalling events, is the action which this Government should take to bring pressure upon those States, which is equal to the pressure which they have exerted upon the Rhodesian Administration, to prevent this happening again. Does anyone doubt that were such pressure exercised, that lower level of violence to which the Foreign Secretary referred would be attained? If we do not have an early debate on this subject the House will not reflect the emotions of the people of this country, nor shall we discharge our duty as the deliberative assembly of the nation. I ask for your consent, Mr. Speaker, for that motion to be moved.
Mr. Speaker: The hon. and learned Member for Beaconsfield (Mr. Bell) did me the courtesy of giving me notice this morning that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the savage and brutal massacre of 12 British subjects, citizens of the United Kingdom and Colonies, at the Vumba mission school and the duty of Her Majesty's Ministers to do immediately what is in their power to prevent the certain repetition of murderous assaults upon British subjects by persons operating from neighbouring territories with which Britain maintains diplomatic relations.
As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the order but to give no reasons for my decision.
I listened carefully to the exchanges this afternoon. It is not for me to decide whether there is to be an early debate. I merely decide whether there is to be a debate tonight or tomorrow night. I have given careful consideration to the representations that the hon. and learned Member for Beaconsfield has made. I

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realise the depth of feeling on the question. But I have to rule that the hon. Member's submission does not fall within the provisions of the Standing Order and therefore I cannot submit his application to the House.

RHODESIA (BRITISH MISSIONARIES)

  STATUTORY INSTRUMENTS, &c.
  Ordered,
  That the draft Maximum Number of Judges Order 1978 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Foot.]

ORDERS OF THE DAY
  SUPPLY
  [25TH ALLOTTED DAY]—considered
  SUPPLY

    TRADE AND NATIONAL PROSPERITY
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]
    4.25 p.m.
    Mr. John Nott: After the Foreign Secretary's statement and the tragic circumstances surrounding it, I think that the House will find it difficult to effect the change of mood which our debate on trade requires. As my hon. and learned Friend the Member for Beaconsfield (Mr. Bell) said a few moments ago, we have just been discussing a deeply emotional matter which causes the whole nation grave concern. To switch from the horrors of the Rhodesian incident to economics is no easy task, not least because I should like to discuss world trade issues in a fairly free-ranging manner.
    I hope that the House will forgive me if I attempt to effect the transition in a gradual way. In order to do so, I have had to change the content of the early part of my speech because the House's mood will be rather different from what I originally anticipated.
    By choosing the subject of trade for this debate, we are not in any way seeking to pillory the Secretary of State. We chose the subject because it is topical and of great importance to the nation. Yet it is virtually never discussed in Parliament as a separate issue. We are accustomed to frequent debates on foreign policy. Trade comprises the most important part of our foreign policy. But trade is in 1978 still a somewhat turgid, if not sordid, parliamentary subject, unsuitable for gentlemen and certainly for hon. Gentlemen in the House. I think that the Secretary of State would agree that that is the general attitude towards it.
    Because of that, the Secretary of State has been able to pose among intellectuals outside the House as almost the creator

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    of modern mercantilism—a type of messiah of modern mercantilism—criticising foreigners such as the Germans for inconsistencies and implying that only he mixes genuine free trade sentiments with political reality, as if political reality exists only in Birkenhead and that it does not worry Bonn or anyone else. In the process, it tends to be forgotten that half the Secretary of State's parliamentary colleagues and a fair proportion of the Cabinet are emotionally wedded to putting a ring fence around Great Britain, to creating a kind of fortress around Britain out of which I believe that they would successfully subjugate the British people.
    The Prime Minister himself is threatening to pull up a drawbridge of the fortress unless every other country in the Western world inflates its economy as fast as we would wish to inflate our own, given, of course, that the Prime Minister shortly will be seeking re-election.
    I hear—I think that there must be some truth in it, and no doubt the two members of the Cabinet who are present will confirm this—that, this time more than any other, there is a real determination to achieve something concrete at the summit, rather than a vacuous communique with no commitments, which would suit the personal inclinations and the political situation of the Prime Minister very well indeed.
    As the multilateral trade negotiations come up to the 15th July deadline, what is increasingly demanded of the present Labour Government is a firm statement against the proliferation of State aids and subsidies which have come to represent perhaps the most bizarre array of devices for unfair competition among the Western nations.
    A country such as Britain, which depends upon an open trading system almost more than any other country for the maintenance of jobs and for the prosperity of its people, is now considered to be—I make the comment objectively—perhaps the most protectionist-minded and to have the weakest Government in resisting pressures among all the Western allies. Perhaps, therefore, the Secretary of State will take the opportunity of telling us what the Government intend to say in these months leading up to the summit about the charges that are
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    increasingly made against the Cabinet that we are the leaders of the world in the field of political subsidy and of devices—non-tariff barriers—to restrain the open trading system.
    Having said that, I understand the political argument for import controls and for greater protection which are frequently advanced by Labour Members below the Gangway. I understand the political argument all too well. The hon. Member for Tottenham (Mr. Atkinson) is not present in the Chamber today, but I take one quotation from what he said recently:
    "If the whole of the Socialist case is about planning the economy, how can we plan it in the absence of controls on our external trade?"—[Official Report, 3rd November 1975. Vol. 899, c. 10.]
    Of course, the hon. Gentleman is right in his own terms. By that statement, he demonstrates his Marxist credentials admirably. A protected Britain would inevitably be a Socialist Britain, necessitating planning agreements, the central allocation of resources and a sort of Stakhanovite determination to increase investment at the expense of personal spending.
    Mr. Alan Clark: rose—
    Mr. Nott: My rather rude gesture to my hon. Friend was made only because he leapt to his feet at a slightly embarrassing half-way point in my sentence.
    Mr. Alan Clark: As a matter of historical accuracy, perhaps I may say that this country has been protected in the past, and very successfully protected, in terms of Conservative Governments. I do not remember any Socialist Government doing it.
    Mr. Nott: In the content of my speech, I shall be comparing the hon. Member for Tottenham, in his likeness, with Joseph Chamberlain. I shall be referring to the right hon. Member for Down, South (Mr. Powell) as being the modern reincarnation of Herbert Asquith. Certainly the arguments for and against free trade have not varied much. It is just the people who have changed. If my hon. Friend the Member for Plymouth, Sutton (Mr. Clark) wishes to align himself with the hon. Member for Tottenham and Joe Chamberlain and other famous

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    characters in British Tory Party history, that is fine by me. I shall be coming on to the arguments for and against free trade in a moment. Perhaps I may continue with the political arguments before I get on to the party and economic arguments involved.
    I think that controls upon our imports of the kind suggested by the Cambridge school—I shall go into some of its arguments shortly—would not only provide a growth in monopolies on both sides of industry but would be an invitation to endless lobbying, the peddling of contracts and the corruption of bureaucracy which has been evident in virtually every country that has pursued the course of import controls of the kind advocated by Labour Members.
    I say to my hon. Friend the Member for Sutton that in the process the British housewife would pay much higher prices for her goods and would have much less choice from which to choose when she went to her supermarket. Her husband, if he had a job at all, would still be working in an ill-equipped large factory in heavy industry. In this perhaps one can say that she and her husband would come to share some of the pleasures of living and working in the Soviet Union, but it is not precisely what the British people want.
    The tendencies to which I have referred in our country under Socialism today are there already; I say no more than that. They can be seen even without a wall of controls around our foreign trade. To justify those controls on political grounds, as I have been saying, I can understand. They would help to bring about a truly Socialist society. But to justify them on economic grounds seems to be a grave mistake, because the political arguments are not really arguable. I do not understand how an Englishman such as the hon. Member for Tottenham could really want the kind of political society which he is seeking for the British people, but it is an unarguable fact that he does, and it is so astonishing to me that there is nothing much that I can say in answer to it. However, when the hon. Member seeks to argue the case on economic grounds the point is arguable. That is what I shall attempt to do, briefly, in my speech.
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    Up at Cambridge there is some disagreement about whether we should describe the economic process, which according to Cambridge calls for import controls, as the de-industrialisation of Britain, or as what Lord Kaldor calls the pastoralisation of the British economy. I suppose that Lord Kaldor's description is a rather more romantic Hungarian one than that of Wynne Godley. But both of them, if they were to succeed in achieving their objectives—I say this without any demur—would reduce Britain to a Socialist slag-heap and would create just the type of political society that Labour Members below the Gangway want.
    I see the Secretary of State essentially as a single blade of grass, rooted rather insecurely in the industrial slag-heap of Socialism. I admire his pertinacity. I admire him very much. Far be it from any of us to reduce his salary. He has been extremely effective, and of all among his colleagues I think that he is grossly underpaid.
    I wish that I could say that of the right hon. Gentleman the Chancellor of the Duchy of Lancaster. He does not take any salary at all. Yet, in my view, he costs too much. He is an expensive hobby. Despite his personal charm—which I acknowledge, and which all of us in the House admire—in public life the Chancellor of the Duchy of Lancaster—I am glad to say that he will be winding up the debate—is an inflator, a compulsive debtor, and he is as capable of speaking for free trade, free enterprise and a free society today as he is of voting against all of them tomorrow. In that, I think that he is a true social democrat.
    I come back to my hon. Friend the Member for Sutton. I come to the question of the arguments for and against free trade. As I have said, I do not think that they have much changed since 1900. I think that that was more or less the period to which my hon. Friend was referring. The only difference is that both sides now have computers—the Cambridge model on the one hand and the Oxford model on the other hand—and into these computers are programmed whatever assumptions are necessary in order to bring about the desired result. That is virtually the only

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    change that has come into all the arguments.
    I think, however, that the vocabulary and the jargon have changed and, most of all, there is now no attempt whatsoever at intellectual consistency. One might expect that the Tribune Group would be the leading castigators of the Multi-Fibre Arrangement. One might expect it to castigate the MFA as a trade conspiracy against the poor. If one looks at it in terms of the workers in Bangladesh, one realises that that is precisely what it is.
    Many Labour Members, perhaps rightly, spend much of their time shouting about the poor conditions in which Tamils work in the tea estates in Sri Lanka. They spend much of their time, I think rightly, castigating, let us say, Consolidated Goldfields for exploiting black miners in Southern Africa and in Cornwall—which it is good at; I say that with the help of parliamentary privilege, which I should not do. Yet those same hon. Members find it possible for their hearts to bleed for the workers in Bradford and those in Bangladesh at precisely the same time.
    Similarly, their hearts bleed for a newborn lamb produced by a New Zealand farmer on 10,000 acres at the same time as they bleed for the agricultural worker in Wales earning £43 a week and for the Welsh hill farmer. There is a grave inconsistency there.
    It is not obvious to me why it should be sensible for the United Kingdom to become dependent on world gluts of food but not on world gluts of steel, shoes, ships and textiles. I do not believe in this country becoming dependent on surpluses of either, but it is inconsistent that the Labour Party wants us to be dependent on world surpluses of food but puts up its hands in absolute horror at the thought that we should erect barriers against world surpluses of shoes, ships, steel and textiles.
    Some controls are advocated purely to isolate specific industries from foreign competition. In a way, the arguments here for the Multi-Fibre Arrangement are an extension of the traditional argument for protecting infant industries. In some cases the wish is to protect senile industries, but the economic arguments are fundamentally the same. The attempt in
    1066
    a way is to construct an argument for protecting the senile industries with precisely the same economic arguments as traditionally were used for protecting infant industries. The most prominent advocate of that view is Commissioner Davignon in Brussels.
    On the other side—this is a more interesting argument to discuss—it is proposed, as part of a coherent strategy to increase output and employment in this country, that we should have general import controls. The argument for it is that by that method one could set up a system which would bring about adjustments in the balance of payments without creating the inflationary pressures which are caused by changes in the exchange rate.
    But, whether one brings about a correction of the balance of payments by a depreciation of the currency or by import controls, a curb to domestic spending by lowering real wages is essential. It would have to happen in both cases. Any gain from a marginal change in the terms of trade would be lost by even the most modest retaliation or any lowered efficiency.
    At least, if one is seeking this adjustment—that is what the Cambridge school is seeking—surely it is better to operate on the currency, because that not only benefits the import side of the equation but also makes exports more profitable. It is wrong economically to look at only one side of the equation—imports—and ignore currency adjustments, which help exports and bring the economy back into balance.
    If we sought controls, where would they come? Presumably the controls—I am now talking of the Cambridge school's proposals, which have great support in the Parliamentary Labour Party—would not be put on imports of machinery. There has been a faster increase in imports of machinery in the last 10 years than of anything else. Machinery is what industry needs to compete with foreign goods. That is at the heart of the cry for greater productivity and more investment.
    Presumably the controls would not apply to food, drink or tobacco, because, in spite of the common agricultural policy, imports of those goods have fallen sharply in the past 10 years as a proportion of total imports. Therefore, the only area

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    available, as I understand it, is light finished goods and consumer goods.
    On the figures, an improvement of about 5 per cent. of our gross domestic product—roughly what the Cambridge school is seeking—would require a tariff of about 250 per cent. on a wide range of light manufactured and consumer goods. The figures of the Cambridge school, as I believe other economists have conclusively shown, are completely unacceptable.
    If one rejects the concept of import controls, which we do, in favour of an open trading system, where can we look for our markets? The options are narrowing day by day, and, unless the summit can reverse that downward slide to protectionism, where shall we find our markets? Now, 27 per cent. of our gross national product, of all we produce, is exported. The figure for Japan is 8 per cent. and for America 12 per cent. Where shall we find the markets for those goods in a world of increasing protectionism?
    I am sure that the foundation of our trade policy must lie within the EEC. In 1978 it provides us with an almost unique area—namely, a reliable free trade area in an increasingly protectionist world. We are dealing here with a large trading bloc, representing one-fifth of world trade. It is large enough for us to develop our technology, it is rich enough for us to sell our goods up-market and it is large enough again for us to test our competitiveness within it and develop the industrial and commercial specialisation without which we could never compete in the wider world.
    So, whether hon. Members are for or against the Common Market for political reasons—I understand the arguments both ways—nevertheless, for the benefit of the nation's prosperity, whatever one's view of the political aspects, I cannot understand how anyone can wish to see trade barriers between Great Britain and the EEC. That is one sure open market for our goods in the world today.
    Mr. Alan Clark: We are in deficit with the EEC.
    Mr. Nott: Of course we are. We have been in deficit with virtually every country. As our general trading deficit reduces, so our trading deficit with the EEC reduces. The critics of our trade
    1068
    performance with the EEC should ask themselves where they think we shall sell those goods—27 per cent. of our GNP—if trade barriers are erected in the Community. I hope that hon. Members will answer that question.
    Within the Community, our policy towards the United States and Japan should be based on reciprocity—on the mutual and balanced elimination of tariffs and non-tariff barriers. Here the outcome of the Tokyo Round is vital, and in this respect our Government have a major sacrifice to make by abandoning their commitment to the array of subsidies which they have erected. The Tokyo Round will not succeed and the summit will come out with another vacuous statement unless the British Government are able to show that they, too, are prepared to make their sacrifices.
    I believe that our voice within the EEC must support, of course, the strongest negotiating stance towards the United States and Japan, but it should also be a voice for liberalisation, particularly in agricultural products, in State monopoly and in industrial subsidy. It is in these latter areas that the British have under the Labour Government been world leaders.
    Mr. Mike Noble: The hon. Gentleman said that we should show courage and abandon subsidies. Will he be precise and say which subsidies a Conservative Government would abandon?
    Mr. Nott: I am happy to be precise, but all I have time to do is to give one example. Less than six months ago the Government provided 110 per cent. credit and massive subsidies for the export of ships to Poland. I give just that one example. That is an industrial subsidy that the Conservative Government would never have given.
    I come now to the LDCs.
    The Chancellor of the Duchy of Lancaster (Mr. Harold Lever): I am curious to ask the hon. Gentleman whether he really believed the latter part of his statement, namely, that the Conservative Government would not have given a similar subsidy or did not give dozens of similar subsidies when they were in office.
    Mr. Nott: Yes. The reason why we would not have done so is that even on a political calculation there are far more people working in our shipping industry—about 100,000—than in our shipbuilding industry. That is not a reason in itself, but there is nothing to be gained for the people of this country by our being world leaders in a credit race. I should be astonished if the right hon. Gentleman and the Secretary of State for Trade within the Cabinet actually supported the Polish shipbuilding deal. Indeed, if the Secretary of State did it would be a good reason for reducing his salary. I absolutely cannot believe that any Secretary of State for Trade would ever have dreamt of such a thing, but we shall have to wait for Richard Crossman's successor round on about 13th October to tell us the answer to all that.
    I come now to a difficulty—our policy towards the less developed countries. This is the area which interests the hon. Member for Rossendale (Mr. Noble), who is waiting for me to put my foot in it so that he can campaign in Rossendale—which he cannot hope to win—on the argument that the Tories will abolish the Multi-Fibre Arrangement, that they will open the floodgates to imports and that they will "ruin your jobs". I know that he is busy at that game now and that hon. Members with marginal seats in Lancashire will talk all kinds of conceivable nonsense they can to delude their constituents.
    I think that the less developed countries pose problems, not least because of their extreme economic nationalism and the manner in which they have—take the shipping industry—done great damage to our interests as a nation. Nevertheless, I think that we should support the transfer of resources to the poorer nations, but it must be on the understanding that it may be necessary to offset some gain to them by trading agreements for the orderly marketing of their products in our domestic markets. I am referring to items such as the MFA.
    Towards the Eastern bloc we should remember that a vast proportion of the accumulated debt to the Western world of $40 billion has found its way into the arms programme of the Soviet Union. We have been paying it too much to destroy us. It is time we put our trade
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    with it on a sensible strategic and commercial basis.
    In general, our policies would involve the phasing out of subsidies. I emphasise "the phasing out of subsidies". I believe that we, like the present Government, would wish to be—indeed, we always have been in the past—a firm and resolute opponent of unfair trading practices, particularly dumping. I am personally far from satisfied that the Commission is yet equipped to handle antidumping cases expeditiously. We are doing our best to see, for instance, how the MFA is being monitored. That is a very important feature of our present trading arrangements.
    It is also essential that we obtain a revision to Article 19 of the GATT—a new safeguard clause—to protect jobs against sudden and temporary surges of imports. As long as it is policed by GATT, it is fair and proper that we should have that protection against unfair trade.
    So where do I criticise the Government for their policies for trade? I shall take a few minutes more in saying where. I have made it clear that as a nation our jobs and our standard of living are being eroded by the lead that the Labour Government are giving in "unfair trade". I also think—I address this more to the Chancellor of the Duchy of Lancaster than to the Secretary of State for Trade—that the Prime Minister's emphasis on demand, on macro-economic policy, for the summit is utterly misplaced. The constraints on real growth do not lie in a deficiency of consumer demand in Germany any more than they do here. I think that Chancellor Schmidt is right and that Premier Callaghan is absolutely wrong.
    If the Chancellor of the Duchy of Lancaster is looking towards a new monetary regime which would replace the post-war system and deal with the massive surpluses in Germany and Japan, I would debate that with him freely, but to look to the stimulus of demand at this important juncture in the Western world would, in my view, only create renewed inflation.
    The way to achieve real growth in world trade as well as in the British economy at present is to remove the multiplicity of constraints to flexibility, employment and output. All of them

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    lie on the supply side of our economy and none of them on the demand side.
    The Government's housing policies have contributed to an immobile society. People are trapped in public sector housing and families cannot move to new and better-paid employment.
    The Government's employment policies are now a significant disincentive to recruitment in new and smaller industries. The Government's tax policies concentrate tax assistance on capital-intensive, low-return sectors of British industry. They are driving our most talented young business men into American industry and banking. They force our entertainers, our musicians, our artists, to live abroad. The hon. Member for Newport (Mr. Hughes) laughs, but what I have said is true, and the work of those people could be an important source of income for this country.
    The Government's tax policies ensure that venture capital is institutionalised instead of personalised, by taxation at nil for institutions and at 98 per cent. for persons. The Government's financial policies crowd out the growth sector of our economy from access to development capital at reasonable rates of interest. How can any money be available out of what we produce in this country for private sector small, growing companies at reasonable interest rates when the Government have a borrowing requirement of £8½ billion? The money cannot be there.
    The Government's exchange control policies and exchange rate policies are, in my view, misguided. Exchange control should be concentrated on removing exchange control restrictions which damage the invisible sector and smaller companies which wish to trade and invest abroad. In fact, the Government go the other way. The exchange rate policy surely should aim not at a stable currency, a stable exchange rate, with all the consequential money supply problems involved, but at generating a genuine two-way flow of capital funds by British residents and firms, as a result of a relaxation of exchange control. The Secretary of State is scribbling on his pad. I hope that he has heard all that I have said.
    I want to see stability of the exchange rate achieved by a two-way flow of personal
    1072
    funds across the exchange rate, not by the Bank of England intervening with the parity of the pound and creating the sort of money supply problems which the Secretary of State himself well understands.
    I shall not go into the greatest restraint of trade because I want to draw to an end. The greatest restraint of trade will always be a restrictive practice. It has been this Government's policy to enhance the monopoly power of some of our most powerful unions in almost every field of our political and economic life. Our trade union structure remains the single greatest obstacle to the prosperity of the nation. But here we shall have to bide our time. One day, one union, deluded by the arrogance of its own power, will overstep the mark just once too often, and then the nation will return to balance.
    A trade policy is not about, or should not be about, putting more money into the British Overseas Trade Board or into overseas exhibitions financed by the Government—looking for new growth points here and growth points there, spending new money on the trade departments of our embassies overseas—all the minutiae of Government action, Government intervention and Government selective assistance, involving an ever-growing bureaucratic back-up. That is not what a trade policy should be.
    A trade policy should be directed at removing the constraints about which I have been speaking. I believe that it would be possible to have a trade policy which was based unashamedly on national interests and which was not dictated solely by sectional pressures or by a bleeding heart.
    I say not that it would be easy but only that it would be possible, and what we must do is move in that direction in the next few years. What is remarkable about our economy today is that, possibly, we still have the most efficient agriculture in the world, the second largest invisible sector in the world, and a great mass of small and medium-size companies which are the leaders in their field in exporting throughout the world. If these companies can survive the climate of the past four years—and together with our large companies they are now contributing 27 per cent. of our gross national

    1073
    product in export markets—one has only to imagine what our trade in the wider world would be like if we were to remove some of the constraints of which I have spoken.
    5.2 p.m.
    The Secretary of State for Trade (Mr. Edmund Dell): First, I thank the hon. Member for St. Ives (Mr. Nott) for raising this subject in the House today. As he says, we have too few opportunities to discuss these trade matters, which are nevertheless of considerable importance. I am especially grateful that the hon. Gentleman is not proposing to reduce my salary. In the House of Commons as it is constituted at the moment, one cannot be wholly confident of what would have happened if he had felt it necessary to move to reduce my salary.
    I apologise to the House, as I have already to the hon. Gentleman, for not being able to be present later on to hear the winding-up speeches. In the course of pursuing the policy which the hon. Gentleman recommends we should pursue to a successful conclusion in the multilateral trade negotiations, now entering a further stage, I have this evening to go to Luxembourg to help to launch them on this further stage.
    The hon. Gentleman compared these debates to foreign policy debates. I understand that it is the practice in foreign policy debates to engage in what is called a tour d'horizon. The hon Gentleman has engaged in something of a tour d'horizon, and so shall I, though perhaps selectively.
    The hon. Gentleman referred to my so-called mercantilism. I assure him that the speeches which I have made, especially over the past two years, on international trade issues I regard simply as a modest contribution to open government. Rather than mouth the traditional pieties of liberal economics, I prefer to talk about the real questions which engage Governments in the course of international trade negotiations. I think that the traditional pieties of liberal economics, as I call them, tend to conceal rather than reveal the real questions on which nations engage when they discuss these matters.
    Nations talk about the real interests of their people, as they perceive them,
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    about achieving perceptible benefits through the trading system and about achieving a better balance in the trading system. In my view, the best way of achieving a more open trading system, and, indeed, the best way of ensuring that the trading system, open as it is, remains open, is to ensure for nations the possibility of achieving benefits from the trading system, for once they begin to believe that those benefits are retreating they will soon depart from it.
    The open trading system has no such guarantees in the political structure of the world, or otherwise, which will guarantee its continuance if nations begin to believe that they are losing rather than gaining from its operation.
    The hon. Member for St. Ives, I know, is a dedicated free trader—until one comes to specific examples. I always listen with interest when the eloquence about free trade turns to consideration of particular issues. I was waiting for that point in the hon. Gentleman's argument when he would begin to justify the Multi-Fibre Arrangement, because I observe that on the Benches behind him were certain Members who would be interested if he condemned the MFA.
    Sure enough, the hon. Gentleman found a reason for justifying the Multi-Fibre Arrangement. The paeans of praise for free trade continued up to the point at which he had to meet a specific political problem—a political problem on his own side and an employment problem in the country as a whole. At that point, the hon. Gentleman became a mercantilist. I welcome him to our ranks.
    The hon. Gentleman accused me of believing that there were political problems in Birkenhead but not in Bonn. I say at once that there are political problems in Birkenhead, though I hope that I shall be able to surmount them at the forthcoming election, whenever it occurs. I am only too appreciative of the fact that there are political problems in Bonn, and part of my endeavour in international discussions is to get people to talk about their own problems overseas as though they had political problems just as we have.
    I take, first, the example of agriculture. The hon. Gentleman, I believe, would like a rather more open policy on agriculture. That is the British Government's

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    position, too. We have argued that case in the Council of Ministers of the European Community. I listen regularly to the paeans of praise for free trade which issue from the mouths of German Ministers, as I have listened to them today, until the question of agriculture arises. I should like a little assistance from them on agriculture.
    We are at present negotiating or, rather, pressing within the Community that there should be better access for Australian beef and New Zealand cheese, not to undermine the common agriculture policy but to give other countries which also have their standard of living to earn in the world an opportunity within the European Community market. I should like a little assistance on that from all those within the European Community who argue the free trade case. I do not want them to be selective any more than we are sometimes required to be selective, but they are selective. People in Bonn are aware of political problems.
    The same might be said to be true of shipping. I have never claimed that the organisation of world shipping is a miracle of competition or free trade, but at any rate it is a lot better than the system which it is proposed to establish under the United Nations liner code. I should like a little assistance from all those within the European Community who argue the free trade and competition case in order to avoid the coming into operation of the United Nations liner code at least in the way it is currently suggested. But I find that there are political problems in Bonn, and it is suggested there that the United Nations liner code should be adopted.
    As for the steel industry, I have noticed no difference in Bonn. True, there is talk about restructuring. Talk about restructuring is only too often the tribute which vice pays to virtue, and the essence of the matter is whether in the current difficult employment circumstances in all our countries we shall sustain our steel industries.
    We know about the difficulties with regard to insurance. We should like as much of a common market in insurance as there is at the moment in goods.
    I believe that the objective of British trade policy—indeed, this is what it is—is to preserve the open trading system.
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    It is more difficult to preserve it today because of the economic conflicts in the world. Those conflicts are increasingly sharp because they appear to represent an increasing threat to employment, because fewer people see the benefits from the international trading system.
    I want to preserve the system. I think it right that the British Government's objective should be to preserve it. But in preserving it we must take some account of the realities of what that open trading system, as we have built it since the war, really are. It is not a system that is perfectly free, perfectly open, perfectly multilateral. Indeed, if it were, we should not now need the multilateral trade negotions going on in Geneva.
    The system does not have those characteristics for certain very clear reasons, among which is the fact that nations have determined for themselves, within their own sovereign jurisdiction, that they will maintain certain industries in their countries, whatever the competitive circumstances. The prime example is agriculture, but there are other examples, including steel. Given the industry's present excess capacity, we are approaching a world arrangement for the steel industry. Does anyone imagine that any country with a significant steel industry will allow it to succumb to competitive forces? Of course, countries will not. They will try to ensure that their steel industry adjusts, to ensure that it is preserved.
    Much may be said at present about textiles.
    Mr. Tim Renton: I was very interested in the right hon. Gentleman's comment that he thought we were approaching a world arrangement for the steel industry. Does he really confidently expect that that arrangement will be able to embrace brand-new producers of steel, such as Venezuela, Iran and Mexico, which have relatively small domestic markets and have so far been uninterested in joining such an arrangement?
    Mr. Dell: The hon. Gentleman is absolutely right to correct me. When I was talking about a world arrangement for steel I was thinking of the European Community, the United States and Japan. He is absolutely right in pinpointing one area of great difficulty, the protected steel

    1077
    markets in certain developing countries which are used as a launch basis for significant exports of steel.
    The reason I have given is one of the reasons why we do not operate, and will not operate, a totally free trading system in the world. To approach the discussions on the subject as though there were such a system, or could be one, is to be totally unrealistic.
    We also have problems of protecting employment, an important consideration that Governments all over the world take very much to their hearts. It does not happen in this country alone. We have arranged selective import controls with the Japanese in relation to cars and other products that they export to us. But that is not done by the United Kingdom alone. We are not in the lead in following a protectionist path. It is done by the United States, as in the case of the footwear arrangement with Korea, by France, Italy and virtually every major industrial nation which in one sector or another wishes to accommodate the adjustment of its industrial structure to the economic realities of the modern world.
    I am glad that the hon. Member for St. Ives came to the conclusion that, even with the general scope of his views, he could support what had been achieved in the Multi-Fibre Arrangement. That negotiation was successful. I believe that it has given confidence to British industry. It should ensure to the British textile industry a more secure market, both within the United Kingdom and within the EEC.
    The position in respect of Mediterranean suppliers is still a little worrying, but the Commission must meet the obligations that it entered into on 20th December regarding Mediterranean suppliers generally. I hope that the matter will be settled satisfactorily to us. I think that in the Multi-Fibre Arrangement we have given valuable guarantees to the British textile industry.
    For a series of reasons, when we talk about preserving the open trading system we are not talking about the preservation of a perfectly open, perfectly free international market. We are talking about preserving the current reality and improving it by steps if we can.
    Mr. Max Madden: Does not my right hon. Friend agree that in facing this reality, those who uphold the prin., ciples of free trade will face an increasing threat from those low-wage Asian economies with great growth potential and access to technology? Does not he believe that we shall have to build into the world trading system an arrangement whereby those countries which do not observe fair labour practices must pay an adjustment to recognise their non-observance of practices which prevail in other, predominantly Western, countries?
    Mr. Dell: It is very difficult for this country or any developed country to try to control the social conditions in other countries. Nevertheless, my hon. Friend has pinpointed a developing problem, one that we propose to deal with in part through the multilateral trade negotiations. I hope that it can also be dealt with in part by beginning to open the markets of at any rate the more developed of the developing nations, by their beginning to accept certain of the responsibilities of the open trading system, from which they see benefits.
    I understand that developing countries, even the more developed developing countries, wish to have a secure position. They do not wish to go into debt more than they can avoid. Therefore, they insist on maintaining a degree of control on their international trade much greater than the Western developed countries do. They show what the hon. Member for St. Ives called extreme economic nationalism. I understand why they do. It is because their position in the world is insecure. But I believe that the more developed of them need to begin to recognise the responsibilities as well as the opportunities of their trading position.
    Mr. Nigel Forman: On the question of the super-competitive countries and the appropriateness of a British or European response, what weight does the right hon. Gentleman's Department give to the following idea? Given that we shall not have a pure free trade system, for the reasons the right hon. Gentleman has given, would it not be much better for some of the money now going in large quantities to the purposes of protection, whether directly or indirectly, to be allocated to adjustment

    1079
    assistance in those same developed economies to help vulnerable sectors make the transition to areas in which they might enjoy a comparative advantage? How much work is being done in that regard?
    Mr. Dell: A great deal is being done by way of adjustment assistance, or what is called adjustment assistance. But the hon. Gentleman should face the practical reality. It is easier to spend money on adjustment assistance than to achieve adjustment. If the mere expenditure of money on adjustment assistance sufficed to move people from one employment into another, I would expect that it would suffice to move the people currently out of employment into employment. That is a process upon which no country in the developed world has recently had a remarkably successful record.
    We are dealing with a trading system that is mixed in its character, with protectionist elements in it, fortunately with a large open element, with different countries operating in different ways and in different relationships to it, with most developing countries following highly protectionist policies. Nevertheless, I believe that it is important to retain the greatest openness possible and to sustain the open trading system. It is in peril at present, although not primarily from any action proposed or intended by this country.
    My first reason for believing that we should sustain the system is political. We have built up in the Western world a political relationship which it would be very difficult to sustain if we were launched into trade war. We have built up a defence system which might be imperilled by a trade war between the main elements in that defence system. Advantages to the consumer and to us arise from the system. If we thought of acting unilaterally, we should bear in mind the serious danger of retaliation against this country's exporting industries.
    Contrary to the argument that I sometimes hear, other countries do not believe that this country is in so special a position, that it is so privileged by the nature of its problems, that a special dispensation should be granted to us to continue to export to markets overseas while protecting our own market, exceptionally, from imports. I do not support that
    1080
    course of action. I wish to sustain the open trading system, because I do not believe the Cambridge hypothesis. I do not believe that protection equals growth. That is a proposition for which I believe there is little evidence. Certainly we can point to some countries which have developed fast under conditions of protection. Equally, we can point to countries which, given protection, have failed to adjust and have sunk deeper into economic difficulties.
    The only thing that can be said about protection is that perhaps thereby it is possible to guarantee survival. But we cannot be sure even of that. I do not deny that under the pressures of current economic circumstances, given the continuation of high levels of unemployment, the world might grow increasingly protectionist. But those who take comfort in that thought—from the fact that thereby growth will be stimulated—are misconceiving the realities of the situation. The dangers which exist today to the open trading system come from the lack of economic growth in the free world. This is widely accepted among the developed nations, certainly among those represented a few weeks ago at the OECD ministerial council.
    Lack of growth makes problems of adjustment more difficult, although it does not make them less necessary. If we do not adjust we accept an economic cost which, ultimately, can be very great. Dangers come from the level of unemployment in the Western world. They come from the continuing Japanese surplus, the existence of which makes it more difficult for the rest of us to accommodate the matching deficits which the OPEC surpluses require. I understand very well the feeling of insecurity in Japan which led to the adoption of policies which, in turn, have led to these surpluses. Undoubtedly, the shock to the Japanese of the oil price increase was exceptionally great. But they must, as they have said, reduce this surplus and do so by opening their market, by importing more manufactured goods, not just by filling tanks with OPEC oil.
    Mr. Julian Ridsdale: The right hon. Gentleman has been talking about growth. Surely an important element in encouraging growth is the recycling of capital, both from the Arab

    1081
    world and Japan. Is not this another side of the argument concerning the reduction of the Japanese surplus? We should encourage the import of capital and thereby produce the conditions that would enable us to deal with some of our unemployment. The Japanese would be willing to export the capital.
    Mr. Dell: As I said the other day, I would certainly welcome Japanese investment in this country, if that is what the hon. Gentleman is proposing. If the Japanese are to invest in the European Community, I would prefer that they invested here rather than in any other of the countries of the Common Market.
    Mr. Nick Budgen: Would the right hon. Gentleman comment upon the last attempt made by the Japanese to open a television factory in this country, something which was greeted with a great deal of opposition, principally, I suspect, from the trade union movement, which opposition the Government did very little to condemn?
    Mr. Dell: That attempt was also opposed by the employers. I say to the hon. Gentleman that I wish that the possibilities for inward investment in Japan were as open as the possibilities of inward investment in this country. I should like to see Japanese investment located in this country. My right hon. Friend the Minister of State for Industry has recently been there.
    It is arguable that there is a limit to which even the Japanese Government can control the operations of Japanese industry. Certainly one thing which the Japanese Government could do at this moment to improve the atmosphere in the negotiations over the multilateral trade arrangements is to make a much better tariff offer than they have so far done. The tariff offer which has been made is totally unacceptable and if it is left on the table as it is I believe that the European Community will have to react accordingly in respect of its tariff offer. There are also problems which arise from the United States' deficit. a deficit stemming very largely from the size of its oil imports and from the rise of protectionist sentiment in the United States.
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    This brings me to a brief discussion of the present situation in the multilateral trade negotiations. So far these have largely taken place between Japan, the European Community and the United States, although very soon all other countries will be clamouring to join. The arrangements cannot be finalised without the participation of many other countries.
    The United States already has a large surplus with the European Community—about $6 billion in 1977. It cannot hope that, to help it pay for the oil, the European Community should accept an even larger deficit with the United States. I hope that that will be in the minds of the American negotiators when they discuss the various difficult issues still to be settled within the multilateral trade negotiations.
    There is first of all the subject of agriculture. We are willing to help here. We wish to provide better access for external supplies of agricultural produce into the European market. If we can achieve that, we would also hope to help Australia and New Zealand with their current requirements of the European Community in respect of better access. I hope that part of this problem will be tackled successfully through the International Wheat Agreement, and I hope that we, for our part, will achieve—notably for the benefit of our Scottish whisky producers—the wine gallon assessment system. There is no problem for this country over our relations with external suppliers of agricultural goods. I believe that all this can be done without in any sense undermining the common agricultural policy.
    I turn now to the subject of tariffs. Here the position is, unfortunately, still rather unsatisfactory. In this negotiation we were aiming to achieve not just a reduction of tariffs—phased over eight years with a break clause over five—but a harmonisation of tariffs. The characteristic of the American tariff has been that it has a series of high peaks. We thought, correctly I believe, that only by harmonisation would real reciprocal benefit be achieved. I cannot say that the United States' offer represents a satisfactory offer. There is one notable example of great interest to British industry, and that is to do with woollen textiles, where the

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    United States' offer is altogether insignificant and comes nowhere near meeting the requirements.
    I have the pleasure of negotiating with the United States from time to time on civil aviation matters. There is no figure on the American scene for whom I have learned to have a greater admiration than that of Mr. Alfred Kahn, the chairman of the Civil Aeronautics Board, who, the House will remember, is a devoted exponent of competition in civil aviation. I wonder whether I might modestly make a suggestion to President Carter to the effect that he should remove Alfred Kahn from the chairmanship of the CAB, where he is no longer needed, and put him in charge of the textile industry, where exactly the same philosophy of competition would be of mutual benefit. So far, we have not achieved, in the United States' offer, the sort of response by way of harmonisation which I would have expected.
    Mr. Nott: Almost everything the right hon. Gentleman says about the position of the United States is correct. Certainly no one is asking the British Government to declare their hand in what will be very difficult negotiations, but would it not be possible to say that we, too, have a few beams in our eyes? Is it not the case that the Americans are asking us to make some concessions on regional policies, industrial subsidies and other of our non-tariff barriers? Will the Secretary of State actually listen to what other people think about us?
    Mr. Dell: The hon. Gentleman is absolutely right. Not merely do I listen to what other people say about us; I frequently tell them what they should say about us. I frequently say that there are many beams in our eyes and that those beams represent our political realities. I ask that others should be as honest with themselves in what they say about their own policies. I entirely agree with the hon. Gentleman. I do not go into any negotiations pretending that in this country we have a pure free trade policy. I do not go into any negotiation pretending that we do not have protective arrangements in respect of these voluntary arrangements that we have with a number of sources of outside supply and the rest. The subsidies that we give, so-called, are, after all, public facts. But they must for their part conduct this discussion on
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    exactly the same level of acceptance of these realities. This is exactly the point that I am trying to make. We shall arrive at better understandings if it is in these terms that we discuss them.
    On subsidies, I always listen with particular interest to the hon. Gentleman, and, indeed, to anyone else who was a member of the previous Conservative Government. My mind goes back to the Industry Act 1972, which I criticised again and again from the Opposition Benches as the most lavish handout ever proposed by any British Government to British industry. Is it the subsidies provided in the Industry Act 1972 to which the hon. Gentleman was referring? I hope that we can come to some arrangement about subsidies which will enable us to achieve success in the multilateral trade negotiations, but this cannot be allowed to undermine the regional and industrial policies which we follow in the United Kingdom, and which are followed widely in the European Economic Community. It cannot be on that basis that we achieve any such understanding.
    I should love to see the abandonment of subsidies to the American shipping industry. That, no doubt, would do a great deal of good. There must, indeed, be understanding of each of our interests before we can come to an agreement.
    Mr. Nott: If the Secretary of State would give a commitment now that the Government will return to the level of industrial subsidies existing in February 1974, and that that will be their position in the multilateral trade negotiations, I am sure that it would be a major move forward.
    Mr. Dell: If the hon. Gentleman will examine once again the Industry Act 1972, he will find that there was no level of subsidy whatever that could not be provided under that Act, and therefore the assurance that he is asking me to give would be meaningless.
    In the multilateral trade negotiations, the Tokyo Round, we have a long way to go on a number of issues. The timetable is pressing. The date has been agreed as 15th July. Whatever we can do by 15th July, clearly a great deal of detailed tidying up will be necessary thereafter. But all those who are participants in the negotiations accept that it

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    is vital that they should be successful, not even primarily for economic reasons but for political reasons. It would be a damaging blow to the entire world trading system if we failed to come to a successful conclusion in these negotiations.
    We shall try to make the negotiations a success. Rules provided in the negotiations for the further development of international trade will not, however, be enough. If the open trading system which we have established is to survive without crumbling further, we shall need faster economic growth, a better balance in trading relationships, an understanding of each other's trading problems, and a willingness to discuss and to negotiate about them. The negotiations are to reconcile national interests in as peaceful a way as possible, without trade war, and with mutual advantage. If we can achieve that objective, I think we can preserve the open trading system from further serious crumbling. That, at any rate, is the objective to which the British Government are dedicated.
    5.34 p.m.
    Mr. Michael Shersby: We have listened to two very interesting and very wide-ranging speeches this afternoon, and I should like to follow them with a speech that is designed to look at a rather narrower aspect of Britain's trade with the world.
    I was very glad indeed to hear the Secretary of State say that the objective of British trade policy is to preserve the open trading system, although, of course, he entered some reservations about the way in which an open trading system should work. There is no doubt that Britain lives by its trade. It is often said and we all know that it is true. But we all know that it is increasingly difficult, in the competitive times in which we live, for many companies in this country to operate as effectively and efficiently as they would like to do.
    We also know that many companies in Britain today are facing very stiff competition indeed, not only from other member countries of the EEC but from Japan, Korea, and other countries in the East where high quality goods of low cost are a challenge which we in Britain
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    have to face if we are to be able to trade effectively with the rest of the world.
    The result is that Britain today is a substantial importer of many manufactured products which only a decade ago were made in Britain. We are, for example, importing a substantial quantity of the motor vehicles which are used in our country. High quality motor cars and commercial vehicles from Continental Europe and from Japan are immediately available in any colour and in any model, whereas to obtain a new British vehicle of equivalent specification often means a very long wait indeed.
    Production is a very important element in the whole business of trade with the rest of the world. As we all know, the production of motor cars in Britain is far too low. For example, I am told that, in Britain, Ford produces eight cars per man year, and that British Leyland produces three cars per man year. That compares with the production in Japan of about 65 cars per man year. It is small wonder that we in Britain have to face very stiff competition indeed from those producers.
    While I am on the subject of motor cars, perhaps the Secretary of State would be interested in one figure which came my way over the weekend. I think it is significant when we are looking at the problems that we are facing in terms of international trade and in terms of the Japanese motor industry. Over the weekend a dealer told me that warranty claims in respect of British vehicles produced by British Leyland amounted on average to £10 a year, whereas, in respect of a Japanese agency which he had taken on during the last year warranty claims had amounted to between £2 and £3 a year.
    If we are looking at world trade and at imports from countries of high productivity, high efficiency and low cost, such as Japan, we can see the problem that we are up against in terms not only of delivery but of reliability. There is no doubt, as has been said today—the Secretary of State touched on it—that the Japanese are highly sensitive to the trade imbalance which their success is in danger of creating. Japan does not want to see a trade war in the West which would weaken Western cohesion. Of that I am quite sure.

