Sitting of 16 March 1978

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

PRIVATE BUSINESS
BRITISH RAILWAYS BILL (By Order)
Read a Second time and committed.

ORAL ANSWERS TO QUESTIONS
  AGRICULTURE, FISHERIES AND FOOD

    Council of Fisheries Ministers
    Mr. Muddasked the Minister of Agriculture, Fisheries and Food when he will next attend a meeting of the Council of Fisheries Ministers of the EEC.
    Mr. Hicksasked the Minister of Agriculture, Fisheries and Food when he will next attend a meeting of the Council of Fisheries Ministers of the European Economic Community.
    The Minister of Agriculture, Fisheries and Food (Mr. John Silkin): There are at present no meetings scheduled.
    Mr. Mudd: When the right hon. Gentleman meets his European colleagues and they discuss matters of conservation, I hope that he will impress upon them the early warning fears expressed by Cornish fishermen of the classic signs of over-fishing of the Cornish mackerel stock? Will he discuss with his European colleagues the possibility of establishing a six-mile zone wherein no vessel in excess of 80 feet shall fish?
    Mr. Silkin: In my view, the whole of the mackerel fishery needs careful watching. Our industry went into something of a self-denying ordinance. As the hon. Gentleman is aware, in this instance we are in the fortunate circumstance of hav-
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    ing no historic rights within the 12-mile zone. I agree that a great deal of thought and care is needed. It is one of the great potential fishery stocks of our country.
    Mr. Hicks: Will the right hon. Gentleman give an assurance to the House that when he lays the additional conservation measures in respect of the South-West mackerel stock he will take into account the needs and requirements of the smaller inshore fisherman based in South-West counties?
    Mr. Silkin: That is an extremely important factor. For that reason, there have been consultations between my officials and the various fishing interests concerned with mackerel, especially the small inshore fishermen but including the larger ones. We hoped to get an all-industry view on the whole matter. That has presented some difficulties, because there are differences of view. However, I think that we may be able to arrive at some sort of modus vivendi. I hope that that will be achieved relatively soon.
    Mr. Robert Hughes: What are my right hon. Friend's minimum requirements for the conclusion of a satisfactory fishing regime? Is there any indication how far, if at all, our European partners are prepared to move towards meeting those requirements?
    Mr. Silkin: In the absence of scheduled fisheries councils, it may be apposite to restate the minimum demands. The demands are an exclusive zone between 0 to 12 miles and a dominant preference between 12 miles to 50 miles. That is a dominant preference in two respects. First, there must be effort limitation, as quotas by themselves are not sufficient. Secondly, it must be dominant in the sense that it would be the United Kingdom that would get the dominant share of the growth. Finally, there must be a proper and more than adequate scientific basis of conservation, which at the moment, in my view, has not yet been put forward by the Commission or any body else apart from ourselves. How far are the other countries prepared to move? I get the signs that there are movements on the part of the other eight. There is no movement on my side on these minimum requirements.
    Mr. Powell: While I am aware that the right hon. Gentleman has much at

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    heart the interests of the Mourne Fishery in the coming season, especially with reference to the skiff fishermen, may I ask whether he will give an indication when he expects that an announcement can be made about what they may look forward to this year?
    Mr. Silkin: I am much aware of that difficulty and the difficulty of other small herring fishermen around the shores of the United Kingdom. I believe that the season starts in June. I hope that before then we shall be in a position to give an answer, which, personally, I should like to be a satisfactory one. However, I think that that must not be—I think that the right hon. Gentleman will follow me in this respect—at the price of overall lack of conservation of the herring stock.
    Mr. Watt: Is the right hon. Gentleman aware of a proposal now being bandied about in the EEC Commission that there should be a dominant preference given to those boats that fish within 4½ hours' steaming time of their ports? If he is aware of that, what is the Government's reaction? If he is not aware of it, what would his reaction be to such a proposal?
    Mr. Silkin: I could give my reaction to a whole lot of matters of which I was totally unaware, but I do not think that the House would be patient enough to listen to me on them.
    I am not aware of such a proposal. If, as would seem to me at first sight, it does not meet the clear definition of "dominant preference" that I have given, I think that the hon. Gentleman knows what my view would be.
    Mr. Skinner: Will my right hon. Friend tell the other Ministers that, apart from the horrifying disaster that the fishing industry has suffered as a result of our entry into the Common Market, the Cambridge Group report, which came out today, also states that 150,000 jobs have been lost, some in fishing, as a result of our entry, that food prices are up at least by half-a-crown in the pound and that £1,000 million a year is the total cost of our entry, some of that arising in respect of fishing matters as well?
    Mr. Silkin: As always, I congratulate my hon. Friend on his ingenuity in introducing an all-embracing question into this rather narrow one. I certainly promise
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    to study carefully the conclusions of Mr. Wynne Godley and his team. I have no doubt that in due course I may even tell the House what my conclusions are on those conclusions.
    Mr. Penhaligon: Getting back to the question of Cornish mackerel, will the right hon. Gentleman tell the House by what percentage the annual catch in the West County has been reduced by the conservation measures taken so far? Is he aware that I cannot name a single West Country fisherman who believes that the measures that have been taken are sufficient to preserve the Cornish mackerel stock on a long-term basis?
    Mr. Silkin: It is difficult to give the actual percentage off the cuff, and I should probably be wrong if I did. However, I shall write to the hon. Gentleman with what information I have. He must appreciate that the cut in mackerel fishing is the result of the self-denying ordinance by the industry of which I spoke. I hope and believe that the industry will have kept to it and that there will be some tangible result.
    Several Hon. Members—
    Mr. Speaker: Order. I called representatives of five of the different parties on that Question. I shall not be able to do the same on every Question. We shall now move more quickly.

    Vegetable Growers (Returns)
    Mr. Hastingsasked the Minister of Agriculture, Fisheries and Food whether he is satisfied that the return to growers of vegetable crops for the last five years has proved economic.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang): The increase in the area under vegetables over the last five years suggests that growers find returns from vegetable production satisfactory.
    Mr. Hastings: Is the Minister aware that the price of potatoes this season has been wholly uneconomic, that the prices of summer vegetables and sprouts have been no more than the level of 1973–74, although since then wages have doubled and the prices of fertiliser and packaging materials have more than doubled? Is he further aware that crops are being

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    ploughed in and men are being laid off? Will he assure the House that the serious losses in this sector of the horticulture industry will properly be taken into account at the next price review?
    Mr. Strang: I am surprised that the hon. Gentleman should seek to make an issue of potato prices this year. Some potato producers, particularly those in the North, did exceptionally well during the last two years as a result of the abnormally high potato prices. The hon. Gentleman should appreciate that potato prices in the United Kingdom have been kept well above Continental levels as a result of our effective system of support.
    Miss Maynard: In view of the comments made by the hon. Member for Mid-Bedfordshire (Mr. Hastings), will my hon. Friend list the number of counties in which wages have doubled?
    Mr. Strang: My hon. Friend has raised an interesting point. She has made this point time and again. I agree that there is no evidence that high farm prices lead farmers to pay higher wages to their workers. Higher wages will be achieved only by the efforts of the union of which my hon. Friend is a member.

    Potato Marketing Board
    Mr. Wigginasked the Minister of Agriculture, Fisheries and Food when he will next meet the Chairman of the Potato Marketing Board.
    The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. E. S. Bishop): My right hon. Friend met the Chairman of the Potato Marketing Board, the Deputy President of the National Farmers Union and other representatives of potato producers on 10th March to discuss the marketing and support arrangements in 1978–79 and subsequent seasons. Because of the uncertainties about the timing and content of an EEC regime and the future of the import ban on maincrop potatoes, we do not expect to be able to announce detailed arrangements for the 1978–79 marketing season until the summer.
    Mr. Wiggin: The Minister of State answers this Question in the same way every time that I ask it. Is it not about time that he proposed a more definitive solution, or could it be that the Gov-
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    ernment, with their usual dexterity, will arrange to have no chips with no fish?
    Mr. Bishop: The hon. Gentleman will realise that within the Community we have been pressing for answers to some of these questions. The fact remains that we have given assurances about the guarantee. The Potato Marketing Board has issued quotas to producers for the 1978 crop in line with the target determined as a guide to the planted area which, given normal yields, is expected to equate supply to requirements. We are pressing for an early determination of these matters.
    Mr. Jopling: Will the Minister of State understand that the Government's attitude to this problem is totally unsatisfactory and that if, because of lack of leadership and of assurances, we find ourselves with a shortage of potatoes and with high prices, the blame will be entirely at the Government's door?
    Mr. Bishop: The hon. Gentleman cannot ignore the fact that there is the possibility of an EEC regime. We have been trying to get that determined as soon as possible. There are also uncertainties about the import ban. The Commission has made some observations on this matter.

    Pigs
    Mr. Temple-Morrisasked the Minister of Agriculture, Fisheries and Food what is the current size of the national pig breeding herd.
    Mr. Bishop: The most recent United Kingdom census for which results are available was taken in December 1977, when the number of sows and gilts in pig was 819,000 head.
    Mr. Temple-Morris: Does the Minister agree that the breeding herd, particularly gilts—this is a bad omen for the future—is down and that the pig farmer, of all farmers, is having a difficult time? As the Danes are publicly saying that they want a larger share of the British market—we know the financial advantages that they have—and bearing in mind that this affects the whole industry, from the producer right through to the retailer, what has the Minister to say about the future of the pig farmer and the pig industry?
    Mr. Skinner: Get out of the Market.
    Mr. Bishop: The fall in the breeding herd has been slightly less than was predicted. If it had not been for the temporary subsidy of £17 million, which my right hon. Friend brought in until he was required to change the policy, the situation would have been much worse. We have been pressing consistently for the Community to look into the revaluation of the MCAs. We think that is the best way to proceed.
    Mr. Corbett: Given that confidence is a key factor in trying to achieve a recovery in the size of the pig herd, is the Minister getting any better sense out of the Common Market over the recalculation rather than the revaluation of the MCAs? Surely that is the key to putting the problem right.
    Mr. Bishop: My hon. Friend is right. He will know of the steps taken by my right hon. Friend in this direction.
    Mr. Peyton: Will the Minister of State urge his right hon. Friend to give stronger support to the French and Italian Ministers on this question of recalculating the MCAs, because it is crucial? How does he face the prospect that, by the end of this year, the Danes will have taken over about 48 per cent. of our market?
    Mr. Bishop: The right hon. Gentleman has got it the wrong way round. My right hon. Friend has been pressing consistently for over a year to get a resolution on the MCAs. That is now supported by the French. We appreciate this encouragement.
    Mr. Peyton: Will the Minister answer the question about the Danish share of the market? Does he agree that by the end of the year the Danes are likely to have 48 per cent. of the bacon market here?
    Mr. Bishop: I should not like to make any predictions on this matter. The right hon. Gentleman will appreciate the steps taken so far by my right hon. Friend and realise the slight improvement because of the change in the green pound. These are matters of consumer choice anyway.

    Sugar Beet (Exports)
    Mr. Loydenasked the Minister of Agriculture, Fisheries and Food how
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    much beet was exported from the European Economic Community during 1976–7.
    Mr. Bishop: Community exports of sugar beet to third countries in 1975–76 were 11,000 tonnes. The corresponding figure for 1976–77 is not yet available from the Community. Community exports of sugar—predominantly from beet—to third countries in 1976–77 were about 1,600,000 tonnes of white sugar and 65,000 tonnes of raw.
    Mr. Loyden: Is my right hon. Friend aware of the concern that is felt in the sugar refining industry in the United Kingdom and is he satisfied that the present arrangements will secure the jobs of workers in that industry? For instance, in the Tate and Lyle set-up, workers are concerned that Tate and Lyle is prepared to advance its plans on reorganisation, with a further loss of jobs. Is this not due to the amount of sugar being imported?
    Mr. Bishop: I am aware of the concern of my hon. Friend and the approaches that he has made to my right hon. Friend with others on this matter. I am aware that the Tate and Lyle company has raised this possibility in local negotiations with its work force. The plan for the reorganisation of the industry was agreed, as my hon. Friend knows, after intensive discussions between the Government, the company and the workers The company undertook that provided its long-term supplies of sugar from the ACP countries continued at the current levels, it would not contract capacity or employment in the port refineries—except by agreements with the trade unions—at a greater rate than was envisaged in the plan. My right hon. Friend the Minister of Agriculture, Fisheries and Food will be following the progress of those discussions with very close interest.
    Mr. Marten: What effect have those exports of sugar from the Community had on the world market price? What effect has that had, in turn, on the export earnings of the developing countries which produce sugar?
    Mr. Bishop: The relevance of the question put by my hon. Friend is the concern that there should be adequate supplies of sugar in this country for processing. The hon. Member will be

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    aware that Tate and Lyle has secured 150,000 tonnes per annum of French raw sugar. The Lomé Agreement has had its effect. The total Community exports, excluding re-exports, were about 1,600,000 tonnes of white sugar and 65,000 tonnes of raw sugar, as I mentioned.
    Mr. John Evans: Does my right hon. Friend accept that the present surplus of EEC beet sugar constitutes a very grave threat to the ACP countries' future exports of cane sugar to this country and thereby a very great threat to the continued employment of cane sugar workers? Will he urge his right hon. Ministers to accept a considerable cutback in beet sugar quotas throughout the Community?
    Mr. Bishop: We are aware of the problem stated by my hon. Friend. It is a matter, within the Community, of equating supply and demand, taking into account the job situation. We have assurances about the national situation with regard to Tate and Lyle and Liverpool in particular. We want to make sure that the assurances which have been given will be pursued.
    Mr. Hawkins: Does the Minister realise that a large amount of refining is now carried out in British Sugar Corporation factories, particularly, in my constituency, where no sugar at all was previously refined? Will he pay tribute to the extraordinary expansion of the home industry, which has saved imports of sugar into this country, and to the great benefit that this industry is to the countryside?
    Mr. Bishop: As I have just said, the problem is one of balancing supply and demand within the Community and outside, and nationally as well. In relation to "Food from Our Own Resources", we have tabled our views about the need for 50 per cent. self-sufficiency by 1980. The White Paper is under review at present and we have to look at the cane sugar side and the beet sugar side in relation to the effect upon the jobs of those concerned.

    Food and Drink Industries Council
    Mr. Knoxasked the Minister of Agriculture, Fisheries and Food when he will next meet the Chairman of the Food and Drink Industries Council.
    Mr. Strang: My right hon. Friend the Minister meets the Chairman of the Food and Drink Industries Council fairly frequently. No firm date has been set for their next meeting.
    Mr. Knox: When the Minister next mets the Chairman of the Food and Drink Industries Council, will he discuss with him the fact that in the EEC the food manufacturing companies fall within the remit of the Commissioner for Industry? Does he think that that is a good idea? Would it not be better if they fell within the remit of the Commissioner for Agriculture?
    Mr. Strang: I think that we can make too much of this matter. The big decisions in the EEC are taken by the Council of Ministers and at the end of the day there has to be a reconciliation of the various national interests.

    Weather Damage (Compensation)
    Mr. Moateasked the Minister of Agriculture, Fisheries and Food what recent discussions he has had with the President of the National Farmers Union on the question of assistance to farmers who have suffered loss in the recent floods and storms.
    Mr. John Silkin: I had meetings with the President of the National Farmers Union on 23rd February and 3rd March, at which we discussed various ways in which farmers who have suffered losses might be helped, including the union's readiness to evolve a method of self-help by the industry and its request for a Government contribution. I am now giving the matter urgent consideration in the light of the information coming forward on the extent of the damage.
    Mr. Moate: Will the Minister say whether consideration is still being given specifically to helping farmers who have lost livestock, whether in the West Country, Scotland or on the East Coast? If so, when will he come to a decision? Cash is urgently needed by certain farmers who will be placed in serious financial circumstances if they do not get help soon.
    Mr. Silkin: I have a great deal of sympathy with the hon. Gentleman's question and with the farmers concerned. I hope that I shall be able to give the House

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    further information following consideration of the matter before the Easter Recess. I cannot promise that, but I am doing my best. I am very well aware, as is the hon. Gentleman, of the enormous damage that has been suffered, particularly by farmers with livestock.
    Mr. Corbett: I thank the Minister and his right hon. Friends for the immediate assistance that they have given to the farming industry during the recent dramatic weather. When he next meets the President of the NFU will he raise with him allegations that on Dartmoor during the winter there has been serious and persistent over-stocking of areas which formerly have never been used for livestock during the winter?
    Mr. Silkin: If my hon. Friend would give me details of this, it is a matter in which I would be quite interested, particularly in its relevance to the Porchester Committee's views on the way in which we deal with the question of areas in which there has been a national environmental interest. On the specific point that he mentioned, perhaps he will write to me.
    Mr. Peter Mills: Will the Minister bear in mind that fanners are very concerned about being made special cases and given special help which does not concern other people in the South-West who have been in trouble as well, such as shopkeepers, garage owners and so on? What the farmers really need is a little more flexibility in the way of capital grants and other aids to rebuild their buildings. What they are concerned about is being made special cases. That is not what they want.
    Mr. Silkin: The hon. Gentleman may find some farmers who are not altogether averse to being made special cases. I was speaking in Kent at a non-political meeting and I met a number of farmers who distinctly wanted to be made special cases—and, indeed, they are. The difficulty is that very often damage to shops, factories or houses is insurable, whereas a lot of damage suffered by farmers is un-insurable.
    Mr. Skinner: As the avowed monetarists and non-interventionists of the Conservative Party are asking the Government to bail out some of their constituents, will the Minister give considera-
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    tion to the request that was made two years ago when gales hit the Nottinghamshire-Derbyshire border? On that occasion, an industry official visited the site, but nothing was done. If a precedent is to be set in respect of West Dorset, will the Minister guarantee that something will be done for the other places as well?
    Mr. Silkin: We can take one simple meteorological fact for granted—that there are weather disasters in the United Kingdom as a whole. Perhaps it is about time—if we can do it and find some basis on which the industry can help itself—for us to look to the future. I should therefore like to deal with the matter for the future rather than go too far into the past.
    Mr. Body: I understand that the Minister is the landlord of three tenants whose land has been almost totally flooded by salt water. That land will not be capable of having anything planted in it for some three years. Will the Minister undertake that the tenants will not be charged any rent, especially in view of the statement made by the Parliamentary Secretary a few days before the flooding that they were to have a rent review, which means, as we understand it, a doubling of their rents?
    Mr. Silkin: That matter is very much under consideration.

    Butter and Lamb (Imports)
    Mr. Jayasked the Minister of Agriculture, Fisheries and Food if he will give an assurance that no further obstacles will be placed in the way of imports of butter and lamb from New Zealand into the United Kingdom.
    Mr. John Silkin: I consider it of primary importance that New Zealand should be able to continue to export butter and lamb to this country. I have made—and shall continue to make—our position clear in Community discussion and shall keep in close touch with the New Zealand Government.
    Mr. Jay: As the Rome Treaty is so keen on competition, would it not provide valuable competition with artificially dear Continental food if we imported foodstuffs from New Zealand free of all quotas, levies and other restrictions?
    Mr. Silkin: My right hon. Friend is well aware that part of the programme that we have is to liberalise the importation of foodstuffs into the Community, especially from Commonwealth countries but from third countries in general. I must tell my right hon. Friend, however, that this will not be—indeed, it could not be—achieved overnight. It is a long and at times a rather painful process.
    Mr. Hooson: Is the Minister aware that the estimated cost of the transportation and handling of one New Zealand carcase of lamb is £8·75 sterling and that this is one of the great impediments to New Zealand trade? Is he aware, further, that New Zealand welcomes an increase in the price of lamb over here since it helps its farmers, who at present receive a very small price?
    Mr. Silkin: An increase in the price of lamb or, for that matter, of butter—for which we pressed with the approval of the House last year—to take account of an increase in costs, is perfectly understandable. But my impression from my discussions with my opposite numbers from New Zealand is that they still look upon New Zealand as a country which is willing and able to supply the United Kingdom with the traditional commodities which it always exported to us at a price which the British consumer can afford.
    Mr. Raphael Tuck: Although I appreciate my right hon. Friend's efforts, does he not feel that those efforts will probably be blocked by the EEC? Are the New Zealanders satisfied with the cavalier fashion in which they have been brushed off? After all, they fought for us in two world wars.
    Mr. Silkin: I am not altogether sure that that last basis is one that comes into the hard-headed calculation of Agriculture Ministers. I hope that it will always come into ours. Dealing with my hon. Friend's first point, I hope that the brush-off of which my hon. Friend talks will at least be softened, if not totally avoided, by the fact that New Zealand farmers have the loyalty, friendship and kinship of Her Majesty's Government and the people of this country.
    Mr. Jopling: Will the Minister give attention to one aspect of the proposed
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    sheepmeat regime, whereby what is called a safeguard clause might be introduced to allow the Community to stop all imports from, for instance, New Zealand at very short notice? Is that necessary, in view of the serious impact that it may have on New Zealand lamb exports?
    Mr. Silkin: It is very good to be able to agree with the hon. Gentleman. If such a proposal were made, the Government would wish to resist it, because it would be totally wrong, in our view.

    Fish Stocks
    Mr. David Jamesasked the Minister of Agriculture, Fisheries and Food what further steps he is considering taking under the 1976 Hague Agreement to conserve fishing stocks.
    Mr. John Silkin: I am currently discussing with the Commission and representatives of the fishermen what further conservation measures may be necessary.
    Mr. James: Will the Minister set his sights a little higher and see whether he can achieve a situation whereby natural resources under the bottom of the sea are treated in the same way as those in the sea? Why should the median line be regarded as the natural way of dealing with oil and gas when such a median line concept has never entered into any fishing discussions?
    Mr. Silkin: The hon. Member tempts me. The real answer is that the Treaty of Accession, which I would not wish to have signed, in fact produced the exact difficulty about which he speaks. But certainly I am willing to set my sights much higher. This aspect of the fish question was a matter which was given away at the time of the Treaty of Accession and which we hope to get back for our people. The proper conservation of fishstocks is a matter that we can teach the rest of the Community to carry out one way or the other.
    Mr. Robert Hughes: Is my right hon. Friend satisfied with the existing measures to conserve herring stocks? If he is not, what further steps does he intend to take?
    Mr. Silkin: In general, the answer is "Yes", since there is a ban on herring fishing in the North Sea. There are still discussions going on with the Isle of Man, which is the relevant authority, and with

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    the fishermen in the area about what might be done with regard to the herring stock there.
    Sir Frederic Bennett: Since most of the emphasis now is understandably placed on the conservation of fish stocks, will the Minister assure the House that in dealing with this very important subject he has not lost sight of his undertaking, which earned commendation everywhere, to reserve and preserve an exclusive area for English fishermen round our coasts?
    Mr. Silkin: I answered a question about that a moment ago, when I was asked what were my minimum demands. I pointed out that they were what they always were and that I was waiting for the other eight to come towards us. I have not moved one inch in that direction myself.
    Mr. Peyton: Has not the time come actually to do something? Does not the Minister think that it would be a helpful way of propelling the discussions along to indicate some positive measures that he might take and to give a clear date when he would introduce them?
    Mr. Silkin: Probably the right hon. Member was not listening in February when I introduced the national measures that are now in existence. Perhaps, too, he did not hear the reply which I gave originally to his hon. Friend the Member for Dorset, North (Mr. James), when I said that discussions were going on with the Commission. This is the point. We may have to take unilateral conservation measures in our own waters—that is a matter that we must consider—but clearly it is better, if we can, to get all the member states to co-operate. To my mind, that is not urgent at the moment, but it is much better to try to get an agreed solution. If it does not happen, we shall consider that course. Among the other outstanding conservation measures is the extension of the Norwegian pout box, with which I agree. But there, the crucial scientific evidence is that that relates to a period from October onwards. So there is time to deal with that. Otherwise there is the herring fishery off the Isle of Man, as I mentioned a moment ago, which requires consultation with the Isle of Man authorities and with the fishing industry, and that dates from August onwards.
    Mr. Peyton: I do not want to add to the right hon. Gentleman's difficulties in negotiations which are already hard enough, but will he now say when he thinks that it would be reasonable for him actually to introduce specific measures of conservation?
    Mr. Silkin: Let me remind the right hon. Member. I said a moment ago that in February—only last month—I had introduced a number of national conservation measures. He must be aware of those measures. They included, to quote an example, the closure of the pout box. They dealt with by-catches, mesh sizes, and so on. Of course, I shall bring forward measures and tell this House about them at the due moment. I still think that it is worthwhile to spend a little time seeing whether those measures can be imposed throughout the waters of all the member States of the Community. I should say that whether we were in the Community or not, because it is more effective to have those measures on a global basis. But I agree with what the right hon. Member hinted at—that the Commission's previous proposals are totally unacceptable, because they are totally negative.

    Agriculture Economic Development Council
    Mr. Bulmerasked the Minister of Agriculture, Fisheries and Food when he will next attend a meeting of the Agriculture Economic Development Council.
    Mr. John Silkin: My Department is regularly represented by officials at meetings of the Economic Development Committee for Agriculture. I attend the National Economic Development Council when necessary.
    Mr. Bulmer: Does the Minister accept that the biggest obstacle to farming confidence in the short term is the green pound differential and in the longterm capital taxation? When he does attend a meeting of the agriculture committee will he explain why his Government appear to regard cheap food as a right and cheap anything else as a threat? Will he also explain how the proposed wealth tax will help British agriculture?
    Mr. Silkin: I hope that in the next two years, or whenever it is, that will appear in the election manifesto of the

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    hon. Member for Kidderminster. The hon. Member is out of date. The House asked the Government to devalue the green pound by 7½ per cent. some weeks ago. To try to make a parity between the green pound and the actual pound—which is something that the hon. Member would like to do over two or three years—would be to add about 6½ per cent. to the cost of food here.
    I throw back a question to the hon. Member to ponder on at leisure. How much food does he think the British farmer would be able to produce if the British consumer was not able to afford it?
    Mr. Ioan Evans: Can my right hon. Friend make an assessment with the Committee on how the common agriculture policy has had an effect on prices in this country? Will he discuss with EEC Ministers the effect on our dairy industry if we had to adopt the Continental style of milk distribution?
    Mr. Silkin: Those concerned are well aware—we have stated it often enough—that the real problem is high prices. These are totally linked to the unacceptable structural surpluses, particularly in the dairy industry. It might be nice to have 400,000 tons of butter in store, but peope would prefer to have it on their bread.

    Livestock (Exports)
    Mr. Costainasked the Minister of Agriculture, Fisheries and Food when he expects to receive a report on the examination of developments in the livestock export trade since it was resumed in 1975, and if he will make a statement.
    Mr. Brothertonasked the Minister of Agriculture, Fisheries and Food whether he has yet received the results of the review of the export of live animals for slaughter.
    Mr. Strang: As my right hon. Friend the Minister told the hon. Member for Leeds, North-West (Sir D. Kaberry) on 14th March, the report of the official working group has now been submitted and will be published in full.
    Mr. Costain: Does the Minister appreciate the great public interest in this subject? What is in this report that he is
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    ashamed to publish so that the public and farmers can read it? Can we not make a decision even to publish something for a change?
    Mr. Strang: The hon. Member may not have heard me. I said that the Government are publishing the report in full. We are doing our best to have it printed before the Easter Recess.
    Mr. Brotherton: Will the Minister bear in mind that any ban for humanitarian purposes on the export of live animals would result in a ban on imports? Then where would we be?
    Mr. Strang: I am not sure that I follow the logic of that question. I assure the hon. Member that all these aspects are considered in the report. There will be time for consideration of it, and the Government will then make a decision.
    Mr. Ovenden: Will my hon. Friend resist those who try to persuade him that this matter can be controlled by regulations? Does he agree that once consignments of animals have left this country we can never effectively enforce regulations? Does he accept that the only solution is to reintroduce the ban?
    Mr. Strang: I am sure that my hon. Friend speaks for many. At the same time, he will appreciate that the Government wish to consider all views on the report before reaching a decision.
    Mr. Charles Morrison: Will the Government announce the decision about the export trade at the same time as publishing the report? Alternatively, will they allow public discussion after publication of the report?
    Mr. Strang: I am glad to confirm that we shall allow a short period after publication so that hon. Members and other interested parties can comment on it before the Government reach a decision.
    Mr. John Ellis: Does my hon. Friend realise that those who have followed this matter and who listened to the advice of the Opposition Front Bench that we should achieve humanitarian measures by legislation have since realised that we were wrong? Does he appreciate that we feel deeply about this matter? Does he agree that it is time that the ban

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    was reintroduced, because it is not possible to enforce regulations once the animals have left our shores?
    Mr. Strang: My hon. Friend has taken an interest in the issue for a long time. I can assure him that his views, and those of others, will be taken into account.
    Mr. Burden: Will the Minister do his utmost to ensure that the report is debated in the House? In the meantime, will he give an assurance that animals are not sent to those countries in which humane slaughter is not practised?
    Mr. Strang: I appreciate the hon. Member's concern. He will recognise that the question when we have a debate is a matter for the Leader of the House.

    TUC AND CBI
    Mr. Nobleasked the Prime Minister when he next plans to meet the TUC.
    The Prime Minister (Mr. James Callaghan): I refer my hon. Friend to the reply which I gave to my hon. Friend the Member for Woolwich East (Mr. Cartwright) on 28th February.
    Mr. Noble: Is the Prime Minister aware that Lucas Aerospace is to announce further redundancies in the North-West, thus adding to the serious unemployment in that region? Will he discuss with the TUC the shop stewards' corporate plan, which is a positive step forward, in that it makes imaginative proposals for products for peace and employment? Will he seek to remove the log-jam that is preventing that from taking place?
    The Prime Minister: I shall look into the plan. I shall ask my right hon. Friend the Secretary of State for Industry to inquire into it. I assume that the firm will be discussing the matter with the trade unions.
    Mr. Adley: Is the Prime Minister aware that the action of a TUC affiliated union—the National Union of Teachers—is causing widespread disruption in our schools? Worse than that, is he aware that large numbers of schoolchildren are being left to run around the streets because they have no schools to go to to learn, and the parents of many are working? Will the Prime Minister invite the TUC to ask the teachers to go
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    back to work so that this matter can be discussed in a more peaceful and quiet atmosphere than is possible with the dangers and stresses in many of our towns and cities today?
    The Prime Minister: I am constantly being invited to pass moral strictures from the Dispatch Box, but I am not sure how much good they do. The teachers have referred this matter to arbitration. When I was a trade unionist and was negotiating, the principle always was that when a matter had been referred to arbitration those involved waited for the verdict of the arbitrators before they took action.
    Mrs. Hayman: When he next meets the TUC will my right hon. Friend discuss its attitude to the November increase in child benefit rates? Is he aware that there is a strong feeling on the Government Benches that this would be the best and most effective way to provide better support for families with children?
    The Prime Minister: I believe that the TUC has made its view clear. There will be an increase in child benefits in April this year from which every mother will benefit. There will be some offset because of the withdrawal of the child tax benefit, and that process is to be continued until April 1979. I cannot give an answer now because the matter is bound up with other budgetary considerations.
    Mr. Cormack: Will the Prime Minister remind the leaders of the TUC that all their members are paying 84 per cent. more in retail prices than they were when he took office?
    The Prime Minister: TUC members are well aware that the Government's policies are having a satisfactory effect in terms of reducing the rate of inflation. If I were to use the figure quoted by the hon. Member I am sure that the TUC members would respond by replying that that is true but that when the Conservatives left office inflation was going up and now it is going down.

    PRIME MINISTER (ENGAGEMENTS)
    Mr. Greville Jannerasked the Prime Minister whether he will list his official engagements for 16th March.
    The Prime Minister: This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be holding further meetings with ministerial collagues and others.
    Mr. Janner: When the Prime Minister meets his ministerial colleagues will he congratulate the Secretary of State for Employment on the excellent statement that he made to the House yesterday? Will he express to him the appreciation of those who represent areas that rely on the textile, clothing and footwear industries, which will benefit from the job release scheme? Although we express our anxiety about the continuing high level of unemployment, we also express our appreciation of the prodigious efforts that the Government are making.
    Mr. Skinner: Give him a little job.
    The Prime Minister: If my hon. Friend the Member for Bolsover (Mr. Skinner) does not take care, I shall offer him one. I think that the House as a whole, whatever views it takes about individual matters, will conclude, as it did yesterday, that my right hon. Friend the Secretary of State for Employment has devised a number of very important schemes, some more valuable than others, which are having a substantial effect on preventing people from simply going on the dole. Taking the TES as a classic case, one should note that in the North-West and in the clothing and footwear industries it has made a remarkable difference to the workers.
    Mrs. Bain: Will the Prime Minister today, before his visit to Scotland, elaborate on his statement in the Glasgow Herald this morning, which indicates that 6,500 jobs are to go to Glasgow via the Ministries of Defence and Overseas Development? Will he give us a firm time for this and indicate how many of the staff will be recruited locally?
    The Prime Minister: The hon. Lady is right to say that a substantial number of jobs will be going from England to Scotland because of regional dispersal policy. I remind her that if Scotland were independent it is doubtful whether the same process would take place.
    Mr. Hoyle: Will my right hon. Friend, whilst accepting my congratulations on the TES, note the growing concern about
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    unemployment in the North-West and in manufacturing industries particularly? Does this not point to the need for planning agreements, and should we not make them compulsory?
    The Prime Minister: I believe that planning agreements would have a valuable effect in bringing workers into a full knowledge of the proposals and plans of the industries in which they work and in allowing them to make comments on the plans and, in certain circumstances, to influence decisions. However, I cannot say that that would have the result of reducing unemployment. It is worth noting that at present unemployment is going down. It has fallen for five months in succession and I believe that that trend may well continue. I believe, too, that the number of vacancies is going up. Unemployment is still far too high, and that is one reason why I am pursuing contacts with leaders throughout the Western world to see whether we can get concerted action to overcome the problem of the more than 16 million people now out of work in OECD countries.
    Mr. Prior: Is it not an extraordinary state of affairs when the Prime Minister can be congratulated by his Back Benchers on achieving a state of unemployment of 1·4 million, with another 400,000 people having to be subsidised in jobs—a potential total of 1·9 million unemployed under a Government who talked about "Back to Work with Labour"?
    Hon. Members: Hear, hear.
    The Prime Minister: I do not think that that is a matter for congratulation, but those who cheer that statement should reflect on what the levels of unemployment would be if subsidies were abolished, if grants were done away with, and if the whole policy of the Conservative Party of cutting public expenditure even more were carried out. We should be talking then about 3 million unemployed.
    Mr. Brothertonasked the Prime Minister if he will list his official engagements for 16th March.
    The Prime Minister: I refer the hon. Member to the reply which I have just given to my hon. and learned Friend the Member for Leicester, West (Mr. Janner).
    Mr. Brotherton: Will the Prime Minister explain to the House his Government's cowardly and craven failure to instruct the Permanent Representative at the United Nations, Mr. Ivor Richard, to veto the Security Council resolution on Rhodesia last Monday?
    The Prime Minister: That has been explained, but I shall try to instruct the hon. Gentleman again. We believe that the Anglo-American plan offers the best opportunity of bringing in the Patriotic Front, which, as the Leader of the Opposition said recently, is important, and will be the best way of solving this problem. We do not believe that the present plan as it stands and as it has been conceived internally is likely to achieve that end. For that reason, therefore, although we think it is an important step forward, we did not think it right to veto it in the Security Council and we are continuing to work to bring the parties together.
    Mr. Radice: Is my right hon. Friend aware that we on the Labour Benches welcome his initiative on the world economy, but does he agree that we need a wide-ranging package to tackle the very difficult problems of international growth, international trade, international monetary stability and international liquidity?
    The Prime Minister: For about 18 months I have been endeavouring to get other world leaders to see the necessity for common action in this area, and I believe that there are now growing signs of a desire to take common action. It is my ambition to see whether we can construct a plan which would be based on the approaches of all countries in time for the July Summit in Bonn. The world needs not only the series of measures that my hon. Friend has described but a feeling that the world's major economies are taking a grip on the problems, so that confidence can grow. There is a necessity for that, I believe, especially in the United States and in some countries on the Continent.
    Mrs. Thatcher: Why does the Prime Minister always blame the world economy for this country's faults? Is he not aware that most of our competitors have done far better than we have in terms of growth productivity and unemployment, and with far lower taxes than we have? Would it not be better to remedy the faults in his
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    own economic policy in this country than to look overseas for our salvation?
    The Prime Minister: I try to do both—that is to say, I never fail to point out the need for higher productivity in this country, or the need for greater efficiency and aggression in our salesmanship overseas. But the right hon. Lady should not try to extract the mote from my eye before she extracts the beam from her own. There is a substantial international dimension to the problem of world trade and world prosperity, and I hope that one day she will recognise that.