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    I hear, for example, that in addition to the measures which are referred to in The Times today, following the visit of the Minister of State for Industry, the Japanese Government are encouraging Japanese companies to buy trucks and other vehicles from Britain which are paid for by the Japanese but which end up in other countries where they have, say, a construction project in hand. All this helps, and we must not, therefore, knock the Japanese as one way of trying to overcome the very real difficulties which British trade faces. That is no solution to our problem.
    What is to be done in order to boost British trade with the rest of the world? Clearly, we must increase our trade with the developing countries. We must begin to correct the North-South imbalance, which is a very serious problem. This has already been touched on in the debate.
    I believe that the Britsh Government should also look at the possibility of providing some sort of guarantee to British companies operating in those developing countries against the danger of direct or indirect expropriation. But these measures alone will not be enough.
    What must be done, then, to boost our trade? Should we go for protection and import controls, which are advocated by some and, as my hon. Friend the Member for St. Ives (Mr. Nott) pointed out, have been advocated consistently by one group or another since the turn of the century or earlier? If we do, then we all know that we shall invite retaliation, restrict the consumer's choice and make it even more difficult for the consumer to obtain the products which he wants.
    Should we subsidise production? The Secretary of State has made his case for subsidies of one kind or another as part of the restrictions which he believes are inherent in an open trading policy. But if one looks at the Polish shipping deal, where we are building merchant ships for a country which will then use those ships to undercut and drive our own merchant fleet off the high seas, one can understand the real worry and state of depression which exists among many companies in this country. How can we possibly expect many small business men, for example, to understand that it is a good thing to be spending £35 million or more of taxpayers' money in subsidising this particular activity when they find it so
    1088
    hard to increase their own business activities?
    The short-term benefits to employment in the shipbuilding industry have been spoken about in the House, but I believe that they will have to be paid for later with longer term difficulties for our own merchant fleet. Therefore, I do not believe that subsidised production is really the answer to our problem. But, as the Secretary of State said, it is the policy of the Government to have an element of subsidy as part of the overall picture of an open trading policy. What we need is higher productivity, higher wages, higher production and lower direct taxation. Above all, we need to make it profitable for small firms to expand and to provide more employment. But they will do so only if they are sure that taxpayers' money is not being pumped into unprofitable activities.
    In an article in The Times last September, William Rees-Mogg made clear that at one time it was argued that the cause of low productivity was that workers resented private capitalism and that public ownership would allow productivity to rise. In fact, the opposite has turned out to be the case. In general, productivity in publicly owned industries is below that in private industries. [HON. MEMBERS: "Rubbish."] For example, even with the added incentive of union loyalty to a Labour Government the steel industry has run into considerable difficulties, and the gap has been very wide, indeed.
    I believe that what Britain has to do in order to boost her trade with the world is to ensure that we do well the things that we can do better than anyone else, and to boost our trade in consequence. Invisible earnings are a good example of what we in Britain can do—banking, insurance, and so on. But there are other things that we in Britain do well, and do better than many other countries, for which we have special skills, which we can still claim to be exclusively British, and where British technicians can make an enormous contribution which could given an even greater boost to trade were the policy pursued by the Government to be more sensitive.
    One such industry is the British feature film industry, about which I should like to say a few words. It is not asking for

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    an enormous subsidy from the taxpayer. It was, and could once again become, a fairly substantial employer of both skilled and unskilled labour. For example, in 1967 the main British studios employed a permanent labour force of about 3,800 craftsmen and technicians. The current labour force is under 1,000. Those figures speak for themselves. But the industry is facing considerable difficulties in expanding its trade. One of its problems is the Government's continued failure to take the necessary action to create the right climate to help it.
    Let me give the Secretary of State a few facts. Production of feature films has declined from 70 in 1973 to 57 last year. Investment in production over the five-year period 1973 to 1977 was between £33 million and £45 million, of which 75 per cent. came from overseas. Although we welcome investment from overseas—the Secretary of State made the point that he wants to see more investment from overseas—we must recognise that we need investment from our own country as well if we are to benefit in terms of our balance of trade.
    It is that particular aspect of the film industry's problem on which I want to concentrate. Above all else, the industry needs the kind of tax incentives for both corporate and individual investors which exist in other countries, notably the United States, Germany and Canada. The Secretary of State knows this, yet he has apparently failed to persuade the Chancellor of the Exchequer to make the vital tax changes which are needed. The result has been a substantial loss of foreign earnings.
    We have recently seen in the British cinemas a wonderful film called "Star Wars". It represents all that is best in British technology. It was made at Elstree Studios, mainly by British technicians, but most of the finance for it was American. In consequence, it is the United States and not Britain that will benefit principally from the enormous success which that film, and others like it which will follow in due course, has achieved.
    For example, the original James Bond films were made in Britain, but I understand that the latest one will not be made here because the star will not come to Britain in view of the crippling taxation
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    which he would face. That situation is a fact of life, whether or not Labour Members like it.
    Mr. Eric S. Heifer: Complete rubbish.
    Mr. Shersby: What, then, is needed to ensure that once again superb films employing British technicians are made in Britain and that British money is again made available for films to be made at Elstree, Pinewood, Shepperton and other studios which are famous throughout the world? What is needed are tax changes to enable Britain—
    Mr. Heffer: Who the hell wants James Bond?
    Mr. Deputy Speaker (Sir Myer Galpern): Order. We cannot have two speeches being made at the same time.
    Mr. Shersby: As I was saying, what is needed are tax changes so that Britain can compete on level terms with countries such as the United States, Canada and Germany.
    The Secretary of State and the Chancellor both know what changes are needed, but nothing has been done. I say they know because the British film production industry has made representations setting out very clear details of what is required. Therefore, there is no question but that the Government know what is needed. The Secretary of State knows that there is an investment tax credit system for films which operates in the United States. He also knows that there are tax reliefs in the three countries that I have mentioned, which all give an immediate write-off possibility in the year in which the investment is made by the investors, corporate or individual. In the case of Germany and Canada, the write-off can be geared up so as to increase the benefit of the write-off, but in all cases the subsequent income as and when it arises becomes taxable in the hands of the investors, thus having the effect of deferring their tax liability.
    The Secretary of State knows that very well. He must know that for the British film industry to compete, similar tax incentives are needed here. But has he persuaded the Chancellor to include such proposals in the Finance Bill? Apparently not. The result of this failure is that there can only be a further decline in British

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    film production. British films which could be made here in Britain, with British investors backing them, will not be made, and will not be shown abroad, thereby not increasing Britain's foreign earnings and boosting our trade.
    Therefore, I can only appeal to the Secretary of State to ask the Chancellor of the Exchequer to look again at this matter before we get to the Report stage of the Finance Bill, and I hope very much that we shall see some amendments to take account of what I have said. Surely it is better to allow corporate and individual investors to defer tax on money put into British films than to see the investment in films such as "Star Wars" bring very little benefit to Britain in terms of foreign earnings.
    I have mentioned the British film industry because its problems in terms of tax incentives needed are a good example of what could be done in Britain today to help offset the cost of imports of foreign manufactured goods and the cost to the balance of payments.
    I believe that we must support high technology British industries. The Government must give encouragement to high profit, high technology British companies at the same time as they encourage higher productivity in our more traditional industries. It is only by a combination of these measures that Britain can increase productivity, profitability and job opportunities and at the same time boost its trade. Whether the present Government will ever be able to bring themselves to provide those incentives, only time will tell. I always feel, when listening to Ministers talking about the need to boost trade, that the trouble is that they are unable to motivate people to increase production, to employ more people and to trade more effectively with other countries. The Government still seem to believe in high public expenditure, high taxation and high employment protection. It is the combination of these three disadvantages which act as a certain amount of lead weight to some of those industries which could do more and do it really well.
    I hope, therefore, that the Secretary of State will take very seriously what I have said about the British film industry. It is an industry which can do a great deal for Britain. It is an industry which once again can make our name
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    famous in terms of a high quality product which is in demand in almost every country. A great opportunity awaits the right hon. Gentleman, and I hope that in consideration of his open trading policy he will look again at this matter and then get cracking and persuade the Chancellor of the Exchequer to do something about it.
    5.53 p.m.
    Mr. Mike Noble: I do not intend to take up any of the remarks of the hon. Member for Uxbridge (Mr. Shersby), other than to congratulate him on his ingenuity. I have never heard the prescription for our economic ills described in such a fashion before. The thought of curing Britain's economic problems by bringing back James Bond and making the rest of us film extras is quite beyond me, but perhaps it is a subject which the hon. Member will pursue on another occasion.
    I was also intrigued by the speech of the hon. Member for St. Ives (Mr. Nott), who has now left us. I can understand his difficulties in making such a speech in the light of the present strife within the Conservative Party. Those of us who looked at The Guardian today see that there is not simply a two-way split in the Conservative Party on economic matters but a three-way or even a four-way split. For example, there is a split on such important economic matters as taxation. Conservative Members cannot decide how much they will lop off taxation and, more important, they cannot decide from where they will get the money. That will be of great interest when we analyse the speech of the hon. Member for St. Ives.
    I come to the third split. We also read in The Guardian today that the chairman, director, president or secretary of the National Association for Freedom has resigned. It may be that the hon. Member for Chingford (Mr. Tebbit) will be taking his place shortly.
    These contradictions in the Tory Party's policies for the economy were well described by the hon. Member for St. Ives, especially when he turned to the subject of subsidies. I am sure that many of us who represent constituencies in the North will have been interested in his comment to my right hon. Friend the Secretary of State when he suggested in an

    1093
    intervention that subsidies should be returned to 1974 levels. The world had not entered the kind of recession that we face today. It had not felt the effects of a 500 per cent. increase in oil prices. In those circumstances, the kind of support that is needed for industry obviously will be totally different from that which was needed in 1974.
    The hon. Member for St. Ives also attacked the idea of protectionism and extolled the virtues of free trade. Then, just before he sat down, he mentioned that we still had the most highly efficient agricultural system in the world—the most protected sector of the British economy. The hon. Member really must sort out his ideas before he tries to put forward Tory Party policies on these matters.
    Before turning to the general issues of world trade, perhaps I may raise two specific matters with my right hon. Friend. First, he referred to Portuguese textile imports. We in the textile areas are aware of the pressures from Portugal to have increased access to the United Kingdom market for its textile goods. The fear in the textile areas is not simply that Portugal will secure increased access but that this will then be used as a precedent by the other Mediterranean nations to secure increased access for their goods.
    I should like my right hon. Friend to say whether the Government have any intention of pressing the European Economic Community not simply to withstand the pressures from Portugal now but to enter into formal arrangements with the Mediterranean associates for next year, since I understand that the present arrangements last for only one year and that what we need is an MFA-type agreement with these countries rather than these informal understandings.
    The other specific matter that I wish to raise concerns footwear. We in the footwear manufacturing regions are aware that there was a fall in the general level of footwear imports at the beginning of this year, and we welcomed that. But concern is being expressed about problems caused by imports of South Korean footwear, and I should like some information about what the Government are doing to deal with them, since they are causing serious concern in my constituency and elsewhere.
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    With regard to the general debate on trade, it seems to me that three courses have been posed. Two of them were put forward by the hon. Member for St. Ives, who spoke of a completely free trade system, provided, of course, that it did not affect industries in the more sensitive areas represented by Conservative Members of Parliament. He was advocating basically a system of out-and-out free trade. Then he put forward a second course, one normally associated with the Cambridge group of economists—the Wynne Godley arguments.
    My right hon. Friend was much more pragmatic in his approach. His argument—and I agree with him to a large extent—is that what is needed is neither free trade nor all-out protection but to look at the situation case by case in terms of securing international agreements on these matters.
    There is an obvious weakness in the argument advanced by the hon. Member for St. Ives that we should have a system of free trade and that we should press for this. I think that we all accept that within certain limitation we should press for it, and in fact my right hon. Friend said that the objective of our policy was to preserve the open trading system. But free trade does not exist. We all know of countries—Japan is a good example—where securing access for almost any British goods is virtually impossible because of the artificial barriers to trade erected by those countries. It is no secret that many overseas nations have what is known as "a dirty tricks trade department" which can find one reason or another for not allowing goods into their countries. These are hidden and in many ways artificial barriers to international trade. I speak to many industrialists who tell me that we need to be a little more realistic in our attitude towards international trade in this respect.
    Then we have the problem with the so-called managed economies where it is very difficult often to determine whether trade is fair, given the GATT definition of what is fair trade, or unfair—whether goods are being off-loaded here at subsidised prices.
    Finally, we have the problem of dumping. I agree with the hon. Member for St. Ives that the machinery for dealing with dumping is by no means as efficient

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    as the machinery that foreign exporters have for dumping their goods in this country. The problem of deciding whether an industry is suffering material damage is a very difficult one to overcome. What is meant by "material damage"? Is it measured in terms of a lack of investment? Is it measured in terms of unemployment? This is rather unclear. This is something that we must come to terms with. In addition, we have to devote more manpower to investigating much more quickly cases of dumping brought to the attention, now unfortunately, of the EEC.
    Mr. Tim Renton: The hon. Gentleman has just said that we have to come to terms with the question of the definition of what constitutes material damage. Is it not the case that there is a certain advantage in that definition remaining obscure, so that exporters from other countries to this country do not know at what point in time the Department of Trade will act against them, whereas if it were clear that material damage meant damage to, for example, 40 per cent. of an industry they would know exactly at what point they would trigger off action against themselves?
    Mr. Noble: The hon. Gentleman has a point. I think that the question of having a precise definition of that kind could result in our being too precise. The problem arising for British manufacturers is that often they present a case and neither the Department of Trade nor anyone else can decide in precisely what terms there is dumping or material damage.
    This brings me to another definition which should be subject to revision—the definition of what fair trade itself is. I would assume that if we were considering fairness in this context we would consider it as being in the same category as fairness in a 400 metre race—that is, the athletes run exactly the same distance, and when they reach the finishing line one can then decide who has run the 400 metres the fastest. They have staggered starts to help them with the bends so that at the end of the race they have all covered the same distance.
    But with international trade that is not the case. The textile worker in my constituency may work in what is still a fairly satanic mill in that many of these
    1096
    mills are old and should be replaced, but he enjoys a reasonable if not excessive wage, he has a social security system to defend him against the ravages of unemployment, sickness and old age, he pays his taxes in order to send his children to school, and he himself is well educated.
    But let us compare that with the situation in some of the developing countries. A friend of mine has recently returned from South Korea, where he studied the footwear industry. There the best employer was paying his male footwear workers 65p an hour and the female workers 45p. But they were working a 54-hour-week—a nine-hour day. He described the factory as a beehive. There may be reasons for that.
    It was discovered that the factory, which employs 22,000 people in one complex, had its own militia, and that the basement was full of guns. I am not saying that the bosses proposed to turn those guns on the workers—I do not think that that is the case. They were all to be pointed towards North Korea.
    The point is that in an atmosphere of that kind there must be a great deal of fear and uncertainty, and in such circumstances the place would be a beehive. The workers would work in a way that we have not seen in this country or anywhere else in the developed world for tens if not hundreds of years.
    Mr. Ridsdale: I have visited that factory, and, whilst I did not see the underground armaments. I can say that the hon. Gentleman is exaggerating the conditions. The conditions are certainly low, but by Asian standards they are high.
    Mr. Noble: I do not disagree that by Asian standards the conditions are high. I said at the outset that this was the best employer. But what do we get from the worst employers? What about other parts of the world? We 'were told by the Hong Kong Government recently, with considerable pride, that wages in Hong Kong for textile workers had now reached 50p an hour and that they actually got six days' holiday per annum. These are people who are competing against this country.
    Mr. Roy Hughes: The hon. Member for Harwich (Mr. Ridsdale) suggested that my hon. Friend was exaggerating in his description of the conditions

    1097
    in the factories in South Korea, but I am sure that other hon. Members must have seen the same BBC programme as I did, which gave full facts and details of the situation along the lines that my hon. Friend is describing.
    Mr. Noble: I thank my hon. Friend for that comment. The report I saw was prepared privately by one of the people in that programme.
    Hong Kong is a jewel of South-East Asia in terms of working conditions and wages. Let us compare it with Thailand. There, textile workers are paid 18p an hour. I do not know whether they get holidays—I doubt it. I should like to know what kind of social security system they have for when they are unemployed or are injured at work.
    The point I am making is that we are not comparing like with like when talking about fair trade but are comparing civilised employment standards in this country, where workers are protected by trade unions through collective bargaining, by legislation and by the Welfare State, with what in many cases can only be described as wage slavery in South-East Asia. Therefore, we have to look very carefully at the question of what is and is not fair competition.
    We must ask ourselves where the capital comes from that provides jobs in South-East Asia which are competing with our own workers. The answer is that a very large amount of the capital comes through multinational corporations based in Japan or, very often, in the United States. That could be one of the reasons why the Americans have from time to time been a little difficult about things like the MFA and controlling trade in footwear, since their interests could be damaged directly or indirectly through the possible deflection of trade.
    These multinational corporations invest—I would not quarrel with that—and thereby, it can be argued, raise the standard of living among indigenous workers. Perhaps we should ask some of the former hand-loom workers in Indonesia, for example. They had an industry employing 320,000 people. One of these multinational corporations came in and wiped that industry out. Now there are 70,000 workers as opposed to 320,000. The wage rates went up by about 10 per
    1098
    cent. The evidence is that the workers in these companies gain very little benefit, at least immediately. The wages paid are at about the indigenous level or only a little above.
    The hon. Member for St. Ives accuses us of having bleeding hearts for the Tamils in Sri Lanka. We have, because we want to end the exploitation of such people through the introduction of a social clause to deal with this kind of problem.
    Mr. Norman Tebbit: Will the hon. Gentleman face the point that, unless the world's market in textiles expands, anything he does by improving the conditions of those workers to make them less competitive in order that our workers can produce more of the textiles which will be sold will result in more unemployment in those countries? Will the hon. Gentleman make up his mind which of his hearts is bleeding?
    Mr. Noble: The hon. Gentleman has it wrong, as usual. The fact is that those people cannot afford to buy even their own products. This is the point of the argument. They are employed for 50, 60 or 70 hours a week at miserable wages, manufacturing shirts to be sold at low prices in this country, and they cannot afford to buy those shirts themselves. When I see every worker in South-East Asia not simply with a shirt, a pair of trousers and a pair of shoes but with a change of clothes as well, I shall think that we are getting somewhere. But where do they live? In Hong Kong, for example, many of them live on rafts in the harbour. That is the kind of standard that we on this side of the House intend to raise and which the Opposition are so intent on keeping depressed.
    The arguments put forward for out-and-out free trade do not hold water. My right hon. Friend the Secretary of State said that in the world today there is a harsh regime. The most ardent free traders are free traders only as long as it suits them. They relax into economic nationalism when it does not so suit them. No better example is found of that than in the United States. The fact is that the world is interdependent. We need some means of resolving the problems that the recession has thrown up. The free trade picture that is portrayed in the economic

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    textbooks that are avidly read by Conservative Members, which seem to have little bearing on what is happening in the real world, does not exist.
    The analysis of the Cambridge group is extremely attractive. It argues that because of the weakness in British manufacturing industry there is a need to erect tariff harriers around the country, behind which we can shelter and recover. That argument has its attractions, but we would have to be too selective, even to the extent of saying that import controls would have to be selective rather than general. That is because there are so many areas where British industry is weak. We could not produce to meet the demand.
    An example is that there are significant sectors of the textile industry that have been under attack for so long that they can no longer produce goods that are required for the home market. The Multi-Fibre Arrangement had to take account of that in establishing the level of imports.
    I well remember the introduction of restrictions on Portuguese imports that took place some two or three years ago. The following week, cloth manufacturers in my constituency told me that they could not get the yarn they needed. They asked me to have a word with the Secreary of State to see whether they could have a special dispensation. In the end they managed to get the yarn that they needed from British sources. That, however, is the sort of problem that exists.
    Another example is the footwear industry. There are substantial sectors of that industry in which we no longer produce many of the products that are consistently in demand. There is some danger, though often exaggerated, of retaliation. We would need to embark on some careful thinking before we could go all the way with that argument.
    The half-way house—what I call the pragmatic assessment of our trading and industrial needs—is an alternative. My right hon. Friend the Secretary of State wrote an article entitled "Politics and Protectionism" which appeared in June. He commented on the international trading situation, and it seems that he was anticipating the thoughts of the hon. Member for St. Ives. My right hon. Friend wrote:
    1100
    "if countries are in major difficulties then, in the end, they are going to protect themselves. There is no use imagining that the international trading system could continue on any other basis than the recognition of that ultimate right. What we have to do is to find ways of avoiding acts which lead to reaction and to the collapse of the whole system."
    That is a reasonably pragmatic and realistic approach. We should be considering the changes that we need to achieve.
    The hon. Member for St. Ives spoke of amending article 19 of GATT. I entirely agree with him. We need to introduce an effective safeguard clause in the General Agreement on Tariffs and Trade so that when the necessity arises we may buy time to avoid the dislocating effects of a sudden flood of imports. The nature of the textile industry is such that it is so sensitive that even an increase in imports over three or four months is sufficient to create dislocation. If we are to amend article 19, the amendment will have to be extremely sensitive and capable of immediate operation if it is to be an effective safeguard.
    That leads me to the argument of the hon. Member for St. Ives about senile industries. He spoke of senile industries that would be propped up and protected. He did not define them. It would be interesting to know exactly what industries the Conservative Party considers to be senile. The hon. Gentleman placed the senile industries in the same category as the infant industries of the developing nations. What does he mean? Surely, the definition of senility as a description of an industry is one that needs great care but an industry from which we cannot expect a great deal of vigour and where the life expectancy is relatively short.
    I am sure that my hon. Friends, the British public and especially the 25 million members of the British public employed in industry and commerce would like to know the areas of industry that the Conservative Party believes to be senile and of short life expectancy. That is a reasonable request to make.
    The Conservative Party is good at butterflying around, butterflying from one flower to another. It may be better to describe the Conservative Party as a bee taking pollen from one flower and then another while leaving pollen in other

    1101
    flowers. It never leaves us with a complete picture of what it would inflict on the electorate if it ever came back to power. We read about the "gang of four", but it never tells us what it would do.
    Mrs. Renée Short: We do not know who makes up the gang.
    Mr. Noble: But we know from reading The Guardian today that it is at it again. Surely it is reasonable to ask its members what it would do.
    The Government and Labour Members can say that we have evolved an industrial strategy. At last the effects are beginning to work through. That has taken some time, and I have been critical, but at least industrialists know what is going on. For example, footwear manufacturers are not satisfied with the present situation. I was asked by a number of them to give my hon. Friend the Under-Secretary of State another hearty kick on the shins to remind him of the problem of imports. However, they said "We know that the Government have a scheme for the footwear industry." It may be that that is a subsidy that the Opposition would like to wipe out. It may be that footwear is one of the senile industries. The retailers in the footwear industry have said "We shall enter into a commitment with the manufacturers to assist them with the problem of imports." The effects are working their way through, partly as a result of the industrial strategy and partly as a result of the footwear report. The footwear industry knows where it is going, and that is true of other industries. However, industry does not know where it stands with the Opposition.
    The second change that we need to make concerns our attitudes to developing nations. In this month's copy of Overseas Development, my right hon. Friend the Minister of State for Overseas Development wrote that we need
    "to extend the concept of intervention and planning"—
    Mr. Robert Boscawen: I am one of the Members who signed the footwear industry report. I ask the hon. Gentleman kindly to tell the House what subsidies the report recommended. I
    1102
    recollect that, except for some minor subsidies concerning the bringing in of design personnel and management personnel from other areas into the industry, very few subsidies were recommended in the report.
    Mr. Noble: I acknowledge the hon. Gentleman's work on the footwear study group. He signed a report that, I am delighted to say, included the recommendation of a planning agreement between the British Shoe Corporation, the unions and the Government. He asks about subsidies. The subsidies were introduced under the Industry Act 1972, which was enacted by a Conservative Government, as outlined by the hon. Member for St. Ives. Apart from bringing in assistance for consultancy and for projects, quite considerable assistance was recommended for introducing modifications in enclosing loom machinery. The sum total as an initial allowance is £4·5 million, which is a considerable sum. That has been welcomed by the industry.
    I was quoting my right hon. Friend the Minister of State for Overseas Development, who wrote:
    "we now need to extend the concept of intervention and planning from the national to the international level … we must now determine that we shall solve our shared and common problems only by a firm rejection of any illusion that there is a free world market economy'."
    Of course, that is an illusion. There is no free world market economy. There is a system of competing economic blocs and competing political blocs, but the idea of free trade as outlined by the disciples of Adam Smith on the Opposition Benches does not exist. We need to come to terms with that fact.
    We must enter into strategic arrangements of the MFA type for a whole range of other sensitive products if we are to protect workers in the developed world against dislocation and give them time to restructure industries to meet competition and at the same time allow workers in the developing world an increasing and agreed planned access to our developed markets. That implies some control and recognition of the multinational corporations.
    I return to the point made by my hon. Friend the Member for Sowerby (Mr. Madden) in an intervention regarding a

    1103
    social clause. Until we can persuade Governments that they are intervening in the interests of humanity, we shall have wage slaves in South-East Asia and unemployment in Europe. I suspect that the arguments which have been erected against the United Kingdom intervening to improve the living standards of workers in South-East Asia are the very arguments which were erected against Lord Shaftesbury 150 years ago when he was seeking to do something for factory children in this country. The examples of exploitation which flow from South-East Asia are heart-rending and overwhelming. We must try to control that situation.
    There are two arguments against it. First, it is said that it would be unwarranted interference in the affairs of other countries. I am amazed that today people talk about unwarranted interference in the affairs of other countries on the one hand and do it on the other hand. We have to consider carefully an international approach, through the United Nations or GATT, to secure that a social clause is attached to international trading with countries which seek to expand in textiles, footwear, electronics and a host of other industries and thereby to undermine jobs in this country. By doing that, despite the peculiar economic arguments put forward by the Opposition, we shall be assisting not only those countries but ourselves.
    The second argument is that we do not have the resources to do it. We need to be able to train workers in the theory and practice of trade unionism and of collective bargaining. It is one thing to be able to say to States "You must have some kind of social security system" but it is another thing to go to those countries and persuade workers to join trade unions. Often those countries have repressive labour laws which reject the very concept of trade unions. For example, Hong Kong has trade unions in the public sector, but they never get off the ground in the private sector. That is reflected in conditions in factories there. I suggest that we lack not the ability but the political will to do something about this matter. I hope that when my right hon. Friend replies we shall have a more optimistic answer on this matter than we have had in the past.
    1104
    Finally, I should like to respond to the point about the consumer 'which was made by the hon. Member for Uxbridge. I concede the argument about the consumer if we are talking of protection. Of course, some imported goods can be bought more cheaply here. Often, because of transferable technology, they are as good in quality as those manufactured in this country. For example, Hong Kong shirts are often superb, and many imported shoes are of excellent quality.
    Mrs. Renée Short: Many of them are poor.
    Mr. Noble: I agree that many of them are poor. That is not the basis of the argument. It is the marginal, not the direct, costs of imports which matter. It is the cost of the worker without a job and the cost of supporting him and his family. It is also the cost of seeing our industrial base eroded. That is the argument about import controls, not the marginal argument about the consumer. The consumer on one day is the producer the next day. The argument is about producers who are often the consumers of the goods that they are seeking to bring in on the one hand and to produce on the other hand.
    Many of us would be grateful to have assurances on the two matters that I mentioned earlier: first, Portuguese textiles and the Mediterranean associates, and, secondly, footwear from places such as South Korea.
    Several Hon. Members rose—
    Mr. Deputy Speaker: Order. I am compelled to advise the House that, if we are to have Back Bench speeches lasting 32 minutes, it will be impossible for the Chair to accommodate even a fraction of those hon. Members who are anxious to take part.
    6.25 p.m.
    Mr. Richard Wainwright: I take note of your remark, Mr. Deputy Speaker.
    I am glad to follow the hon. Member for Rossendale (Mr. Noble) in his engageing, if misguided, speech, because it enables me at once to correct a vulgar Lancashire error into which he, like so many others, has fallen—I hope that it is an error, not a deliberate tactic—of

    1105
    presenting to the House a non-existent entity called the textile industry, as though people who produce innumerable different types of cloth have in some ways unified aims, strategies and results. That is not so.
    The wool textile industry, which employs many of my constituents, differs from the industry of which the hon. Gentleman was speaking because it has an enormous export trade. Therefore, it has its horizons far away in the world and is not preoccupied with little England ism of the kind which all too often we hem advocated.
    The hon. Member for Rossendale was misguided, for instance, in suggesting that Japan's markets are virtually impenetrable. Many Japanese are extremely well dressed, because there is an ample market for fine worsted in Japan. I suggest to the Chancellor of the Duchy of Lancaster—I hope that he will mention this matter in his reply, to which we are looking forward—that it is far easier to take fine Yorkshire cloth into Japan than into the United States of America. It is about time that the badly dressed Americans realised that situation. Presidents come and go, but a stupid tariff of about 50 per cent. on fine Yorkshire cloth, the Americans cannot make, persists.
    My constituents are perhaps too tolerant in accepting from Governments, who come and go in our ludicrous box-and-cox system, the mere statement that they have tried their best but that the Americans will not see sense and we must continue to put up with a ludicrous series of barriers which are by no means limited to this 45 to 50 per cent. tariff.
    The Secretary of State for Trade, to his great credit, cultivates a deserved reputation as a dealer in political realities. I hope that in the present round of GATT negotiations he will show that flair in dealing with the United States. It should not be very difficult. The fact is that Americans are denied many of the best material things of life by the stupid protectionism of their own Governments. They are not well dressed. Through their stupid product liability insurance, which makes many people in this country terrified of exporting to the United States because of the possible penalties,
    1106
    Americans are denied many of the medical and surgical benefits which people in this country and in much poorer countries freely enjoy. Surely it should not be beyond the wit of British Governments and embassies to point out to the Americans what they are losing because of these incredibly short-sighted concessions to worthless lobbies in the United States.
    The hon. Member for St. Ives (Mr. Nott), in his engaging speeches, does himself an injustice by not lifting his horizons above those of the the little bethel of the sectarians, which the Conservative Party has become under its present leadership. For example, he said that he did not think either the country or the House cared much for discussing trade, as though it is rather sordid. I assure him that in the streets of Huddersfield people discuss little else. That is why Frederick Engels rightly described it as one of the fairest of English towns. I always feel that debates on trade bring out the fine flower of the two Front Benches—at any rate, in relative terms.
    I thought that the hon. Member for St. Ives was more elegant than profound. His remarks about free trade reminded me of remarks made by my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) some 15 years ago. My right hon. Friend referred to some of our most venerable Liberals at that time as old lifebuoys who were gradually dropping astern. The hon. Member for St. Ives has not come to terms with the harsh realities of the modern world. To that extent he is an old lifebuoy before his time, which is a great pity. I hope that we can do something to rehabilitate him.
    The hon. Member for St. Ives, in a curious fit of nationalistic masochism, described this country as the most subsidy-ridden and one of the most unfair competitors in the world. But he was ignoring the record of many of our competitors. American industry is riddled with subsidies which do not have the merit of being openly discussed in a Chamber such as this. They are subsidies which come from the appalling system of American public contracting which puts billions of unearned dollars into the pockets of certain fortunate companies. Japan has a feudal economic system where profit scarcely counts at all.

    1107
    These systems make our competitors torrn!dable subsidisers with whom we have to try to compete.
    I prefer the Secretary of State for Trade's approach, because he acknowledges the difficult realities. I feel that we are not really grappling with the problems. Today we have been speaking in terms of ideal generalities. There has been much talk of "the steel industry", as if there is such a thing, and "the motor car industry", as if there is such a thing. What do we mean by those terms? In my constituency the people are not so arrogant as to describe their industries in such grandiose terms. They describe themselves realistically as top-makers, spinners, dyers, finishers or weavers. They realise that it is misleading to talk about these vast industrial processes in simple general terms.
    When we talk about the motor industry, are we talking about the people who are condemned to bolt the things together as they go over their heads on a belt or are we talking about the marvellous people who make sophisticated components and who could go on selling them even if we were unable to continue bolting motor cars together? The situation needs more careful analysis.
    I hope that the Chancellor of the Duchy of Lancaster will be able to say something about the danger that, in our anxiety to be humane and sensible when dealing with industries that are in secular decline, we may gravely handicap the export prospects of new industries which offer marvellous prospects to our well-educated young people coming out of our new education system.
    I hope that we can have an assurance that the Government are not prepared to press their temporary help to old-fashioned industries, admirable though that is, to the point where it provokes the rest of the world into inhibiting our trade in modern goods.
    Mr. Tebbit: I wonder whether what the hon. Member for Colne Valley (Mr. Wainwright) calls old-fashioned industries or industries in decline are what one of my hon. Friends calls senile industries. Is the hon. Member going to tell us which ones he means?
    Mr. Wainwright: I am talking of those sections of industry to which the lion. Member for Rossendale referred.
    Mr. Ivor CIemitson: Those industries without a name.
    Mr. Wainwright: Not the nameless ones. I am talking of those industries producing relatively crude goods which can be produced to an almost similar quality by people who are far less well educated, enjoy a lower standard of health and have worse working conditions than workers in this country. That must apply to certain sections of the steel and motor car industries. That is why I am pleading for the matter to be discussed in a more carefully analysed fashion.
    Mr. Roy Hughes: How many people in the hon. Member's constituency actually work in the car and steel industries?
    Mr. Wainwright: I am happy to take up that question. Every Yorkshireman would feel the same. I rejoice to say that in Yorkshire we have virtually nothing left of what used to be called the heavy woollen industry, which, in unpleasant conditions, used to produce cabbies' overcoats and other outer wear which a centrally heated country no longer requires.
    We have made the adjustment with pleasure. It has removed from our scene a low-wage and unpleasant industry. Now our young people are able to do something better. In my constituency the lowest end of the trade is being eliminated gradually with relatively easy adjustment for those who are not over the age of 55 years. We have gone over to making tractors and other goods, and better wages are being paid.
    I am not frightened that the position in my constituency should be cited as an example. I ask the Government to bear in mind, however, that there comes a point when the excessive subsidisation of some failing industries inhibits our export industries by invoking retaliation. In some sections of industry we might be on the verge of being in that unfortunate position. It is silly to give the Americans, for instance, even the vestige of an excuse for maintaining high tariffs against our high-quality goods because they say

    1109
    "You British are a nation of dumpers in respect of some of your State industry products."
    Protectionism, whether it masquerades under some type of sophisticated antidumping provision or whatever hypocritical title it is given, will not produce any new jobs. It might possibly shore up jobs for people who would have done better if they had been forced to move a little earlier. It is no great help to a man to keep him in a job until he is over 55 years of age when, if he had to go out into the labour market before he was 50, he might have done better.
    I hope that we shall hear from the Government that the termination of the promises of aid to Chrysler, for instance, is only the beginning of a realistic policy under which failing industries are assisted and there is reasonable provision for adjustment but which recognises that enough is enough. Enough is reached when aid to failing industries inhibits the progress of new industries.
    6.38 p.m.
    Mrs. Renée Short: Like my hon. Friend the Member for Rossendale (Mr. Noble), I found the speech of the hon. Member for St. Ives (Mr. Nott) rather depressing and disappointing. I thought that he would come forward with a long list of tough policies which he saw as the Conservative Party's answer to all our economic problems. But that did not happen. I hope that the hon. Member for St. Ives will not be too shocked when I tell him that I agreed with what he said about dumping. I am pleased to hear that he is against dumping. I am glad that he referred to GATT as a possible means of protecting us against the unfair trading activities of other countries. I hope that he will join us in persuading the Secretary of State to take steps in that direction.
    The hon. Member for St. Ives seemed to ignore the fact that every country in the Western industrialised world including every country in the EEC, is in a similar position to us. Their problems are similar whether they have Conservative, Liberal or Social Democratic Governments and whatever are their trading and economic policies. Other countries perhaps experience different degrees of
    1110
    problems and perhaps they involve different areas of economy.
    No one has yet referred to the figures that were released last week by the Central Statistical Office which indicate an improved growth rate. That improvement is good news. In the first quarter of this year the growth rate was almost 1 per cent. If maintained, that works out at about 3½ per cent., which is very much better than the rate last year, which was only 1 per cent., or in 1976, when it was only 2 per cent.
    The decline in the seasonally adjusted unemployment figures, also announced last week, is small but it shows some movement in the economy and a movement in the right direction. It seems that this is a consumer-led movement rather than an export-led movement. That is something that causes all of us a great deal of concern.
    If we are to improve our position at home and to reduce unemployment, quite clearly we need to export more and somehow to compensate for the inevitable rise in imports that will be brought in if manufacturing industry is to perform better. This is what the Prime Minister has attempted to stimulate in anticipation of the meeting in Bonn next month. If we export more, it is clear that others have to import more. That is where the problem lies. However, I agree with my right hon. Friend the Secretary of State that it is essential that the Bonn meeting should reach a successful conclusion. We shall all be in difficulty if it does not do so.
    Last week, some of us who are members of the Select Committee on Expenditure went to Brussels to look at what proposals the EEC had for dealing with unemployment, which is widespread throughout the EEC. We found only gloom about the future level of unemployment. The period to 1983–84 was mentioned as the period ahead of us during which we could not expect to see any improvement in the unemployment situation. If that is the view of our partners in the EEC, quite clearly we cannot simply sit back and trail along behind them. We must act in our own interests to build on the present improvement. There are special regional and industrial dimensions within the national picture.

    1111
    My hon. Friend the Member for Rossendale mentioned that, as did the spokesman for the Liberal Party, the hon. Member for Colne Valley (Mr. Wainwright). This is well known on both sides of the House.
    Perhaps I may comment on my own region. In the West Midlands, five major manufacturing sectors account for nearly 70 per cent. of manufacturing output, as compared with 45 per cent. nationally, and employ 70 per cent. of those employed in manufacturing industry altogether in the region, whereas nationally less than 50 per cent. are so employed. Now—pace the Liberal spokesman again—these industries build vehicles of all kinds—motor cars, trucks and all sorts of things—and metal goods of all kinds and are engaged in metal manufacturing, mechanical engineering and electrical engineering. These have been the basic industries for a long time in the West Midlands. But new technology has reduced employment. Foreign competition has reduced our markets. We have not devised new products, nor have we challenged our competitors at their own game. Therefore, in vehicle manufacture aircraft manufacture, the production of electrical machinery and the production of engines we now employ only two-thirds of the work force of 10 years ago.
    The result is increasing unemployment. In 1973 less than 2 per cent. were unemployed in the region. Today, the figure is 6 per cent. This decline should have compelled us to get into other areas, such as high technology industries, where world demand was expressing itself.
    Present schemes run by the Manpower Services Commission are providing employment for a large number of young persons and adults who would otherwise be unemployed. Some of these are rather short-term jobs. But, as the Government have provided more resources for the MSC, schemes can be extended and increased. However, the decline in apprenticeships and the general ill-preparedness of a certain number of school leavers for entering industry bodes ill for future jobs and for trade development.
    My hon. Friend the Member for Rossendale has mentioned textiles, knitwear and footwear manufacture which have been badly hit by imports from not only the Far East but from EEC countries. In the East Midlands the situation
    1112
    is equally critical. We must, therefore, make two major changes quickly. We must invest much more rapidly in new technology in general and in micro-electronics in particular. We must impose strict control on imports from countries with which competition is unequal and unfair.
    The Advisory Council for Applied Research and Development is said to be working on the impact of micro-electronics. It must hurry up if we are not to be overtaken in this area as we have been in others previously. America is already well into micro-electronics. I do not suppose that Japan is very far behind. It never is far behind. We know that Sweden has already started in this field.
    Some members of the Expenditure Committee also went to Sweden recently. We were told of exactly the same inroads by Far Eastern manufacturers into the Swedish footwear and clothing trade. Sweden now has only one footwear manufacturer and only a tiny part of its former clothing industry. However, we were told that Sweden is cutting its losses in these industries and is also developing micro-electronics.
    In 1977, the total world expenditure on micro-electronic circuits was about £2,000 million, providing jobs for 300,000 people. Only about 3 per cent. of those jobs are in Britain. Clearly, therefore, we must get a move on and make progress in this area. The export potential is vast. The cost of manufacturing in this field decreases dramatically as production rates increase. This is something that can be used in all manner of products that are in world-wide demand and products that we could sell very easily—the obvious things such as pocket calculators, but also electronic games, super-accurate watches and computers, as well as electronically controlled machine tools. All the electronically controlled machine tools that I have seen in the factories in my constituency come from America. Why should we not be manufacturing these ourselves?
    To do this successfully, we must be prepared to invest considerable amounts of money. My right hon. and hon. Friends on the Front Bench will have to look at the areas in which we do a fair amount of investment and give support at present. We must be prepared to go into a wide variety of products and not

    1113
    simply concentrate on one or two, and do it on a world-wide basis.
    We must be prepared to back smaller and medium-sized manufacturers and not rely on the giants which have always got other fish to fry. There are jobs to be created and there is a great deal of the world's export trade to be won. If only we support and encourage really good small and medium-sized firms. Here the National Enterprise Board has a considerable role to play.
    There is one other area of industry in which we talk a great deal about winning support and about injecting new lifeblood into the economy. It is an industry which is always referred to when we are thinking of how we can do something to get the economy moving. That is the construction industry. It is a key industry, but not enough is being done to stimulate it. This is really an urgent matter.
    I suggest two things that might be done and which could have a very swift result. That is surely what we want. If hon. Members look at the kind of industrial buildings in their constituencies, they will see that there is a very considerable stock of outdated derelict buildings. This is the cause of bad conditions for the work forces. The buildings are cold, dirty and noisy, with primitive sanitary and eating facilities. Whenever I visit foundries in my constituency, and some engineering works, I see workers eating their sandwiches sitting beside their benches. In this day and age, that is quite unacceptable. The facilities in the buildings of many firms are quite appalling.
    Many firms would like to renew their industrial buildings, but at present this would remove their profitability. Why do we not put industrial building on the same basis as industrial plant for taxation purposes? I am sure that this would have a very dramatic effect on the building industry.
    The other area in which building is urgently needed is that of arts centres, sports centres and decent football stadia. If we were to provide these and help local authorities to build them, not only would we improve amenities but we would be able to cut out some of the vandalism and hooliganism that occurs at football matches.
    Mr. Clemitson: Would not my hon. Friend agree that one reason for the decline in employment in building and construction is technological progress in that industry? Are not the examples that she has quoted—industrial buildings, sports centres and so on, which I agree we greatly need—precisely the sort of buildings for which advanced production techniques are used, and which thus have much smaller employment consequences?
    Mrs. Short: Not necessarily so. Not all industrial building needs to be more than one or two storeys. It depends what kind of building is needed, how big it is and what industry it is intended to serve. I do not agree that most of our advanced firms are not into modern methods of building. We have led the way in some respects. But there is scope for that kind of building and of the less sophisticated type to renew the vast amount of derelict industrial building that this country still has. I hope that that will be considered so that it may lead fairly rapidly to new activity when so many building workers are unemployed. We must be tough and adventurous to win back the trade that we have lost, but I believe that it can be done. I hope that we shall see some progress and that we will hear the Minister's views.
    6.52 p.m.
    Mr. William Shelton: I followed the speech of the hon. Member for Wolverhampton, North-East (Mrs. Short) with great interest. There was little in it with which I would disagree, save for her reference to the speech of my hon. Friend the Member for St. Ives (Mr. Nott), which I thought was outstanding. I suspect that the Secretary of State felt the same, since he followed it closely. He disagreed with little that my hon. Friend said. Interestingly, he even used the same pronunciation of "mercantilism", which I hope will enter the House of Commons vocabulary.
    A pragmatic approach to trade barriers is the most sensible. If one wants to take a moral view, one should talk of aid rather than trade. I am happy to see trade barriers, free trade or a mixture of the two—whatever is to the best interest of this country, whatever will further our people's interests, trade and prosperity. There is no doubt that prosperity depends on trade.

    1115
    One can understand the popularity of protectionism, which seems like a magic wand to get rid of nasty foreign competition and enable one to sell much more. There are advantages in protecting in some situations, as all who have spoken today seem to agree. We are talking about dumping and the protection of fledgling industries, as permitted under the Treaty of Rome. I do not propose to enter the argument about senile industries.
    I would not object to protection if it could be shown that it increased competitiveness in certain industries, if only the barrier could be one way—if one could keep others out without leading them to keep us out. That, of course, is not possible; the world is not like that.
    The history of the last 40 or 50 years shows that the more we can move towards free trade, the better we shall do. The decline in world trade in the 1930s was partly responsible for the tragedy which hit so many countries then.
    The restriction of consumer choice by trade barriers must also be considered. The hon. Member for Rossendale (Mr. Noble), the thread of whose speech I lost after the first 40 or 50 minutes, in all that time did not once mention consumer choice or acknowledge that, if one stops the importation of an attractive gadget from Hong Kong which a housewife prefers, one limits her freedom of choice and probably makes her pay more. Automatic limitation of consumer choice is the other side of the coin of trade protection. If we can move towards free trade in an imperfect and difficult world, we should do so.
    Mrs. Audrey Wise: I do not know how much shopping the hon. Member does, but how is a housewife's choice limited when in so many places she can buy only the Hong Kong product and she might prefer something made in Britain?
    Mr. Shelton: If the hon. Lady is right, that is an opportunity that I hope English manufacturers will take. It is sad that practically all electrical equipment, such as television sets, comes from the Far East, but presumably this is because the great British public in their wisdom have chosen to buy those products. I can see no other reason. I deplore it, but it is unhappily a fact.
    1116
    If one limits foreign imports, inevitably there will be a fall in the consumer's standard of living. As in most things, one must strike a balance—between encouragine one's own production and giving the consumer the maximum freedom of choice. The balance is difficult and one should be fairly pragmatic. One should approach the matter with an open mind, remembering that history shows that free trade is more important to us than restriction.
    My hon. Friend the Member for St. Ives rightly said that the constraints are on supply rather than demand. We have not given as much attention to supply as we should. My hon. Friend the Member for Uxbridge (Mr. Shersby) mentioned motor cars. The Government have been pressing Japan to restrict their car exports to us. I can understand that, although I do not believe that it comes into any of the categories that I mentioned—dumping, helping fledgling industries or increasing competitiveness. It may be all very well, but it is damaging people as well as limiting consumer choice.
    For instance, a distributor of Japanese cars in my constituency—a small but important employer—told me why he handled Japanese cars. He said that in 1969 he had handled Ford cars as a second dealer in a two-tier system and that he had four traumatic years. This culminated in his getting a contract to sell a fleet of 250 cars for three years. Ford cars were never on time and never in the quantity he needed. In 1972, his allocation was 150 and 17 were delivered. In 1973, he was allocated 150 and received 47. He terminated the contract.
    In other premises he had an Austin, MG and Wolseley franchise. He had dealt with them before. In 1970, they changed distribution and he had MG and Wolseley only. Until he terminated the contract two years later, he did not receive one MG car. In that period he had four Wolseley cars and he never had enough Austin cars. For both those franchises he had to buy special tools and repairing equipment and stock spares. He said that in 1971 a Japanese car manufacturer said "You can have the spares on sale or return and a quota of 150 cars." In the first year he sold more of that Japanese car than all the other franchises that he had together. He sold

    1117
    about 250, and 250 were delivered to him.
    How can that man be blamed? He now sees his livelihood endangered by the Government's pressure to limit the exportation of Japanese cars to this country, with the consequent limitation of choice. The sale of that model of Japanese car is going comparatively well in that part of London, presumably, only because people are choosing to buy them.
    My hon. Friend the Member for Uxbridge mentioned warranty repairs. I can give more details. In 1977, from British Leyland they were £14 per unit for the year, from Ford they were £9, from Chrysler they were between £9 and £14 and from the Japanese company they were less than £1.
    I asked that motor dealer in my constituency "How is it possible that the inspection procedure of this Japanese car manufacturer is so excellent that the warranty is under £1?" He said "I went round the factories there. They have a very simple system. They have a checker on the coachwork, a checker on the engine, a checker on the wheels, a checker on the transmission, and so on. If he finds a fault, he gets a bonus for each car. If he does not find a fault, those on the production line get a bonus." I said "It sounds to me a remarkably sensible arrangement. Why do not we operate it in this country?" He said "I do not know. I suppose either the unions or the management do not want it, but I do not think it is done." It seems to be an excellent idea. The results are seen in the warranty repairs and, consequently, in the choice shown by the British public for these cars.
    I make an appeal to the Government on behalf of the consumer who decides to buy products—whether they are Japanese cars or any other manufactured goods—brought in from abroad because he prefers them on quality grounds or on grounds of price or for any other reason. Surely, before the Government cut back on the importation of such goods and thereby create unemployment, possibly in my constituency in South London, it is necessary to put up a convincing argument that by so doing we shall in some way materially help the British car industry. If I can be shown that that is so, I shall have to accept it. Of course, I do
    1118
    not accept it; I do not believe it to be so. I believe that the result of such a cut-back is merely that more French or more German cars will be brought in instead. I do not believe that by restricting the importation of, for instance, Japanese cars we would sell more British cars. The problem with British cars is not demand but supply.
    So my first question is, does it help the British car industry? Secondly, if we are restricting the importation of, fur instance, Japanese cars, are we using this as a lever, because this is the way trade should be negotiated, to help to open the Japanese market to us? I am sure that everyone in the House would rather see us selling much more in Japan and the Japanese selling much more here than the Japanese selling much less here and us selling much less in Japan.
    7.4 p.m.
    Mr. Roy Hughes: I agree with the hon. Member for Streatham (Mr. Shelton) that our primary concern must be with the interests of Britain. However, I think he will agree with me that the debate has tended to focus on the contribution of the hon. Member for St. Ives (Mr. Nott). I suppose the hon. Member for St. Ives can claim credit for that. He made a "light contribution" in defence of free trade. I contend that free trade is no longer any good for Britain.
    The hon. Member for St. Ives was very critical of import controls. Apart from rhetoric, it appeared that he had little constructive to offer by way of policy. He said that some of us who have been proposing a policy of import controls have not been consistent. He said that we were in favour of buying up cheap food on the world markets but that we believed in putting tariffs on our manufactured goods.
    The hon. Member for St. Ives should look at the mote in his own eye because he supports the Common Market. The Common Market has, on the one hand, the common agricultural policy, which is perhaps the most advanced stage of protectionism that has ever been invented, and, on the other, a policy of free trade in manufactured goods. We in the House must be concerned about what is good for Britain.
    My greatest criticism of the hon. Member for St. Ives was that as I recall

    1119
    from my intent listening he made no mention of the very high figure of unemployment. He castigated the Cambridge school of economists. He referred back to Joseph Chamberlain, and so on. People such as the hon. Gentleman made the same criticism of Keynes in the late 1930s, but eventually as a result of his policies being adopted there were 25 years of full employment in Britain.
    Then the hon. Gentleman argued that there would be less choice if we acted on import controls. If people at certain times have to wait three months for a motor car, it could be argued that this will bring them to a sense of reality about our present economic difficulties which have worsened over the years. The highest possible priority should be given to curing our massive unemployment.
    The hon. Member for St. Ives did not mention the fact that alongside import controls some of us have called for massive investment in British industry so as to make manufacturing industry more efficient and give that power to the British workers elbow which has for so long been enjoyed by workers in Germany, Japan and elsewhere.
    Mr. Michael Neubert: Does not the hon. Gentleman recall that in the report of the "Think Tank" Lord Rothschild revealed that the British car worker with the same power at his elbow as the Continental car worker produced just half as much per shift?
    Mr. Hughes: It is so easy to criticise the British car worker. In view of the way our car workers have been castigated by, for example, the British Broadcasting Corporation, it is easy to understand that morale in the car industry has been at the lowest possible ebb, although it is to be hoped that it is on the upturn again. I speak with some experience of the motor industry because I spent at least a decade in Coventry. Despite all the criticism that is levelled at him, I have the highest possible regard for the British car worker.
    The Secretary of State did not spell it out today, but the Government do not seek to expand the economy as much as they would like to expand it and as much as they should expand it for fear of sucking in imports with the consequent adverse effect on our balance of payments.
    1120
    Likewise, in their wisdom, the Government have given the highest priority to curbing inflation. They reason that to expand the economy without increased productivity would simply drive up labour costs, which would, in turn, make inflation worse. But they should be reminded that when plant is under-utilised, this in itself is inefficient, since unit costs are higher when plant is operated below capacity.
    Moreover, as my hon. Friend the Member for Rossendale (Mr. Noble) pointed out, we must take into consideration the high social costs now being carried, with huge amounts being paid out in social security benefits.
    This Government have had an abundance of good will, especially from the trade union movement, but with over 2 million unemployed today—that is the real figure if one takes into account all the Government-sponsored schemes of one sort and another—that good will is not likely to continue indefinitely. We have a grave youth unemployment problem. Our young people could eventually rebel and assert their right to a job. Equally, they could turn to crime. We have a manifestation of that now in all the muggings, particularly in London, of which we constantly see reports in the Press.
    As I see it, the only way to return Britain to full employment is to curb imports. I do not say that this is in any way desirable, but I think it inevitable that the Government will have to do something along those lines. I do not speak in any sense from the point of view of Marxist dogma. Indeed, it seems to me that the dogma has come from the Opposition. My wish is that the United Kingdom shall survive as an industrial nation, and I remind the hon. Member for St. Ives that there is no monopoly of patriotism on his side of the House.
    If we do not want to see the whole of our oil resources dissipated, we must do something along the lines which I have advocated. Some 25 years ago we were importing only half our food and raw materials for our manufacturing industry. Today, huge expenditure is involved in the import of manufactured goods. An attempt must now be made to curb these imports or at least to arrest the persistent upward trend which has continued over recent years.

    1121
    Alongside that, we need massive investment of our oil resources in manufacturing industry. My belief is that eventually our Government will have to come round to that view. I should prefer them to act sooner rather than later.
    7.15 p.m
    Mr. Norman Tebbit: I shall not follow the line of argument presented by the hon. Member for Newport (Mr. Hughes). I should very much prefer not to follow him into his vision of the Socialist Utopia of the future in which it may be possible to acquire a motor car if one queues three months for it, and, presumably, if one has a priority certificate as a Member of Parliament, a civil servant or an occupant of one of the quango boards which will be operating the system for preventing people from importing motor cars. I imagine that it would do a power of good to some people in this country, such as those selling single airline tickets out of Britain, because I do not see that there would be any wild enthusiasm among most people for living in the only modern Western industrialised country in which one had to put in for a permit and wait in the queue to get a motor car.
    I shall direct myself almost exclusively to aspects of trade policy involved in air transport policy. I know that my hon. Friend the Member for St. Ives (Mr. Nott) did not mention those matters. The field is so wide in a debate of this kind that it was possible for him to use the whole of the time which he could reasonably take without coming on to these matters. I shall therefore confine myself to them.
    The Secretary of State is the sponsoring Minister for both the British Airports Authority and British Airways. I know, therefore, that he will have seen with great interest the Boyle Report on the salaries of the board members of those two organisations. I am sure that he will already have a view about those matters. I know that he will not want to say much about it today, but I hope that he will say whether he thinks it reasonable that, for example, the director of planning and finance of British Airways should now be paid £3,000 a year less than his deputy who reports to him. That anomaly is shot right the way through the
    1122
    nationalised industries. The director of safety of the Civil Aviation Authority has, I believe, no fewer than five people now reporting to him who draw a higher salary than he does.
    I do not know whether that is part of the same grand design which will require people to wait three months for a motor car or whether it is some accidental byproduct of Socialism. But it cannot go on. If our air transport is to be successful, we must do something to restore sensible differentials at the top end, as well as all the way through other parts of the organisation of our nationalised industries.
    At some points in its organisation, British Airways is lacking the skilled engineers which it needs because of the same problem. That is not directly under the control of the Secretary of State for Trade, but he is directly responsible for seeing that the board members whom he appoints are paid sensible salaries and do not continue to see their standard of living fall until it is grossly below that of their subordinates.
    Moreover, the Secretary of State must make a decision soon, with his Cabinet colleagues—
    Mr. Roy Hughes: Can the hon. Gentleman give us some figures to back up his argument on the relative salaries paid to these gentlemen?
    Mr. Tebbit: Yes, I can. They are public knowledge. The director of planning and finance of British Airways receives £16,500 per year and his deputy receives £19,500.
    Mr. Roy Hughes: So he is struggling is he?
    Mr. Tebbit: If the hon. Gentleman wishes to say that that is too much anyway in this Socialist world, he is entitled to that view, but I can tell him that the consequences of maintaining it is neither he nor the Secretary of State will continue to find men of quality to do those jobs when in any other country they would receive a better salary. Indeed, if they emigrated to the Soviet Union they would have a wider differential by far—probably by a multiple of 10—than they have in this country. The hon. Gentleman must make up his mind. He may not think that he is worth very

    1123
    much, but there are some people in this country who are worth a lot of money.
    I was about to come to what the Government will do about the request of British Airways that it should purchase 19 Boeing 737 aircraft. This is at the very heart of trade. Are we in favour of free trade between countries in products of that kind, or are we in favour of protectionism?
    In the absence of any of his colleagues, I put it to the Under-Secretary of State, the hon. Member for Oldham, West (Mr. Meacher), who is sitting on the Front Bench waiting for someone else to come back to reply to the debate, that it is we who stand to gain most from freer trade and we who stand to lose most if we go in for protectionism. The prospects of discrimination in the United States against British Aerospace exports are high. In fact, they are not even prospects.
    We have had discrimination for years whenever the Americans have been able to discriminate without being absolutely obvious about it. We have no cause to give them further excuse to discriminate against the success we are now enjoying with the export of, for example, Rolls-Royce engines and other parts of collaboratively produced aircraft from Europe to the United States.
    It would be pertinent to ask whether the Secretary of State is standing up for the board of British Airways, which has a statutory duty to run the affairs of British Airways and not those of British Aerospace. If the Secretary of State has confidence in the commercial judgment of the board, some members of which he appointed and others of whom he has confirmed in office, it is time he said so. If then, despite the fact that he feels that way, he thinks that other factors should override their judgment in the particular case of the order of the 737s, that is fair enough, as long as those facts are set out precisely and clearly and the directors of British Airways are told in public what they are and why their commercial judgment should be overridden.
    If, however, the Secretary of State does not have confidence in the commercial judgment of the directors of British Airways, I think he would agree that it would be wrong to leave them in their posts. Indeed, I suspect that some of them might feel that at the salaries they are
    1124
    paid it would be wrong to remain in their posts without the confidence of the Minister who appointed them.
    Then there are the broader issues. What is the Government's policy these days towards air fares and the future of IATA? Do the Government have a policy towards fares in the international market place? As a free marketeer, I must point out at once that competition in world air transport is not always fair, nor is it even based entirely on economic considerations. Some airlines are purely commercial. Some are instruments of national policy but none the less pay heed to commercial considerations. Others are just political creatures, flag wavers rather than flag carriers or buyers of foreign currency at a discount. There can be no fair competition between airlines which are such different creatures, so I accept that there must be a substantial measure of Government intervention, directly or through airlines and through IATA, in the fixing of fares in many parts of the world.
    We all share a desire to see low fares. I noticed that British Airways News of 16th June had the headline:
    "Air fares bonanza is coming".
    It was slightly spoilt by the fact that on the right-hand side of the page one read:
    "Fares for the coach service operated by British Airways between Heathrow and West London and Victoria terminals are being raised to £1·20 for adults on June 18th."
    But on the broader issue of the air fares British Airways has it right.
    Mr. Nott: Competition.
    Mr. Tebbit: My hon. Friend has it right, too—new low fares.
    We know that somehow or other we must ensure that those low fares are introduced at the lowest levels possible while still making a return for efficient carriers. If we put British Airways or other carriers back into the "red" again in the short term, we do very little good for the customer in the long term.
    In the past, IATA put a floor on fares, a floor which was much too near to the ceiling for my liking and for the liking of most customers. But now IATA has been increasingly undermined in recent years, first by the charter operators and then most notably recently by Sir Freddie Laker.

    1125
    When we consider these matters of fares, it is worth recalling where the Government stood on the matter of the Laker Skytrain. In these days one sometimes has the impression that the British Government were at Freddie's elbow all the time, egging him on. But I turned back to Hansard of 31st July 1975, where I found that the Under-Secretary of State who deals with these matters said on that day:
    "I would contend that Laker's own assumption as to profitability and certainly his assumptions about enjoying a monopoly with this service were unrealistic … Laker would withdraw but it would not be a simple situation consequent upon the withdrawal, because he could leave behind a fair measure of chaos."
    The Under-Secretary of State spoke of profitability being possible for a short time, but added:
    "it would be for a fairly short period—Skytrain could earn substantial profits for Laker if it were introduced now. But the level of profitability depends on several factors, which in my judgment would not continue for long, and are based on a series of assumptions which I described before as unrealistic."— [Official Report, 31st July 1975; Vol. 896, c. 2329–34.]
    Yet only very recently we heard that Freddie Laker had become Sir Freddie to mark the Government's appreciation of his great service in bringing Skytrain into operation for the benefit of the British people and the air transport industry.
    The Under-Secretary of State also said:
    "My next point is that British Airways would operate with more empty seats, which would make complete nonsense of the policy that we have been trying to establish".— [Official Report, 31st July 1975; Vol. 896, c. 2338.]
    Is British Airways operating with more empty seats because of the Laker Sky-train? No. Because of the Laker Sky-train, the air fares bonanza is coming, in the words of British Airways itself.
    Anyone who cares to look back to the debates not only in 1975 but in 1976 will see that the previous Secretary of State for Trade, now Secretary of State for the Environment, said on 11th February 1976 in reference to the Laker Skytrain service:
    "Moreover, having regard to the existing facilities that are available for cheap travel, it would confer no really worthwhile benefits
    1126
    to the consumer."—[Official Report, 11th February 1976; Vol. 905, c. 443.]
    We have all changed a great deal since then—
    Mr. Nott: Except the officials.
    Mr. Tebbit: Indeed. Clearly, there still exists somewhere the mood that if only we could make people queue for three months to get a seat on Skytrain, as they should queue for motor cars, it would be a much better, happier and more prosperous world.
    Since then, we have had a great rush of low fares. But, being an old cynic, I suggest that it will not be long before not only is IATA dead but the ennobled Sir Frederick Laker enters as son of IATA proposing a floor to air fares to prevent unfair competition. That is when we shall all have to watch it very closely to make sure that we do not have a new round of restrictionist concepts in air travel, with the fares going back up again to unrealistic levels.
    What is the Government's policy on that? Is it to let unfair competition lower fares indefinitely, to the harm of the United Kingdom carriers, or if we had no IATA would the Government put floors on fares on a bilateral basis? If the Government do that, how will they prevent leakage of United Kingdom traffic to third countries on the North Atlantic routes, for example?
    There is no end, fortunately, to human ingenuity in getting round restrictions imposed by bureaucrats. The hon. Member for Newport (Mr. Hughes) will be interested in an advertisement I noticed recently for Air Wales. An entrepreneur has discovered that he can offer a service out of Cardiff to connect more conveniently with intercontinental services via Brussels with Sabena than he can via Heathrow and Gatwick and the British carriers. No doubt if Sabena's fares were lower, because the British Government had put a bilateral floor on the fare from the United Kingdom to North America, we would suffer that leakage. Therefore, bilateral arrangements clearly do not entirely answer the problem.
    The most important bilateral arrangement that we have had in recent times is the Bermuda Agreement. Here it is a puzzle to know what is the Government's policy. The United Kingdom position at

    1127
    the time the new Bermuda agreement was made was based on single designation. Lord Oram made a great virtue of it. He referred to the Los Angeles route and said:
    "we believe that traffic at Los Angeles will be insufficient to justify more than two carriers for some time to come.… We see no justification for putting a second British carrier on that route and adding to the over-capacity that is likely to result from the existing three airlines."—[Official Report, House of Lords, 21st July 1977; Vol. 386, c. 596.]
    At the moment, it looks likely that Her Majesty's Government will approve Sir Freddie Laker as the second British carrier, making him the fourth carrier when, less than a year ago, three were already excessive on that route.
    Now President Carter has told the Prime Minister that he wants to designate a second United States carrier from Boston to Britain. What is our Government's reaction? Last week at Question Time the Secretary of State gave the Government's reaction. When I asked him about this matter, he said:
    "The President offers 'comparable comparative opportunities'. We are considering what 'comparable comparative opportunities' should be. One possibility which would be of great advantage to the United Kingdom would be the transfer of an American airline to Gatwick … But we are prepared to consider what the United States has in mind".— [Official Report, 19th June 1978; Vol. 962, c. 12.]
    Is this the way to conduct the negotiations for the British air transport industry—
    "we are prepared to consider what the United States has in mind"?
    Do we not have anything in mind that we want in return for granting the Americans the concession of a second carrier on another route, a principle which is totally opposed to that with which the British Government went into negotiations on the Bermuda Agreement? Perhaps the Government intend to support British Caledonian's bid to operate into an additional seven United States cities. If so, would it not be a good idea if it were the Government who made the proposal to the United States instead of asking meekly what the Americans have in mind for us? Or is it that the Government are going back to the mood of 1975, 1976 or 1977 when they were against more opportunities for innovative British carriers?
    1128
    I end with a plea to the Secretary of State. If he does not know what to seek in a deal with the Americans or what to do about air transport policy, I advise him to play for time. Let him wait until October when my right hon. and hon. Friends will help him out—and help him out of office too.
    7.33 p.m.
    Mr. Ivor Clemitson: I shall resist the invitation of the hon. Member for Chingford (Mr. Tebbit) to "Come fly with me" even at a reduced rate. I wish to begin with three simple propositions which we ought to take into account when considering the question of trade. The first is the obvious point that the traditional picture of trade, so beloved of school teachers, namely, that we import food and raw materials and export manufactured goods, has long since ceased to bear much relationship with reality.
    By my calculations, in 1977, only 22 per cent. of our imports by value were from those countries which in the statistics are classified as either developing or oil-exporting countries, and only 26 per cent. of our exports went to those countries as compared with 36.4 per cent. of our exports going to the other members of the European Community and 38·4 per cent. of our imports coming from other member States..
    To take up the point touched on by the hon. Member for St. Ives (Mr. Nott), by my calculations, in 1970 we had a deficit with the EEC—at that time we were not a member—of £81 million. Last year we had a deficit of £2,033 million which, even allowing for inflation, is quite an increase.
    Mr. Nott: That is an interesting figure, but what we need to know, if it is to make any sense, is what was the balance of payments surplus or deficit of the country in 1972 and what is the balance of payments surplus or deficit now. It is the proportion which is of obvious interest.
    Mr. Clemitson: I am merely noting that the traditional pattern of our trade, with us being importers of food and raw materials and exporters of manufactured goods, has long since ceased to represent reality. I was putting on record the trade deficit with the EEC. I fully accept the

    1129
    hon. Getleman's point that our deficit or surplus with other parts of the world may have changed correspondingly. On the other hand one of the great arguments advanced in favour of entering the EEC was that we would have a much larger market to which to export. Of course, it was equally true that the rest of the EEC would be able to export its goods to us. However, I do not want to get involved in that argument.
    My second simple point is that our export performance is not bad. It is really rather good. By my calculations, between 1970 and 1977 our exports went up by volume by 54·3 per cent. while our exports of manufactured goods went up by a similar figure, 53·4 per cent. which is a pretty good performance. By value, our exports went up by 182 per cent. and 176 per cent. respectively. By contrast our import record is not very good at all. I calculate that between 1970 and 1977 our imports of manufactured goods went up by volume by 125 per cent.
    The third point I want to make concerns the phenomenon of the supranational company. I prefer to use the term "supra-national company" rather than "multinational company" because it seems better to describe the reality. The phenomenon of the development of the supra-national company has made the traditional political map of the world at best a half truth. It seems to me that it has also made the traditional trading map of the world at best a half truth because we are talking these days not just about trade as between one nation and another, but about trade within the context of supra-national companies, within those companies themselves. This development can produce a considerable distortion of the traditional balance of payments statistics as between countries.
    Starting with those simple points, what conclusions do we draw? Do we conclude that we need either total or partial controls? This is at the heart of the discussion. The argument for the desirability of free trade is weaker, it seems, when trade ceases to be a necessity. Clearly we cannot grow certain foodstuffs. We do not produce certain raw materials. We need to import these. But we do not need to import goods which we do or can make ourselves.
    1130
    The argument for trading between nations becomes the much weaker one about consumer choice. Unless we still live in the mythological world of perfect competition, that is a difficult argument on which to put too much weight. What we are so often talking about is a choice between virtually indistinguishable products. What I call the consumer choice argument or the philosophical argument for free trade is weaker nowadays than perhaps it was because of the changing pattern of trade.
    What are the positive arguments for protection and restriction of trade? It seems that basically they come under two headings. The first is concerned with unfair competition. All hon. Members agree that dumping is a practice which should be deplored and that it is legitimate to take action against it. I think that we can take that as read.
    But what about a subject which has already been touched upon this afternoon—labour practices in certain competitor countries which we may find undesirable? We may think that wage rates are too low. We may think that people are being exploited. We may think that labour laws in those countries are repressive, certainly by our standards. We may think that safety is given a rather low priority in those countries. All these things may well be true, I merely raise the question: is the right way to combat those undesirable practices through the restriction of trade? It may be; it may not be. I merely raise the question.
    Another point is that other countries may operate barriers against our trade. If those barriers are overt, it is perfectly reasonable to retaliate against them. The trouble is that quite often—this is alleged in the case of Japan—the restrictions are not overt but covert, and are much more difficult to combat. There are certain questions there which I do not attempt to answer. I simply ask: is the best way to combat certain undesirable practices through the restriction of trade?
    The second of the arguments which seems to me to be of particular interest, and which certainly interests me much more, is that about employment consequences. Obviously, if an industry declines, or disappears altogether, there is a loss of jobs. That is so obvious that it

    1131
    hardly needs saying. But there are several questions I should like to put. For example, is it necessarily desirable to support industries when other countries can produce articles more cheaply than we can? Is it necessarily desirable that we should continue to support our industries? Is it desirable to do so particularly when the competitor country may be a developing country, towards which we may feel that we have certain moral obligations?
    Is it necessarily a wise policy to continue to support and protect industries which may have been the mainstay of the early phases of the Industrial Revolution? If I remember my economic history correctly, it was, after all, in the cotton industry that the first factory employing 1,000 people was built, in Preston. But is not our trouble historically that we have been far too slow in changing our industrial pattern? Have not we for too long tried to cling on to certain industries instead of getting on to newer waves? Was this not the case at the turn of the century, when we were very slow to climb on to what I might call the second phase of the Industrial Revolution—the phase of the motor car, the phase of electricity as the main source of power, and all the rest of it? Did not we to a certain extent miss out then, and have not we continued to miss out all the way along the line?
    Is not the logic, then, that we should be looking to develop newer industries, with more advanced technology? I am not saying that all advanced technology is good. That would be an absurd proposition. I am saying that as a general proposition we should be looking in that direction.
    Should we not face fairly and squarely the employment consequences of doing that? If older industries are to continue, it must be with greater efficiency, with more investment, and therefore with fewer job opportunities. Incidentally, one of the reasons for the decline in employment in the cotton industry is precisely that the cotton industry has become more technologically advanced, because investment has been put into it. With respect to my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short), this was precisely the point that I was trying to make about the building industry, although it is not particularly germane to our discussion, that the decline in employment in the building industry is
    1132
    not to be accounted for completely by the decline in the demand for building. By my calculations, there has been a greater increase in percentage terms in investment in plant and machinery in the building industry, albeit from a low base, over the last few years than in virtually any other industry. One of the reasons for the decline in employment in the building industry is precisely the technological advances in that industry.
    If we are to develop new industries, with higher technologies, will they not themselves tend to offer lower employment opportunities, that is to say, lower in total terms, although arguably much higher opportunities in terms of the quality of the jobs, the skills required and so on?
    If we are to face the problem of employment and what is to happen to employment in the future, should we not be looking not for a policy of job preservation for the sake of job preservation but for a policy of wealth creation, with the object of using the wealth to fund various alternatives to unemployment? Work is one, but there are many others. It may be that we would prefer a shorter working life. It may be that at long last we shall take education through life seriously. It may be that we shall extend the principle of sabbatical leave from university professors, who need it least, to workers on the track, who need it most. I speak with feeling as many of my constituents work on the track.
    Mr. Tony Durant: I am grateful to the hon. Member for giving way. I am following very closely his very impressive speech, and I agree with most of it. There is one aspect that he has not touched on in his formula. I refer to the service industries, which are a growth area and use up a lot of manpower. Would he care to touch on that aspect?
    Mr. Clemitson: I did not wish to make a speech about employment, much as the subject interests me, but merely to touch on employment in the context of trade. Very briefly, I broadly agree with the hon. Member for Reading, North (Mr. Durant), but I think that, looking to the future, the service industries will also, in the long term, become increasingly susceptible to technological change. I do not think, therefore, that we should look too much to them. I think we should look

    1133
    to the public service sector. I am not talking about bureaucrats. I am talking about people in face-to-face work. For example, the statistics show that the cheapest way to create jobs is to put money into the National Health Service. That may say something about wage rates in the NHS, but that is a fact.
    The conclusion I draw from what I have very briefly tried to delineate in the last moment or two is that the strongest case for selective import controls is to be found in the case of new developing industries, to allow those industries to become established. As I remember my economics, even the most fervent free traders have usually conceded the infant industry argument for control, or at least have looked at it with some sympathy.
    I think that there is a strong case for protecting an industry in its early days in order to allow it to become established. If we are to protect older industries as a purely short-term move, it should be on a strictly limited time scale with conditions built in for modernisation and concentration on particular sectors which are susceptible to technological advancement and improvement. Indeed, as a general point, I would say that any measures of protection which we take should have conditions built into them in terms of investment and so on.
    While it is important to regenerate industry, which is a fairly widely held view on both sides of the House, and while it is important to aim for a reasonable balance of trade—I am talking about trade in goods as opposed to balance of payments—we should not thereby denigrate other methods of paying our way or assume that there is some inherent moral superiority in manufacturing industry. At times I think that we come a bit close to doing that. Historically, there is a movement from primary employment to secondary employment to tertiary employment. This is true within our own country and it is true within every advanced country. Arguably, it will become increasingly true on a world scale as well.
    Therefore, whereas historically at one time we may have been the workshop of the world, there is no reason why we should necessarily continue to be so. It may be that those countries which are now the developing countries will in their
    1134
    turn become the workshops of the world, and we may find ourselves increasingly earning our way by other methods. We may do so not only by manufacturing in the high technological areas but by earning our way in the service sector as well. There is nothing necessarily morally inferior about doing that.
    I believe that we must come to grips with the question of the power of supranational companies. I am convinced that this cannot be done on a national basis. It can be done only on an international basis, whether we are talking about relationships between nation States, relationships between trade unions in different countries and so on. Again, the creation of tariff barriers is not necessarily the best way to do this, but ways must be found. As I have said, I merely note the point without offering any solution.
    I believe that we should adopt neither a doctrinaire free trade attitude, which I felt the hon. Member for St. Ives came very close to doing, nor a little England attitude. Selective controls on imports, with conditions attached, are justifiable in certain circumstances. But if we are not careful we could be sidetracked from fundamental questions such as "What do we do with multinational companies?", "How do we raise the living standards and labour practices in certain countries?", and perhaps. above all, "How do we tackle employment problems?". We could be sidetracked from looking seriously at that whole agenda of problems by looking for some simple panacea in the form of a trade policy.
    If that sounds like a criticism of some things which have been said on this side of the House, that criticism is as nothing compared with my criticism of certain Conservatve Members. To imagine that we can tackle the problems of supra-nationals, employment and all the rest by so-called free enterprise doctrines adumbrated by the hon. Member for St. Ives is to live at least 150 years behind the times.
    7.55 p.m.
    Mr. Tim Renton: I start by joining with my hon. Friend the Member for Chingford (Mr. Tebbit) in deeply regretting the continued absence of the Chancellor of the Duchy of Lancaster, who is to reply to the debate. We see

    1135
    him all too rarely in this House, but however good a scribe the Under-Secretary of State is, and however many powers the Chancellor of the Duchy of Lancaster has, I never attributed to him until now the power of osmosis, which in this case I would define as "the gift of receiving information transmitted in this Chamber while he is sitting on a chair in a considerably more comfortable place." The Chancellor of the Duchy of Lancaster has not been here since the opening speeches, and it is a great pity that he has not been here to take part in the debate.
    I listened with great interest to the speech of the hon. Member for Luton, East (Mr. Clemitson). For a long time, as perhaps was his wish, he kept me on tenterhooks as to just which side of the fence he would land. Much of his speech was fair. On balance, I would agree with a lot of what he said. However, I hope that the hon. Gentleman will not mind my saying that particularly towards the end of his speech, when he advocated selective controls, he indulged in what I can only call, in the phrase of George Orwell the newspeak of protectionism—fair but controlled trade, pragmatic approach, voluntary quotas. import adjustments and structural reorganisations. They are all words that we have heard this afternoon. In my book, however, they all come down to meaning one thing in business terms, which is "You are making X products better than I am. I am frightened that you will drive me out of business. Therefore, if I cannot stop you in the market place I shall get a politician to stop you for me."
    In my book there is always a case or an excuse for protectionism, but it is almost invariably unjustified, particularly in this country, because we rely for such a high percentage of our gross domestic product on international trade—about 27 per cent. compared with 6 per cent. in the case of the United States—and also because protectionism without exception leads to the saving of jobs today at the expense of tomorrow's growth. It is because it leads to the saving of jobs at the expense of tomorrow's growth that politicians throughout the world indulge so frequently in acts of protectionism. If protectionism is to be avoided, it means trusting in a multilateral organisation to see that all politicians stand together to
    1136
    stop the increasing recession in world trade.
    This brings me inevitably to GATT and the current round of multilateral negotiations going on at Geneva. It is on that subject that I should like to spend some of my time. I believe that the trade negotiations going on at Geneva are the most important current developments for all our British industries. The outcome of those negotiations will decide whether within a protective barried our industries shrink or whether, in a difficult, expanding but competitive world, they will grow in the 10 or 20 years ahead.
    There is a paradox here. The GATT negotiations receive no publicity at all. It is far too remote a subject. Tariffs, duties and non-tariff trade barriers mean nothing to the British public, nor, indeed, to the public of most of the industrialised countries, yet it is on the outcome of the negotiaions of GATT and also at Lomeé and UNCTAD that whether we have a 5 per cent., a 3 per cent., a 1 per cent. or a nil growth in the years ahead will depend.
    But, as I have said, I do not believe that politicians have the strength to act single-handedly in these negotiations. We are all Luddies when it comes to our constituently interests. We all tend to defend industries, be they infant or geriatric, when they affect our constituency interests, and it is quite understandable why we do so.
    I do not believe that any exhortations from the Prime Minister will be successful in persuading Chancellor Schmidt or President Carter to inflate more quickly in their domestic economies than they wish to do, because they are politicians as well. So I do not see any other solution than the multilateral negotiations at Geneva. If they do not succeed. I am sure that the consumer will go on saving more because he will be worried increasingly about the future, oil will get progressively more expensive, the steel and other basic industries such as the motor car industry will suffer, unemployment will rise, and thus the vicious circle will be completed, leading to more protectionism, shrinking world markets, less growth, higher unemployment and thus more protectionism again.
    It is fair to say that there is one other alternative to this vicious circle, which

    1137
    is war. There is no doubt that a war would, for example, greatly increase demand in the steel industry throughout the world. It has traditionally done so in the past. But, clearly, that is an alternative which is unacceptable to us all. So I am led back to GATT.
    Very little is known about what is going on in these negotiations at the moment. In responding to my hon. Friend the Member for St. Ives (Mr. Nott), the Secretary of State for Trade said that he hoped that the 15th July deadline would be met. I hope that the Under-Secretary of State will pass on to the Chancellor of the Duchy of Lancaster my request for a better indication of how he thinks that the 15th July deadline could possibly be met. My impression is that it is very unlikely. From what I hear, the Americans and the Australians are complaining increasingly about the protective nature of the Common Market in terms of agricultural produce. Unless they are given some concessions which will open the EEC in a greater degree to farm produce from the United States, Australia and New Zealand, the GATT negotiations are likely possibly to founder and certainly to drag on for a very long time.
    But, clearly, if such concessions can be given—and I think that they should be given—there is a quid pro quo which can be wrung from the Americans. They can alter their definition of anti-dumping to include the necessity to show material injury in the United States before antidumping duties become effective. The fact that in many cases this does not happen at the moment in the United States makes it very much easier for the United States to bring in anti-dumping provisions than would be the case otherwise.
    The quid pro quo could be very important to this country. It is noticeable at the moment, for example, that as a result of the anti-dumping allegations, which have been made in the United States, the British Steel Corporation may lose sales of 1 million tons of business in the United States in the current year. That represents more than £100 million worth of exports, and that underlines the degree to which we are dependent on each other in the GATT negotiations.
    Going beyond that, I believe that an act of vision is now required by OECD
    1138
    statesmen if the world is not to sink into a further spiral of depression comparable to the 1930s. But this will have to be a multilateral act of vision. As a result of it, I should like to see coming out of the conclusion of the GATT negotiations tariff concessions equal to those which took place within the Kennedy Round.
    As for non-tariff barriers, I remind the House of what the director general of GATT, Olivier Long, said last November when he estimated that the percentage of international trade affected by the restructuring of imports decided upon or merely envisaged by the industrially advanced countries was now between 3 per cent. and 5 per cent. of international trade. That does not sound a very high figure but, as Mr. Long pointed out, it represents trade to a value of between $30,000 million and $50,000 million, and that in a matter of barely three years. This shows the extent to which, especially through non-tariff barriers, since the Kennedy Round the industrialised nations are now protecting themselves.
    It is essential that GATT should set up an institute as an affiliate of itself permanently to study and to publish details of non-tariff barriers which exist in the industrialised nations. In order to do this, it should have access to the necessary records. Its job would be to call attention and invoke public hostility to the increase in non-tariff barriers. Its aim then would be through GATT to obtain agreement on the harmonisation of non-tariff barriers and their eventual reduction.
    I say this because I believe that there is a great deal of ignorance among business men throughout the OECD countries about precisely what non-tariff barriers exist in the countries to which they are exporting. Japan is a notable example of this. So often we hear that it is very difficult to do business with Japan, and the comment is made that MITI, the Ministry for International Trade and Industry in Japan, is all-powerful. However, when I was in Japan 18 months ago I met some MITI representatives who impressed upon me that it was a very small Ministry with only a few hundred people, that it had very little power and that what was heard about it abroad was a mere charade. We need to get at the truth far more easily about the non-tariff

    1139
    barriers which exist, notably in Japan but in other countries such as the United States.
    We read in the Press that at the moment great business is being done in selling second-hand Minis to Japan and that the company doing it cannot get hold of enough second-hand Minis. If secondhand Minis can be sold there, why cannot new Minis be sold there in much greater numbers than at present?
    It is for that reason that I should like to see this permanent body available, publicising details of non-tariff barriers, administrative regulations, specifications, standards, public purchasing policies, and all the red tape which can represent almost insurmountable obstacles to anyone seeking to export to a new market, in order that this can be very much more visible and dealt with more easily than it is at present.
    I move on to UNCTAD. The countries of the Northern Hemisphere must take a far more positive attitude to the negotiations which have taken place at UNCTAD than they have done in the past. I realise that it is very irritating for the representatives of an OECD country to go to an UNCTAD meeting in Nairobi, for example, and to be lectured and called capitalists in economic policies. But this rhetoric must not be taken too seriously. The great potential for growth for the OECD countries lies in increasing the purchasing power of the less-developed countries so that they are capable of buying more.
    Apart from the morality of that, I am sure that the dictates of self-interest demand that we contribute far more to UNCTAD than the Government have so far done. I believe that the fault for this lies in the fact that there has been a division of responsibility between the Secretary of State for Trade and the Minister of State for Overseas Development, so that much of the attention to UNCTAD and the North-South dialogue has fallen between these two Hart and Dell stools. What has happened, for example, to the initiatives suggested three or four years ago by the right hon. Member for Huyton (Sir H. Wilson) at the Kingston conference? Great attention was paid to them at the time, but they have disappeared out of sight. It is only in helping the Southern Hemisphere to move to
    1140
    a faster growth rate that there lies a real chance for the Northern Hemisphere to help itself out of depression.
    Tariffs are one thing, but in the end, of course, one has to have the right product to sell, and here I say to our industries that we really should at times stop belly-aching about the Japanese. We should instead go out and emulate them. They have been the great imitators in the past. Let us and our industrialists imitate them now. Let us design and sell new products to meet the needs of the next five or 10 years, products that can sell throughout the world.
    One can think of many products that we all use, household names, that are now Japanese when they used to be British-made. Among these are the Honda moped, when the household names for such products used to be the Norton and the Raleigh. There is the Yamaha outboard motor, when the household name was the British Seagull. All these are light products which are easily used by young people. They are well thought out, cheap and well designed. One can think back over the last 20 years to products that we could sell in Britain or in the old imperial markets throughout the world.
    It is for these reasons that in part, I believe, our industrialists have fallen so far behind. I remember one British manufacturer of valves who was suddenly finding for the first time that he was facing a great deal of competition from new manufacturers in the EEC in his traditional export markets. He was complaining about this to me. Then he said "We have reached a satisfactory compromise. They have agreed that my company will make the inch size and that they will make the metric sizes." He thought that this was a good solution. Whether his company is still in business I do not know, but it would not be surprising if it were not.
    We cannot expect encouragement from the Labour Government for private industry in this task because a Labour Government do not believe, as we have found out so well over the last four years, in the success and wealth creation of private enterprise. Doctrinally, it is impossible for a Labour Government to accept these as the goal of private industry. But there is no doubt that it is in this direction that private industry must move, and there is still a great

    1141
    capacity within our country not simply to sit back and be raped by Japan but rather to see what Japan has done in the last 10 years and emulate it.
    We have to be bold to preach and practise free trade and to take a positive approach in the North-South dialogue when national resources are short and there is such pressure—and it may be increasing—in this country for the protection of jobs at home. I believe, however, that it is the only long-term way out of our present economic recession.
    Against the background of the tragic events in Rhodesia over the weekend and of the invasion of Kinshasha province in Zaire by Angolan rebels, led by Cuba and inspired by Russia, I want to quote from a speech by Mr. Robert McNamara in Montreal in 1966. He said:
    "In a modernizing society security means development. Security is not military hardware, though it may include it; security is not military force, though it may involve it; security is not traditional military activity, though it may encompass it. Security is development, and without development there can be no security. A developing nation that does not, in fact, develop simply cannot remain secure for the intractable reason that its own citizenry cannot shed its human nature."
    It is worth bearing in mind in the background the definition by the World Bank: that the poorest of the poor in the developing countries, the many hundreds of millions of them, can expect only $4 a year maximum growth in income for the rest of their lives. Clearly, therefore, at present they see no hope of development. It is for that reason that I believe that an act of determination and vision comparable to that of Marshall Aid is required from the statesmen of the OECD, acting together, in order to produce the sustained development of which Mr. McNamara spoke and on which the success of the 1980s now depends.
    8.16 p.m.
    Mrs. Audrey Wise: We have heard a lot from the Opposition about consumer choice and the need to protect and preserve it. It is a curiously old-fashioned world that they live in when they are talking about consumer choice. They seem to live in a world where competition is perfect and where production is determined by what the consumers choose to buy quite freely. If that world ever existed, it does not exist now.
    1142
    I think that some hon. Members opposite are consumers at second hand rather than at first hand, and do not perhaps engage in the day-to-day purchasing in the market as much as some of the rest of us, otherwise they would know better.
    I made a choice recently. I chose to buy some sports shoes marked "Made by Dunlop". That is a household name. Surely, then, I was choosing to buy British. Nothing of the sort. They were labelled "Dunlop" but were made in Hong Kong. What is happening to my choice as a consumer in that sort of situation? I might choose to buy cutlery labelled "Viners"—another household name. But again it is rather improbable that the cutlery will have been made in this country.
    Free choice by consumers is really a myth. The choices that are being made are far more choices by multinational companies about how to manipulate production, where production should take place, and what that production should be—in other words, what seems to be in their interest as multinationals and not to the advantage of the British economy.
    Coventry depends very greatly on manufacturing industry, and we are deeply interested in trade and related questions. Indeed, in Coventry, two-thirds of our employment comes from manufacturing industry, which is exactly twice the national average. When I visit local factories, I am told by managements that they would prefer to buy British machine tools—and often that would mean locally-made machine tools because in Coventry we have several large machine tool factories. However, I am told by local managements that they cannot get what they require. I am prepared to believe them when they say that they would prefer to buy British machine tools. I have to ask myself whose fault is it that they cannot obtain what they require.
    It seems that some of the investment incentives that the Government lavish on companies find their way into maintaining employment not in Coventry or elsewhere in Britain but in further increasing our import propensities.
    What has been happening in the machine tool industry during past years, in the light of the fact that the jobs of 40,000 machine tool workers have been destroyed in Britain since 1970? The majority of the jobs have been destroyed

    1143
    by giant multinationals, which control about 40 per cent. of United Kingdom machine tool production.
    In Coventry we believe that the conglomerates bought machine tool firms when quick profits could be made in a rapidly expanding world market and that only a minute fraction of the profits that were made in the good years was ploughed back for the long-term future of the industry—for example, into research and development. Now that international competition has stiffened, the multinationals are taking their profits at the expense of the workers. They have cut back production on machine tools to little more than half what it was in 1962 in real value terms.
    Increasingly, manufacturers make their money not from manufacture but by acting as middle men and buying and selling foreign machine tools. Sometimes I wonder how much the Department of Trade knows about trade in Britain. I have made repeated endeavours to ascertain from the Department what is happening to apparently British manufacturers. For example, I have tried to establish how much they are acting as middle men. It is extraordinarily difficult to obtain any firm information from the Department. That is not because the Department is secretive but because it does not know the role of apparently British manufacturers in preferring to act as mere importers. I find that totally unsatisfactory
    In Coventry we assert that it is a fact that machine tool manufacturers are increasingly preferring to act as middle men. Some are shifting their capital out of machine tools into other areas of business. The result of this drastic so-called rationalisation is a sharp rise in imports, so that only half the machine tools bought in the United Kingdom are made here. That is extremely serious. Its importance is emphasised by the fact that the Government have made genuine and well intentioned endeavours to increase investment in British industry, which means increasing possibilities for the machine tool industry but which are being lost.
    What has been the response of workers in Coventry? They have been looking in vain for a suitable response from the Government and they are now making their own endeavours. For the past year they have been trying to build an organisation
    1144
    that unites workers from different firms and unions, both manual and white collar. They are doing so with the full blessing of the district committees of the AUEW and the Confederation of Shipbuilding and Engineering Unions. They are spending a great deal of time in investigating and discussing the crisis in their industry to develop their understanding of how to combat it. They are beginning to prepare trade union plans for the future for the machine tool industry with a strategy for the short, medium and long term that protects the jobs of workers, and builds on their efforts, skill and experience.
    In taking that course, the Coventry machine tool workers committee is following a path that is increasingly being blazed by workers. In a slightly different way, but with the same principles, it is following the example that was set by the Lucas Aerospace shop stewards combine committee. In that instance there is the astonishing fact that an important company prefers even to forgo the chance of profitable sales rather than respond to the plan made by its workers. It is an amazing fact that the Lucas Aerospace management commissioned a market survey which indicates that there is great potential in the production of heat pumps, one of the products advocated by the shop stewards combine committee, but despite the result of its own market survey Lucas Aerospace is declining to go ahead with that production.
    The company is declining also to go ahead with the production of other exceedingly useful items that could have great potential for fulfilling the needs of real people in the United Kingdom and abroad. There is enormous export potential. The company is declining to respond, and no pressure seems to be being put on it by the Government.
    I believe in trade but I believe in the sort of trade that is about fulfilling the real needs of real people. The products that are presented by the Lucas workers span such projects as the road-rail vehicle and the combined battery and internal combustion engine. They are products in which we could lead, to the great benefit of employment. That would be a rational development of trade. Instead, we are becoming increasingly subject to import penetration. As my hon. Friend the Member for Newport (Mr. Hughes)

    1145
    reminded us, my right hon. Friend the Chancellor of the Exchequer finds that his economic policies are constrained because he is afraid of encouraging the sort of boom that would result in a massive further flooding of our markets with imports.
    The Department of Trade could play a useful part in getting some sense into our production and trading policies. To some extent, that would certainly necessitate import controls, which I consider should be fairly wide ranging. That would be necessary to buy time while we went ahead with sensible developments. However, import controls are not a panacea, or a complete policy in themselves. They are merely one tool that should be used.
    The time that is bought by using import controls must be used to develop sensible production and to enable companies to consider their product ranges to ensure that they are producing what is needed. If they are not willing to do that, the Labour Government must find ways of ensuring that all the incentives and encouragements, including financial incentives, that are given to industry are tied to an insistence that product ranges are reviewed so that production becomes more sensible and employment is maintained.
    In my constituency, Massey-Ferguson is cutting jobs by little fewer than 1,000. That means that during the next few years this large number of young people who formerly could have relied on jobs at Massey-Ferguson, producing tractors, will no longer find those openings. Massey-Ferguson has taken that decision without making any specific approaches to the Minister of State for Overseas Development to see whether she can offer any advice, suggestions or help. I trust that my right hon. Friend the Chancellor of the Duchy of Lancaster will agree that it is deplorable that a large company should prefer to cut jobs rather than to enter into discussions to find out whether the Government can help and, if possible, advise on where increased trade can he found.
    I understand from my right hon. Friend the Minister of State for Overseas Development that there are more openings for trade in light agricultural machinery than in some of the items at present being
    1146
    produced. Therefore, it would appear to be sensible to diversify production into the light agricultural machinery which is needed. I am sure that Coventry workers would be capable of making it. Yet they are not given any alternative. Instead, jobs are cut.
    The Departments of Trade and Industry are separate Departments, but I believe that they should co-ordinate their activities and that the Department of Trade should play a more positive role than it now plays.
    I hope that in reply to the debate my right hon. Friend will have something constructive to say about ensuring that we are given less exhortation about increasing exports, but that the Department will develop import substitution polices and that the Goverment will respond to workers' plans for rational production patterns so that we can maintain employment and satisfy people's needs by trade and production.
    8.32 p.m.
    Mr. Giles Shaw: I do not wish to follow the hon. Member for Coventry, South-West (Mrs. Wise) in her argument. I find it difficult to follow the concept of real and other people. As far as I am concerned, consumers, manufacturers, employees and employers are real people who have real problems which we try to tackle to the best of our ability.
    It is wise and proper to have a debate on trade linked with prosperity. I am glad that the Chancellor of the Duchy of Lancaster is in his place and preparing to reply to the debate.
    I suspect that it is within the small business sector that some of the best lessons for trade and prosperity can be learned. I readily recognise that, as my hon. Friend the Member for Mid-Sussex (Mr. Renton) pointed out, major negotiations on the world trade scene are effectively concerned with very large economies and in which there tends to be a dominance of the larger industrial sector. Pudsey is not representative of the larger industrial sector. It has a sector made up fundamentally of the smaller businesses.
    I want to make only three points in my contribution to the debate. First, the Government have an overall responsibility

    1147
    for trade policy on three levels. The first is the grand international regulation of the Geneva or UNCTAD type. That has always been the way in which major elements in the world marketing scene are set. I trust, as everyone else trusts, that the international negotiations will succeed in clarifying world objectives not only to free access into more markets but to fair trading standards.
    Secondly, the Government have a direct responsibility for negotiations in trading conditions within our domestic market, which is now the European Community. They can and should take steps to ensure harmonisation of trading standards between the Community markets. Such steps should be taken quickly and sensibly and should not redound to the difficulty and discredit of those operating within the United Kingdom.
    Thirdly, the Government have the general and overriding responsibility for exporting as the crucial concern of the British economy and for achieving, through the development of creative products and effective prices, an income on which the nation may survive.
    I do not wish to discuss the major international problems involving GATT and UNCTAD because they have been adequately covered. I wish to discuss the problems of negotiations within the domestic market and the EEC, for which the Department of Trade bears an important responsibility.
    This weekend my local newspaper carried the headline:
    "Shut down—76 workers lose jobs."
    A total of 76 workers in the small town of Pudsey is a substantial number. The newspaper was referring to the closure of a local tannery—J. & G. Mohun Ltd. which was established originally in Leeds in 1856, moved to my constituency in 1914, was rebuilt and re-vamped in 1947 and is now going out of business. The closure of this family busness is of great and direct interest because it underlines the points I wish to make.
    The leather industry has a big problem of foreign penetration. There is substantial penetration from Brazil which in 1974 imported 1·4 million sq ft. of leather valued at £300,000. In 1977 it imported 20·3 million sq. ft. of leather valued at £7·8 million. Entry of leather products
    1148
    into Brazil is subject to a tariff of 170 per cent. It is not surprising that the overall market in which that small family business operated was heavily depressed, with a resultant fall-off in orders.
    The second problem, since it involves international negotiations, is the responsibility of the Department of Trade. It concerns the EEC regulations on guarding the drums in which the tanning process takes place. New regulations were issued which were to a different standard from those required in the United Kingdom. Because of these regulations the company was required to spend £15,000 of capital investment. The third problem encountered by the firm involved the factory inspectorate which decided, probably for good reasons, that the factory required total re-wiring. That involved a capital cost of another £15,000. The Department of Employment is responsible for the factory inspectorate.
    That small family business was required to spend £50,000 with no increase in output and no reduction in costs. That was against the background of a falling British market in the leather for shoe manufacture. As a consequence the company closed down. That is sad, but it is typical of the problem. The whole pattern of trade and of Government involvement is evident in this story.
    The story involves the international trading scene, with heavy protection for the Brazilian market, with vast penetration into the United Kingdom market, not necessarily at dumped prices but at prices which are artificial in relation to the production of the raw material. Tanning follows that and produces a cost which is not a true reflection of the United Kingdom equivalent.
    Then there are the EEC regulations and the factory inspectorate requirements. The managing director, to whom I spoke this morning, has no argument about the necessity for re-wiring or increased guarding for the tanning vats. But the coincidence of all these matters led to his small company going out of business.
    We must ask whether it is within our power to prevent the sudden increase in pressures which destroys a small business, destroys jobs and perhaps destroys a valuable industrial sector. So often in our discussions on trade we concentrate on the

    1149
    mote in our brother's eye—the question of tariffs and protection. Infrequently we look at the beam in our own eye. The Department of Employment required certain standards, the EEC required another set of standards.
    By this tale I show how frequently our small industrial problems are of our own making, are accidents of administrative incompetence because they happen to coincide in their application; or they are perhaps intelligent suggestions carried out according to a time scale which is disruptive to a company trading in an industry where there is fall-off in the demand for products.
    It seems to me, that frequently we could, if we applied our minds to it, phase our problems slightly differently. We could take a little more time. We could perhaps decide not to implement a series of regulations this year but next. We could perhaps phase the implementation of regulations over a longer period.
    The wool textile industry, in which I am also closely involved, has great problems of this kind with regard to effluent charges. It is right and proper that the polluter should pay, as I think all parties are agreed, but the phasing in of these charges is traumatic to the industry, and it has discovered that within the EEC similar charges are not carried by its competitors within the domestic market.
    I conclude that, in the general context of trade, it is not so much the great discussion between free trade and protection which is crucial to our smaller industries. It is often the coincidence of events within our own control. We can take a slightly more consultative view. We can try to prevent small amendments which are required from becoming an overburdening on a management team. So often management teams in small companies do not have the resources suddenly to expand and obtain expert opinion.
    Those are the sorts of things that seem to have a place in a debate on trade and prosperity. I think that we in this House would agree that the only real chance of increasing prosperity is to lighten the load on business, to increase the opportunity for fair trading under fair conditions, without restrictions on either employment, on the one hand, or on the
    1150
    entry of goods, on the other. I do not see any real virtue in import controls. I do see virtue in encouraging the development of smaller businesses.
    Several Hon. Members rose—
    Mr. Deputy Speaker: In the remaining 20 minutes before the winding-up speeches I should like to accommodate three hon. Members who have been present throughout the debate. Whether I can do so depends on each hon. Member who is called to speak.
    8.42 p.m.
    Mr. Alan Clark: Having sat here for four and a half hours, I have heard a number of interesting speeches, and I am now rewarded with having the Chancellor of the Duchy of Lancaster included in my audience. This is a great honour, because his flexibility and receptivity to new ideas is, as my hon. Friend the Member for St. Ives (Mr. Nott) said, matched only by the rigidity of his voting habits.
    In the speeches to which I have listened, nobody has drawn attention to the enormous latent strength of the British economy. The United Kingdom is preeminent amongst Western industrialised nations in being at the level of self-sufficiency—not absolute but considerable—in its natural resources. We should be preeminent among trading nations. We and our subjects should have a positively Roman existence in this country, and we have only to imagine, uncomfortable and embarrassing though it might be, what the Germans or the Japanese would be doing if they had the level of self-sufficiency in energy resources that we enjoy to realise the extent to which we have declined and the unhealthy condition from which our economy currently suffers.
    That is because British industry is at the moment so diseased and demoralised, so encumbered with restrictions, controls, over-weighted subsidies, fines, taxes, every kind of governmental interference, private misgiving and lack of confidence that it has become totally uncompetitive in almost every sector. It is, therefore, necessary for it to be given by us, the legislature, a period of a completely free market, in which it can come to its senses and recover.

    1151
    When my hon. Friend the Member for St. Ives was discussing the various ailments which presently afflict British industry, he dwelt—it was very natural that he should do so—on the restrictive practices of the trade union movement. I believe, however, that these arise largely because the trade unionists themselves allow their leaders, on the shop floor and at higher level, to conduct what is essentially an obstructive campaign. simply because all of them realise, consciously or subconsciously, that they are in declining industries, that their days are numbered and that they must prolong their employment to get as much out of it as they can while the going is good.
    If one could remove those fears and give trade unionists the confidence—which management and industrial leaders also need; I shall come to that matter shortly—which would come with assuring them that the market for the goods that they are making is protected against foreign competition, we could get, particularly with the new and moderate leadership that is coming to the fore in the trade union movement, a very considerable and enormously important change of attitude.
    It is exactly the same with managements. They do not really have any fundamental confidence in the future of large sectors of manufacturing industry. They blame the backlog of Government interference, the restrictive practices and the lack of incentives, certainly. One of the planks of the Conservative Party is to restore incentives and to reduce taxation. However, unless that is coupled with other long-term measures to bring back real confidence, the corollary of the obstruction and the restrictive practices of the trade union movement will simply be seen at management level with further flights out of the currency into quick-return investments, and not with any positive and substantial effect on the long-term future of manufacturing industry in Britain.
    It has been said that if one punches out a computer card differently or if one programmes a computer as one wishes, one will get the desired result. That may well be true. Certainly the jargon in which much of this argument is expressed is incomprehensible, and, indeed, it can be adapted to suit practically any case. One does not need a computer or jargon. All
    1152
    that one needs is that celebrated economic instrument which was so denigrated when it was first produced by a former Member of this House, now Lord Home of the Hirsel—a box of matches.
    All that one needs for one's arguments is to look at the sectors in which goods are being manufactured abroad that were formally manufactured in this country, be they radios, electronic goods, motor cycles, aircraft, shoes or whatever else, and simply subtract or add one's matches on the table. One will then see that people who used to be making these goods in Britain are no longer making them because they are being made abroad. Therefore, it is plain that the people who used to be making them do not have the job opportunities that they used to have. Therefore, it is plain that the foreign currency which is being used to buy these goods that are being made abroad is adding to our balance of payments deficit.
    I should like to develop this argument further, but in deference to your request. Mr. Deputy Speaker, I shall not do so. However, I should like to put at rest the mind of my hon. Friend the Member for St. Ives, in this respect at least. He mentioned Joe Chamberlain. Indeed, protectionism was rampant to a very large extent under Neville Chamberlain also, in the 1930s, very much later, and to a large extent it was responsible for the recovery in our terms of trade and in the prosperity of Britain that took place between 1933 and 1938.
    But those of us who argue this from the Conservative side do not envisage protectionism encumbered and packaged with all the apparatus of control with which it is presented and, indeed, favoured by Labour Members below the Gangway—none of whom is present at the moment.
    Mr. Lever: The hon. Member is putting their case very well without them.
    Mr. Clark: I am certainly not doing so. I am arguing that protection should be accompanied by other financial measures—incentives, reduced taxation and the lifting of the burden of other forms of governmental interference. That will pay, because if we protect, which costs the Treasury nothing, we shall be free of the obligation, if such it is, to subsidise, to divert money in concealed forms to ailing industries.