NEW ZEALAND
Mr. MartenQ4. Mr. Marten asked the Prime Minister if he will seek to pay an official visit to New Zealand.
The Prime Minister: I have at present no plans to visit New Zealand. However, I was pleased to meet the Deputy Prime Minister of New Zealand during his visit to London last week, when we had most useful discussions.
Mr. Marten: Will the Prime Minister make it absolutely clear to the people of New Zealand that we in this Parliament have no intention of allowing their agricultural products to be squeezed out of this country by the common agricultural policy? Is he aware that the New Zealanders have tried to find new markets for their products because of our membership of the Common Market, but that they have been met head-on by heavily subsidised or dumped Common Market products in competition? Will he give an assurance that the Government will support New Zealand in its crisis?
The Prime Minister: Since the renegotiations and the talks that we had in Dublin at the Heads of Governments meeting in 1975 we secured an extremely valuable agreement on behalf of New Zealand in respect of butter and some other commodities—
Mr. Jay: It was only temporary.
The Prime Minister: Yes, it was temporary. We were unable to get a permanent agreement. Consistently since then my right hon. Friends the Minister of Agriculture and the Foreign Secretary have taken up the cudgels on behalf of

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New Zealand in these discussions in the Common Market, and we shall continue to do so.
Mrs. Dunwoody: Will my right hon. Friend be kind enough to try to persuade the other Heads of Governments that the EEC is in grave danger of taking so many protectionist moves against other Governments that it will soon be very difficult for us to trade openly? Is he aware that Australia has already made its position clear? Will he make sure that there are no barriers to agricultural imports coming into the Community?
The Prime Minister: I could not guarantee that that would be accepted with acclamation, because we are facing a situation in which protectionism is growing throughout the world. On balance, I believe that that would be disadvantageous to this country. Therefore, we constantly press for the restriction of protectionist devices, except in certain selective cases where there are structural differences, and that will continue to be our policy.

PARLIAMENTARY PAPERS (PRINTING)
Mr. Rost: On a point of order, Mr. Speaker. It will not have escaped your notice that Hansard has again not been printed this morning. The official Order Paper of the House has again been disrupted. Moreover, this is the third occasion this week when the business of the House has been disrupted and inconvenienced by an inability to provide the printing in the normal way. I accept that you, Mr. Speaker, obviously do not have direct responsibility for this; nevertheless, you have an indirect responsibility to ensure that the proceedings of the House are conducted in an orderly way and in a manner in which we can conduct our business with reasonable facilities.
Is it not possible, Mr. Speaker, for you to extract a statement or an apology or explanation from the Leader of the House, he having failed to make such a statement, so that we can get some understanding as to how long this dispute will continue?
Mr. Speaker: I should like to tell the House that a good many of the servants
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of the House have been working extra hard in order to ensure that we have the facilities that we have. On the question of the industrial dispute, the House will not expect me to make a statement off the cuff.

MR. SPEAKER'S CHAPLAIN
Mr. Speaker: The House will be aware that the Reverend Canon David Edwards, who has been Speaker's Chaplain since September 1974, has been appointed Dean of Norwich. [HON. MEMBERS: "Hear, hear."] On Thursday next, 23rd March, he will be conducting our Prayers for the last time. [HON. MEMBERS: "Hear, hear."] Order. Good manners are always worth while.
I wish on behalf of the House and myself to express deep gratitude to the Reverend Canon David Edwards for his devoted service to my predecessor and myself and to this House during his service as Chaplain.
I know that many right hon. and hon. Members will want, if possible, to pay their own tribute to Canon Edwards by being at Prayers before he leaves us.
Mr. Faulds: On a point of order, Mr. Speaker. When would it be possible for Members of the House who have appreciated the work of Canon Edwards to make it quite clear that they appreciate it?
Mr. Speaker: I understand that the hon. Gentleman is really being helpful, and I am grateful. I believe that the best tribute can be made during next week. I realise that next Thursday there will be Adjournment debates and that we are not likely to be as crowded as we are at present, although there will be Questions to the Prime Minister as well. The last two days on which the Canon will be taking Prayers would be appropriate, on Wednesday and Thursday.

CIVIL LIABILITY (ROYAL COMMISSION'S REPORT)
The Prime Minister (Mr. James Callag-han): With permission, Mr. Speaker, I wish to make a statement. The report of the Royal Commission on Civil Liability and Compensation for Personal Injury has

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been published today and copies are now available in the Vote Office.
The Royal Commission was established five years ago to examine our present practice for compensation for personal injuries, including the particular concern felt about children injured through thalidomide.
The Government are grateful to Lord Pearson and his colleagues for the work and for the comprehensive report which they have now produced. It contains numerous recommendations for change. The main recommendations are as follows.
Two systems of compensation for personal injury through civil liability and through social security should continue to exist side by side but with an altered relationship, and that social security should be recognised as the principal means of compensation.
A no-fault scheme of State compensation should be introduced for road accidents involving vehicles, to be financed by a levy on petrol. This would provide benefit in respect of injuries, irrespective of blame.
The manufacturers should be strictly liable—that is without proof of negligence—for injuries caused by defective products.
A new State benefit should be introduced for all severely handicapped children whatever the cause of their handicap.
The Government or local authority concerned should be strictly liable for severe damage caused by vaccination where vaccination was recommended in the interests of the community.
The industrial injuries scheme should be extended to cover the self-employed and certain benefits of the scheme should be increased at the expense of employers.
Social security benefits should be fully offset in assessing damages awarded by the courts for personal injuries.
The House will see that the Royal Commission's proposals are far-reaching, having important implications for consumers, manufacturers, employers, employees, trade unions, motorists, insurers and handicapped children. The Government will therefore
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study the recommendations with care and urgency and consult interested organisations as appropriate. In reaching their decision the Government will have regard to the public expenditure cost of implementing the proposals, which could be considerable.
As the House will recall, the Government have already announced their commitment to introduce a scheme of payments for severe damage caused by vaccination. Decisions on the form of the scheme have been awaiting the Royal Commission's report. As soon as the relevant recommendations have been considered—and this will be done as a matter of urgency—my right hon. Friend the Secretary of State for Social Services will make a further statement.
Mrs. Thatcher: Is the Prime Minister aware that it is not possible to make any detailed comment on this very far-reaching report without very considerable study and consultation on the part of us all, especially where the Commission is suggesting a wide range of compensation without any need to prove liability? I should like, therefore, to ask him about just two points.
First, do the recommendations on injuries caused by defective products—I imagine that some of them are meant to go towards thalidomide cases—include recommendations about the unborn child?
Secondly, does the report include details of the financial implications, both the public finance and the kind of cost that the self-employed will have to face if they are to provide cover? Are all the financial implications calculated in the report?
The Prime Minister: I can answer the second question. There is a total placed on the cost, and that is £130 million, but I have not yet gone into the details of how that has been calculated. That would be part of public expenditure.
As regards the unborn child, there is a substantial statement on that in the report, but I would prefer not to go into that as I do not want to mislead the House and I want to be absolutely sure of the recommendation.
Mr. Abse: I am sure that many of the recommendations that have been indicated by the Prime Minister will prove to be welcome, but his announcement that

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the Commission is recommending that social security payments should be taken into full account when damages are awarded is bound to bring concern to trade unions in particular, bearing in mind that the damages that are received in the courts of this country at present are so much lower in the case of injured workmen than they are in most other sophisticated countries. I hope that the Government will give particular consideration to this matter.
Secondly, while there may be many attractions in a no-fault scheme, will not the Prime Minister acknowledge that it is important to realise that it is a scheme which, apart from causing an increase in the price of petrol, could have burgeoning bureaucracy and could be a scheme which could mean that the reckless could benefit as a result of the care of other motorists? These matters require great surveillance.
The Prime Minister: My hon. Friend has great experience on the first point that he has raised. I have not read the full report, but as soon as I read certain extracts I realised that this would be a matter of great concern, as also would my hon. Friend's second point.
My hon. Friend's second question on motor vehicle injury is well argued in the report. I am sure that my hon. Friend will read it with care. This illustrates the need for the Government to be very careful in their further consideration and to receive representations from any groups that wish to put them to us. At the same time, some of these recommendations are so valuable that I would not like to see them delayed indefinitely. A whole range of Ministers is involved here, and I would ask them to get ahead with their consultations as quickly as they can.
Mr. Hooson: The report is very welcome, indicating a cautious advance in the direction of not having to establish blame in order to obtain compensation. Nevertheless, the report took five years to prepare, and I hope that it will not take five years to implement its recommendations. Will the Prime Minister ensure that time is found for a debate before the end of this Session? The Government might then indicate the priorities. There are very varied recommendations. Some could be implemented fairly easily, whereas others are very complicated.
The Prime Minister: Without committing myself, I should like to consider that suggestion sympathetically, because the report goes into many new fields which concern many people. Three months is not long for a Government to consider these matters, I would want Ministers to have a proper opportunity of consultation, but I should like to consider whether we can have at least a preliminary debate and make some preliminary indications before the Summer Recess—if, by saying that, I have not got myself into too much trouble with my right hon. Friend the Leader of the House.
Mr. Ashley: Following his welcome statement, will my right hon. Friend ensure that the proposal for helping disabled children will be not only adequate but generous? Is my right hon. Friend aware that while I welcome the proposal for strict liability for drug damage, it would be outrageous to insist that vaccine-damage children must go through the courts to define that strict liability—not prove it, but define it? There are reports that Pearson suggests that. Therefore, will my right hon. Friend set up an independent board to consider the question of strict liability, in addition to honouring the proposal for compensation for children already damaged by vaccines?
The Prime Minister: I am aware of my hon. Friend's great interest in the matter, and I thank him for all the work he has done. He will find that reference is made in the report to his work in this matter. The Government are giving urgent consideration to the scheme that we shall produce in respect to these children, but we are also having parallel consideration of the general recommendations made by the Royal Commission in respect of the great body of children.
Mr. Wigley: Is the Prime Minister aware of the great disappointment and dismay that will be felt by slate quarry workers suffering from pneumoconiosis and silicosis, whose appeal for a compensation scheme similar to the coal-miners' has been rejected by the Pearson Commission? Is the right hon. Gentleman aware that time after time the Government have put off a compensation scheme for those people until the

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appearance of the report? Does he recall his words on 8th July 1976—
"In logic, there is very little reason why remedy should be limited to coalminers."—[Official Report, 8th July 1976; Vol. 914, c. 1597.]
In those circumstances, can the Prime Minister give an assurance that the Government will consider a scheme for quarrymen irrespective of the Pearson Commission report?
The Prime Minister: It would be wrong for me to give such an assurance this afternoon. One of the parts of the report to which I turned was that on the question of compensation for slate quarrymen. I saw the argument produced in the report. I shall not go into that argument now, because all that I am doing is to report on the Royal Commission, which has found against a special scheme for slate quarrymen for reasons that it considers to be good. We shall certainly consider the matter, but we shall weigh what is said by the Royal Commission on this subject.
Mr. Douglas-Mann: Is my right hon. Friend aware that the very welcome proposals for no-fault liability for road accidents will bring an entitlement to compensation to about 200,000 people, victims of road accidents, who receive no compensation now, but that the deferment of any action with regard to industrial injuries will leave about 480,000 people, three-quarters of the 600,000-odd who suffer industrial accidents every year, without compensation? Is my right hon. Friend also aware that proposals were put to the Royal Commission which would have enabled full compensation to be paid to such people with no increased cost to public funds? Will he indicate to the House the nature of the objections that caused the Royal Commission to defer taking action on the industrial injury proposals?
The Prime Minister: It would be preferable if my hon. Friend and other hon. Members would read the report first and then we could have questions put and the Government's views on it extracted.
Mr. Fairbairn: Does the Prime Minister appreciate that when the Government are considering the matter—as the right hon. Gentleman has said, they will have to do so very carefully—they should
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bear in mind that if one opens the door to the no-fault liability concept there are grave dangers that those with disadvantages such as having only one eye or one leg, through birth, illness or accident, may also have to be compensated, in equity?
The Prime Minister: I note the hon. and learned Gentleman's point. I am sure that Ministers will be glad to have such points and bear them in mind.
Mr. Carter-Jones: I give qualified support to the Pearson Report. Will the benefits for disabled children be given without being subject to taxation? Is my right hon. Friend aware that our intention was to give disabled housewives a non-contributory invalidity pension, but that the poorest of the disabled housewives had it knocked off their supplementary benefit? Will my right hon. Friend give an assurance that that will not happen to the disabled children?
The Prime Minister: The Government have introduced a number of benefits for disabled people generally, including benefits for handicapped children, but I cannot this afternoon go into the tax provisions of another proposal that has been made in the Royal Commission report. We must have time to consider that.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: I propose to take four more questions from each side of the Chamber. It is an important statement, but we cannot debate it now.
Mr. Burden: Will the Prime Minister give early consideration to the proposals for State help for handicapped children? I ask because undoubtedly many of the thalidomide children will now be reaching a stage at which their educational opportunities should be seriously considered, as with the mentally handicapped children. This is an area that should be dealt with promptly. Will the Prime Minister give an undertaking that the recommendations about handicapped children will receive special consideration by him and his right hon. Friend the Secretary of State for Social Services?
The Prime Minister: Yes, Sir. I certainly give that undertaking. Apart from child benefits, there are attendance allowances at present, and handicapped children have access to the full range of health

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and social services. If there are gaps in them, I shall ask the Ministers concerned to look at them.
Mr. Thompson: Is the Prime Minister aware of the differences in the levels of award given, on the one hand, by the courts in Scotland and, on the other hand, in the courts of England and Wales? Has the Royal Commission been able to make any suggestion for a levelling out of those differences?
The Prime Minister: The hon. Gentleman will understand that, as there are more than 550 pages in the report and as I received it the day before yesterday, I cannot answer his question.
Mr. Ward: Is my right hon. Friend aware that hon. Members who have tried to obtain copies of this most welcome report find that Volume 1 is not available in the Vote Office? Will he take steps to see that such delays do not recur on important occasions of this kind?
The Prime Minister: Certainly, Sir. I am very sorry to hear what my hon. Friend says. I do not personally deliver copies, but I shall inquire why they were not there when I was told to say that they were.
Mr. Graham Page: May I press the Prime Minister on the question of a debate? Will he consult the House before all the consultations with outside bodies are complete and not wait for their completion? In the circumstances, will the right hon. Gentleman find time for a Private Member's Bill on no-fault liability, in the name of the right hon. Member for Crosby, already before the House?
The Prime Minister: I cannot go further than I have already gone on either of those questions. The matter of a debate can be discussed through the usual channels. As regards the right hon. Gentleman's Bill, I am sure that my right hon. Friend the Leader of the House is sympathetic to all Bills at all times.
Mr. Alexander W. Lyon: Does my right hon. Friend recognise that to extend no-fault liability only to those injured in road accidents would increase the sense of injustice felt by those injured at work or
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in the home? Is it not unfortunate that after so much consideration we should lose the chance to go over to something like the New Zealand scheme, which is totally comprehensive and is bound to be cheaper than the present system because one saves on the lawyers' fees?
The Prime Minister: The Royal Commission has examined the scheme and has given its views on it. I suggest that my hon. Friend should study them and see whether that study modifies his conclusions in any way.
Mr. Christoper Price: In as much as my right hon. Friend gets opposition to no-fault liability substantially from the legal profession, will he be very wary of that, bearing in mind that the extra public expenditure related to these schemes could be very much compensated by the smaller amount of money flowing into the pockets of the lawyers?
The Prime Minister: I do not want to make enemies of the lawyers. There are too many in this House—[HON. MEMBERS: "Oh."] I had not finished the sentence. There are too many of them in this House for me to quarrel with them. But I certainly share some of my hon. Friend's views about this, and I should like to think that some of the fees which now go to the legal profession could be diverted to channels in which they would perhaps do even more good.
Mr. Wyn Roberts: With reference to the Prime Minister's reply to the hon. Member for Caernarvon (Mr. Wigley), he is no doubt aware that the problem of silicosis among quarrymen has agitated North Wales Members on both sides of the House. Is it not clear from the report, and from the Prime Minister's reply, that a special scheme for slate quarrymen will have to be devised, just as there is one for sufferers from pneumoconiosis in the coal pits and sufferers from byssinosis in other industries?
The Prime Minister: I take note of the hon. Gentleman's views, but I am here to report on the Royal Commission's findings and its arguments, and I cannot go further than that today. I am sure that the argument will continue. I am well aware that my hon. Friends and Opposition Members have followed the health problems of slate quarrymen very carefully, as I have myself, but the Royal

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Commission has made a recommendation, I am reporting back to the House, and consideration will now have to begin.
Mr. John Evans: Will the Prime Minister confirm that employers' liability for defective products goes much wider than the question of thalidomide damage to children? Is he aware that there is a Common Market regulation on employers' liability at present before the European institutions? If the Government are to legislate, will my right hon. Friend ensure that there is comparability between the two schemes?
The Prime Minister: I am aware of this draft directive. We shall take it into account in any recommendation we make and try to make the two comparable.

BUSINESS OF THE HOUSE
Mr. Speaker: Mr. Joel Barnett—Public expenditure debate.
Hon. Members: Business Statement?
Mr. Speaker: There was a double Business Statement last week, and I consider that that was an act of mercy.
Mr. Wigley: On a point of order, Mr. Speaker. We have no knowledge of the business on the Monday after the recess. This information is usually given to us in the Business Statement. Perhaps the Lord President's attention can be drawn to that.
Mr. Speaker: If there is any statement to be made, it will no doubt be made at some other time.
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): I am sorry that the assistance that I sought to give to the House last week has not been fully appreciated, although it was appreciated in some quarters at the time. I shall, of course, be making an announcement next week, on Wednesday, about the business when we return after the recess. I hope that that will give the hon. Member for Caernarvon (Mr. Wigley) and the House full notice.

PUBLIC EXPENDITURE
Mr. Speaker: I have selected the amendment in the name of the right hon. Lady the Leader of the Opposition.
3.54 p.m.
The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move,
That this House takes note of "The Government's Expenditure Plans, 1978–79 to 1981–82" (Command Paper No. 7049); and approves the plans to increase public expenditure in view of the need to reduce unemployment and improve public services.
Perhaps I may start with a reasonably non-controversial statement, namely, that none of us knows by what percentage the eventual 1978–79 level of public expenditure will exceed the eventual 1977–78 outturn of public expenditure. We can all agree that anyone who pretends to know is either a fool or a knave—or both. I am not sure quite where that leaves the right hon. and learned Member for Surrey, East (Sir G. Howe), but in a typical piece of instant statement-mongering, within minutes of the White Paper being issued, he was ready to pronounce that we were planning a real increase of 8·2 per cent.
Of course, if we compare the estimated outturn for 1977–78—that is, the planned expenditure after shortfall—with the planned figure for 1978–79 without shortfall, we get that figure. We can also get a whole range of different percentage increases, as many commentators did, between 2 per cent. and 8 per cent.
The only point that all these estimates have in common is that they are all estimates or best guesses. If we compare plans with plans, the increase is 2·2 per cent. That is not purporting to show what will be the eventual outturn. As I have said, none of us can know what that will be, but within a range of reasonable estimates of shortfall, the increase could be about 4 per cent.
The shortfall confuses the picture, but I doubt whether the picture would be any clearer if the White Paper had used 4 per cent. or some other figure from the many which have been suggested. We tried to deal with this difficult problem at the point in the White Paper, paragraph 10, where we refer to the 2·2 per cent. increase in 1978–79 on a like-with-like basis. There we draw specific attention by footnote to what the eventual outturn

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might be. Perhaps it is worth quoting what is said there:
"The increase compared with the latest estimates for 1977–78 is much greater."
That is obviously true, of course. I do not pretend that it is an ideal solution, but, frankly, there is no ideal way of presenting such a complex set of figures.
I turn to the central question, that of shortfall, which is at the heart of the problem. I am concerned about the amount of shortfall both last year and this year, but some forms of shortfall are more serious than others.
Not all shortfall has to do with underspending. Much of it is not underspending at all. Some arises from deliberate policy decisions taken during the year—in the current year, for example, the agreement under which the banks undertook to re-finance a greater proportion of export credit. Some arises from extra receipts or better trading performance, and thus lower net lending to the nationalised industries. Some arises from factors which are not directly within the control of the spending authorities concerned, such as changes in economic conditions or interest rates or sometimes even the weather.
Where shortfall is in the nature of underspending, there are, again, many causes. In some cases it is due to more economical administration, and that is to be applauded. In others, it may reflect a tendency to overestimate requirements. The new monitoring procedures should help here. When programmes are expanded or new projects launched, progress may be slower than hoped when the funds were allocated, and procurement delays can be greater than expected, especially where complex equipment is involved.
Finally, a degree of shortfall is only to be expected when planning figures are used as a basis for setting control limits. The Government expect some underspending to occur for this reason and allow for it in their plans for managing the economy. The new procedures for controlling public expenditure, and especially cash limits, may have made managers more inclined to play safe. The role of cash limits should not, however, be exaggerated. About half of the estimated shortfall shown in the recent White Paper
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for the current year is expenditure not even covered by cash limits.
Nevertheless, where shortfall represents a failure to achieve a planned level of service, it is a lost opportunity. Shortfall of this kind must be reduced as far as possible. The remedy is not to jack up existing programmes but to improve management and estimating procedures. It is vital that we do, especially now that there is room for a controlled increase in public expenditure.
Mr. Eric S. Heffer: Will my right hon. Friend indicate to the House how much shortfall there has been in relation to housing programmes by local authorities, many of which have been controlled by the Conservatives? What exactly is happening in that area, and what have the Government done to correct this position?
Mr. Barnett: We do not have the latest figures for 1977–78. It is clear that there has been some underspending on new starts for houses, particularly in the kind of local authorities to which my hon. Friend referred. As he will know, there is the problem of local autonomy and central government autonomy, and how far central government should go in interfering in the rights of local authorities is a very difficult question.
Mr. Timothy Raison: I am grateful to the right hon. Gentleman. His last sentence has slightly restored my faith in him. Should he not say firmly to his hon. Friend the Member for Liverpool, Walton (Mr. Heffer) that it is up to local government to decide those things within the purview of local government and that it is no good taking a sort of corporate-State attitude and constantly bullying them?
Mr. Barnett: That is an entirely different matter. I agree with my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) that we should deplore circumstances in which some local authorities are not building new council houses which are desperately needed in many parts of the country. I entirely agree with my hon. Friend and, knowing him, I am sure that he is not seeking the kind of State that the hon. Gentleman has described.
As I was saying, it is vital that we do have a firm control over expenditure—whether we are increasing it or reducing

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it—for expansion, no less than retrenchment, must be effectively controlled. We cannot afford a return to the uncontrolled surges of expenditure of previous years which led inexorably to damaging cutbacks. The ability to keep expenditure within the stated totals is vital to the maintenance of confidence, the fight against inflation and the promotion of internal efficiency.
Mr. Alexander W. Lyon: If the last scheme was so bad because it led to overspending and cut-backs, why—when we introduce cash limits which are a greater restraint on the freedom of the spender—cannot we deal with the question of carry-over so that it can be spent in the following year?
Mr. Barnett: There is a case in some circumstances for having carry-overs. We do allow carry-overs in some areas. But we entirely lose parliamentary control if we allow total carry-overs. Indeed, not only do we lose parliamentary control but we have a serious problem with regard to control and efficiency of particular programmes. While I agree that in some programmes there is a case for some element of carry-over, I would not accept that it would be the right or proper thing to do in general. However, I would say this to my hon. Friend about cash limits generally: if we do not have adequate control over expenditure—knowing how my hon. Friend wants to see increases in public expenditure—the net result would be that the likely priorities within any given total might well not be the kind of priorities that he and I want to see.
The use of cash limits and the use of proper control of expenditure is every bit as vital to Labour Members who want to see improvements in public services as it is to those who want to use cash limits, and other methods of control, for no other reason than for massively cutting public expenditure.
Before leaving the subject of shortfall, I should like to refer to the argument that shortfall in public expenditure is a significant factor in the present levels of unemployment. It is very difficult to quantify the effect of shortfall on demand and unemployment. Many estimates of the consequences assume that the Government take their decisions on the basis that expenditure plans will be exactly fulfilled without any shortfall. That is just
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not so. Budget decisions are based on economic forecasts which make allowance for some overall shortfall. The table of expenditure and revenue projections in the White Paper reflects this.
It is also necessary to take account of the different economic effects of different kinds of underspending. A considerable amount of the shortfall shown in the White Paper is on expenditure which has much smaller effects on demand than public expenditure generally. I referred to a number of such items—including the refinancing of export credit—a few minutes ago.
It is misleading simply to take a total figure for shortfall and to try to translate it into an equivalent number of jobs. There are wider effects, too. If expenditure is higher, the public sector borrowing requirement is also somewhat higher and that tends to push up interest rates and depress employment. It is difficult to put any precise figure on these offsets, but it must at least be clear that estimates of the effect of shortfall on unemployment are not a simple calculation and cannot be made with any confidence—although I am sure that will not stop estimates being made.
Shortfall apart, criticism of our expenditure plans themselves—
Mr. Nigel Lawson: The right hon. Gentleman said a moment ago that if there had been a shortfall the borrowing requirement would have been greater and that would have pushed up unemployment. Will he confirm that if the borrowing requirement next year is greater than this year, that will increase unemployment?
Mr. Barnett: The hon. Gentleman should not try to be over-clever. I was talking about one aspect of the problem. As he knows, there are many other aspects. It is no use seeking to make silly little debating points, if he will pardon my saying so.
Mr. J. Enoch Powell: I am obliged to the right hon. Gentleman. I do not want to make a silly debating point. Is it not the case that any shortfall of whatever kind must be counterbalanced by reduced demand by the Government upon the public?
Mr. Barnett: It depends on what else is done, as the right hon. Gentleman

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knows very well. I appreciate that he is not seeking to make a debating point. Unlike the hon. Member for Blaby (Mr. Lawson), he does not need to. The fact is that this will depend on what other action the Government take. But, as I pointed out with regard to shortfall in expenditure, we make assumptions of shortfall in our Budget judgment in deciding what other action it is necessary to take. That is why there is great difficulty about making an assumption about the effect of any particular shortfall on employment generally. I should have thought that the right hon. Gentleman would agree with that.
But shortfall apart, criticism of our expenditure plans themselves falls into two diametrically opposed camps. On the one hand, many of my hon. Friends think that growth is too slow and, on the other hand, the Opposition think that growth is too fast. All my sympathies are with my hon. Friends' desires to see bigger increases in public expenditure. I shall return to the reasons why we have not felt able to do more at this stage. I shall also return to the criticism of the Opposition that the planned growth is too fast. I assume that is what the Opposition mean in their amendment when they refer to the White Paper leaving
"inadequate scope for the reductions in taxation".
But first I should mention one fact on which I hope we can all agree. The whole economic environment, both domestic and international, has become a good deal more uncertain and unstable. The increase in oil prices at the end of 1973 both brought about an enormous structural shift in international balances of payments and added to the already worrying levels of inflation in the consumer countries. In consequence, most Governments have been extremely cautious about stimulating demand in their economies. In this situation it is impossible to predict with any degree of confidence the prospects for the world economy—or our own economy—beyond a fairly short time period. One can, and in my view should, seek to achieve the highest possible rates of growth. One can make assumptions about it. One can have hopes about it. But we should not delude ourselves that we can forecast it other than on inevitably uncertain assumptions.
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One particular uncertainty confronting all recent forecasting exercises is the relationship between output and employment. This has behaved very oddly in recent years, particularly in the past year, when employment rose slightly even though output was flat. This makes projections of the future course of unemployment extremely hazardous. The past relationships on which such projections are normally based have not proved a very reliable guide. I mention this because some of those submitting evidence to the Expenditure Committee have laid great stress on the need for the economy to grow at a certain rate in order to reduce unemployment to a given level by a given year.
The prescription in one of the papers submitted was that the Government should make a firm commitment to an annual rate of growth of real GDP of 41 per cent. I wholly accept the motives that lie behind this prescription, but the achievement of a particular growth rate is not something that is within the gift of the Government alone. It requires cooperation, both internationally in stimulating world trade and with labour and management at home in containing inflation and improving productivity. The Government can create the monetary demand for an expansion, but unless they can be sure that this demand will not be dissipated in higher money earnings and prices and that domestic industry is able to match the extra demand with extra production, the result will simply be another inflationary, import-led boom that will kill our hopes for the sort of sustained expansion that, alone, can bring down unemployment.
Mr. Ron Thomas: Can my right hon. Friend give an indication of what is the propensity to import finished and semi-finished manufactured goods of each £1 billion injected into the economy? I should have thought that the major constraint was high penetration of finished and semifinished imports.
Mr. Barnett: It is not possible to take a given £1 billion without knowing the content of it. One "£1 billion" injected into the economy would have a different effect on imports from another. I am aware of my hon. Friend's solution to all these problems—wholesale, non-selective import controls.
Mr. Thomas: No.
Mr. Barnett: Well, perhaps my hon. Friend does not say that, but there are some who suggest substantial import controls. In the light of our strong financial position, if my hon. Friend believes that we could maintain such import controls for long enough for them to have meaningful consequences for our economy generally or for our level of employment, we shall have to agree, in the friendliest possible way, to differ.
The White Paper discusses the major factors that are likely to determine the course of demand and output over the years ahead. The Expenditure Committee's report urges the Government to publish more on the medium-term projections, including publication of the Treasury's work on assessing the medium term. I shall naturally consider the Committee's views carefully when decisions are made about the shape and content of the next White Paper.
I shall also consider the suggestions made about Table 8 of the White Paper which gives projections of general Government revenues and borrowing requirements. The inclusion of such a table has been widely welcomed. Requests have mainly been for widening its scope, both by giving projections on alternative assumptions about earnings and by extending it to include the public sector borrowing requirement. I do not find all the arguments entirely persuasive, but I hope that we can submit a reply shortly.
Meanwhile, given the great uncertainty to which I have referred, we have decided to keep our plans within what might reasonably be expected for the growth of national income. We have all seen the pain caused by having to cut overambitious plans. That is why a vital element in our improved financial position has been the demonstration of our readiness to keep a firm control on public spending. I believe that control is essential not only if we are to maintain a stable financial position but, equally, if we are to be able to increase our public spending.
Within past and present spending plans, concern has been expressed, notably by the Expenditure Committee, about the balance between capital and current expenditure. I appreciate that the criticism from the Committee is generally
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put in an objective and non-party political spirit, although I hope that I may be forgiven for, at times, finding that what may be true of the Committee in general is not true in every particular.
For example, the mind boggles at describing the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) as viewing these matters in a non-party political way. Even more difficult to take is the blatant dishonesty of the Opposition amendment which seeks to jump on this bandwagon when the right hon. and learned Member for Surrey, East had squeezed out of him by a question in last year's debate that he would have cut both capital and current expenditure. That is his way of, as he says in the amendment, restoring a "proper balance". I am being positively moderate in my references to the Opposition and their amendment.
However, I understand the more sincere concern of those who have expressed the view that past cuts have fallen too heavily on capital programmes. But cutting expenditure involves difficult decisions on priorities and, after four years, I am under no illusion that such decisions are likely to please many.
Choices between capital and current expenditure are more complicated than is often realised. Major influences on the balance include the high priority that the Government attach to the protection of the least well off, for example, old-age pensioners, and to the improvement of education and social services. These and other key services entail a large amount of current expenditure. They also provide employment for dedicated people undertaking vital tasks in society—nurses, doctors, teachers, transport workers, civil servants at all levels and many others. The scope for manoeuvre is much more limited than some choose to recognise.
The need for capital expenditure is greatly affected by demographic changes and the changing requirements of individual spending programmes. For example, in the education programme the fall in the number of pupils in schools implies a reduced requirement for additional school buildings. In the housing programme, the proportion of households living in physically unsatisfactory conditions has fallen dramatically over the years. It is still very bad in some areas, but, as was pointed out in the recent

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Green Paper, the era of absolute housing shortage is over.
In the Health Service, the present policy is to substitute non-institutional care for hospital care as far as possible and to reduce the number of hospital beds, along with the length of stay. In the transport programme, the recent White Paper showed that the expenditure needed for roads is less than previously.
In addition to these demographic and programme considerations, we have to pay regard to the consequences that capital expenditure has for current expenditure. All this has to be taken into account when making a judgment on what balance between capital and current expenditure best serves the objectives and efficiency of particular services.
We are aware of the problems faced by the construction industry, but cuts in previously announced plans have been unavoidable. They were painful, and we recognise that the construction industry was heavily affected. However, in the light of the improved financial situation, we announced last year increases in planned expenditure on construction over the period 1977–78 to 1979–80 totalling more than £800 million, and the White Paper plans show a steady level of expenditure on construction—about £6,250 million a year in the public sector.
I know that my hon. Friends who complain about cuts in capital expenditure do so honestly without suggesting that increases be offset by cuts in current expenditure, hut that is not the position of the Opposition.
Mr. Michael English: My right hon. Friend is correct in saying that there were divisions within the Committee on this issue and there is a sentence in our report of which the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) did not approve. His proposed amendment was negatived. There was no Division for the simple reason that the overwhelming majority of the other Members on the Committee, Labour and Conservative, agreed with the sentence that said that we failed to see how current expenditure could benefit from the fact that 60 per cent. of office buildings were being leased rather than owned by the Government.
Mr. Barnett: That is an entirely different point. My hon. Friend should listen to me. I was stating the reasons for the importance of getting a balance between capital and current expenditure. I know that my hon. Friend will show me the same courtesy that I show him. I always listen to him and I answer questions to the best of my ability when I appear before his Committee. I read its reports with great consideration because I nave enormous regard for my hon. Friend and his Committee.
Before my hon. Friend intervened, I was about to deal with the Opposition. They want cuts in capital expenditure. but in order to "restore a proper balance", they want even bigger cuts in current expenditure. They have never told us where they would make their cuts in public expenditure.
If we look at almost any programme we shall find that the Opposition are demanding increased expenditure, and there can be little doubt that more is needed in many programmes. For example, a substantial part of the expenditure on hospital care, community health and personal social services goes to help the over-75 age group. Numbers are increasing. Simply to keep pace with this, and to provide the same standards of service to old people and children in care, hospital and community health services need to grow at 1 per cent. a year, and the personal social services at 2 per cent. a year. Would the Opposition cut the growth of this expenditure?
Then we come to the social security programme. I make no apology for the increased retirement pensions to keep pace with the earnings increases when these are ahead of prices. In this way pensioners are assured of a share in increased living standards, and indeed they have done better than that. Extra expenditure is also inevitable in view of the increasing numbers of retirement pensioners. I hope that the Opposition would not seek to cut this programme.
In education, the numbers of children in primary schools are falling, but those in the more expensive secondary education are rising. After that, part of the peak will be moving on to the even more expensive further and higher education Would the Opposition cut this?
It is against the background of demographic influences such as these that calls

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for cuts in the public expenditure plans set out in the White Paper must be assessed. To counteract the demographic influences that I have mentioned, plus demands for increases in other programmes, even a nil growth means that some programmes would have to be cut. and cut savagely.
Where would those cuts fall? The Opposition are obliged to tell us. It is no use the hon. Member for Blaby nodding his head. He is not yet the Shadow Chancellor. Where are the Opposition intending to make these offsetting cuts for the increases that are inevitable?
Will it be on defence expenditure? Naturally, I take it that the right hon. and learned Member for Surrey, East listens to the defence spokesmen of the Opposition. Therefore, he will know that what they have in mind is a very substantial increase in this expenditure.
Will it be on law and order? I take it that the right hon. and learned Member also listens to his Front Bench spokesman on this matter. If so, he will know that the Opposition also have in mind a very substantial increase in that area. We also know from a junior spokesman that the Opposition want to spend more on the inner cities. Therefore, exactly where would they cut expenditure?
Would it be on transfer payments? I read the article written by the right hon. Member for Leeds, North-East (Sir K. Joseph) recently on the question of transfer payments—industrial and employment transfer payments. I am sure that it appears to workers, particularly in Lancashire, that the Opposition have it in mind to cut temporary employment subsidy to textile workers in Lancashire. We very much want to know whether that is what the Opposition have in mind. Is it the cutting and phasing out of these industrial subsidies? If the right hon. and learned Member does not tell us tonight, I hope that my hon. Friends will remind the House what the Opposition have told us in the past.
If they are not cutting out subsidies to industries and individuals, where will they make the cuts? There is not much left to cut—agriculture, fisheries and food is the only other area. Do the Opposition propose to cut out agriculture payments? There is a most apalling deathly silence from the Opposition Front Bench. They
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have never told us what they intend, and I have no doubt that they will not tell us where the cuts will fall.
Mr. Spencer Le Marchant: Wait and see.
Mr. Barnett: The Whip should not intervene. We have waited, but they have never told us and I do not expect they ever will.
Unless I hear to the contrary, I must assume that what the Opposition have in mind is not planned cuts in actual goods and services, which even they must recognise need more, rather than less expenditure. They will not admit to plans to cut transfer payments. So until I am contradicted, and if their amendment has any meaning, I can only assume that they are planning very large charges for a visit to a doctor, a hospital, new charges on education and massive increases in council house rents and school meal charges. If that is not what they have in mind, perhaps they will tell us, because their whole public expenditure position is totally lacking in credibility.
Mr. Heffer Mr. Heffer rose—
Mr. Barnett: I shall give way in a minute. Actually, the Opposition have no credibility either way, as even large charges of the kind I have described, given the essential exemptions that would be necessary, would make only a modest contribution to reducing total public expenditure, especially allowing for the increases in other fields of public expenditure that they are demanding.
Mr. Heffer: My right hon. Friend keeps using the term "transfer payments". Would he explain to working people precisely what transfer payments are? That term does not mean a thing to the average person. Does it mean cuts in pensions, sickness benefits, redundancy benefits and unemployment payments? If so, would he say so, so that working people will know what that crowd opposite have in mind?
Mr. Barnett: I am grateful to my hon. Friend. He has done the job for me. I know that he understands, the Opposition understand and the House understands. We on this side of the House will make sure that there is no doubt among the electorate later this year or perhaps next

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year. We shall tell them just what is intended by the Opposition.
On the other hand, my hon. Friends have an entirely different motive for pressing increases in public expenditure. I do not complain. In fact, I welcome the pressure.
Mr. Ivor Clemitson: You could have fooled us.
Mr. Barnett: The point is that against the background of the present international economic climate and our experience over many years, it is essential that we do not plan to spend more than we can afford.
Nevertheless, we can point to significant achievements in public expenditure. Expenditure on housing in each year of this Government has been significantly higher than during the final two years of the last Conservative Administration. We have sustained a steady growth in health and personal social services and we have substantially increased pensions and social security benefits.
We have steadily increased expenditure on law and order as well. We are now spending more in real terms on law and order and protective services than the last Conservative Government, and our record on overseas aid demonstrates our concern for the plight of the Third world.
These improvements have been achieved at a time when real living standards have declined. However, things are now improving and real take-home pay is starting to rise again. There is a lot of ground still to be made up. That is why our plans for the growth of public expenditure need to be within the likely growth of GDP over the White Paper period.
But we have planned for additional growth in public expenditure. I hope that it will be possible to do more still in the years ahead. We do not have to apologise for wanting to see improvements in our public services. Real living standards and the creation of a decent civilised society are dependent on something more than the need to cut taxes, important as that is after a decline in real take-home pay.
In our first three years we had to concentrate on cutting public expenditure, or rather cutting public expenditure plans.
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That is an important distinction. Even allowing for a £1½ billion estimated shortfall next year, adjusted public expenditure will have grown in real terms between 1973–74 and 1978–79 by around £2½ billion, or 5 per cent. From now on we can look forward to a steady planned growth of expenditure.
I know that many of my hon. Friends would like us to do more and faster. I hope that it will be possible, but we must first earn it. Meanwhile, we must not jeopardise those prospects by giving this cynical Opposition an opportunity to preside over the destruction of the public services, as we now know them, especially as they do not even have the honesty to spell out their secret plans. I ask my right hon. and hon. Friends to dismiss the Opposition amendment and to support the Government's motion.
4.32 p.m.
Sir Geoffrey Howe: I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof:
'declines to approve a White Paper which fails to restore a proper balance between capital and current expenditure, and which leaves inadequate scope for the reduction in taxation needed to create a healthy and thriving economy'.
I wish to begin by reminding the House of the remarkable style, even for him, in which the Chief Secretary opened his speech to the House this afternoon in one prolonged paragraph which added up to the words "I do not know".
I wonder whether the Chief Secretary has any recollection of the object of the White Paper on Government expenditure. Does he remember that when the idea was first adopted by the previous unlamented Labour Government it was commended on the basis that—and I quote from the White Paper in April 1969—
"This new annual White Paper which will look three and five years forward at the resource implications of public expenditure would prove of great help to public discussion."
That was the then Labour Government recommending the implications of the original Plowden Report, which suggested that the White Paper would be designed to
"facilitate the creation of informed public opinion about these matters."