    1153
    The Government's sole duty in protecting the livelihood, earnings and prosperity of their subjects is to prevent the penetration of foreign goods into this market. Once they have done that, it is for management and the work force to work out their future protection under the laws which we pass.
    I do not follow the argument that we depend upon an open trading system. We are in a deficit wherever we trade under that system: we are being cut to pieces. The research department at Transport House has supplied me with an alphabetical list of industrial sectors—from aerospace production to surgical instruments, synthetic resins, textile machinery and so on. On every item, import penetration increases year by year. If that continues, the present plight of British industry will be steadily worse.
    Mr. Charles Fletcher-Cooke: Does my hon. Friend have a list of those sectors where the export penetration of British industry increases year by year? It is probably just as good as a list of import penetration.
    Mr. Clark: With respect, it cannot be, can it? That is an obvious mathematical truth. If we are in permanent deficit, as we are, on trading account in manufactured goods, the penetration, so-called, of our exports must be exceeded by the deficit arising from imports. That is mathematically self-evident.
    In deference to you, Mr. Deputy Speaker, I shall not develop this argument at much greater length. In the celebrated Red Book produced at the time of the Budget, there were forecasts which were meant to justify the Chancellor of the Exchequer's measures. Copies of this book have probably all gone into the wastepaper basket by now, but I have kept one.
    On page 14, a variant with a stronger trade performance appears in the right-hand column. For some reason, the authors left out the variant with a weaker trade performance, which should have gone into the left-hand column. It is that variant that we are in now, and we shall stay in it. Unless we introduce protection, and the sooner the better—British industry needs not a breathing space but an oxygen tent—the variant with the weaker trade performance will increase
    1154
    in size and scale and will vitiate all other forecasts made in this book and by many of my right hon. and hon. Friends.
    8.54 p.m.
    Mr. Michael Neubert: In a speech lasting three minutes, it is scarcely possible to contribute anything to such a wide-ranging debate, but in the dying moments I think that someone should spare a dozen words on the subject of tourism. I must use nine of them to declare a professional interest.
    It is astonishing that in a debate on our trade policy no one has thought it sufficiently important to mention what a major contribution to our economic wellbeing and balance of trade is made by tourism. There are even some people who, astonishingly, resent our very success. It seems that after so many stories of depression, faced with the success story that tourism undoubtedly is, they are affronted, even offended and in some cases hurt. They resent the fact that nowadays we should rely for our prosperity on a service industry such as tourism which previously they had perhaps associated with countries with lower standards of living than ours. It is an unfortunate, and perhaps in certain cases unacceptable but none the less unavoidable, fact that in the future we shall have to abandon our traditional heavy industries for the newer industries, of which tourism is one.
    Tourism makes a major contribution to our economy. Although here in our capital city, in the centre of the country, we have to put up with problems arising from the influx of tourists every year, we must recognise that that is part of the price we pay. It is a price we have no choice but to pay. There are possibilities for the Government to ease the shoe where it pinches. It pinches in London. It must be recognised that the vast majority of the 11 million or so foreign visitors to these shores will, in the early stages of our development as a tourist country, come to London.
    The Government must ensure that the local authorities, which at present are the instruments for providing the necessary facilities for tourism, are co-ordinated at national level. This is not a parochial pump matter enunciated by a London Member. It is a matter of a national

    1155
    industry which needs Government attention.
    To those who would turn away the tourists and say that they are an affliction, I would say "What alternative do you offer?" Do those who present that argument want the tourists to be turned away at Dover like another episode of "Exodus", with the poor, wretched Europeans in sight of our shores not allowed to come here? Or do they want them to come here and to force them away by making life so unpleasant for them while they stay here that they will return to their home countries and tell their friends about it so that nobody would ever come here in the future? Or will they put a tax on tourists? What a spiteful Socialist idea that is.
    I contend that tourism will find its own level. There is nothing that one can do but welcome it. It brings immense benefits to the people of London and to the country at large, not only in providing employment but in the contribution that it makes to our essential overheads. Where would, for example, the theatres, the cinemas, even the churches, be without tourists? Even our own church of St. Margaret's is financed in part by the proceeds of brass-rubbing sessions that the tourists support there.
    It is not only these perhaps more elevated cultural activities. Foreign visitors contribute £50 million to the income of London Transport. Residents in central London may well resent the crush and congestion at this time of year, but where would the network of services which they enjoy at peak rush hours be without that contribution?
    In those three minutes, that is the only point I wish to make. I now make way for my hon. Friend the Member for Harwich (Mr. Ridsdale).
    8.58 p.m.
    Mr. Julian Ridsdale: Three weeks ago I was at a British industrial exhibition in Korea. One of our machine tool manufacturers complained to me on three counts. His first complaint was that he asked why we lent billions of dollars to the Soviet Union at 4½ per cent. interest for them to manufacture machine tools exactly the same as ours. The second complaint he made was "Cannot you do something to see that taxation is reduced so that incentive is given to
    1156
    produce more of our own machine tools in Britain?"
    The third complaint he made—I am glad that the Chancellor of the Duchy of Lancaster is here—was that the machine tool industry contracts much of the work to smaller companies, and he said that it was a disincentive to some of the smaller manufacturers to have the Employment Protection Act acting against them. The reason is the lack of delivery of machine tools in our own country.
    In the one minute remaining to me, I say that if we wish to reduce taxation we do not wish to see the Government finding so much capital by taxing the British people. The real way they can do it is to show that conditions are right in Britain for capital investment from abroad. I found on recent visits to America and Japan that there was in those capitalist countries a desire to invest in Britain. Alas, they are doubtful about the conditions here.
    That is what the Government must look to, because the capital investment per industrial worker in Japan is £30,000 and the capital investment per industrial worker in West Germany is £23,000, while the capital investment per industrial worker in the United Kingdom is £6,000. That is the challenge. There are foreign investors who want to help. We must create the conditions of the market economy here so that they may do so.
    It is now 9 o'clock, and I thank you, Mr. Deputy Speaker, for allowing me those few moments in which to speak.
    9.0 p.m.
    Mr. Cecil Parkinson: It is almost inevitable that a debate on trade should cover a wide range of subjects, and today's debate has been no exception. We have had some very interesting speeches. I mention, first, what was said by my hon. Friend the Member for Uxbridge (Mr. Shersby) about the film industry. My hon. Friend did not ask for grants or handouts. He simply said that if a tax system of the kind that the Chancellor of Duchy of Lancaster talks about but never does much to produce were to be introduced, our film industry would flourish. The hon. Member for Liverpool, Walton (Mr. Heifer), in typical fashion, snorted

    1157
    "Who cares about films?" I shall tell him. My constituents at Elstree Studios and those who work at ATV care a great deal about films. Films are a valuable source of earnings for this country, and all that my hon. Friend was saying was "Give us the right tax climate and a film industry will be created."
    My hon. Friend the Member for Rom-ford (Mr. Neubert) took up the same theme, referring to the contribution which tourism can make and is making, and he, too, argued that the tax system is one of the principal drains on that trade.
    I heard the almost amazing speech of the hon. Lady the Member for Wolverhampton, North-East (Mrs. Short), who, if I say so without costing her her seat, made a first-class Tory speech. I only waited for the final moment when she would announce, as I was sure she would, that she was planning to cross the Floor. But she did not do that. She sat down.
    Mr. Tebbit: That will come in October.
    Mr. Parkinson: As my hon. Friend says, that comes in October.
    My hon. Friend the Member for Chingford (Mr. Tebbit), in a typically interesting speech, talked about aviation. The past 12 months have seen the beginning of the collapse of the IATA cartel, thanks, in the main, to the activities of Sir Freddie Laker, aided and abetted by other independent operators. At long last, the myth has been exploded—the myth so dear to the Government, that the high price is the right price. Although hon. Members on the Government side now act as though they invented Sir Freddie, the truth is that Skytrain eventually took off after the right hon. Gentleman's predecessor as Secretary of State had tried in every way he knew how to stop it.
    Since that time, fares across the Atlantic have tumbled dramatically, and now the pressure is building up to bring down fares on other routes. The Government should recognise that this pressure is here to stay. The public will have little sympathy with those who try to maintain fares higher than necessary, especially, for instance, on the European routes.
    My hon. Friend the Member for Uxbridge talked about shipping. He pointed out the damage which was being
    1158
    done to our shipping industry by subsidised competition from Eastern bloc shipping fleets. I agree with what he said. I have found it hard to understand the Government's attitude, knowing what they now know, to such deals as the Polish shipping order. When the Chancellor of the Duchy of Lancaster asked my hon. Friend the Member for St. Ives (Mr. Nott) whether he was saying that the Conservatives would not have done such a deal as the Polish shipping deal, my hon. Friend replied firmly "No", and he meant it. The truth is that it was one of the most shabby and foolish deals which even this Government have entered into, perhaps matched only by the gift of ships to the Indian merchant fleet. When these ships are handed over, they will effectively represent dumped shipping capacity at a time when there is already a surplus of shipping capacity. We shall be creating subsidised competition for one of our most important industries.
    Hon. Members on the Government side squeal like mad about cheap textiles, cheap shoes and cheap suits coming into this country, and quite properly call for better anti-dumping. At the same time they cheer the Government for dumping ships on the world market, although that damages our long-term interests.
    Labour Members have a similar hang-up about cheap food. They see it as a right, but cheap shoes and cheap clothes are a threat, in the Government's view. Apparently, farm workers' jobs do not matter, but textile workers' jobs do. Those are strange arguments for Socialists.
    Mr. Neubert: Does my hon. Friend agree that the two deals he mentioned, with Poland and India, may well be matched, indeed exceeded, by the recently concluded deal by British Aerospace with Romania, which it is reported provides for increased imports of steel, glass, textiles and other clothing? It seems to go completely counter to much that we have heard today from the Government.
    Mr. Parkinson: My hon. Friend points to yet another example of a rather strange deal cooked up by the Government, the full details of which have never been made available to the House, so far as I know. The House has a right to know the terms. Then we can form a judgment on them.
    Mr. Tebbit: My hon. Frien dis right. We do not know the full details, and therefore it would be wrong to prejudge them in their entirety. But I have had a letter from the chief executive of British Aero space, who assures me that the deal was on a strictly commercial basis. Whether it is attached to a trade deal on other matters, we shall have to wait and see.
    Mr. Parkinson: I am glad to have my hon. Friend's assurance. I find it more reassuring than any I might have received from the Government.
    A moment or so ago I mentioned cheap textiles. The hon. Member for Rossendale (Mr. Noble) introduced the subject and other hon. Members took it up. The hon. Gentleman introduced a new aspect to Labour mythology—the Korean employer who stores rifles in his basement as a means of getting higher production from his labourers. If the hon. Gentleman will believe that, he will believe anything. I advise him not to build too many of his speeches around that example
    The hon. Gentleman is always twitting us about our lack of direct expertise on textiles and the shortage of Conservative Members from textile areas, although he recognises the quality of those that we have, including my hon. Friend the Member for Pudsey (Mr. Shaw). May I reassure the hon. Gentleman on one point? We are planning to increase our representatives from the textile areas. We are planning to take his seat. We shall find out in October, or as soon as the Government like to go to the polls, whether out plans materialise.
    The renegotiated Multi-Fibre Arrangement has been in operation for only a short time. It is far too early to say whether in practice it will work out as intended. One of the objectives of the renegotiation was to give our textile industries a chance to regroup and modernise. It was never intended that the MFA should offer the industry permanent protection. It is a short-term measure. In fairness, I should add that that is all that the industry asks for—the chance to regroup and to face competition. It does not seek permanent protection against competition.
    The other major objective was to retain access for developing countries to markets such as ours. I was concerned to see that the first four months' statistics
    1160
    show that this might not be working out as planned. The last available figures show a marked increase in imports from the developed countries and a 7 per cent. fall in our imports from the poorer developing countries.
    It is worth reminding ourselves, as The Economist did this week, that the rich countries have a huge and increasing trade surplus with the poor countries in manufactures. It would be very unwise of the Government to neglect the important safeguard of the interests of the poorer developing countries. A number of places, such as Hong Kong, were forced to make cuts in their exports. They were assured that that was to make way for the poorer developing countries, but it does not seem to be working out. I hope that the Minister agrees that this is a trend that will need to be watched.
    Mr. Nicholas Winterton: Does my hon. Friend not consider it rather unfortunate that at such an early stage in the new MFA the EEC should be seeking to increase the quotas on textiles coming into the EEC from Portugal? Is this a situation which will give our textile industry an opportunity to regroup, to reorganise and to get that new encouragement which I and many others feel the industry deserves?
    Mr. Parkinson: My hon. Friend is knowledgeable about textiles, but I would rather not join him in speculating about what is at present a rumour.
    Mr. Winterton: It is not a rumour.
    Mr. Parkinson: The truth of the matter is that there is a procedure for dealing with imports from Portugal, which is built into the MFA. It is quite possible to take action against those imports if what my hon. Friend says is happening is indeed the case.
    As my hon. Friend the Member for Mid-Sussex (Mr. Renton) said in his extremely interesting speech, the next month will be crucial for those interested in maintaining a liberal system of world trade. The GATT renegotiations, which started in a very different climate six years ago, are due to reach agreement on general principles and are due to report to the Summit effectively next month. As my hon. Friends the Members for St. Ives and Mid-Sussex have said, it is vital that the Tokyo Round ends in success.

    1161
    It is worth reminding ourselves of what that round is intended to achieve. Weaknesses have appeared in the GATT system as renegotiated in the Kennedy Round. The objectives of the renegotiation was to tackle four main weaknesses. The first concerned the principle of nondiscrimination, which had been the corner-stone of the GATT system and which had become more honoured in the breach than in the observance. The second weakness affected the special status which had been negotiated for agricultural products in the original negotiations and which excluded them from the process of liberalisation. The provisions for market disruption, for dumping and allied problems, had not worked satisfactorily. There was a generally agreed need to renegotiate article 19. Finally, there was great concern about the absence of a complaints and arbitration procedure, which meant that small companies in particular had little prospect of achieving satisfaction in trade disputes, especially with the major trading powers.
    It is important for the House to recognise that the GATT negotiations have not been concerned only with the liberalisation of trade within an accepted framework of rules. What is taking place in Geneva is wholesale redrafting of the rules. We are attempting not just to reduce barriers within an established framework, but to create a brand new and much more sophisticated framework.
    Listening to the debate it would be easy to form the impression, especially from the speeches of Labour Members, that the negotations were simply about reducing tariff barriers. The truth is that tariff barriers are only a part of the negotiations. The development of rules on non-tariff barriers, on subsidies, on countervailing duties and especially Government procurement are vitally important.
    The negotiations cover the development of a satisfactory system of safeguards. I recognise that the absence of satisfactory rules on these subjects has been the basis of the growth of a range of subsidies, grants and hidden barriers which bedevil the trading system. Labour Members give the impression that we are the last of the free traders and are constantly being taken for a ride by the wily foreigners. As my hon. Friend the Mem-
    1162
    ber for St. Ives pointed out, the Government offer a range of subsidies, grants and discretionary grants designed to create the unfair competition about which they love to complain.
    The Prime Minister, in replying to last Wednesday's economic debate, called ardently for the success of the multilateral trade negotiations. He regarded them as a very important part of the Government's plans. But as reported at column 1134 of the Official Report, just before he had made his remarks about the importance of freer trade, he listed a number of industries receiving just the sorts of subsidies that the GATT negotiations are aimed at eliminating. He is all for having renegotiation, he recognises the importance of the GATT negotiations, but then he boasts about the way in which his Government have been getting around the GATT agreements.
    Only last week the Secretary of State was busy attacking import controls and protectionism. A few days later he was reported to have said that if the latest attempts to prop up the European steel cartel failed, Britain would take unilateral action to protect her steel industry. He talks of protecting our steel industry as if we are the innocent yet many people in the world community feel that nationalised steel industries such as ours, which can make huge losses with impunity, are the very industries against which they need protection.
    Mr. Noble: In view of the fact that the hon. Gentleman has been talking about subsidies, will he list quite clearly and categorically, for the benefit of people in the House and outside, which subsidies a Tory Government would withdraw, and say whether they would be in favour of central arrangements for protecting industries under threat?
    Mr. Parkinson: The hon. Gentleman talks very authoritatively about trade, and I had actually begun to believe that he understands it. The GATT negotiations are precisely about eliminating the type of subsidy that he is talking about. We recognise that it is in our interests, and in the interests of the world trading system as a whole, to eliminate non-tariff barriers, hidden subsidies and the whole welter of things about which I was talking. The answer is that the subsidies that we are hoping to remove are precisely

    1163
    the same subsidies that his right hon. Friend the Secretary of State has gone to Luxembourg tonight to talk about. We are in exactly the same business. The hon. Gentleman had better wake up to what is happening over there in his name.
    We know why the Secretary of State talks tough whenever he can. It is because he knows that a growing number of people in his party prefer the alternative strategy put forward by the new Cambridge economic group, the Tribune Group, and by the Trades Union Congress. We know that the right hon. Gentleman the Chancellor of the Duchy of Lancaster despises the Tribune Group and has a very low opinion of the new Cambridge economic group. Does he despise the TUC equally? Would he care to comment on that?
    Mr. Lever: I am not as ready with scorn and despising, or with venom and hate, as the hon. Gentleman implies. I disagree very strongly with protectionist views, even when put forward from the Opposition Benches.
    Mr. Parkinson: I have not noticed many of those being put forward today. I hope that the Chancellor of the Duchy of Lancaster, when he replies, will give us a better answer than that.
    The strategy about which I am talking was summed up very well by the hon. Member for Luton, West (Mr. Sedgemore) in an article in The Guardian, in which he said:
    "What is becoming abundantly clear to all those who care seriously about our future is the need for a broadly supported alternative strategy which involves not merely planning and protection but plans that can be translated into action through a reorganised Whitehall machine, the Scottish and Welsh Development Agencies, the National Enterprise Board, the trade unions and the local authorities."
    Britain, if this prescription is to be believed, is to try to win the economic world cup with a team of guaranteed all-time losers. The key to Britain's future, according to this particular gang of three, is an ever bigger role for those who many would say are the causes of many of our problems. The only role for the private sector, according to the hon. Member—and he speaks for the Tribune Group—is to be planned and directed by those who have a very dubious record in
    1164
    discharging the responsibilities which they already have.
    Several of my hon. Friends have attacked the case for import controls and made the case against them. I agree with the Secretary of State that the Cambridge hypothesis, that protection equals growth, is very much open to argument.
    At this point I should like to comment on the Secretary of State's question to us about the CAP and our attitude to agriculture. It will be extremely difficult for the EEC to expect to maintain the CAP in its present form, and to keep its markets closed to the agricultural products of other countries and not expect retaliation against its own industrial products. As my hon. Friend the Member for Mid-Sussex said, if the EEC would just show a little imagination, and bend a little and accommodate such people as the Australians, the EEC overall would gain.
    I have spoken to a number of members of the Australian Government. Quite frankly, they are fed up with the inflexible approach of the EEC, and they will retaliate. There is no need for me to remind the House that the EEC has a substantial surplus with Australia and that Britain and Germany are the main trading partners. We stand to lose a great deal if the EEC remains totally inflexible in this particular area.
    As many of my hon Friends have said, import controls are unfair to the consumer and the housewife who are forced to pay more than they need to pay for the products which they want. They protect sleepy managements and institutionalise inefficiency and restrictive practices. My hon. Friend the Member for Plymouth, Sutton (Mr. Clark) argued that behind the shelter of protectionism British industry would modernise itself. I do not think that there are any grounds on which he can make that assertion.
    Let us examine the really protected industries of this country. Let us take newspapers, which by their very nature are protected. There is no foreign competition for the newspaper industry. It is one of the most overmanned, inefficient, resistant-to-change industries in the country. I would argue that my hon. Friend's assertion that behind the framework of protection thousands of employers would get on with the job of modernising their companies ignores the fact that

    1165
    we have a craft-based trade union system which has an entrenched dislike of change.
    Does my hon. Friend really think that the trade unions in British Leyland would be even prepared to discuss manning levels with Michael Edwardes if they knew that there was no alternative for the British purchaser than to buy British cars? They are prepared to co-operate, and talk about co-operating, because they know that if they do not meet the need the customer has an alternative. Increasingly and sadly, the customer is taking advantage of that.
    Mr. Alan Clark: Yes, I believe that they would, because I believe this would have to come hand in hand with a complete removal of wage control, a return to free collective bargaining and with enormously increased employment opportunities. The pressure upon the unions would come from the trade unionists themselves. They would compel their leaders to fit in with the new arrangements in this new climate.
    Mr. Parkinson: That is not the impression that I get when I am visited by trade unionists. By a coincidence, I was recently lobbied by a group of printers. The argument was simply "I did five years' apprenticeship. I spent five years training. I now find that my job can be taken away from me by a machine which any sensible person could learn to operate in a few weeks. What are you going to do about it?" There was no suggestion that "My job in this particular industry has come to an end and, therefore, I must look around for new opportunities in a new industry". My hon. Friend suggests that people would have new opportunities in a new industry. Such an attitude is very optimistic. I put it no higher than that.
    I believe that import controls would almost certainly invite retaliation and that in a variety of ways they would undermine our export performance by siphoning off labour and resources. But, far more important than any of these things, coupled with exchange controls they represent a vital and major step towards the Socialist State which we must assume all Labour Members want, although we recognise that some, such as the Chancellor of the Duchy of Lancaster, want
    1166
    it a little later than others. If the Government control the flow of goods and the flow of capital, the direction and control of investment and compulsory planning agreements follow as night follows day and essentially planned economy is well on its way.
    Today, the Government parade before the House a pair of Trojan horses, the Secretary of State for Trade and the Chancellor of the Duchy of Lancaster—and, if I may say so, a most engaging and agreeable pair of Trojan horses. I have no doubt that the Chancellor of the Duchy of Lancaster will do his usual trick of assuring us that he despises the alternative strategy, deplores the suggestion of import controls, believes passionately in private enterprise, and is not really a Socialist at all.
    The truth is that he and people like him and the Secretary of State for Trade have been in the majority in Socialist Governments and Socialist Cabinets since the war and have presided over the steady spread of nationalisation, the steady expansion of public expenditure and the steady increase in taxes which are the distinctive achievements of Labour Governments. The Left, which has been consistently in the minority, has consistently, if slowly, had its way.
    The Chancellor of the Duchy of Lancaster, the Secretary of State for Trade, the Chancellor of the Exchequer and the Prime Minister all recognise that the private sector holds the key to the nation's future success or failure. They point out consistently that taxes are too high, that differentials are too low and that profits are too low. Yet, when the Opposition move amendments to cut one and restore the other, the Chancellor of the Duchy of Lancaster votes against us, having identified both as necessary. Does he agree with the Minister of State at the Treasury, who replied to the debate on the amendment to reduce the top levels of direct taxation, that we, the Opposition, were promoting the class war and favouring our well-heeled friends? I am sure the Chancellor of the Duchy of Lancaster will take it as a compliment when I say that he is walking evidence that not all the well-heeled are Conservatives. The right hon. Gentleman supported the Minister of State with his vote. Did he support his argument?

    1167
    The question of dividend controls will arise shortly. The right hon. Gentleman knows better than most that dividend restraint damages the interests of millions of pensioners who are dependent on the institutions which are the main shareholders. His noble Friend Lord Diamond has identified the vast majority of personal shareholders as the holders of small quantities of shares and the recipients of small dividend incomes. Will the right hon. Gentleman be pressing this knowledge on his right hon. and hon. Friends, or will he once again go along with them in pandering to the prejudices of the Left?
    Did the right hon. Gentleman see the Labour Party political broadcast 10 days ago in which profits and private ownership were described as the sources of most of the nation's problems? Did he agree with that diagnosis? If not why does not he disown it?
    The right hon Gentleman will pronounce his usual comforting words tonight. He and his right hon. and hon. Friends will present themselves as a solid bulwark against their colleagues. They will say that they will continue to resist the demands of the Left, the TUC and their annual party conference. The truth is that they have not succeeded in the past, and the result is a country in the state which our country is in today. The British people have no confidence in the right hon. Gentleman and his colleagues and, in October, they will give them their well-deserved come-uppance.
    9.28 p.m.
    The Chancellor of the Duchy of Lancaster (Mr. Harold Lever): I am grateful to the Opposition and to their two spokesmen today for opening a discussion in an area where I am passionately concerned.
    When I learnt that there was to be no vote to reduce the salary of my right hon. Friend the Secretary of State for Trade, it not being possible to reduce my own, I hoped that we should be saved the party knockabout which disfigures so many of our economic debates—not because party differences ought not to be explored openly when they are relevant, but because I do not think that it adds usefully to a very promising debate when, for example, the Secretary of State and I are described as Trojan horses. I must confess that as the Oppo-
    1168
    sition have difficulty in projecting either of us as a red revolutionary, the only discreditable alternative that they could think of was to describe us as Trojan horses. I had understood that it was some of my hon. Friends rather than the Opposition who regarded us in that light.
    Mr. Ernest G. Perry: My right hon. Friend mentioned that the Opposition could not move a motion to reduce his salary. Does he not wish that they had done that, since it would have saved him income tax?
    Mr. Lever: I am grateful for my hon. Friend's concern for my fiscal safety, but I am not sure that it is accurately directed at this particular point.
    This has been a very interesting debate because, as everyone is conscious, we are in a great world recession. Everyone is conscious that there is widespread disillusion about the way in which our present system is working and that desperate so-called remedies are around which are the children of that desperation, born of the sense of danger, unemployment, monetary instability, payments imbalances, shrinking world trade and all the things which seem to threaten our prosperity and security.
    Not surprisingly, many hon. Members on both sides of the House—it is not true to say that it is confined to one side—have been asking whether it is not the protectionist remedy, which contracts out to a greater extent than the present system, that is a possible way of improving our situation. I want to make my own position abundantly clear, even at the risk of astonishing hon. Members at some future date by voting in support of my own Government—a not unusual procedure, I find, at any rate if one wishes to remain a member of that Government.
    To the hon. Member for Hertfordshire, South (Mr. Parkinson), who thinks it surprising that I should go dutifully into the Lobby in support of my own Government's proposals and invites me to comment on the more colourful expressions of colleagues in the Government, I say that these are shallow and insubstantial points. It is absolutely inevitable for all of us that every time we make a judgment on a vote we make a judgment not only on that vote but on the alternative to that

    1169
    vote. If I am tempted sometimes to be rebellious in the Division Lobby, I have only to look at the alternative to be reassured that any sin on my part would be even greater if I voted the other way.
    I make clear that my position is, add is likely to remain, one of clear-cut opposition to increases in protectionism, not on theological grounds but on the severely practical grounds that it is not in this country's economic interest, nor in our political interest, and that it generally offers no hope for our future to tread that road. It is a road of desperation. It is a road that we trod in the world before the war and which led to the rate race and the political disasters, and to the ultimate calamity of the Second World War and the villainous regimes brought into being by desperate European populations suffering high unemployment and wriggling to get out of it.
    I do not want to tread that road again, the more especially since the post-war prosperity was achieved by following precisely the opposite road—the road of co-operation between nations, with each nation seeing its prosperity in the success and prosperity of the whole community.
    What alarms me most in the whole of the discussion that has taken place within the debate is that whenever the less developed countries make new industrial achievements, which are modest on a world scale but important and significant to them, instead of seeing the creation of new wealth in sterile, arid and poverty-stricken areas as a promise for the peoples of the world, we see it as a threat.
    That is a threat only if we are so bankrupt of ideas and strategies that new achievement threatens us instead of offering us the hope, as history has always shown us it can, of a higher standard of life for us all. We should deal with the understandable anxieties of some of my hon. Friends and some Opposition Members about unemployment and their desire to cure it by the reaction of protectionism.
    Mr. Tebbit: Before the right hon. Gentleman leaves that point—
    Mr. Lever: I shall give way in a moment.
    The co-operative system is fairly fragile, and in my view it is silly to debate the relative hypocrisies of countries. We
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    should start from where we are now. As my right hon. Friend the Secretary of State rightly says, our object must be to reduce the element of protectionism and not to increase it. It is no good sermonising at each other on past faults. We shall get nowhere doing that. If we want to improve co-operation and the liberalisation of trade, we must accept that we are where we are and start from that position to reduce tariff barriers and non-tariff subsidies.
    We should start reflecting on the contracting out into protectionism with the thought that one of the things that economists have been agreed upon for about a couple of hundred years is that the route to greater wealth lies in the increased division of labour and that prtectionism is the enemy of increased division of labour and the improvement of wealth.
    If we move into protectionism, we are saying that the aggregate wealth creation will be less but that we shall do better within the aggregate.
    Mr. Alan Clark: That is right. That is exactly what we should say.
    Mr. Lever: The hon. Gentleman says that that is right. His box of matches nearly burst into flames as he spoke. He has simplified the whole argument for me by confirming my point. The hope is that we shall get more wealth in a world that is achieving less wealth. That is not an encouraging starting point for a protectionist campaign.
    I turn to consideration and rejection of a non-theological character. I shall do it briefly rather than itemise the arguments of every hon. Member who has spoken. The first argument is that of self-injury. That has been well made by the hon. Member for Colne Valley (Mr. Wainwright). Protectionism forces us to subsidise the less efficient, to put burdens on the efficient, and very often to engage in a hopeless battle to continue producing what is being produced elsewhere better and more cheaply.
    The hon. Member for Colne Valley gave the example of motor cars and motor components. Our motor car production has diminished because it is inefficient compared with other industries. The production of the motor components industry has increased because it is

    1171
    efficient compared with other such industries. It must be borne in mind, too, as my hon. Friend the Member for Luton, East (Mr. Clemitson) said, that tariffs do not get us exports. In a world in which we have to pay for our imports by our exports, we have to be efficient enough to sell competitively. No amount of tariffing will get us exports.
    Thirdly, there is retaliation. At times of high unemployment, we shall not be alone if we say "Let us do well even if the method we use will do injury to the aggregate prosperity of our trading partners. If the process is started and encouraged further by his country, for example, we shall have a great number of countries saying "Let us get more wealth out of a world that is getting increasingly impoverished because of the damage done by widening protection." There is not a very encouraging promise of prosperity by that route.
    There is another factor that has to be faced. When we engage in protectionism, we are arresting the better division of labour, especially in areas which have not yet achieved development.
    Mr. Nicholas Winterton rose—
    Mr. Lever: Let me finish. We are preventing the advancement or industrialisation of backward countries most of all.
    I am not arguing for a topsy-turvy, unlimited, uninhibited advance of freedom of trade. We must have an orderly system. I was impressed when the hon. Member for Hertfordshire, South, in his serious moments, rightly attached importance to the Geneva discussions, because they represent a sophisticated and advanced attempt to preserve our liberal trading system not by theological passion but by a careful analysis of what is required to permit an orderly advance without disruptive consequences—in other words, to increase the international division of labour and wealth creation but at a pace which is manageable and allows countries to get their breath on the way.
    We must do that because, as hon. Members know£and this applies in other countries—when constituents are put out of work it is not the normal practice of Senators or Members of Parliament to congratulate them on their contribution to the better international division of labour. On the whole, a somewhat more constructive response is expected.
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    Although I am strongly against the cruel folly of attempting to inhibit the advance of industrialisation and deve lopment in impoverished regions, I recog nise that this must go at an orderly pace which can be managed and dealt with. But I urge all right hon. and hon. Members to think again before seeing in protectionism some contribution to the solution of unemployment.
    Mr. Tebbit: Will the right hon. Gentleman give way?
    Mr. Lever: I will finish this sector and I shall then give way. The hon. Gentleman must allow me to finish this point.
    In fairness, protectionists are always a little defensive. They always recognise what I have said to be true. They are always saying "It is not permanent. It is a finite period of retreat into protectionism." But this half-hearted tribute of vice to virtue is unconvincing. If Britain retreats in this way, other countries will follow. There will be an organic change in the world's trading, economic, monetary and even political structure which will not readily be reversed. Therefore, let us not deceive ourselves. If we opt in the direction of the rat race—or, dare I say, further in the direction of the rat race than we have already gone—it will not readily be reversed and we shall not readily restore the spirit of co-operation and of liberal trading.
    Mr. Tebbit rose—
    Mr. Nicholas Winterton rose—
    Mr. Deputy Speaker: Order. To whom is the Chancellor of the Duchy of Lancaster giving way? I think that the hon. Member for Chingford (Mr. Tebbit) was first.
    Mr. Tebbit: The right hon. Gentleman has put his arguments, if I may say so, not like a Trojan horse but like a most vigorous stallion in these matters. I hope that he will not be a gelding in Cabinet when it comes to the point. May we expect him to announce now that British Airways will be authorised to import foreign aircraft, or is he still in favour of protectionism in that area?
    Mr. Lever: I regret that the hon. Gentleman does his intelligence and my time no useful credit by his intervention. He must know that I am not authorised to make an off-the-cuff pronouncement

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    about a matter which is under consideration at the present time.
    Mr. Nicholas Winterton: Will the Chancellor of the Duchy of Lancaster give way on a matter which I think is relevant?
    Mr. Lever: I shall give way in a moment; one at a time. I wish that I had suggested that the hon. Gentlemen had tossed up and that the hon. Member for Chingford (Mr. Tebbit) had lost the toss.
    Disillusionment with our present arrangements is fully justified. I have much sympathy with those who, even if they go down or urge the wrong road through lack of thought, will not echo the complacent platitudes of the hon. Member for St. Ives (Mr. Nott), because he did not give us any answers. He posed the questions but did not give us the right answers. He merely repeated conventional, oft-repeated platitudes. We must find answers to the kind of anxieties that people have about employment and our economic prospects.
    We must see what has gone wrong that has reversed that remarkable progress of prosperity which marked the first 25 years after the war. What has gone wrong is that our present adjustment system is not compatible with the prosperous interdependence of the world and of liberalised money and trade. Unless we make the system compatible with prosperity, interdependence and liberalised money and trade, we shall see the gravest and most dangerous erosion of liberalisation of trade and world co-operation.
    At the risk of sounding a little eulogistic, I believe that our Prime Minister's initiative in relation to the summit has such a special relevance and is of such special value because it is addressed directly to the weakest parts of the adjustment process.
    The weakest parts of the adjustment process are that we fail to achieve stabilisation of currency and, linked with that, that we have failed to achieve an adequate financing of current account deficits between nations. That is inevitable in a vigorous and expanding world where continuous equilibrium is a notion of Utopia rather than of real life. It is
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    neither desirable nor attainable in real life.
    We have also failed to deal with the ocean of rolling money which immediately magnifies every current account imbalance as it arises and often speculatively anticipates a current account imbalance and produces a major disruptive effect upon currencies.
    What does the hon. Member for St. Ives recommend in order to achieve stabilisation of currencies? He answered the question in a sentence. He said that all we need is that private balances should match. I am not sure why he supposes that this will happen autonomously or what has stopped it so far, apart from his catalogue of Labour Government shortcomings. It is not apparent why the inflows and outflows of dollars, yen, deutschemarks, francs and so on have not produced that balance which would have gratified the hon. Member. If the hon. Member is dealing seriously with these questions, it is not enough for him to mouth simple phrases. He must tell us how he will achieve that end and how he will get that balance to match.
    Mr. Nott: The right hon. Gentleman has misunderstood me. I was saying that if one endeavours to maintain a stable currency by intervening in the exchange rate—which I understood to be the Government's view—one is then taking in deutschemarks and yen. I suggested that the currency should float more naturally, which would make the problem less severe for the money supply. I was also suggesting that there should be greater freedom in exchange control. That is different from what the Chancellor suggested that I said.
    Mr. Lever: I took a careful note of what the hon. Member said. He said that we should seek to have private inflows matching private outflows and not have central bank intervention. Leaving the matter to the private flows did not stop the dollar depreciating sharply, to the alarm and disruption of much of the trading world. Even though the central banks of Britain, Germany, Japan and Switzerland intervened heavily in support of the dollar, a decline in the dollar occurred which was so grave and threatening that even now it dominates all financial and business calculations throughout the world.

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    If we followed the hon. Member's platitudinous prescription and left it to the private balances to deal with, I wonder where the £60 billion that was put up by the central banks would have been replaced. I can tell the hon. Member that there would have been chaos in the world monetary markets if the central bankers of Germany, Japan, Britain and Switzerland had last year refrained from intervention.
    The hon. Member for St. Ives said, in effect, that we should float and correct imbalances of trade by letting currency devalue, as it were, and not by tariffs. So he offers us a charming constructive alternative to tariff wars: currency wars. That is not very encouraging either. In the present situation, free floating is a bust. It is a complete washout for currency correction. It is a recipe not for balance of payments correction but for slump, trade war and economic disruption on a scale that would make the present slump move to the dimension of the 1933 slump if we failed to take action.
    Mr. Fletcher-Cooke: I want to know what the right hon. Gentleman proposes. He has been swingeing with my hon. Friend the Member for St. Ives (Mr. Nott), but he has admitted that there is a great problem. We want to hear what he and the Prime Minister propose.
    Mr. Lever: I have to refer the hon. and learned Gentleman to the five-point plan that will focus the attention of the summits at Bremen and Bonn. With respect, I cannot explain it in 10 minutes, but I shall do my best to outline it.
    Mr. Fletcher-Cooke: The right hon. Gentleman can do it in 10 minutes.
    Mr. Deputy Speaker: Did the hon. and learned Gentleman say that he would extend the debate by 10 minutes?
    Mr. Fletcher-Cooke: What I said, Mr. Deputy Speaker, was that if the right hon. Gentleman put his mind to it he could explain anything in 10 minutes.
    Mr. Deputy Speaker: I thought that the hon. and learned Gentleman was going to extend the whole business by 10 minutes.
    Mr. Lever: The correct way of achieving currency stabilisation is by co-operation between the great nations of the
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    world to accept and finance imbalances larger in size and longer in duration on both current and capital account than we have experienced and found acceptable so far. If we fail to accept and finance these capital movements and current account imbalances with more vision than we have shown before, the world will continue in its slump. We shall deepen the slump by false remedies and false roads along which people will feel themselves to be driven, and the Prime Minister has recognised that in seeking to focus the summit on achieving that stabilisation.
    I think that part of the remedy is that surplus countries must deploy their surpluses in part of the process of financing the current account and capital account imbalances of the deficit countries. What else would anybody think was constructive to be done with surpluses of this kind? In other words, we have to find the means at the summits to achieve a strategy for dealing with he disruption on capital and current account caused by the present monetary disorders.
    I think, too, that we have to turn our eyes to the needs of the poorer countries from the point of view of providing adequate finance for those countries to enable them not only to contribute to world trade at least to their present levels but to secure their development and their political stability.
    I think that it is no good talking about ruling out protection. The hon. Member for St. Ives can twit me with my votes and so on, but it is no good his ruling out protection and then advocating the positions that would lead to protection. He has to give answers to the unemployment question, to the currency instability and to the current account imbalances.
    It will not be very helpful if those of us who are struggling to meet this problem suffer from unkind vulgarisations of our position. The hon. Gentleman said that I was an inflator and borrower. If being an inflator means that I do not accept his thesis that today's level of demand is acceptable, with all the unemployment and waste that go with it, I am content to be called an inflator.
    Mr. Nicholas Winterton: What is the right hon. Gentleman going to do about it?
    Mr. Lever: We are trying to create the conditions in the world that will enable us to expand our demand, safely and securely, by providing the adequate funds to finance over a sufficient period of time the imbalances of trade which are inevitable in the kind of situation in which the world finds itself at present.
    Mr. Nicholas Winterton: Who will be paying for it? Germany.
    Mr. Lever: The answer is that every deficit has a surplus, and surpluses and deficits must be matched together so as not to allow surplus and deficit to injure the deficit country and, in the end, to injure the surplus country.
    It is no good the hon. Member for St. Ives repeating nineteenth century incantations, such as that Schmidt is right and Callaghan is wrong in seeking to improve the demand situation in the world. Callaghan is not some Bolshevik eccentric in seeking to improve employment in the countries of the Western world. The Prime Minister is addressing himself, in a way that the hon. Member evaded, not merely to the platitudes about protection, free trade and the like. He has addressed himself to creating the conditions that will favour the continuation of that.
    Mr. Richard Wainwright: Does the right hon. Gentleman agree that to make a success of the Bonn summit, of which he has stressed the importance, it will be necessary for our Prime Minister to address himself over the heads of Ministers at Bonn to the peoples of the United States and the other countries represented?
    Mr. Lever: That is a splendid liberal precept, but not necessarily a rewarding one.
    In conclusion, I want to say this about the Bonn summit and the Bremen summit. Everyone is rightly warning us against having dangerously high expectations. But there is another danger, too. That would be to have no expectations from the summit. It would be too easy a ride for all the leaders there if we did not have any expectations. We must have very firm expectations that they will show the developing common purpose—to get the world out of this stagnation, unemployment and threats of our present disorder economically and monetarily.
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    We do not expect a complete set of answers from the summit. We do expect convincing evidence of common purpose and of work immediately to be undertaken in support of it. I hope that that will come out of the summit.
    I think that the summit should demonstrate that the world is going to see a solution to its problems in extending, not diminishing, the collective monetary and economic security which was set up after the Second World War, from which we retreated a few years ago and from which we have not moved forward again with the kind of visions that inspired the architects of Bretton Woods. Bretton Woods went out of date, but it is miles in advance of the near-anarchy that marks the system now prevailing in the world.
    The great archetypal advance in thinking, vision and generosity was the Marshall Plan. The great lesson of that plan is that though it was the most imaginative and generous act of enlightened self-interest in world economic history, long after it has been concluded and forgotten—alas, forgotten too soon by its beneficiaries—there is not one citizen of the United States who is worse off economically or politically by that remarkable act of vision and generosity.
    The great lesson for the summit is that vision and generosity between trading partners and allies pays in the modern world. It does not cost one money. It is that vision and generosity which I hope to see greatly in evidence as a result of the summit deliberations that are shortly to be upon us.
    Mr. Frank R. White: I beg to ask leave to withdraw the motion.
    Motion, by leave, withdrawn.

UNFAIR DISMISSAL CLAIMS
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Frank R. White.]
10.0 p.m.
Mr. Greville Janner: I am happy to have this opportunity to discuss the increasing failure rate in claims for unfair dismissal brought before industrial tribunals. The latest figures

1179
were supplied to me by the Minister on 9th June and show that the failure rate is now 69 per cent.—that is to say, those who bring unfair dismissal claims stand at least a two-to-one chance of losing. Their prospects of success are now no more than 31 per cent.
In addition, according to the figures for the second quarter of 1977—the latest for which figures are available—even if successful they would recover an average of only £355. In other words, the failure rate is 69 per cent. and even where it is ruled that they were dismissed unfairly they will probably get no more than £355.
I am sure that the House will find these figures profoundly worrying. Employment protection legislation, which had its embryo in "In Place of Strife", which was brought in without dissent as about the only uncontroversial part of the Industrial Relations Act 1971 and which has been strengthened by a series of Acts introduced by the present Government, has been designed to protect people in their jobs, so that a man may truly say, "This is my job." By that he means that it is not to be taken from him without good cause and that if it is taken he will have a reasonable prospect of good compensation to tide him over and cushion him against one of the miseries of fate, which was in no way of his making.
What has happened to the prospects of success? In 1972, about 34 per cent. succeeded. That was regarded as a low rate and was to no small extent due to people bringing claims out of time. Instead of 28 days people were given three months after the termination of employment in which to bring claims. The success rate rose to 37 per cent. in 1973 and 1974, and to 38 per cent. in 1975. Then there was a small drop to 36 per cent. in 1976 and a massive fall of 5 per cent. between 1976 and 1977.
Those of us who are concerned that employees should be properly protected ask ourselves why there has been this drop in the protection of employment. The answer that we commonly hear from the Opposition is that too many claims are brought without justification and should never have been allowed to proceed. It is true that some claims should never have seen the light of day, but equally there are hundreds, if not thousands, which are
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not brought because the ordinary person remains apprehensive of tribunals anxious about courts and happy to keep as far away as he can from lawyers, tribunals, chairmen and procedures of the law.
I regret to say that other people do not bring claims because they do not want to be labelled as troublemakers, knowing that when they apply for other jobs, if they have been before a tribunal, prospective employers will say "We do not want this man: he is liable to be a nuisance." So we can balance the bad claims which should not have been brought against the good claims which should have been brought but which were not.
So I come to the question of industrial tribunals. Why is it that this failure rate is probably the highest in any tribunal in Britain? I suggest, after not inconsiderable experience in this sphere, that there are two main reasons. First, employers are learning to operate procedures which are at least apparently fair. They document their procedures. Where possible, they give at least one written warning of intended dismissal. Where a tribunal is faced with a fair procedure, the employer nearly always wins.
Equally and conversely, the employee does not know how to operate any such procedure for his own protection. The average person does not know, for example, that when he receives a memorandum of complaint, when he receives a warning suggesting that he may lose his job if he does not change his ways, he should reply in writing and that he should keep a copy of his reply. The documentation of his case is as important to him as it is to the employer. The employer will have his case on file. The employee will be left naked before the storm without any form of documentation and usually with little or no oral corroboration to assist him.
It is true that wise employees who are members of trade unions will go for help, but they generally do so after they have been dismissed. It is equally true, alas, that the average employee does not know that, although he cannot get legal aid, he can get up to £25 worth of legal help, if not more, under the Legal Aid and Advice Act in the preparation of his case.

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That leads me to my second point. In general, the average employee is not as articulate as the average employer. I happily pay tribute to the chairmen and members of industrial tribunals who do their level best to assist those claimants who appear on their own and in some cases they lean over backwards to do so. In some cases they descend into the arena, and they cannot maintain that balance which a judicial function requires.
I submit that the lack of representation in industrial tribunals is as sad as it is understandable. One wants to avoid the legalistic approach. One wants to avoid the growth of what some judges have described as a plethora of case law. However, we are dealing with legal rights, with cases in which people's future is to be decided according to the law of the land. We are dealing with cases in which there is an appeal—alas, on points of law only —to the Employment Appeal Tribunal, and one cannot avoid dealing with legal niceties. It is the law which was brought in to protect the employee when voluntary effort has so dismally failed to do so.
So today there is a failure rate of 69 per cent. There is an average award of only £355 for the 31 per cent. of claimants who are lucky enough to proceed. So why is it that we hear the plaintive cries of chambers of commerce and employers' organisations throughout the land that the employee is over-protected? It is obvious that the employee is under-protected. The protection which the law is meant to accord to him is not providing the cushion which he needs.
The truth is that the employers' associations are making political capital in order to avoid further protection and they are complaining of what they describe as undue protection of the employee for one of two reasons. Either they do not know the truth, or they do not wish to know it and are deliberately misrepresenting the truth. Either they do not appreciate that there is a two-thirds failure rate and that the average successful claimant receives only £355 and that, as far as one can tell, not one claimant has ever received an "additional award" or approached anywhere near the magical £13,400, or they do know it and are deliberately ignoring it.
The fact is that the average employee is not sufficiently protected and the aver-
1182
age employer should be told that if he provides that decent measure of protection which the employee is entitled to receive he has very little to fear from the law. There is no reason why this protection should not be afforded. After all, it is no more than the requirement of a decent system, with fair regard for rights and a fair and proper way of dealing with people in their jobs.
In many cases, it is not the inarticulate shop floor employee who is inadequately protected. It is the manager and the executive. The higher up a person goes, the greater is his loss if he is pushed off the shelf into the mire of unemployment, and the greater is the need for his protection since the more difficult it may be for him to get another job.
At every level there is inadequate protection, which is not realised because people do not want to know and not appreciated because there is a deliberate campaign by employers' organisations to make out that precisely the opposite is the case, in the teeth of the truth and in the face of the figures—69 per cent. failure rate and £355, on average, when someone succeeds.
What can the Government do about it? First, I draw my hon. Friend's attention to the assurance which he gave in the debate we had on this subject a few months ago, when he said that he would have the procedures of the tribunals looked into with a view to seeing whether there was some way in which they could be improved so that, for example, the parties to a case could know rather more in advance what they would face when they arrived at the hearing.
That improvement will not necessarily protect the employee. As we have seen, he has no documentation to assist him. In addition, of course, while the employer can generally bring oral evidence to assist his case, the employee cannot do so because the only people who could assist it are his colleagues at work, and they in their turn are afraid of losing their jobs. The employee does not know how to us the witness summons or subpoena to bring them to the hearing, and even witnesses called on subpoena have a nasty habit of losing their memory as a result. The employee may not get more evi-without assistance, but he will at least dence without the documentation and know precisely the case he has to face.

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Secondly, I suggest that we ought to provide far more information to employees about how they can help themselves—about how they can, for example, make use of their right to request written particulars of the reasons for their dismissal and about the duty of employers to provide those reasons within two weeks of the request.
The employee and his trade union should be helped to understand the need for documentation and the need to try to set out the employee's case in writing in the same way as employers do. Indeed, the need here is greater for employees than it is for employers because employers will have other evidence and employees will not. Employees should learn to understand, and should be told by the Department of Employment, how best to present their case. I hope that if these suggestions were followed there would be an increase, not a decrease, in the number of those successful in their efforts.
I wish in conclusion to pay a personal tribute to my hon. Friend the Minister of State. He has been at work, beavering away in the background in his modest and unassuming way, trying to help people at work virtually ever since 1974, and before that date, outside the House, for most of his working life. I should not like him to feel that this effort to find common ground in order to assist people is in any way intended as an attack upon him or the service which he is giving and which, I am sure, he will give. It is much appreciated.
On the other hand, somehow my hon. Friend has failed. We have failed. Employees are not receiving the protection which they should have. The latest figures which my hon. Friend has given prove that. I hope that he will be able to provide some hope of improvement, some greater protection for the employee and, perhaps, some hope also that the employer may have reason to worry rather more than he does at present if he does not follow those fair systems which, after all, are designed by the law to protect the employee from unfairly and unreasonably losing his job.
10.15 p.m.
The Minister of State, Department of Employment (Mr. Harold Walker): I am very grateful for the kind and generous
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remarks of my hon. and learned Friend the Member for Leicester, West (Mr. Janner). His speech dealt again with a series of very important matters that he touched upon on the last occasion when the House debated the industrial tribunals. He has argued tonight as cogently and lucidly as he did on 21st November last year. I am glad that, in spite of the limited time available, I may be able to deal a little more fully with his case now than I could then.
First, my hon. and learned Friend expressed concern about the number of complaints of unfair dismissal—and not only the number but the proportion—of all applications to the tribunals that fail. Secondly, he advanced what he believes to be some of the reasons, which he believes may in some cases be beyond an employee's control. Thirdly, he made some constructive suggestions for reform.
Between 1972 and 1976 the proportion of complaints upheld at hearings was about 37 per cent. In 1977 that figure fell to 31 per cent. It is much too early to say whether it is part of a trend over recent years for this figure to decline. Much more noticeable, perhaps, is the consistency in the figures since 1972. In any event, it is not a figure that I would set much store by, for reasons that I shall explain briefly.
It would be wrong to infer that a small drop of this kind in the proportion of complaints upheld necessarily means that employees are failing to obtain their rights under the law. There may be a number of explanations for such a change. It may be that there are changes from year to year in the strength of the applications made, and that the cases which get as far as a hearing are not evenly matched year on year.
In any case, we see that the picture is different if we look at what we might call the overall success rate. By that I mean the proportion of employees whose case was upheld at a tribunal hearing, plus employees whose case was settled at conciliation. That proportion was 39 per cent. in 1972, but since 1975 it has been more like 47 per cent. each year. Therefore, if we look at the system as a whole, we see that perhaps there has not been the tendency that my hon. and learned Friend suggests.

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My hon. and learned Friend also made the point that applicants might not be fully informed about their rights and were often at a disadvantage in conducting their cases. We are doing our best to counter that problem. We publish a number of guides about the legislation, guides which explain what employees' rights are, including a very full booklet about employees' rights on dismissal. Indeed, I well remember criticisms from Opposition Members that my officials were too ready to inform people about their rights.
My hon. and learned Friend is right to say that many working people are apprehensive about appearing before any judicial body. That certainly applies to industrial tribunals, notwithstanding their informality. It is natural. But we seek to do everything we can to explain the procedures to applicants and respondents alike. There is a leaflet on the subject. Moreover, I believe that the chairmen try to be as helpful as possible, particularly to unrepresented applicants.
My hon. and learned Friend was concerned about applicants being at a disadvantage as compared with the employer regarding witnesses. This was a point he made in our previous debate—the question of witnesses' reluctance to appear for the applicant. In fact, both parties may bring witnesses to the tribunal, and if there is any difficulty they can ask the tribunal for a witness order. The tribunal may grant such an order if it considers it justified. The reason for giving the tribunal that discretion is that it is important not to lengthen the proceedings with irrelevant detail. If parties could bring whatever witnesses they liked, the tribunal would soon be like law courts. In my view, that would be a retrograde step. I think that already many employers produce too many witnesses, some of whom can add nothing to what has already been said in the proceedings. In such cases, many chairmen discourage witnesses who can add nothing, and I am sure it is right that they should do so.
I share the view that perhaps tribunals are becoming legalistic. I do not want them to become as legalistic as the courts. Nor do the presidents of the tribunals. We want to keep them as informal as possible. To the extent that they are becoming more legalistic, as is often suggested, I believe that there is one outstanding
1186
reason, namely, that there is an increasing tendency for employers to engage lawyers to represent them. Not only does that put up the cost to the employer; it increases the legalism, and often prolongs cases. I do not go along with those who want more lawyers in tribunals. They may be necessary in a small number of difficult cases, but in the overwhelming majority of straightforward unfair dismissal cases employers could do themselves a good turn and dispense with legal representation. They would find the tribunals no less sympathetic to their case than they are at present.
Let me come now to some of the other criticisms we hear about tribunals. Some people think that the tribunals may be unduly favouring employers. Yet much of the criticism comes from the other side with complaint that they unduly favour applicants. The truth is, of course, that they are impartial.
Let us look at the facts. The tribunals consist of a legally qualified chairman and members nominated by both sides of industry. They are therefore well suited to their task and are evenly balanced. Virtually all of their judgments are unanimous, which hardly suggests bias towards either side. I suggest that the truth—and this, perhaps, is why they are criticised from both sides—is that they get things right and so, inevitably, one side or the other is disappointed.
My hon. and learned Friend rightly drew attention to those who seek to scare employers by quoting the possibility of an award of £13,400 being made against them. Let me confirm what my hon. and learned Friend has said. What most people fail to say is—that that can happen only in the most exceptional cases. To the best of my knowledge it has not yet happened. It can happen only to someone over the age of 61 who is earning more than £5,000 a year, who has been with his employer for more than 20 years, who gets the maximum basic and compensatory award, whose employer refuses to reinstate him following a tribunal decision and whose original dimissal was on race, sex or trade union grounds. I suggest that that is a most unlikely set of circumstances. Well over half the awards made—55 per cent. —are for less than £400 and nearly four-fifths are for less than £750.

1187
Much has been made of increasing caseloads. It has been suggested that the number of unfair dismissal cases is increasing dramatically. In 1977 there was a slight increase of 5 per cent. Experience so far this year is that there is a slight decline of about 10 per cent. Those who were predicting 100,000 this year have been proved to be wildly wrong.
There are some, including Tory Members, who, as my hon. and learned Friend reminded us, attribute a high failure rate to the flimsiness of many of the claims. We are often given the impression by critics that people who have nothing to lose lodge a complaint of unfair dismissal just to try it on. That is certainly not the impression that I get from letters to my Department. I have had many comments from employees about the consequences of applying to an industrial tribunal. Applicants who are legally represented have to pay solicitors' fees. More seriously, the publicity resulting from an industrial tribunal's decision and from the evidence given during the hearing can adversely affect an employee's ability to obtain other employment—even when he has won.
I have had comments in letters such as:
"So I failed to clear my name. I was now classified as a troublemaker—industrial misconduct. Where could I get employment with a character like that? No one would want to employ me."
I think that comments such as that show that employees will not apply to tribunals lightly because they know that they risk their reputation.
Certainly the tribunals are less intimidating to the ordinary man than the rest of the judicial system. That is deliberately and intentionally so. They may not be perfect, but the tribunals were set up to provide a speedy, informal and inexpensive means of settling disputes. I am anxious however, to stop them becoming more like law courts, and I know that the presidents are also. They are constantly seeking improvements in organisation and procedures which will save everyone's time and trouble, while giving both employers and employees a fair hearing.
My hon. and learned Friend asked about the improvements that I touched on and, indeed, promised in the course
1188
of our last debate. I am glad to be able to tell him that I am proposing to introduce some changes in the tribunal procedure regulations which I hope will be to the benefit of both applicants and respondents, and which will mean that more information is available, as my hon. and learned Friend asked, before the tribunal hearing. They can only be of help to all the parties, and should help to shorten hearings. I am aiming for those changes to be effective by about the end of August.
In conclusion, may I say that in all this criticism of the tribunals and the employment legislation it would appear that too many people lose sight of the advantages which flow from them. For the first time in this field, employees have legal rights in employment which prevent those employers who would otherwise do so from behaving unscrupulously and recklessly. The good employer, of course, has nothing to fear and need have no anxeties from this legislation. But, in turn, the increased security which employees now have reduces the antagonism between employee and employer, and helps to promote stable industrial relations.
My belief is that there can now be no going back on the new rights which employees have. Among other things, to do so would be to step out of line with the rest of Europe, and to shift the basis for the development of sound industrial relations which the legislation has created. I believe that the way forward is for employers and employees alike to familiarise themselves with the basic provisions of the new laws and to set about building sound procedures which are based on them.
Mr. Greville Janner: Before my hon. Friend sits down, will he give an indication of the nature of the changes in procedure that he has in mind? In view of the fall in the number of cases before industrial tribunals, can he give any hope of wrongful dismissal cases being transferred to the tribunals within the powers given to the Lord Chancellor in the Employment Protection Act 1975?
Mr. Walker: On the second point, my hon. and learned Friend will know even more sharply than I the distinction between wrongful dismissal and unfair dismissal, and the statutory provisions

1189
deal only with unfair dismissal. There is some provision within the Employment Protection Act to enable certain matters relating to contracts of employment to be dealt with in specified circumstances by the industrial tribunals. I do not think that it extends their jurisidiction to cover wrongful dismissal. We are looking very carefully at the possibility of implementing that remaining power within the Employment Protection Act to extend the jurisdiction of the tribunals to cover contracts of employment in the specified circumstances. But I rather doubt whether it will be to cover cases of wrongful dismissal.
1190
The procedural changes will be those that I suggested, which will enable the parties to have, as my hon. and learned Friend wishes, rather more information before the proceedings of the tribunal commence than they have at present. If my hon. and learned Friend wishes, I shall be happy to send him details—
The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at half-past Ten o'clock

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

THE LORD BISHOP OF EXETER
Eric Arthur John, Lord Bishop of Exeter—Was (in the usual manner) introduced between the Lord Bishop of London and the Lord Bishop of Newcastle.

LEBANON: SUPPLY OF ARMS
2.43 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will reconsider their decision to supply arms to the Government of Lebanon.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, the Government have agreed to meet the reasonable requests for arms from the Lebanese authorities in order to help them rebuild their armed forces, which were largely destroyed in the civil war, and thus re-establish the Lebanese Government's authority throughout the country. The Government see no reason to reconsider their decision.
Lord BROCKWAY: My Lords, may I ask the Minister whether there are not two dangers: the first is the instability of the Government. The Times on 15th June said that the Lebanon State has "long since ceased to exist". The second danger is that it may be succeeded by private armies which will take over the arms supplied by our Government and lead to an extension of the sectarian conflict.
Lord GORONWY-ROBERTSMy Lords, I think the answer to both contingencies mentioned by my noble friend is that in accordance with the United Nations Security Council Resolutions 425 and 426, which sought, among other objectives, to restore order in the Lebanon, the Government have seen fit to assist the only legitimate Government of Lebanon to reassert its authority and to ensure that the kind of circumstances that my noble friend rightly fears shall be made less probable than would be the case if they were not assisted to reassert their authority.
Lord PAGET of NORTHAMPTON: My Lords, is not the trouble with the Lebanon that when you put arms in there it is very difficult to know who is going to use them, and there are far too many arms there already?
Lord GORONWY-ROBERTS: My Lords, the Government have authorised the supply of weapons to the legitimate Government of the country for use by its armed forces. We have no evidence that they are being used improperly or are likely to be transferred to unauthorised hands.
Lord BROCKWAY: My Lords, is it not also already the case that private armies are threatening the Government, and that military armies under the ex-President Chamoun may very well take over and use our arms in a sectarian struggle, unhappily named Christian, against the Moslem population?
Lord GORONWY-ROBERTS: My Lords, that may indeed happen unless the legitimate Government is properly strengthened to meet all such contingencies, and this is what Her Majesty's Government are endeavouring to do, I repeat, in accordance with the objectives of United Nations Security Council Resolutions.
Lord LEATHERLAND: My Lords, is my noble friend aware of the opinion that although it might be virtuous to refuse these arms, this is a case where virtue is not its own reward because the Lebanese people would immediately go to another country to get them?
Lord GORONWY-ROBERTS: Yes, my Lords, indeed it is a question of whether, if we were to take a wholly negative view of this reasonable request, the Lebanese Government would not find it necessary to apply to some other country, in which case there might be another Question in this House.
Lord KINNAIRD: My Lords, in view of what one reads in the Press today, and for the greater safety of the Western world, would the Minister not agree that certain noble Lords and certain honourable gentlemen would be well advised to give up reading Alice in
4
Wonderland and try to understand a children's book called Little Red Riding Hood?
Lord GORONWY-ROBERTS: My Lords, I am quite sure that my noble friend's reading experience is somewhat wider than either Alice in Wonderland or Little Red Riding Hood.

CZECHOSLOVAKIA AND ILO CONVENTION
Lord BROCKWAY: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is the attitude of the British delegation at the ILO to the complaint made by International Confederation of Free Trade Unions that the Government of Czechoslovakia, by dismissing supporters of the Charter 77 Movement, has violated the Convention 111 which requires that no one be denied employment for holding political beliefs.
Lord WALLACE of COSLANY: My Lords, under ILO procedures the Government of Czechoslovakia has the right of reply to the complaint made by the International Confederation of Free Trade Unions and the right to be present when their reply is debated later this year by the Governing Body of the International Labour Organisation. As these procedures have not yet been completed the matter must be regarded as sub judice, and it would not be appropriate to express views on the substance of the complaint. The Government take the view that all Governments should comply with the terms of ILO Conventions they have ratified.
Lord BROCKWAY: My Lords, while not wishing to repudiate the sub judice issue, may I ask the Government this question very seriously: May it not be that these international agencies in which East and West participate, neutral nations participate and trade union organisations and employers have a part, are the most effective means of exerting influence to end the persecution of dissidents, not only in the Communist countries but in all the countries in the world?
Lord WALLACE of COSLANY: My Lords, I would not disagree with my noble friend. In this case some papers are being submitted, and the matter will be dealt with under the usual procedure. I would not disagree. In point of fact this is, contrary to some people's thinking, a very useful and valuable organisation.

WATERWAYS: MAINTENANCE PROGRAMME
2.50 p.m.
Viscount HANWORTH: 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 why they have not yet authorised the proposed programme of essential maintenance work submitted by the British Waterways Board four months ago, in spite of the fact that they have agreed in principle that the work should start and have allocated funds for the purpose.
Lord STRABOLGI: My Lords, although the programme of work drawn up by the Board poses no problems as such, this significant increase in the Board's normal maintenance programme involves substantial increases in staff numbers and salary levels which raise difficult associated issues. Because of their implications for pay policy and future levels of financing it has not yet been possible to give the Board clearance in respect of these matters.
Viscount HANWORTH: My Lords, I thank the noble Lord for that reply. However, I should like to ask first, when is it expected that this difficulty will be resolved, and secondly, does he fully appreciate what a sorry tale this has been? Five years ago the backlog of maintenance was estimated at £40 million but all the Government did was to ask for an independent consultant who confirmed that estimate. At last we have the £5 million but even that, in view of this urgent maintenance, is, for one reason or another, being delayed. Cannot the Government grasp the problem and realise that it is of immense importance to the recreation of a great many people—people who are not the upper classes?
Lord STRABOLGI: My Lords, the Government are fully aware of the importance of getting the Board's programme under way with the least possible delay and will do their best to resolve the matter as quickly as possible. As I have said, matters are by no means straightforward. Effective implementation of the first £5 million that we have given for this year depends on the resolution of the staffing and pay problems. I remind the noble Viscount that the Government have already given £12 million a year, which is 50 per cent. of the Board's income; we are now proposing an extra £5 million as recommended by Fraenkel; and there will be another £5 million next year.
Viscount HANWORTH: My Lords, I should like to press the noble Lord further. The £12 million has nothing whatever to do with the arrears of maintenance; it is for the running costs.
Lord STRABOLGI: My Lords, with regard to the long-term question, I should remind the noble Viscount that the recent Commons Select Committee on Nationalised Industries, in its fourth report on the British Waterways Board, made specific recommendations. The Government will be stating their position on that report in the near future. I think that it would not be appropriate for me to comment on it in advance.
Lord GEORGE-BROWN: My Lords, does the noble Lord think that his Answer is really fair? I agree with the point that has just been made, but the real point is that the chairman of the British Waterways Board, a colleague and friend of all of us, has been fighting a battle against successive Ministers for a long time to get this programme authorised. If the implementation of it now presents a problem, that is only because it has taken this long to persuade the Ministers to stop obstructing its implementation. Therefore, is it really fair to defend the present Government proposal for inaction on the grounds that they have themselves brought about what is now a very difficult problem?
Lord STRABOLGI: My Lords, the Board provided a detailed programme to support the first grant allocation of £5 million, but that would create many new posts, regrade a quarter of the existing staff and move the entire top management

7
on to substantially higher salaries. That of course raises very important questions of pay policy which must be resolved before we can go ahead.
Lord ORR-EWING: My Lords, will the noble Lord remember that the civil construction and building industry is desperately short of work and that there is massive unemployment in that area? Therefore, would it not be helpful to get on with the letting and the planning of these contracts for the maintenance of these important waterways so that jobs can be secured and extra jobs provided?
Lord STRABOLGI: My Lords, I am sure that that is a very interesting suggestion which I shall put to my right honourable friend.
Lord MOWBRAY and STOURTON: My Lords, is the noble Lord aware that all the Government have to do is to subcontract to local authorities? That would enable my noble friend's suggestion to be carried out?
Lord STRABOLGI: My Lords, I am sure that that is another very interesting suggestion, which I shall put forward as well.

NATIONAL HEALTH SERVICE: STRIKES
2.55 p.m.
Lord LEATHERLAND: 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 permanent machinery can be set up to prevent strikes and threats of strikes by hospital staffs.
Lord WELLS-PESTELL: My Lords, Her Majesty's Government are naturally concerned to avoid strikes by National Health Service staff, especially where they may affect the care and safety of patients. It is considered unlikely, however, that any effective permanent machinery could be devised which would prevent all such action. I am glad to be able to inform your Lordships that
8
discussions are currently taking place to consider ways of improving the machinery for dealing with collective grievances.
Lord LEATHERLAND: My Lords, I thank my noble friend for that reply. However, in view of the distress caused to relatives and the danger caused to patients by these dislocations, can he tell us the exact nature of these discussions?
Lord WELLS-PESTELL: My Lords, yes. My right honourable friend the Secretary of State has met leaders of the major Trades Union Congress affiliated National Health Service trade unions and the main organisations representing the medical and nursing staffs—I am referring to the British Medical Association, the Royal College of Nursing and the Royal College of Midwives. The purpose of that meeting is to see whether some arrangement can be formulated whereby grievances affecting any group within the National Health Service could be dealt with very quickly. The first meeting was held on 24th May when the representatives to whom I have referred were present. That meeting took place, and future meetings will take place, under the chairmanship of my honourable friend the Under-Secretary of State for Health and Social Services.
Lord SHINWELL: My Lords, is my noble friend aware that the principle of withdrawing ones labour is one that we accept and have accepted for a long time? We also accept that almost every strike causes suffering of some kind. However, when it causes suffering to people who are helpless, disabled and cannot do anything for themselves, surely we can depart from the principle, which is accepted by almost everybody, that people have a right to withdraw their labour? Is it not possible to promote some kind of arbitration machinery in cases of this sort in order to prevent, so far as it is practicable, additional suffering?
Lord WELLS-PESTELL: My Lords, I am obliged to my noble friend for his comments and observations. The particular purpose of the discussions which are taking place is to see whether some firm conclusions can be reached as to future discussions. It is hoped that when some sort of agreement is reached

9
it could, perhaps, be put to the General Whitley Council with a view to its being able to draw up some kind of agreement which would be acceptable to everybody concerned in the National Health Service, should there be any grievance coming from any section.
Lord TRANMIRE: My Lords, do not the present difficulties show that there are certain defects in the Whitley Council machinery? Could the review include a review of the Whitley Council machinery?
Lord WELLS-PESTELL: My Lords, I am speaking from memory, but I think that I am right in saying that my noble friend Lord McCarthy undertook, at the Government's request, a complete review into the working of the Whitley machinery, the results of which were published a few months ago after three years' very careful study. The Government are looking at that report. If I am wrong I shall certainly let the noble Lord know.
Lord SHINWELL: My Lords, my noble friend has mentioned discussions. Have there been any discussions with the TUC General Council about this matter? After all, the Whitley Council has no authority in a matter of this sort; it can only engage in discussions and negotiations. As this is a matter of high moral principle, is it not advisable to have some discussion with the TUC?
Lord WELLS-PESTELL: My Lords, apologise if I did not make it clear, but at the first meeting on 24th May, to which were invited representatives of the various bodies engaged in the National Health Service, in fact a representative of the Trades Union Congress was present.
Lord SEGAL: My Lords, instead of setting up any new machinery, could it conceivably be possible in future for hospital staffs not to be engaged unless they voluntarily agree to waive their perfectly justifiable right to strike where lives of patients are concerned?—because such strikes were totally unknown before the advent of the National Health Service.
Lord WELLS-PESTELL: My Lords, I think I can say that the Government—and I am sure that I am speaking for the whole of your Lordships' House—deplore matters resulting from stoppages and
10
strikes where they affect people in the community. I think it might be very difficult to exact the kind of undertaking for which my noble friend is asking. But, obviously, my right honourable friend the Secretary of State is very concerned, and that is why the discussions are taking place at the moment at the highest possible level.
Lord THOMAS: My Lords, will the noble Lord not agree that although we hear a great deal about human rights in other parts of the world it is about time that we took steps to ensure that the human rights of our own people when they are sick are fully looked after? Further, will he not agree that in these days in this country the so-called National Health Service is neither national nor in a very healthy condition, and does not give a very good service?
Lord WELLS-PESTELL: My Lords, I would advise the noble Lord to read the general daily Press. Recently there have been a number of poll on the opinions of the ordinary people of this country who use the National Health Service, asking them to comment on it. The majority of them are very well-satisfied with the National Health Service as it is.
Lord ALEXANDER of POTTERHILL: My Lords, although it might be unreasonable to expect any of the staff totally to give up the right to withdraw labour, would it not be quite reasonable to require them to do so with arbitration procedure until that arbitration had taken place?
Lord WELLS-PESTELL: My Lords, I am obliged to the noble Lord. The whole purpose of these discussions is to try to arrive at a formula whereby if there are any grievances at all they can be dealt with almost immediately at Area Health Authority level, so as to prevent any stoppages or strikes.
Lord BROCKWAY: My Lords, is not all the blame in this case being placed on the nurses and the hospital staff? As the father of two nurses,. I know that their conditions have been intolerable. Although I am in favour of necessary arbitration, should not some blame for these situations be attached to the management as well as to the National Health Service staff?
Lord WELLS-PESTELL: My Lords, I do not think that any useful purpose would be served if I embarked upon a process of apportioning blame. Let us get down to the fact that discussions are taking place at this moment.
Lord LEATHERLAND: My Lords, while thanking my noble friend for telling us about the three prestigious organisations which his right honourable friend has consulted, will he also bear in mind that the National Union of Public Employees—with which I have no connection whatever—is largely involved in these disturbances and dislocations at hospitals? Would it not be a good idea if his right honourable friend also consulted them?
Lord WELLS-PESTELL: My Lords, I thought that I said very clearly that the discussions included leaders of the major TUC-affiliated National Health Service trade unions, which includes COHSE and NUPE.

RHODESIA: MURDER OF BRITISH MISSIONARIES
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m. my noble friend Lord Goronwy-Roberts will repeat a Statement being made in another place on the killing of British missionaries in Rhodesia.
IRON AND STEEL (AMENDMENT) BILL
Brought from the Commons, endorsed with the certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act 1911; read 1a, and to be printed.

GREATER LONDON COUNCIL (GENERAL POWERS) BILL
3.4 p.m.
Read 2a, and committed to the Unopposed Bill Committee.

GREATER LONDON COUNCIL (MONEY)BILL
Read 2a, and committed to the Unopposed Bill Committee.

THE OFFICIAL SECRETS ACTS
3.5 p.m.
Lord WIGODER Lord WIGODER rose to call attention to the need to replace the Official Secrets Acts by a measure to put the burden on public authorities to justify withholding information; and to move for Papers. The noble Lord said: My Lords, those of your Lordships who find the wording of this Motion familiar will recognise that it is taken verbatim from a specific pledge to legislate contained in the last Labour Party Manifesto, issued in October 1974. That pledge was, no doubt, successful in obtaining a certain number of votes for the Labour Party at that Election; it is a pledge that has not been honoured. Whether that thereby makes the Labour Party's Manifesto a breach of the Trade Descriptions Act is a rather nice point of law upon which I need not perhaps embark. Therefore, it is clear that the Government have run into very real difficulties on this problem, and the purpose of this debate this afternoon is to see whether the collective experience of Members of your Lordships' House can help to contribute towards solving those difficulties and facilitating early legislation.
There have been a few rather tentative steps along the road since the days when that Manifesto was issued. In July 1977 a memorandum was issued by the Head of the Civil Service asking those who worked under him to be more forthcoming in the production of official information. In November 1977 there was a Government promise to be more ready to publish background material. It will come as no surprise to your Lordships to know that there is a White Paper on the way. The White Paper has been imminent now for many, many months; as each day goes by it no doubt becomes more imminent. It may be that the noble Lord, Lord Harris of Greenwich, will be able to tell us when we can actually expect its arrival. That is not a satisfactory record on a topic which my noble friends on these Benches regard as one of extreme importance.
The position appears to be this. First, as your Lordships will know, the Official Secrets Acts were passed during one afternoon in 1911, at a time of grave international crisis. They were rushed

13
through both Houses in, I think, record time. It is hardly surprising that ever since they have given rise to considerable difficulties.
This afternoon I am not concerned with Section 1 of the principal Act, which deals with acts which prejudice the safety of the State. That is really aimed at espionage. Its scope has perhaps been a little extended. For example, your Lordships may remember that some gentlemen belonging to an organisation called the Committee of One Hundred were successfully prosecuted under that section because they planned to lie down on an airfield in front of some American nuclear-carrying aeroplanes as a protest and a political demonstration. I doubt whether that section was meant to cover that sort of action and it may be that in time it will be necessary to look at it with care and see to what extent it can usefully be reformed.
The real nub of the problem, as your Lordships know, lies in Section 2 of the Official Secrets Act, which deals with the unauthorised disclosure by a civil servant of any official information. It deals with those who receive it and those who subsequently transmit it. It makes them liable to heavy criminal penalties. There are two objections to that section. The first objection is that it is far too wide in its application. It has often been called a "catch-all" section. It applies in theory to every piece of official information, of however trivial a variety. It means, for example, that the Press are in peril of prosecution under that section if they choose to reveal the colour of the carpet in the Minister's office. It is an insult to those people in this country who are seeking to report freely the activities of Government that they should be liable even in theory to prosecutions under a section as wide as that.
There is of course a second problem about that section which is perhaps not so generally recognised, which is that, so far as those who subsequently transmit the information—not the original civil servants—are concerned, the construction of the section is in extreme doubt. Your Lordships will no doubt remember the case where the Sunday Telegraph were prosecuted some years ago over a report relating to Biafra. In the course of that case, Mr. Jeremy Hutchinson, as he then was—we shall have the pleasure of
14
welcoming him into your Lordships' House next week—and I stood side by side and argued for some three days before the trial judge as to what precisely the construction of the section was. It so happened that all the defendants were acquitted. There was therefore no need for a ruling from the Court of Appeal or the Appellate Committee of your Lordships' House on the section.
However, in the result, the apparently wide ambit of the section, combined with real doubt as to its precise meaning, has led to Section 2 becoming almost entirely inoperative and almost entirely inoperable. For example, in the lifetime of the present Government, there has been only one prosecution brought under that section. There are, I know, three others pending at the moment, but they are cases where there are also charges under Section 1, the more serious section, and perhaps this consideration does not apply. The position, therefore, is that there is at the moment a section on the Statute Book which is totally ineffective.
The first matter that I desire to stress to your Lordships is that in calling for a reform of that section to make it more realistic and more effective, we must recognise that any reform, however liberally intended, is in practice going to be more restrictive and not less restrictive than the present position, because it will mean that there is an Act which can apply as against an Act which is inoperable. It is for that reason that, in calling for a reform of Section 2 of the Official Secrets Act, we on these Benches regard it as absolutely essential that at the same time the whole question of the access by members of the public to official Government information should be dealt with either in the same Statute or in a complementary one.
Reforming Section 2 is in itself perhaps not now a particularly controversial matter. The aim must obviously be first that the law should henceforth be clear, which it is not; secondly, that the application of the criminal law in this field should be reduced to a sensible minimum. I believe that there is a wide measure of agreement now for the general proposition that was put forward by the committee presided over by my noble friend Lord Franks, which came to the conclusion, in a sentence, that the criminal law should

15
only be invoked in certain limited circumstances where there was the wilful disclosure, or receipt, or transmission of correctly classified information in certain very limited spheres: defence and foreign policy is obviously one; law enforcement is obviously another.
Information which has been entrusted by individuals in confidence to the Government, or by companies in confidence to the Government, which is of a sensitive commercial nature is, I think, obviously a third category of such information. Certain classes of Cabinet documents require protection. This, I think, is not in dispute. The Franks Committee recommended further that certain sensitive information which if disclosed might affect the currency or the reserves ought similarly to be protected. I know that the Government have indicated that they do not agree with the Franks Committee on that last matter. There is perhaps scope for second thoughts so far as that is concerned, because it may be that there are few things that can cause more damage to this country these days than the unauthorised premature disclosure of classified information which might lead to a drain on our currency reserves.
Those are all matters which are broadly those which the Franks Committee recommended might usefully and properly be made the subject of a revised Section 2. Your Lordships will have noticed that I mentioned that of course a prosecution would only be brought, and the criminal law invoked, in those limited categories and where the disclosure was of correctly classified information. That raises at once a real difficulty, and one faces up to it as a real difficulty, as to who is to determine in the event of a prosecution whether the document has been correctly classified.
The Franks Committee suggested that it might be left to the Minister to do that by way of certificate. We on these Benches would not find that an acceptable solution, for the obvious reason that it would appear to be making the Minister, in a sense, the judge of his own cause. Other suggestions have been put forward. The Conservative Party in the other place, in a debate on this subject, suggested a Committee of the Privy Council. We suggest that, in order to ensure more democratic involvement
16
in the process, it might be left to a Select Committee perhaps of Members of both Houses of Parliament who would be able to keep an eye on the legislation and determine whether classifications were being correctly made.
As an alternative it might be left to the courts to decide whether the document had been correctly classified. But I am bound to say I find that not easy to regard as a justiciable issue. I doubt whether it is one which the courts would welcome. It may be that it is desirable to find some method by which that process can be determined in a democratic way before the case goes to the courts on that issue; that is, to as whether or not the document was correctly classified.
I believe that those are now recognised broadly and generally as being the proper limits of the criminal law in this field. I think there would be no difficulty in presenting a revised, reformed Section 2 which would cover those limited categories in that way. But, as I indicated earlier, we would regard it as absolutely essential that, if that were to be done, there was at the same time to be considered the whole question of the right of the public of access to other public records, other Government information. As soon as one mentions that problem one realises that there is a genuine clash of interest, and I think it does no good to the discussion for either side to deride the other. There is a genuine desire among many people for many purposes to obtain access to public records and public information. There is, equally, a perfectly legitimate desire inside the Civil Service for a degree of confidentiality.
We all know that our Civil Service is a most remarkably confident, efficient and uncorrupt body. Its efficiency depends very largely on its ability to deal in complete frankness in its documents with those to whom the observations are being made; but it must follow that the degree of frankness is bound to be in inverse proportion to the degree of publicity and the extent of the circulation which the document will obtain. It must follow that, if unlimited access is given to every Government document of every kind, the result will be that either the documents will be tepid, lukewarm affairs of on value to anybody, or else the documents will not exist and everything will be done

17
over a telephone, and there will be no record of what has transpired.
When I talk about the public interest, it is perhaps desirable to try to see just what is meant by the public interest in terms of official information. We in the Liberal Party would regard it in this way: we try to ensure that our democratic processes work efficiently; we try to ensure that ordinary people have the chance to participate, if they wish, in the processes of Government; we regard it as important that those who wish should be able to comment on policy decisions in the light of intelligent, well-informed discussion; and we believe it is equally important that they should he able to discuss policy matters before the policy is announced, because we all know of the grave difficulty that arises of attempting to change the Government's mind once a provisional view has been expressed.
We therefore believe that in order that our democratic process can function more efficiently, it is essential there should be a public right of access to a vast variety of information. Perhaps the simplest and most effective list of that sort of information was given in the appendix to the Outer Circle Policy Unit's document on the Official Information Act, which has been one of the more constructive contributions to this discussion.
They had in mind—and I support what they said—documents of this nature: reports of commissions of inquiries or committees, councils or other bodies established by the Government outside the ordinary departmental structure; reports by valuers; reports of specialist investigatory bodies within the departmental structure; environmental impact studies; statistical surveys; feasibility and technical studies; reports on product tests; studies, surveys reports and factual documents compiled by departmental officers; reports of courts and boards of inquiry, including the evidence that is given, except of course where that evidence was given in camera.
That is the kind of information we have in mind as being essential if people in this country who want to play a full part in participating in the processes of discussion are able to fulfil their role properly. I stress, and I want to make this perfectly clear, that I am not suggesting there should be access by the public
18
to a vast mass of internal departmental or interdepartmental memoranda; I do not believe that would carry the matter any further. It is documents of the kind I have indicated to which it is important that there should be access.
The view which we on these Benches take has not entirely commended itself to some of the wilder extremists who have leaped on to this bandwagon. We have nothing in common with those whose patron saints are Messrs. Agee and Hosenball. We have nothing in common with those who, because there is a trial of three people pending, are able to determine without knowing evidence that they are clearly innocent and the prosecution is utterly outrageous; we have nothing in common with those who, in a fit of extreme childishness—and that may be a rather charitable word for it—thought it was clever to disclose the name of Colonel B; we have nothing in common with the Scientologists;, who are clearly out to grind their own axe in this particular matter; and we have nothing in common with that group of Socialist workers inside the National Union of Journalists who are anxious to get at every conceivable document, however confidential, simply for the purpose of stirring up trouble and, if possible, for the purpose of bringing Government grinding to a halt. The Liberal aim is to open up Government so that there can be assistance and free discussion in the formulaton of policy in the belief that that will make Government more accountable, more responsible and more efficient.
I dealt with the question of criminal sanctions in a very limited sphere. So far as the rest of the documents are concerned which can properly be kept confidential, we believe that can be left to the ordinary processes of Civil Service discipline. Therefore the only other question I want to raise with your Lordships this afternoon is this: how is access by the public to the type of document I have indicated, the official information which is of real help, to be achieved? There are ways by which this has been done abroad, but perhaps we should be a little careful before assuming too readily that what is done in quite different constitutional systems is applicable to this country.
There is the American system under which there is a vast, highly expensive

19
procedure for cataloguing every conceivable document so that the public might look at the lists and decide what document to obtain. I doubt whether we could afford that in this country. There is the Swedish system, which I think we should much prefer, by which citizens are entitled to ask for any particular document they may wish and that must he disclosed unless it comes within certain statutory grounds of exemption which the Civil Service or the Minister may claim. That raises the practical difficulty as to how one asks for a document if one does not know it exists, bearing in mind the need for some form of cataloguing. Perhaps the noble Lord, Lord Harris of Greenwich could help as to the extent to which there is already in this country a catalogue or index of the principal types of documents I have indicated which might make the Swedish system adaptable and suitable for this country.
There is the proposal, just put forward by a distinguished committee of a distinguished body known as Justice, that there should be a code of practice which would enable this information to be made available to the public. Obviously that is worthy of consideration, but perhaps it smacks just a little of being a concession by the Civil Service to the right of people to know what is going on, and it may be that it would be better embodied in legislation.
There is, finally, the possibility that there might be a statute relating to official information which would set out the specific categories of information available—it could be added to as experience showed that it was being successful—and that would be, we should hope, policed by a Parliamentary Commissioner, either a new one or one of the existing ones if it were possible for him to take on that burden. That would be, we hope, under the general supervision of the Parliamentary Select Committee that I indicated previously.
Those are matters for consideration as to how this end is to be achieved. What is not a matter for consideration, in our view, is whether any longer there is a need to reform the Official Secrets Act and a need to provide information of this kind to members of the public. We regard this as a very high priority indeed
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if we are to seek to build up a really free society in this country. My Lords, I beg to move for Papers.
3.28 p.m.
Lord WINDLESHAM: My Lords, I approach the subject of today's debate with an open and, I confess, still somewhat undecided mind. I found the speech of the noble Lord, Lord Wigoder, a thoughtful and informative introduction to this topical issue. The Official Secrets Act has been regarded for very many years as both a clumsy and inappropriate way of safeguarding official information. It originally went on the Statute Book 67 years ago against a background of espionage and extreme concern over national security. It passed through Parliament, as Lord Wigoder said, in a single day and with little debate in either House. It has remained ever since, reinforcing the tradition of secrecy and non-disclosure which has been a feature of the Whitehall scene throughout the period.
As the activities of Government have increased, the policies and decisions of Government have come to affect a wider and wider range of the affairs of its citizens; and it is worth noting that economic policies and decisions have become as important and sensitive today as were defence policies and considerations in the period when this Statute first became law before the First War.
At the same time a vast quantity of detailed information, much of it of a confidential nature about the conduct of private individuals, is accumulated by the State. Side by side with this process of development—and fortunately for the health of a democractic society—has been the emergence of a multiplicity of interest groups often trying to get at information which Government would prefer not to release, while the power of the Press has been considerably strengthened by the advent of television.
The objections to the Official Secrets Act are many, but I single out three. The first I shall refer to only shortly because the noble Lord, Lord Wigoder, has already made the same point. It is this: the Official Secrets Act is far too wide in its application, in that it covers the unauthorised disclosure of any information which comes to a Crown servant in the course of his work, irrespective of its

21
confidentiality. The second objection is that it does not distinguish between those Crown servants, including Ministers, judges, senior civil servants who can themselves authorise disclosure, and hundreds of thousands of officials inside and outside the Civil Service who have either a strictly limited discretion or none at all. For example, in the recent debate on this matter in the House of Commons an instance was quoted of a young student working as a temporary gardener at Hampton Court. She was required to sign a form incorporating Section 2 of the Official Secrets Act and to do so, presumably, as a condition of employment. These forms, which have no legal force and never have had, have been the subject of much criticism, and it is disappointing to find they are still so widely and unnecessarily used.
The Act is also objectionable in that it applies criminal sanctions not only to the person who discloses the information but also to the person who receives it. The picture of a journalist in the dock has never accorded well with the idea of a free Press and this has been one of the most contentious aspects. Behind these three objections—and there are many others which no doubt we shall hear in the course of the debate—there is the fact that the Official Secrets Act encourages, and in a sense legitimises, a prevailing atmosphere of secrecy which is no longer in accord with the spirit of the times. It is thus hardly surprising that all of the three main political Parties, plus an official Departmental Committee under the chairmanship of Lord Franks which reported in 1972, and a host of special interest groups, including Justice, have urged reforms in this field.
Incidentally, reform would have come many years ago as the situation would have become untenable had the letter of the law been observed; but for one requirement—and I do not recall that this was mentioned by the noble Lord, Lord Wigoder, when he dealt with the point in his speech. The consent of the Attorney-General is necessary before any prosecution is launched. Experience has shown that successive holders of this office—looking, as they must, to a public interest wider than that of the Government of which they are a member—have used this discretion sparingly, and they have been wise to do so. As a result,
22
there have been few prosecutions under Section 2 of the Official Secrets Act. The total between 1945 and 1971, for example, amounted to no more than 23 cases in all.
If, therefore, the case is male out, as I believe it is, for the repeal of Section 2 of the Official Secrets Act, the question then arises of what should take its place. Some absolutists might reply, "Nothing". The necessary degree of secrecy for the defence of the realm is contained in Section 1, while the Civil Service and other public bodies have their own disciplinary procedures. Others see a continuing place for the application of the law in this field, including criminal sanctions, but only to protect what is of real importance. Some people lock to the model of the Freedom of Information legislation in the United States, which is relatively new legislation seeking to give effect to the right of the citizen to know what is being done in his name by the Administration and by other agencies of Government. There are differing views on the effectiveness of this legislation in the first few years in which it has been in operation.
Another approach is that contained in a report published last week by Justice which was summarised in an article in yesterday's Observer by its principal author, Mr. Anthony Lincoln. Here the proposal is for a non-statutory code of practice to be adopted throughout the public service, backed by the authority of Parliament, and with cases of dispute referred to the Ombudsman.
All of these are interesting proposals and each of them is worth debating. But, in the end, I am inclined to come down in favour of the approach Advocated in the report by the noble Lord, Lord Franks. This recommended rim legislative provisions to take the place of Section 2 which would be more limited in range and more certain in application. Only clearly defined categories of information would be protected and the mere receipt of information would no longer be an offence. The consent of the Attorney-General or, in certain instances, the Director of Public Prosecutions would still be required and the penalties were spelt out. One of the main objections that have been raised to this approach concerns the practical difficulties inherent in classification and where in controversial

23
cases a particular set of circumstances might fall on one side of the line or the other. Partly for this reason some interests, including sections of the Press—although not Independent Television, which gave evidence to Franks in favour of a change—would prefer to see no change at all, on the grounds that it might make things even worse. Conservative arguments of this sort have been expressed also by Parliamentarians. For example, one distinguished former Minister gave evidence to Franks in December 1971 in these words which I quote from the Franks Committee Report, vol. IV, page 188:
"if I were asked to be a member of this Committee I would think a long time before I could draw up a schedule which would enable me to say, 'This falls on one side and this falls on the other side'. I think, therefore, if it is not improper for me to say this, unless you are capable of drawing up such a schedule and being pretty certain that it will work better than the existing Section 2 does, I would be inclined to leave it alone as it is, rely upon the prescience of all those concerned, the sense of responsibility of others, and the fact that the press watch the situation extremely closely. I have a feeling—but I will read what you conclude with very great interest—that in the end you may draw up a different distinction and a different line, but it will not be any better than the existing one, and I see no reason why one should just alter things for the sake of it".
The name of the witness was the right honourable James Callaghan, M.P. Perhaps we can see in this statement of opinion one of the reasons for the Government's hesitation and delay in bringing forward proposals in the form of a White Paper. Nevertheless, I believe that the debate in this House today will show, as did the recent debate in the House of Commons, a degree of unanimity in all parts of the House for some action to be taken. And let it he soon.

RHODESIA: MURDER OF BRITISH MISSIONARIES
3.41 p.m.
Lord GORONWY-ROBERTS: My Lords, with the permission of your Lordships, I will now repeat a Statement being made in another place by my right honourable friend the Foreign and Commonwealth Secretary. The Statement is as follows:
"I will, with permission, Mr. Speaker, make a statement about the appalling
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tragedy which took place at the Elim Pentecostal Church Mission near Umtali on Friday the 23rd June. I am sure that honourable Members will join me in expressing the deepest sympathy of this House for the families and friends of the 12 people so callously murdered and our admiration for the Christian spirit and courage with which the Church has responded in its decision to stay on in Rhodesia, working for conciliation and peace between all the people. We are in close touch with the Pentecostal Church Headquarters and are giving all possible assistance to its members and the families of the murdered missionaries to travel to Rhodesia for the funeral.
"The fact that those who have been murdered were solely concerned with working for peace and conciliation between the races is a horrific reminder of the dangers in Rhodesia today and of the escalating level of indicriminate violence which has been building up now for five years. The House will recall the incident at Gutu a month ago in which at least 50 Africans were killed. Also the killing of the two Salvation Army women. There have sadly been many other incidents involving both white and black Rhodesians.
"This latest tragedy confirms the urgent need to bring about by every available means round table talks to achieve a negotiated settlement which will bring an early end to the fighting. We have a joint Anglo/U.S. team at this moment in Salisbury and I believe that we are making some progress towards our objective of round-table talks. It is for the leaders of all the parties to respond now in a way that measures up to their overriding responsibility to bring about a non-racial, peaceful and independent Zimbabwe."
That concludes the Statement.
3.44 p.m.
Lord CARRINGTON: My Lords, the whole House will wish to be associated with the noble Lord and the Government in condemning this massacre and expressing our horror at what has happened. No civilised person, whether he be black or white, can condone such brutality, for any reason, political or otherwise. If I may say so, I am glad that the Foreign

25
Secretary in this Statement has, to an extent, remedied what seemed, though perhaps unintentionally, a selective condemnation of terrorist murders.
This incident highlights the deteriorating situation in Rhodesia. I think that the time has now come when the Government must be seen to be taking some further initiative or action—or, at any rate, to be giving some indication of why they believe that they are making progress towards a further round of talks. All the information which we seem to have is that this is becoming more and more unlikely. I should have thought that the incident over the weekend made it that much more difficult to achieve those talks which the Government seek to arrange.
It appears that the Patriotic Front is not interested in a peaceful settlement, except, so to speak, a surrender on its terms. In the meantime, the internal settlement is, to say the least of it, faltering and is not carrying out those reforms which would make it abundantly plain that it was a new African Government committed to ending racial discrimination. The Government really must either succeed in the very near future in getting a conference going between the parties in accordance with the five principles, or support the internal settlement equally on the five principles. To continue on their present course will not only sabotage the internal agreement but substitute nothing in its place.
3.46 p.m.
Lord BYERS: My Lords, the whole House will deplore this horrifying and senseless massacre. Those of us who have seen dedicated missionaries such as these at work in Rhodesia and elesewhere, looking after the welfare of Africans and their families in the field, can only denounce in the strongest terms the utter waste and stupidity of such indiscriminate violence as this.
We extend our sincerest sympathy to the bereaved families and their friends. From these Benches we offer full support to Her Majesty's Government to do all they can to obtain an effective cease-fire for a period in which renewed efforts can be made to get all the parties round the same table to bring peace and security to this area. I should like to support what the noble Lord, Lord Carrington,
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said in his concluding phrases: we cannot go on like this; something must be done.
Lord GEORGE-BROWN: My Lords—
3.47 p.m.
Lord GORONWY-ROBERTS: My Lords, of course I am most willing to defer to my noble friend. Both he and I are used to the procedures on these occasions. He will, I am sure, allow me to make a brief reference in reply to what has been said by the two noble Lords who lead the Opposition.
We shall all be in full accord with the words of horror and sympathy which have been spoken by the noble Lord, Lord Carrington, and the noble Lord, Lord Byers. I would say that my right honourable friend's condemnation of terrorism has never been selective. Repeatedly he has denounced it, from whatever quarter or for whatever alleged cause it has been exercised. As to progress, we all agree it is urgent that progress should be made for an all-in, comprehensive settlement on the basis of the five principles. This is what Ambassador Low and our own Mr. Graham are engaged in at the moment. As I have said, as I have repeated, and as my right honourable friend has just said from the other place, I believe that we are making some progress towards our objective of round-table talks, which indeed was the objective emphasised by the noble Lord, Lord Carrington—a round table conference based on the five principles—and which was endorsed by the noble Lord, Lord Byers.
3.48 p.m.
Lord GEORGE-BROWN: My Lords, I had no desire to get in the way of the normal procedures of this House. Sometimes it is difficult to forget the procedures down at the other end of the corridor. May I associate myself completely with the horror that we all feel about this particular incident. However, I am very glad too, as the noble Lord, Lord Carrington, said, that in the Statement today, both in justice to himself and in recognition of what we all feel, the Foreign Secretary did include the blacks and others who have been treated in this way over a very long period. The fact that the present incident involves white missionaries may give us a peculiar shock but does

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not give any more distinctive, peculiar shock to those who are concerned with the black families, the black missionaries and the black social workers who have already been thus maltreated. I wholly endorse that recognition.
At the risk of being slightly out of tune with the mood, may I say to the Minister of State, with all compassion and sincerity, that the reiteration of the phrase "calls upon all parties to cease these horrible deeds" begins to have a horrible, sanctimonious and rather distressing sound about it. Let us be clear—he is clear, is he not?; I am sure that he is—that there are only two parties engaged in these murderous, mutilating attacks. They are the two external guerrilla armies led by Mr. Nkomo and Mr. Mugabe. Some of us had the distressing experience, in the past few months, of seeing Mr. Nkomo feted and cosseted here in London by all kinds of gatherings, and by Government Ministers. Is it not time that we made it clear that we are not putting Bishop Muzorewa, Reverend Sithole or Mr. Chirau in the same bay as the murderous leaders who are organising and condoning these kind of things, and even calling for them to take effect?
Finally, I want to put a point to the Minister of State. I know that he will not be able to agree with me, though I am not sure what his private views may be as compared with what he will be required to say here. Will he put it strongly to the Foreign Secretary that some of us believe that, in view of the circumstances, the time really has come to announce firmly that we will recognise as of now the internal settlement, the internal Government, with all its weaknesses; and that in order to give the non-murderous Rhodesian leaders a chance to succeed—as well as, incidentally, a chance of survival, because they, too, have been set up for assassination—we will start to organise the raising of sanctions so that they can receive the weapons and the supplies they need in order to give that internal settlement a chance in this horrid situation?
Lord GORONWY-ROBERTS: My Lords, I much appreciate the tone and the content of what my right honourable and noble friend has said. I wish to take up from what he has said something that I should have said in response to what the
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noble Lord, Lord Byers, said. I wish to make special mention of the Christian courage of the missionaries in situations of this kind. I believe that this incident has shown once more the intrepidity and the self-sacrifice—up to the ultimate sacrifice—of people who venture out into these countries and conditions solely to serve their fellow men, of whatever colour or background.
My noble friend Lord George-Brown rather narrowed the issue by saying that only two parties were responsible for these incidents. I do not want to take issue with him at a time like this, but it is a fact that we could quote examples of fairly recent terrible happenings which affected, not white people in Rhodesia, but black people. There was the incident at Gutu in which 52 black Africans were killed; Bishop Muzorewa himself put the number at 105. However, I do not think that there is any advantage to be gained by exchanging examples of atrocities in this way. This is a situation which breeds atrocity, from whatever source it may come.
My noble friend's proposal that we should examine the possibility of a new departure is of course worth studying. I freely and willingly undertake to bring the words of the concluding part of his intervention to the notice of my right honourable friend; and, as my noble friend knows, my right honourable friend very carefully considers everything that he says in this House on foreign and Commonwealth affairs.
Lord HOME of the HIRSEL: My Lords, I, too, should like to associate myself with the expressions of sympathy extended to the victims of this terrible massacre, as well as pay tribute to the courage of the missionaries. This is not an isolated incident. The noble Lord, Lord Goronwy-Roberts, is obviously aware of this fact; he said so. The Statement also recognises this. The casualties in Rhodesia are, I think, running at about 150 Africans a week—20 a day. I should have thought that the whole House would agree that that kind of situation is not tolerable. Obviously the round table conference is the right answer, if that can be achieved. Nevertheless, it seems that in these circumstances patience can be carried too far, and can be carried to the point of overwhelming tragedy. Therefore, is it not necessary now to tell the leaders of the

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Patriotic Front that, unless they come to the negotiating table within a stated time—which should be days, or, at the most weeks—the British Government will have to give the fullest possible support to the Salisbury provisional Government? I see no alternative to that.
Indeed, I should go almost as far as the noble Lord, Lord George-Brown. I think that we should go to the United Nations very soon and say quite clearly, and above board, that the situation has arisen—and has been brought about by the Russians and by the Patriotic Front in alliance—in which Britain will have no other possible course but to lift sanctions and to give help to the provisional Government in Salisbury, unless they come to the conference within a given time and without arms. I believe that we should be quite above board and open, and go to the United Nations and say this very soon.
Lord GORONWY-ROBERTS: My Lords, we are all grateful to the noble Lord, Lord Home of the Hirsel, for putting us in perspective about these horrifying incidents. As he said, it is quite true that the situation affects black, as well as white, Africans; and proportionately, but not in terms of human tragedy, more so the black people of Rhodesia. I have figures here which I could give, hut I do not think that I need emphasise the point already made so well by the noble Lord, Lord Home. This is a situation of common tragedy for everybody in Rhodesia.
The noble Lord also spoke of the overwhelming tragedy which would overtake that country and its people unless certain policies were followed. I must say in all sincerity that the Government, having considered this very closely for a very long time, believe that the overwhelming tragedy—even the intensification of what is already appalling—might very well occur if we went ahead without the co-operation of the very substantial Rhodesian elements now outside the internal régime. It is a matter for very serious thought indeed as to whether we should take the steps suggested to us by the two noble Lords who have just spoken.
I have said that I shall certainly bring the words of my noble friend to the attention of my right honourable friend,
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and of course I shall, naturally, do the same regarding the words of the noble Lord, Lord Home. However, I ask the House to consider very carefully indeed what might happen in terms of intensified tragedy if, in a mood of desperate urgency, howsoever well motivated, we forged ahead, without the consent and cooperation of the very substantial elements who are right outside of, and resistant to, the internal regime.
Lord BROCKWAY: My Lords, as the son and a grandson of Christian missionaries, I look upon this appalling incident with personal feeling. In addition to the horrible circumstances of the incident, we must surely remember that very many others—Africans, as well as whites—have died in this conflict. Surely our aim must be to bring the armed conflict to an end. I wish to ask the Minister to consider, while studying the proposals made by the Leader of the Opposition, whether recognition of an internal settlement would be likely only to intensify the conflict and the deaths which would follow. I also wish to ask him whether the proposal for an all-Party conference is now an increasingly practical suggestion. Has it not been reported that Mr. Ian Smith has declared in favour of entering such a conference if it is constructive; and has not a large majority of African members of the Legislature also declared in favour of this all-Party conference? If we are going to seek an end to these horrors in Rhodesia, would it not be for all of us to concentrate upon that hopeful proposal?
Lord GORONWY-ROBERTS: My Lords, it is of course a fact, as I said last week in this House, that the Patriotic Front are prepared to attend round-table talks. It is an encouraging fact that in the last few days Mr. Smith has indicated that on certain conditions he might now attend such talks. This is part of the meaning of the phrase that my right honourable friend used when he said that he believes there has been some progress towards such a round-table conference. On the second point made by my noble friend, it is of course true that there would be a clear danger of an intensification, even of this appalling situation, if we went ahead without something like the support, the near agreement, of the Patriotic Front and the Front Line

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Presidents, the rest of Africa; especially, I would suggest, when, in the last few days, the Organisation of African Unity, which contains some very good friends of ours, have gone on record as saying that they take the view of the Patriotic Front about the Rhodesian question. I suggest this calls for very serious consideration before we proceed on the line that the noble Lord, Lord Home of the Hirsel, suggested to us a few minutes ago.
Lord ALPORT: My Lords, may I ask the Minister whether the Government recognise that a large proportion of the guerrillas are no longer under the political control of the leaders of the Patriotic Front? Do they recognise, at the same time, that the security forces in Rhodesia are no longer under the political control of the Executive Committee, and that a very large proportion of that country, particularly in the Tribal Trust areas, is not under the control of the security forces? Do they recognise that, before there can be any political solution or any purposeful round-table conference between the parties immediately concerned, it is going to be essential to restore law and order within Rhodesia and prevent the continuing militancy of the Patriotic Front forces in Zambia and in Mozambique; and that therefore a prior condition of any successful outcome from the present situation is the establishment in Rhodesia of an international force with, at the same time, the co-operation of the Front Line Presidents in order to bring the militant forces under control? Is it not most important, therefore, that the conference should not simply be a round-table conference with the Patriotic Front, Mr. Smith and the other internal leaders, but should be on an international basis under the United Nations?
Lord GORONWY-ROBERTS: My Lords, if I may say so without in any sense patronising him, the noble Lord, Lord Alport, has very considerable experience of Africa as a High Commissioner, and I think he has come very close to the nub of this international action. But I would ask the House to consider very carefully what reception the United Nations would give to a proposal for action of the kind we have heard urged this afternoon. It would hardly be interpreted as the kind
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of international action that the noble Lord has suggested. I think that what he has said has some chance of success. Indeed, there is general agreement that a United Nations force might be the crux of a transition period. The noble Lord's contribution will be very carefully studied. One sees the possibilities in what he has said. I am afraid I cannot, with all respect, see any possibilities in the alternative urged by my noble friend Lord George-Brown and the noble Lord, Lord Home.
Lord ORR-EWING: My Lords, would the noble Lord bear in mind that, currently, 20 black and white people are being murdered in Rhodesia every single day, and that this position is getting worse, more serious and more bloody every single week? Could not the Government call on the live Front Line Presidents for a ceasefire even before we have the round-table conference? Could he not also set a target, as my noble friend Lord Home has said, of days or weeks—14 days, say, before there is to be a roundtable conference—seeking in the meantime to persuade the United Nations to bear some responsibility, so long as any such force could he put together quickly, but announcing at the same time that if this does not come about then we shall have no alternative but to lift sanctions so that simple self-defence arms can be imported to better defend the inhabitants of Rhodesia, black and white, from the terrible holocaust which is going to come upon them?
Lord GORONWY-ROBERTS: My Lords, the noble Lord, Lord Orr-Ewing, has reminded us once more of the extent of the consequences of war-like action on both sides. I have figures here supplied from Rhodesia: that since 1972, when irregular activity of this sort at last started, seven years after the beginning of UDI, 530 members of the security forces have been killed and 4,555 guerrillas, as well as 1.899 civilians, of whom 158 were white civilians. Proportionately, far more black Rhodesians than white have been killed, but that does not reduce the human tragedy, especially for the people concerned and their families. The point I am making is that this is a human situation affecting all peoples in Rhodesia, and that we should try to solve it on the basis of securing that these appalling

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figures are not kept up in the next few months, as they have been in the last few months.
As to how to do it, there is clearly a difference of opinion as to how to go about this. There is the suggestion that we should issue a kind of ultimatum. Fourteen days—and then what? We take unilateral action? What would be the attitude of the world authority, of the UN, to such? These are questions to be asked and studied very carefully indeed. In the meantime, Ambassador Low and Mr. Graham are there. They have not returned because they are meeting with some success; and my right honourable friend has said in another place today that he believes that some progress has been made in the direction of a roundtable conference. If we can get that, if we can get the Patriotic Front and the OAU as well—some of us forget that the OAU is crucial to this; crucial to any action we might take unilaterally; certainly crucial to a settlement around a table—then we may engage in a concessional process which may be monitored in the way that the noble Lord, Lord Alport, has suggested; and it is in that direction that Her Majesty's Government are working.
Lord HOME of the HIRSEL: My Lords, would the noble Lord allow me one more word? I do not want there to be any misunderstanding. I would far prefer the noble Lord's solution and that of my noble friend Lord Alport, but the essence of this matter is speed, and neither of these solutions so far seem to me to be within sight.
The LORD PRIVY SEAL (Lord Peart): My Lords, I think noble Lords feel deeply about this, and we have had an important Question period. In view of what has been said, which my noble friend is prepared to convey to Ministers, I think we should proceed.