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It recommended that
"the various official published documents should expound the fact of public expenditure as lucidly as possible."
The Chief Secretary has some experience of moving away from the standards of lucidity and clarity there envisaged. This White Paper, which will be the last he will ever present, shows that the longer he goes on, the worse he gets.
I am sure that the whole House will agree with one observation made by the Select Committee—and the House is grateful to the hon. Member for Nottingham, West (Mr. English) and his colleagues for the work they have carried out. Paragraph 4 of the Select Committee's report said that the White Paper was
"capable of being read only by professionals who are prepared to study it intently, read all the footnotes and perform extensive calculations".
That is astonishingly moderate language when we consider that that document was composed by the hon. Member for Nottingham, West, my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and the hon. Member for Luton, West (Mr. Sedgemore).
The Select Committee referred simply to the "obscurity" of the White Paper. The Committee must be astonished at its own moderation in using that word. Rather more to the point was the observation we had from the former chief economic adviser to the Government, Sir Alec Cairncross, who, after having wrapped his head in wet towels, referred to the "incomprehensibility" of the White Paper. That is correct—and it is not a literary criticism of the Chief Secretary's style but a description of the thinking, if that is not too charitable a word, that lies behind the document.
The document contains no analysis of the Government's planned demand on resources. That has disappeared. It contains no monetary analysis or reference to money supply. It is not surprising when this afternoon's figures show money supply roaring ahead by 14¾ per cent. [HON. MEMBERS: "Oh".] The Chief Secretary may be amused at that, but the Chancellor of the Exchequer has been priding himself on setting targets of the growth in money supply of 9 to 13 per cent. It is now way beyond that. But the White Paper has nothing to say
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on that score. It contains no estimate of the outlook for the economy but contains instead a coy and far from sensible assumption for the growth rate of the economy in the year ahead.
Treasury witnesses before the Committee were asked to speak on this topic. They were far from forthcoming. They said that the growth rate figure of 3½ per cent. was not a target, a policy or a forecast but a sort of projection. When asked what this "sort of projection" was, they said that it was founded on a number of assumptions. One of those assumptions was that earnings in the year in question would increase by 10 per cent. That looks likely to be too low. Secondly, it assumed that the exchange rate would be 62¼ per cent. of the Smithsonian value, which is certain to be too low. Thirdly, it assumed that there would be a continuing growth in world trade, but all current comments suggest that that will not happen.
The White Paper contains no meaningful commentary or analysis of the likely course of the economy in the next year. Perhaps I am expecting too much of this document, which is only 180 pages long and costs only £3·05p. The title of the document makes plain that it relates only to the Government's expenditure plans. Perhaps it is unfair to expect the document to deal with more than the Government's expenditure plans.
Therefore, we look for details about that matter with some excitement in the hundreds of tables, but even the answer to that is not to be found there. It is no wonder that the Chief Secretary began his remarks by trying to deal with this matter in his inimitable fashion by explaining that he did not know what the Government expected to spend next year compared with what they are now spending. It may be hard for the House to believe that, but it is the case.
So, since the White Paper appeared, dozens of brains have been whirring up and down the country in a kind of national economic lottery to decide what the Chief Secretary may have meant. If one looks at the answers as to what the Government may have in mind as between what the Select Committee's various economic advisers said, one finds that one said that expenditure might fall rather than rise, while at the top end is a growth forecast of 8·2 per cent., which is

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the figure I used in my comment. That was used by two other people who presented papers to the Select Committee.
It is no wonder the Chancellor has not appeared to speak in defence of the White Paper. He has not even dared to sit alongside the Chief Secretary in this debate. He made a flying visit a little earlier and then disappeared, no doubt astonished and dismayed. In other words, he has left the matter to his accountant—in the same way as a recalcitrant taxpayer leaves things to his accountant—to try to justify the position.
When we examine the performance of the Chief Secretary before the Select Committee, we appreciate that its members must have waited with bated breath for the right hon. Gentleman's comments on what he expected next year's Government expenditure to be. The right hon. Gentleman gave the Committee the classic reply that it
"could be anything ranging from 2 per cent. to 8 per cent".
That is the band that he puts forward for the year that is shortly to begin. It puts in perspective the figure that appears in the White Paper for the last year in the series if the forecast even for the forthcoming year is between 2 per cent. and 8 per cent. That is what we have from the right hon. Gentleman after his long professional career, in which he has given his clients and others a true and fair view about the state of their accounts. That is a career that we are longing to see him resume as soon as possible.
We must assume that a growth of between 2 per cent. and 8 per cent. is the right hon. Gentleman's true and fair view of what is likely to happen to public spending. My hon. Friend the Member for Cirencester and Tewkesbury has said that the economy is as idle as a painted ship upon a painted sea. One might add that it is now a painted ship whose radar, sextant, compass and every navigational instrument have broken down. That is the picture that the right hon. Gentleman would have us believe.
I do not believe that the Chief Secretary is quite such a simple man. I do not believe that he has presented his figures in this way merely on the basis of ignorance or because of an inability to match what his predecessors have done.
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There is a curiously revealing bit of skill in the right hon. Gentleman's construction of the White Paper, to which he referred today. He made the great point that one of the important qualifications about the likely growth of public spending is contained in a footnote. Let the House mark that. He put his qualification in a footnote. When asked about that when he appeared before the Select Committee, he said that he did not want to have it
"tucked away in some paragraph".
Is that his idea of tucking things away?
The reason for that approach is that the White Paper was prepared not for one audience, not for two audiences, but for at least three. That is why we have this band of contradictions. The White Paper was prepared for the benefit of international financiers and bankers who care about the danger of overspending. It has to demonstrate to them that public spending is being tightly and ruthlessly controlled by this fierce fellow at the Treasury. The figure that appears in large print for the financiers and bankers, and which is publicised widely, is a growth rate of 2·2 per cent.
The White Paper also has to satisfy Labour Members below the Gangway who are increasingly concerned about shortfall. It has to persuade them that the economy, under the right hon. Gentleman's beneficient guidance, is about to resume its happy explosion of public expenditure. That is why 8 per cent. appears at the top end of the bracket.
Thirdly, the White Paper has to satisfy the Prime Minister, who is now developing an increasing concern, for electoral purposes only, to begin cutting taxes.
Somehow the right hon. Gentleman has to show simultaneously that he is not increasing spending very much, to show that he is increasing spending massively and to show that he still has enough room left to fulfil the Prime Minister's tax cut pledges. The Select Committee was quite right to draw attention to that state of affairs and to point to what is described as
"the absence of any argued strategy"
in the White Paper.
There is no such strategy in the document. This great strategic Government who took office four years ago with plans for putting the country back on the rails

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are now without a strategy. Even the Chief Secretary cannot think of a way of squaring the circle. We may as well discard him from the argument and take our only cue from the evidence of the Treasury witnesses.
What did they say? They stated that the likely increase next year was 4 per cent. up on this year's outturn.
Mr. Nicholas Ridley: Is it not true that the Chief Secretary said that anyone who made a guess as to what it would be was either a fool or a knave? Is it not rather unfortunate that the right hon. Gentleman should call his own civil servants either fools or knaves?
Sir G. Howe: It is curious, but when men are driven into a desperate corner under cross-examination, as the right hon. Gentleman was, they are likely to say desperate things.
Mr. Joel Barnett: Will the right hon. and learned Gentleman point out in the document where any of my officials forecast exactly a 4 per cent. growth for next year?
Sir G. Howe: That is the figure that they repeated several times.
Mr. Joel Barnett: Will the right hon. and learned Gentleman quote the relevant passage? Let him tell the House what they said.
Sir G. Howe: In previous White Papers, Governments have condescended to make forecasts of this sort. In the relevant passage this year, a Treasury witness told the Select Committee:
"if you want me to give a forecast, then the best forecast that I can offer is that it may be of the order of £1½ billion and that would give an increase of about 4 per cent. However, I would again stress that that is a single figure in the middle of a wide range."
The House is entitled to know roughly where the Government think they are going. How can the Government say, as the right hon. Gentleman said earlier, that they are confident that matters will take such and such a course over the entire period of the White Paper? Yet that was what the right hon. Gentleman said not long back. He said that his planned growth of public spending over four years would be lower than the likely growth of gross domestic product. How can he say that that will be so over four years when
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he is unable to say with any confidence what the GDP growth rate will be for the next 12 months and when he is disclaiming any knowledge even of what the growth of public spending will be during the same period?
Mr. Joel Barnett Mr. Joel Barnett rose—
Sir G. Howe: I shall give way later.
It is clear that if there is a 4 per cent. growth in public spending over this year's outturn it will exceed any conceivable forecast of the likely growth of the economy during the forthcoming year.
Mr. Heffer: I revert to the right hon. and learned Gentleman's point about forecasting and the role of civil servants being that of either a fool or a knave. Is he aware that his hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) wrote a pamphlet, which was published by Aims of Industry, which indicated clearly that in his view civil servants were all fools or knaves?
Sir G. Howe: I gave way to the hon. Gentleman because I normally find his interventions are to the point and that it is worth while responding to them. However, if he wishes to make that point, he may make it to my hon. Friend the Member for Cirencester and Tewkesbury—that is, if he thinks that it is worth making at all.
Mr. English Mr. English rose—
Sir G. Howe: No, I cannot give way to allow the intervention of the hon. Member for Liverpool, Walton (Mr. Heffer) to be followed by an intervention of the same sort.
A growth rate of 4 per cent. in public spending with a GDP growth rate of less than that will be taking us down the wrong road. The right hon. Gentleman must know that. He must know that if taxes are cut in the forthcoming Budget, as we are all told they will be, the inevitable consequence of a 4 per cent. growth in spending over the next year and the nation's GDP growing at a lesser rate is that a Labour Chancellor in office in 12 months' time—that will not be the position—would find himself obliged next year to increase taxes again.
Mr. Heffer Mr. Heffer rose—
Sir G. Howe: No, I shall not give way again.
Mr. Heffer: Why not?
Sir G. Howe: I shall give way later.
The Chief Secretary spoke about the agony of cutting over-ambitious plans. It seems that his plans for spending are that it will increase between 2 per cent. and 8 per cent. and that his best guess is 4 per cent. That is well beyond the most optimistic assumption for the rate of growth of total national wealth. The people should not be misled. They should be told that that is what will happen. A Labour Government with these spending plans are not merely restricting their chances of reducing taxes but are making tax increases in the year ahead inevitable.
Mr. English: If the right hon. and learned Gentleman looks at page II of the Select Committee's report, he will see that the figure of 4 per cent. that we took from the Treasury is really 3 per cent. if we exclude the sales of BP shares as an exceptional factor, unless he thinks that we shall sell another chunk of BP this year. Surely the right hon. and learned Gentleman must exclude the sale of BP shares as exceptional. It should not be assumed that we shall sell a bit more of the Government's holding in BP.
Sir G. Howe: I know that my hon. Friends are looking forward to further sales of BP shares as soon as possible.
Even if one were to accept that the figure is 3 per cent., that figure is likely to exceed the likely rate of growth of the economy. The reality will remain—
Mr. Joel Barnett: The right hon. and learned Gentleman has made an important statement. Is he saying that if by any mischance he ever became Chancellor, one of his first tasks would be to sell the rest of the Government's BP shares?
Sir G. Howe: I was not describing my first task. There are many more important things to be done to put the economy right when we come back to office.
Mr. Joel Barnett Mr. Joel Barnett rose—
Sir G. Howe: The Chief Secretary was making a bogus point. He knows that we were exhilarated when we saw that the Government had the good sense to sell a
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large tranche of BP shares. It is one of the few sensible things that the Government have done.
Mr. Joel Barnett Mr. Joel Barnett rose—
Mr. English Mr. English rose—
Mr. Deputy Speaker (Mr. Oscar Murton): Order. There appear to be three separate debates taking place. We must come to order. Sir Geoffrey Howe.
Mr. Joel Barnett Mr. Joel Barnett rose—
Sir G. Howe: I am dealing with the subject of the debate. I am not in the least surprised that the Chief Secretary should seize on any opportunity to get away from the subject of the debate. I shall come back to it now.
I shall describe the conclusions that we draw from this document and the way in which the House should react to it. There is no prospect of the economy recovering its prosperity through some automatic expansion of exports by some form of export-led growth. The movement of trade figures in the last three or six months certainly underlines the wording used by the Bank of England in today's Bulletin that the outlook for export-led growth is "sombre."
Nor—here I agree with the Chief Secretary—is there any hope of a solution along the lines advocated by some Labour Members below the Gangway for increasing public expenditure. The Chief Secretary was right to point out that that would be a prescription for inflation. If things are not to turn out that way, we ask: where is the money for increased public expenditure to come from? It will come from the pockets of the people represented by Labour Members below the Gangway—the very people whose votes the Prime Minister is seeking when he talks now about the need for tax cuts.
Two years ago the Chief Secretary told us that if we were to take away every penny over £5,000 from people's incomes that would increase the yield of taxation by about 6 per cent. That is rather less than, or just the same as, to be fair to the right hon. Gentleman, the Chief Secretary's forecasting bracket for the likely outturn of public expenditure next year.
Mr. Russell Kerr: A wealth tax.
Sir G. Howe: The people whom Labour Members below the Gangway claim to represent are asking the question that the Prime Minister is beginning to learn: where are we to get public expenditure from, except at the cost of a higher price in the form of higher taxes on us? A wealth tax will not help them. The yield from a wealth tax—whatever form has so far been proposed—would be less than sufficient to keep the British Steel Corporation afloat for more than six months. The sooner the Government drop their proposals for a wealth tax, the greater would be the contribution to the health of the economy. If only they had sense to follow the example of the Irish Government and to scrap it before it is introduced, it would be of enormous advantage. There is no hope there of increased public spending.
Mr. Alexander W. Lyon: Will the right hon and learned Gentleman give way?
Sir G. Howe: No. I must get on.
If we were to raise money for more public spending, how would it be spent? How would Labour Members below the Gangway hope to spend it to increase prosperity and to raise our economic performance?
The National Enterprise Board is reported to be scouring the country and failing to find any places in which to put its money. To argue that temporary employment subsidy or subsidies to steel are any long-term answer to our problems is equally to deceive ourselves. We understand why in this country and in other countries Governments are looking for ways of maintaining employment, one would hope, on a temporary basis. But the Government as well as anybody else that the temporary employment subsidy and subsidies to the steel industry will not in the long run either create wealth or save jobs. The East Moors steelworks and others are closing at a time when unemployment is worse than it was one year or two years ago and when up to £1 billion of taxpayers' money has been spent on sustaining the steel industry. We have moved further down the road.
Therefore, the money that is being spent in this way will in the end destroy jobs, because it will have come from taxes paid by other working people and by other companies from which jobs should come.
Mr. Dafydd Wigley Mr. Dafydd Wigley (Caernarvon)rose—
Mr. Joel Barnett Mr. Joel Barnett rose—
Sir G. Howe: I give way to the hon. Member for Caernarvon (Mr. Wigley).
Mr. Wigley: Will the right hon. and learned Gentleman tell us whether it is his intention, if a Conservative Government come in after the next election, not to have the type of temporary employment subsidy about which we have been talking, particularly in the context of the steel industry?
Sir G. Howe: The answer is clear. It is a temporary employment subsidy. Therefore, it will eventually have to be tapered out. It cannot go on indefinitely. It is no solution to the problem. The longer we go on imposing taxes on other businesses and workers to maintain it, the more difficult it becomes to maintain employment and to expand production in other places.
There is no need to go on down this desperate road. Labour Members do not seem to understand that there is another way of running the economy. For example, the United States of America, with a 5 per cent. wealth tax and a top rate of income tax of 50 per cent. on incomes higher than in this country, has over the last three years created—[An HON. MEMBER: "Unemployment."] I am coming to unemployment. In the last three years the United States Government have created 8 million new jobs. Unemployment there has been coming down since 1975. Unemployment in the United States in the last quarter of last year was 6·8 per cent.
The achievements of this Government have resulted in unemployment rising over the same period. In the last quarter of last year our unemployment rate was 7·2 per cent. Unemployment has gone up in this country, whereas in the United States it has come down. For example, California, with a population about half the size of our own, has seen its steelworks and bomber factories closed down in the light of the ending of the Vietnam war. And, indeed, that State faces Japanese competition more closely than we do. Yet, over the last two years, it has created 400,000 new jobs because it is a prosperous, thriving, free enterprise

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society. That shows what can be done if we go down that road instead of the road about which the Chief Secretary was talking.
Mr. John Pardoe: I do not know whether the right hon. and learned Gentleman minds misleading the House, but I must save him from misleading himself. There are two other countries, Switzerland and Germany, which have the kind of economies of which he was speaking. Switzerland has lost 10 per cent. of its jobs since 1973–300,000 out of a work force of 3 million. Germany has lost 1·8 million jobs since 1973, which is 7 per cent. of its work force. It does not always work.
Sir G. Howe: Germany has an unemployment rate rather less than half that prevailing in this country, and it is coming down.
Mr. Pardoe: Will the right hon. and learned Gentleman give way?
Sir G. Howe: I cannot give way continually.
There are reasons why economies of that kind are more prosperous than our own. The United States, Germany and most other Western economies of the same scale as our own are prospering better than we are because they have tax systems which, unlike the one created by this Government, make it worth while for people to work, to move house, to change occupations, to acquire new skills and to start new businesses. In those countries it is still possible for people in a wide range of occupations to get rich and to prosper out of their post-tax incomes without provoking the hostility of the Tribune Group. That is what we suffer from here.
It is not just a matter of high income earners or high taxpayers. Labour Members below the Gangway may laugh. But what sense does it make to have the level of benefits payable to a family man with three children at £55 a week free of tax while alongside it we have a tax system which requires that same family man with three children to pay tax of 40p in the pound on an income of £45 a week? It is absolute lunacy to ask people to pay tax on incomes which are £10 below the poverty line. Tax concerns not only high
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income earners but ordinary working people. Members of the Tribune Group would do well to remember that more often than they do.
In addition, a great deal of public expenditure in this country is now devoted to the administration of bureaucracy, and that is a positive deterrent to enterprise. Members will have seen yesterday, for example, a story in the Daily Mail about one of Britain's leading housebuilding companies pulling out of housebuilding because, to quote from its chairman:
"It is simply not worth our while to continue. Many of our managers are having to spend most of their time dealing with central and local government regulations. One of our directors spends 70 per cent. of his time dealing with planning appeals. This kind of work is simply not cost-effective. Virtually every site we want to develop is the subject of planning appeals."
The bureaucracy of the administration, for which we are paying, for which the taxpayer is paying, is standing in the way of enterprise and growth. Those are the reasons why public spending has to be reined back to take a smaller share of national wealth each year. That is what the Chancellor described as his intention when he wrote to the Director of the IMF in 1976. In December 1976 the Chancellor said:
"An essential element of the Government's strategy will be a continuing and substantial reduction over the next few years in the share of resources required for the public sector."
Whatever happened to those good intentions? They are still entirely valid.
When the Chancellor spoke to the House at the time of the White Paper in March 1976 he said that it was then his intention to hold public spending steady for several years and to ensure that there was no real growth in it. That is still right. There should be no further expansion in real public spending for some years to come beyond the level of outturn in the current year.
I do not need a lecture from the Chief Secretary to remind me of the importance that we attach to defence and the police. The increases which we all regard as necessary on defence expenditure and on the police and law and order should be found from within that total. Within that total, room should also be found to redress the balance between capital and revenue expenditure. For many years the

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balance between capital and revenue has run at between 18 per cent. and 20 per cent. Now it has fallen to about 9 per cent. A switch will have to be made within that total of resources.
Labour Members have asked about and have been told often enough where the savings should be found. In the first place, when the Government have announced plans, as they have, for example, to raise the charges for school meals, those plans should be implemented and carried ahead. In the second place, there should be much tighter management of existing programmes. The Public Accounts Committee's reports abound with examples of ill-controlled, extravagant and wasteful Government expenditure. The Devonport dockyard, for example, ended up by costing more than four times its original estimate of £20 million. The Liverpool hospital cost four times its original estimate of £11 million. The Professional and Executive Register places only one applicant per day in each of its offices up and down the country.
Labour Members say that it is not possible to make savings by applying proper discipline to public spending. It is the answer of Labour Members to say "A few £10 million, £20 million, £30 million, £40 million-what does it all add up to?" They should face the reality that Conservative councils which have come into office over the last year throughout the country have been able, with proper control of public spending, to cut back expenditure by 10 per cent. and 20 per cent. simply by prudence and frugality.
Mr. Joel Barnett: The right hon. and learned Gentleman has mentioned school meals and the PAC. Is his suggestion that the PAC never found any overspending during the Conservative Administration?
Sir G. Howe: Not in the least. There are many examples of overspending found by PAC reports. All I am saying is that a tighter administration of the whole range of Government spending programmes would save substantial sums of money, which has happened in local authorities under Conservative control. The Chief Secretary should not be laughing at that prospect. If he were able, by tighter administration, to save 2 per cent. on the total burden of public spend-
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ing, he would be saving more than £1 thousand million a year.
Beyond that, the total expenditure on trade, industry and employment planned over the next 12 months is £3,000 million. That is the total spending on those three programmes over the next 12 months, without taking any account of the continuing losses of the British Steel Corporation. Mysteriously, those losses do not appear under that Vote. The spending on trade, industry and employment is almost one and a half times as much as the annual corporation tax paid by British industry.
The Public Accounts Committee has reported a number of projects in development areas costing £100 million, which would have gone there anyway and for which regional development grants were, in fact, unnecessary. It has been drawing attention to the fact that the present pattern of regional development grants is wasteful of money in the way in which it is not related to the number of jobs created.
Mr. Pardoe: It is the right hon. and learned Gentleman's Act that is doing it.
Sir G. Howe: It is also wasteful in the way in which it is being administered. Within the total of £3,000 million there is a substantial saving that can be made and the CBI is right to say so.
The budget on housing runs all told to £4,000 million. Almost half of it is on subsidies—up from a much lower figure, as the Chief Secretary was boasting, four years ago. Almost £2 billion out of £4 billion is going on subsidies. They have doubled in real terms between 1973 and 1974. There is room for substantial savings to be made there.
At the time of last year's White Paper it was the Chief Secretary's target to raise the percentage that goes forwards thereon on housing being paid in rent from the figure of 42 per cent. to a much higher figure. A much larger saving could be made if the Government were willing to encourage the sale of council houses.
Finally, savings could be made if the Government were to abandon those elements of Socialism which they have already placed on the statute book which threaten to cause a good deal of Labour Members not to be content with what has happened. The Community Land

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Act, for example, is being doubly futile. [HON. MEMBERS: "No money."] That is exactly the point. We have got the entire legislative apparatus of the Community Land Act multiplying and increasing the process of administration in local authorities up and down the country. Ask local councillors the extent to which they are having to take account of these legislative provisions, although they are not fertilised with money. The bureaucracy is there but the purpose for which it was intended is not. So it should be repealed forthwith.
The reality is that public spending for some purposes is essential and good, but for many other purposes it is a comforting way of describing the process whereby the Government misspend money which they have taken from the people. All too often the process of public spending is uncontrolled and reduces choice, lowers living standards, causes inflation and destroys jobs. The White Paper offers no prospect of an end to increasing public expenditure as a part of the total national income. If it is allowed to continue, if public expenditure is allowed to grow on the scale forecast by the White Paper, there will be no prospect of significant tax reductions and no prospect of a restoration of the property of our economy.
For those reasons, I invite my right hon. and hon. Friends to support our amendment in the Lobby tonight.
5.9 p.m.
Mr. Michael English: The idea that the Prime Minister and the Chief Secretary are Socialists, red in tooth and claw, which I think was the picture that the right hon. and learned Member for Surrey, East (Sir G. Howe) was trying to paint, is not generally appreciated on this side of the House. The Chancellor of the Exchequer could perhaps be described as a more orthodox Chancellor in monetary terms than his predecessor under a different Government. That may be rightly so.
I want to thank a lot of people who helped the Expenditure Committee. The right hon. and learned Gentleman mentioned briefly the number of economists who wrote papers for the Committee. One of them was his colleague on his Front Bench, the hon. Member for Blaby (Mr. Lawson). We are grateful to all
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those people who wrote papers. It says something for the prestige of the House that they did so so readily. Of the people whom we asked to write papers for us, only one person, who was out of the country at the time, found himself unable to do so. Instead, his colleagues wrote a paper for us. People do that only when they regard the House of Commons as being of some importance. When it requests assistance, they give it readily. I thank all those people who so assisted us, and I hope that the Financial Secretary, unlike the Chief Secretary, will thank them as well on behalf of the Government.
I turn to the question of obscurity. In times past, like many other right hon. and hon. Members, I was once chairman of the finance committee of a local authority. It was the Rochdale authority, and I had on that committee the hon. Member for Rochdale (Mr. Smith). His presence made it extremely interesting.
Each year, a local authority estimates its expenditure and usually manages to come within about 3 per cent., plus or minus, of the figure that it anticipates spending in the forthcoming year. Figures for local authorities as a whole were produced by Dr. Marshall for the Lay-field Committee in which he showed that local authorities were capable of estimating their expenditures with a fair degree of accuracy. No human being in this unforecastable world can be precisely accurate, but it is possible to get within close and reasonable limits, and, in my view, the limit is plus or minus about 3 per cent. in the case of local authorities.
I quote local authorities because, in round figures, they represent one-third of public expenditure, so that the people responsible for that third have over a period of years shown a precise ability to estimate what they will spend. Over a period of years, it seems to me that the Government have not had the same ability to forecast the other two-thirds of expenditure.
I hope that it is realised that when the Committee criticises shortfall, it does not criticise it in the abstract. We anticipate that every other year on average there will be a shortfall, and we anticipate that on plans of this type, which are not cash limits but forecasts of proposed expenditure in real terms in the alternate

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Years—approximately every other year, though not so precisely—there will be an overspend on those planned figures.
That is not expected in the case of cash limits, because a cash limit is what its name implies. It is a limit. It is like the lines on the Floor of this House. It is the point beyond which one may not go. That does not apply when one is merely forecasting the real level of expenditure—the programme or the plan of expenditure. That is what the title of the document is. The Government gave themselves their own title, and their title is "The Government's Expenditure Plans". I think that there was a year when they actually spent the money that they proposed to spend, but in all other years they underspent it. When that happens, it means that what is being planned is not happening. What that means in terms of jobs, we do not know precisely, but it means something. It means that some people are unemployed whom the Government did not plan to leave unemployed. It means that some people are not in jobs who should be in jobs. It means that some schools, houses and hospitals, or whatever it may be, are not being built.
When hon. Members had very deep and passionate arguments about the Government's expenditure cuts, we were talking about a myth. We are not talking about the important issue, because the total of the Government's planned expenditure cuts is less than the accident of shortfall. So we were having the argument on the wrong subject. It was of great importance. We were discussing £2 billion in two successive sets of cuts. But in fact the unplanned shortfall was greater than the planned cuts.
Whatever the views of right hon. and hon. Members may be on expenditure cuts, that cannot be said to be an adequate way of running the country. It applies to successive Governments. I do not make a party point. It cannot be said to be the proper way in which this House should be considering this issue. We should be here discussing the Government's plans for the future. We are discussing them. That is the very title of the White Paper that we are discussing. But, after the experience of years past, one can almost forecast now that in practice the figures that we are discussing will never happen. Something less will happen. Because it is something less that will happen—but we
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do not know what—we are in the difficult position of discussing what we do not know. That cannot be.
What is worse, we cannot tell how far the reality is known within the Government. My right hon. Friend the Chief Secretary will be the first to tell me if I fail to point out that the Treasury, responsible for volume I of the White Paper, anticipates a shortfall and has put a figure of £1 billion for it into the total in these figures. So that whenever we discuss, say, the total of the health programme, the education programme, the road programme or any other programme in which any individual hon. Member may be interested, we must always remember that that figure in volume II, when all those programmes are added up, does not equal the total in volume I. The total in volume II is £1 billion more than the total in volume I.
But it is not so simple as just saying that we can knock, say, 4 per cent. off every programme. We know that shortfall occurs in large lumps in some programmes and in small lumps in others. So in each programme we do not know what the figures in volume II mean. Therefore, to a certain extent, we do not know how far Departments are aware of this when they are arguing their case with the Treasury or in the Cabinet.
This White Paper is about priorities. The Opposition will probably say that they wanted more spent on defence. Government supporters may say that they wanted more spent on social security or education. But that is what the argument is about. That is what the political argument in the whole country is about.
We are arguing on a basis that we do not know. We do not know whether the figures which the Departments put in will be spent, and we do not know whether the Departments themselves realise that. We know that the Treasury does, but we do not know whether the Departments do. So if the Department of Health says "This is what we want to spend on the National Health Service", we do not know whether it is anticipating the inevitable shortfall. We do not know the basis of the argument between the Department and the Treasury or in the Cabinet.
Mr. Powell: As the hon. Member was speaking, my hand happened to fall on a page in Crossman Volume III. There

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are two sentences there which run as follows:
"We considered Roy's proposal to reckon in our £17 million in exchange for a six-month delay on new hospital starts and we all agreed to turn it down. This was partly because we know we have £45 million of hidden reserves, which Dick Bourton hadn't told the Treasury about."
Mr. English: I am grateful to the right hon. Member for his assistance. He has illustrated the point to perfection.
That, therefore, is what we mean by putting a title to a section of our Committee's report, "The significance of shortfall". It is significant in two respects. It is very big. It is much bigger than anything that the Chancellor of the Exchequer or the Chief Secretary ever intended in the expenditure cuts. It is larger than the total of the two sets of expenditure cuts. Also, it is just not right. It would not be tolerated in local government. It would not be tolerated in industry.
Forecasts cannot be accurate. Human beings are not omnipotent. Certainly they are not omniscient. We all tolerate inaccuracy in forecasts. We know that plans can be made which do not necessarily happen. But what cannot be tolerated is if they never happen and if always the error is in one direction—not in two directions, but always in one. What that means is that all this is a myth. It means that this debate is about a fiction. I do not think that the House will always be prepared to tolerate that situation.
The other major argument is about current and capital expenditure. I have been somewhat critical of the Treasury and the Chief Secretary, but he and I illustrated a few moments ago that we are capable of co-operating readily. The right hon. and learned Member for Surrey, East must have forgotten what we said in paragraph 10 of the Fourth Report from the Expenditure Committee last year. On page ix the Committee said:
"The Government is thus itself acting like those industrialists it criticises for failing to invest. Indeed, even worse, it appears to be cutting capital expenditure and selling off productive capital assets (eg BP shares)."
Contrary to the general tenor of the remarks by the right hon. and learned Member for Surrey, East, that portion of our report was unanimous. There are
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many right hon. and hon. Members opposite—and I am not afraid of it, but grateful for it—who have a strong business sense and a strong sense of the reality of their positions as taxpayers. They do not want to see the Government selling off productive capital assets. They know that in the country, as in a company, that is not necessarily the best way to success.
The same was true this year, although one hon. Member objected. The Second Report from the Expenditure Committee stated:
"We fail to understand, for example, how the taxpayer gains in the long run from the fact that nearly 60 per cent, of Government offices are leased rather than owned."
One Opposition Member took exception to that sentence, but the rest of the Committee did not. That is why there was no Division.
Many Conservative Members as well as Labour Members are capable of seeing that taxpayers' current expenditure must be increased by such a practice as allowing two-thirds of Government offices to be leased rather than owned. A proportion should be leased because there should be some slack in office space that can be disposed of if Government Departments are reduced, if there is a change in the machinery of government or, however unlikely, a decline in the number of civil servants. But the average business man would not agree to 60 per cent, of his office space being leased.
The Chief Secretary used the example of schools. I shall be parochial for a moment and take the example of central Nottingham, which is next to my constituency. We had a slum there called The Meadows. It was built in the 19th century and comprised typical terraced houses on an old water meadow. I see that the hon. Member for Croydon, South (Mr. Clark) remembers because he represented part of Nottingham in his past career. That slum has been torn down and the houses replaced. All that remains are 140-year-old schools. The people have been rehoused in brand new homes, but they are forced to send their children to schools that were built at the same time as the houses that have been torn down. I do not say that one cannot educate children in older schools. Many dedicated members of the teaching profession do that every day. But it is not the best way. The best teachers are not

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attracted to such schools if somewhere else further out of the city has good, efficient and modern schools.
The basic needs element that the Treasury allows the Department of Education and Science to spend is barely sufficient to build schools in the suburbs to keep up with the natural expansion of owner-occupied and corporation-owned houses that are built on green field sites. Not enough money is available to build new schools. This was pointed out by the Sub-Committee that I chair. I have no reason to believe that this has changed. Indeed, it has got worse. This is the reality of what we mean when we talk about cutting capital expenditure.
I am sure that my hon. Friend the Member for Liverpool, Walton (Mr. Heifer) will agree that there is another injustice. If one cuts public expenditure to some extent one reduces the number of jobs in the community. Perhaps that would be a good thing. Perhaps it is sometimes necessary to allow for an increase in jobs in the private sector. However, in the present circumstances, that does not apply because there are over 1 million people unemployed. That situation is likely to continue well into the 1980s according to the evidence given to the Committee.
Where does one cut the jobs? The capital expenditure cuts were of the order of 23 per cent. —much deeper than the current expenditure cuts. The bulk of current expenditure, other than transfer payments, is on jobs in the Civil Service and local government. I do not want to see civil servants unemployed, but if there is a measure of unemployment, and if for economic reasons we feel that we should cut public expenditure, the burden should be borne fairly. The man in the Whitehall office, however reluctant we might be to sack him, should be as vulnerable as the man in the building industry.
Capital cuts are made because they are convenient, there is less row about them and so the man in the Whitehall office stays and the man on the building site becomes unemployed. The construction industry has the least effective lobby. It needs someone, such as the farmers have, to act on its behalf. Perhaps someone from the Opposition Benches could take on that job.
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Construction industry workers also have never been regarded as the most powerful. Some workers in that industry may be eminent, but collectively the unions involved in the industry have never been regarded as being as powerful as some others. They cannot stop mining coal or pull electrical switches. They cannot exercise the same power as some other unions.
The line of least resistance is taken and we cut capital expenditure. It is grossly unfair that the rate of employment in one industry is higher than it is in others. All members of the Committee found that objectionable.
That is why I agree with the first part of the Opposition's amendment. But I shall not vote for it because I do not agree with the second part. I agree that there is a need to restore a proper balance.
Mr. Frank Tomney: Is my hon. Friend making a plea for equal misery all round?
Mr. English: I am making a plea for the prosperity—or perhaps the misery—to be shared. That is a very good Socialist principle. I should have thought that it was highly undesirable for people who possess power to export misery solely to those in the community who do not have that same power. That is what I object to.
These are the principal points that we made as a Committee. We also elicited the possibility of growth in public expenditure in the next year of, in non-exceptional terms, 3 per cent. The figure is 4 per cent. if the BP shares are taken into account. The figure of 3 per cent. is slightly less than one hopes the economy will grow in that year. One would like to see it grow by 3½ per cent., as the Government have forecast, for several years. None of us has much belief in the possibility of it growing at 3½ per cent. for five years in succession, but it could happen for one year and we must hope that it does, even if the state of the world economy causes us to have doubts about that.
I was amazed that the right hon. and learned Member for Surrey, East did not notice that the unexceptional figure was 3 per cent., not 4 per cent. I congratulate him on his skill at escaping from his own figure of over 8 per cent., but he has

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perhaps illustrated that for some incomprehensible reason he does not always check his figures before coming to these debates.
What is most needed is the consideration promised by the Chief Secretary of the presentation of the medium-term assessment in some form. The Government resisted that many years ago. As a compromise, they put in the resources table. We do not mind them dropping that resources table because it was always somewhat artificial, but we cannot debate the future of the economy and public expenditure without a reasonable projection of the Treasury's best guess of what will happen to the economy in future years—the medium-term assessment, as it is called. I am grateful to my right hon. Friend the Chief Secretary for saying that he will consider that. I hope that he does and I hope that the next debate we have on public expenditure will in that sense be better informed. By that time one trusts that the figures in the White Paper may also be more reliable than they seem to be at the moment.
5.33 p.m.
Mr. J. Enoch Powell: I consider this to be a very remarkable White Paper, possibly to be an epoch-making White Paper. If that seems to the House a rather startling statement—it seems to have taken the Chief Secretary rather by surprise—I am reminded of the proverb that the truths which shake the world come upon the feet of doves. I find many doves' footmarks over this White Paper, and wish to draw the attention of the House to some of them and draw one or two conclusions.
The first footmark I find is right at the beginning and is closely related to the amendment to the motion that is technically now before the House. It is in paragraph 4 and it states:
"it is necessary that the planned growth rate for total public expenditure should be within the prospective growth rate of national income."
That is a blameless aspiration or assertion, one that is based upon the desire expressed in the surrounding text to avoid programmes being
"subjected to the disruption of sudden cuts"
and
"to leave room for manoeuvre on taxation"
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—a very delicate expression that has been put more flat-footedly in other contexts.
Before proceeding to consider
"the prospective growth rate of national income",
against which the public expenditure plans in this White Paper are to be considered, I should like to go to the end of the White Paper to draw attention to a very sad sentence in paragraph 65. It reminds readers that there have been "four years of no growth". I admit that the context there is about consumption; but the statement is very little different from that in paragraph 44 which reminds us that
"In the first half of this decade … national disposable income grew very little".
Let us ask whether, at the beginning of these four years—that is putting ourselves back from 1978 to 1974—the forecast of the rate growth of national income was nil, nil, nil, nil. The answer is that it was not, and for a very simple reason. No Chief Secretary of the Treasury, no Financial Secretary—I do not know what it feels like to be a Chief Secretary because that post had not been invented in my time, but at least I was Financial Secretary and I know what that feels like—would possibly have been allowed to produce four years ago a document which proceeded to set out that which we know has actually happened, namely, that the growth rate would be nil, nil, nil, nil over four of the five years which the annual expenditure statement covers.
To that extent, all the expenditure plans over the last four or five years have been based upon what we now know to have been a complete breach of the proposition with which this latest White Paper begins, that
"the planned growth rate for total public expenditure should be within the prospective growth rate of national income."
Of course, there is that saving word "prospective". Prospective growth, when read in this kind of literature, does not mean that growth which the eye of the Almighty already perceives is destined over the next four years. It means the sort of figures which we reckon we dare insert in this kind of paper, especially with the possibility of a General Election in the coming year or the year after.
Much attention has already been drawn to the fact that, greatly daring, in Table 8 the Government have actually displayed

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part of the planned growth of public expenditure against what is coyly called resources. But there are very important and interesting qualifying paragraphs which I hope other hon. Members have read with the same repeated relish as I find that I have done, and they do not stale with rereading. The ratios which are represented in that table, we are told in paragraph 47, are based
"on present expenditure plans and the illustrative assumptions on GDP growth made in paragraph 58".
So, what are these "illustrative assumptions" on domestic product growth which are made in paragraph 58? They are that in the next two years
"GDP will continue to grow at 3½ per cent. and that private sector expenditure will be sufficient to produce a level of demand consistent with that growth rate."
So this is not a nil projection of growth rate. This is not based on form. We are not betting on form. Form for the last four years is zero. Instead, for various reasons which are set out in preceding paragraphs—I shall mention them in a moment—we are working for the next two years on 3½ per cent. per annum growth in GDP. But—and here comes the sentence which I fear will not be so frequently quoted, which will not be inscribed on tablets of stone, which will certainly not be inscribed on any election literature during the period—
"The figures for 1979–80 are thus not forecasts, but illustrations of what might be consistent with one assumption concerning the growth of GDP."
So we have a table set out in this White Paper virtuously purporting to compare
"the planned growth rate for total public expenditure"
with
"the prospective growth rate of national income"
and to draw this vital comparison at any rate for the next two years—something very modest—and yet the
"growth rate of national income"
for these two years, at any rate for the second year, is not even a forecast. It is just an illustration of how the figures would work out, and what the mathematics would be, if one took one particular assumption. So it is just illustrative arithmetic. Say the authors of this paper. "You can take any other figure you like
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and you can work that out, too, as an illustration; but we are not giving you a forecast—at any rate, we are not printing it as a Command Paper—of growth rate in the year beyond the immediate one a year ahead."
For the immediate year ahead, the Treasury, in this paper, has rather more confidence. It says:
"it would be imprudent to count on a faster growth of productive potential than 3 per cent. a year."
It does not say that it will be 3 per cent.: it says that it would be "imprudent to count on" more than 3 per cent. On top of that, of course, there would be the utilisation of the excess capacity, on which I shall now quote from paragraph 56. I apologise for so much quotation, but even this document is intended to be read. In paragraph 56, the Treasury says:
"on present prospects a marked improvement in industrial performance would be necessary to sustain a growth rate above 3½ per cent."
So the Treasury is regarding 3½ per cent., even in the next year, as the maximum that one would be prudent to contemplate; and the 3½ per cent. in the year after that is just an assumption so as to give an illustration of how one works out the mathematics, but is not a forecast in any way.
It may have struck you, Mr. Deputy Speaker, that I have been talking about only the next two financial years. Yet this is a five-year expenditure plan. This is the brood of Plowden, who, in 1961, recommended that for the proper control of public expenditure and for the due education of the public so that they should be brought more into understanding what was being done in their name—a five-year prospect of expenditure should be laid out from year to year. The technical term for that is rolling—rolling, perhaps, in more senses than one.
Here, then, is a five-year projection or plan, as the hon. Member for Nottingham, West (Mr. English) pointed out that it is called, for public expenditure over the next five years. But only for two years are we vouchsafed to know in one case a forecast, in the other case a specimen illustration, of the all important correlative, the growth rate of the national income. So we have one year projection, reasonably argued—that is putting it high —of the growth rate of the national

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income, side by side with a five-year plan of the course and growth of public expenditure.
In an interruption, which was entirely unrehearsed, in the speech of the hon. Member for Nottingham, West, I have already quoted from that remarkable book from which posterity will continue to learn year after year about how people really behave and really think when they are under the stresses of government. I want to venture just one more quotation from Crossman Volume III, because this is about what happens if one has a five-year—indeed, a much less than five-year —future projection of public expenditure.
Once again, it is Crossman and the right hon. Member for Blackburn (Mrs. Castle) on the one side, against the person whom it is now allowable in this Chamber to refer to as Roy—[HON. MEMBERS: "Woy."]—the then Chancellor of the Exchequer, on the other. The book says:
"The discussion was on the whole friendly and good-tempered. At the end Roy said severely, 'It's no good. It's not true that the social services Ministers cannot get economies if they really want to. The fact is that they don't really want economies. Psychologically they are spending Ministers.' He had to be reminded that we had already loyally carried out the economies he had asked for. We had been given a four-year programme and told that in 1969–70 there would be 3 per cent. growth, so we had planned for that. It wasn't fair to say that we are not economical. We had kept within the margins that were given us."
They had, in fact, exploited the well-known benefits of five-year programmes of public expenditure: they kept within them, and here, in July 1969, was the Chancellor of the Exchequer accusing them of being spendthrift and coming back for further cuts.
I only mention, to conclude the quotation, the end of the paragraph:
"Barbara and I secured one major success. We persuaded Roy not to circulate his paper but to discuss this orally on the basis of the medium-term prospects and the various economic documents' but without his specific project of a 2½–3 per cent. cut, which we did not want to see in the newspapers."
So all this agony of cuts in public expenditure derives from following the notion that one can set out a five-year programme for public expenditure, coupled, as it ought to be, with a five-year reliable indication of what resources
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are going to come forward to match that programme. So far from producing certainty, this method has produced chaos. So far from producing confidence in the management of expenditure programmes so that they shall not be
"subjected to the disruption of sudden cuts"
—paragraph 3 of the White Paper—it has caused precisely that. Moreover, it has poisoned the relations between Government and Government supporters, and, worse still, between Government and public, since the public have constantly been given the impression that something which they had already and had earned was being taken away from them almost malevolently.
The whole literature of the subject has been radically misleading, for the figures which were being cut never had any reality. What was really happening was that the Chancellor of the Exchequer was, in preparing his Budget for the coming year, doing what it was his duty to do in the current circumstances as he understood them.
At the spectacle of these fantastic tricks, the angels might be forgiven if they laughed. But we are told that in these circumstances angels weep. Yet I do not want to leave the House without some consolation.
So I shall make a brief reference, more for the benefit of Labour Members, to the relationship of all this with the phenomenon of unemployment, over which they and everyone else are rightly and necessarily concerned. This business of the projection of spending programmes in the light of unknown and unknowable, but necessarily overestimated, future resources not only does nothing to maintain employment: it is a positive hindrance to the maintenance of employment and produces the effects on the building industry, for example, which have already been referred to in this debate.
Public expenditure in itself, addition to public expenditure in itself, cannot reduce unemployment, for it can be secured only by two means: by taking purchasing power away from areas in which it is already being employed or—and we should know this by now—by adding an impetus to the cycle of inflation, which as it is later unwound, inevitably has the result of bringing rising unemployment in its train.

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I am entitled to say, especially to those on the Labour Benches who are anxious about unemployment, that for years as inflation has risen I have said in the House and outside that this portends rising unemployment, because, sure enough, as the rising curve of inflation must descend, so the inevitable concomitant of a reduced rate of inflation—rising unemployment—will emerge, as emerged it has. Unless we can keep the rate of inflation down, unless we can prevent that curve from bouncing up again, we shall be entailing the curse of renewed unemployment upon people in years to come.
As to the five-year programmes—and this is why I hailed this White Paper with such perhaps extravagant hopes as portending a real change—those who wrote this White Paper have at last come face to face with the fact that the whole Plowden notion was misconceived. They have come face to face with the damaging consequences for every section—Government, public, Parliament and the rest —of the foredoomed attempt to create five-year plans, published plans, of public expenditure, matched in this case with two-year projections, more or less speculative, of the growth of resources. We must some time give up this nonsense and go back to proper budgeting which is the function of government and which can be done only in the circumstances of each year as it emerges.
Of course, the Departments, the great services, must have their aspirations for the future. They must know, broadly speaking—although they will modify their notions—where they want to go to. But we must not entail upon ourselves and others the evils which follow from publishing year by year a five-year projection of what no human being can project.
5.55 p.m.
Mr. John Garrett: The right hon. Member for Down, South (Mr. Powell) took a fair time to tell us that we were wasting our time. I believe in the Plowden concept of producing priorities and programmes for five years ahead, but, as I shall try to show, I think that that idea has never been properly followed through.
I wish briefly to comment on both the form and the content of the public
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expenditure White Paper and to express the disquiet I feel about both aspects of what is a very important public document.
The form of the White Paper, including the presentational conventions it embodies, is rarely discussed in this annual debate. It is a subject which can be technical and even boring to hon. Members in a general debate and should properly be discussed in a Committee. Indeed, it is a subject discussed in the General Sub-Committee of the Expenditure Committee, and from time to time the Treasury has responded with some improvements in presentation. But it seems to me right to raise some general principles in this debate to illustrate how poorly served we are with information on which to assess the purposes and the results of Government decisions on public expenditure.
There is a controversy at present about excessive secrecy in government, concerning the Government's proposed information Bill and the counter-demand by many hon. Members for a freedom-of-information or right-to-know Act on American or Swedish lines. I am not directly concerned with that issue here, but I am concerned with the narrower issue of the quality, quantity and scope of the regular reporting on spending by the Government to the House—what in other organisations would be called management information or control information, the kind of information we need in order to assess what the Government are trying to do.
There is a demand at present, most recently expressed in the Expenditure Committee's report on the Civil Service last July, for a new system of powerful investigatory committees of the House, with each committee related to a Department or group of Departments. The Procedure Committee of 1964–65 said much the same thing.
In my view that is an essential reform, but if such a committee system were to be set up it would achieve nothing if there were no parallel reform in the information published by Departments. It seems to me highly significant that the present Expenditure Committee cannot comply with its terms of reference because of the Treasury's failure to provide the information which would enable it to do so.

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The Expenditure Committee was intended
"to carry out a scrutiny of the results and value for money obtained by departments and to assess the efficiency with which departments set and realised their objectives".
The Committee cannot carry out those tasks, because nowhere in our system of one-year Estimates or in the five-year public expenditure survey is there any attempt to display results or set objectives.
What we are shown in the White Paper are enormous aggregated spending programmes, with very little analysis of what they are expected to achieve, and usually only the sketchiest details of what past programmes have produced. In other words, we are told what we are spending but never what we are buying. For example, £6,000 million of health expenditure is accompanied by three pages of discussion and three tables of analysis of service provision in the past.
In contrast, I have been much impressed by the published analyses accompanying the United States federal budget on health spending in the 1978 budget. There are 27 pages of highly detailed information about where the money is going and why, although admittedly for only two years ahead. Those analyses include international comparisons, disease and mortality rates, comparable research expenditures by disease categories, and service provision by region and by category of the population. That is the kind of information needed by legislators if they are properly to examine the priorities and purposes, in this case of health spending, and call Ministers and officials to account.
When my right hon. Friend the Financial Secretary is pursued on this issue and asked for the kind of information I have mentioned, he usually replies that it would be unfair to burden hon. Members with so much detail. I cannot see how hon. Members who are deeply concerned with the rationale behind spending programmes can carry out this important function unless they are given better information. I should like my right hon. Friend to reply to this point, if only to tell us once again that to ask for more information is an impertinence.
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Turning to the content of the White Paper, we are immediately faced with an expenditure shortfall in 1977–78 of £2·4 billion-more than the cuts announced for the year in July and December 1976. Leaving aside the wider implications for Treasury competence of such an under-spend, the Government now appear to be indicating that it shall be a source of tax reliefs in the next Budget, and so an unplanned underspend becomes a policy for redistribution from the public to the private sector.
We shall no doubt discuss these reliefs in the debate on the Budget, but I am convinced that, both in social justice and, for that matter, in popular appeal, it would be better to spend, say, £300 million on the National Health Service or on child benefit than to relinquish an equivalent sum in tax reliefs.
The White Paper is as close as we ever get to a national plan, or, at least, some kind of statement of priorities by the Government. I believe that this White Paper gets some important priorities very wrong indeed, and I shall give a few examples and ask a few simple questions.
The cuts in capital expenditure continue. Capital expenditure for 1978–79 is planned to be 25 per cent. below the level of 1975–76. The consequent damage to the construction industry is incalculable. By next year, capital expenditure will be between 15 and 16 per cent. of public expenditure as against 23 per cent. in 1972–73. Construction work will fall as a proportion of public expenditure throughout this period. One industry particularly important in areas outside the great industrial centres has been singled out for attack without any statement that this was public policy.
Treasury officials, when giving evidence to the General Sub-Committee of the Expenditure Committee, said that school building was being cut because of the falling school roll. When I pointed out, for instance, that there are 264 schools in the county of Norfolk which were built before 1903, they did not think that this had relevance for restoring cuts to the school building programme.
The target GNP growth rate of 3½ per cent., if that is what it is, for the year ahead, if that is what it is, would still leave, even if that were followed right through the whole period, well over

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1 million unemployed by 1981. Where is the justification for that?
The volume increase in defence spending is put at 6·5 per cent. The volume increase for health and personal social services is put at 5·2 per cent. The increase for education, science and the arts is to be 2·4 per cent. How on earth can those figures he relevant to Labour Party priorities? For social policy programmes, nearly all the small planned increase in expenditure will be needed simply to keep pace with the number of the elderly. There is no additional spending on mental health services, and no funds are being set aside to improve community care for the elderly.
We spend less on health care in this country than any other developed Western country. In fact, 5·2 per cent. of our GNP goes on it compared with 7·4 per cent. in the United States and 6·9 per cent. in France, for example. The National Health Service is the most outstanding creation of the Labour movement, and the movement is proud of it, yet we end up by starving it of funds On what basis can it be such low priority? It is clear that the funds allocated to the Health Service programme are far too low, and unless they are increased a real deterioration in standards will follow.
So, obscure in form and misguided in content, the White Paper should be forgotten as soon as possible. The Expenditure Committee says that the Treasury has this year produced a document which reaches new heights of obscurity. Next year, I hope that it will produce one that seeks to inform and at least promote informed discussion. But I doubt whether it will. Yesterday's reply by the Government to the Expenditure Committee's report on the Civil Service on this very question dodged and twisted to avoid any such commitment about giving more information in future.
In the short term, I want the Government to rethink their priorities. We have to increase public expenditure to create jobs both in manufacturing industry, where private investment fails to respond to the inducements we give it, and also on the public services. We have massively to increase the crucially important child benefit. We have to revive the construction industry through public spending and to rebuild the National Health Service.
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I listened to the right hon. and learned Member for Surrey, East (Sir G. Howe) on this great issue, and I understood him to say for the Conservative Opposition "We will build more battleships out of better housekeeping in the Civil Service". Public spending is not some kind of national burden or overhead, as the dominant tendency in the Conservative Party seems to believe. Public spending is the way we create jobs and a civilised society for ordinary people.
6.6 p.m.
Mr. Nicholas Ridley: I hope that I shall be very brief, but it is impossible for me to estimate whether my speech will be anywhere between 2·2 and 8·1 minutes long. I hope, however, that I shall keep within the magical eight minutes which Mr. Speaker announced the other day.
I start with a quotation from page 60 of the evidence to the General Sub-Committee by the Chief Secretary to the Treasury. When I asked him on what forecasts of earnings the White Paper was based, he said that officials
"are given instructions to do this on the basis of Government policy, namely, a 10 per cent. rise in earnings."
But we all know that it will be not 10 per cent. but more. When I asked the right hon. Gentleman why that figure, which is known to be incorrect, should be included in the forecast for next year, he replied:
"it is a Ministerial paper and the figures are prepared on the basis of the Government policy of restraining the growth of earnings to 10 per cent."
Of course, I would not at all wish to be political about this, because we are always non-political in the Expenditure Committee. We may be fairly nonpolitical in the Committee, but the Treasury is not non-political because it is filling up all the figures, to the extent that I almost wonder whether officials do not send to Treasury Ministers a blank White Paper with boxes along the side saying "Tick these where appropriate"—for example "growth will be 0 per cent., 1½ per cent., 2½ per cent., 3½ per cent." "the earnings rise will be 0 per cent., 10 per cent., 15 per cent., 20 per cent."; "inflation will be what you like."
I have never myself been so shocked as I was as the evidence came out on the extent to which the figures have been

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massaged by Treasury Ministers. Indeed, the whole Treasury is a sort of massage parlour. It goes on producing documents like these and the chief masseur, who has just left the Chamber, is, I believe, the most culpable of the lot.
This White Paper, at least so far as it concerns 1977–78, should be the officials' best guess as to what expenditure is going to be, what the growth in the economy is going to be, and what the revenues are going to be on the basis of unchanged tax and matters of that sort. If the figures are to be massaged in this way, I believe that the Treasury should be required to come and give evidence at the same time to the Select Committee, so that we can publish our own version of the White Paper, based not on political hopes and gerrymandering but on what is actually thought, so that Members in all parts of the House would have a chance to discuss the figures, because once one gets to the stage of manipulating the figures there is little more to be done.
I entirely accept what the right hon. Member for Down, South (Mr. Powell) said, and, of course, the key figure has been massaged in this way. The Chief Secretary said in his speech today—he also said it in the White Paper—that we must live within the growth of gross domestic product. His last words were that we must earn it first.
If we look at the figures in the White Paper, we find that the intention is that there will be 3·5 per cent. growth and 2·2 per cent. extra expenditure. Under cross-examination, however, those figures become 4 per cent. extra expenditure and somewhere under 3 per cent. growth—even if we believe that last figure. Therefore, even from within the Government's own White Paper, and for one year ahead only, the cardinal principle upon which the whole thing is erected has been thwarted. I am quite certain that it is right not to seek to carry this exercise into future years.
In the table on page 11 of the White Paper we are given some figures showing the growth of public expenditure as a percentage of gross domestic product, and it is quite clear from those figures that, give or take 1 per cent. here or there, there was a rise of about five percentage
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points which accompanied the entry of the Government into office and which has, broadly speaking, persisted up till the present time and is likely to persist in the year ahead.
There has been, I acknowledge, a much more strict and effective control since 1974–75, and the percentage has been held steady. This, of course, is essential in the sense that the gross national product has not grown for those four years. With hindsight, one cannot help thinking what a pity it was that the control was not imposed at the beginning of the period of office of the Government instead of after that disastrous rise.
But the question that I want to discuss is the permanent shift, it seems, of five percentage points of gross domestic product into public spending. What have we got for it? Labour Members are advocating a bigger shift. What do they think they have got for this 5 per cent. shift which their Government have undoubtedly produced? The numbers and pay of those in the public sector have increased, but I do not think that that is the main point.
There are two big elements. First, there has been a large increase in transfer payments from earners to drawers of benefit, with the result that those who have been on pension have on the whole had their standard of living increased, whereas those who have been earning have, on the whole, had their standard of living reduced. That is a policy which the Labour Government are entitled to pursue. I question whether it is right that, when the standard of living of some people is falling, that of other people should be increased. But if that is the Labour Party's idea of social justice—
Mr. Heffer: It depends on the point at which one starts.
Mr. Ridley: The process of the increase in the standard of living of those drawing a pension has been continuous in the last 20 years, and I do not grudge it. I am not quarrelling with that. What I am quarrelling with is the other major element of the 5 per cent. shift—the massive increase in subsidies. These are disguised in one way or another, or not at all, but they are intended to create jobs. About £2 billion has gone to the Department of Industry for rescues, for

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industrial investment and for keeping lame ducks and the British Steel Corporation going. In addition, a growing sum of money has gone to the Department of Employment for job creation programmes and similar schemes.
Has it escaped the notice of the Labour Party that, as a result of this, unemployment has more than doubled? Can it be the prescription for the future that the way to increase employment will be to increase this sort of activity? Four years is a good period over which to test these things, and there has been no stinting of resources put into the preservation of jobs, yet let us look at the debilitating effect that this policy has had on British industry. Look at the declining competitiveness of our industry, despite the fact that our currency has never been as low historically over a period of centuries as it has been in this period.
The decline continues, however, and the demoralisation and the de-industrialisation of this country have got worse and worse during those four disastrous years. But the Labour Party will never learn that the prescription for dealing with failure is not to give more and bigger doses of the same medicine as before.
6.16 p.m.
Mr. Giles Radice: The bark of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is sometimes worse than his bite, and I pay tribute to the constructive role that he plays in the General Sub-Committee. Certainly his speech was superior to that of the right hon. and learned Member for Surrey, East (Sir G. Howe). I cannot say, however, that either of those speeches persuaded me that the Opposition's amendment is anything other than hypocritical.
The Opposition call for further and major cuts in public expenditure but they do not really seriously say where these cuts are to fall. About the only serious point that was made in the speech of the right hon. and learned Member for Surrey, East was that he would have to think about changing regional incentives. Certainly my constituents in Chester-le-Street will be very interested to hear that he is thinking about changing regional incentives, and I hope that they will draw appropriate conclusions.
Mr. Lawson: I think that the hon. Gentleman may have misheard what my right hon. and learned Friend said. If I recall it aright, what he said was that there was certainly no scope for any increase in public expenditure over the level of the estimated outturn for the present year. He did not say that we were looking for substantial overall cuts below the level reached in this present year.
Mr. Radice: Then where are the Conservatives' tax cuts to come from? The Conservative Party must face up to that question. If there are not to be further cuts in public expenditure, where are the further cuts in taxation, over and above those which will happen as a result of the Budget, to come from?
As the Chief Secretary has pointed out, and as the General Sub-Committee's report shows, the main problem raised in the White Paper is that of shortfall, which, as has been said, is larger than all the Government's public expenditure cuts over the last two years. Certainly this has made the task of the General Sub-Committee very difficult. It has made it very difficult to make a judgment about the spending plans and about whether, as the Chief Secretary says, it is 2 per cent. or 8 per cent. if one is looking at spending plans for 1978–79. It also makes it very difficult to estimate the budgetary stance of the Government. Most important of all, as the Chief Secretary acknowledged, this means a serious cut and a serious loss of services.
The other main criticism of the White Paper has been that it lacks a strategy and that it is not placed in the context of a medium-term assessment. I think that there is a lot in that, but we have to accept that at this time it is very difficult to make a medium-term assessment, particularly when we have regard to the international context. That is a point to which I wish to return later.
I want to say something about the growth of domestic resources. The White Paper, as hon. Members have pointed out, assumes a growth rate of 3·5 per cent. The latest output figures show that the economy is still very stagnant and that there is still very little growth in the economy, although, given the fact that consumer spending is rising and that real incomes are now rising, one

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certainly ought to expect more growth. There is also plenty of headroom in regard to the public sector borrowing requirement, and we are in surplus in the balance of payments. This means that there is a strong case for a stimulus in the Budget.
However—this is a very important point—it is essential that our expansion rate is one that we can sustain. We have had too many dashes for growth. We saw what happened in 1964 and in 1972–73 when we had a dash for growth. We ran quickly up against supply bottlenecks. We sucked in imports and costs went up, which resulted in an inflationary problem. It is important to remember that even with North Sea oil we must not expand domestic demand beyond the ability and the capacity of our own industry to supply it.
I now want to turn to the world context. As is generally acknowledged, the domestic scene this year is overshadowed by the international context. As the White Paper states in at least three paragraphs—paragraphs 48, 54 and 56—our rate of growth will depend in part on developments in the world economy over which we do not have much control. We must also remember that most of our attempts at sustaining growth in the past —in 1963–64, 1968–70 and 1972–73—have taken place against a background of expanding world trade. Indeed, one of the features of the period which ended in November 1973 was that world trade expanded faster than national output, certainly much faster than United Kingdom output.
But the problem is that the prospects for the world economy are the most gloomy that they have been since the war. According to GATT, world trade increased by only 4 per cent. in volume in 1977, compared with 11 per cent. in 1976. On present trends, the increase is likely to be only 4 per cent. this year—well below the levels in the 1960s.
The level of growth in GDP for the OECD countries was little more than 31 per cent. in 1977. On present trends it is unlikely to be higher in 1978, and that is 10 per cent. below its potential level. It is hardly surprising that there are well over 16½ million people unemployed in the OECD countries and that the
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numbers are likely to grow. In addition, we have the background of a very unstable monetary system. The monetary flows have become very unstable. Indeed, the movement of money across the exchange rates threatens to disrupt world trade.
We are facing a major international crisis caused mainly, I believe, by a deficiency of demand on a world scale. Because they are unable to absorb all their new wealth internally, the OPEC countries have been amassing surpluses—to a tune of £40 billion a year—and have put them mainly in fairly hot money and property rather than in investments. That has meant that world purchasing power has suffered. The oil-importing countries as a whole inevitably have to be in deficit. What they have done is to try to shift the deficit one from the other. That, in turn, has depressed demand and output.
In those circumstances, everyone is the loser. The indebtedness of the developing countries threatens to overwhelm all their economies. Already they are threatened by the slackening of world demand and the protectionism of industrial countries. The weaker industrial countries—the ones which have been in deficit—have had to follow restrictive policies in order to improve their balance of payments. That has affected world demand. Even countries in surplus, like Germany and Japan, find themselves worse off. The slackening of world demand reduces the expansion of their exports. As they do not feel able to expand their home demand to take up the slack, the consequences are slower growth and more unemployment. The truth is that at present we are trapped in a vicious circle of demand deficiency, reduced output and growing unemployment on a world scale, from which, I believe, only concerted international action will free us.
Here I welcome the efforts of my right hon. Friends the Prime Minister and the Chancellor of the Exchequer. They have consistently stressed the need for a major international initiative. In particular, I congratulate the Prime Minister on the steps that he is now taking to bring this about. My right hon. Friends recognise that the growth of world trade and the increasing interdependence of the national economies means that there can no longer

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be purely national solutions the problems of our economies.
What is required is a package of measures. Many people would agree that, to be effective, that package of measures has to include the following items: first, a co-ordinated expansion by a number of countries, including the United Kingdom, France, Italy as well as Germany and Japan; secondly, the creation of more special drawing rights by the IMF to help those countries in deficit and to prevent further deflation; thirdly, long-term loans by countries in substantial surplus, particularly to the developing countries. OPEC countries, which are spending about one-seventh of their surpluses in loans to the developing countries, could step them up considerably, as, indeed, could Japan. There is also a strong case for the development of the so-called Ortoli facilities to help to finance European investment.
Fourthly, we need more stable exchange rates. We must move away from the instability of the present system to a more orderly monetary system of a kind envisaged by Bretton Woods.
Fifthly, we need more trading agreements along the lines of the Multi-Fibre Arrangement. If we are to prevent a retreat into a "beggar-my-neighbour" protectionism, we must provide more effective arrangements to ensure that essential industries are safeguarded from both dumping and disruptive trading. In short, what we need is a major change in international behaviour—a change on the scale of Bretton Woods.
What is required is political vision and political will of the kind that led to the Marshall Plan and to the reconstruction of Europe after the war. We are entitled to expect—indeed, to demand—this kind of creative international co-operation, because the failure to act together will inevitably lead to "beggar-my-neighbour" protectionism, further unemployment and declining living standards. Democracy itself could be threatened in many countries. We must act before it is too late.
6.28 p.m.
Mr. David Atkinson: I am grateful to you, Mr. Deputy Speaker, for calling me to make this my maiden speech in such an important debate. It is a pleasure to follow the
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hon. Member for Chester-le-Street (Mr. Radice).
First, I want to record the gratitude of the people of Bournmouth, East for the long period of service of my predecessor, John Cordle. During the by-election campaign last November, I was particularly impressed by the many expressions of appreciation that I received on the doorsteps for the generous help and personal advice that he gave to so many of his constituents for which they will always be grateful.
I am extremely privileged to have the opportunity to represent such a pleasant residential seaside constituency with so many attractive and natural amenities. To most people, Bournemouth is a first-class, all-the-year-round holiday centre. Many hon. Members present will themselves have experienced the hospitality of its fine hotels and excellent conference facilities. It is also an equally attractive place to retire to. Perhaps for that reason, Bournemouth is not without its special problems, because it has twice the national average of elderly people. More than 25 per cent. of its population are over the age of 65.
Many of those people have fought to keep this country free. They have sacrificed to bring up and educate their families. They have saved and invested their savings throughout their working lives in order to retire and enjoy their remaining years in prosperity and security. That is a right they have earned and which they have deserved.
However, in the past four years they have seen the value of their savings reduced by half, their dividends restrained and their investment income not only falling short of inflation but surcharged. As a result of the value of their homes, in an area where houses are not cheap, they are threatened with the prospect of a wealth tax. That is not what they anticipated when they retired, and it is not what they deserve.
It may come as a surprise to some hon. Members to learn that, far from being the affluent place that it is supposed to be, Bournemouth, according to figures issued by the Department of the Environment last month, is top of the table for towns with the most claims for rate rebates. A total of 28 per cent. of

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Bournemouth ratepayers claim rebates—twice the national average. This shows just how hard elderly people in particular have been hit in recent years. Unlike many other people, they have little opportunity to top up their incomes and maintain their living standards.
On their behalf, I urge the Chancellor of the Exchequer to recognise the elderly as today's new poor and to treat them as a very special case in his forthcoming Budget by increasing significantly the age allowance so that they may keep and enjoy more of the income from their savings than they are allowed to keep at present.
Another characteristic of my constituency, which has little manufacturing industry, is the large number of small firms. These are run by dedicated men and women and often whole families. They are intent on supplying a personal service. They must compete in order to survive. They have not heard of the eight-hour day or the five-day week and they do not clock on and clock off. The verb "to strike" is not part of their vocabulary. They cannot take a holiday together, because that would mean closing the shop and letting the customers down.
It is they who, by endeavouring to reap a reward for themselves, enrich our community. It is they who offer a quality and variety of goods and services which no large impersonal chain or nationalised industry could hope to match. They do not seek special favours from the State and they are willing to pay taxes to benefit all—provided that they have the incentive to make a profit in the first place.
Yet it is they who have been let down by successive Governments who have passed legislation which has made it difficult or impossible for them to survive. And, when so many of them give up the struggle and sell out to the large groups, we are told that the trend is inevitable. It is only us in the House who make such a trend inevitable, and I hope that the Lever Committee on small businesses will appreciate this fact.
May I suggest to the Chancellor of the Exchequer one area where he can, I believe, produce a sigh of relief as opposed to howls of anguish from 500,000 small businesses? They would
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no longer be legally obliged to be registered for VAT if the Chancellor were bold enough to raise the tax threshold to an annual turnover of £20,000 from the present £7,500. According to the reply to my first Written Question in January, the annual loss of revenue would be about £40 million. This loss, of £80 per business, would be made up in no time at all through the extra taxation from the increased income which would result on their being free of the burdensome commitment of administering VAT, apart from the bureaucratic savings resulting from such a move.
Retired and elderly people and small businesses are common to every constituency and the key to their prosperity is the key to the country's prosperity—namely, to reduce taxes. There is only one sound way to cut taxes. It is not by blowing the revenues from the North Sea. It is not by maintaining a high public sector borrowing requirement. It can be achieved only by reducing Government expenditure—the subject of this debate.
It may be an academic argument whether public expenditure is partially or wholly responsible for our present inflation, but none of us can deny that excessive taxation is a cause of inflationary pressure and that taxation and public expenditure have accounted for a growing proportion of our national income since records began. A century ago the proportion was 10 per cent., in 1900 it was 15 per cent. and by 1958 it had risen to 40 per cent. Today, although the Chancellor will argue various interpretaions of national income, the proportion is more than 60 per cent.
The point to which I wish to draw attention is that every Government in the past 20 years have left office spending a greater proportion of our national income than when they arrived in office. Whereas in 1958 a married man on average earnings was paying less than one-tenth of his income in taxes, he now pays three times as much.
In the light of results, I ask whether greater public expenditure has meant greater public efficiency. Spending on education has trebled since 1960, but there is no evidence that standards in our schools have improved by that much, if at all. Spending on housing has increased

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by nearly 1,000 per cent. since 1960, but not only do we still have a high number of homeless, we have a record number of empty dwellings. Spending on health has increased by 500 per cent. since 1960, yet, despite long waiting lists, the number of hospital beds is being reduced and wards are closing.
We are spending more on social services than ever before, but, as chairman of a county council social services committee, I know that we are nowhere near satisfying needs and that no social service authority in the country is meeting its statutory obligations. I question whether these authorities ever will, even though it is an area in which few would argue that our resources should not be concentrated.
For all the £8,000 million losses, compensations, subsidies and write-offs in our nationalised industries, do we enjoy efficient and profitable State services? Ask the consumer; ask the taxpayer.
I ask whether it is not a fallacy that for services to be good, it is the State which must spend the money. I urge that Parliament—not Government—should consider whether better results would not be achieved by using an altogether different approach—although I realise that to suggest substitutes for public expenditure would be venturing into controversial areas and trespassing on the kindness and indulgence that the House extends to a maiden speaker.
However, I hope hon. Members will agree that I am stressing the obvious when I say that there must be, and will be, a point at which the amount of State spending of our private earnings becomes so high that there can be no turning back because it will have become so much a part of our way of life that no Parliament or Government will be able to reverse it. Then, we in this House shall no longer be servants of the people; we shall be servants of the State. This should be one of the main points at issue in this debate. The plain fact is that Government spending has risen, is rising and should be diminished.
6.40 p.m.
Mr. Eric S. Heffer: We have heard an extremely honest, cogent and fluent speech from the hon. Member for Bournemouth, East (Mr. Atkinson). It is not easy to make a
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maiden speech in the House of Commons. I find it difficult to make a speech even now, and I have been here for a number of years—
Mr. Pardoe: I do not believe it.
Mr. Heffer: I am glad that the hon. Member did not keep strictly to the tradition of making a non-controversial speech. I always feel rather sad when new Members come into the House and are non-controversial. They were not elected to be non-controversial. They were elected on a political programme and for their political ideas. They were elected to fight for what they believe in. It is always welcome when a new Member indicates from the word "go" that he or she has very firm ideas and will fight in his or her corner for certain political concepts.
In that sense it is a very great pleasure to follow the hon. Member—and I mean that sincerely. I hope that we shall hear more from him, but I warn him that he will get only one chance not to be interrupted and not to have a difficult time. Things will change from now on.
I turn to the speeches made by my right hon. Friend the Chief Secretary and the right hon. and learned Member for Surrey, East (Sir G. Howe). I think that my right hon. Friend made a good speech within what I would call his "cash limits". It is quite clear that my right hon. Friend, and all right hon. Members on the Government Front Bench, have to fight on two fronts. On the one hand, they have to fight the Conservatives, aided by one or two others opposite who sometimes put their case more effectively. These Members argue that there should be strict cash limits, strict control of money, no planning, cuts in public expenditure and so on.
On the other hand, my right hon. Friends have to face those of us on this side of the House, behind them and below the Gangway, who ask exactly the opposite. In fact, my right hon. Friends listen to the Opposition far too often. If we have any criticism of the Government, it is that they do not listen to us enough and they listen too much to the Opposition. That is a great pity, because as a result they get into political difficulties and the country gets into economic problems.