THE OFFICIAL SECRETS ACTS
4.9 p.m.
Debate resumed.
Lord GOODMAN: My Lords, it is not altogether easy to return our concentration even to so important a domestic
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matter as the one we were discussing before this Statement was made; but we must do so, and we can perhaps reflect with some contentment that our most intractable problems compare very favourably with the appalling situations which prevail elsewhere. That may be quite a healthy mood in which to continue our discussions.
The two previous speakers, in this debate have, if I may venture to say so without being patronising (if I may borrow a word from the Minister of State), made a very distinguished contribution to it. It is an exceptionally difficult matter, and it is one worthy of the best attention we can give to it. It is not a matter of exceptional urgency because, so far as the principal absurdities of the law are concerned, they have been healthily counteracted by the common sense of juries. This is an important consideration. It is sometimes unwise to leave it to the common sense of juries to correct the state of law which is inherently unsatisfactory. The Sunday Telegraph case demonstrated, as did a number of the cases which occurred previously in the general area of censorship, that twelve men can rectify very adequately some of the prejudices and built-in notions of people much wiser and holding more eminent positions who have arrived at settled conclusions not in consonance or consistent with public opinion of the moment. But you cannot leave that too long. First, you do not know how long you can rely upon the common sense of a jury and also you do not know how long a Government that has been defeated in this way will continue to lick its wounds. After a time, confidence is restored and some further absurdities are perpetrated.
What I would say about the Official Secrets Act is this. I agree with the noble Lord, Lord Wigoder, that what we are concerned with is Section 2 and not Section 1 of the Act. Section 1 has obviously assumed much greater importance as Section 2 has advanced further into the area of the absurd and the ludicrous. Section 1 becomes more imporant because today we could be totally dependent for our survival on being able to control the desemination of security information and classified information. In the days when the design of the crossbow was not perhaps an appallingly secret matter—and for a

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long time we know that the more rudimentary long bow continued to prevail—it was not necessary to send to prison anyone who had travelled to France with an advance copy of the bow that we were going to use at Agincourt.
Section 1 was not then an especially important consideration; nor was it there, if I may venture to say so. But today, when we have atomic bombs and hydrogen bombs and when every kind of appalling device that mankind has thought out for his own destruction can come into existence by reason of treachery on the part of people, often well-intentioned people, as we know from some of the post-war cases, people moved by the highest motivation who fail to recognise that their principal obligation is to their own country—today, when these things can happen, Section 1 is of the greatest importance. I do not know whether it needs to be rectified or extended in any way; but I do not think that that is what we are discussing today.
Today we are discussing the absurd situation of Section 2 which, as has been said so rightly, is the section which allows a man to he prosecuted, at least theoretically, for divulging any information that has come his way in the course of his employment. That cannot be sensible; it cannot even be sane. As Lord Wigoder said, you can be prosecuted for divulging the colour of the carpet in your room or for making known something you heard on the telephone while someone was talking to his wife; you can be prosecuted for any triviality. It is the fact that the history of these prosecutions very often touches the ludicrous and the absurd. Some noble Lords may remember the Compton Mackenzie prosecution, and others the Sunday Telegraph case. I should declare an interest, an interest which shows me to be a person of singular altruism becasue I have occasionally earned an honest penny by being concerned with the defence in these cases. I had the privilege of retaining the noble Lord, Lord Wigoder, in the Sunday Telegraph case. I was concerned in the Richard Grossman case, where my firm acted for the publisher. In so far as Section 2 gets abolished, this cannot be of any advantage to me; it cannot be of any advantage to honest lawyers; but I do not think, important as their interests are,
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that they are necessarily the supreme interest when the salus populi arises.
I venture to think that on this point I find myself in mild disagreement with Lord Wigoder. He said that there is no way of amending the Official Secrets Act without, in fact, making its bite more vigorous and more effective and making it a stronger instrument for censorship. But there is one way, of course: it is to abolish Section 2 entirely as far as it relates to criminal law. This is the major suggestion that I wish to make.
What is the vice of Section 2 at the moment? It is a very important social vice: that it interferes with important freedoms of expression. It inhibits the historian, it inhibits the newspaperman, it inhibits the journalist and the author. It leaves him in an appalling state of insecurity and uncertainty about what he can do. It has been rightly said that one of the most effective forms of censorship is uncertainty in the law. You could not have a better illustration of that than in relation to Section 2. What I want to suggest—and I do not put it forward as a positive solution that I have formed in my mind as necessarily right—is that in the current mood in the country, the general feeling that secrecy is something prevalent among Governments is a very unhealthy feeling. I do not believe it to be true; but a lot of young people believe it is true.
Undoubtedly there is an atmosphere in Government reminiscent of the mood of the man who in his house says, "Do not speak so loudly, the neighbours will hear!" This is the sort of psychological attitude that needs to be rectified. I do not think that you can start to amend this Act unless you decide what is going to be your philosophy; unless you decide what it is that you want to do. Many years ago, when I first became the Chairman of the Arts Council of Great Britain, I suggested to a meeting that we should admit the Press to our discussions. I cannot tell you with what horror this proposal was received. It would be quite impossible to do it, I was told in the firmest terms by the officials and the other members of the Council: that no one would speak his mind. I think we have progressed some distance since then. People are not inhibited from speaking their minds from a fear that other people will know what is in their minds, if there

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is anything in them at all. I believe that the first approach to rectifying this situation is to ensure that we do not necessarily try to inhibit the spead of information in a belief that it will be injurious. Most of the information that people seek to protect can do no injury to anyone.
What we must remember, in amending this section, is that our purpose is not to protect individuals from awkward, inconvenient, embarrassing revelations about views that they have expressed. That is not what we are about to do; but genuinely to protect a public interest. Of course, it is embarrassing to be reminded of advice or of views which one gave at one time. No one who has practised as a lawyer can fail to know what an embarrassment it would be to be reminded of previous advice given. I have never heard of anyone protected from having advice that he had uttered to a client or patient published in public terms. I do not think that we should give consideration to this.
There is a very interesting passage in the judgment of the Lord Chief Justice in the Crossman case. The interesting part of that case was the fact that it demonstrated with great force the total futility of Section 2 of the Official Secrets Act. The defendants in that case—and there is no secret about it; it emerges in a book about the case—were all strongly advised that they had no defence under the Official Secrets Act and that if the Official Secrets Act had been pleaded in the action against them, there was no defence available. But the Act was not used. Unkind people may say it was because it was a Cabinet Minister involved. Kinder people may say it was because it was regarded as being inappropriate to use a sledgehammer to crack a nut. But, whatever the reason, why is there need to retain an Act of which we make no use of any kind when a serious issue arises? Judgment in that case demonstrated beyond peradventure that that Act is of no use in those circumstances. One cannot conceive of the Act being used against a Cabinet Minister or an important civil servant in circumstances where it was an innocent revelation, made with deliberation because it was thought that the public ought to know something.
What the case shows is the urgent necessity of revising the whole of the law
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on the censorship area; because the law is an appalling muddle and mess when you think of the area of possible censorship that arises in these matters. You have the Official Secrets Act, Section 2, which prohibits your saying anything about anything if you happen to have learned it from an official source; there is the law of copyright which prohibits the printing of a document unless you are certain that you enjoy the copyright to any substantial extent; and the rights of quotations are extremely limited; there is the law of confidentiality. I would invite even the noble and learned Lord who sits on the Woolsack to tell us what the law of confidentiality says at this moment or to what extent it can operate.
There was an interesting case recently which also indicated the social mood in which we are moving and which also indicated the necessity of bringing the law into line with it. This was the case, I think, a few weeks ago. You will find it in the 1971, 1 All England Reports, page 700-odd. It was a case where two "pop" singers sought to restrain their previous agent from selling articles about their activities. One pop singer's name was Jones and the other was Humperdinck. I do not think that he was the composer of the famous opera. Whoever he was, the fact remains that these two gentlemen had employed an agent to publicise their affairs. The agent was employed by them and he had signed a letter undertaking that he would not disclose any information about their affairs. Then he proceeded to write four articles, I believe for the Daily Mirror. After three had been published, the unfortunate principals awoke to the fact that what he was saying was not wholly complimentary. They sought to enjoin the fourth article from being published.
My Lords, you will be astonished to hear that in the present mood tilt!), failed. The Court of Appeal—Lord Denning's judgment—held that as the gentleman had been employed to publicise them, these people could not complain whatever the publicity he gave them—at least to the point of getting an injunction. So they totally failed to get an injunction, but they were left with a remedy in damages which, as any lawyer will know, is a very dubious remedy in such circumstances. That reflects the present social mood. I do not say that the judgment was right;

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I do not say that it was wrong. I say that it is a contemporary judgment indicating how people feel about things today. If we are going to introduce new laws, we ought to introduce them in key with how people think about things today.
In his judgment in the Crossman case, the Lord Chief Justice made some very pertinent observations. He made it clear, for instance, that under the existing law he would regard genuine Cabinet secrets that were still current as open to protection by the law of confidentiality. So it is not necessary to have an Official Secrets Act to use this. He also made it clear that civil servants were not entitled to the protection of that Act: that it was inappropriate to seek to protect civil servants on the basis that they had given advice that was now being brought to light.
May I say this: I have absolutely no animus against civil servants; I have a great many friends who are civil servants. I have worked with them in a great variety of areas but I cannot for the life of me see why it should be necessary to have a criminal Act to drag somebody into the dock at the Old Bailey because someone else divulges the advice that a civil servant has given. The remedy here is the same as in ordinary private life: when you select your employer, select wisely. When you select your employee, select wisely.
I have spent a lifetime dealing with people's secrets and divulging them to my own employees. I cannot think of a single instance where any has been disclosed, although some of my employees could have made very substantial sums of money by divulging information to improper sources. This is a question of how people behave. If you are unwise enough—if I may say so—to work for anyone as distinguished, amiable, nice and intelligent as Dick Crossman, you should take the precaution of saying nothing until you are out of the room. If you are unwise enough to employ a private secretary on some immensely confidential activity, make sure that he is a gentleman who will not divulge your secrets however much he may disapprove of what you are doing. These are the solutions in this matter. The solution is not to put people into the dock; but the solution is to consider how far this matter can be dealt with by the civil law.
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I believe that a change in the civil law is very necessary. The Law Commission, if they have not already done so—and they work so arduously and assiduously that no-one can say what they may or may not have done at any moment of time—should consider the whole question of the obligations of confidentiality in contractual employment. It is an extremely important question: how far may a bank manager divulge the balance in the bank; how far may a secretary divulge what you have said in a letter? It is not necessary to make use of the appallingly ferocious weapon of criminal prosecution in order to secure an adequacy of protection.
This is obviously a debate in which a number of people want to speak, a debate which we have had interrupted, inevitably, by the awful matters that were discussed previously. I would conclude by saying that I think we are dealing with a matter which is important to the whole tenor and tone of our community at this moment. There is a feeling afoot that governments seek to protect information for the sake of protecting it and for the sake of preventing the embarrassment of individuals rather than for sake of the public good. It will be a very important matter to allay that fear and disabuse people of that idea, and to produce an Act which is in key with our present thinking.
4.25 p.m.
Lord JACOBSON: My Lords, the House will be grateful to the noble Lord, Lord Wigoder, for giving us the opportunity to hold this debate. I can assure him that his speech will be welcomed by all who hold the freedom of the Press and the importance of the free flow of information at heart, and particularly by journalists inside and outside the House. Here perhaps I may declare an interest: I was, until my retirement three years ago, a journalist, mainly with the Daily Mirror group. I receive a pension from them; I am a member of the NUJ; and I still occasionally write some articles.
The Motion calls for the replacement of the Official Secrets Act by a measure to put the burden on public authorities to justify withholding information. This seems to me to be like trying to bell the cat, and it is in line with an undertaking as the noble Lord, Lord Wigoder, pointed out, in the Labour Party manifesto of

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October 1974 which has not yet been met. I believe the Motion to be worthy of your Lordships' support. I see it as a step in the right direction. But only as a step. It would do some good if it were to be followed by other steps; but not if it were to obscure the ultimate objective.
That objective, in my opinion, is to secure the freest possible flow of information through an Official Information Act or an Access to Information Act, on the lines of those in Sweden, other Scandinavian countries and the United States. The Swedish freedom of the Press Act goes far beyond anything contemplated by the Government or in the terms of this Motion. It does not, for example, simply limit criminal penalties to disclosures of certain kinds of information. The Swedish Act provides a right which is legally enforceable for anyone to see Government information unless it falls within specific limited categories. The Swedish and American Acts both provide that the decisions as to whether the information falls within the limited exemptions from disclosures have to be made by impartial arbitrators, such as the Swedish Ombudsman or the Supreme Administrative Court.
My Lords, I do not believe that official information is going to be made freely available to the Press and the public simply because it is no offence to release it or because public authorities have to justify withholding it. Established conventions and practices, civil service discipline and secrecy, the desire of governments and Government Departments to withhold politically sensitive information for Party advantages, all these are too deep rooted for that to come about without some more clear-cut and specific legislation. There will always remain in the official mind the temptation to withhold information and try to justify the decision later, or hope that the information will become too out-of-date to be significant, or that the problem will just quietly fade away and be forgotten.
May I give an example of what I mean. Your Lordships may have read or heard about a remarkable book by a former civil servant, Mr. Leslie Chapman, or your Lordships may have seen one of the television programmes based on this book. Mr. Chapman was head of the Southern Region of the Property Services Agency, formerly the Ministry of Works. In this
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job he succeeded in saving the taxpayer many millions of pounds in his region. But when he tried to get his methods adopted elsewhere in the agency, he ran up against a brick wall of indifference or downright hostility. Finally, he became fed up, resigned from the Civil Service and wrote this book.
His economies had come to the notice of the Public Accounts Committee and, in 1975, they called in Sir Robert Cox, the head of the Agency, and asked him why the economies made by Mr. Chapman had not been matched by other regions. Sir Robert's reply, to the effect that there were special factors in the Southern Region, was misleading and is now admitted to have been misleading. But although the Agency knew that they had misled the Public Accounts Committee by early 1977, the Committee were not told so until June 1978, a few days before the publication of Mr. Chapman's book and the subsequent disclosures in the television programmes.
If the question is now asked, "Why was Sir Robert's statement to the Public Accounts Committee incorrect?" it cannot be answered fully because the Official Secrets Act stands in the way. This particular cover-up was not totally successful because of the determination of one man, backed by some newspapers and broadcasters. But how many cover-ups have been successful? This we shall never know.
Before I retired, I was a newspaper executive for many years. I will not pretend that all newspaper editors spend their days in fear of the Official Secrets Act and spend sleepless nights because of the laws of defamation and contempt. But what worries me is that it is precisely those newspapers are that most concerned with thorough investigation, both national and provincial, and those broadcasters, too, who most consistently want to make a thorough job of investigation in the public interest, who encounter most obstruction from public authorities, from bureaucracy and the existing laws of defamation and contempt—particularly the law of contempt. One has only to remember the difficulties encountered by the Sunday Times in a long, brilliantly conducted and ultimately successful campaign on behalf of the thalidomide families to see what can occur in that field.

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We had a debate on 26th January this year on the report of the Royal Commission on the Press, and I should like to say I am delighted that the Chairman of that Commission, my noble friend Lord McGregor of Durris, is speaking later today. That debate was also initiated by the noble Lord, Lord Wigoder. Some of us then urged the Government to give further consideration to the question of a freedom of information Act and also to get on with the reform of the laws of contempt and defamation. We were fortified by the fact that the Royal Commission and the Government had pushed in similar directions.
I must confess, with regret, that on that occasion I found the reply from the Government Front Bench disappointing. No blame, of course, attaches to my noble friend Lord Oram, who replied for the Government: he was bound by a negative departmental brief. I am sure he has the freedom of the Press at heart as much as any of us, but he could give no undertakings. That was five months ago and it is now nearly a year since the final report of the Royal Commission was published. All we have had from the Government so far is a discussion paper on contempt. It is more than three years since the reports of the Committees on Contempt and Defamation were published. I hope that my noble friend Lord Harris of Greenwich will be able to assure us of some progress when he speaks today. He was a journalist before his elevation to ministerial status. I hope he will remain a Minister for a long, long time ahead—certainly after October—but perhaps there will come a day when he wishes to revert to the profession of journalism and he will have made things a little easier for himself by anything that he can tell us today.
These are complex matters; they are both fundamental and urgent. As the noble Lord, Lord Goodman, said, there is a great deal in the mood of the country at the moment, particularly on the part of young people, who have become very impatient about what they regard as the growing secrecy of our public life. These things bear on the very basis of the open society on which we pride ourselves so much. I must confess that I sometimes wonder whether this Government, or any Government in recent years, have really
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taken seriously the need to reduce excessive secrecy in our public, administrative and political life to which the Fulton Committee drew our attention 10 full years ago. Successive Prime Ministers have promised us more open Government. Mr. Heath did so; Sir Harold Wilson did so; and Mr. Callaghan has done so. But when we come to examine the record to date I fear that all we have to look at is a pretty blank sheet. It is therefore with no great optimism that I support the Motion moved by the noble Lord today, but I hope that I may be proved wrong.
4.34 p.m.
The Earl of HALSBURY: My Lords, I speak as a scientist rather than a lawyer and I am not going to discuss the legalities of this matter, which are rather outside my competence. However, I should like to tell your Lordships, with permission, how I managed to overcome the obstacles in the way of getting the history of the first computers in this country declassified. It is quite a story. A computer-like object was conceived by Charles Babbage, a Cambridge mathematician, about 150 years ago, but he was unable to reduce it to practice because he had no other means than cog wheels and cams. The bits and pieces of his computing engine can be seen in the Science Musuem at South Kensington. In the early part of the war, Professor Alan Turing, late of Manchester University, actually embodied the Babbage computer in hadware which he used for code-breaking at a secret establishment. Many other people were employed and the thing gradually got more and more electronic, and when the was was over they dispersed themselves and all started building computers.
The first public knowledge of these strange artefacts was in either autumn 1948 or spring 1949; and you award the palm to Cambridge or to Manchester according to whether you think that a tape input is an essential part of a computer, as opposed to manual input. Thereafter, everybody was building computers and I became very closely involved in them at that time. Ten years later there was a computer exhibition at Olympia, and a symposium on computers took place at the same time. I was asked to give an address on "Computing, the first Ten Years". As I was just, as

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I thought, passing out of the subject—this was my sort of apologia pro vita mea over the 10 years of transactions in which I had been involved—I repeated a story which had been told to me 10 years previously, that the most important event in computer history was the meeting of Turing and Von Neumann in America when they were both working on the atomic bomb project. The story was told to me by John Womersley, the director of mathematics at the National Physical Laboratory, and I quoted it in good faith.
Ten years after that, a computer historian at Newcastle University said that he had been studying my paper and could I establish the story of the meeting between Turing and Von Neumann, each of whom had sparked the other off by having half the story in his head. I just quoted John Womersley (who was dead) and said that the only other person who would know about it was Emeritus Professor Max Newman, late of Manchester University and now in retirement. I said: "You had better go and get the history out of him." He did try to do that, but Max Newman was as tight as a clam. He came under the Official Secrets Act and he had been specially warned that this was a very sensitive area so he would not say anything at all. He would not even admit that he had ever been in on the project, although everybody knew that he had been
At this point in time, it just so happened that I was on corresponding terms with the then Prime Minister, Mr. Heath. I told him the whole story and I said: "This is absolutely absurd. We are being done out of the credit of inventing the first computer in world history and Turing's object was a toy compared to anything we have got now and his methods of code breaking are now universally used. There is nothing here that is secret at all. The trouble is that the people who are refusing to declassify this do not know what it is they are refusing to declassify. The only person who knows the whole story from the beginning is Max Newman, in retirement."
I got a very nice letter back from Mr. Heath, saying that he was reluctant to overrule departmental advice but that he had asked that an official history of the matter should be written, to which Professor Newman could make his contribution. That was done, and it was then
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submitted to a proper adjudication. It was decided there was absolutely nothing in it that the world could not know, and the whole thing has been written up recently in some very interesting publications which I can commend to anybody who is interested in this subject. And there was the Official Secrets Act, and the vague, numinous threat it presents, obstructing the credit that ought to go to this country for inventing the first computer. I think that was a very great pity, because by this time everybody thinks that computers were invented in America, although they were not.
If I may, I should like to close on a very brief anecdotal point. I was once let into a secret. It was a very deep secret but I had to know it. It was that there was a body called the Government Communications Headquarters at Cheltenham, which was abbreviated to GCHQ. Under no circumstances must I ever refer to it except to other people who, like myself, were in the know. It was necessary for me to go and talk to them because I had to collaborate with them on the design of future computers which they thought they were going to need. I was told I could go by train and I was given a map of how to reach them. I showed it to the taxi driver and he said: "Oh, that's the Government Communications Headquarters, GCHQ". And I had been carrying that secret under my belt all that time. It is what is sometimes called, I think, a secret de Polichinelle: it is a secret that everbody knows and no one may talk about. My Lords, this has been a somewhat anecdotal contribution to the Motion of the noble Lord, which I support; but it has taken only five minutes and I hope that your Lordships have been interested.
4.40 p.m.
Lord RITCHIE-CALDER: My Lords, I am sure that we are all in complete agreement on the necessity for doing something drastic about Section 2 of the Official Secrets Act. Therefore, we are very grateful, once again, to the noble Lord, Lord Wigoder, for raising this issue and enabling us who are involved—particularly the Press—to see our way through some of the absurdities and difficulties which have always confronted us. I have been involved in official secrets for quite a while. With colleagues, such as my noble friends Lord

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Leatherland and Lord Jacobson, I have probably been as agile as most people in getting around the D Notices covered by the Official Secrets Act and, as my noble friend Lord Jacobson said, it is not very difficult. We did not stay awake at night worrying about official secrets and how to get away with them. If you were astute I think that you could. What was much more important was that much of this restriction might be counter-productive, because if you found your way through a D Notice you obtained a great many leads into things that you were not supposed to know, or to talk about. Therefore, in many cases, such as scientific matters, from the fact that something was covered by a D Notice you discovered something that you ought to find out about.
During the war, I was an official secret, and for 30 years after the war I was still an official secret. It was a breach of the Official Secrets Act—and, indeed, some people were threatened—to disclose the fact that I was Director of Plans of the Political Warfare Executive. What was the significance of that? During the war, it might have been reasonably doubtful whether I should be known. But, apart from the fact that I might, in general association, be linked up with Dick Crossman and Hugh Gaitskell and a few other people who might have indicated the kind of operation we were on, there was not very much in the way of information to the enemy that could have been disclosed in my case. But that experience in a top secret department during the war gave me—and has left me, from the other side of the fence—an absolute obsession about official secrecy.
While it is true, as has been rightly pointed out, that in the military sphere—and probably as much now as during the war—the giving away of secret information which would involve the lives of millions of people is legitimate official secrecy, I found, as I think is borne out by some of the remarks made here, that, however much we may praise and commend the Secret Service, and say what a wonderful Secret Service we have, a good deal of official secrecy is merely an attempt to cover up, or prevent the proper ventilation of, a mistake by a Department. I mean that quite seriously, and one could document it in a very substantial way. The OSA, or Official Secrets Act, often
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stands for RIP. Blunders are buried, which is reprehensible enough in its intention, but worse still when those blunders can be repeated. This is a real situation. It is not merely the fact that politicians in sensitive areas of politics would gladly not have facts discussed when that would be embarrassing to them, because, at the same time, this official secrecy operates between Departments to the positive disadvantage not only of the public, but even of good and efficient government.
The most desperate 24 hours of my life were spent during the war, when a file marked "Most Secret"—that was before the Americans came in and imposed the term "Top Secret" on us—was lost. The whole of the Foreign Office security service went on red alert and everything was stirring, whirring and raging. It was recovered without harm, but the extraordinary thing about that official file was that it would not have given one piece of information, or even comfort, to the enemy. It was merely a collection of minutes dealing with our criticisms—and our proper criticisms—of a section of the War Office. It was merely something inter-departmental, and the lengths to which my own Department, the Foreign Office, was prepared to go to prevent it getting into the hands of the enemy, the War Office, were quite prodigious. This kind of thing is repeated in peacetime. As has been said, young people have a greater sense of the absurdity of this state of affairs than we, who grew up through a less uninhibited period.
I shall give your Lordships one more example since we are getting anecdotal, following my noble friend Lord Halsbury. During the war, we had a D Notice on the information contained in leaflets dropped on Germany. No one was allowed to print these. There was a D Notice prohibiting newspapers from printing what was contained in those leaflets and, in fact, it was a crime to be in possession of a leaflet or to disclose its contents. As your Lordships will understand, those leaflets were dropped by intrepid bombers which, on many occasions, ran into a solid wall of flak, so they turned back and, very properly, ditched their leaflets in the North Sea. They fell on trawlers or were picked up in trawls, and on one occasion were blown by the wind over Grimsby, but anyone

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in possession of a leaflet could have been tried under the Official Secrets Act. There we were, spending a fantastic amount of money, risking people's lives and risking bombers, trying to get that information through to the Germans, but people could be prosecuted for disclosing it. That is the kind of absurdity which still exists today.
What I am concerned about, since I still believe that journalists are agile enough on their feet to cope with much of what is now in Section 2, is that it is dishonest that we should be put in that position. I have some real misgivings about producing a new Section 2 which would strengthen or redefine the position, because, once again, after it was spelled out and hardened out, it would be another pretext for oppression, for suppression or, in our case, for evasion. I feel that that is not the proper way to approach the matter. We need something, and what we need in a very real way is a restoration of what used to be the ethic of my profession, which included confidentiality—and I am not invoking the act of confidentiality.
The fact is that today there has been a great corruption of human relationships. It is a moral question and not a legal one. How can people—person to person, or corporately—be frank with each other and discuss matters, when there is always the risk that something will appear in the gossip column or be used against you? This was illustrated in America, where they have a Freedom of Information Act, when Daniel Elsberg, on his own initiative, disclosed the Pentagon Papers to the New York Times. The Pentagon Papers disclosed the whole verbatim account of a discussion, in the National Security Council of the United States, on the Vietnam war. This is a pretty grim document. I was asked on American television what I thought of it, and I said that I had no doubt about Daniel Elsberg's intentions and motives. He felt very strongly about the Vietnamese war and thought that this was something which ought to be revealed, to show just the kind of things which were going on.
However, as I said on that programme, I find myself in considerable difficulty. How does one conduct any kind of reasonable discussion if one does not have some kind of guarantee of a degree of confidentiality? During the war, people were,
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in many cases, inadequate. Fairly often during my involvement in political warfare I had to argue a proposition and be the devil's advocate as well, merely because other people were not able to deploy the argument. The facts had to be brought out and a dialogue had to be conducted. Again I said on this programme: what would happen in these circumstances if something which I totally deplored but which I was putting forward as the devil's advocate was quoted against me and I looked like an absolute bastard? What could I do about it? This is not fair. I believe that a great deal of this is now happening in public life, and it is a corruption of public life.
Confidentiality surely means that people ought to be on such terms with each other that they can trust each other, to the extent that they realise that they are thinking aloud, in honesty and security. Throughout my life the gossip columns have been chasing after this kind of keyhole or earhole gossip. It is getting worse.
I would ask—and I think my colleagues agree with me—that any consideration of the improvement of the Official Secrets Act, or the removal of Section 2, should include what was asked for by the noble Lord, Lord Wigoder. I now support him in asking for a real consideration of what we mean by these areas about which the public have the right to demand information and about which we have the right to know. I do not believe that we always have the right to know. In fact, in some cases it would be very bad for us if we knew. But there are other areas in which the Press should be free to navigate on the high seas of information. I agree with my noble friend Lord Jacobson that decent, investigative journalism—which is becoming very good in this country to the embarrassment of many people—ought to be encouraged by the availability of and accessibility to facts, but it should be accompanied by something which I want to see restored, at least in journalistic dealings; namely, confidentiality, which gives to people at least the confidence to speak to other people.
4.53 p.m.
Lord FOOT: My Lords, so much has already been said in this debate which impinges upon what I had thought of

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saying this afternoon to the House that I think it would be best if I abandoned my original plans and confined myself to one or two limited observations. The debate has already illustrated that there is a very large measure of agreement in this House and, indeed, among the public generally about the Official Secrets Act, and particularly about Section 2 of that Act. The problem of the dissemination of information in a free, democratic society is one of those problems—they are not infrequent in human affairs—where it is very easy to see what we should like to achieve in general terms, but when we try to work out how to do it we are faced with very considerable problems. I was glad that my noble friend Lord Wigoder began by saying that there could not be any very useful discussion of this matter unless we recognised that here is a very serious clash of interest. That was illustrated by what the noble Lord, Lord Ritchie-Calder, said just now: that there are very difficult matters which have to be resolved.
If I may put the matter in a slightly different way, there are some problems where it is very easy to see what is wrong but where it is not at all easy very often to find a suitable remedy. In that regard, the problem that we are discussing today concerning the communication of official information bears a striking resemblance to the problem of the reform of this House.
I think everybody is agreed that when we were discussing the Bill for the reform of this House—nearly 10 years ago, I think—there was unanimity that the present constitution of the House will not do: that both its powers and its composition are an anachronism. However, as soon as we started to discuss what to do about it and what to put in its place, the unanimity very rapidly evaporated. Indeed, it led to ructions, particularly in the other place. In this particular case, nobody—and this is not at all surprising—has come forward to defend Section 2 of the Official Secrets Act. I foresee that when the Minister of State gets up to reply to this debate he will not pin Section 2 to his helmet as the Oriflamme; he will not go to the barricades in defence of Section 2, whatever Mr. James Callaghan may have said
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when he gave evidence to the Franks Committee.
The second point which has been brought out very clearly is that the reason why the original error was made during the passage of Section 2, in all its comprehensiveness and width, the reason why that piece of legislation, which everybody agrees is ludicrous and absurd in its application, came about, was because the measure was not adequately and properly discussed at the time. I say this, bearing in mind that it must have been a Liberal Government which was responsible for the situation, but however that may be—
Lord BYERS: My Lords, the noble Lord's father was in it!
Lord FOOT: No, my Lords, that is a charge which I immediately refute. My family had nothing to do with it.
Lord WIGODER: My Lords, then it must have been the noble Lord's grandfather!
Lord FOOT: My Lords, according to the noble Lord, Lord Wigoder—and I have no doubt that he has got it right—the Bill passed through the House of Commons in a single afternoon. We do not learn much from experience, do we, because here we are today. It is a common complaint that we are asked to pass a great mass of legislation without any proper opportunity to consider it, in particular in the other place. Great chunks of legislation are forced down the Parliamentary throat, and today we are making the same kind of mistake that was made at the time of the passage of this Act.
The other startling contrast is that when we come to speak about remedying the mistake which was then made, immediately all Governments, of whatever colour and persuasion, are apparently seized by a kind of state of lethargy. What are the facts of this case? The facts of this case are that the Franks Committee was set up in April 1971. It performed its own task with considerable expedition, because it reported in August 1972. Since that time—a period of about six years—nothing whatever has happened except, as my noble friend has pointed out, that a

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promise to do something about it appeared in the Labour Party's Manifesto of October 1974. I am not sure whether that was the second edition of the promise and that it appeared originally in the February 1974 Manifesto.
Now that the new Manifesto is in print—if it is—I suppose that that promise will be repeated. But there is this startling contrast between the speed, the unseemly haste with which we pass bad legislation, and the reluctance and unwillingness of successive Governments to try to remedy what has gone wrong. After all, we have had this Section 2 on the Statute Book for nearly 70 years and during the whole of that period it has been the cause of infinite controversy, trouble and anxiety.
The last thing that I want to say to the House is this: I have been trying to foresee what the Minister will say when he replies and what explanation he will give for the fact that the Government have not been able to introduce the amending legislation which they had undertaken to do. I foresee that the Minister will say, quite rightly underlining what my noble friend said at the conclusion of his speech, that this is an extremely difficult matter; it is very difficult to strike a balance between the security of the State and the right of private individuals to have their privacy respected—which is one aspect of the matter—and on the other hand the right and freedom of a democratic people to have access to Government information.
I entirely agree that that is an extremely difficult matter and my fear is that we shall be told by the Minister that the difficulty of the problem and the fact that there are all the varying alternatives which are being canvassed are the reasons for the delay. My noble friend referred to all sorts of different ways in which one could deal with this problem and we shall be told that such are the difficulties of producing a satisfactory piece of legislation that the thing has had to be put off. If I may say so, that is exactly when the importance of the recent report of Justice called Freedom of Information, comes in.
I do not suppose that many of your Lordships will yet have had an opportunity of seeing anything more of this report than has appeared in the public Press, because it only came into publication last
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week. I should like briefly to tell the House what the substance of the report is, because in my submission it constitutes a way in which we could, tomorrow, make an important contribution to the solution of this difficult problem without the necessity for any legislation. Indeed, the first burden of this report is that we could perhaps go quite a long way towards dealing with the problem of the public being given proper access to official information by purely administrative measures which would not call for any legislation. That is the theme of the report and perhaps I may quote from paragraph 6. It says:
"For these reasons we have reached conclusions which can, we think, be put into effect without legislation. If their implementation proves to be a success, whatever Government is in power will be the more ready to extend t le ambit of their operation by detailed legislation, and it is our hope that there will eventually be such legislation. A small but immediate success, however undramatic, in facilitating access to official information, even on a modest scale, is much to be preferred to a prolonged and indefinite controversy over a statutory right on a larger scale, a controversy which may produce no practical results".
I shall first draw your Lordships' attention to that point because the theme is that perhaps by administrative measures we could make some progress. How will it be done? It is proposed that there should be drawn up a code of practice in the matter of the dissemination of official information. I shall not weary your Lordships with the details but perhaps I may read the first paragraph from the proposed code of practice, which sets out the purposes and the objects:
"It is essential to the effective working of a democratic society that the public should be adequately informed about the actions and decisions taken by the Government and other organs of public administration of the United Kingdom. The paramount criterion should be that the public may, by being adequately informed, have the opportunity of understanding and evaluating the nature of, and the reasons and grounds for, such actions and decisions. Accordingly, with certain necessary exceptions"—
and those exceptions are set out later on and they follow very largely the exceptions which are contained in the Franks Committee Report, dealing with matters of national security, defence, foreign affairs, crime enforcement and the rest—
"all documents containing information on such matters should, so far as is reasonable and practicable, be disclosed within a reasonable time to any person requesting their disclosure"

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Who is to decide what is reasonable and practicable? What can reasonably and practically be disclosed and what should not be disclosed? The proposal in this report is that the job of policing or monitoring the code of practice should be given to the Ombudsman. The way in which it would be given to him is that the code of practice would be laid down; if any individual felt aggrieved that he had been refused access to certain information, he could then make a complaint to the Parliamentary Commissioner according to the present procedure and then the Parliamentary Commissioner, who has a lot of experience of this sort of 'thing could make his judgment as to wher thethe refusal to give the information amounted to maladministration.
That is the substance of the proposal and perhaps I may quote one further passage to your Lordships. It sets out what I think would be the great advantages that this proposal might entail. It says:
"Successive Parliamentary Commissioners have already acquired considerable experience in investigating complaints, and the office is respected by Parliament and the Civil Service as well as by the public. We therefore lay upon the Commissioner the crucial function of determining whether in any given instance insufficient information has been disclosed".
This is the important part:
"A body of precedent will be developed. Guide-lines will emerge. In this way, instead of a rigid system seeking to provide an answer for a multiplicity of circumstances, we should have a flexible Code which leaves room for development by an independent figure in the light of experience".
I should like to conclude by saying that this report is not produced by a lot of fanciful people. It was produced by a number of distinguished legal practitioners and academics, including the former Ombudsman Sir Alan Marre, and it included two former Permanent Secretaries, one of whom was the noble Baroness, Lady Sharp. So this was an eminently practical and pragmatic document and I suggest that it ought to receive the most serious consideration by the Government because if they were to adopt it, it would not require any legislation at all, except possibly the total repeal of Section 2, which could be done by a one-clause Bill. It could be introduced, as the Chairman of the Committee said in his article in the Observer yesterday,
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within a matter of weeks. If the Government chose to study this document and if they thought there was value in it, it would give them the opportunity of carrying out the commitment which they made in their last Manifesto, and carrying it out within the remaining period of the Government's life.
5.10 p.m.
Lord McGREGOR of DURRIS: My Lords, it might have been expected that the Royal Commission on the Press would have dealt in detail and at length with the subject matter of the Motion proposed by the noble Lord, Lord Wigoder. However, we could not do this because we were faced with four reports which covered ground which was central to our terms of reference. The Younger Committee and the Franks Committee on Section 2 of the Official Secrets Act 1911 had both reported in 1972; the Phillimore Committee on Contempt reported in 1974, and the Faulks Committee on Defamation in 1975. We could not sensibly have traversed the same ground as those expert Committees. We did not even have a response from Governments about the conclusions which those Committees had reached. Indeed, as my noble friend Lord Jacobson reminded us earlier, the only formal response of Government to date to any of these inquiries has been a discussion paper on contempt, published a short while ago, three and a half years after the Committee reported.
This discussion document runs to some 21 pages, and concludes laconically with a hope on the part of the Government that, "all who feel they can contribute to the discussion of these matters will do so." The Royal Commission defined freedom of the Press as,
"That degree of freedom from restraint which is essential to enable proprietors, editors and journalists to advance the public interest by publishing the facts and opinions without which a democratic electorate cannot make responsible judgments".
In other words, we centred our definition upon the requirement that a free Press must have access to information.
I do not wish to add to the wise commentaries which have been made by earlier speakers. Indeed, I found myself in the unusual situation of having listened to seven speakers and agreed with every

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word they all said. I wish instead to extend the boundaries of our debate to include awareness of an international debate which I think is closely related to our own today; at least, I hope that your Lordships will not feel that this relationship is tenuous. It goes back some seven years to the growing awareness of developing countries that their radios, televisions and newspapers are filled with news which comes from the West, and their televisions with programmes which come largely from the United States. The feeling has grown, and it is very strong now, that efforts should be made to reduce the dependence of Third World countries on Western sources of news and entertainment.
Of course, such dependence is in part a legacy of colonial days. Telephone calls and telegrams have to go from those countries to the old Imperial capitals. You cannot telephone from Lusaka to Nairobi save via London. Satellites, I understand, are rapidly altering that. There is a shortage of trained personnel, whether to produce programmes, or as journalists, and in the particular case of journalists the Commonwealth Press Union is making valiant efforts to provide training facilities on the spot. These are genuine grievances and I do not wish to discuss whether we in the West should be blamed for this situation. I do not think we should. But these anxieties and irritations about the situation have swelled into a campaign which was described in a recent lecture by Doctor Richard Hoggart, who for five years was an Assistant Director General of UNESCO, in the following terms. I quote them because I think what is being said is of significant importance to us, and because an awareness of these attitudes is going to be a very necessary part of our outlook. Doctor Hoggart said:
"Both from politicians in power and from intellectuals not in power, the same cry goes up: this is neo-imperialist aggression; this is cultural imperialism. The West is still dominating and colonising us. They provide the machines; they provide the programmes to fill the machines; they shape our realities day by day.
The 1972 General Conference of UNESCO called on the major communicating countries to recognise their international responsibilities on the grounds that otherwise the mass media could become vehicles for 'the domination of world public opinion or a source of moral and cultural pollution'. It went on to argue that the one-way flow from only a few virtually
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monopolistic countries might seriously harm 'the cutural values of most of the remaining countries'."
Year after year after year at international gatherings that sort of resolution has been passed and that sort of attitude strengthened. Moreover, the Soviet Union has joined in the debate and taken advantage of the multiplicity of opportunities which it offers. Doctor Hoggart continued,
"The Soviet Union has put down resolutions at all the relevant UN Conferences about the dangers of 'uncontrolled' growth in mass media activity. The formulation is usually that, in view of the great power of these media, it is the duty of sovereign States to ensure that they are not used for 'corrupting' ends; and, in particular, that States should agree not to transmit 'undesirable material' across each other's frontiers".
There is a serious risk that developing countries and such organisations as UNESCO will embrace censorship, though it will be called "constructive reporting", and Government control over means of communication, and that will be described as "protection of national soveriegnty and cultural identity". In a move which may point in the direction of control over Press and broadcasting in large areas of the world, UNESCO last year set up a Commission under the chairmanship of Mr. Sean MacBride, the concern of which is to study:
"The totality of communication problems … globally".
It has 15 members, one of whom is Mr. Leonid Zamiatine, lately Director-General of TASS and now a senior ideologue in the Soviet Government. The Commission is to report next year.
Among journalists in this and other Western countries there is great concern about the outcome of this development, the background of which I have tried to sketch. The chairman of the Communications Advisory Committee of the United Kingdom National Commission for UNESCO last week called a conference of journalists and others to assist them in the international presentation of British views on freedom of the Press and other means of communication. At that conference, very well-informed people expressed great anxieties.
To be effective in combating this further trend towards totalitarian control of news and opinions, we must be clear about the meaning of the principles which we maintain and about their application at

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home. We cannot preach the virtues of access to information abroad and deny it at home. It would greatly strengthen the hands of those who have to present the democratic case to such bodies if there could be at least a statement of Government response to the issues raised by the motion of the noble Lord, Lord Widoger. Of course, I am not expecting my noble friend Lord Harris of Greenwich to make such a response today, but a response is necessary because many people when faced with the case for democratic freedom in this area will respond by citing, among other things, the existence of our Official Secrets Act. So, in supporting the Motion, I wish to put the matter in a wider perspective than the particular details of a piece of our own legislation. I hope that the noble Lord, Lord Wigoder, will not feel that I have strayed too far from his Motion.
5.25 p.m.
Viscount COLVILLE of CULROSS: My Lords, the noble Lord, Lord Wigoder, invited us all to be constructive and I think that no one for a moment would deny that the noble Lord, Lord McGregor of Durris, from what he has just said, has taken the noble Lord, Lord Wigoder, very much at his word. Perhaps it is a feature of this debate that we have carried on from where the recent debate in another place finished, because everyone on all sides of the House has taken it for granted that Section 2 of the Official Secrets Act needs reform, and everyone except the noble Lord, Lord Goodman, at least implicitly seems to accept the broad Franks approach. Certainly the three main political Parties are already on record as doing so and certainly on this side I was very glad to hear my noble friend Lord Windlesham endorse the criticism and, I think, the solution.
The noble Lord, Lord Foot, reminded us that if one takes some of the arguments that have been voiced in the debate any distance at all there are substantial implications for privacy—not least via the computers mentioned by the noble and learned Earl, Lord Halsbury—in a large number of cases. However, although that is an important part of the argument, perhaps I might be forgiven if I stick to the main stream of what has been discussed this afternoon.
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As I thought about this matter, it seemed to me that there were two main problems confronting those who wished to make decisions. First, does one merely legislate so as to prohibit, on some sanction or another—whether it is criminal or civil—the disclosure of such necessarily secret or confidential information as one may choose to define? Or does one, in addition, and perhaps separately, go further and positively enact that there shall be a right of access by the public to certain documents or, indeed all documents, save those which are specifically exempted? Those are two separate issues which it seems to me do not necessarily have to be solved at the same time or in the same way. Indeed, the noble Lord, Lord Foot, has reminded us that Justice sees the second half of this as being able to be implemented in part by administrative means without legislation at all.
However, the other problem—and I should be grateful if the noble Lord, Lord Harris of Greenwich, was able to say a word about this—lies in the difficulty that always arises over any individual document. If it is withheld or if someone seeks to obtain access to it and is refused, under either the replacement of the Official Secrets Act or under the more general freedom of information type of legislation, who decides whether it is within the class that is to be disclosed or is undisclosable, and in particular who decides—even if it used not to be able to be disclosed—whether that restriction is still valid?
I strongly suspect, in view of the statement made by the right honourable gentleman the Home Secretary on 22nd November 1976—where the ambit of the reform was clearly set out and the Government said what they thought—that it is the question of who is to deal with the problem of identification of what may be disclosed at a given moment that is causing difficulty. Certainly, different solutions have been put forward and, as has already been mentioned, my right honourable friend the Member for Wimbledon said what he thought my Party would do about this matter.
I should be very grateful if the noble Lord, Lord Harris, could say whether that is the sticking point and if so whether the Government have any further thoughts on it. However, I thought that, as we had delivered ourselves of our view upon

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that matter, I might, with advantage, look a little further at the Swedish and the other Scandinavian and American precedents for the second type of legislation—that is, the freedom of information type of approach which the noble Lord, Lord Jacobson, mentioned. As I have attempted to do so I have been particularly struck, as indeed was the Franks Committee, by the care that one must take before one can assume that any overseas arrangement or solution is readily transportable into the United Kingdom system of law and governmental procedure. It seems to me that it is at least as relevant to consider the attitudes of the courts and of the Civil Service—and perhaps, indeed, the size of the country because that has a bearing upon the amount of information that any system might throw up—as it is to consider the actual terms of the legislative solutions that other countries have adopted.
I would say in passing that the terms of the Manifesto, which forms the basis of the Motion of the noble Lord, Lord Wigoder, are not really very adventurous; because in the civil sphere of a replacement of the Official Secrets Act all one has to do is to adopt the Franks Committee recommendation. It is very plain that in the criminal sanction in paragraph 221a of the report the burden is, indeed, on the prosecution—as one would expect—to show that the information should not have been disclosed. In the civil field we already have a situation where the courts themselves, in considering claims of Crown privilege, have produced this very rule as well. In the case of Conway v. Rimmer this House laid down the rule that it was for the courts to consider whether the Crown was justified in seeking to withhold documents in a civil case. Certainly, when one is dealing with a claim of privilege for a class of documents, the courts have said that there is a very heavy burden on the Minister seeking to withhold which they will certainly seek to consider and where they are unlikely to be persuaded.
It is a little different when it is the contents of an individual document that are at stake. But in the Conway v. Rimmer case, which related to a police cadet and the records of his service in the police force, eventually the noble and learned Lord, Lord Morris of Borth-y-Gest, looked at the five documents concerned
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and pronounced himself of the view that there was no earthly reason why they should not be disclosed, and the case went on with them in public.
I do not think that it was that rather simplistic version of the debate that the Liberal Party and, indeed, the noble Lord, Lord Jacobson, wanted solely to discuss. I agree with both that a mere reform of the Official Secrets Act will not by any means necessarily of itself lead to any great change in the availability of documents for the public. After all, the terminology of Section 2 at the moment deals in terms of authority. If a document, or whatever it is, is authorised to be communicated, then no charge lies. What happens at the moment is that the Civil Service and Ministers authorise themselves to release whatever it is they think fit and refrain from authorising themselves where they do not. In practice, the choice of what to publish and what to withhold would be exactly the same under the formula adopted by the Franks Committee as it is now.
Therefore, the mere reform of that sort will not necessarily lead to any greater disclosure at all. Indeed, as one would expect, in paragraph 81 the Franks Committee points this out and reminds us that it is the differences in constitutional and governmental conventions, practices and arrangements across the different countries that were studied that are at least as important as legislation that has been passed in achieving the greater disclosure and freedom of information that has in some places been achieved. In the United States and in Scandinavia, particularly in Sweden, positive legislation has evolved which grants a right of access to the citizenry, although in both cases—and, indeed, elsewhere as well—I suspect that there are still many more restrictions than people have realised.
If we wanted to pass similar legislation in this country, I see no reason to suppose that we could not do so; but we could do so whether or not we had already put on the Statute Book a comparatively simple Act along the lines of Franks. Certainly to do that would not rule out a further step forward later on if that was what Parliament wished. In fact, all we have done, or would have done, in the Official Secrets Act repeal and reform would be

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to set out the list of exceptions from what may be disclosed, which are built into the Swedish code in the Secrecy Act, and in Section 552B of the United States Code of Law. Those are the restrictive parts of both those systems and we would similarly provide in English law for something that looks to me remarkably similar in the territory that it covers.
What we would not have done is to provide for the other positive rights of access. Here what seems to me to be of great significance is that this is a subject that has never been fully researched. The Franks Committee forswore the task expressly, and we can see the reasons on paragraph 85 of its report. I do not believe that the public has ever considered in full the implications of what is suggested. Let me give your Lordships one example. In Sweden I believe that there is a book in which any member of the public can look up and find out the exact income of any citizen of Sweden in the previous year, as disclosed to the income tax authorities. There are certain young ladies, or parents of young ladies, who, when marriage is contemplated, make good use of this. But it is a far cry, (is it not) from the Statutory Declaration of Secrecy by all Inland Revenue personnel and people associated with the tax world?—which has been imposed for a long time in this country and which is now found in Schedule 1 to the Taxes Management Act 1970. There would have to be a marked change in public attitudes before one went that far.
I suppose that to some extent the reason such a thing is tolerated—or even possibly enjoyed in Sweden—is because of the very long custom of openness of information in that country, which goes back about 225 years. Therefore, they have had time to get used to it. It would, indeed, be a novel suggestion to some of the members of the public here. The United States also gives us an example of something that we might need to bear in mind ourselves when working in this comparatively unexplored field. Even before the Freedom of Information Act was passed in America, in the course of deciding cases the judges had drawn up a list whereby they would permit the establishment, the agencies of Government, to withhold information relating to certain broad classes; it was very much the
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same as was finally incorporated in the exceptions to the Freedom of Information Act.
So there was a background against which the courts were prepared to provide for restrictive interpretations of what could be disclosed. Then the Freedom of Information Act itself was passed with the list of exceptions. It is interesting to note that a learned author, writing very soon after the Act came on to the Statute Book, said that the exception which related to the existence of statutes, which allowed the agencies to withhold information, in his view might prove the largest loophole in the whole scheme. He pointed out that, at that time, there were nearly 100 statutes treating disclosures in force at that time, and that while many of them were specific, other applied only through the discretion of the Government officials. So it turned out in practice.
First, the Government officials interpreted their discretion so that, on the whole, they refused to produce information that was sought and they used their statutory powers to do so; and, secondly, the courts—I think, at least, in part because of their history—tended to uphold this restrictive view. I found, for instance, that a file 23 years old which had at one time been said to have been top secret was simply ruled out by one of the courts on the basis of an affidavit by a Minister that it was still top secret. Equally, there were civil servants who were prepared to withhold files 20 years old relating to violations of Department of Labour Regulations, simply on the grounds that they were investigations into law and order. Those are the sort of things that happen.
So it was that certain amendments had to be made. First of all, the civil service in America had been extremely dilatory, and that was one of the methods whereby they managed to avoid producing the information that was sought. Secondly, they tended to interpret against the right to inspect any discretion that they had. I suppose the reason why the Act fell upon such barren ground was at least in part because of the constitutional arrangement in America whereby there is a specific separation of functions, so that when Congress passed the Act it did not need to have the support of the Executive, or indeed of the courts. It certainly did not have the support of the Executive in 1974