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As the Government never listen to us and never carry out our policies to the extent that we would wish, no one can prove whether we are right or wrong. Unfortunately, our ideas are not accepted and are not put into operation. We have had Tory ideas for years. They have been implemented by Government after Government after Government. As a result, we are in a crisis and the country faces economic difficulties. This is because we have carried out the Opposition's ideas.
I want to look at the document itself. To some extent I agree with the arguments, though not with the political ideas, of the right hon. Member for Down, South (Mr. Powell). A lot of what he said about the document was of great interest. Item 62 on page 14 says:
"Forecasts of borrowing requirements are subject to a wide margin of error."
One can say that again. I remember going with a deputation from that wicked body, the national executive of the Labour Party, to discuss these matters with the Chancellor of the Exchequer when the earlier White Paper came out. We were told that the public sector borrowing requirement meant that we had to do something or other, and we were given the figures. We asked how the Chancellor knew that these figures were right. He told us that they might not be right but that was what was required. Of course, they were wrong.
Some of us at the time had the temerity to say that we thought the forecast figures were wrong. We are merely simple Back Bench souls in the Labour Party, but even we can see that they were wrong. The Chancellor of the Exchequer had this battery of civil servants at the Treasury, and the funny thing is that they were wrong and we were right. When it comes to forecasting, we can certainly accept the statement that these forecasts are subject to a wide margin of error. That point is 100 per cent. correct.
The last paragraph says that, after four years of no growth,
"There is now, thanks to North Sea oil and to the adjustments achieved in the past year, an opportunity to move to a higher rate of economic growth than has been achieved for many years."
I agree with that, but we must not rely on North Sea oil to save this country
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from its problems. The hon. Member for Bournemouth, East made that point. He is right to say that it would be quite wrong to rely on North Sea oil. Income from North Sea oil will go up for a period, then it will level out and then it will decline. For this reason, we must not rely on it.
I differ from the hon. Member and other Opposition Members on the use to which North Sea oil revenue should be put. Conservatives see it as a great opportunity for bringing down taxes. They also want to use it for overseas investment. We have heard a whole series of ideas from the Opposition on this matter. I think that we should use this money for investment in this country. The truth is that, if we look at investment per worker in Britain compared with Japan, West Germany and France, we find that we are well below them. That has not happened only since the Labour Party came to power four years ago.
In fact, Sir Fred Catherwood made a speech in which he gave the 1975 figures. Those figures applied to a period when we had been in office for only one year, after being out for four years. On the basis of those figures, we can see the total failure and lack of investment in Britain compared with our major competitors.
A grand opportunity is presented in the White Paper to use oil revenues intelligently to bring about investment in industry. However, investment in manufacturing industry by itself will not solve the problem of unemployment. On the contrary, investment can lead to further unemployment because, the more machinery that is put in, the fewer the number of workers required, and, therefore, more and more workers will be thrown out of a job. Therefore, alongside the question of investment in manufacturing industry we need to see the creation and development of new industries.
We must plan for these things—and this is where we reach a fundamental difference between the two sides. The Opposition would leave all these matters to chance. Their view is "Let us not plan anything. We do not have to look ahead. We have only to leave these things to competition and hope for the best, and everything will come out all right in the end." I have a message for

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the Conservatives, based on the years I have spent studying what happens in the world. The process does not work in that way.
We know what happens where one has a totally competitive society without any element of planning. The right hon. Member for Sidcup (Mr. Heath), who used to lead the Tory Party, understands these matters well. He and his colleagues recognised that one had to have an element of planning in intervening in the economy, even within the confines of the existing capitalist society. That is where we have such a fundamental difference on these matters.
I wish to deal with the speech made by the right hon. and learned Member for Surrey, East. He is not the most scintillating speaker in the House, but now and again scores a few minor points. One was the point he made that the Chancellor of the Exchequer came into the Chamber for only a few minutes and then disappeared. However, my right hon. Friend the Chancellor was not down to speak in the debate, because that job was left to the Chief Secretary. When the right hon. and learned Member for Surrey, East had delivered himself of his speech, he disappeared. I have not seen him since. Having made his own remarks, he did not stay to listen to even one speech.
We all know the old saw about people living in glasshouses not throwing stones. The right hon. and learned Gentleman should not criticise the Chancellor and then, having made his own speech, walk out of the Chamber and not return. I appreciate the fact that nobody can spend all his time in the Chamber, because Members have to go for a cup of tea or see their constituents, but the right hon. and learned Gentleman, having made a speech of the kind he did, should be here to listen to the debate as a whole, particularly as he occupies the Opposition Front Bench.
Let me refer to some of some of the points in the right hon. and learned Gentleman's speech. I get a little confused when I consider the cuts that are to be made by the Conservatives. Some Conservatives say "Yes, we must cut public expenditure", whereas others take the view "Let us not say too much about these things, and let us not let on what we
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are going to cut." The question of what they intend to cut is the whole point of the argument.
My right hon. Friend the Chief Secretary referred to transfer payments. In an intervention I tried to spell the matter out. Transfer payments will mean that there will be cuts in unemployment, sickness and disablement benefits, as well as cuts in pensions, redundancy payments and other areas. I hope that the people of this country will understand that when the Conservatives speak of cuts in public expenditure, those are the ways in which the cuts will be made.
The Tories then say that we should get rid of all the subsidies to private industry. I am not enamoured of such subsidies for other reasons. If subsidies are given without public control, they must be regarded as a handout if people use those subsidies for their own benefit and not for society as a whole. But if cuts are made in subsidies to private industry, we cannot escape the fact that that will mean further unemployment.
I must make clear to the hon. Member for Blaby (Mr. Lawson) that if he seeks to deploy his argument on this topic, he will not have much support from industrialists. When I was a Minister in the Department of Industry, industrialists were lining up at the door. They said "We are having a bit of a problem. What can you do to help us? Will you be able to give us more assistance?" One has only to ask any Minister from that Department to know what actually happens. I am referring not to theoretical arguments but to the realities of the situation.
The Tories say they will cut subsidies, and they have also made clear that they intend to impose higher charges for school meals and also higher rents. I hope that all these matters will be borne in mind by the people of this country.
I wish now to turn to the subject of the construction industry. The Second Report of the Expenditure Committee contains a memorandum from the National Federation of Building Trades Employers, from which I should like to quote. Nobody will suggest that I am the pin-up boy of the NFBTE.
Mr. Lawson: The hon. Gentleman is not mine either.
Mr. Heffer: I know I am not the hon. Gentleman's pin-up boy. I am certainly not the pin-up boy of the federation, particularly after the Labour Party issued its document "Building for the Future in Britain". The federation does not favour cuts in public expenditure. It says in paragraph 10 of its memorandum:
"There is no evidence in the White Paper that any of the shortcomings of the allocation of public expenditure in 1977–78 are to be rectified to any significant extent in the next four years."
I know that my Governmental colleagues would object to that. They would say that the Government are to put back into the construction industry in the next two years a total of £800 million. I agree that they are allowing for a figure of £400 million a year. However, I must tell the Government that, although I support any public expenditure for the construction industry, I do not regard it as sufficient. The federation makes a very important point in that context.
The report also contains a memorandum from Shelter, which says:
"First, there is a desperate need for more capital expenditure on housing, particularly house improvement. The 1977 house building figures are the worst (with the exception of the three day week year of 1974) for 26 years".
The memorandum goes on to instance home improvements.
I hope that the Government will consider a 75 per cent. grant for home improvements rather than maintain the present 50 per cent. figure in areas of high unemployment. This matter requires tight control by the local authorities in terms of spending, but I believe that my suggestion could be an immediate way to help to put construction workers back to work. I hope that my hon. Friends will recognise this.
It seems necessary to point out to Conservative Members that the idea of cutting taxes is not new. It is not their proposal. They imagine that they are the only ones in favour of cutting taxes. The package that the national executive committee of the Labour Party has put to the Government contains the argument that the way to boost the economy is that one-half of the boost should be by way of taxation cuts and that the other half should be directed to public expenditure.
The argument for taxation cuts depends on whose taxes we are cutting. I am not
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in favour of massive taxation cuts at the higher end of the tax scale, or even in the higher and middle tax brackets. I am in favour of taxation cuts at the lower end and the middle of the scale—in other words, the average. It is important that that should be done.
We have suggested ways in which it can be done. We argue most strongly that there should be public expenditure to give extra assistance to the construction industry. Money should be made available from public expenditure to restore the cuts that have taken place in the provision of health services and education. Those are areas that can immediately give employment to workers who have been thrown out of work as a result of cuts or have not been taken on because of the imposition of cuts. That is not because there have been massive cutbacks, although there have been cutbacks, but because projected plans have not gone as far as they should have proceeded.
This is an important and fundamental debate. It has always been so. I am shocked when I attend these debates and find so few Members coming into the Chamber. I am not criticising all those who are not present. I accept that they have many other activities. However, the debate is central to the future of our people and to the whole issue of public expenditure, involving as it does the level of public expenditure and how it is used.
The effectiveness of public expenditure and our methods of using it are central to having a civilised society. That is why I fundamentally disagree with Conservative Members who constantly argue for cuts, cuts and more cuts. Those cuts can only mean worse services, poor services and a lack of development, whereas we believe in a civilised society. That means accepting the principle that public expenditure is essential to that sort of society.
7.3 p.m.
Mr. John Pardoe: First, I wish to say how great a privilege it is to follow the hon. Member for Bournemouth, East (Mr. Atkinson) in a notable maiden speech. The hon. Gentleman told us something about the problems of his constituency, but accomplished what I think was a stupendous feat: he made Bournemouth sound like

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a depressed area. I thought that that was impossible, but he did it as near as anyone could. I congratulate him. If he can do that, he can argue the case of his constituents in future in the House.
I agree with everything that has been said about small businesses. I, too, welcome the fact that at last there seems to be a consensus growing on all political sides that there has to be positive discrimination in favour of small businesses. I hope that we shall see many more steps in that direction in the near future.
The Select Committee has given the debate valuable help in its comments on the White Paper. I echo the remarks of its Chairman, the hon. Member for Nottingham, West (Mr. English), in thanking those who contributed to its comments. The contributors were not only Members of the House but outside commentators. I have one or two differences with the Select Committee to express, but it has helped the House by making possible a much more open way of conducting the political debate, which is wholly welcome.
The concept that government may be carried on in dark corners is entirely against the spirit of the times, and does not lead to good government. I am delighted that the Select Committee procedure, especially in this area, is beginning to open up the process of government. Would it not be much better if we had a Select Committee on the revenue side of government, so that we could open up the Budget to a greater extent than is now the case? I accept that great strides have been made in that direction in the past 12 months, but there is still far to go.
The matters on which I mainly dissent from the Select Committee's report are contained in paragraphs 10 and 11. Before turning to those matters, I must say that it is my opinion that the Committee's Chairman, the hon. Member for Nottingham, West, stressed the wrong point. He laid stress on underspending. I suppose that it is a theoretical truth that if we underspend rather than overspend we are not getting it right and that for that reason public spending is still out of control. However, there is a substantial difference between the two concepts. There is more than one state of being out of control, some such states being more out of control than others. I do not think that it would be helpful
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to the control of public spending for the hon. Gentleman's criticism to gain ground.
We are all aware of the sort of thing that happens among local authorities on, for example, 29th March. There is the reaction "For goodness sake, we have some money to spend and we must decide where to spend it. If we do not spend it now, we shall not get it next year. We have underspent and the Select Committee is criticising us for underspending." When that is the reaction, it means almost inevitably that money is badly spent. Therefore, the Select Committee should not be giving credence to the concept that authorities, Departments or nationalised industries should spend their allocated sums willy-nilly to accord with a forecast made 12 months ago. That is not a strong point. I hope that the Committee will drop it.
As I have said, there are matters in paragraphs 10 and 11 from which I dissent. I can find no evidence that children in England and Wales are maleducated by reason of being educated in buildings constructed before 1919. I honestly believe that that argument is a load of codswallop. I represent part of Cornwall, an area that has the oldest school buildings in the country. Cornwall has the largest proportion of pre 1919 primary schools of any country in Britain. It is not true to say that that has any effect on the quality of primary education. Therefore, I consider that the Committee is putting forward a bogus argument.
I do not agree with the argument advanced in paragraph 11 dealing with the Treasury official's view that
" 'a lot of' capital expenditure tends 'to push up the need for current expenditure' ".
The paragraph states:
"More replacing of old buildings would not be likely to do this and should lead to a reduction in maintenance costs."
I have not seen much evidence of that anywhere. The paragraph continues:
"much capital investment must result in gains in productivity, when all the benefits are properly assessed."
It specifically refers to new port facilities and roads. I see no evidence that new port facilities or roads have improved operating efficiency in Britain. This is an argument that we all used in the early 1960s when we called for better road

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networks and better ports, but I have not seen it proved, I have seen no document in which it is proved. The Committee should try to prove it before it asserts it. I should be delighted if the argument were proved, but I doubt whether it can be.
The right hon. and learned Member for Surrey, East (Sir G. Howe) made a curious speech. He exhibited his blind spot, which is a positive obsession with all things American. Surely he should have learnt his lesson, having gone to America to import to Great Britain American labour legislation. Surely that should have taught him that we cannot successfully go to America for everything that we want to improve the British economy.
The right hon. and learned Gentleman's argument is that America, by being a free economy, by doing all the wonderful things that he wants Britain to do, by having that get-up-and-go and entrepreneurial spirit, has succeeded and created a whole host of new jobs and wealth. When I said to him that Switzerland and Germany are exhibiting the same entrepreneurial flair and that Switzerland has lost 300,000 jobs, or 10 per cent. of its work force, since 1973, and Germany has lost about 1·8 million jobs, which is about 6 per cent. to 7 per cent. of its work force, since 1973, he merely quoted unemployment figures at me and asked "Is it not splendid that Germany has been able to keep down its unemployment?"
Any country can keep down unemployment if it can sack its foreign unemployed and send them over the border back to Yugoslavia, Turkey or wherever it may be. The fact that Germany's labour force has reduced, that it has lost this number of jobs and yet can have lower levels of unemployment than elsewhere must surely mean that what I have said is true. I gave the figure to the right hon. and learned Member for Surrey, East because he did not use it. The ludicrous figure for comparing unemployment levels is the Swiss figure. There are 8,000 people registered unemployed in Switzerland. We all know that is impossible. There must be something wrong with it. It is not in any sense a measurement of the spare capacity in the Swiss economy. The figure is 8,000 only
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because the Swiss have been able to send so many foreign guest workers over the border.
Mr. Lawson: My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) was comparing the German economic experience as a whole with our own. Does the hon. Gentleman agree, if he is to be fair, that if we could have the Germans' economic problem and they could have ours in return, we might be better off?
Mr. Pardoe: It depends where we start. If we could go back to 1870 and have the German economic record since then rather than our own, yes, I should prefer that. But if the suggestion is that the policies adumbrated by the right hon. and learned Member for Surrey, East will somehow create jobs in Britain, the examples of Switzerland and Germany do not prove that proposition. Therefore, we should not use that argument. Of course, it seems to have worked in America, but it does not necessarily mean that it will work here.
The right hon. and learned Member for Surrey, East, as always, failed to answer the fundamental question that must be put to anyone who suggests cutting public expenditure. He really must say some time what a Conservative Government will not do that this Government now does. These matters must be spelt out clearly if we are to believe that a Conservative Government have a magic formula for the management of the economy. When taxed, the right hon. and learned Gentleman, unbelievably I thought, started with a latter-day equivalent of milk snatching—in other words, school meals charges. We have been round that course several times in the last 20 years. It is becoming boring. Putting up the price of school meals, necessary as it may be in some senses, will not solve the problem of public spending.
In any case, who in this House really believes that to teach a poor child Latin grammar, or even the three Rs, is more important than giving him a good square meal each day? Which will develop him more as a citizen for the future?
Mr. Raison: Of course a child must have a square meal every day. The question is whether that square meal must necessarily be administered through the

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education service. The school meal is just as essential as proper education. That is a completely false question.
Mr. Pardoe: If a child has to have a square meal—the hon. Gentleman appeared to suggest that may be the case—where will he get it other than at school? If the hon. Gentleman suggesting a new meals-on-wheels service in the evening for poor kids? Of course not. Therefore, it has to be given at school and it must be administered through the education service. I cannot see any argument against that.
The right hon. and learned Member for Surrey, East then spoke about tighter management of existing programmes. That is splendid. All hon. Members on both sides of the House are in favour of that. It is certainly needed. We need an efficiency audit. But what proof did the right hon. and learned Gentleman give us that any of the measures adopted by the Conservative Government between 1970 and 1973 improved the efficiency of public spending? We have the example of the reorganisation of the Health Service. We know what that has done for the efficiency of public spending. I could go on—water authorities, local government reoragnisation and so on. One only has to name it and they have got it. Inefficiency is the Conservatives' middle name.
We then come to regional development grants. We need this matter to be spelt out. I hope that the hon. Member for Blaby (Mr. Lawson) will say something specific about this matter. What industrial incentives are the Conservatives not going to give in future? The hon. Gentleman and I may agrre that industrialists cannot be bribed to invest, but the evidence shows that, whereas that may be so, they can be encouraged to invest in particular locations. We may not be able to increase the totality of investment in the economy by incentives, but we can certainly encourage the direction of investment geographically.
I represent an impoverished, low income, high unemployment, development area. What regional incentives would a Conservative Government cut off? Do the Opposition agree that the Government were right this week to extend the small firms employment subsidy to the assisted areas? That will be of enormous benefit
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to the small business sector in Cornwall. Will the Conservatives end that subsidy? Do they agree that the Government were right to extend it? Let us have answers to those questions.
Housing subsidies come next. That subject is a huge bag into which one can dip one's hand and pull out any little goodies one wants to spend. Housing subsidies have grown far too large over the years and have undoubtedly led to inefficient use of housing resources. This nation is over-housed, not under-housed. We are under-utilising our housing resources in terms of occupation. We need to reduce this inefficiency. We can probably do that only by changing the whole basis of subsidy in the rented sector and, indeed, of mortgage relief in the owner-occupied sector because that encourages under-occupation, too.
How fast can we move? Millions of families have built their budgets on established figures of subsidies and mortgage relief. It is absolute madness to pretend that we can end that suddenly—even over two or three years. Therefore, that will not be a major source for reducing public spending quickly in future.
There are two overriding questions behind our consideration of public spending. First, how far do we believe that the Government should now expand demand? Secondly, how far should this be done through increased public spending and tax cuts?
My answer to the first question is that the Government should now expand demand quite rapidly. A 3½ per cent. growth rate—whether that is a forecast or an assumption, it is in the White Paper—is not enough to bring production into line with capacity. The latest Midland Bank Review contains a fascinating study by two Cambridge economists, C. H. Feinstein and Professor Reddaway. On page 16, they say:
"The crucial question for demand management is, therefore, the pace at which the economy can be brought up towards its potential. On present Government policy the Treasury forecast is that GDP will grow at an annual rate of 4½ per cent. from the second half of 1977 to the first half of 1978, and will then slow down to an annual rate of only 2 per cent. between the first and second halves of 1978.… This would in our view be an unnecessary cautious approach. The primary objective of policy in 1978 should be to maintain in the second half of 1978 (and thereafter) the growth rate of about 5 per cent. per annum established in the first half."

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I agree with that completely, and it leads me to certain conclusions. It obviously leads me to the conclusion that the Government should expand demand. The Government believe that there are constraints on such expansion. First among those constraints is the balance of payments. That cannot be a primary constraint for any Western Government at the present time. Because of the OPEC surplus, there must be a mirror deficit in the West.
The OPEC surplus in 1974 was $62 billion. In 1971 it was $31 billion, and everybody started to whoop with joy and say "It is all right. It is coming down of its own accord. There is not going to be a problem. If it halves next year it will be splendid. We shall be all right." It has not been halved. In 1976 the surplus increased to $42 billion. The OECD estimates that this level of surplus has continued in 1977 and will continue in 1978. Therefore, no Western country with the resources of North Sea oil on its balance of payments account should be thinking of running a surplus at this stage of the world economy.
The second major constraint which the Government recognise is the fear of wage-led inflation. This is a very real danger without an effective and enforceable incomes policy. The Government have their remedy there. If they fail to use it, there is no doubt that unemployment and a low growth rate will be due to the failure to have an enforceable incomes policy. The hon. Member for Bristol, North-West (Mr. Thomas) shakes his head. It is very easy to separate the arguments of radical economists in this country. I do not know a radical economist who would agree with the hon. Gentleman about the expansion of the economy who does not also enter the caveat "but with an enforceable incomes policy". They all say it. Only the Tribune Group wishes to have its cake and eat it and, consequently, lives in cloud-cuckoo-land.
All this leads me to conclude that Government borrowing should be higher than it now is. There is plenty of room for greater borrowing. The argument about crowding out does not exist. The Government have had to step in and stop the building societies lending money because they have got so much. In industry there
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is a lack of borrowers. This borrowing should not be ploughed into public spending.
That brings me to the answer to the second overriding question that I mentioned, income tax cuts versus spending increases. I believe—in contrast to the hon. Member for Liverpool, Walton (Mr. Heffer)—that all the emphasis this year, anyway—must be on income tax cuts first of all because we need to create a new psychological climate in the United Kingdom industry, and, secondly, because it will have a substantial effect on wage push. The Government are desperately afraid that increasing the retail price index will have its effect on wage push. Nothing will have a greater moderating effect on wage push than to put more net-of-tax money into the pockets and pay packets of the average employee and trade union member—and that can be done by cutting income tax.
The final matter here is the effect of those cuts on the balance of payments. I am very well aware that there are those who argue that if we cut income taxes and give the increased boost that way, it will all go into Japanese and Italian goods. Therefore, they say, "We must put it into the Health Service, not because it needs it, though it certainly does, but because we do not employ too many Japanese nurses." This is a fallacious argument. If we pay the money to nurses, they will spend the money in the economy and they may just as well spend it on video cassette recorders or Japanese cars or other Japanese goods. In the second stage the money, therefore, works through, wherever it is put—whether it be on education or on another sector of public spending—in exactly the same way as do income tax cuts.
Mr. William Molloy: There is an overwhelming case for tax cuts, but they do not take into account the contribution to reducing unemployment. If one has a balance of public spending with tax cuts, one can make a contribution also to reducing unemployment, putting men in work. That must aid the economy.
Mr. Pardoe: I dissent entirely from that view. One can expand demand for employment just as well by putting more purchasing power in the pockets of people to spend as they will as by increasing

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public spending. It is a question not of which is more effective in creating employment but of which will work the quicker and which is right to do this year.
I believe that the emphasis, therefore, should be on tax cuts. The Government have their priorities approximately right in the White Paper, but I note that the Conservative Party does not agree and has tabled an amendment which refers to the balance between capital and current expenditure. Of course, it would be right and proper to increase capital spending. According to population forecasts, there is another good argument for increasing public capital spending in many areas. The number of pensioners and the young—I define the young as being between the ages of 0 and 15—as a proportion of the working age population will decline from around 71 per cent. in 1976 to 66 per hundred of the working age population in the year 2001. The interesting feature is that the forecasts show that in 1991 they will be around 64 per hundred of the working age population. In other words, the figure will go down through the 1970s and 1980s and will then begin to rise again. Therefore, we ought to spend the money now on providing the capital structure, the infrastructure particularly. We shall have to spend more on current account, looking after the non-working population, when that starts to increase from 1990 onwards. There is, therefore, a good case for increasing capital spending now.
But if we are to increase capital spending we can do so only by cutting current spending—the Opposition have not said where—or by somehow increasing the totality of public spending. These are incredibly difficult choices to make.
The Conservative Party's amendment is far too facile and does not spell out how it would make such a choice. The second part of the amendment refers to the hoary old idea that we are overtaxed and spending too much in the public sector. There is, by comparison with other economies, no evidence for that. In terms of taxation we are about the middle of the industrial nations' league in the proportion of our gross national product that is spent in the public sector. Therefore, that is a nonsensical argument.
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In the argument about expenditure and taxation we cannot conclude that public expenditure and public taxation are too high. We can conclude that in the present state of the economy the borrowing requirements ought to be higher and that that ought to be used to expand demand through income tax cuts. There are some priorities in public spending. The Health Service is an obvious one. I should hope that child benefit is another. Apart from those two, I would give increases in public spending over and above that which the Government have provided for in the White Paper a miss this year and go for substantial tax cuts.
7.29 p.m.
Mr. Ivor Clemitson: I want to try to assess the White Paper in the light of what seems to be arguably the central economic and social issue that we face—unemployment. I say that it is the central issue—or one of the most central issues—for three reasons. One reason is obviously that of the suffering which unemployment causes to those who are on the receiving end. The second reason is the equally obvious one that if we have high or, possibly, rising unemployment, it provides the seed bed from which poisonous weeds of racialism grow and threats develop to our democratic society and freedoms.
Thirdly, it is important because on how we approach the question of unemployment depends what policies we adopt across the whole range of our affairs, such as education, health and overseas aid. Every element of public policy becomes changed if we adopt different attitudes towards the unemployment question.
There are two basic considerations to which we must address ourselves in discussing the problem of unemployment. The first is concerned with the effects of technology and of investment. There is already very considerable evidence, which I do not have the time to detail, that investment in industry does not necessarily result in increased employment. The reverse is more likely to be the case. The prospect is that the pace of technological change will accelerate rather than decelerate, and, given the fact that it is acknowledged in any case that this country has fallen behind others in

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terms of efficiency, productivity and competitiveness, the chances are that manufacturing industry will in future require fewer rather than more workers. We need investment, higher productivity, greater competitiveness and greater efficiency, but we must acknowledge that in the process we shall probably need fewer industrial workers.
The second consideration concerns the size of the work force itself. Between 1971 and 1977 our work force increased by 1,206,000, and, incidentally, we have a higher proportion of the total population in the work force than has any other Common Market country, with the sole exception of Denmark. Each year, the work force is expanding by about 170,000. Forecasts which appeared in 1976 suggested that by 1991 the work force would have increased by 2 million. As I say, we have a higher proportion than many other countries, despite the fact that our total population in absolute terms is falling.
If I am right about these two basic considerations, we have the prospect, therefore, of fewer jobs in industry and a rapidly increasing number of seekers after jobs. The question is what we do about it. Can we create the number of new jobs needed to fill the gap and reduce unemployment to acceptable levels? I believe that we cannot, and I shall explain why later in my remarks.
I suggest that we have to realise that employment is only one of a number of alternatives to unemployment. There are many other alternatives, and I am glad to see that they are now being canvassed seriously—for example, in the first chapter of the TUC's "Economic Review" for this year.
We could encourage more young people to stay on in full-time education. At the moment, only 30 per cent. of our young people do so, and my guess is that that does not compare very favourably with certain other countries. We could build on the time-off provisions in the Employment Protection Act to enable more adults to have longer periods away from work. Why not have sabbatical leaves for educational or other purposes? We could shorten the working life through earlier retirement. There are many options.
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What we must do is formulate a policy of alternatives to unemployment, not merely as short-term palliatives and not merely as ways of shifting people from one column of statistics—unemployment—into another column of statistics but as a positive way of enhancing the quality of people's lives. In my view it is vital to get on with this now, because, if such a programme does not run concurrently with a programme of increased investment, the very purposes of the investment will be frustrated and people will adopt a defensive attitude which will mean that the greater efficiency which we seek will not be achieved.
Given that inevitably very simplified and truncated analysis of the problem, we then have to consider how the White Paper stands up to a critique based upon it. What assumptions does the White Paper make about unemployment? The table on pages 92 and 93 of volume II shows the number of people expected to be in receipt of unemployment benefit. For 1977–78 it shows a figure of 655,000, rising to 710,000 next year and then falling to 510,000 in 1981–82. Of course, we all know that for various reasons not all the unemployed receive unemployment benefit. Some of them have been unemployed so long that they are now out of benefit. Others have not a sufficient contribution record. But presumably, given those figures, the forecast is that there will be a reduction in unemployment, and the expected reduction appears to be between 300,000 and 500,000.
Mr. Ron Thomas: I have been studying this table. Might it not also indicate that, more and more, the hard-core unemployed will go from unemployment benefit to social security benefit and that we could still have 1·5 million or 2 million unemployed, even given those figures?
Mr. Clemitson: I am grateful to my hon. Friend because that is an alternative explanation, and a very pessimistic one.
Mr. Thomas: Perhaps we could be told.
Mr. Clemitson: In a sense, I am trying to give the benefit of the doubt to the Government.
Mr. Thomas: My hon. Friend should never do that.
Mr. Clemitson: I am assuming that the pattern of unemployment in terms of duration will not be noticeably different in 1981–82 from what it is today. It seems to me that the Government are thinking in terms of a reduction in unemployment of between 300,000 and 500,000—in other words, a reduction to about 1·1 million or 1·2 million unemployed.
How does that compare with the now famous job gap of the Manpower Services Commission? In paragraph 219 of its Review and Plan for 1977, the Commission says that, with the increased work force, 1·34 million jobs will be needed by 1981 to reduce unemployment to 800,000. Assuming the more modest target in the White Paper which I have circulated to be between 1 million and 1·2 million unemployed, and assuming that we are not to have any of the alternative measures to unemployment which I mentioned earlier, we are talking about the creation of about 1 million jobs, given the increase in the work force and given a certain reduction in unemployment.
If my argument is right, we cannot look to the manufacturing sector to provide any of those jobs. There may be a continued job loss there, which will increase that figure of 1 million even more. But let us assume that manufacturing industry will provide roughly the same number of jobs in 1981–82 as it does today. I believe that we should be looking to the public service sector to provide more jobs, and by that I mean not bureaucrats but people in face-to-face public service employment. Much of that is, by its nature, labour intensive and likely to remain so.
Between 1972 and 1976, central and local government manpower—that is, public service manpower excluding public corporations—increased by about 660,000. Public expenditure between 1972–73 and 1976–77 increased by 10·2 per cent. Given a fairly constant ratio between public expenditure and jobs, what is the likely increase between 1978–79 and 1981–82? I agree that this is a crude technique, but, flowing from that calculation made from past experience, I come up with the figure of about 250,000 jobs in the public sector in that three-year period.
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I am not arguing for greater public expenditure only because it provides more jobs. That is clearly a consideration, but it is not the only justification. Neither am I saying that we could not, if we revised our policies, have a greater job pay-off in public expenditure terms than we have at the moment. We could rearrange public expenditure so that within the same amount we could employ more people if we wished.
There are no particular signs of this type of rearrangement in the White Paper. With 250,000 jobs in the public sector, we are still a long way short of our target. We therefore turn to the private service sector. Between 1971 and 1973, when we last experienced a boom, there was an increase of 373,000 people in the private service sector. In that two-year period, GDP increased by 8·3 per cent. We did rather well.
What does the White Paper say about growth for the future? In paragraph 56, which has been mentioned many times, the figure of 3½ per cent. is referred to as a possibility. It slates:
"Provided inflation is contained and there is some recovery in world trade, the economy should be able to grow at above its past trend rate. But on present prospects a marked improvement in industrial performance would be necessary to sustain a growth rate above 3½ per cent. over the next few years. The aim must be to achieve such an improvement; but it cannot be assumed in advance as a basis for planning public expenditure. With the current degree of unemployment and the bonus of North Sea oil it would be disappointing if a 3½ per cent. growth rate were the limit."
The figure mentioned for growth is 3½ per cent. It is true that the authors hoped for more, but it could be less. We do not know. There are all sorts of variables, not to say downright imponderables, in that paragraph.
Assuming that the increase in public sector employment is about 250,000 and that there is no change in manufacturing employment — which is optimistic — the increase in the private service sector employment would need to be 750,000 to achieve our target of 1 million jobs. Assuming that technological change will have no noticeable effect on the private service sector—and that is not necessarily the right assumption, because change will affect both sectors—and assuming a similar rate of growth as in the early 1970s, we would need to increase GDP

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by about 16 per cent. in the three-year period.
We are talking of a growth rate of at least 5 per cent. per annum, which is well above the 3½ per cent. figure in the White Paper. The only conclusion that I can draw on the unemployment figures is that the assumptions in the White Paper are, to say the least, on the optimistic side. The only way in which this analysis can be fundamentally wrong is if the White Paper embraces in its other assumptions the alternatives to unemployment that I mentioned earlier. Sadly, my conclusion is that it does not.
I shall take three examples. First, let us examine the idea of sabbaticals and educational opportunities for people throughout life—adult education and so on. Acording to the figures in the White Paper, the increase in the provision for further and higher education between 1978–79 and 1981–82 is only about £126 million. Even then, we shall still be spending less in real terms than we were in 1973–74.
Let us take the idea of encouraging young people to stay in full-time education. I have already mentioned the small increase in further and higher education expenditure. There is little increase in secondary school provision. Clearly there is no provision for educational maintenance payments for the 16- to 19-year-olds, which would, admittedly, involve considerable expenditure, as the Secretary of State said on Tuesday. However, the provision of educational maintenance is a key factor in encouraging more young people to stay in full-time education.
Let us consider the question of early retirement. That is not my preferred option for dealing with this problem but it is a favourite with many people. The figures for pensions on pages 90 and 91 of volume II of the White Paper make no provision for early retirement. Of course, the job release scheme, which, I am glad to learn, is to be extended and which is to be welcomed, runs out in March 1979. There is no provision for continuing, let alone expanding, this programme beyond that date.
I use those three examples to illustrate that behind the White Paper there does not seem to stand an overall policy about alternatives to unemployment which
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would be the positive response to the problem. I am led to pessimistic conclusions. The White Paper is too optimistic about employment prospects, and it lacks the fundamental philisophy and policy without which not only will our industrial policies fail to prosper but we shall miss the great opportunities for the advance of human welfare which are opening up. Lest I end on too pessimistic a note, I say to the Government that there is still time—although precious little—to do some rethinking about these fundamental issues.
Mr. Deputy Speaker (Sir Myer Galpern): I hoped that Mr. Speaker's statement yesterday about the length of speeches would produce some results today. The last three speeches have taken 22 minutes, 23 minutes and 26 minutes. Without the aid of a computer, I have calculated that if we have 20-minute speeches in the next hour there will be time for only three more. I leave the matter to hon. Members.
7.50 p.m.
Mr. Reg Prentice: I shall do my best to comply with your advice, Mr. Deputy Speaker.
The Government have brought before the House a White Paper which proposes to increase public spending. There is some argument as to whether the increase over the previous year is of the order of 2 per cent., 4 per cent. or 8 per cent. There is no argument about the fact that it is an increase and that a further increase is proposed in the following year, with another increase taking place in the year after that.
My submission is that that is wrong The current overriding need is for a strategy on public spending of which the centre-piece should be determination by the Government to maintain public expenditure at its existing levels. I repeat the words "existing levels". I am not recommending cuts in those levels, although I recognise the validity of the point made by the Chief Secretary that if we were to keep within existing levels, there might be some marginal cuts of existing services to make room for those services where there is some inevitable continual increase in costs.
We discuss this matter against the background of the fact that since 1964 public spending in Britain has increased by just