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because they passed one of the amendments in the teeth of the Presidential veto, which is a pretty severe thing to do.
This leads me to the suggestion that if one is liable to have, in a country which I should have supposed is as civilised in these respect as we are, as much obstruction as that, we ought to go carefully before we, in Parliament, simply decide that we should like to legislate. I suggest that before we go very far on the freedom of information road, we ought to take certain steps something like these: first of all, we ought to ask what is the total body of information publicly collected and publicly assembled which might be the subject of disclosure. I do not know whether anybody knows the answer to that, and there is certainly no record that I have been able to find listing such things for the public to consider. Then one would need to decide whether it was the sort of information that would be susceptible of being dealt with generically or only in terms of specific requests for a given document, and, if the latter, how would one catalogue it.
Then, perhaps having discovered what there is available, one ought to assess the impact of the suggestion of making it available upon the Civil Service itself and also upon the public. Here is the area where privacy comes in, because if personal records are to be made available to everybody else as well as to the person concerned, that person may very likely object. Perhaps just as importantly there should be public discussion of the whole idea. This, again, is something that has never taken place. Perhaps there should be issued a Green Paper with fairly specific proposals which people inside and outside Parliament could consider and talk about.
Unless we end up with a broad area of consent about what is to be disclosed and how the exercise is to be carried out, and who is to decide which documents may be seen and which may not, we shall run into difficulties of the same sort that seem to have beset America in the last ten years. That is why I should prefer to see something done now about the Official Secrets Act, Section 2. I should like to know why it is that we cannot have the promised reform and re-enactment in the shape suggested by Lord Franks. Why is it that this Government have had to
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wait such a long time without doing anything? But, that having been done, then I should be happy indeed to go further down the path along the field of information trail to see what would be acceptable. But we do not need to do that before we have the Franks reform.
5.45 p.m.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, we are all indebted to the noble Lord, Lord Wigoder, for having put this subject down for debate today. This has been a most valuable debate. Virtually all those who have spoken have done so with some degree of specialist knowledge, be it the noble Earl, Lord Halsbury, or my noble friend Lord Ritchie-Calder, talking about their experiences in the war, and a number of others who have had a great deal of experience with the professions of journalism or the law.
There has been one common theme running through nearly all the speeches and it is one with which I would in no way dissent, and that is that there has been in this country an altogether unreasonable level and unnecessary degree of secrecy. It is necessary to do something about this. That is a general view on all sides of the House, and it is certainly not one with which I would be disposed to quarrel this evening. As the noble Lord, Lord Wigoder, indicated, this is the second debate on this matter in the last eleven days, because eleven days ago there was a debate in another place on precisely the same subject. Whatever may have or indeed has been said about lack of debate on these particular issues in the past, that charge can hardly be made now, given that situation.
There have been two entirely different strands of thought in this debate. First, there has been the specific question of Section 2 of the Official Secrets Act 1911, and then there is the much wider question of "open government" touched on by the noble Viscount, Lord Colville of Culross, in, if I may say so, a characteristically thoughtful speech, and by a number of my noble friends and noble Lords on other sides of the House.
It is of course Section 2 that we are talking about. I agreed with what was said by the noble Lord, Lord Goodman,

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that it is a question of Section 2 and definitely not a question of Section 1. This country has secrets, and it is desirable to keep them. That being so, there can be no doubt that we require on the Statute Book official secrets legislation that is going to be effective. What we are talking about today is the much narrower question of Section 2, though undoubtedly, as has been made clear by virtually all who have spoken, it is an important matter. Certainly the whole question of Section 2 is a long-standing problem. Governments of all complexions have found its resolution particularly difficult. For the last ten years at least it has been a matter of debate. That being so, we are in no danger of repeating the mistakes made, as the noble Lord, Lord Foot, said, of undue haste in 1911. Whatever else may be said we can hardly have that charge made against us.
As the House will recall, the Fulton Report in 1968 proposed that:
"the Government should set up an inquiry to make recommendations for getting rid of unnecessary secrecy in this country. Clearly, the Official Secrets Act would need to be included in such a review".
That was the statement in the Fulton Report. In April 1971 the then Home Secretary, Mr. Maulding, set up the Franks Committee,
"to review the operation of Section 2 of the Official Secrets Act 1911 and to make recommendations".
That Committee reported in August 1972.
There was hardly a Party element in anything that the noble Viscount, Lord Colville, said, subject to one or two little asides in his peroration. I therefore feel it necessary, as I am sure he would agree it is desirable for me to do, to say that when the present Opposition left office in 1974, despite the fact that these recommendations had been made in August 1972, no proposals had seen the light of day, not was anything said on this particular subject in The Right Approach. Nevertheless, in the debate on 15th June we had an interesting speech by Sir Michael Havers, and certainly we shall take close account of what he has said in our own discussions of this matter.
No similar criticism could be made of the Liberal Party, who have devoted a great deal of time and attention to this matter in the recent past. The noble
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Lord, Lord Wigoder, raised the matter in the debate on the Address last November and indeed has initiated today's debate. If I may say with respect, the speech he made last November and the statement which was subsequently made by the Liberal Party illustrate some of the problems about changing Section 2.
Lord Wigoder will recall that in the debate last November he contemplated criminal sanctions being applied to the unauthorised disclosure of Budget information but not to law and order information; that, broadly speaking, was the thrust of his argument last November. But the Liberal Party, who came out with this very interesting statement of their position on this matter, said they wanted to see the protection of criminal sanctions for law and order information but not for budgetary information: exactly the other way round. This is not simply to make a debating point; it illustrates part of the problem which was referred to in the quotation given by the noble Lord, Lord Windlesham, when he quoted some words of the present Prime Minister on this matter. It is one of great difficulty, if one is talking about invoking a criminal sanction, and it is well that we should recognise that.
I accept at once that the Government have been unable to make progress on this matter as fast as they would wish. That is undoubtedly true. Before going further, I will deal with a few slightly similar criticisms which were made by my noble friends Lord McGregor and Lord Jacobson when they referred to other reports on not unadjacent matters, but first let me say I recognise entirely the strength of Lord Jacobson's view that the Official Secrets Act does not normally worry editors. Though I did not have the good fortune to occupy as senior a position on a newspaper as my noble friend, it is undoubtedly the case that this is not the central issue so far as most editors are concerned in their day-to-day activities, and I very much agree with him.
With his substantial recent experience as chairman of the Royal Commission, Lord McGregor referred to a number of other reports—the Phillimore Committee on Contempt of Court, Faulks and Younger—and I will briefly say what the position is on each. So far as the Phillimore Report on Contempt of Court

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is concerned, as has been pointed out a Green Paper was published in March 1978 and we are now expecting reactions to it. However, the House can have it one way but noble Lords cannot possibly have it both. I think it was Lord Wigoder who said—if it was not Lord Wigoder I apologise, but I suspect he would not hesitate to adopt this argument, if I am misrepresenting him—that once a Government have a fixed position on a matter, it is extremely difficult to get them to change it. That essentially is the argument for publishing Green Papers; it is so that the public should be made aware of what the facts are, the general range of possibilities so far as the Government are concerned, and then the public are in a position to make comments before the Government have reached a settled conclusion. That is exactly what has happened so far as the Phillimore Committee on Contempt of Court is concerned.
I am well aware of this so far as the profession of journalism is concerned. Of course, a large number of journalists would like to have this matter cleared up as speedily as possible, but it seems to me that if the Government had come forward with clear-cut proposals, the other criticism would then have been made: "Why did you not set out the issues in Green Paper form rather than coming to us with a clearly defined position on this particular matter?" That illustrates one of the problems that arise in matters of this kind. The fact is that if you are going to consult people and give them the opportunity to put their case forward, undoubtedly this will be a factor which will delay ultimate decision on policy, and we must recognise that.
Lord WINDLESHAM: My Lords, would the noble Lord not accept that there is a distinction between circumstances, as has applied throughout this whole field; not just on official secrets, but also on the other reports to which he referred? A Departmental Committee has already been into the subject matter exhaustively, people have had an opportunity to give evidence; a report is then published, as the Franks Report was, and a public debate follows on that. So to that extent the public debate can take place on the basis of the report of the Departmental Committee rather than on the basis of a Green Paper.
Lord HARRIS of GREENWICH: My Lords, I am not sure I would altogether agree with the noble Lord on that. After all, as I have indicated, we have had this particular matter before us for some considerable time—this question of Section 2 of the Official Secrets Act—based, as it is, on the report of a very high level committee, and I can say that without fear of contradiction because my right honourable friend the Home Secretary was one of its members. Nevertheless, there is still a substantial area of disagreement, as had been made clear in this debate and in some of the comments which have been made in the last few weeks, so far as the Conservative Party and statements by the Liberal Party are concerned, and a number of people who have spoken outside the ranks of one of the established political Parties. That being so, it seems not unreasonable that in matters of this sort, notwithstanding the fact that there has been a committee of inquiry, the Government should state their position in the form of a Green Paper, making it clear that people have the opportunity to make their position known before the Government come to a settled conclusion on the matter. It seems to me not at all unreasonable to proceed in that way and, as I have indicated, that is what we have done so far as the Phillimore Committee is concerned.
As for Faulks, this matter is still under consideration by my noble and learned friend the Lord Chancellor. As for the Younger Report, the Lindop Committee, as I suspect Lord McGregor is aware, is at the moment considering the question of data protection which arose directly from the report of the Younger Committee, and the Law Commission is now considering the civil law on breach of confidence, which again is a matter of considerable importance, and I hope we shall have their conclusions before long.
I return to the narrower question of the Official Secrets Act, and I will give as briefly as possible a summary of the recent history and the present position. On 22nd November 1976 in a Statement to which the noble Viscount, Lord Colville of Culross, referred, the Home Secretary reported in another place on the conclusions which the Government had reached so far; it was, one might say, a sort of interim Green Paper put in the form of an oral statement. He was pressed,

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following his Statement, to produce a White Paper. In the gracious Speech on the opening of the present Session we said we would introduce legislative proposals for the reform of Section 2 and, as has been made clear many times, the Government have promised a White Paper in the present Session of Parliament, and we shall keep that promise. Lord Wigoder asked whether I could be more precise on the timing of that White Paper. It will be out before the Summer Recess.
So much for the background. I think it is fairly common ground that Section 2 is unsatisfactory because of what Franks, and indeed Lord Wigoder, called its "catch-all quality". As Franks said:
"The section makes no distinction of kind, no distinctions of degree. All information which a Crown servant learns in the course of his duty is 'official' for the purposes of Section 2, whatever its nature, whatever its importance, whatever its original source. A blanket is thrown over everything; nothing escapes".
That is indeed precisely the position. In practice, of course, things do not work quite like that, and Lord Wigoder emphasised that in his speech. A great deal of official information is revealed by the Government without contravening Section 2 in any way because its disclosure is authorised. Section 2 is concerned only with unauthorised disclosure. As Franks explained—
"Actual practice within the Government rests heavily on a doctrine of implied authorisation, flowing from the nature of each Crown Servant's job".
Of course, Government Ministers can sanction their own disclosure. Again, if I may quote—
"Ministers are, in effect, self-authorising. They decide for themselves what to reveal".
As has been made clear in a number of speeches, not least that of the noble Lord, Lord Windlesham, prosecutions can only be brought by or with the consent of the Attorney General, or, in Scotland, the consent of the Lord Advocate. As Franks said, this particular sanction
"is saved from absurdity in operation only by the sparing exercise of the Attorney General's discretion to prosecute",
and, if I may deal with the point raised by the noble Lord, Lord Goodman, no doubt to some extent is affected by jurists' previous decisions in indidual cases.
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The main conclusion reached by the Franks Committee was:
"that the present law is unsatisfactory, and that it should be changed so that criminal sanctions are retained only to protect what is of real importance".
The Committee's first major proposal for improving the law was:
"that Section 2 should be repealed and replaced by narrower and more specific provisons".
The Government accept that conclusion. The Government have also been devoting a great deal of thought to the central issue of which information needs the protection of the criminal law. The Franks Report sets out the Committee's recommendations on this question in some detail but I do not intend this afternoon to pursue any detailed analysis of what the Government have in mind. As I have indicated, the Government's views on this matter will be contained in a White Paper which will be out in the near future.
Briefly, then, Franks recommended that the criminal law should apply to the disclosure of information in a strictly limited number of categories. These, broadly speaking, were foreign affairs, defence and internal security, currency or the reserves, Cabinet documents, law and order (where the information concerned would facilitate crime) and confidences of the citizen. The Government have accepted the general scheme of these particular recommendations but, as my right honourable friend, the Home Secretary said in his Statement on 22nd November 1976, there are two areas in which the Government propose to curtail Franks' recommendations on matters to be protected by the sanction of the criminal law. My right honourable friend stated that the disclosure of information about currency and the reserves should not attract criminal sanctions. He also said that Cabinet documents should be protected by the criminal law only when, by their content and security classification they fall into one of the other categories so protected. The Government intend to stick to these conclusions.
Franks further recommended that, in some of the categories, disclosure of information should attract criminal sanctions only if it satisfied a test of damage to the national interest. The ways in which such tests might be incorporated into any new statutory provisions, and the method of proving in any

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proceedings that the disclosure in question had involved the specified degree of risk to the national interest, are certainly not simple to resolve. For obvious reasons, I do not propose to embark on discussion of this question today. There are equally technical questions relating to the types of defence that should be available to an accused depending on his status and in particular whether or not he is a Crown servant. The Government's conclusions on points such as these will be spelled out in detail in the White Paper and this will provide the basis for further debate on this matter.
I take another point raised by the noble Lord, Lord Windlesham: that is, that the point to which I think he referred as having been made in another place about rather surprising people being in some circumstances required to sign a form that the contents of the Official Secrets Act had been brought to their attention. I am well aware of this point. Only a relatively short time ago I learned that some members of Boards of Visitors at prisons had been required to sign forms of this sort, which seemed wholly unnecessary. This requirement has now been withdrawn. I take the general question and I shall gladly draw the matter to the attention of my right honourable friend who has day-to-day responsibility for the Civil Service Department.
May I now turn to the second element of this debate; that is, open government. The essential point here is that the reform of Section 2, can by its nature, deal only with the limited point of what disclosure of information should be prohibited on pain of criminal sanctions. Once we have got the criminal sanctions for unauthorised disclosure right, we can sensibly turn to consider this wider issue. Before reaching any conclusions on whether a comparable arrangement would be appropriate in this country, I think we should need to look carefully at the experience of other countries whose legislation places an obligation on Government agencies to disclose official information. The noble Lord, Lord Wigoder, and indeed the noble Viscount, Lord Colville of Culross, referred to the American experience of their Freedom of Information Act. I think the noble Lord, Lord Wigoder, urged upon us some degree of caution in approaching this matter because we would
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not necessarily be considering an altogether comparable situation.
I can understand clearly those who favour a Freedom of Information Act. Certainly, in the light of some developments in the United States over the last 10 years or so, one can understand why there has been pressure in Congress to have legislation on these lines. I can understand the people saying, "Why do we not have something on these lines in this country"? We will obviously examine this question in the light of the general debate which will arise following the publication of the White Paper. I hope we will not always assume that other countries necessarily have the perfect answer to this question. My recent experience of visits to the United States, and talking there to representatives of the law enforcement agencies, would indicate that some of the law enforcement agencies undoubtedly have a special interest in defending this debate. One was fairly surprised—and I use rather moderate language—when one discovered what the resource implications were to the Freedom of Information Act legislation.
If I may say this, it is all very well to say, "Let us immediately do something precisely on the same lines as the Americans". But we have to recognise that there will be a public expenditure cost. Will we put this in front of housing expenditure, or education expenditure, or are we cheerfully going to agree to an overall increase in the level of public expenditure? We have to be very clear on this. There is no point in imagining that reforms of this character can be done without any Government expenditure. The expenditure can be quite considerable and we should have that in mind when we discuss this general range of issues.
As I have indicated, the reform of Section 2 is in no way holding up administrative action to make more information available. Indeed some action has already been taken. There has been a steadily increasing flow of consultative papers, including Green Papers. Let me give a few examples. We have had Green Papers on housing, on education in schools, and on British nationality law, a matter now of some considerable interest. That was the situation last year. This year—again to take one example—there has been a Green Paper on energy policy.

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As the noble Lord, Lord Wigoder, said, it was announced in July of last year that it would be the Government's policy in future to publish as much as possible of the factual and analytical material used as a background to major policy studies. The working assumption which is now to be used is that once Ministers have reached their conclusion on a particular major policy study, associated factual and analytical material will be published unless Ministers have good reason for deciding otherwise. That is the current situation. Obviously this was last July. The results of this initiative are naturally only beginning to be seen, but I could reaffirm that we are determined to see that the citizens in our democracy are kept better informed of the reasons behind Government proposals and decisions.
If I may conclude with these words, certainly, as part of our continuing examination of these issues, we shall take account of what has been said in this debate, Many of those who have spoken, as I indicated at the outset of my speech, did so on the basis of a wealth of personal experience in this area. Therefore, I think that this debate has been of great benefit not only to this House, and I hope to a wider public outside, but also to the Government themselves. However, as I indicated, the first and crucial point is to get right an amendment to Section 2 of the 1911 Act. As I have indicated, we shall be publishing our detailed proposals on this in the very near future.
6.12 p.m.
Lord WIGODER: My Lords, it would not be right for me to seek to prolong this debate. We on these Benches regard it as an urgent problem that there should be a statutory right of access to public information. Having listened with great care to the noble Viscount, Lord Colville of Culross, and the noble Lord, Lord Harris of Greenwich, I am left in some doubt as to whether it will be a Conservative Government or a Labour Government that will proceed the more slowly.
I must thank all of your Lordships who have taken part in, and indeed who have stayed to listen to, this debate. I hope and believe it has been a constructive contribution to a problem which I accept
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is not only important but difficult. I believe that I have the opportunity of moving for Papers, but I am told that they are all stamped "Top Secret", and that I should be committing a criminal offence if they came into my possession! In those circumstances, I beg to ask your Lordships' leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

EEC: MONETARY UNION
6.14 p.m.
The Earl of BESSBOROUGH The Earl of BESSBOROUGH rose to ask Her Majesty's Government whether they will give their views on the need for monetary union within the European Community. The noble Earl said: My Lords, let me say at the outset that I am no economist. Some of what I have to say may perhaps be considered simplistic, although I have had some experience in a bank and have tried to master some of the intricacies of this question. Then, as a Member of the European Parliament Budgets Committee, I have also in recent years become accustomed to thinking in terms of units of account and baskets of currencies. However, after five and a half years in that Parliament I think I can say that some of us, who would like to see a greater convergence and integration of policies within the Community, have been much concerned that the people in each Member State should more readily be able to identify themselves with Europe and have more of a sense of belonging to it than they do at present. I feel, in particular, that many British electors do not yet feel that they are Europeans.
Of course, direct elections to the European Parliament will certainly make an important contribution to their sense of involvement as they will have elected specific Members to represent them. Then I think that the introduction of a common passport, on which I hope the Council of Ministers will soon come to agreement, will also help to make the increasing number of travellers conscious of the fact that they are citizens of Europe as well as of their own country, as indeed the present Members of the European Parliament are when showing their Community laisser-passers. A common currency, which I hope will ultimately be attainable, would I believe give an even greater sense of belonging.
It was, therefore, a great disappointment to some of us to learn that the target date for economic and monetary union—the target date of 1980, which was agreed at the 1972 Summit—was abandoned. However, the question was recently revived by Mr. Roy Jenkins, President of the European Commission, and indeed by Vice-President Ortoli, Commissioner responsible for economic affairs, who has spoken about it in somewhat different, perhaps, but none the less realistic terms. These two departures have been widely welcomed in European circles. I think that we should congratulate President Jenkins and Vice-President Ortoli on the work which they have done on this subject.
Mr. Jenkins' re-statement of the arguments is, in my view, largely cogent and convincing, as are the recently published proposals of the European League for Economic Co-operation for a parallel currency. But I feel at the outset that I should summarise some of Mr. Jenkins' arguments briefly, and also add some comments of my own, taking into account particularly the Commission's communication of November last year, on the prospect of economic and monetary union, which is I think beginning to be more widely accepted. I refer particularly to the Action Programme on Convergence, which, I would guess, was largely the work of M. Ortoli.
First, to summarise some of Mr. Jenkins' points, monetary union would favour a more efficient expansion of industry and commerce in Europe. As Mr. Jenkins said, there are few businessmen, whatever their doubts about the political will—and I think that the political will is beginning to develop and the need for this union is more widely recognised—who do not believe that the removal of exchange risks and inflation uncertainties between Member States would have a major confidence effect. For instance, trade can be fostered with greater confidence if British firms can make quotations for business in other Member States so that the currency risk is removed from any given transaction. At the moment firms normally tend to quote in a harder currency. I need hardly tell your Lordships that.
Monetary union would also bring all the advantages to Europe of a major international currency backed by sufficient
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economic diversity and strength to make it an asset and not a burden. The United States, with a weak balance of payments, derives advantages from that position. For the first time Europeans would be freed from excessive dependence upon the dollar, which is still the only effective international medium of exchange, although not an entirely satisfactory one. I know from personal discussions with certain members of OPEC that they might well welcome an alternative currency for quoting oil prices even if, as I am sure they would, they continued using the dollar as well. But I recognise that it may well be wise in the first instance to use the proposed unit of account only within the Community; that is between the European central banks and not, at the outset, outside as well. It is, of course, already being used in respect of the so-called Ortoli loans, and in that sense the Commission's November proposals are already being implemented to some extent.
Then, as Mr. Jenkins says, monetary union would help us in Europe to control inflation and provide us with the means to recover control over prices and demand, which most individual Governments have lost. Such a union could also give a major new stimulus for growth and employment. By lowering barriers and giving a greater sense of assurance and opportunity to our people, it could, in Mr. Jenkins' view and, if I may modestly say so, in mine, constitute the means for the unleashing of energies on a major scale. This is greatly needed today if we are to restore the employment levels and even the confident growth of the' sixties. I agree, too, that monetary union must be combined with moves to promote better regional distribution of work and wealth in Europe through measures to accelerate the flow of private, as well as public, finance. The poorer regions of the Community will need assurance that their economic difficulties will not be aggravated, and the richer regions would know that they would have more stable and secure markets.
Economic and monetary union would also be part of the process in which we seek to balance the need for decisions to be taken at a level higher than the national one, with those in favour of decentralisation. I agree that there is no contradiction here. From long experience of the European Commission I am quite

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certain that it would in this case propose to give the Community only those functions which can best be performed by it. In present circumstances we have to manage a floating rate system with one group of countries grouped around the currency that happens at present to be strongest in the Community. In my view there must now be a different approach.
Bretton Woods may have served well for a generation, but, as Mr. Jenkins said, in 1968 it cracked; in 1971 it broke. Since then there has been no real system. Here, as elsewhere, without a system—and sometimes with one, too—the power, as has been said, goes to the big battalions. But we also in Europe have the big battalions, and we must now organise them. Without such re-ordering of the European monetary system, Member States will continue to be subject to all the short-term hazards.
I have no time this evening to follow all Mr. Jenkins' thoughts, or even all those of M. Ortoli, but I am mainly in agreement with them, and I beieve that the two have now come very close together in what they are proposing to the Council. I hope that those of your Lordships who are interested have read what they have written in their own words, as well as the Commission's official communications.
However, there are one or two further points which I should like to mention, particularly the point that much of the additional expenditure incurred in the Community budget will be redistributed, and as a Member of the Parliament's Budget Committee I should like to stress this point. Indeed, the purpose of this expenditure would be to direct it into the poorer parts of the Community so as to ensure a reasonable share-out of the greatly increased wealth which monetary union should make available as a result of increased investment.
As to the kind of institutions required, there could be various alternatives, including something similar to a European reserve bank, responsible, as in the United States, perhaps to Parliament rather than to the Executive. I should be interested to hear what other speakers have to say on this point. I am very glad that my noble kinsman Lord Cromer is to speak, as well as the noble Lords,
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Lord George-Brown, Lord Roberthall (who is, I think, chairman of a working party on this subject) and Lord Banks; and of course my noble friend Lady Elles. I regret that the noble Lord, Lord Ardwick, is not here, for he is a rapporteur on this subject in the European Parliament. However, I have no doubt that there will be other occasions on which your Lordships will be able to hear him, too.
As I see it, the basic first step should be vastly to strengthen the European Monetary Co-operation Fund by increasing its resources. As has been suggested, Member States would deposit in the Fund a portion of their gold and/or foreign exchange reserves, and against that deposit receive an equivalent amount of units of account. I rather like that concept. This would thus constitute something similar to European special drawing rights. As your Lordships know, there are several different units of account at present used by Community institutions which might be considered in this connection.
I should be grateful for the Government's views, as well as those of other noble Lords, as to whether before or at the same time as increasing the European Monetary Corporation Fund's resources, we should re-enter a larger Snake, or boa, as it has been described, or a Snake within a Snake—a Snake with a kind of double skin. These are thoughts which are being considered at the moment. Personally, I consider that the two steps—increasing the resources of the Fund and the introduction of the new snake—could well be taken simultaneously. That is not only my own view, but also the view of those who can speak much more authoritatively than I on this subject.
The new Snake would, I hope, be followed eventually by fixed parities, and then by a Europa bank note, which in the first instance would give the national currency, as well as the European, on its face. Each country could have its own design of notes in the same way as Bank of England, Bank of Scotland and Bank of Ireland notes; and Belgian and Luxembourg notes differ in design, although their parities are fixed. Therefore in Britain we should continue to have a portrait of the Queen, with a designation of £1 sterling and, underneath, the Europa equivalent.
Travelling, as my friends and I do, almost every week to the Continent, I cannot tell your Lordships how much this would simplify our lives, as well as, much more importantly, the conduct of business generally within the Community. It would also simplify life for millons of our electorates, particularly British tourists who are, as I have said, continually increasing in numbers. One of my colleagues in another place asked me the other day whether I thought that this whole concept of a single currency was a vote-catcher. He rather thought that it was not. I replied that for those increasing numbers in this country who travel on the Continent it could certainly be an electoral winner—not that I should wish in any way to turn the question into a Party political issue.
I know that it took the United States of America a long time to achieve monetary union after the Declaration of Independence. I hope that it will take Western Europe less long, for I believe that Europe now needs it even more urgently than the United States did then. I sincerely hope that the Bremen Summit will take a decisive step towards the creation of a zone of monetary stability in Western Europe. I believe there is some hope that it may.
6.30 p.m.
Lord BANKS: My Lords, the House will be very grateful indeed to the noble Earl, Lord Bessborough, for asking this important Question this evening; and he has chosen a very opportune moment to do so because, as he has himself told us, the whole question has been forced to the front of public attention recently by the speeches of Mr. Roy Jenkins. It was also the subject of Governmental discussion at the EEC Copenhagen summit in April, and aspects of the problem are bound to be discussed, as he has just said, at the Bremen meeting of the EEC Council. Then, ten days after that, there will be the further summit at Bonn of the seven leading industrial nations, when world currency problems are bound to be discussed and when the position of the dollar and the weakness of the dollar owing to the US deficit will undoubtedly be on the agenda.
The noble Earl has given us a clear summary of the views of Mr. Jenkins
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and the case for economic and monetary union as he has presented it—a case which he has presented under the seven heads which the noble Earl elaborated. The argument is that economic and monetary union would provide more efficient expansion of industry and commerce in Europe; bring the advantage to Europe of a major international currency with freedom from excessive dependence on the dollar; help in controlling inflation; provide a major new stimulus for growth and employment; lead to better distribution of wealth because of the shift of resources which would inevitably be a condition of economic and monetary union; allow a balance of decision-making at European national and regional levels; and provide the essential means of underpinning political union. I merely state the headings; the noble Earl, Lord Bessborough, summarised the arguments, and Mr. Jenkins has set them forth in detail.
I can say for myself, for my noble friends on these Benches, for my right honourable and honourable friends in another place and for my Party outside Parliament that we wholeheartedly accept the case as summarised by the noble Earl today for economic and monetary union. In what I now want to say, however, I shall be speaking for only myself, and I do so with diffidence in view of the expert speakers who are to follow; but I should like to discuss for a moment or two what we do once we have accepted the case for economic and monetary union as it has been outlined to us tonight. How do we progress towards it?
Various solutions have been put forward. M. Tindemans, in his report on European Union published a year or two ago, said that the Community should maintain the Snake linking the currencies of some EEC countries; should gradually abolish the remaining obstacles to the free movement of capital between the countries in the Snake; should place obligations on these countries with regard to domestic economic policies; should discuss all decisions with the EEC countries outside the Snake; and, finally, should devise ways of enabling those outside to join, although this was not to be automatic and was to be dealt with case by case.
The House may remember that that gave rise to the objection that this two-tier

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system would mean first-class and second-class members of the Community. M. Tindemans replied very strongly that that was certainly not his intention, but that what he wanted to do was to see that all the nations in the EEC were involved in making the decisions even although not all were initially in the Snake. Nevertheless, I think the objections to the two-tier concept were substantial: that inevitably there would be some feeling of first-class and second-class nations, and that politically, whatever the economic arguments might be, that particular solution was not "on". In the main, what we should have been doing if, in Europe, we had implemented that solution on its own, would simply be, so far as I can see, to institutionalise what already existed, and it would not have provided anything new to solve the problem of how we advance from the present situation to greater integration.
Following the Copenhagen summit of the EEC in April, three schemes appear to have been discussed which were summarised by Melvyn Westlake in The Times on 19th June. One, called the "boa", to which the noble Earl referred, would effectively build on the present snake arrangements but allow some currencies to move within a wider band of fluctuation than others. A second, less rigorous, scheme envisages target zones within which currencies would normally be held. The margin of fluctuation, however, would be quite wide. A third scheme would keep exchange rates within certain margins of the weighted average of all the other currencies in the operation. It seems to me that all these schemes are open to the objection that it is unlikey that the transfer of resources which is necessary to sustain them would be achieved so long as they are purely experimental with an escape route out which can be taken at any time. I should have thought that monetary union must be fixed and permanent. Surely, monetary union has to be entered as we entered the EEC itself—without thought of withdrawal. Otherwise, will not the pressures be too great, so that it will fall apart again, as it has in the past?
Then there are the ideas which might be summed up in the word "convergence". The Commission's report, to which the noble Earl has referred, dated 17th
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November 1977, contains many useful proposals for a five-year plan preparing the way for economic and monetary union. It has proposals with regard to the transfer of resources; proposals with regard to improving the single market; proposals for improving the Customs arrangements; proposals allowing for free movement of capital; proposals for abolishing monetary compensatory amounts and proposals for establishing an energy policy. Also, it proposes a parallel currency for Europe, and we know that recently, as the noble Earl said, the European League for Economic Co-operation have published a most interesting paper on this subject suggesting the creation of such a currency, to be called "Europa". The Federation of Liberal and Democratic Parties of the European Communities, with which we on these Benches are associated, in a recent declaration put forward a similar list of proposals: a pooling of currencies; a parallel currency (although they want to call it a florin); limits on exchange rate variations; a co-ordination of budgets and economic policies, and the hope that the Community would speak with one voice to the rest of the world on monetary matters.
I agree with these proposals in general, put forward by the Commission and by others. I am sure that the Community should attempt to do these things, whether or not we have monetary union. Nevertheless, they are all associated in the way in which they are put forward with the idea of convergence: with the idea of a planned programme leading up to economic and monetary union. It is rather like attempting to transfer men at sea from one warship to another by overhead cable: you have to wait until the ships are moving at the same speed and in the same direction. But I doubt whether the achievement of convergence should be made the condition for monetary union. I doubt whether it should be made the condition: I am not saying it should not be attempted.
Your Lordships may remember that there is a scene in the Gilbert and Sullivan opera, The Pirates of Penzance, where the policemen are being inspected by the major-general before they go off to deal with the pirates. "We go, we go", they sing as they march round the stage, postponing the dreaded encounter. "Yes,

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but you don't go" complains the major-general in exasperation. "We converge, we converge", sing the nations of the EEC as they march round the European stage, to which one is entitled to reply, "Yes, but you don't converge". I wonder whether the economies ever will converge so long as there are variable exchange rates, so long as there are loopholes or so long as there is an escape route out of monetary unity. After all, if we could converge at will, there would surely be no need for economic and monetary union. "Ah, but", it would be said, "we can manage to converge for a very short period of time". Rather like lining up horses at the start of a race. At the crucial psychological moment, we will transfix everybody in a locked embrace—if I may be permitted to choose a metaphor which does not mix very well with my simile.
That argument seems rather fanciful to me. Is it, perhaps, true to say that what is important is what happens after economic and monetary union rather than before? What happens after would certainly have to be very carefully planned: the institutions set up, the method of control clearly determined, the immediate policies prepared, contingencies prepared for, long-term policies developed and the transfer of resources provided for. It would all need very careful planning. It would be a complex and highly sophisticated D-Day operation. I am inclined to think that once that is thoroughly worked out and prepared the Governments of the Nine—if it is nine at that time—must take an unannounced and, in relation to the progress achieved towards convergence, purely arbitrary decision to link. It must be well understood in advance that that is the agreed aim.
It would be a great economic and monetary leap; it would be a great institutional leap; but, above all, it would be a great political leap for it would provide the cement for political union, not merely making it possible but making it essential. The political will would have to be there on the part of both Governments and people. I shall listen with interest to the noble and learned Lord, Lord McCluskey, to assess how much, if any, of that political will the Government have at this moment.
6.43 p.m.
Baroness ELLES: My Lords, my noble friend Lord Bessborough could not have introduced into your Lordships' House a subject of discussion more timely, more appropriate or, indeed, more relevant to our economy as a whole than the question of economic and monetary union within the EEC. I know that noble Lords on these Benches, at any rate, will wish to express their gratitude to him for his most clear exposition of the problems which are involved with this question. We have had over the years a succession of reports, studies and committees which have concentrated on the matter beginning with the Weiner Report in 1971, reviewed by M. Tindemans and his Report, then the All Saints' Manifesto, published, naturally and appropriately, on 1st November 1975 in The Economist, and other committees including, I understand, one recently chaired by my noble friend Lord Cromer from whose experience and opinions we shall be able to benefit this evening. I look forward to hearing him later in the debate.
All these reports have set out considerations involving very many alternative approaches. Perhaps one of the most interesting reports recently has been the up-to-date review which M. Pierre Weiner himself published at the end of 1977 on how he considers the situation on EMU to be to date. I think it makes rewarding reading. But the revival of the subject in the political sphere by Mr. Jenkins recently, and his views which have been ably explained and put forward to your Lordships by my noble friend Lord Bessborough and touched upon by the noble Lord, Lord Banks, ate elements for debate this evening.
The Government have had the benefit of the recent discussions in both Copenhagen and Hamburg, and now, within a few days, there will be discussions both in Bremen and, later, in Bonn. So EMU has become a subject of major political debate at supra-national level. It is therefore right that a subject of such major importance, which could well have considerable effect on the economy, on the financial measures to be taken by the Government and on our political co-operation within the European Community as a whole, should be debated. I think that it is perhaps, in hindsight, a pity that

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this debate has taken the form of an Unstarred Question and has come at the end of the day. It could have been a subject of major debate in this House. Even so, I am grateful to my noble friend for having initiated even an Unstarred Question which he has put to the Government this evening.
It is true that perhaps we should not have had many partakers even in a major debate because of the complexity, the technical aspects; and the fear of having to take any step forward in any political co-operation outside the boundaries of the United Kingdom and of losing some national control over decisions of national interest, has mitigated against any kind of discussion or debate either in Parliament or outside it. EMU remains one of those subjects which you do not talk about too much, and nobody quite knows the answer to it. It is a very complex subject with endless ramifications. We have already had two speeches which have covered different aspects, and undoubtedly we shall be hearing more speeches this evening looking at the problems of EMU from expert viewpoints possibly even unrelated to each other. The one thing that one learns about economists and experts in economics is that the only single factor which unites them is that they always disagree and that probably their forecasts are nearly always wrong. That is probably the one common factor between the economic experts and their forecasts; so that when we discuss a subject like EMU it is largely theoretical and I suppose that anybody's guess is as good as anybody else's.
I think, however, that there are certain facts we can go on. The first is that we have to accept that in the period since the war there has been a radical change both in our own international economic relations and among international economic relations as a whole. That is the first fact that everybody could accept. The bulk of our trade was with the Commonwealth countries, and despite wide geographical disparities, it was conducted in the same currency; that is, the pound sterling. One has only to think of our trade with South Africa, Canada and Australia, and the stability of the currency at the time and the identical unit as a measure of trade were undoubtedly a potent contribution to the
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reliability and trust on which long-term commercial relationships must be based to be successful.
For the United Kingdom, the European Community has become the group of countries with whom we have our largest trading activities. The Community itself as a whole is the world's largest trading bloc and the second strongest economy in the world taken as a whole. There has been another change in international commercial and financial relations to which my noble friend has already referred. That is, that following the collapse of Bretton Woods, we have noticed a steady decline of the rôle of the dollar as a reserve currency for the rest of the world, so that we are now faced with looking for some form of order and regulation which gradually could be recognised as being beneficial to international commercial relations. It is only necessary to think of the devastating effects of wide disparities in the exchange rates of currencies and their fluctuations over short periods and of the effect that they have on the economies of the less developed countries—countries, incidentally, to whose improved economies we are morally committed to contribute. The increasing trade between the European Community and third countries demands some stability for our currency for the benefit of both the European Community and others.
I should like to say a word on the currency in relation to monetary union. It is true European Community trade and finance are dependent on payments in national currencies. They are also subject to disruption by financial difficulties of individual currencies. It is not evident, however, that the adoption of a single currency would necessarily resolve these financial and economic difficulties. I think that this must be said. There may be some obvious benefits from the adoption of a currency such as is proposed possibly to be called a Europa. It must also be said that national economic improvement must depend on economic and fiscal policies which are pursued by a or any national government. The adoption of a single currency across Europe will not resolve even our own economic difficulties or the economic difficulties of any other individual nation, and it must be remembered that international co-operation, however close and

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integrated, is no panacea for bad national government.
The adoption of a single currency has been recommended. But it must also be faced that it would raise concomitant difficulties of a political nature: the establishing, for instance, of a European central bank; the question of the control of the money supply. These are all obvious matters for doubt and discussion and it would need, as the noble Lord, Lord Banks, said, political will of a high order to accept changes in our national financial institutions. Where I believe we are in agreement is on the need for a stabilisation programme, an exchange rate contained within some kind of limits, not necessarily confined, but nevertheless some kind of contained limit and, at the same time, allowing sufficient flexibility for national governments to respond to market forces.
I should be grateful if the noble and learned Lord, when he is replying, will set out the options for the Government before the discussions in Bremen, and what kind of results he is expecting from the summit meeting later on in July. The noble Lord, Lord Banks, has set out the three alternatives which were published in various newspapers, both daily and weekly. I shall therefore not take up the time of your Lordships in repeating those. Nevertheless, these three options are obviously ones for discussion and it would be helpful to the House if we might have some indication of the thinking of the Government on this particular aspect of monetary union. I should like to ask the noble and learned Lord whether he considers that the creation of a monetary zone on the basis of one of the three options would be a contribution to monetary stability and consequently of great benefit to the commercial relations of the United Kingdom and therefore of course to our economy as a whole.
It must surely be clear, however, that no monetary zone will solve our own problems in this country, as I have already indicated earlier, unless we in this country are willing to take the measures necessary to put our own house in order: cuts in public expenditure; reduction of the PSBR; tighter control of the money supply; cuts in taxation. All these are measures which would not only be of benefit to our own economy, but would
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draw our economic policies closer to those being followed by our major partners in the European community.
For myself—speaking purely personally and not on behalf of my Party, though I believe that it is an opinion which is shared by my Party—I do not believe convergence ipso facto to be a cure for our economy. Co-operation in economic affairs with our partners, yes; but convergence at this stage of the game is too early. While not necessarily advocating any form of monetary union, we have to ask, not to propose, that it should not be forgotten that contributions to decision making in co-operation among fellow Member States sharing the same overall objectives implies considerably less interference in our internal affairs than control by the IMF in exchange for massive loans to prop up a declining economy. It has often been said that EMU will lake away sovereignty in our economic affairs, but one must really ask how much sovereignty we have at the moment.
Certain actions have of course already been undertaken to ensure some small measure of unity in the financial and fiscal fields. We only have to think of the changes and modifications in relation to VAT on a Community basis: the formation of the Customs union itself is already a major contribution towards an eventual economic and monetary union, if that is indeed the objective of the Community.
The Commission's document which sets out an action programme contains a whole series of proposals. I do not think that anybody will say that these must be rigidly followed in the time-scale laid down in that programme. This would be unreasonable and nobody would expect that to be accepted by any national government. But I believe that there are some aspects of it which would be welcomed by sectors of our society in the United Kingdom. Traders would welcome increased freedom of movement of goods and services. Farmers would most certainly not object to the disappearance of monetary compensation amounts. Certainly, if a single currency—even for limited use—were to be introduced, it would be of benefit to those carrying on commercial contracts within the European Community and of course, as my noble friend has mentioned, to the many millions

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of tourists both from Britain and from other members of the European Community.
I do not think that this is the time to embark on a major discussion of the benefits or failures of EMU; but I believe that a full debate on this subject would be very welcome, perhaps after the noble and learned Lord has told us what are the views of the Government, and after some considerations have been taken in Bremen and Bonn which, as I have said, will undoubtedly affect the economic and financial policies of this country.
Our own approach to this question—which is a complex one—has been summed up clearly by my right honourable friend Geoffrey Rippon in a speech in October of last year, when he said:
"What is required—and possible—is a series of specific initiatives within the framework of a broadly agreed strategy".
This view, while not accepting ipso facto the rigid timetable set out in the European Community document to which I have already referred, does not close the door to progress in monetary and economic co-operation for mutual benefit of Member States. Indeed, there are some initiatives which have already taken place and others which we would welcome.
It is fair to say that whatever quid pro quo is demanded by this country from other Community countries if we are to accept any creation of a monetary zone creating stability in the European Community, it must also be matched by members of our Government who go to Brussels, who must show that they are prepared to work with other Member States of the Community for the benefit of the Community as a whole. I should like to add my voice to that of my noble friend Lord Bessborough in putting this question to the Government: What is their view of economic and monetary union?
6.58 p.m.
Lord GEORGE-BROWN: My Lords, before I begin my speech, may I say that I find a certain piquancy in the fact that immediately after I sit down I shall be followed by the noble Lord, Lord Balogh, and, after him, the noble Earl, Lord Cromer. That brings back to me some exciting days during the latter part of
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1964, throughout 1965 and early 1966 when I was receiving papers—most of which I found agreeable—from the noble Lord, Lord Balogh, containing economic advice for the carrying forward of our country's affairs.
We spent pretty well every morning in the economic committee of the Cabinet waiting for the Chancellor of those days to come in and tell us what "Rowley" had said: It became a touchstone to open that meeting by saying to the then Chancellor: "Well, what has Rowley said to you today?". I must say I did not find all that "Rowley" then had to say as agreeable as I used to find the advice I received from the noble Lord. I have a feeling that the position may be wholly reversed tonight. It is, as I say, one of the piquant and amusing sides of it.
One needs to find some amusement: I find this discussion—not because of the quality of the speeches—a frightfully depressing occasion. It is depressing because one has only to look round the House to see the vast amount of enthusiasm the subject raises; it is depressing because the Minister who is to reply to us, if he has any distinguished views on Europe at all, could hardly be described as passionately in favour of European integration of any kind. It is depressing because I have a feeling that everybody is feeling a sense of disappointment about the developments in Europe. Yet nobody is willing to confess that it is almost wholly because of us and partly because of our long absence from the European scene—the years from The Hague right down to just a few years ago when we stayed away and things had to develop in ways they would not otherwise have done because we were away, and because of the attitude we have taken there since we joined. We have gone there. We have sent Ministers there who are either openly-confessed non-believers or who, at best, have gone there to make the best of a bad job and do what they could with the details that arose. Therefore, we have produced the situation which we now affect to be disappointed with.
I think the value of the raising of the standard for the development of European economic and monetary union lies in the fact that, because of circumstances which have arisen, we now have the possibility to take some concrete, positive action

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which will make the whole idea of European integration mean something to people in circumstances where they need something to believe in and where there is a need for something to happen. I do not think the attempt to create a political union of Europe—which is my reason for interest—can be made out of an economic approach. I think the attempt to do that is, to some extent, responsible for what has happened in the last few years. I must say, by the way, that if I did not have the conviction that we need politically to integrate our Continent, I would not be involved at all in any of these side issues, as it were. I simply do not understand Ministers and other representatives who bother to go to the European Council of Ministers, to any of the ministerial meetings or to the Parliament, if in fact they do not have the conviction that they wish to create a political union of Europe. That is all it is about and that is the only reason for being there. I have that conviction and I confess it. It is the basis of what I want to say to your Lordships tonight.
The political development of Europe seems to me, therefore, the only valid purpose and the only valid cause for which we should now be fighting, partly because we need to create a European external policy towards the problems of the world. We were talking earlier today about an equally depressing situation; the situation in Central and Southern Africa, where there is no European external effective policy—the French made their own effort—but where there should be a European external policy and activity, because the matter is of critical importance to us.
We need a European external policy, with America, in my opinion, in a situation where it can give no leadership and where it will be unable to give any for quite a while ahead because of its recent past experiences. We need European integration in order to have a defence policy; and it is ridiculous that at the moment there is no European defence policy in a situation in which we are all talking about Russian aggressiveness and about our lack of faith at the moment in the American will or ability—and, of course, the neutron bomb hassle did not encourage any of us to feel very much different. Thirdly, we need European integration in order to get a common economic
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policy. The economic and industrial condition of Europe at the moment surely not only provides the occasion for having our present debate and for Mr Jenkins, Commissioner Ortoli and the others to raise the issue; it provides the reason why our people should be—I admit they are not, but they should be—so concerned about its achievement.
We have all over Europe at the moment—happily, in some countries not nearly as badly as in this country—a state of economic stagnation which, compared with what is going on in other parts of the world, is quite staggeringly depressing. We are thinking and talking about only achieving a growth of 2 per cent. or 3 per cent., and some of us doubt very much whether that will be achieved. This country, at the present rate of progress, will not achieve anything like that and, in a state of economic stagnation and almost nil growth, there is no hope of providing the standard of hung that our people talk about or that our trade union leaders spend their time demanding. All they can achieve is switching it from here to there. There is no way by which you can make a quart of anything, if all you have to fill is a pint pot and you are barely doing that. We have unemployment all over Europe —I forget the figure: somewhere about 9 million, is that right?
Baroness ELLES: My Lords, 6 million
Lord GEORGE-BROWN: My Lords, 6 million throughout Western Europe as a whole. We have a figure here that we do not really understand at all, but it is somewhere around 1½ million to 2 million. We have a trade situation in which we are greatly under pressure and in which we are finding it difficult to get our exports out or to stop other people filling our own market. Therefore, the whole economic situation of our Continent is one of the deepest possible depression and gloom—and with no prospects of coming cut of it.
All this, I think, is concentrating our minds rather wonderfully and is the reason behind the Question which the noble Earl has raised tonight, because possibly this may be just the moment when we could get something moving again. It is, after all, no use Ministers continually badgering Germany to take risks and chances with its own situation. It is no

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use badgering the United States to do things which, if one goes to the United States, one sees all the reasons why they cannot do them. It is no use calling on the Japanese to keep their exports at home. Why the hell should they!
Always, when we are told we should not have so many Japanese cars coming in here because we should be looking after our workers at Leyland, I say to myself: "What about looking after the other workers in this country who want to get a new car? If they cannot get a new car from Leyland, why should they be prevented from getting one from Japan or anywhere else who can supply it?" I never do understand the arguments of the trade unions on this point. These kind of arguments, which are the only ones which are put up, seem to me to have no particular virtue; and as for the general argument on protectionism, despite what the two noble Lords, economists, who are going to follow me later may say, I simply do not understand it. It seems to me quite impossible that there is any future at all for these islands, with this population, with or without any European integration, if there is a protectionist policy seeking to shut out other people's goods and inviting them to take retaliatory action against us.
For progress in any direction to deal with the major matters to which I referred just now, we need the creation of a common economic strategy and a common economic policy for the Continent. I agree entirely with the noble Baroness, and it must be repeated and repeated, that that does not excuse the non-existence of sound economic strategy and sound economic policies here at home. Just as our failure to make use of the domestic market which joining the EEC provided for us, because we could not become efficient enough to make use of it, has meant that the benefits which entry made available have not come to us, so, as the noble Baroness said, if we have a common economic policy and strategy and are in no condition to fulfil our part in it we shall still suffer very much. But that is not to say that there should not be one. Indeed, unless the countries of Europe fit their own economic policies and their own economic actions into a common strategy, then they will simply defeat themselves and export their troubles to each other, and the more successful
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ones at home will be the ones who export most of them to the weaker ones, such as ourselves.
I shall not go into all the questions of the technical monetary arrangements. Incidentally, the monetary arrangements, the common currency which is necessary and essential, are, in my view, only one part of this and are not a replacement for the rest, which basically has to be the economic strategy that we adopt. But on the kind of monetary devices that we use, the kind of arrangements that we make to keep stability between the various currencies, in order to stop us from adding to our other problems the one which flows from currency fluctuations, there are many possibilities, as has been said and as will be said again in a moment. I wish that we could stop using reptilian names by which to describe them; there must be something nicer than "Snakes" and "boa constrictors". But there are many ways by which we can provide for stable relationships between our currencies, and there must be a way—indeed, there is a way—by which we can fit national currencies into a scheme where they can work for quite a long time ahead, side by side with a common currency which can be used for other purposes, and, again, can cut down the instability with outside countries. I shall not go into all those details; it is not a major theme. We can solve the problem if we can get a determined will that the problem exists and must be solved.
I think that for economic improvement in this Contenent we must first look within this Continent. It is an absolute dream to think that there is any way by which we can solve anybody's problems, if we, ourselves, go it alone in the world outside. It is also an absolute dream to think that the Europeans nation, as a whole, could serve in that way. After all, half of our exports in this Continent go to each other, and it seems to me that the European dimension is the one that we must make the most of.
But this need, which is imperative today, will become so much greater when the other three nations which are immediately being considered for membership of the EEC—that is, Greece, Spain and Portugal—themselves join. We shall need to have some way of increasing our total available goods and services if we are to be able to do any element of social readjustment