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over two-thirds at a time when our national output has increased by about one-quarter. During that period, Labour Governments have been in office for most of the time. I was a Minister for much of that time. I therefore share responsibility with my former colleagues for that process, and I do not attempt to duck it. I can remember a number of amiable arguments with the Chief Secretary, who was the spending Minister when I tried to get him to agree to higher totals in respect of my Department than he was ready to concede.
I was prepared to argue, as most Social Democrats are, along the lines of Professor Galbraith and the late Anthony Crosland that increases in public spending were one of the essential tools of creating a more just and equitable society. I have not retreated from that basic view. Most modern and humane societies have high levels of public expenditure. I believe that this country should have a high level of public expenditure whichever party is in power.
But what has basically gone wrong in the period since 1964, and perhaps earlier, is that public spending has been increasing faster than national output We have increased the share of the national product being spent publicly at such a rate as to make two things inevitable. One has been that we have had to impose upon our people taxation levels which have been a serious disincentive at all levels of income, with consequent damage to our economic performance. The other consequence has been a public borrowing requirement of such a size that it has been one of the main causes of our excessive rate of inflation in recent years. That lesson should have been learned by December 1976. It should certainly have sunk into the minds of Ministers during the crisis of November and December of that year.
At that time, this country had to go cap in hand to the IMF and to the Governments of countries with stronger economies in order to get substantial credits to keep us afloat. Those creditors quite rightly insisted on a certain measure of self-discipline on our part in relation to the size of our public borrowing and our future spending plans. It is, I think, to the eternal discredit of those of us who were in the Government at that time that we did not impose those
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disciplines upon ourselves earlier. It was to our discredit that we had to reach the point at which they were imposed upon us from outside.
With this White Paper, I believe that we should focus upon the fact that the lessons of 1976 have still not been learned. Since then there has been some modest improvement in the balance of payments, the public borrowing requirement as estimated by the Treasury in late 1976 has turned out to be lower than that estimate, and the pound has been a bit stronger. Because of all that, the Government feel that: they can get back again on to the old merry-go-round of increasing public expenditure and of putting down on paper plans to spend resources that the country has not yet earned.
It would be a major contribution to the health of our economy if the Government would change course. I do not expect this Government to do so. Nevertheless, they should accept that our public spending in the next three or five years should be frozen at existing levels. That is what the situation demands. It it something which public opinion would accept, and it is something that our creditors overseas are entitled to expect of us. That course of action has been urged upon the Government in the cogent reasoning of the CBI's policy document "Britain Means Business", and it is something that the Chancellor appeared to be promising to the IMF in the letter setting out the agreement of December 1976.
If that basic policy decision had been made, I think that in making its choice of priorities the Cabinet could have retained this kind of discipline without wrecking our social services. I speak with some experience of having sat through the painful business of trying to allocate public expenditure choices. There would have been difficult decisions on the margins, but I believe that that could have been done.
If this discipline had been accompanied over the next five years or so by the kind of economic growth which is indicated in part of the White Paper and by rising revenues from North Sea oil, the percentage of the GNP being spent by the State and local government would have gone down to a very real extent year by year. The CBI's analysis that I have just

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referred to suggested that it could have gone down from 44 per cent. to 38 per cent.
That would have enabled reductions to be made in the borrowing requirement and in taxation at all levels. But, above all, it would have been simple and clear proof of a change of direction in our affairs. It would have given encouragement to people in business and industry, it would have given encouragement to the world community, and it would have given encouragement to the British people to achieve better results than they have been achieving in recent years.
I should like to go on and talk about the kind of cuts that are necessary at the margin in order to obtain this state of affairs, but I am bearing in mind your advice to be brief, Mr. Deputy Speaker.
Labour Members have challenged the Conservatives to be specific about the cuts we would make. The Opposition are perfectly entitled to keep their options open in this matter. There is nothing sillier than the parrot cry from Government Back Benchers to Opposition Front Benchers of "What would you do?" and "What would you cut?" What is needed is a continuing debate in which we give our personal views, and I should like to see substantial reductions in five main areas.
First, I should like to see cuts in subsidies to industry. I take account of what was said by the hon. Members for Luton, East (Mr. Clemitson) and for Liverpool, Walton (Mr. Heffer) about the employment effects of subsidies to industry. But the Government have met themselves coming back. In making excessive subsidies to industry they have to cut building programmes, and that throws building workers out of work. They have to make cuts in education programmes, which means that newly trained teachers are unable to find employment. That is saving one person's job at the expense of someone else's, and that is no contribution to full employment.
Secondly, I should like to see cuts in subsidies on housing, transport, school meals and many other matters. Thirdly, I should like to see much higher charges in the National Health Service. The prescription charge, fixed at 20p in 1972,
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would, it translated into the present value of money, be at least 50p per item—and so it should be.
Fourthly, I should like to see an amendment of the legislation on public service pensions so that they are not guaranteed automatically against the effects of inflation. I see no justification for the situation over the last two years in which wage earners and salary earners have had to accept a cut in their living standards whereas many pensioners on a higher living standard have had the level of their pensions guaranteed in this way.
Fifthly, I should like to see the same discipline imposed on short-term national insurance benefits. I do not mean retirement pension or widow's pension; I mean sickness benefit and unemployment benefit. It should be the Government's policy to open up a meaningful gap between what people can earn at work, even in low-paid jobs, and what they can gain in national insurance benefits.
In general, I want to see a shift, to which many hon. Members have referred, from transfer payments towards capital programmes, because—[Interruption.]
Mr. Deputy Speaker: Order. The Chair will not have cross talk across the Benches.
Mr. Prentice: I was on the point of agreeing with at least part of what the hon. Member for Walton said about the construction industry, because I want to see, as he does, better and more consistent capital investment programmes. The greater part of the increase in public spending over the last 14 years or so has been an increase in transfer payments, by which we all pay to each other ever more complex subsidies, means-tested benefits, tax reliefs and the like, which lose all meaning and which people are simply not able any more to understand.
Mr. Heffer: Will the right hon. Gentleman give way?
Mr. Prentice: No, I want to complete my speech quickly.
Meanwhile, what we have seen is a steady decay in the basic pattern of many of our most important public services, the National Health Service, the education service and many others, as the out-of-date buildings stay on and on in service long after they should have been

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replaced. That is bad in itself, it is bad for the morale of those who work in them and it is very bad for the construction industry.
I return again to the anomalies of Government policy. Some of the cuts in relation to the construction industry have been necessitated by the so-called industrial strategy through which the Government are subsidising other industries but are doing so at the expense of one of our most basic and important industries of all.
I want to make two final comments. I think that the first will not be very controversial and I want to put it on record. I welcome quite unreservedly the proposals on overseas aid, which involve a rise of 6 per cent. a year over the survey period. I wish that it were more. But this rise is a rise in real terms and is one that is overdue.
If there are hon. Members on either side of the House—I think that there are a few on both sides—who have doubts about the aid programme, I would refer them to a Cabinet Office publication of 1976 called "Future Words Trends", written in the sober language of Whitehall but, nevertheless, containing this very important conclusion:
"Unless there are resource transfers on a scale many times greater than at present, the effective check to world population will be the Malthusian trilogy of war, famine and disease."
We should recognise in this House that under successive Governments Britain's share in the development struggle against world poverty has not been adequate and that many of our European partners are doing far more than we are doing. Therefore, I support this increase. I hope that it will be immune from any public expenditure cuts, either from the present Government or from the future Conservative Government.
My final point is more controversial. Last Friday the House debated "Labour's Programme for Britain 1976". It would be more accurate to say that Opposition Members debated it and Labour Members avoided debating it. However, I hope that the Chief Secretary and the Financial Secretary have read that document and that they have added up the cost of those proposals, because, if a Labour Government were elected again on a manifesto based on that programme or
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on maintaining a substantial part of the proposals in that programme, all the figures in the White Paper before us would be knocked sideways. An incoming Labour Government, if there were such proposals, would be committed to public expenditure vastly in excess of the proposals that have been put before the House this afternoon.
Therefore, Treasury Ministers and, indeed, all Ministers, if they have any sense of their constitutional position, should be stumping the country arguing against the policies to which they are being committed and to which they are allowing themselves to be committed by the absurdity of the block vote at the party conference. Otherwise, it is no use their coming to the House and pretending that it is the policy of this White Paper that will prevail over the next few years. Either it will be an extreme Socialist policy involving enormous increases in expenditure, way above anything in the White Paper before us, or, as I hope and believe, it will be a Conservative alternative.
8.6 p.m.
Mr. Alexander W. Lyon: In an interesting maiden speech today, the hon. Member for Bournemouth, East (Mr. Atkinson) referred to the increasing proportion of the gross national product that is going in public expenditure, and he was concerned about that in case it was coming to a point at which our people would come to depend upon it and the progression upwards would be irreversible. It reminded me of a statement some years ago by a gentleman whom the right hon. Member for Down, South (Mr. Powell) has now blessed with the name of Roy. That was that the percentage of the GNP at 60 per cent. was freedom; the percentage at 61 per cent. was slavery.
Those completely unjustified and, as the Treasury figures turned out, unjustifiable assertions have been carried on today, and in the past, by the right hon. Member for Newham, North-East (Mr. Prentice). In a speech that I deeply regret, and a speech that I hope may be the right hon. Gentleman's last in this place, there was only one echo of the man who used to be a friend of mine for 10 years and who was made into a public figure in this country on the back

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of the Labour Party that he now so despises. That was the moment when he referred to the transfer of resources across from the rich world to the poor world in order that the poor world would be able to avoid any Malthusian prophecies of war or strife.
The same argument is the argument which we have always held on the Labour side, and which the right hon. Gentleman held in times past, for transferring resources from one part of the nation to the other. It is the very essence of the creed of social democracy which I espouse and upon which I have not reneged, and it is the very hallmark of Anthony Crosland's "Future of Socialism". If my former right hon. Friend would now go back and read Tawney on "Equality", he would read the same precise statements about the future and about the way in which we reach the future which he now spurns in the manifesto that we put out for the next General Election, because it is there written clearly in Tawney's analysis of social democracy.
I can understand those with whom the right hon. Gentleman now sits spurning it. They have the right to spurn it, but he does not have that right. He has no right to turn round now and say that all that we worked for over those years was false. He can now retreat, if he likes, into oblivion, but he should not get up every week in this House in order to spurn the kind of philosophy which made him and to which we adhere.
The fact is that this country depends for its standard of living partly on what comes out of the pay packet of individual workers and partly on what comes out of public expenditure. Increasingly, our workers depend on that part which comes out of public expenditure. Most of our people educate their children free through the education service which is provided by public expenditure.
In sickness, old age, redundancy and unemployment, most people look to a social security service that is provided out of public expenditure. They look to the very social security service that the right hon. Gentleman now wants to undermine by trimming the benefits in order, as he says, that there should be a visible gap between what one can earn and what
736
happens to one at the very moment when one needs most resources, in unemployment or sickness. That is the moment when the right hon. Gentleman would trim. It is the moment when Ramsay MacDonald wanted to trim. The right hon. Gentleman is in a good sedition, but that is hardly something that would find favour with us.
Over the years since 1945, all Governments—Conservative and Labour, but particularly Labour—have extended the range of services which are available to our people and upon which our people wholly depend, to the point where many items—it may be most of the major items that are essential to a good standard of living—are provided out of public expenditure. Apart from food, furniture, clothing and the element of the housing cost—by no means the whole of the housing cost, and in many cases not even the major part of it—that comes out of the private purse, almost every item of real significance in the standard of living of our workers comes out of public expenditure.
When Conservative Members say that they want to cut public expenditure, they are seeking to cut the standard of living of our people in just the same way as if we were to raise taxation by an equivalent amount. What we would cut if we raised taxation is the margin of private expenditure which goes out of the private purse not necessarily into the most important items in the standard of living but sometimes into the less important—I shall not say the luxury items. Some of them are important in giving a fullness to the life of our people but are not as important as education, health, the provision of proper pensions and security in unemployment and sickness, and all the other areas of public expenditure on which our people totally depend.
That is a factor that must be borne in mind when people tell me that we are spending more of the public's money in public expenditure now than we were then. That is true, but it is bad only if we are spending unwisely and wrongly. There are areas of public expenditure that I would like to cut. I do not find it entirely happy that the last Government reorganised local government so that the town clerk of York became the chief executive of York and does less work for more money. That is not an area of

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public expenditure that I would necessarily want to defend.
But I want to defend the major part of public expenditure. As the White Paper shows, the proportion of public expenditure is 46 per cent., until one takes away the transfer payments. But they are immensely important in guaranteeing good-quality living to people who are dependent on them. Anyone who is on supplementary benefit is totally dependent upon public expenditure. An old-age pensioner is largely dependent on public expenditure. We hear talk across the Floor suggesting that public expenditure is a bad thing or, as the right hon. Gentleman seems to think, something that we can afford only when we are growing.
The right hon. Member for Down, South made merry with forecasts, and there was something in what he said. But the truth is that the forecasts are simply expressions of hope about what might be spent in the future. We all know that they are not worth the paper they are written on. If the borrowing requirement increases, if there is an economic crisis, the Cabinet will be summoned together and these expenditure proposals will be cut. The important thing about having them is that they are an estimate of what we should be doing in the future, and they tend to focus our minds on the right priority for spending, provided that the resources are available.
If the resources are not available, we come to the key question that the right hon. Member for Newham, North-East has always managed to avoid in the tortuous doubts that led him across the Floor of the House. What Crosland was saying in "The Future of Socialism" was that we could manage to have major redistribution and an advent of greater equality as long as we had growth, because we could pay for the redistribution by the greater growth without impinging to any great extent on the standard of living of anyone.
But the question for any Socialist is "What happens if you cannot get the growth, if you have a nil rate of growth over the past four years", as the right hon. Gentleman pointed out we have had, "and if you have a nil rate of growth into the future? What is to happen in order that the people who depend on public exenditure should have a greater share?" Somebody must pay for it. The people
738
who have—who may be the people over the top rate of income tax, but who may also be the ordinary workers—may have to share more in order that all of us benefit, which is the whole ethos of public expenditure. It is so that there should be a greater benefit overall.
I think that it was the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) who said that over the past four years one substantial item of public expenditure that had grown out of all proportion was the transfer payments, which he wanted to reduce. The hon. Gentleman said that pensioners had been enjoying a better standard of living at the same time as other people's standard of living had been falling. But, even now, the average pension for a married couple is £26 a week. Who can live on £26 a week today? Average earnings in industry are £70 a week, and for most of the people in my part of the country they are less. But they are still substantially more than the pensioner has. I do not begrudge the pensioner any increase in his standard of living, and I do not think that the population at large begrudges it.
We always argue public expenditure in overall terms that ordinary people do not understand. If one told them "What the Tories will do when they get back next time—
Mr. Heffer: If.
Mr. Lyon: —"is to put up the cost of school meals and cut unemployment benefit, supplementary benefit and the old-age pension", we should know who would be the most popular.
Of course tax cuts are popular. Of course everybody wants to feel that at the end of the week he will get a bit more in his pay packet than before. The greatest fault is in my right hon. Friends the Prime Minister and the Chancellor of the Exchequer, because they have the greatest call upon publicity. It is they who should be doing this publicity work. Nobody tells our people what public expenditure is for and why they are paying the extra tax that is going into the standard of living that they now enjoy.
People must decide "Is it better to go on a foreign holiday or that my kid should have a decent education? Is it better that we should be able to buy a

739
boat in addition to the car that we have or that we should have a decent health service that can treat the grandmother and the children who need to go into hospital?" Those are the kinds of question that should be asked in a debate about public expenditure, because that is what the whole argument is about.
I have said, and I hold to it, that as a Socialist I would make this choice of priorities even if I were faced with nil growth. It may be that, if our people are to depend upon public expenditure to a greater extent, they must pay for it in increased taxation. I would not go into a greater borrowing requirement, because I would make people face up to the reality of what must be spent and how it must be paid for.
I do not believe that the resource implications for the economy are greater if one spends through public expenditure rather than through giving money back to people to spend themselves. The economic implications, with marginal exceptions, are the same whether we spend through public expenditure or through private consumption.
What has happened in the past, and what we should guard against in the future, is that we tried to spend that public expenditure without telling people that it had to be paid for, and that it had to be paid for by increased taxation, by a borrowing requirement, by inflation, or by any of the other things which have so bedevilled our economic performance in the past.
But if we tell people that out of this year's cake a greater proportion will be spent on public expenditure, which means that they will have less in their pay packets, that at any rate is the right way to approach the matter, although I accept that in political terms it may be unpopular initially until it is explained. But, at least, it would have to be explained. But I also accept that it would be easier, better and on every level more desirable if all these things could be achieved against a background of greater economic growth. In my view, this is the year when we ought to go for greater economic growth.
I am tired of listening to statements such as that which came out of the mouth of my right hon. Friend the Chief Sec-
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retary about the difficulties of inflating demand at this moment. The truth is that that statement could have been made by Roy Jenkins when he was Chancellor of the Exchequer in 1968. It has been made by every Chancellor since then in order to justify cutting. It is a normal Treasury orthodoxy in order to Justify cutting.
How can one say at this moment that, if we were to release more demand into the economy, there is not the slack in the economy which would allow it to be met? We have 1½ million unemployed; we are running our industry at less than we were running it in the three-day week; we have enormous spare capacity in almost every industry. The steel industry is in its present situation because there is not the demand in the economy for its products, and we could easily produce more steel to meet the demand if it were there.
The way demand comes is the way that Keynes taught us. In these days, when Milton Friedman and his friends reign supreme, it is about time we got back to Keynes. We can create demand as easily as we can knock it down. When people say that 1½ million unemployed is the price of four years of Socialism, all I can reply is that for the first two years of this Government we did not have such unemployment because we were running the manifesto but that when we turned to Treasury orthodoxy and started cutting demand, we started the move beyond the 1 million unemployed mark. We cut demand and we got unemployment. If we reinstitute demand, we shall cut unemployment.
But if we do it we take a risk. I do not think that we take a risk with inflation, because I believe that there is sufficient slack in the economy to allow us to provide the products that would meet the increased demand without necessarily stoking up inflation. It is possible that, because of the poor productivity and the poor investment in British industry over the years, our competitors, who also have slack but are markedly more efficient in using their investment, would be able to provide for that increased demand in our economy.
There are two ways to deal with that. One way is to decide to run a balance of payments deficit for a substantial time in order to give encouragement to our own

741
manufacturers to invest. Nothing encourages investment like sustained growth. Over the last 15 years, the percentage of the gross national product that has gone into industrial investment has remained static at between 4 and 5 per cent. It goes up with growth and comes down with recession. It does not matter about tax give-aways or giving incentives to the boardroom or middle management—that is not what encourages investment. It does not matter about putting actual resources into investment—the employers do not use that. They will invest only when they can see a period of substantial growth ahead in which they think they will get a good rate of return.
We could get growth now, even if it meant a substantial balance of payments deficit, because we could probably carry it for a substantial amount of time because of the relief that our balance of payments would get from North Sea oil. We would have such a deficit for only four or five years, or a few years longer, and this is the moment when we should go for sustained growth even if it means sucking in imports. This is the one moment that we can afford to do it.
The other way is to follow the suggestion made not only by the Tribune Group but by the prestigious Cambridge School, that we should go for selective import controls in order to maintain our own industry for that period. The Cabinet would be doing a great deal more if they discussed that proposal rather than the nostrums of the right hon. Member for Newham, North-East. Such a proposal is not Socialism. No one will be able to persuade me that import controls, first put forward by Chamberlain, are such a Socialist measure that we are in danger of going over to a Marxist society.
The only argument about selective import controls is whether they would work and whether we would be allowed by our competitors to get away with them. I think that for a certain period—not long, but perhaps for two or three years—there is no doubt that we could get away with it.
Either of these two propositions would be a way in which to deal with the sucking in of imports until we got growth. This is the year of all years to go for growth. We do not want simply a £2 billion handout. We need nearer the £4½
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billion that the TUC has sought, either in tax cuts or by an increase in public expenditure. My belief is that there should be about equal shares, £2 billion on each. If we got that, we should get the kind of growth which in the end would cut unemployment.
8.27 p.m.
Mr. Ian Stewart: After that extraordinary speech by the hon. Member for York (Mr. Lyon), a compound of fantasy and economic nonsense, it is time to bring the debate back to reality.
1 was appointed to the General Sub-Committee of the Expenditure Committee only a few months ago, so this is the first White Paper on expenditure that I have been able to examine at close quarters from that position. In the past, in my innocence, I thought that the public expenditure White Paper was designed to provide a basis for debate about the Government's public expenditure plans, but after the experience of the last few months and the Committee sittings that we have had questioning Treasury officials and the Chief Secretary, I have concluded that that is exactly the opposite of the intention of the White Paper and that, on the contrary, it is designed to confuse and obscure more than to instruct or provide the basis for reasonable debate.
I do not think that we should leave the matter there. White Papers of this kind should be a basis for informed discussion. Yet we have had to wait even until today to hear from the Chief Secretary one of the most significant comments on the White Paper. He said that it was necessary, according to the White Paper, to keep the growth of public expenditure within the growth of the economy over the period of the plans. The plans go for four or five years ahead. Paragraph 4 of the White Paper, which was quoted by the right hon. Member for Down, South (Mr. Powell) states that
"it is necessary that the planned growth rate for total public expenditure should be within the prospective growth rate of national income. The present plans are constituted to this end".
That is why the figure for growth of public expenditure this year is shown at 2·2 per cent., and the rate of growth in the economy is suggested to be 3·5 per cent., and obviously 2·2 is less than 3·5. But even Treasury officials admit—at Question 25 on 30th January 1978 in the report of the Expenditure Committee—that the plans for this year do not fall

743
within that framework. This year the projected figure for expenditure is beyond 3·5 per cent., and even if we were to achieve 3·5 per cent. this year, which many hon. Members have doubted—perhaps it is no accident that it is an election year—the Government intend to increase their expenditure beyond the rate of growth in the economy.
The Treasury official who answered that question said that for that particular year the forecast was just outside the rate of growth of the economy. But that is the coming year, which is the whole basis of these public expenditure plans. Everyone knows that, when taking a period of three or four years ahead, experience has shown that the march of public expenditure carries on relentlessly, whether or not growth is achieved.
It is high time that we realised that the cynicism that now greets this sort of presentation of public expenditure plans renders them counter-productive. I no longer think that the Government get benefit from being able to talk with two voices about their expenditure plans—to say, on the one hand, that they are keeping down the growth of expenditure to 2·2 per cent., which is all very responsible, and to refer on the other hand, to the increases in public expenditure programmes, which are being made in order to satisfy the Left.
I think that this is at the heart of many of the Government's economic problems. It goes back in another context to 1976, when the Government really had made effective restraints on public expenditure and initiated cuts. But they spent such a long time in playing down the fact that a further crisis occurred in July that year, and in the end the International Monetary Fund had to come in to sweep up the mess.
If the Government really want to control public expenditure, they should say so. If they are not intend to do so, they ought to admit it. The point we have now reached is that the Government have decided this year, by strange coincidence, that now is the time when public expenditure growth should be allowed to go ahead of growth in the economy. No hon. Member is so naive as not to know the reason for that.
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The debate has been very interesting but it has shown how impossible it is to relate public expenditure plans to the Government's economic policy without knowing their taxation programme and in isolation from the Budget. The point has been made many times that it would be much more satisfactory to be able to look at both sides of the account at the same time. In a sense, all discussion of this kind is theoretical. If the Government do not know what is coming in on the one hand, how do they know what should go out on the other? The danger with our public expenditure arrangements is that we plan the public expenditure first and then think afterwards about how to pay for it.
In my early days in the City, I was asked to look at some projections for a company which had a wonderful thing called a five-year plan. There was to be a great increase in investment, and new productive facilities were to be brought on stream. I asked "Could you show me the cash flow out of which this is to be financed?" I was shown a beautiful cash flow which brought about exactly the right amount of money to meet the expenditure which the company had put into the five-year plan. When I was so rash as to ask how the company arrived at the figures for the cash flow for the following five years, I was told "Those are to reconcile with the expenditure plans which I have just shown you."
I am afraid that that is the way in which the British Government conduct a lot of our public expenditure plans. No company, household or individual would get away with it. Any company which did that would go bust, if expenditure was planned first and it then rushed around trying to find the income with which to pay for it. Not only is it irresponsible to do it in this way; it is unreal, and it puts the House in an impossible position to take a realistic view of the Government's economic intentions.
I hope that the Government's intentions are honourable. I hope that everyone in the House would like the Government to behave responsibly on the economic front. None of us wishes to see our country suffering because of the ineptitude or the irresponsibility of Government. But on the present basis we are not able to make any decision about that. We cannot tell whether these public expenditure plans

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can properly be financed within the framework of income.
There is some evidence that income is going ahead of expectations, and that probably, because wage settlements are going at 14 per cent., rather than the 10 per cent. assumed in the White Paper, and perhaps because stock relief is no longer cutting back the yield on corporation tax, Government revenue may be rather larger than the Government expected it to be. In fact, the evidence of last year suggests that this may well be repeated, because in July the Chancellor of the Exchequer was able to take a more relaxed attitude about his funding through tax than he had at the time of his March Budget, and by November he was saying that the sums were all out again.
That is not very helpful. Because the Government are not prepared to come clean and say exactly how they propose to finance their expenditure plans, people do not give them the benefit of the doubt. It is no good the Prime Minister saying, as he did at the Finance Houses Association meeting the other day, that he wished markets would not look at one month's figures. Of course they will look at one month's figures if they cannot rely on the continuing presentation of a consistent policy by Government. It is the Government's fault for not presenting a clear picture.
The point I want to leave with the House is that I believe that a White Paper on expenditure should be designed to inform and not to confuse. If it confuses, it merely makes it more difficult for those who have to lend the Government money in order to finance these plans—or more difficult for the taxpayers who have to fork into their pockets to pay for them—to judge whether the whole thing is being done on a proper basis.
If this Government or any Government presented their plans in a coherent way, matched their revenue and expenditure and, if possible, had this debate on the economic future for the coming year coupled with the assumptions made in the Budget, so that we could see both sides at the same time. I think that they would have the basis on which to make a clear presentation about what they were trying to do.
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In those circumstances, I believe that the reaction from the country would be to accept the Government's plans with more enthusiasm than it does when the policy is piecemeal and contradictory and we are served bits and pieces one after the other.
It is a depressing prospect for taxpayers to look at the figures in this White Paper and to see that even if no changes are made in taxation over the coming three or four years there will be hardly any reduction in the borrowing requirement. There is very little scope for a reduction in taxation based on the expenditure plans contained in the White Paper. Yet the Prime Minister and the Chancellor of the Exchequer are dropping heavy hints all around the place, as often as they can, about the need for tax cuts in the package that will come in the Budget. No wonder that sort of thing rattles markets.
Those who are meant to be persuaded to buy gilt-edged securities in order to finance Government expenditure ask why the Government say one thing with one voice and another with the other.
Mr. Molloy: Will the hon. Gentleman explain why, at Question Times, Tory Member after Tory Member wants more hospitals, better health facilities, better roads and altogether much more money spent in their constituencies, yet when it comes to a debate like this they want public expenditure cut to the bone? That is being two-faced on a level that I have never before experienced in this House.
Mr. Stewart: Any hon. Member worth his salt wants to get for his constituency as much of the available resources as possible. That is the basis on which they make those applications.
Despite the time which has been spent in considering and questioning the Treasury and the Chief Secretary about the White Paper, it does not present a sufficient and reasonable basis for an informed discussion about the public expenditure plans for the coming year. Such indication as it gives is profoundly disturbing for the taxpayers of this country.
8.39 p.m.
Mr. Hamish Watt: Although my colleagues and I have no confidence whatever in the ability of a Tory Administration to run the country's economy, we cannot bring ourselves to support the Government. Looked at from a Scottish

747
point of view, there is nothing in the White Paper that warrants our support. Indeed, the SNP is particularly aggrieved to find that virtually all the proposed increased expenditure is being devoted to bolstering up a clapped-out economy.
I should like the House to ponder the position we would be in if we had not found oil off the Scottish coast. By now we would have run down our creditworthiness with the rest of the world and there would be tremendous howls of anguish from all sides as the Government proposed cuts. Fortunately for everyone, this has not happened. We do not begrudge the Government the extra revenue they are getting from the oil, but, in the Scottish context, we object to the unfair way in which it is being spent. It is wholly unreasonable to expect Scotland, particularly those parts that have put up with inconvenience because of oil, not to be recompensed for the discomfiture.
It is ludicrous that the proposed expenditure plans include a reduction in the road programme over the next five years. This will mean that the "oil road" between Perth and Peterhead will not be made into a dual carriageway or a motorway as it should and the communities along that route will get no benefit from the oil revenue. We believe that they should get a disproportionate amount of the revenue because they are the only people who have to put up with the discomfort.
The Government have completely ignored the plight of ratepayers in North-East Scotland and the oil areas who are being burdened with the repayment of loans for the next 60 years to pay for the infrastructure for oil which they neither need nor desire. It is a gross abuse of the rating system and local authorities should dig in their heels and say that there should be no further expenditure borne by ratepayers; it must come from central Government. The Government would then have to get the oil companies to pay for the roads, houses, schools and so on—which they should pay for in any case. Alternatively, the Government could use the Contingency Fund for this purpose; and if the coming of oil is not a contingency, I should like to know what is.
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Another area of conflict is the repeated failure of the Government to ensure that a reasonable portion—say 75 per cent.—of oil jobs go to United Kingdom personnel. Government expenditure on the training of young men in Scotland is totally inadequate. It is ludicrous to have so many able young people on the dole and yet to bring in all nationalities to do the work which our young men are keen to do.
I heard recently that one oil firm in Aberdeen advertised in a Glasgow newspaper for a roustabout, which is virtually a general labourer, with some oil experience and received 390 applications. If we adopted a policy of local recruitment and asked the oil companies to implement that policy—and Norway insists upon this—not only would we save on unemployment benefits and social security payments and so improve those figures in the expenditure White Paper but we would have the extra revenue from the tax on the good rates of pay that these young men could be getting from the oil companies.
It is small wonder that people in North-East Scotland are totally fed up with Westminster government and are likely to show their disgust by throwing out Tory and Labour Members at the next General Election—just as the fishing communities did at the last election. They are fair people and all they ask for is fair and reasonable treatment. We do not believe that we get that from a Westminster Government, whatever the complexion.
Is it not ironic that there is not one Scot in the Treasury team when so much of the Government revenue is coming from Scotland? When the Scotland Bill goes through and the Parliament is restored to Scotland, Scots will not for long be content with this unfair treatment. They will demand the right to spend their wages and not just pocket money. I believe that an oil-sharing agreement will be reached between Edinburgh and London and that Scotland will have its legitimate costs met before the money comes to London.
I cannot let this opportunity pass without being critical of the Department of Industry for downgrading the development area status of Aberdeen. The Department has failed to appreciate that many firms and industries in the Aberdeen area have had greater difficulties

749
because of oil developments than they had before. They have had absolutely no compensatory benefits.
I illustrate my point with two examples. The textile industry and the papermaking industry have both lost engineers and maintenance men to higher paid jobs in oil. They are powerless to stop the drain without breaking the Government's pay guidelines, and there is no way in which these industries can put up their prices because they will price themselves out of the market.
If the Government do not want the oil industry to get development grants, they should have the courage of their convictions and tell the oil companies that they are no longer eligible for them. Why not have the guts to say so? Why should they not tell the oil companies that they should not have these development grants? I believe that this is the right way to proceed. If we want to make economies, this is an excellent opportunity. Do hon. Members honestly think that the oil companies would not place orders for oil rigs because they were not getting the 20 per cent. grant? The companies must have the rigs in order to get the oil out, and they must have them whether or not they receive the subsidy.
The Government have a precedent. They have cut out grants to mines and quarries, and that is reasonable. So why not oil? These are not mobile industries. They are tied to an area in which they must develop. If development grants were refused to the oil companies, they would need only an extra couple of months of oil pouring ashore before they started profit-making.
On the more general question, the British economy is left with only two alternatives. I was particularly interested to hear the hon. Member for Chester-le-Street (Mr. Radice) say that the British economy was in a trap. There are ways by which we could get out of this trap. We must go for higher technology industries which require only a small input of raw materials and a high input of highly skilled labour.
On this point I criticise the White Paper, and particularly the Department of Industry, for spending only £1·8 million on processing and project developments and for envisaging increasing this to only £3·6 million by 1980–81. I believe that much more money must be
750
allocated to project and process development instead of bolstering up out-of-date industries which must of necessity be on the way out.
I speak particularly of those industries which have a high import content to output. The country will run up against the same brick wall as it encountered when the oil producers put up their prices four times. The same could happen again if other commodity countries put up the prices of tin, rubber and copper in the same way.
While going for high technology industries, we must seek to change the economic strategy and go also for industries with a high labour input for which the basic raw materials are here in our own country. I wish to instance tourism, fishing and agriculture.
I should like to concentrate primarily on the role that agriculture could play in getting the British economy right and also in providing much needed jobs. For the Government to reduce expenditure on agriculture from £1,133 million in 1976–77 to £899 million this year, and even further to £706 million in 1978–79, is surely the height of folly.
Agriculture is an industry with a sure market. It does not have to depend on volatile foreign markets. Every million pounds value of extra food produced replaces a million or more of imports.
Although I appreciate that there are now few vacancies in agriculture, do the Government realise the vast potential for job creation in agriculture if a proper expansionist programme were undertaken? Can they not see the opportunities in food processing, the leather industry, the agricultural machinery industry and many others? Will the Minister in reply explain to British farmers why industry can get interest relief grants, whereas agriculture cannot? The Danish and Dutch farmers can obtain such grants. Why cannot the British farmer do so?
What is equally important is that these goods do not need any subsidising by export credit guarantee from the Treasury because with agricultural exports it is a matter of money "on the nail". I could go on in similar vein quoting the potential of the fishing industry and of forestry, all of which are of greater relative importance to Scotland than to England.
It is small wonder that Scotland has such a strong desire for a greater degree

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of economic independence. When we see money being spent as wastefully and unwisely as is indicated in this White Paper, right up till 1982, with no serious attempt being made to correct the dangerous imbalances in the economy, does anyone wonder why Scotland wants away?
Unless there is a change of direction in trade and industry, soon Her Majesty's Government will use up all the oil revenue and be in the same sorry muddle as we were before oil was discovered. We Scots are too canny and too careful to stand by and see our share of the oil revenues dissipated in this way.
There is not even a hint that any of the God-given money will be used to clear up the man-made deprivation of the West of Scotland, yet the surplus labour to do the job is there, the money is now there and goodness knows the deprivation is there for all to see. Should we not do something about the situation while there is an opportunity to do so? Does this House really expect us to support this White Paper tonight and then face the electors of Garscadden on their doorsteps tomorrow? Surely we in the SNP can offer everyone in Glasgow something better.
It is nothing short of scandalous that proposed expenditure on housing is to be cut, at a time when there is so much surplus capacity in the building industry. It may be that certain areas in Britain do not need increased expenditure on housing. If so, may the Scottish people have some of the spare cash to tidy up the West of Scotland?
Do not let anyone in the House accuse the Scottish people of being in any way greedy because we refuse to condone the wastefulness of Westminster Governments past, present and future, if we read the White Paper rightly. It seems that that wastefulness is to continue right up to 1982 if the thinking that is exemplified in the White Paper is a true indicator of what will happen in the next five years.
We in the SNP say to the House "A plague on both your Houses. You are both totally irrelevant to the needs of Scotland."
Mr. Deputy Speaker (Mr. Oscar Murton): The wind-up speeches are due to start at 9 o'clock.
8.56 p.m.
Mr. Ron Thomas: I have an important point to make and if I go slightly beyond 9 o'clock I hope that the House will understand.
I refer to what the right hon. and learned Member for Surrey, East (Sir G. Howe) had to say about the Tory amendment. The right hon. and learned Gentleman talked about the need to reduce taxation. He said that he would do that by introducing certain so-called savings. Those savings would be brought about by increasing school meals, cutting rent subsidies and reducing spending in terms of the Community Land Act. As for the last item, there is no longer any money available to cut. The right hon. and learned Gentleman suggests that he would cut away some of the officials who, he insists, are every day looking after that piece of legislation. Anyone who has served on local government will know that that is a nonsense. However, the members of NALGO should be aware of what he intends to do.
At the same time the right hon. and learned Gentleman shed crocodile tears about the level of taxation of low-paid workers. At one moment he was talking about wanting to reduce the tax paid by low-paid workers, but in the next breath he was seeking to increase their rents and the price of school meals. I point out to my right hon. Friend the Financial Secretary that Labour Members are opposed to any increase in the price of school meals. If the House had an opportunity to vote on the school meals issue, I doubt whether my right hon. and hon. Friends on the Government Front Bench would get one vote from the Labour Back Benches in favour of an increase in the price of school meals.
Mr. Dennis Skinner: My right hon. Friend would get the support of Ministers.
Mr. Thomas: Yes, he would get the payroll vote. I was not including them in the situation that I postulated. I included those who would be free to vote as they thought fit.
In September 1977 the increase in the price of school meals meant that 648,000 fewer children had school meals. About 416,000 children began taking their own so-called food to school, which probably

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meant a packet of crisps or a packet of biscuits.
The Tory amendment refers to the need to create a "healthy and thriving economy". What happened between 1970 and 1973? That is when the Conservative Government gave the capitalist class in Britain everything for which it asked. However, the level of capital investment in industry decreased. We had investment overseas and speculation in land and property in Britain. We know that the present subsidies to industry are running at about £9 million, £10 million or £11 million a day.
In a recent Answer to a Question that I tabled I was given to understand that up to 31st March 1978 the estimate of the accumulated net reduction in corporation tax resulting from stock relief will be about £4,500 million. If the Tories are serious about reducing taxation for working people, why is it that they did not join some of my hon. Friends and me when we tabled an amendment to the previous Budget? It was our intention to reduce the taxation of low-paid workers. We wanted to stop those in the higher bands getting considerable tax handouts.
Recently, in answer to a Question tabled by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), it was stated that the Government's tax changes in 1977 gave £94 to a married couple with two children earning £2,000 a year but gave those, like some Conservative Members or those they represent, earning £63,000 or more £852. When we discuss the next Budget we shall try to make the Government give whatever tax reliefs are available to those who most need them. If the right hon. and learned Member for Surrey, East believes in that policy, I am sure that he will support us in the Lobby.
What alarms me is that the White Paper and the report from the Public Expenditure Committee hardly give the impression that they are written against a background of at least 1½ million people unemployed. They are written against the background of a loss of tax revenue and payments of one kind and another and of goods and services of up to £10 billion a year.
Mention has been made of other countries. Western Germany, with its 1¼ million unemployed, having sent back
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1 million or more immigrant workers to their own countries, is sitting on a massive surplus of gold and convertible currency reserves. It also has the lowest level of inflation in the industrialised world. Yet it cannot solve its unemployment problem. That is a clear indication that capitalist measures cannot solve the problem of unemployment. Germany, which has the lowest level of inflation, a healthy balance of payments and massive gold and convertible currency reserves, cannot solve the problem of unemployment. That indicates that capitalism and capitalist measures cannot solve unemployment. There are 7 million unemployed in the EEC countries, another 5 million or 6 million unemployed in the United States, there is unemployment in Japan and so on.
A good deal has been said about the productive potential of this country. That is mentioned in the White Paper. Unfortunately, Britain's productive potential is becoming emasculated every day because of plant closures of one kind or another.
We hear arguments about the economic growth that we can achieve being limited by our so-called productive potential. That productive potential is getting less and less, because manufacturing industry is causing a spiral of contraction and decline.
The economic growth predicted in the White Paper is not enough to begin to deal with the present level of unemployment. It is nowhere near sufficient to create the 1 million new jobs that we need by 1980. Given that we have excess capacity in British industry, and given that increased capital investment will lead to more labour being released, we must face the problem that an increase in expenditure, whether via the public sector or tax cuts, will mean an increase in import penetration of finished and semifinished manufactured goods.
My hon. Friend the Member for York (Mr. Lyon) argued that import controls may or may not be Socialist. There is nothing very Socialist about leaving multinational companies to decide what imports of finished and semi-finished manufactured goods should come into this country. About two-thirds of our import Bill of £31,000 million is represented by finished and semi-finished manufactured goods. That cannot be Socialist in any sense. We call for a planned trade policy.

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The White Paper, although it does not mention it, shows that the Government's ideas—that cuts in public expenditure would lead to a transfer of resources from the public sector into export and capital investment—are completely false.
I do not agree with that part of the White Paper that talks about the need for a pay policy to deal with inflation. I cannot go into them now, but there are far more important reasons than pay increases for inflation. The lack of demand in our economy has contributed to inflation. That lack of demand has meant higher unit costs because of a lower level of capacity working and so on.
Looking at the detailed programmes in terms of public expenditure, we see that important items are to be cut relative to two or three years ago. There has been a shift from social policy items. There will be a significant increase in expenditure on defence and a significant proportional decrease in expenditure on housing, education and health.
It is no good my right hon. Friend telling us that our public expenditure is higher than that of the previous Tory Government. Of course it is and it ought to be, because we are supposed to be a party that believes in public expenditure. To take the period just before the Labour Party came to power following the Barber cuts and to say that we have done a little better than the Tory Party is not good enough.
I can remember an occasion when the Prime Minister expressed a sentiment—just one—with which I agreed. He said that the level of public expenditure on education, health, housing and social services was an important contribution not only to the standard of living but to the freedom of the people in this country. It makes the important contribution which enables people to be free from poverty and bad housing and to receive education, social services and so on. Therefore, apart from making a very important contribution to the social wage and the standard of living of working people, public expenditure makes an important contribution to their freedom. If the Conservative Party comes to power, it will unquestionably reduce that social wage and the freedom of ordinary working people.
9.7 p.m.
Mr. Nigel Lawson: We have had a very good debate on an important subject. It has been distinguished by an outstanding maiden speech from my hon. Friend the Member for Bournemouth, East (Mr. Atkinson). It was both outstanding and robust. I hope that we shall hear him a great deal in the future, equally robust.
We had also contributions of great value from a number of my ex-colleagues from the General Sub-Committee of the Expenditure Committee which produced a most useful report for us all—in particular from my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and also from the hon. Members for Nottingham, West (Mr. English Norwich, South (Mr. Garrett) and Chester-le-Street (Mr. Radice), all of whom made thoughtful contributions. We heard also from a newcomer to the General Sub-Committee, my hon. Friend the Member for Hitchin (Mr. Stewart). The Committee was thoroughly well represented in the debate.
In a few weeks' time, on 11th April, we shall be debating half of the Government's Budget. I say "half" because it is simply the revenue side of it. Today we have been debating the other half, which is an equally important half, the expenditure side. The sooner that the two sides are brought closer together, the better it will be for Parliament, for good government and for economic understanding throughout the country.
The failure to understand the inexorable connection between expenditure and revenue, between expenditure and taxation, was one of the unconscious themes running through a great many of the speeches from Labour Members.
But today at least, unlike last year, we have before us a substantive motion—one that has at least some family resemblence to what ought to be before us. We should, however, be considering a motion to approve the Government's public expenditure White Paper. This time we are not quite being asked to approve it. Such is the Government's lack of confidence in their own supporters—we heard from a number of those supporters today, and we can understand the Government's feelings—that we are not asked to approve it in its entirety. Instead, we have a most

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curious form of words. The House is being asked to take note of the White Paper as a whole but to approve certain aspects of it.
It is not clear precisely what aspects of it we are being asked to approve. That particular part of the motion refers to the
"plans to increase public expenditure".
Let us see what that means. Hitherto, the convention—as the right hon. Member for Down, South (Mr. Powell) pointed out, a thoroughly bad convention—has been to describe as public expenditure cuts reductions in previously announced spending plans for a particular year.
However, using this convention, which is the one that has been used in the past, there are no increases in public expenditure announced in the current White Paper. Line G, table 14, which is the relevant one in the White Paper, shows an increase of £232 million, chiefly, incidentally, in increased payments to the Common Market under the CAP, in 1978–79, and a reduction of £34 million in 1979–80. Both these figures are less than one-half of 1 per cent. of total public spending and are well within the margin of error—even a normal margin of error, let alone the Chief Secretary's "Guinness Book of Records" margin of error—and they are statistically insignificant.
It seems clear, therefore, that the increase to which the Government are referring is the very substantial increase in public expenditure planned for next year, 1978–79, over this year now ending, 1977–78. This seems to be a very much healthier and more sensible use of language than the old convention was. I hope that in future we can agree to confine the term "spending cut" to a reduction in spending from one year to the next, and similarly with "spending increase". Certainly that is how I intend to use those terms.
In discussing the Government's plans, I suggest that we would do best if we confined ourselves exclusively to what is proposed for the year immediately ahead, 1978–79. As the White Paper points out,
"The figures for the year immediately ahead, 1978–79, are firm plans"
—quite how firm, apparently, the Chief Secretary is not sure, but the firmest there are. The White Paper goes on:
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"The figures for the succeeding years are increasingly provisional."
The Government can say that again.
Since this general truth of the provisional nature of the figures for future years is of particular relevance now, because the incoming Conservative Government clearly will need to make substantial changes to the plans for succeeding years, that is a further reason why we now should address ourselves solely to 1978–79.
Before looking to the future, however, let me pay tribute where tribute is due, because, as the Chief Secretary knows, I like to be fair. In the public expenditure debate two years ago, in March 1976, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) declared that public expenditure needed to be cut by £4 billion. This was met with hoots of derision from Treasury Ministers at the time, so much so that the Chief Secretary chose to remind the House of this incident during last year's public expenditure debate. Now we have in the White Paper figures for the estimated outturn for public expenditure in 1977–78. They show that at constant 1976–77 prices there has been a reduction of precisely £4·1 billion in public expenditure over the past two years. Clearly, the Government listened to us and did what we suggested, even though they derided us when we put forward the suggestion.
We disagree, of course, with some of the ways in which this has been achieved. We disagree in particular with the savage cuts in defence spending. But the total sum at least is exactly what we asked for, and it is right.
It was to be expected that Government supporters would ask during the debate where we would have made the cuts to compensate for the cuts which we would not have made in defence and in certain other areas. There are a number of possibilities. The Chief Secretary himself, for example, has pointed out frequently the rocketing cost of indiscriminate housing subsidies, and he has given this as an example of where the present Government have got their priorities wrong. But he has been unable to do anything about it, of course, because he could not get it through a Labour Cabinet.
Then there are all manner of expensive Socialist follies—[Interruption.] I see that the Lib-Lab pact has taken on a new

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aspect, with the hon. Member for Liverpool, Walton (Mr. Heifer) and the hon. Member for Cornwall, North (Mr. Par-doe) now in conclave.
I was saying that there are all manner of Socialist follies to be extirpated, such as the Community Land Act, which, so far from costing nothing, is scheduled to cost £64 million in the coming year. There is the artificially inflated demand for higher education as a job screening device. There is the excellent example set by the present Government, with the unloading of £500 million-worth of BP shares, of the sale of public assets to the private sector. There is the sale of council houses, which is a most important part of this process of selling public sector assets to the private sector.
Mr. English: Will the hon. Member refresh my memory? Was he not on the Sub-Committee of the Expenditure Committee which I chaired when we criticised the sale of BP?
Mr. Lawson: No. That error was made after I left the Committee.
Then there is the overmanning, the administrative overburden and waste which still permeates much of the public sector. There is the increasingly expensive nonsense which my right hon. Friend the Member for Newham, North-East (Mr. Prentice) mentioned, as did my right hon. and learned Friend the Member for Surrey, East, of the so-called industrial strategy—the State as entrepreneur, of which the hon. Member for Walton wanted more and more and which, in a paper delivered the other day, was so devastatingly exposed by, of all people, the former managing director of the Industrial Reorganisation Corporation Mr. Ronald Grierson himself.
Indeed, I see that even the CBI, in its Budget representations to the Chancellor of the Exchequer, has said that
"There should be less Government spending on support for industry and employment."
If the CBI can say that, perhaps even the hon. Member for Walton can accept it. There is ample scope, in these and other ways for a rearrangement of priorities.
Although I acceded to the request of the Chief Secretary to spell out the areas where we see that there is scope for economies, I am not sure that it is incumbent on us to spell out in any detail what
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we would cut in one area to make way for necessary increases in another when it is now clear that the Government themselves, with all the information at their disposal and with the books in front of them, are unable to reveal their own cuts in advance of making them. For, as the General Sub-Committee of the Expenditure Committee has pointed out in its report on the White Paper, the unannounced shortfall in spending this year has in fact turned to be larger than all the pre-announced and hotly debated cuts put together. The Government did not know what they were going to do. It just happened. I do not see why it is incumbent on us to spell out the detail when the Government cannot.
But, as far as the total is concerned, the Government, whether by accident or design—or, maybe, a combination of the two—have achieved the necessary cuts of £4 billion. If they were now to hold expenditure at the current year's level—and my right hon. Friend the Member for Newham, North-East and my right hon. and learned Friend the Member for Surrey, East suggested that there is a lot to be said for holding it constant for several years to come—the State's share of the national wealth would continue to decline and there would be scope in the coming Budget for the substantial cuts in income tax that the people want and the nation needs.
Of course, instead of doing that and holding public expenditure steady, the Government are planning a massive increase in expenditure. Quite how massive they rather delicately decline to reveal, and even the General Sub-Commitee had some difficulty in winkling it out. It is absolutely clear that it is greater than the 2 per cent. rise that the Press was led to believe was implicit in the White Paper. The Chief Secretary told the Expenditure Committee that it might be anything from 2 per cent. to 8 per cent. But what did he know? What did he care? Treasury officials told the same Committee that their best guess was 4 per cent. but that this was only
"a single figure in the middle of a wide range".
The Bank of England Bulletin, out today, reckons that it might be
"close to 7 per cent."
but that it is more likely to be
"closer to 4 per cent."

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My own guess—it shows, incidentally, the absurdity, as my right hon. and learned Friend has said, of discussing figures for later years when the Treasury cannot even be sure, within a margin of billions of pounds, what next year's public spending is likely to be—is that the increase in 1978–79 will be around 5 per cent. I say that as a confirmed White Paper watcher for many a long year. This is not only 5 per cent. too much; it is also roughly double the likely rate of growth of the economy as a whole over the same period, as my hon. Friend the Member for Hitchin pointed out.
So much for the ringing declaration, which has already been quoted by the right hon. Member for Down, South, in paragraph 4 of the White Paper that
"in order to leave room for manoeuvre on taxation, it is necessary that the planned growth rate for total public expenditure should be with-in the prospective growth rate of national income."
Yet for the only year for which we have any figures that we can believe it is at least double the likely growth of national income. It is clear that, with a General Election in the offing, the Government are now bribing on all cylinders and planning a substantial increase in public expenditure, and substantial tax cuts too.
It is worth contrasting this with what the same Treasury Ministers were saying in last year's public expenditure debate before they had lost all sense of responsibility. For example, the Chief Secretary, in opening the debate, said:
"the same people who ask for higher public expenditure invariably also want large cuts in direct taxation. They cannot have both."
Of course, if there is a General Election coming, maybe they can.
The Financial Secretary wound up on that occasion as he is winding up tonight. He took it upon himself to reply to the hon. Member for Bedwellty (Mr. Kinnock). I am sorry that the hon. Member is not here tonight. I shall not attack him. Last year, he declared that the Government should increase the Budget deficit in order to reduce unemployment. With great patience, the Financial Secretary explained that an increase in the Budget deficit would increase inflation, which in turn would prevent a reduction of unemployment.
Incidentally, that was why I intervened earlier in the Chief Secretary's speech. It
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was not to make a silly debating point but to refer directly to the contrast with what the Financial Secretary said last year. He then said:
"If we were to increase the public sector borrowing requirement as a result of increasing public expenditure, we would have to raise interest rates. Once we did that we would make it more difficult to invest. Then we would not get the industrial expansion that is absolutely essential."—[Official Report, 17th March 1977; Vol. 928, c. 637, 760–1.]
What do we now see? The Government's motion tonight was obviously drafted by the hon. Member for Bedwellty, because it approves the plans to increase public expenditure specifically
"in view of the need to reduce unemployment".
In other words, since a General Election is now in the offing, the Government have decided, even though they have a busy parliamentary timetable, to repeal the laws of economics. Unfortunately, those laws cannot be repealed. That is the trouble. The inexorable consequences will follow—not lower unemployment, but higher and rising inflation.
I know that the Government will make much of the fact that the public sector borrowing requirement this year is likely to turn out much lower than forecast, probably less than £6 billion, in large part because of unexpectedly high income tax payments. I suspect, incidentally, that there will be a very much smaller shortfall in the public sector financial deficit, which is in many ways a more significant figure. I am glad to see the hon. Member for Nottingham, West, Chairman of the General Sub-Committee, agreeing with me. For the first time ever, we may find that the PSFD is bigger than the PSBR.
But what matters now and for the future course of inflation is not the borrowing requirement for the financial year just ending but the borrowing requirement for the year ahead. It is abundantly clear that any tax cuts in the coming Budget will, on the basis of the plans for public expenditure for the coming year as contained in the White Paper, mean a substantial rise in the borrowing requirement.
This underlines still further the gross irresponsibility of the Chancellor's new pre-election economic strategy. What could be more irresponsible than to plan for a substantial increase in the borrowing requirement at a time when the money

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supply in terms of sterling M3, as today's figures have confirmed—it was not just January's figures—is increasing at a rate well in excess of the Chancellor's 13 per cent. upper limit? It will not be long before the brakes are off altogether.
This year, as the hon. Member for Cornwall, North remarked, a number of eminent academics were invited for the first time by the Expenditure Committee to comment on the White Paper. It was an interesting and useful innovation. I too contributed my fourpennyworth. Every one of them commented on the complete lack of any coherent economic framework to the Chancellor's proposals—the disturbing intellectual vacuum in which the White Paper is presented.
What, for example, does the Treasury regard as the maximum permissible size of the PSBR? Perhaps the Financial Secretary would care to answer that question now. I hope that he will answer it when he replies to the debate. The White Paper is silent on this, even though it is absolutely crucial. Perhaps the Financial Secretary will tell us. Or perhaps he thinks that it does not matter at all and that there should be whatever degree—this is clearly what the hon. Member for Cornwall, North thinks—of so-called reflation is needed to bring about full employment—the very same crude fallacy that he himself rebuked last year.
But in that case, if there is no limit in terms of the borrowing requirement—I hope that the Minister will say that there is a limit and what it is—what determines the Chancellor's scope for action? It is quite clear what, in practice, the Chancellor regards as limiting the scale of the bribe he is now contemplating for 11th April. As he ponders in his room now, he is asking himself "How much can I do without risking a major balance of payments crisis and a collapse of the pound?" That is the one thing that is causing him concern and the one thing that he feels is a constraint.
Yet the fact that that is the only practical limitation that he sees, the only one remaining now that he has decided, evidently, that monetary restraint is something with which he need no longer bother at all, should surely provide the clue to where the real answer lies. For the reason why, even with North Sea oil, we once
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again view the prospect for the balance of payments with great trepidation, and why there has been such massive import penetration into this country even while our economy has been stagnant, has nothing whatever to do with demand, whether inadequate or excessive.
The problems lie entirely on the supply side—our appallingly low productivity; the pervasive lack of confidence; the erosion of the incentive to acquire a skill, to work overtime or even, in some cases, to work at all; and, in general, the malfunctioning of both the labour and the capital markets, due in large measure to inflation, to formal incomes policies and to high direct taxation.
It is the correction of these fundamental weaknesses—not the expansion of public expenditure; that has nothing to do with it—that alone will enable the economy to expand and unemployment to come down, as we all hope it will.
The present Government have presided over the worst economic record in the Western world. In four years our currency has lost almost half its value, industrial production is still at the level reached in the three-day working week, productivity has been totally stagnant and unemployment is higher than that of any of our major competitors.
Mr. Clemitson: Nonsense.
Mr. Lawson: It is not nonsense. It is true. Official figures show this to be so on a comparable basis.
Despite that record, the Prime Minister has the impertinence to lecture other countries on how they should conduct their affairs, evidently confusing foreign travel with statesmanship. But other countries will not save us. We must save ourselves.
The measures that we need to take are perfectly clear. Perhaps they are clear to the Chancellor too; I give him that credit. But, if they are clear to him, he has chosen to ignore them, because he is all too well aware that his predecessor—this was mentioned by the hon. Member for York (Mr. Lyon)—Mr. Roy Jenkins, was blamed by the Labour Party for losing the 1970 General Election by not having a give-away Budget. He knows that, and he is clearly determined that at any rate he will not be similarly blamed for the loss of the next General Election.

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The spending plans in the White Paper and the Budget that will follow them after Easter are cynically designed as the two barrels of the biggest pre-election bribe the British people have yet been offered. The people will not be fooled. But they will, none the less—this is their hardship; this is the tragedy of it—suffer the inflationary consequences for a considerable time to come.
I invite my right hon. and hon. Friends to register their distaste for this whole shoddy and shabby episode by voting for the amendment tonight.
9.30 p.m.
The Financial Secretary to the Treasury (Mr. Robert Sheldon): My first happy task is to congratulate the hon. Member for Bournemouth, East (Mr. Atkinson) on his maiden speech. He spoke with confidence and fluency in illustrating the problems of his constituency, and we look forward to his further contributions. He was a little more controversial than has been the custom, but that custom is not quite so strongly observed as it used to be, and I urge the hon. Gentleman not to regret on that score what he said.
The debate has changed considerably from its original format. It is my regret that we do not have those Sub-Committees which form a part of the Expenditure Committee putting forward their assessment of their own programmes. I have always held that that should be an integral part of the debate on expenditure. Those who study the subject could comment upon the choices that the Government make and bring pressures to bear on the basis of the knowledge they have acquired in their own areas. Only when that is done shall we have the exchanges of views and the formation of new and changing priorities that those best equipped can contribute to the debate. I understand that the Sub-Committees are examining the White Paper and I believe that they will make their comments in due course. I hope that they will be able to make their comments in the course of future debates.
There have been a number of comments from the Opposition in this debate about the nature of cuts. The right hon. and learned Member for Surrey, East (Sir G. Howe) went rather further in describing the kind of cuts he would wish to see. There was an absence of an assessment in that direction by the hon. Mem-
766
ber for Blaby (Mr. Lawson). We must assume that the Conservative Party's policy, on economic matters at any rate, is still being made by the right hon. and learned Gentleman. We note his comment that one of the ways in which expenditure might be saved is by the selling of more BP shares. We look forward to learning in a later debate what the Conservatives' intentions are in this respect.
Sir G. Howe: What are the Financial Secretary's intentions?
Mr. Sheldon: We have no plans to sell BP shares. That is quite clear. I wish that the right hon. and learned Gentleman would explain how many BP shares he has it in mind to sell. This is a very important matter. We are dealing with one of the largest world companies. For the right hon. and learned Gentleman to make such a comment upon an international company of BP's size and reputation, without being able to tell us just what he has in mind, is to fail miserably in the position that he holds.
We know that there is a division on many of these matters. I wish to refer to the way in which this has been explained by the right hon. Member for Leeds, North-East (Sir K. Joseph), who wants very strong cuts. The right hon. and learned Gentleman wants reasonable cuts, the hon. Gentleman does not seem to be sure whether he wants cuts at all immediately, but the right hon. Gentleman put his position clearly in an article in The Sun on 3rd August last year, when he made this emotive statement:
"We will put an end to the spend, spend, spend."
If the right hon. Member for Leeds, North-East has changed his mind since, we shall be happy to hear about it. If the right hon. and learned Member for Surrey, East has changed his mind since the opening of the debate, when he explained the number of cuts that he would make, we shall be glad to hear that also. What we are seeing here is the Tory Party demand to cut public expenditure so that it can increase the assistance given to the best-off in our community.
Sir G. Howe Sir G. Howe indicated dissent.
Mr. Sheldon: The right hon. and learned Gentleman's memory seems extraordinarily short. He said that there should

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be tax incentives to get rich and to prosper out of post-tax incomes. He said that he wanted these people to get rich so that they could prosper out of post-tax incomes. I do not know his definition of "rich", and I should be glad to hear it. It is a pity that he did not go into it more fully. But let us be clear what the Tory Party has in mind.
Sir G. Howe: Does not the right hon. Gentleman accept and remember that one of the points I made was that a tax system which imposed taxes and national insurance contributions on people with incomes of £45 a week at the level of 40p in the pound was entirely absurd, and that we are interested in creating opportunities for people of all incomes to have lower taxes so that they can improve their own conditions by their own efforts?
Mr. Sheldon: I must repeat what the right hon. and learned Gentleman said. I made a note of it at the time. He said that he wanted tax incentives for people to get rich. The House understands that he wants people to get rich—fair enough. We know where we are. That is what the Tories want to provide. But let us look at the case and see what was actually done by the Tories. Let us compare what they are saying now with their earlier performance in office.
In the years 1970–71 to 1973–74, there was an increase in public expenditure of 13 per cent. If we take the more comparable years 1969–70 to 1973–74, there was a 16 per cent. increase. However, the problem was not an increase in public expenditure but the way it was paid for. It was paid for by an expansionary boom, an expansion in money supply, and an expansion in the public sector borrowing requirement.
On the contrary, in the years 1973–74 to 1978–79, we are having an increase of 5 per cent. in public expenditure after allowing for the £1½ billion shortfall in 1978–79 referred to by my right hon. Friend the Chief Secretary. I think that that is responsible, within the limits of what we have set out in the White Paper, and in the light of these figures it was outrageous of the right hon. Member for Leeds, North-East to say that the Tories would put an end to spend, spend, spend. For it was the Tories who spent money that they did not have and produced the
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problems that we are living with even today.
What we are seeing now is a modest growth in our gross domestic product, and as our capacity grows, so will our public expenditure be able to grow with it. This compares with what the Tories did when they had their growth in public expenditure paid for by the disgraceful increase in money supply.
By 1974, the money supply had worked its way through, the bubble had burst, and the myth of Tory financial responsibility burst with it. The hon. Member for Blaby talked of lack of confidence. He should understand that, although many people in the City would welcome cuts in taxation which would be heavily biased in favour of the wealthy, when they consider the possibility of a Tory Government they do not forget the profligacy of the Tory past and are justifiably fearful for the City's future.
That is why we have also heard from a former Financial Secretary to the Treasury, one who held the post that I now have the honour to occupy. He said on 17th March 1977:
"I doubt whether the same degree of control"—
that is, control over public expenditure—
"has been exercised with such determination for so long by any Administration in the last 20 years."—[Official Report, 17th March 1977; Vol. 928, c. 676.]
As that statement comes from someone who certainly advocates control in this matter, I think that we have refuted the argument that we are doing nothing more than spend, spend, spend. We are controlling public expenditure in a way that is generally appreciated outside this House and in most parts inside as well.
The right hon. and learned Member for Surrey, East in his list of public expenditure cuts, would cut down on industrial assistance. I am not sure whether all parts of the United Kingdom will react with very great joy and delight to the prospect of the factories not receiving the money that they need for expansion.
The right hon. and learned Gentleman talks about ending or phasing out the temporary employment subsidy. That may go down very well in Surrey, East, but it does not go down at all well in the North of England, or in those areas which desperately need the investment

769
opportunities that we are providing and the assistance in regard to jobs.
Finally, the right hon. and learned Gentleman talked about the Public Accounts Committee as if it were a body which criticised only the spending of Labour Governments. He ought to know that, even at this stage, there are certain matters on which the Committee is still criticising the activities of the Conservative Government.
There are other aspects of public expenditure which the Conservatives would be likely to increase. I shall not go into the matter of defence; we know about that. Let us consider the Conservatives' sometime undertaking to abolish the rates. Are they still intent on doing this, at a net cost of nearly £2 billion?
The Conservatives also had a proposal to introduce tax credits. We do not hear much these days about tax credits. We can read about tax credits in "The Right Approach" as a useful scheme which the Conservatives will implement in due course. They speak of using their period in Opposition in order to improve the scheme and examine the possibilities of broadening it—not narrowing it—within the resources available. But when we look at "The Right Approach to the Economy", we find that this tax credit scheme, which would cost £6 billion, is not there. In other words, the scheme that was set out in "The Right Approach" turns out to be the wrong approach to the economy. It is not, after all, thought right to spend £6 billion, a large part of which would be bound to be public expenditure, on tax credits. The Conservatives know full well that their claim to be cutters of public expenditure would vanish overnight if they were to include their tax credit scheme in "The Right Approach to the Economy".
I know that there are those who say that tax credits ought to be treated as tax forgone. We all know that that is the constant call of Tory spokesmen who always want their expenditure to be treated in that way, but that is an over-simplification. It depends very much on the nature of the scheme. While it is true that certain parts of a tax credit scheme would be tax forgone, a large part of the £6 billion would be bound
770
to be public expenditure, and Conservative Members know it.
Mr. Lawson: The right hon. Gentleman's argument is getting more and more confused. Is he suggesting that the next Conservative Government will spend more than the present Government or Ness?
Mr. Sheldon: The right hon. Member for Wanstead and Woodford (Mr. Jenkin) very much believes that he will get the money to provide about £6 billion in tax credits. My belief is that, if the Conservatives were to get in, that £6 billion would vanish before they were able to implement the very first of their policies, and the visionary ideal that so many of them have would come down to earth very rapidly indeed.
The right hon. and learned Member for Surrey, East, as I mentioned earlier, talked about tax incentives which were to be provided to enable people to get rich and to prosper out of post-tax income. No one can doubt that at a time of economic difficulty, the level of taxation is bound to be higher than that which we would otherwise be prepared to accept.
It is also true that at a time when there has been a decline in the standard of living—necessitated by the increased price of oil—there should be a sharing of the burdens. Whenever there is a sharing of the burdens, that, by its very nature, is bound to have a greater effect on those with high incomes than on those with medium incomes, while at the same time one hopes to be able to assist—as we have done—those on low incomes.
That is the best way of dealing with the population and the country when we experience economic difficulties. This was understood in 1940 when we had a level of taxation which no one could ever justify on economic grounds. We had an excess profits tax of 100 per cent. and income tax at 19s. 6d. in the pound. Their economic effect was nil, but their uniting effect on the country as a whole was enormous. In that kind of situation, given these economic difficulties we have been able to keep the country united by sharing burdens in the most equitable way possible.
But that was not understood in 1931 when the Tories had another chance, because at that time the wealthy and

771
leisured society did not change its amusements and even sharply increased the divisions in our society. Many people will consider that what happened at that time has led to many of the industrial problems that we have subsequently seen.
I believe that reductions in taxation can make a valuable contribution to the economy. But I make no apology for the level of tax which was consequent on the decline of our national income as a result of the oil price increase. Had there been a Tory Administration to carry out the particular programme that was needed then as a result of the profligacy of the previous Conservative Government, we would have seen not only privilege under attack but we might not have remained free from its being only a verbal conflict. It could have assumed more dangerous and unpleasant forms.
What we have seen is the debate that is going on in the Conservative Party, that has still not been resolved and is unlikely to be resolved satisfactorily—certainly not for the country—between those who advocate the control of the money supply and those who advocate some sort of pay policy. The argument is seen in its most personal form between the right hon. Member for Leeds, North-East and the right hon. Member for Lowestoft (Mr. Prior).
The right hon. and learned Member for Surrey, East complained that there was no monetary analysis in the White Paper. I myself find that the conflict going on inside the Conservative Party is now at a very interesting stage, because the Conservative Party is now seeing the possibility of its having to come to an agreed decision as to whether it will have the recklessness and the audacity to risk—on the strength of a disputed theory—the task of running the country.
Not many hon. Members were present on Monday night when the hon. Member for Blaby made an astonishing commitment. He said:
"The Bank of England"—
as a result of his proposals—
"would then, in effect, be charged by Parliament with ensuring that the target was met".—
The hon. Gentleman ended his speech by saying:
772
"it will fall to the next Conservative Government to embark on this course".—[Official Report, 13th March, 1978; Vol. 946, c. 168, 170.]
I see the hon. Gentleman still on the Front Bench. Apparently it is now his commitment to tie the Government's hands and to settle in advance—by some form of legislation—what the monetary target of this country should be and then to take it out of the hands of the Government and leave it to the Bank of England to implement.
Those who understand these problems know that a dollar crisis or something similar can occur within a few hours and they know the sort of flexibility that is needed. Hon. Members who have scorned and disdained this Government's regular fine tuning should know that the fine tuning we have done so far is nothing compared with the fineness of the tuning that would be needed to keep to the statutory monetary targets that are to be laid upon the civil servants responsible.
This would be an unnecessary strait-jacket and it makes us wonder why the Opposition have such a peculiar attitude to what is, after all, only one indicator among many that could be produced to achieve much the same purpose. If we look at what has happened over the years, we can understand what makes them so neurotic about a monetary target that was barely known to the general population more than a decade ago. If we look back, we can understand why the Opposition take these matters to heart so strongly.
In 1971, the figure for sterling M3 was 13 per cent. It went to 27 per cent. in the following year and it remained at 27 per cent. the year after. Since this Government came to power, the annual figures have been 10 per cent., 6 per cent., 9 per cent. and 8 per cent. We see that the Opposition are trying to tie the hands of the Government, but their quarrel is not with this Government but with the previous Tory Administration. That is what it is all about.
No conflict is ever fought with greater bitterness than the conflict of the civil war within the Conservative Party. We hear the distant sound of artillery as the struggle continues.
The great danger that we face with this Opposition is that, under the respectable and fashionable cloak of monetarism, they are trying to abdicate

773
from monetary control. They will really be seeking heavy devaluation, assisted by cuts in public expenditure, which will inevitably lead to cuts in confidence. We see all this as further evidence of pre-war unenlightened Toryism. In this form of monetarism we see the use of new theories to justify old intentions.
If the Conservatives ever came to power, they would realise the nonsense of implementing this absurdity. If they tried to implement it, they would find themselves having to withdraw it. If they did not change their minds, they would be defeated by the facts they strove to oppose. They would be like a stage army marching to the top of the hill and down again with barely enough time at the top to admire the view.
What is all this about? Why do the Conservatives feel that this is so important? They want to have scope to reduce the highest levels of taxation among the wealthy. They still believe, despite the facts of the past, that they are able to introduce incentives that will produce an increase in productivity and will set the country going again.
We have the example of the past. This happened in 1962, when Mr. Selwyn Lloyd, as he was then, decided that he would reduce the level of taxation for the wealthy to see whether the incentive effects produced results. The surtax threshold was raised from £2,000 to £5,000 a year. What happened? The Tories had to change their minds within two years. They did not learn from their experience. They tried the same thing again in 1971. Once again, they found themselves assisting those paying the highest levels of income tax in the guise of the changeover to the new unified tax system. They tried the same trick again. It took three years this time, and at the end of the three years, despite the enormous incentives given at the top end of the scale, they still found themselves with an economic crisis on their hands.
To try to go along the same road once again and to try to justify handouts to the wealthy in order to produce results in industry is to fail once more in the task that they have set themselves.
I do not believe in the concept of a fixed maximum proportion of public expenditure to gross domestic product. I regard that concept as silly. At a time of slow economic growth, if public expenditure is to be increased, personal consumption may fall to unacceptable levels. There are cycles in these matters, and, given a large increase in growth, there could be a demand for better services voiced by the people of this country. If such a situation arises, as we hope it will shortly, we must be ready to respond to these wishes.
The increase in public expenditure that can be made can respond in this way. The burden with which we have had to contend for so long has been the difficulty of reducing levels of public expenditure because the growth of the domestic economy has not increased as much as both parties would have wished during the last decade or so.
We must seek the approach that is made in the White Paper—the changes made must increase public expenditure rather than our going through the agonising task of reducing it.
This has been another instalment in the saga of Opposition demands for reductions in public expenditure without proper acknowledgement or acceptance of the problems involved. A number of my hon. Friends have called the amendment hypocritical. I have no quarrel with that assumption, and I urge hon. Members to oppose it.
9.59 p.m.
Mr. Norman Tebbit: In a most extraordinary speech, the Minister has been unable to talk about his own White Paper's expenditure plans for more than five minutes. He could not even make his speech last the full half hour. The scene that we have seen tonight is a Minister unable to justify his own policies before his own party.
Question put, That the amendment be made: —
The House divided: Ayes 256, Noes 294.

Division No. 151]

AYES

[10.00 p.m.

Adley, Robert

Atkins, Rt Hon H. (Spelthorne)

Bendall, Vivian (Ilford North)

Aitken, Jonathan

Atkinson, David (Bournemouth, East)

Bennett, Sir Frederic (Torbay)

Alison, Michael

Awdry, Daniel

Bennett, Dr Reginald (Fareham)

Amery, Rt Hon Julian

Baker, Kenneth

Benyon,W.

Arnold, Tom

Bell, Ronald

Berry, Hon Anthony

Biffen, John

Havers, Rt Hon Sir Michael

Page, John (Harrow West)

Biggs-Davison, John

Hawkins, Paul

Page, Rt Hon R. Graham (Crosby)

Blaker, Peter

Hayhoe, Barney

Page, Richard (Workington)

Body, Richard

Heath, Rt Hon Edward

Paisley, Rev Ian

Boscawen, Hon Robert

Heseltine, Michael

Parkinson, Cecil

Bottomley, Peter

Hicks, Robert

Pattie, Geoffrey

Bowden, A. (Brighton, Kemptown)

Higgins. Terence L.

Percival, Ian

Boyson, Dr Rhodes (Brent)

Hodgson, Robin

Peyton, Rt Hon John

Bradford, Rev Robert

Holland Philip

Pink, R. Bonner

Braine, Sir Bernard

Hordern, peter

Powell, Rt Hon J. Enoch

Brittan, Leon

Howe, Rt Hon Sir Geoffrey

Prentice, Rt Hon Reg

Brocklebank-Fowler, C.

Howell, David (Guildford)

Price, David (Eastleigh)

Brooke, Peter

Hunt, David (Wirral)

Prior, Rt Hon James

Brotherton, Michael

Hunt John (Ravensbourne)

Raison, Timothy

Brown, Sir Edward (Bath)

Hurd, Douglas

Rathbone, Tim

Bryan, Sir Paul

Hutchison, Michael Clark

Rawlinson, Rt Hon Sir Peter

Buchanan-Smith, Alick

Irving, Charles (Cheltenham)

Rees, Peter (Dover & Deal)

Buck, Antony

James. David

Renton, Tim (Mid-Sussex)

Budgen, Nick

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

Rhodes, James R.

Bulmer, Esmond

Johnson Smith, G. (E Grinstead)

Ridley, Hon Nicholas

Burden, F. A.