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which will take care of the poorer of the territories—and the three incoming ones are, after all, among those—without pulling down the rest of us.
The main features were set out earlier, and perhaps I may briefly restate them. We must try to get a single market within Western Europe, with a minimum of harriers to movement of trade, of people and of finance among us. We must have a centralisation of major macro-economic policy decisions within the Continent, just as I have always thought we should have here at home. Alongside those, we must aim, as quickly as possible, for the adoption of a single currency. We must make sure that that currency, and whatever schemes we adopt to back it, are provided with adequate financial resources to enable it to stand up to the pressures. Finally, may I repeat my conviction that it is the political purpose of European integration which really matters; and that that political purpose, in turn, depends upon underpinning with a sound economic base and policy in our Continent to get it.
I believe that at this moment, because of the conditions of Europe, recent sceptics, such as the Chancellor of Germany, and even more, I gather, our own Prime Minister, have been brought to move towards a certain willingness to accept what yesterday they would have rejected in this field of economic integration. It also explains the change which I noted when I was in America only a few weeks ago, in that it is no longer seen as a ganging-up against the United States, which is what they used to say, but is now seen as a way by which Europe can cease being a drain, a heavy stone on progress in the world outside.
The only worry which they raised with me, both the economic people in the present Administration and those I knew in the last Administration when I used to have to deal with them, was whether we ourselves intended to do it. They were no longer telling us that we ought not to and giving us all the arguments against it. There has been a great change, which I believe is due to the economic conditions in the Continent. I believe that if we could produce some belief—what has been called some political will—we could give back to our people some degree of hope, imagination and drive.
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One of the things missing in the wretched state of our nation at the moment is any positive will, belief or drive for anything. Part of the reason is in this place tonight. Part of the reason is with out political Parties. Nobody ever wants to commit any more. There is always the saving, qualifying clause. We are never committed to the actual details, even if we can get so far as to say that something sounds a rather nice, broad idea. We need some political will, some belief, some idealism, if you like.
I believe that it can only be within the terms of our Continent, because there is no other grouping available to us. I believe that a political Europe provides Britain with its role as leader, and provides Europe with its role in the world. I also believe that an integrated economic policy, which will necessarily involve a common currency and an integrated monetary policy, is the essential underpinning for that political Europe which I want to see. If anybody following me does not accept the basic premise then of course there is really no point in the argument. If there are those who do accept the basic premise or pretend to, as do Her Majesty's Government, then they have to come forward and say why my way is the wrong way, and put up some other way of their own.
7.20 p.m.
Lord BALOGH: My Lords, it is always very difficult to follow the noble Lord, Lord George-Brown. I have always admired his capacity for enthusiasm, and he has shown tonight that this capacity has not diminished with age. The noble Earl phrased his Question in a very reticent, restrained and discreet manner, totally in accordance with the traditions of this House. However, he obviously shares the view expressed so forcefully by my old pupil and friend, Roy Jenkins, that the establishment of a complete monetary union in the European Community is likely to help in diminishing unemployment which, as the noble Lord, Lord George-Brown, has just said, is at a frightening level. It results in a loss of something like £600 billion to £700 billion per annum in world production and income.
I must say to your Lordships that the noble Earl could not have bun more

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mistaken. He not only put the cart before the horse but he left them in a position where the cart is liable to roll backwards, crushing, or at least maiming, the horse. Monetary union results from a successful alignment of social, financial and economic policies and, provided that the participant who is entering into it does so from strength rather than weakness, might be beneficial. I do not doubt that; nobody does. For a weaker partner to mingle so intimately with the strong, without the assurance of help in the readjustment which will be periodically required from him, might prove to be fatal. Already the tariff union in manufactures and fisheries as against the violent protectionism of the Common Agricultural Policy has done, and does, enormous harm to this country. Monetary union at the present time would expose us to an extreme degree to the aggressive superiority of German competitive power without any means at all for self-defence. This does not mean that I share the views of conventional economists who for a long time, and with the stout support of The Times and the Economist, held that changes in parity—indeed, the floating of the currency—represented the panacea for all ills.
For us to succeed, as was made quite clear in the excellent debate that we had on the initiative of Professor Lord Baker, we need to find a more resolute attack on the structural shortcomings which have caused our relative decline since at least 1873 and which I tried to put before your Lordships' House last week. To go into the turbulent seas of the coming economic fluctuations in a small and fragile boat, shackled to the Teutonic elephant which obviously repudiates all accommodation, would be folly. It is the refusal of the monetarists to inquire into and take serious note of the realities of our problems, a refusal shared by a large part of our Civil Service and the Bank of England, which is so very disturbing. In 1967 and early 1968, when entry into the Common Market was being deliberated, the official as against the temporary advisers of the then Labour Government wrote their report about the probable consequences of our entry, on the basis of an assumption—I emphasise, assumption—that we were going to enter from strength rather than from weakness. That assumption was not
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proven then and has not been proven to be correct since. We have suffered from a relative decline in manufacturing, almost equal to a de-industrialisation. This has not been mentioned by any of the previous speakers. It is very important.
Nor is the second condition of a successful unification of currencies at all in sight. My right honourable friend the Prime Minister has fought a valiant battle for the enlightenment of the so-called Social Democratic German Chancellor, whose economic knowledge and co-operative spirit can be likened only to the most primitive, classical economist, bent on economic conquest after the failure of his nation to achieve military victory. The devoted effort of the Prime Minister, however excellent in conception, has failed. The Germans refused to initiate a sizeable expansion in their country, yet they suffer from grave unemployment even though they have repatriated hundreds of thousands of so-called guest workers and exported unemployment through a vast excess of exports over imports. Even the German Government's independent experts agreed that such expansion was bitterly needed, but some of our noble colleagues here do not seem to have noticed that. I fear that the guardians of our currency have succumbed to the monetarist tantrums dictated, at their own peril, by the Americans. Instead of analysing the real problems and discussing the modalities and requirements of full employment and full production, the irrelevancies of monetary controls are given official recognition by our Government.
I do not, as I said, believe in the "all-cure" effect of a floating exchange rate or repeated devaluations. This does not mean, however, that I am in favour of a total monetary union in a situation in which the basic trends in the participating countries are not aligned and cannot be aligned. As it is likely that our weakness does not entirely originate in existing costs and prices but results from non-price weaknesses, the irrevocable joining of our currency to that of Germany might have the most catastrophic consequences on the export of capital, general industrial decline and unemployment.
This danger is the greater as we have come to a point at which even the Bank of England, not to say those of the United

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States and Germany, have fallen into the Chicago trap and regard the supply of money, or money stock, as the main, if not decisive or sole criterion of monetary management. This surrender to a witches' brew would, like the insensate policy of credit control through competition (which, having done immense harm to the economy, had to he given up), undoubtedly increase the direct pressures emanating from a common central bank in charge of the common currency and in which the creditors will undoubtedly have a decisive voice. It would, like the colonial currency boards of old, rob us of a vital part of sovereignty even if, joined in the boa-constrictor of the European Snake, or, even more, a common currency area, we surrendered to the untutored dogmatic frenzy of the Germans. This choice of a policy indicator shows not only a regrettable ignorance of the complexity of the monetary system but shackles Governmental action to the market forces.
What are these market forces? Are they the result of basic economic factors? Do they reflect the balancing strength of a well-functioning, self-balancing economic system? Not a bit of it. As one of the monetarists authors, Mr. Congden, admitted in The Times the other day, these market forces represent nothing more than the views of
"many economic commentators principally but not exclusively City financial analysts"
whose ignorance of Keynes and the functioning of a modern monetary system is remarkable. In the inter-war period, their predecessors presided over the decline of Britain. Now their absurd notions about the money supply dominate our continued malaise. This is quite arbitrary and has undergone startling changes and can be influenced by completely irrelevant influences. I will not demonstrate to your Lordships the absurdity of this policy because there is not time.
The statistic of monetary supply or money stock cannot rationally be used for policy making because it disregards the possibility of non-income transactions which are totally excluded from the conventional concept of the velocity of circulation. Sadly enough we are here confronted with phenomena which are self-validating. The insistence of the Chancellor and the Governor on being
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strictly guided by that useless fetish has delivered us to the mercy of the financial analysts and other speculators who merely need to withhold the purchase of Government securities in order to push up the rate of interest and to make illicit profits instead of concentrating on maximising production.
If the danger of these delusions is ugly to contemplate how much more exposed we should be, shackled into monetary union, the central bank of which would necessarily be dominated by the main creditor country, Germany; unwilling to follow the rules of the game enunciated by the British philosopher Hume two centuries ago, which prescribed expansion for the creditor country helping the contraction in the debtor country to restore equilibrium. As the valiant but unsuccessful efforts of the Prime Minister show, even a so-called social democrat German Government is unwilling to give up this indirect dominance over our economic fate. What would happen should the Conservatives win in Germany?
We have already suffered from the invasion of German manufacturers into our markets and the turning of our deficit from a trivial amount in 1970 to over £2 billion last year. If the Americans give in to the false advice delivered by the 19th century notions of the Governor of the German Federal Bank and support the dollar instead of letting it press on German exports, the present economic hesitancy might be turned into a rout through the American defensive monetary restriction. Herr Schmidt, totally ignoring the grave dangers of such a financial crisis, is reported as saying,
"I understand that some participants want to talk about growth and unemployment. I want to talk about a better balance in t le energy equations of the world. I want to talk about a better balance in the network of payments, at least among the rich industrial countries".
This means that he wants us to be dominated by a hopeless quest of shifting the desert Arab surplus from oil exports from country to country, each time adding a further twist to the pressure on employment and production. I very much hope that the Minister replying to this Question will give a firm and unmistakable negative to the suggestion implied by it, and will not contemplate being swallowed either by the monetary union or even a boa constrictor.
7.33 p.m.
The Earl of CROMER: My Lords, I should like to join with the noble Baroness, Lady Elles, in her words of thanks on the timeliness in tabling this Question on the part of the noble Earl, Lord Bessborough. I thought this was starting off rather well because I found myself agreeing with practically every word that the noble Lord, Lord George-Brown, said and right at the beginning of the speech that we have just heard by the noble Lord, Lord Balogh, I thought I caught a sentence that I agreed with, but as his speech continued I became more and more doubtful on that score. We tend to look at things from rather a different point of view.
Although it is late I feel that it is important to look at the question of monetary evolution in the context in which we are living and it seems to me that the politico-social challenge of the next quarter of a century will be that of providing a sufficiency of jobs so that the numbers of unemployed do not rise to intolerable levels. This is a problem that faces the whole of the industrialised world, not just the United Kingdom. It arises in large part from improving technological efficiency and other progress that is coming about at a rapid rate in such things as micro-processors. Here the Prime Minister is to be commended on commissioning those extraordinary brains in the "think tank" to examine this matter. I should be even more impressed if he had commissioned them 18 months ago when the French Government set up a similar study, instead of a week after the French study was reported.
Whether we like it or not, countless existing tasks in many fields, particularly in the clerical fields, are likely to disappear over the next quarter of a century and it will be the clerical field and not just the factory floor where the problems of redundancy will apply. It seems to me that efforts to mitigate this redundancy merely by protecting existing jobs are likely to prove wholly self-defeating and to lead to a rapidly spiralling decline in the standard of living of those countries which choose the road of protectionism rather than the road of moving with the times. It so happens that in this country and in Western Europe, and to a smaller degree in the United States, we have
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currently a high percentage of redundant industry. It is the same throughout most of the Continent, certainly in France, the Benelux countries, Italy, and only to a lesser degree in Germany. These redundant industries will have to be restructured. At the same time, we have too high a proportion of our economies depending upon what one might describe as non-market influenced activities.
Perhaps I may cite the example that in the years 1971 to 1976 public sector employment in Britain grew by 845,000 while manufacturing employment in Britain fell by 774,000. It has been estimated that each 5 per cent. increase in the share of national income going to the non-market sector activities will typically lead to a fall of one per cent. in the rate of growth of the GNP. So the crying need will be for the creation of new jobs deriving from new innovative activities and new industries.
An interesting study recently carried out in the United States on this subject showed that of new jobs created in an area where the study took place some 60 per cent. of the new jobs were created by new industries and only 40 per cent. were created by the growth of existing industries. In America a remarkable job has been done in job creation: some 3.7 million jobs have been created in the last 12 months. In Britain and in France particularly, very many large businesses are by general consent still over-manned.
This points to the urgent need for a higher rate of growth of new firms and new enterprises and the greater part of our energies being applied to the creation of wealth and less to the distribution of wealth. The birth rate of new firms and enterprises in Britain and in the EEC is generally much too low for our future good. But what clearly stands out as being self-evident is that if we are to seek our way through this difficult evolutionary process in the whole of the industrial world especially, then we shall have to do it in co-operation with our EEC partners facing the same problems. To seek solutions on a narrow nation state basis with the devil taking the hindmost can only end in disaster. Hence-and perhaps I have taken rather a long time to get there—there is a powerful need for an EEC integrated payments system to support the enterprising young people

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that I am sure we do not lack. It is the creation of new jobs in new industries and new productive pursuits that will be paramount.
Unfortunately, the current course of deterioration in the world international payments system is leading us in exactly the wrong direction. The decline in the rate of growth of international trade since the demise of Bretton Woods is a very worrying factor in its own right, since so much of the prosperity of the 'sixties was predicated on the growth of world trade, depending at that time very largely on the influence of the International Monetary Fund and the GATT in the removal of barriers to trade and in providing for the greatest freedom of movement of funds. We in this country, depending so heavily on international trading and manufacturing of raw materials imported, are perhaps more vulnerable than most countries to the demise of this old system. Only the other day I was talking to a man who was the buyer of one of our larger milling firms. He told me that today the erratic movement of exchange rates was a far greater hazard to him than the movement of the prices of the commodities that he was dealing in if he was to achieve the lowest possible costs to our consumers and obviously to optimise his own profits.
The disarray in the international payments system is a very serious affair. I think it is fair to claim that the highly volatile exchange rates that we have seen over the last year or so are inevitably leading to higher prices for the consumer as traders are driven to widen their margins to cover the wider risks, and this, of course, in turn feeds inflation. Now we have the looming fear of protectionism. The fact is that the Free World floating of all currencies has not worked out in the way that some thought it would. The random volatility of exchange rates which has built up since 1971 has led to all kinds of arbitrary fluctuations over and above the more fundamental movements between one country and another. Of course, the major influence in this has been the divergent inflation rates in the different countries: United Kingdom manufactured prices rose by 135 per cent., United States prices some 56 per cent. and Swiss prices only 21 per cent. But, even when these fundamental facts are taken into account,
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the highly volatile movements superimposed alongside the basic ones have caused tremendous instability of business.
I believe that what has gone wrong in the international payments system is the lack of any medium of constant value against which relative measurement can be made, and hence the absence of any unit which provides any tolerably constant store of value of monetary wealth. The pound sterling, of course, provided this under the gold standard up to 1914 in its own particular way. In the inter-war years the pound and the dollar provided a barely adequate successor up to 1931 when we went off the gold standard and a great deal of chaos and fluctuation occurred until the tripartite agreement in 1936 restored an element of stability. Post-World War Two, the Bretton Woods system, based on the US dollar, somewhat arbitrarily tied to the value of gold, served the purpose as a pivot for other currencies.
However, then the Americans discovered, as we had previously discovered, and the Germans were wise enough not to put to the test, that policies appropriate to the international reserve states of a national currency did not seem necessarily to meet the internal growth and employment objectives of the Government, and domestic politics naturally held the field. We are thus left with a situation in the international state in which currencies are relatively and randomly changing; against each other and there is no point of reference in the whole system. It is rather like trying to navigate by the sun, the moon and the stars, with each of these points of reference on a random, uncharted, erratic course. There is no single point of reference. In these circumstances a weathervane such as the dollar is no substitute for a compass aligned of a fixed point of reference. We are all floating incontrollably.
There cannot be any question of' any attempt to return to fixed exchange rates, even of the Bretton Woods type. I myself have the gravest possible doubt; about attempts to revive the original larger European currency Snake, although I would not deprecate it for those who happen to be in it at the present time. Similarly, I do not see a great deal of future for the boa. The disparity in inflation rates and the lack of harmonisation in monetary management and in fiscal approach in the

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Member countries, I think, make any kind of development along this road premature. There is, as we have heard from noble Lords, an alternative system of moving towards target zones for exchange rates. This, I think, is innocuous because I have had sufficient experience of public life to know that Governments have no shame in either missing the target or changing the aim if it suits them. So I think this is merely futile, but harmless. The SDR, similarly, suffers from the defect of the instability of its ingredients.
Nonetheless, against the background of my opening words, there is, I think, a crying and urgent need for some stabilising element in the world monetary regime, an element which will command confidence as a measure of store of wealth, something that is trustworthy, available, usable and used by international traders and by the international capital markets of the world, perhaps starting in the Community. Without this, I am convinced, we will not support the investment nor the trade that is needed to provide employment that we know that we need to provide. For the reasons I have stated, no national currency is likely to provide what is necessary in this respect. This is becoming more and more recognised by world traders, and in particular, of course, by the OPEC countries, who do not take great joy in having priced their oil in dollars; nor does that act beneficially to other countries, such as ourselves, whose rate may not improve against the dollar when it should, with the result that we may be paying more for our oil because it is priced in dollars than we would if it was in some more constant unit.
This distortion in the rates between one country and another is a very harmful affair for all the world trading countries. Neither the producer nor the consumer is, I think, well served or well satisfied. It is perhaps not surprising—and I say this with some diffidence with the noble Lord, Lord Cobbold, sitting just in front of me—that finance Ministries and central banks are the most reluctant to admit the inadequacy of a national currency to serve adequately as the ideal medium for international payment and investment as this tends to impugn sovereign monetary virility. There is, of course, an element of irony in this, as it is the policies of the
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central banks in fulfilling the requirements of their Governments that lead to this instability.
There was, of course, a world currency proposed by Lord Keynes at Bretton Woods, shot down by the Americans, and I think any idea of a world currency today is wholly too ambitious. The composition of the IMF is such that agreement would be interminable if not impossible. There is, however, in Europe a realisation that our nation-States are too small, that limitation of movement of funds in order to protect local employment levels creates a downward spiral in activity and employment, and there is in Europe certainly the technical expertise to set up, first, a European unit of account imbued with the essential qualities of constancy and continuing value which could, in due course, develop when the time is ripe, into a European parallel currency to be used alongside existing national currencies. It would be a mistake to try to elide those two processes too closely together. I think that it should be taken step by step. If that is the way that Mr. Jenkins's mind is directed—and I hope that it is, but he has been so far rather unspecific in his ideas—I think that he deserves all our support. That is the only way in which I see practical proposals coming forward.
The other matter that I would suggest to Mr. Jenkins from your Lordships' House with all due diffidence, is that as he will not get ideas welling up on to his desk from Ministries of Finance or central banks, he should convene a small group of experts—and God knows there are plenty of experts in this field!—who could work around him and see whether they can make any real progress, unencumbered by institutionalised postures of Ministries and central banks. I do not see any reason why discussion should be limited, as has been suggested, to the wholly unnatural phenomena such as Snakes bursting out of tunnels, nor even currency baskets containing withering aspirations and writhing currencies. Similarly, crawling pegs and SDRs seem to me signally lacking in market appeal.
Being the heretic that I am in these matters, I would suggest that, in an age when the synthetic is often superior to the traditional material, a synthetic inconvertible gold monetary unit might form the basis that would command respect in

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all the markets of the world and be highly usable. But here we get into the rather deeper esoterics. European monetary rationalisation to my mind is the only road that we can follow if we are to avoid a serious decline in our way of life accompanied by desperately rising unemployment. It is, curiously enough, only the European Community that is in a position to offer this opportunity to the world, as it is only that group of States that is in a position to create with credibility an element of monetary stability that could give light in a world that is steadily growing darker.
7.54 p.m.
Lord MORRIS: My Lords, I believe, with respect, that any discussion of European monetary union must surely begin by looking to it in the context of the European Economic Community as it has unfolded since the Treaty of Rome and the direction in which it is supposed to be heading. Whether the EEC was formed to re-accommodate Western Germany into the international fold; whether to provide balance to the free-world hegemony of the United States of America; whether to strengthen European defence policy with respect to the Socialist Republics; whether to provide the means towards longer term political union, the way it has evolved since 1958 is reasonably clear.
The European Economic Community is first and foremost a customs union—a Zollverein; that is, as I understand it, a group of countries that exchange their manufactured goods free of duty and agree common tariffs for goods traded into the bloc from outside. To that can be added, as adjuncts, the Common Agricultural Policy and the Regional Fund, which fund has grown markedly in importance since 1975. Peripheral to these aspects are a horde of harmonisation issues—exhaust emissions, regulation of lorry drivers' hours et cetera. However, those issues do not change an initial judgment of the European Economic Community over the past 20 years. It is a customs union.
It is at this stage that I must try to make the point that the Zollverein, the German customs union of the 1820s—developed through the century until full German unification in 1871—provides a vital historical example of how, I would
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humbly submit, we should be thinking today. For it is fundamental that we bear in mind that the economic unification of Germany, over some 50 years at a time of sublime trading and industrial simplicity compared to our own times, came about not as a result of the customs union. The customs union was the result of urgent economic necessity. In other words, customs union, and thus monetary union, is a symptom of political will for union and not its cause.
Thus, in the context of what we are discussing today, we must be mindful of the fact that there are still a number of statesmen today—for instance, Mr. Roy Jenkins—who are not totally forgetful of the original concepts of Schuman. The fulcrum of the concept of European monetary union is that, for the European Economic Community to present a true bloc policy to external countries or groups of countries, it must itself show itself to be internally unified. To disbelieve that concept in the European context is to come to a sudden halt.
Noble Lords will recall that a group under Pierre Weiner presented a report on the subject of European monetary union in October 1970 which stated that European monetary union was possible, given the necessary political will and means, and that:
"the principal decisions of economic policy will be taken at Community level".
Furthermore, the report added That:
"A monetary union implies, internally, the total and irreversible convertibility of currencies, the elimination of margins of fluctuation in rates of exchange, the irrevocable fixing of parity ratios and the total liberation of movements of capital". Needless to say, in spite of the affirmation of the idea of common economic and monetary policy at the Paris Conference in 1972, nothing happened as the world moved into a period of acute economic problems. Your Lordships will recall that the establishment of the Snake did not last too long as the French were obliged to move out and the British continued to assert the impossibility of joining.
In 1975, the Marjolin study group reported to the Commission recommending:
"the establishment of a Community system of internal and external monetary policies, accompanied by medium-term guidelines with respect

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to the movement of exchange rates, a broadening of the possibility of borrowing at Community level and the development of a European unit of account determined in relation to a basket of European currencies".
Finally, the much acclaimed but little implemented Tindemans Report of December 1975 reiterated that the Council should:
"revise discussions within the institutions on the manner in which a common economic and monetary policy can be achieved and its role in the European Union".
At least the Tindemans Report added that:
"During this policy discussion no proposals should be set aside a priori".
Tindemans' recommendation was that since it was impossible that all States should reach the same state of harmonisation at the same time:
"those States which are able to progress have a duty to forge ahead. The others had to catch up".
In other words, his recommendation was centred on the consolidation of the Snake, which, as he said,
"lies at the heart of monetary stability".
But, as we know in so many walks of life, union springs from the heart and not from the mind. As with the Zollverein, there must be, from the first, an urgent necessity for union. For example, if one's exchange rate is fixed to the Snake and one's productivity growth is less than that of one's fellow Snake members, one's exports will decline as one's goods are over-priced, with consequent effects on employment. You cannot harmonise where there is no harmony. Hence, the United Kingdom's reluctance to join the Snake and France's exit from it.
However, as noble Lords are aware, full European monetary union would entail one European currency, the supply of which would be regulated by a central European body, like the "Fed" in the United States of America. To this extent individual States would suffer a loss of sovereignty in that individually they could less easily boost their Government spending by deficit finance, in that it was no longer the component Governments which controlled the money supply. Nor could they devalue. The State of Michigan cannot devalue its dollar. It is, of course, important to bear in mind that depriving
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States of the power to control the money supply removes from them the control of the level of economic activity.
European monetary union as proposed under Tindemans, with so much emphasis on a central body laying down restraints on Member countries' internal monetary and budgetary policies, must to some extent transfer sovereignty to that body and attempt to harmonise the policies of countries that are in very different stages of development. To this extent European monetary union is absurd. You cannot put the cart before the horse.
Before even attempting to harmonise the structure of European currencies in the Snake, or to create a new European unit of account, thus giving a man in Brussels the power to lend this new money to, say, Italy and the United Kingdom it is much more important that European Economic Community States should carefully examine why the discord exists. Why does productivity grow so slowly in the United Kingdom? Why does the United Kingdom have such a high rate of inflation? What of differing wage levels? What of deficit financing? Once these problems have been sorted out, then—and only then—can Europe move towards fuller economic and, hence, monetary union. This suggests what can and should be done to facilitate a gradual movement towards fuller economic and thus monetary union.
It must be right that the Europeans Economic Community Member countries do not pursue policies that are openly against the interests of the bloc. A country such as West Germany, enjoying a large external surplus to the detriment of its partners, should be encouraged to pursue measures to inflate its own demand for imports. Countries that are flagrantly incapable of satisfying that demand—like the United Kingdom—should be obliged to pursue policies that improve their level of production for export rather than for internal consumption.
Thus, by planning internal policies together, the EEC could prevent a period where all countries inflated together, causing wild commodity prices and ultimately high domestic inflation. When the movement between Member countries' exchange rates has been reduced to a more stable level, by eliminating differences in productivity growth rates, inflation rates

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and to some extent, taxation—which causes capital flows out of high-taxation countries—then the bloc as a whole can fix its currencies against a new European currency to be used for external trading.
At this moment the liberalisation of internal capital movements would provide a more satisfactory means of allocating resources than any Regional Fund. European monetary union, therefore, in my layman's view, is not even desirable without the provision of the correct groundwork. The Snake is viable as it stands for only a very few countries. The European unit of account could be a dangerously inflationary weapon, providing borrowings for overheated economies. When the European Economic Community countries have harmonised their budgets and have harmonised their taxation and domestic economic policies, then and only then is the time to think in terms of monetary union in full.
8.5 p.m.
Lord ROBERTHALL: My Lords, like most noble Lords who have spoken I welcome the opportunity given to us to debate this important question. As the noble Earl, Lord Bessborough, reminded us, it has come to the fore again recently, so that it has become topical. I am looking forward to hearing what light the noble and learned Lord, Lord McCluskey, will cast on present Government thought. I had hoped to get a little light from the other Front Bench speakers on the subject, but when both the noble Lord, Lord Banks and the noble Baroness, Lady Elles, arrived at what we were going to do, they were careful to say that they were speaking for themselves alone. However, I think that in both cases their counsel could be summed up as "Make haste very, very slowly". I do not think that they would be far out of line even if they were speaking more for themselves.
To me, this is a painful subject. As a convinced supporter of European economic union for a long time, it is painful because we are now further away from monetary union than we have ever been since we began to think about it. As this was to he the crown of the co-operative structure, it is to me—and I am sure to many others—a very melancholy situation.
I ought to begin by informing your Lordships' House that the Sub-Committee
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of the Select Committee on Community Affairs—the Scrutiny Committee—has considered various recent statements in Brussels and elsewhere which deal with the subject. Although I do not feel that its consideration has gone far enough to justify detailed examination and report to the House, it has appointed a working group, of which I am acting as chairman, to follow developments and to report to the Committee as and when any concrete proposals come forward. But as no concrete proposals have yet come forward and the group has, therefore, not had anything to get its teeth into, I must make it clear in the remarks that I shall mike that I am speaking purely for myself and not in any way for this Committee.
I do not want to range as widely as many speakers have. I want to talk manly about what I consider to be the main obstacle before us in this area. I have said that we are further away than we have been since we first began to talk about this We are a good deal further away than vie were in 1958, 20 years ago. At that time, most of the European currencies were becoming convertible. They were all declaring a fixed gold price and, as the noble Earl, Lord Cromer, has reminded t s, it was really a dollar gold parity. So the main requirements for monetary union that exchanges should all be fixed in relation to one another, were already present at that time and any monetary union could only hope to be a smoother and more efficient system than the one which the world used to have before 1914 and to which it was returning after 1958. Broadly speaking, the 1960s were a quite favourable period, and it is not surprising that at the end of that time great hopes were raised in Community circles of moving towards monetary union. I suppose they reached their height in 1972 when the Snake was formed, which was to have a narrower range of fluctuation than the Smithsonian range which had been reached before, when the United States, as we can now see, torpedoed the whole system by cutting the gold/dollar link.
What happened, as several noble Lords have reminded us, is that the United Kingdom only stayed in the Snake for I think seven weeks; they were followed out by Italy in the following year, and France the year after that. Although, the French made an attempt to came back in it did not last long. Now what has

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happened? We just have a small deutschemark group, and even some members of that have changed their parities within it. If you look at what has happened, the outlook, is extremely depressing.
Why is this? It is basically because the world has entered a different phase, in which, rightly or wrongly, it is much more preoccupied with the problems of inflation than with the other problems. Every country is now struggling with inflation, but, as the noble Earl, Lord Cromer, pointed out in his interesting speech, the rates of inflation that countries have are different from one another, and the rates themselves change. In 1976 the German annual rate was about 4 per cent.; the American rate, 7 per cent.; the French about 9 per cent.; we were up near 20 per cent., and the Italians beyond that. The Germans are now down a little, the Americans have gone up a little, and we are down to about 8 per cent., with a great deal of doubt in the minds of a great many people as to whether we are going to stick at that. It is a creditable rate compared to what we had.
Monetary union means that you have all got to be tied closely together. We are all struggling with the problem of inflation and no country has been able to solve it in a satisfactory way, and that is the problem about getting into a monetary union. Just imagine trying to get in when you have these different rates. First, you have to settle your monetary policy, and you cannot do that with a veto. The central bank must have an instruction. It cannot have 12 different countries vetoing it. Suppose that we and the Germans discussed having a monetary union now, with them having 3 per cent. inflation and our rate of inflation at 8 per cent. and rising. Who is going to work whom? They would never settle. The central bank would never get off the ground because it never got any instructions.
Suppose for a moment that they made this great act of will and agreed: then what happens to the Member countries at this point will depend on how their current rate depends on the chosen rate. Suppose we settled for 7 per cent. or 8 per cent. inflation a year, we would put a most violent inflation into the German system. Meanwhile, if we were up where we were a few years ago, we
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would get a violent deflation here. Political problems would arise if we tried to get a monetary union before we had not only control of inflation but control at more or less the same rate. There are all kinds of other things that we have to do in the way of convergence and harmonisation before we can get to a working union. But, dealing with what is to be the crown of the whole business, my view is that we are getting further away now because of this inability, one way or another, to deal with inflation.
I expect that your Lordships are frightfully bored at hearing that there are two main schools on how to deal with this: there is the monetary school, and the incomes policy school. I have long been a supporter of the incomes policy school of thought. I suppose we ought to judge the hope of progress towards monetary union by the progress we arc making in this way. Monetarists ought to be in favour of going to a monetary union as soon as possible, because, as I understand them, they want a particular monetary policy to be adopted willy-nilly, and everybody would have to adjust themselves to it. They are rather like the school of European thought at present which thinks that we should take a great dive forward; do it first, and then deal with the difficulties. I have always thought that you can only control this by some kind of agreement.
Therefore, as I say, I am an incomes policy man. From my point of view, the people who are doing the most to get us towards monetary union are Mr. Callaghan and Mr. Healey, because they are doing their utmost to get us to have a permanent incomes policy. I am not sure what the policy of a possible alternative Government will be on this. I think that the right honourable lady who leads the Opposition is right not to spell out in detail what she is going to do until she comes to power. Some of her pronouncements suggest that she leans rather more towards the monetary school, so I suppose those convinced Europeans who are monetarists would put it the other way round.
As I remarked in passing, a great deal has to be done before we can get to economic and monetary union. Under harmonisation we have to harmonise our tax system; we have made a start with

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VAT; and on convergence, which means convergence of policies, we still have a long way to go. But, in my view, however successful you may become in this field, until you have learned to deal with inflation and have a recipe you can all apply at the same time, you will not be able to get to a monetary union.
8.18 p.m.
Lord KALDOR: My Lords, I have listened to all the speeches in this debate. As I expected, I did not hear any new argument that would have caused me to change my views on the merits of the issue of monetary union which I am going to expound. I was glad to learn, however, that I was not alone in this House, and not even on this side of the House, in thinking such a move would entail great dangers and disadvantages. In particular I was glad to hear the noble Lord, Lord Morris, say many of the things that I would wish to emphasise, and I hope that he will forgive me if I sound somewhat repetitious in what I am going to say. I can think of few things that could be more inimical to the national interest of Britian and, in the longer run, even to the interests of a united and strong Europe, than the creation of a monetary union of Europe in present circumstances—on the lines on which it was recently advocated by my able and misguided friend, Mr. Roy Jenkins.
I cannot help feeling that those, like him, who urge this step have little understanding of the significance of a separate national currency under the direction of a national central bank from the point of view of the power of a country to direct its own affairs in accordance with its own interests—or else they have reached the stage, as I believe at least one noble Lord to whom we listened this evening has reached, that they regard this matter of the national interest as of little importance in itself. To deprive a country of the power to issue currency or create credit is the equivalent in the economic filed of an ultimate surrender of sovereignty in the political field. It is the economic equivalent of surrendering a nation's own defence force in order to merge it into a European defence force with a European commander-in-chief who would not be responsible to any particular Government. In the same way, a European currency would be directed by a
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European governor of a central bank who would not be responsible to the Government or Parliament of any particular Member country.
To create such vast power; without responsibility would in itself be irresponsible to the highest degree and it would be an understatement to say, as my noble friend Lord Balogh said, that creating a single European currency or a single European army in advance of political union would by putting the cart before the horse. Monetary union—I believe this was also said by Lord Morris—is a consequence of political union, but it cannot be its cause. Those who think that be creating complete monetary and economic integration they bring about political union—I feel I detected a note of this in at least one of the speeches in this debate—precisely because they create conditions that make life intolerable without political union, are not only disingenuous but, in my view, are in the highest degree misguided.
It is a naïvety to think that creating the stresses and strains which full economic and monetary integration would involve would strengthen the forces making for political union. They are more likely to have the very opposite effect; they are far more likely to strengthen the forces of disruption, to strengthen the centrifugal forces, which would make the ultimate creation of a united Europe far more difficult or possibly altogether impossible.
It would be a different matter from our own point of view if Britain were the strongest, richest and the economically dominant partner of this union, so that any act of integration—and monetary union is only one particular form of integration—would be bound to enlarge Britain's power and benefit her interests, even when, by so doing, she acted against the interests of the other countries. This may well have been the case in the first part of the 19th century. British industry no doubt benefited greatly from the opening up of Continental markets for British goods after Waterloo. We might have benefited even more if we had then been able to create a full economic union with Europe and impose on all the other European countries our own currency as the sole medium of payment.
But those days are long past. Germany emerged as by far the strongest European

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Power in Europe by the end of the 19th century. She surpassed Britain in her industrial capacity, in trade and in competitive power. After defeat in two world wars, Germany emerged divided into two parts, but the Western part by itself has, in a matter of two decades, achieved the same, or even greater, predominance among the Western European countries than that which imperial Germany possessed before the first world war. I am not saying anything against the Germans; they did it by sheer hard work, by ability and so on; but we are not talking about cricket or about who deserves to win the world cup or to win Wimbledon. We are talking about the life and the future of the nation.
We entered the Common Market with high expectations of mutual benefit in the matter of trade, on account of the disappearance of Customs barriers, in the hope that these benefits would more than offset the cost of membership in terms both of the large net contribution to the Community and of an agricultural policy which admittedly did not suit our interests. Some of us voiced fears at the time that the so-called "dynamic benefits" of membership flowing from the disappearance of Customs barriers would redound, not to our advantage, but to our disadvantage, because they would cause a further loss of market share to our Continental competitors, mainly to Germany but also perhaps to Italy and France, both inside and outside Britain.
The five years that have elapsed since our joining have done nothing to disprove such fears. Our trade balance, particularly the balance in our trade in manufactures, has deteriorated to the tune of £2,000 million a year in relation to the other countries of the Common Market. Although our exports to the other EEC countries have increased, our imports of manufactures have increased far more, and British industry is today in a relatively much weaker position in relation to the other industrial Powers of the EEC than it was when we entered the Community.
Baroness ELLES: My Lords, as the noble Lord mentioned our trade figures with the EEC, may I ask him whether it would not be fair to compare them with the trade figures of the other parts of the world?
Lord KALDOR: Our trade figures with the other parts of the world show in fact a surplus, my Lords. That our industrial position is so much weaker today ill relation to the other Members of the EEC than it was five years ago is best shown by the fact that our manufacturing production is hardly any higher than it was in 1970, whereas in the case of all the other countries, despite the unique, prolonged and deep economic recession that occurred in the course of this decade, current production levels are 20 per cent. to 25 per cent. higher than they were in 1970.
It is difficult to see in what way we should benefit from the creation of a European monetary union, if one ignores such trivia as the convenience of tourists in entering Europe and not worrying about changes in the exchange rates. On the other hand, it is difficult to exaggerate the disadvantages inherent in the loss of power that any sovereign state possesses for the protection of its own interests.
The Earl of BESSBOROUGH: My Lords, on this question of the surrender of sovereignty—because he has started talking about it again—would the noble Lord agree that we have surrendered sovereignty to the IMF?
Lord KALDOR: My Lords, I was just about to expound on this very point if the noble Earl will allow me to do it at rather more length. We shall lose our freedom to pursue independent fiscal and monetary policies and our ability to take specific measures in a national emergency, at least in certain fields such as exchange control, which in national emergencies are very important. We shall lose rights which any sovereign country can claim for the protection of its vital national interests.
It is possible that some people take the view, as perhaps does the noble Earl, who initiated this debate, that our record in the matter of economic management has been such a poor one since the second world war that nothing can he lost by losing this power or handing it over to someone else. This is saying, in fact, that we would be better off without the sovereignty of Parliament, just as it is said of some of the British ex-colonies, justly or unjustly, that they have become

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worse off as a result of gaining their own sovereignty and that they were better off when they had no sovereignty.
This would be a more arguable case if in fact a central authority existed which was capable, through adequate fiscal powers, of enforcing the maintenance of equal standards in different parts of the Community, in the same way as our own Government in Westminster enforces equal standards in different parts of Britain in the matter of equal pensions, of social services, of the Health Service and of educational facilities. Through this, a large and invisible transfer takes place, or rather flows all the time from the richer to the poorer areas of the country. The central Government at Westminster, by collecting taxes on uniform criteria based on income or on expenditure, automatically takes more from the rich areas than from the poor areas, and, by giving the same benefits to the different areas in the field of social and welfare services of all kinds, automatically pays out more to the poorer areas than to the richer areas. An enormous transfer occurs the whole time from one part of the country to another, but it takes place invisibly. It is an automatic consequence of having a central Exchequer through which all money flows, of collecting the money on principles of taxation applied equally to everybody, and of providing services of the same standard irrespective of the riches or poverty of the particular area. The achievement of this end pre-supposes a strong central Government with wide powers of taxation and charged with responsibility not only for matters like defence but also over a large part of the field of social and economic expenditure, which, in the 20th century as against the 19th century, takes up the greatest part of total Government expenditure.
There is no prospect of anything like this emerging in the near future and there is no prospect of having a political union which will have a strong central government of the kind which exists in the United States today but which was not in existence for a long time after the American colonies had become independent. It would he foolish in the extreme, in the absence of such political institutions, to rely on the present methods and organisation of the Community to receive adequate compensation for economic losses in the form of regional subsidies and their like. We
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should in effect become part of the German Lebensraum or Wirtschaftsraum, but we should have no political say, no political power to ensure that our interests were protected in the same way as, for example, they are in the case of a poorer Land within the present German Federal Republic.
Many noble Lords spoke about the regrettable state of economic stagnation in Europe at present and answered without any argument that the creation of a monetary union would be an effective way of overcoming this stagnation. I would say it was just the opposite. As some noble Lords have mentioned, Germany is a country which is in the strongest economic position from the point of view of taking steps to secure a policy of economic expansion. She fps a large surplus in her balance of payments, yet for reasons which we may consider good or bad and which may be due to Philosophy or prejudice—who are we to teach the Germans economics, or how they should conduct their policy when they have done so much better than we have? —they are not prepared to take steps to ensure full employment for their own citizens. How, therefore, can we expect them—if we put them in the dominant position in which they would be bound to be put through the very fact of a monetary and economic union—to take more effective steps than the Government in Westminster do to protect the economic livelihood of the people of these Islands? The people of these Islands, particularly those in the outlying areas such as the North of England or Scotland, are already in a very poor condition. Any country which maintains achronic surplus in her balance of payments does in fact follow what used to be called before the war a "beggar-my-neighbour" economic policy. It gains employment, it gains prosperity, it gains wealth, at the expense of other people. It draws wealth to itself. It pursues therefore a form of predatory behaviour and any step towards integration enlarges the scope and importance of this type of behaviour.
As I said, without the monetary union the Germans have succeeded in maintaining a large surplus and have thereby increased employment within their borders and increased production to a level which is far higher than that of the less, fortunate partners of the Common Market. This process would be greatly enhanced, not diminished, if we followed the present

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customs union with more fundamental steps towards full economic and monetary integration.
Since the war, we have taken many foolish decisions from the point of view of our national interest. In the light of all this, I would not by any means rule out our taking even more foolish decisions in the future. Fortunately, not all the members of the European Community are equally foolish. I must confess that I would not trust my own Government not to resist the temptations of the German Government, and not to accept some modest step which gradually eased the way into something which is completely contrary to our national interest.
However, I would far rather trust other people such as the French or the Italians to look after their interests. Italy benefited enormously by having her currency tied to the dollar at a time when we had foolishly cut loose from the dollar in the mistaken belief that this would improve out economic situation. I cannot see Italy lightly entering into any such step. Despite the declarations of some of the French leaders in the past, I cannot see France doing so. France's remarkable economic prosperity since the Second World War could certainly not have been realised without frequent devaluations of the French franc in relation to the German mark. I think that since the 1950s the franc has been devalued in terms of the German mark at least eight times. The franc value of the mark is today two and a half times what it was in the 1950s. The noble Lord, Lord Roberthall, referred to this when he said that if different inflation rates persisted—and certainly differences in inflation rates have persisted for 20 or 30 years between France and Germany—then monetary union can spell disaster. I cannot see these countries lightly entering into commitments which would so seriously compromise their ability to pursue the best economic policies from their own point of view.
Some people, including I fear, some noble Lords in this House, have become so European that they have ceased to be patriots. However, I was relieved from the tone of the remarks of the noble Baroness, Lady Elles, that this view is not
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shared by her. And though as she said she spoke only for herself, possibly this is not a policy that animates her Party. I think that is far from true of the people of Britain at large.
8.45 p.m.
The SOLICITOR-GENERAL FOR SCOTLAND (Lord McCluskey): My Lords, may I begin by joining other noble Lords in thanking the noble Earl, Lord Bessborough, for raising this matter and giving the House the opportunity to discuss it. May I offer him my personal thanks for his kindness in giving me advance notice of what he intended to say in order that I might better prepare my reply to this debate. Other noble Lords, in addressing themselves to this Question, have considerably widened the debate. The noble Lord, Lord George-Brown, did so after complaining how thinly attended was the House. One notable Lord has left. The attendance is thinner because it is the noble Lord, Lord George-Brown, himself who has left.
I do not propose to follow him into the general debate about the European Economic Community. Nor dare I enter the arguments to which we have just listened, whether about the position of the cart and the horse or about monetarism, or about the other matters that have been spoken about with such expertise and differences by the various noble Lords. That is not because I disagree with all the points that have been made. I could pick out a number of points from the speech of the noble Lord, Lord Morris, my noble friend Lord Kaldor and the noble Lord, Lord Roberthall, with which I would agree. However, I do not myself want to widen the debate. I hope that your Lordships will understand if I attempt to take the question narrowly and therefore not indicate particular points of difference from what has been said.
As has been pointed out in this debate, discussion of economic and monetary union has a long history in the European Community although it is not referred to in the Treaty of Rome itself. It is indeed a later idea. In 1969 the Summit Meeting of the original Six at The Hague announced that plans would be worked out
"with a view to the creation of an economic and monetary union".

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By 1971 the European Council resolved to make the Community a single economy by 1980 with, in effect, a single currency and a single authority for domestic and external monetary management. That is a very far-reaching concept and it promotes diametrically different reactions, as we have seen in the course of this debate. A common Community currency would mean the elimination of exchange rate changes between member countries. A central monetary authority for the Community would remove much of the freedom that Member States have at the moment to determine their own fiscal policy, as the noble Lord, Lord Kaldor, has just been reminding us. It would, in short, involve very substantial transfers of economic sovereignty to the Community.
Since 1971 world conditions have changed radically. In particular the strong inflationary pressures of the 1970s, the upsurge in commodity prices, and the abrupt oil price rise at the end of 1973, have all had profound effects. The countries developed different policies in reaction to the crisis, and progress towards economic and monetary union was effectively halted. I would remind your Lordships of the White Paper on renegotiation in 1975 which stated bluntly, but I believe truthfully, that:
"events have shown that the programme of movement towards full economic and monetary union by 1980 was over-ambitious and unattainable".
This does not mean that the objective of economic and monetary union has been formally abandoned. Indeed, as late as December 1977 the European Council reaffirmed its attachment to the objective of economic and monetary union. But all Member States now accept that it has become a more distant goal.
Against this background the Community has had to try to combat the recession of the middle 1970s with more pragmatic and less idealistic policies. The Commission is now broadly in accord with this way of approaching problems and looks at economic and monetary union less as a matter of ideology than in terms of the contribution it can make to solving the present problems of unemployment, low growth and inflation in the Community. This line of argument is shown in the most recent Commission paper (to which reference has already
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been made), on the prospect of economic and monetary union which was presented to the European Council last December (COM(77)620). This paper laid emphasis on a gradual approach to economic and monetary union, an important part of which was to make progress towards the convergence of economic performance in Europe. At the same time, however, the President of the Commission, Mr. Jenkins, was advocating in his speeches what might perhaps be described as a more idealistic approach. His arguments h we been summarised by the noble Earl, Lord Bessborough, but I think that it is important to reiterate that Mr. Jenkins' bold proposals would involve very far-reaching transfers of economic sovereignty. The Government feel that the Commission are right in arguing in the paper to which I have referred that the Community is not yet politically prepared For these transfers, and that a gradual move towards economic and monetary union is therefore preferable. Her Majesty's Government, and other Governments in the Community, have been readier to build on the essentially practical approach of the Commission to stress the importance of ensuring, by concerted action among the Member States, that the economies of the EEC should grow more rapidly And more harmoniously.
Several noble Lords have, in their speeches, recognised the absolute importance of such harmony. The Prime Minister and the Chancellor of the Exchequer have been advocating, and working for, policies of concerted action for growth to be worked out at the European Summit in Bremen, and the World Economic Summit in Bonn in July. Her Majesty's Government very much hope that these meetings will have positive results.
I have explained to your Lordships that the Government have in recent weeks and months thought it best to lay the greatest emphasis on co-operation among the Member countries of the Comrmnity to secure growth and to reduce unemployment. In the Government's view, the best way of promoting the European idea is to convince the peoples of the Community that Member Governments concentrate and co-operate on real issues, and that membership is going to promote welfare.

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It is certainly true, as noble Lords have suggested, that the instability of currencies can be inimical to confidence among businessmen. That was graphically illustrated by the noble Earl, Lord Cromer. Instability of currencies can also stand in the way of the kind of growth we want to see. This is one reason why there has been renewed interest in the possibility of new currency arrangements in Europe. Your Lordships will all have seen—and some have mentioned—quite extensive Press comment about this. The noble Baroness, Lady Elles, asked me to say something about this. But your Lordships will not, I hope, press me for a detailed or definitive statement. It would be premature and necessarily incomplete.
This matter was one of those discussed at a meeting of the EEC's Finance Council in Luxembourg a week ago. My right honourable friend the Chancellor of the Exchequer was present, and there was a valuable exchange of views; not about the mechanics for a scheme, but about the principles on which a new scheme would have to be based if it were to be durable, and to serve the general interest. The Finance Ministers were generally agreed, for example, that a durable system would need to be founded on continued progress towards the convergence of economic performance. This is in line with the approach that I was mentioning earlier in my speech. A report of the Finance Council's discussion will be placed before the meeting of the European Council—the so-called European Summit—at Bremen next week. What the outcome of that further discussion may be, we must wait and see; but I can assure your Lordships that the discussion so far has been interesting and constructive, and I can at least venture to say that it will continue.
I was asked by the noble Baroness about the opportunities for debate. It may be that after the Bremen or the Bonn discussions noble Lords will, if they wish, find an opportunity to debate what emerges; but there will have to be much more discussion of, and indeed study of, the detailed mechanisms before the question arises of a choice of the precise way to seek and achieve currency stability in Europe—
Baroness ELLES: My Lords, will the noble and learned Lord allow me to intervene? Is any consideration being given to the publishing of some form of Green Paper or other Government document, which would set out the benefits or the alternatives on EMU? —because this is obviously a vital subject which will have to be discussed by the public at some time.
Lord McCLUSKEY: My Lords, I cannot positively say that that will be done, but certainly I take that as a suggestion from the noble Baroness, and I shall draw the attention of my right honourable friends to it.
We accept what several noble Lords have stressed; namely, that currency stability is obviously desirable, and would lead to the benefit of the economy and of trade. Indeed, it is for that very reason that Ministers are discussing it.
Reference was made to the role of the European Monetary Co-operation Fund. This is at present only embryonic, and carries out certain functions relating to the working of the present European currency margins agreement—the so-called Snake. If Community Governments so wished, this fund could be developed and built upon in quite ambitious ways, with functions relating to intervention in the foreign exchange markets, and to the provision and receipt of credit. I cannot say whether the European Council will wish further studies to be carried out of these quite complex and far-reaching ideas, but the Government would certainly be ready to join such further examination.
I do not know what comfort the noble Lord, Lord Banks, can take from the little that I have to say—perhaps not very much if he is looking for a resounding declaration of immediate and overriding political will. But, of course, I do not offer the resounding negative which my noble friend Lord Balogh sought. I can say that we agree that some progress on currency arrangements can take place before convergence is complete.
To summarise, I should say that the Government wish to continue to approach the question of achieving economic and monetary union in a pragmatic way with the fullest regard to what is practicable in a reasonable time-scale, and what is

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most helpful to the people of the Community. I can assure the noble Lord, Lord Roberthall, that the Government are alert to the significance of the present disparities in economic performance, including inflation, to which he drew our attention. The Government's approach has led to emphasis on co-operation at the levels of economic policy making, and this is, we believe, the crucial element in the way forward in present circumstances. But alongside economic convergence, so long as this is clearly seen to be something which Governments are joining together to work for as a continuing process, it is also right that the Community should be discussing whether there could be durable and sustainable currency arrangements within the Community, which many would see as further evidence of progress towards economic and monetary union.

  SCOTLAND: GOVERNMENT EXPENDITURE AND REVENUE
  SCOTLAND: GOVERNMENT EXPENDITURE AND REVENUE