Jones, Arthur (Daventry)

Ridsdale, Julian

Butler, Adam (Bosworth)

Jopling, Michael

Rifkind, Malcolm

Carlisle, Mark

Joseph, Rt Hon Sir Keith

Roberts, Wyn (Conway)

Chalker, Mrs Lynda

Kaberry, Sir Donald

Rodgers, Sir John (Sevenoaks)

Channon, Paul

Kershaw, Anthony

Ross, William (Londonderry)

Clark, Alan (Plymouth, Sutton)

Kilfedder, James

Rossi, Hugh (Hornsey)

Clark, William (Croydon S)

Kimball. Marcus

Rost, Peter (SE Derbyshire)

Clarke, Kenneth (Rushcliffe)

King. Evelyn (South Dorset)

Royle, Sir Anthony

Cockcroft, John

King. Tom (Bridgwater)

Sainsbury, Tim

Cooke, Robert (Bristol W)

Kitson, Sir Timothy

St. John-Stevas, Norman

Cope, John

Knight, Mrs Jill

Scott, Nicholas

Cormack, Patrick

Knox, David

Shaw, Giles (Pudsey)

Costain, A. P.

Lamont, Norman

Shelton, William (Streatham)

Crouch, David

Langford-Holt, Sir John

Shepherd, Colin

Dean, Paul (N Somerset)

Latham, Michael (Melton)

Shersby, Michael

Dodsworth, Geoffrey

Lawrence, Ivan

Silvester, Fred

Douglas-Hamilton, Lord James

Lawson, Nigel

Sims, Roger

Drayson, Burnaby

Lester, Jim (Beeston)

Skeet, T. H. H.

du Cann, Rt Hon Edward

Lewis, Kenneth (Rutland)

Smith, Dudley (Warwick)

Durant, Tony

Lloyd, Ian

Smith, Timothy John (Ashfield)

Dykes, Hugh

Loveridge, John

Speed, Keith

Eden, Rt Hon Sir John

McAdden, Sir Stephen

Spence, John

Edwards, Nicholas (Pembroke)

McCrindle, Robert

Spicer, Michael (S Worcester)

Elliott, Sir William

McCusker, H.

Sproat, lain

Emery, Peter

Macfarlane, Nell

Stainton, Keith

Eyre, Reginald

MacGregor, John

Stanbrook, Ivor

Fairbairn, Nicholas

MacKay, Andrew (Stechford)

Stanley, John

Fairgrieve, Russell

Macmillan, Rt Hon M. (Farnham)

Steen, Anthony (Wavertree)

Farr, John

McNair-Wilson, M. (Newbury)

Stewart, Ian (Hitchin)

Fell, Anthony

McNair-Wilson, P. (New Forest)

Stokes, John

Finsberg, Geoffrey

Madel, David

Stradling Thomas, J.

Fisher, Sir Nigel

Marshall, Michael (Arundel)

Tapsell, Peter

Fletcher, Alex (Edinburgh N)

Marten, Neil

Taylor, R. (Croydon NW)

Fookes, Miss Janet

Mates, Michael

Taylor, Teddy (Cathcart)

Forman, Nigel

Mather, Carol

Tebbitt, Norman

Fowler, Norman (Sutton C'f'd)

Maude, Angus

Temple Morris, Peter

Fox, Marcus

Maudling, Rt Hon Reginald

Thatcher, Rt Hon Margaret

Fraser, Rt Hon H. (Stafford & St)

Mawby, Ray

Thomas, Rt Hon P. (Hendon S)

Fry, Peter

Maxwell-Hyslop, Robin

Townsend, Cyril D.

Galbraith, Hon T. G. D.

Meyer, Sir Anthony

Trotter, Neville

Gardiner, George (Relgate)

Miller, Hal (Bromsgrove)

van Straubenzee, W. R.

Gardner, Edward (S Fylde)

Mills, Peter

Vaughan, Dr Gerard

Gilmour, Rt Hon Ian (Chesham)

Miscampbell, Norman

Viggers, Peter

Gilmour, Sir John (East Fife)

Mitchell, David (Basingstoke)

Wakeham, John

Godber, Rt Hon Joseph

Moate, Roger

Walder, David (Clitheroe)

Goodhart, Philip

Molyneaux, James

Walker, Rt Hon P. (Worcester)

Goodhew, Victor

Monro, Hector

Wall, Patrick

Goodlad, Alastair

Montgomery, Fergus

Walters, Dennis

Gorst, John

Moore, John (Croydon C)

Warren, Kenneth

Gow, Ian (Eastbourne)

More, Jasper (Ludlow)

Weatherill, Bernard

Gower, Sir Raymond (Barry)

Morgan, Geraint

Wells, John

Gray, Hamish

Morris, Michael (Northampton S)

Whitelaw, Rt Hon William

Grieve, Percy

Morrison, Charles (Devizes)

Wiggin, Jerry

Grist, Ian

Morrison, Hon Peter (Chester)

Winterton, Nicholas

Grylls, Michael

Mudd, David

Wood, Rt Hon Richard

Hall-Davis, A. G. F.

Neave, Airey

Young, Sir G. (Ealing, Acton)

Hamilton, Michael (Salisbury)

Nelson, Anthony

Younger, Hon George

Hampson, Dr Keith

Neubert, Michael

Hannam, John

Newton, Tony

TELLERS FOR THE AYES:

Harrison, Col Sir Harwood (Eye)

Nott, John

Mr. Spencer Le Marchant and

Haselhurst, Alan

Onslow, Cranley

Mr. Michael Roberts.

Hastings, Stephen

Oppenheim, Mrs Sally

776

777

NOES

Abse, Leo

Fletcher, Ted (Darlington)

Mahon, Simon

Allaun, Frank

Foot, Rt Hon Michael

Mallalieu, J. P. W.

Anderson, Donald

Ford, Ben

Marks, Kenneth

Archer, Rt Hon Peter

Forrester, John

Marshall, Dr Edmund (Goole)

Armstrong, Ernest

Fowler, Gerald (The Wrekin)

Marshall, Jim (Leicester S)

Ashley, Jack

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

Mason, Rt Hon Roy

Ashton, Joe

Freeson, Rt Hon Reginald

Maynard, Miss Joan

Atkins, Ronald (Preston N)

Freud, Clement

Mellish, Rt Hon Robert

Atkinson, Norman

Garrett, John (Norwich S)

Mendelson, John

Bagier, Gordon A. T.

Garrett, W. E. (Wallsend)

Mikardo, Ian

Bain, Mrs Margaret

George, Bruce

Miller, Dr M. S. (E Kilbride)

Barnett, Guy (Greenwich)

Gilbert, Rt Hon Dr John

Mitchell, Austin

Barnett, Rt Hon Joel (Heywood)

Ginsburg, David

Molloy, William

Bates, Alf

Golding, John

Moonman, Eric

Bean, R. E.

Gourlay, Harry

Morris, Alfred (Wythenshawe)

Beith, A. J.

Graham, Ted

Morris, Rt Hon Charles R.

Benn, Rt Hon Anthony Wedgwood

Grant, George (Morpeth)

Morris, Rt Hon J. (Aberavon)

Bennett, Andrew (Stockport N)

Grant, John (Islington C)

Moyle, Roland

Bidwell, Sydney

Grocott, Bruce

Mulley, Rt Hon Frederick

Bishop, Rt Hon Edward

Harrison, Rt Hon Walter

Murray, Rt Hon Ronald King

Blenklnsop, Arthur

Hart, Rt Hon Judith

Newens, Stanley

Boardman, H.

Hattersley, Rt Hon Roy

Noble, Mike

Booth, Rt Hon Albert

Hayman, Mrs Helene

Oakes, Gordon

Boothroyd, Miss Batty

Healey, Rt Hon Denis

Ogden, Eric

Bottomley, Rt Hon Arthur

Hetter, Eric S.

O'Halloran, Michael

Boyden, James (Bish Auck)

Henderson, Douglas

Orbach, Maurice

Bradley, Tom

Hooley, Frank

Orme, Rt Hon Stanley

Bray, Dr Jeremy

Hooson, Emlyn

Ovenden, John

Broughton, Sir Alfred

Horam John

Owen, Rt Hon Dr David

Brown, Hugh D. (Provan)

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

Padley, Walter

Brown, Robert C. (Newcastle W)

Hoyle, Doug (Nelson)

Palmer, Arthur

Buchanan, Richard

Huckfield, Les

Pardoe, John

Butler, Mrs Joyce (Wood Green)

Hughes, Rt Hon C. (Anglesey)

Park, George

Callaghan, Rt Hon J. (Cardiff SE)

Hughes, Robert (Aberdeen N)

Parker, John

Callaghan, Jim (Middleton & P)

Hughes, Roy (Newport)

Parry, Robert

Campbell, Ian

Hunter, Adam

Pavitt, Laurie

Canavan, Dennis

Irvine. Rt Hon Sir A. (Edge Hill)

Pendry, Tom

Cant, R. B.

Irving, Rt Hon S. (Dartford)

Penhaligon, David

Carmichael, Neil

Jackson, Colin (Brighouse)

Perry, Ernest

Carter, Ray

Jackson, Miss Margaret (Lincoln)

Phipps, Dr Colin

Carter-Jones, Lewis

Janner, Greville

Price, C. (Lewisham W)

Cartwright, John

Jay, Rt Hon Douglas

Price, William (Rugby)

Castle, Rt Hon Barbara

Jeger, Mrs Lena

Radice, Giles

Clemitson, Ivor

Jenkins, Hugh (Putney)

Rees, Rt Hon Merlyn (Leeds S)

Cock,, Rt Hon Michael (Bristol S)

John, Brynmor

Reid, George

Cohen, Stanley

Johnson, James (Hull West)

Richardson, Miss Jo

Coleman, Donald

Johnson, Walter (Derby S)

Roberts, Albert (Normanton)

Conlan, Bernard

Johnston, Russell (Inverness)

Roberts, Gwilym (Cannock)

Cook, Robin F. (Edin C)

Jones, Alec (Rhondda)

Robinson, Geoffrey

Corbett, Robin

Jones, Barry (East Flint)

Roderick, Caerwyn

Cowans, Harry

Jones, Dan (Burnley)

Rodgers, George (Chorley)

Cox, Thomas (Tooting)

Judd, Frank

Rogers, Rt Hon William (Stockton)

Crawshaw, Richard

Kaufman, Gerald

Rooker, J. W.

Cronin, John

Kelley, Richard

Rose, Paul B.

Crowther, Stan (Rotherham)

Kerr, Russell

Ross, Stephen (Isle of Wight)

Cryer, Bob

Kilroy-Silk, Robert

Ross, Rt Hon W. (Kilmarnock)

Cunningham, Dr. (Whiten)

Kinnock, Neil

Rowlands, Ted

Davidson, Arthur

Lambie, David

Ryman, John

Davies, Bryen (Enfield N)

Lamborn, Harry

Sandelson, Neville

Davies, Rt Hon Denzil

Lamond, James

Sedgemore, Brian

Davies, Ifor (Gower)

Latham, Arthur (Paddington)

Sever, John

Davis, Clinton (Hackney C)

Leadbitter, Ted

Shaw, Arnold (llford South)

Deakins, Eric

Lee, John

Sheldon, Rt Hon Robert

Dean, Joseph (Leeds West)

Lestor, Miss Joan (Eton & Slough)

Shore, Rt Hon Peter

Dempsey, James

Lever, Rt Hon Harold

Short, Mrs Renée (Wolv NE)

Doig, Peter

Lewis, Ron (Carlisle)

Silkin, Rt Hon John (Deptford)

Dormand, J D.

Litterick, Tom

Silkln, Rt Hon S. C. (Dulwich)

Douglas-Mann, Bruce

Lomas, Kenneth

Silverman, Julius

Duffy, A. E. P.

Loyden, Eddie

Skinner, Dennis

Dunnett, Jack

Luard, Evan

Smith, John (N Lanarkshire)

Eadie, Alex

Lyon, Alexander (York)

Snape, Peter

Edge, Geoff

Lyons, Edward (Badford W)

Spearing, Nigel

Ellis, John (Brigg & Scun)

Mabon, Rt Hon Dr J. Dickson

Spriggs, Leslie

English, Michael

MacCormlck, Iain

Stallard, A. W.

Ennals, Rt Hon David

McDonald, Dr Oonagh

Steel, Rt Hon David

Evans, Fred (Caerphilly)

McElhone, Frank

Stewart, Rt Hon Donald

Evans, loan (Aberdare)

MacFarquhar, Roderick

Stewart, Rt Hon M. (Fulham)

Evans, John (Newton)

McGuire, Michael (Ince)

Stoddart, David

Ewing, Harry (Stirling)

MacKenzle, Rt Hon Gregor

Stott, Roger

Faulds, Andrew

Maclennan, Robert

Strang, Gavin

Fernyhough, Rt Hon E.

McMillan, Tom (Glasgow C)

Strauss, Rt Hon G. R.

Fitt, Gerard (Belfast W)

McNamara, Kevin

Summerskill, Hon Dr Shirley

Flannery, Martin

Madden, Max

Swain, Thomas

Fletcher, L. R. (Ilkeston)

Magee, Bryan

Taylor, Mrs Ann (Bolton W)

778

779

Thomas, Dafydd (Merioneth)

Walker, Harold (Doncaster)

Williams, Alan Lee (Hornch'ch)

Thomas, Jeffrey (Abertillery)

Walker, Terry (Kingswood)

Williams, Rt Hon Shirley (Hertford)

Thomas, Mike (Newcastle E)

Ward, Michael

Wilson, Alexander (Hamilton)

Thomas, Ron (Bristol NW)

Watkins, David

Wilson, Gordon (Dundee E)

Thompson, George

Watt, Hamish

Wilson, Rt Hon Sir Harold (Huyton)

Thorne, Stan (Preston South)

Weetch, Ken

Wilson, William (Coventry SE)

Thorpe, Rt Hon Jeremy (N Devon)

Weitzman, David

Wise, Mrs Audrey

Tierney, Sydney

Wellbeloved, James

Woodall, Alec

Tinn, James

Welsh, Andrew

Woof, Robert

Tomllnson, John

White, Frank R. (Bury)

Wrigglesworth, Ian

Tomney, Frank

White, James (Pollok)

Young, David (Bolton E)

Torney, Tom

Whitlock, William

Tuck, Raphael

Wigley, Dafydd

TELLERS FOR THE NOES

Urwin, T. W.

Willey, Rt Hon Frederick

Mr. James Hamilton and

Varley, Rt Hon Eric G.

Williams, Rt Hon Alan (Swansea W)

Mr. Joseph Harper.

Wainwright, Edwin (Dearne V)

Question accordingly negatived.
Main Question put:—
The House divided: Ayes 283, Noes 258.

Division No. 152]

AYES

[10.16 p.m

Abse, Leo

Davis, Clinton (Hackney C)

Irving, Rt Hon S. (Dartford)

Allaun, Frank

Deakins, Eric

Jackson, Colin (Brighouse)

Anderson, Donald

Dean, Joseph (Leeds West)

Jackson, Miss Margaret (Lincoln)

Archer, Rt Hon Peter

Dempsey, James

Janner, Greville

Armstrong, Ernest

Doig, Peter

Jay, Rt Hon Douglas

Ashley, Jack

Dormand, J. D.

Jeger, Mrs Lena

Ashton, Joe

Douglas-Mann, Bruce

Jenkins, Hugh (Putney)

Atkins, Ronald (Preston N)

Duffy, A. E. P.

John, Brynmor

Atkinson, Norman

Dunnett, Jack

Johnson, James (Hull West)

Bagier, Gordon A. T.

Eadie, Alex

Johnson, Walter (Derby S)

Barnett, Guy (Greenwich)

Edge, Geoff

Johnston, Russell (Inverness)

Barnett, Rt Hon Joel (Heywood)

Ellis, John (Brigg & Scun)

Jones, Alec (Rhondda)

Bates, All

English, Michael

Jones, Barry (East Flint)

Bean, R. E.

Ennals, Rt Hon David

Jones, Dan (Burnley)

Beith, A. J.

Evans, Fred (Caerphilly)

Judd, Frank

Benn, Rt Hon Anthony Wedgwood

Evans, loan (Aberdare)

Kaufman, Gerald

Bennett, Andrew (Stockport N)

Evans, John (Newton)

Kelley, Richard

Bidwell, Sydney

Ewing, Harry (Stirling)

Kerr, Russell

Bishop, Rt Hon Edward

Faulds, Andrew

Kilroy-Silk, Robert

Blenkinsop, Arthur

Fernyhough, Rt Hon E.

Kinnock, Neil

Boardman, H.

Fitt, Gerard (Belfast W)

Lambie, David

Booth, Rt Hon Albert

Flannery, Martin

Lamborn, Harry

Boothroyd, Miss Betty

Fletcher, L. R. (Ilkeston)

Lamond, James

Bottomley, Rt Hon Arthur

Fletcher, Ted (Darlington)

Latham, Arthur (Paddington)

Boyden, James (Bish Auck)

Foot, Rt Hon Michael

Leadbitter, Ted

Bradley, Tom

Ford, Ben

Lee, John

Bray, Dr Jeremy

Forrester. John

Lestor, Miss Joan (Eton & Slough)

Broughton, Sir Alfred

Fowler, Gerald (The Wrekin)

Lever, Rt Hon Harold

Brown, Hugh D. (Provan)

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

Lewis, Ron (Carlisle)

Brown, Robert C. (Newcastle W)

Freeson, Rt Hon Reginald

Litterick, Tom

Buchanan, Richard

Freud, Clement

Lomas, Kenneth

Butler, Mrs Joyce (Wood Green)

Garrett, John (Norwich S)

Loyden, Eddie

Callaghan, Rt Hon J. (Cardiff SE)

Garrett, W. E. (Wallsend)

Luard, Evan

Callaghan, Jim (Middleton & P)

George, Bruce

Lyon, Alexander (York)

Campbell, Ian

Gilbert. Dr John

Lyons, Edward (Bradford W)

Canavan, Dennis

Ginsburg, David

Mabon, Rt Hon Dr J. Dickson

Cant, R. B.

Golding, John

McDonald, Dr Oonagh

Carmichael, Neil

Gourlay, Harry

McElhone, Frank

Carter, Ray

Grant, George (Morpeth)

MacFarquhar, Roderick

Carter-Jones, Lewis

Grant, John (Islington C)

McGuire, Michael (Ince)

Cartwright, John

Grocott, Bruce

MacKenzie, Rt Hon Gregor

Castle, Rt Hon Barbara

Hamilton, James (Bothwell)

Maclennan, Robert

Clemitson, Ivor

Harper, Joseph

McMillan, Tom (Glasgow C)

Cocks, Rt Hon Michael (Bristol S)

Harrison, Rt Hon Walter

McNamara, Kevin

Cohen, Stanley

Hart, Rt Hon Judith

Madden, Max

Coleman, Donald

Hattersley, Rt Hon Roy

Magee, Bryan

Conlan, Bernard

Hayman, Mrs Helene

Mahon, Simon

Cook, Robin F. (Edin C)

Healey, Rt Hon Denis

Mallalieu, J. P. W.

Corbett, Robin

Hetter, Eric S.

Marks, Kenneth

Cowans, Harry

Hooley, Frank

Marshall, Dr Edmund (Goole)

Cox, Thomas (Tooting)

Hooson, Emlyn

Marshall, Jim (Leicester S)

Crawshaw, Richard

Horam John

Mason, Rt Hon Roy

Cronill. John

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

Maynard, Miss Joan

Crowther, Stan (Rotherham)

Hoyle, Doug (Nelson)

Mellish, Rt Hon Robert

Cryer, Bob

Huckfield, Les

Mendelson, John

Cunningham, Dr J. (Whiten)

Hughes, Rt Hon C. (Anglesey)

Mikardo, Ian

Davidson, Arthur

Hughes, Robert (Aberdeen N)

Miller, Dr M. S. (E Kilbride)

Davies, Bryan (Enfield N)

Hughes, Roy (Newport)

Mitchell, Austin

Davies, Denzil (Llanelli)

Hunter, Adam

Molloy, William

Davies, Ifor (Gower)

Irvine, Rt Hon Sir A. (Edge Hill)

Moonman, Eric

Morris, Alfred (Wythenshawe)

Rogers, Rt Hon William (Stockton)

Tierney, Sydney

Morris, Charles R. (Openshaw)

Rooker, J. W.

Tinn, James

Morris, Rt Hon J. (Aberavon)

Rose, Paul B.

Tomlinson, John

Moyle, Roland

Ross, Stephen (Isle of Wight)

Tomney, Frank

Mulley, Rt Hon Frederick

Ross, Rt Hon W. (Kilmarnock)

Torney, Tom

Murray, Rt Hon Ronald King

Rowlands, Ted

Tuck, Raphael

Newens, Stanley

Ryman, John

Urwin, T. W.

Noble, Mike

Sandelson, Neville

Varley, Rt Hon Eric G.

Oakes, Gordon

Sedgemore, Brian

Wainwright, Edwin (Dearne V)

Ogden, Eric

Sever, John

Walker, Harold (Doncaster)

O'Halloran, Michael

Shaw, Arnold (Ilford South)

Walker, Terry (Kingswood)

Orbach, Maurice

Sheldon, Rt Hon Robert

Ward, Michael

Orme, Rt Hon Stanley

Shore, Rt Hon Peter

Watkins, David

Ovenden, John

Short, Mrs Renée (Wolv NE)

Weetch, Ken

Owen, Rt Hon Dr David

Silkin, Rt Hon John (Deptford)

Weitzman, David

Padley, Walter

Silkin, Rt Hon S. C. (Dulwich)

Wellbeloved, James

Palmer, Arthur

Silverman, Julius

White, Frank R. (Bury)

Pardoe, John

Skinner, Dennis

White, James (Pollok)

Park, George

Smith, John (N Lanarkshire)

Whitlock, William

Parker, John

Snape, Peter

Willey, Rt Hon Frederick

Parry, Robert

Spearing, Nigel

Williams, Rt Hon Alan (Swansea W)

Pavitt, Laurie

Spriggs, Leslie

Williams, Alan Lee (Hornch'ch)

Pendry, Tom

Steel, Rt Hon David

Williams, Rt Hon Shirley (Hertford)

Penhaligon, David

Stewart, Rt Hon M. (Fulham)

Wilson, Alexander (Hamilton)

Perry, Ernest

Stoddart, David

Wilson, Rt Hon Sir Harold (Huyton)

Phipps, Dr Colin

Stott, Roger

Wilson, William (Coventry SE)

Price, C. (Lewisham W)

Strang, Gavin

Wise, Mrs Audrey

Price, William (Rugby)

Strauss, Rt Hon G. R.

Woodall, Alec

Radice, Giles

Summerskill, Hon Dr Shirley

Woof, Robert

Rees, Rt Hon Merlyn (Leeds S)

Swain, Thomas

Wrigglesworth, Ian

Richardson, Miss Jo

Taylor, Mrs Ann (Bolton W)

Young, David (Bolton E)

Roberts, Albert (Normanton)

Thomas, Jeffrey (Abertillery)

Roberts, Gwilym (Cannock)

Thomas, Mike (Newcastle E)

TELLERS FOR THE AYES:

Robinson, Geoffrey

Thomas, Ron (Bristol NW)

Mr. A. W. Stallard and

Roderick, Caerwyn

Thorne, Stan (Preston South)

Mr. Ted Graham.

Rodgers, George (Chorley)

Thorpe, Rt Hon Jeremy (N Devon)

NOES

Adley, Robert

Cormack, Patrick

Hampson, Dr Keith

Aitken, Jonathan

Costain, A. P.

Hannam, John

Alison, Michael

Crouch, David

Harrison, Col Sir Harwood (Eye)

Amery, Rt Hon Julian

Dean, Paul (N Somerset)

Haselhurst, Alan

Arnold, Tom

Dodsworth, Geoffrey

Hastings, Stephen

Atkins, Rt Hon H. (Spelthorne)

Douglas-Hamilton, Lord James

Havers, Rt Hon Sir Michael

Atkinson, David (Bournemouth, East)

Drayson, Burnaby

Hawkins, Paul

Awdry, Daniel

du Cann, Rt Hon Edward

Hayhoe, Barney

Baker, Kenneth

Durant, Tony

Heath, Rt Hon Edward

Bell, Ronald

Dykes, Hugh

Heseltine. Michael

Bendall, Vivian (Ilford North)

Eden, Rt Hon Sir John

Hicks, Robert

Bennett, Sir Frederic (Torbay)

Edwards, Nicholas (Pembroke)

Higgins, Terence L.

Bennett, Dr Reginald (Fareham)

Elliott, Sir William

Hodgson, Robin

Benyon, W.

Emery, Peter

Holland. Philip

Berry, Hon Anthony

Eyre, Reginald

Hordern, peter

Biffen, John

Fairbairn, Nicholas

Howe, Rt Hon Sir Geoffrey

Biggs-Davison, John

Fairgrieve, Russell

Howell, David (Guildford)

Blaker, Peter

Farr, John

Hunt, David (Wirral)

Body, Richard

Fell, Anthony

Hunt, John (Ravensbourne)

Boscawen, Hon Robert

Finsberg, Geoffrey

Hurd. Douglas

Bottomley, Peter

Fisher, Sir Nigel

Hutchison, Michael Clark

Bowden, A. (Brighton, Kemptown)

Fletcher, Alex (Edinburgh N)

Irving, Charles (Cheltenham)

Boyson, Dr Rhodes (Brent)

Fookes, Miss Janet

James. David

Bradford, Rev Robert

Forman, Nigel

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

Braine, Sir Bernard

Fowler, Norman (Sutton C'f'd)

Johnson Smith, G. (E Grinstead)

Brittan, Leon

Fox, Marcus

Jones, Arthur (Daventry)

Brocklebank-Fowler, C.

Fraser, Rt Hon H. (Stafford & St)

Jopling, Michael

Brooke, Peter

Fry, Peter

Joseph, Rt Hon Sir Keith

Brotherton, Michael

Galbralth, Hon T. G. D.

Kaberry, Sir Donald

Brown, Sir Edward (Bath)

Gardiner, George (Reigate)

Kershaw, Anthony

Bryan, Sir Paul

Gardner, Edward (S Fylde)

Kilfedder, James

Buchanan-Smith, Alick

Gilmour, Rt Hon Ian (Chesham)

Kimball, Marcus

Buck, Antony

Gilmour, Sir John (East Fife)

King, Evelyn (South Dorset)

Budgen, Nick

Godber, Rt Hon Joseph

King. Tom (Bridgwater)

Bulmer, Esmond

Goodhart, Philip

Kitson, Sir Timothy

Burden, F. A.

Goodhew, Victor

Knight, Mrs Jill

Butler, Adam (Bosworth)

Goodlad, Alastair

Knox, David

Carlisle, Mark

Gorst, John

Lamont, Norman

Chalker, Mrs Lynda

Gow, Ian (Eastbourne)

Langford-Holt, Sir John

Channon, Paul

Gower, Sir Raymond (Barry)

Latham, Michael (Mellon)

Clark, Alan (Plymouth, Sutton)

Gray, Hamish

Lawrence, Ivan

Clark, William (Croydon S)

Grieve, Percy

Lawson, Nigel

Clarke, Kenneth (Rushcliffe)

Grist, Ian

Lester, Jim (Beeston)

Cockcroft, John

Grylls, Michael

Lewis, Kenneth (Rutland)

Cooke, Robert (Bristol W)

Hall-Davis, A. G. F.

Lloyd, Ian

Cope, John

Hamilton, Michael (Salisbury)

Loveridge, John

782

783

McCrindle, Robert

Page, Richard (Workington)

Spicer, Michael (S Worcester)

McCusker, H.

Paisley, Rev Ian

Sproat, lain

Macfarlane, Nell

Parkinson, Cecil

Stainton, Keith

MacGregor, John

Pattie, Geoffrey

Stanbrook, Ivor

MacKay, Andrew (Stechford)

Percival, Ian

Stanley, John

Macmillan, Rt Hon M. (Farnham)

Peyton, Rt Hon John

Steen, Anthony (Wavertree)

McNalr-Wilson, M. (Newbury)

Pink, R. Bonner

Stewart, Ian (Hitchin)

McNair-Wilson, p. (New Forest)

Powell, Rt Hon J. Enoch

Stokes, John

Madel, David

Prentice, Rt Hon Reg

Stradling Thomas, J.

Marshall, Michael (Arundel)

Price, David (Eastleigh)

Tapsell, Peter

Marten, Nell

Prior, Rt Hon James

Taylor, R. (Croydon NW)

Mates, Michael

Raison, Timothy

Taylor, Teddy (Cathcart)

Mather, Carol

Rathbone, Tim

Tebbitt, Norman

Maude, Angus

Rawlinson, Rt Hon Sir Peter

Temple Morris, Peter

Maudling, Rt Hon Reginald

Rees, Peter (Dover & Deal)

Thatcher, Rt Hon Margaret

Mawby, Ray

Renton, Tim (Mid-Sussex)

Thomas, Dafydd (Merioneth)

Maxwell-Hyslop, Robin

Rhodes, James R.

Thomas, Rt Hon V. (Hendon S)

Meyer, Sir Anthony

Ridley, Hon Nicholas

Townsend, Cyril D.

Miller, Hal (Bromsgrove)

Ridsdale, Julian

Trotter, Neville

Mills, Peter

Rifkind, Malcolm

van Straubenzee, W. R.

Miscampbell, Norman

Roberts, Wyn (Conway)

Vaughan, Dr Gerald

Mitchell, David (Basingstoke)

Rodgers, Sir John (Sevenoaks)

Viggers, Peter

Moate, Roger

Ross, William (Londonderry)

Wakeham, John

Molyneaux, James

Rossi, Hugh (Hornsey)

Walder, David (Clitheroe)

Monro, Hector

Rost, Peter (SE Derbyshire)

Walker, Rt Hon P. (Worcester)

Montgomery, Fergus

Royle, Sir Anthony

Wall, Patrick

Moore, John (Croydon C)

Sainsbury, Tim

Walters, Dennis

More, Jasper (Ludlow)

St. John-Stevas, Norman

Warren, Kenneth

Morgan, Geraint

Scott, Nicholas

Weatherill, Bernard

Morris, Michael (Northampton S)

Shaw, Giles (Pudsey)

Wells, John

Morrison, Charles (Devizes)

Shelton, William (Streatham)

Whitelaw, Rt Hon William

Morrison, Hon Peter (Chester)

Shepherd, Colin

Wiggin, Jerry

Mudd, David

Shersby, Michael

Wigley, Dafydd

Neave, Airey

Silvester, Fred

Winterton, Nicholas

Nelson, Anthony

Sims, Roger

Wood, Rt Hon Richard

Neubert, Michael

Sinclair, Sir George

Young, Sir G. (Ealing, Acton)

Newton, Tony

Skeet, T. H. H.

Younger, Hon George

Nott, John

Smith, Dudley (Warwick)

Onslow, Cranley

Smith, Timothy John (Ashfield)

TELLERS FOR THE NOES:

Oppenheim, Mrs Sally

Speed, Keith

Mr. Spencer Le Marchant and

Page, John (Harrow West)

Spence, John

Mr. Michael Roberts.

Page, Rt Hon R. Graham (Crosby)

Question accordingly agreed to.
Resolved,
That this House takes note of 'The Government's Expenditure Plans 1978–79 to 1981–82', (Command Paper No. 7049); and approves the plans to increase public expenditure in view of the need to reduce unemployment and improve public services.

EUROPEAN COMMUNITY (ECONOMIC POLICIES)
10.30 p.m.
The Minister of State, Treasury (Mr. Denzil Davies): I beg to move,
That this House takes note of EEC Commission Documents Nos. COM (77) 620 final, R/2355/77 and R/415/78 on Economic and Monetary Union and Co-ordination of National Economic Policies.
These three documents contain proposals by the Commission to try to achieve a better and more balanced overall economic performance by the member States of the Community in the next few years. The document on the prospect of economic and monetary union, COM(77)620 final, outlines a five-year programme covering four main areas, convergence of economic policies, the completion of a common market, and structural and social policies. The communication on improved co-ordination, R/2355/77 covering COM(77)433 final, discusses a number of practical steps that member States might take to that end. The economic and monetary programme, R/415/78 covering COM(78)52 final, contains specific proposals for action this year.
Before referring to the content of the documents perhaps I may put them in an appropriate context with a brief account of how they are being considered in Brussels. Last December, the European Council took note of the document on prospects for economic and monetary union but agreed to await the advice of Finance Ministers before it attempted to form a view. All three documents are currently being subjected to a detailed examination by the specialist economic and monetary committees that advise the Finance Councils, and by the Committee of Central Bank Governors. Finance Ministers are expected to begin discussion of them shortly on the basis of reports from these Committees. The present debate will enable the views of Members to be taken into account at ministerial level, prior to further discussion at the European Council.
It may help the House if I outline briefly the background and scope of the present initiative by the Commission which is embodied in these documents. It is convenient to take as a starting point
786
the Summit meeting of the original Six members which announced at the Hague in 1969 that plans would be worked out
"with a view to the creation of an economic and monetary union ".
From this beginning came the report of the Prime Minister and Finance Minister of Luxembourg, with its concept of a Community proceeding rapidly to a fully fledged economic and monetary union in a few years. In accepting this initiative in 1971 the European Council committed itself to making the Community a single economy by 1980, with, in effect, a single currency and a single authority for domestic and external monetary management.
The sequel to this undertaking is well known. Some of the first stage of the Werner scenario—notably the system of maintaining EEC currencies within certain margins, known as the snake—was implemented, though even this was not effective for the whole of the Community for more than a few months. The 1975 White Paper on renegotiation stated that
"events have shown that the programme of movement towards full EMU by 1980 … was over-ambitious and unattainable."
Let me assure hon. Members, especially my hon. Friends that the objective of EMU has not been formally abandoned, but all member States accept that it has become what might be described as a more distant goal.
The Community countries had been forced to focus their own efforts to overcome the problem which, in a sense, came to a head with the oil price crisis. But the emergence of inflation and recession, with poor confidence, poor investment and mounting unemployment, has increasingly led Member States to consider whether there can be benefit from concerted efforts and more economic convergence within the Community. I believe that there is now a much greater recognition that we should be talking about practical action in these areas, rather than having fruitless arguments about the unattainable.
Our economies are becoming more interdependent. Nearly half the external trade of the Nine is carried on within the Community. As a result, we must cooperate with our partners in the EEC to ensure that we achieve faster growth and continuing control of inflation. This aim

787
of convergence of the economies of the Nine is the connecting thread that runs through all the documents.
Convergence is rather a general term and it appears that there is no single definition. Some Governments tend to equate it mainly with greater equality of living standards achieved possibly through a transfer of resources within the Community. Others stress the need to devise complementary economic policies designed to achieve faster rates of growth for member States leading to lower levels of unemployment. Yet others think primarily in terms of greater price stability throughout the Community. These objectives of lower unemployment and greater price stability that all member countries share will be furthered if convergence in some of these senses is achieved.
Document COM (77) 443 is the most important document on convergence. It makes a number of specific proposals designed to achieve more coherent and consistent economic policies. I shall return to these later.
Document COM(77)620 discusses the prospect of economic and monetary union. Broadly, the Commission sees progress towards EMU as two-stage: first, persevering with and intensifying a gradual approach; and secondly, deciding on significant transfers of economic sovereignty. The second stage, however, the transfer of economic sovereignty, is seen as a longer-term goal, and the Commission recognises that it cannot be reached in the immediate future. So we are left with the gradual approach, a vital part of which, apparently, is economic convergence.
Finally, we have the 1978 economic and monetary action programme—Document COM(78)52—which is the first year of a five-year action programme foreseeen in Document 620. Again, an important part of this action programme concerns economic convergence, and the document therefore reflects a number of the themes in Document 443.
Document 443 argues for three things: first, the extension of the existing system of budgetary guidelines and their stricter supervision; secondly, the fixing of monetary guidelines for each member State; and, thirdly, developing consultations on
788
exchange rate trends and establishing exchange rate guidelines.
Mr. Neil Marten: Will the Minister explain a little more about how it is proposed to give guidelines on and more control of the money supply, which is what he was really talking about just now?
Mr. Davies: I think that the hon. Gentleman will appreciate that the documents are not particularly clear as to how this state of affairs is to be achieved, but I thought that I had better set out for the House the main proposals in the documents and then listen to hon. Members' suggestions as to how they were to be achieved.
Mr. Ian Wrigglesworth: I hesitate to suggest that the Minister, has not, perhaps, looked right through the documents, but if he looks a little more closely, he will see that there are proposals for meetings of central bank governors and co-ordination of monetary credit in the individual member count-tries. There is a fair amount of detail that we have not seen previously.
Mr. Davies: There are suggestions for a large number of meetings. Whether the suggestions will lead to practical decisions is another matter.
The convergence proposals in Document 443 are, essentially, summarised in the part of Document 620 which deals with economic convergence as one aspect of the five-year action programme which, the Commission believes, will pave the way for economic and monetary union.
Sir Anthony Meyer: Are we listening to a Front-Bench speech, or is the hon. Gentleman making a Back-Bench speech from the Front Bench?
Mr. Davies: It should be noted, however, that this does not in any way imply that economic and monetary union will take place in five years. In fact, no timetable is proposed and I imagine that many hon. Members will share my view that this is a very distant prospect.
Additionally, Document 620 referred to the possibility of a return to greater integration of Community currencies, but it does not make any specific proposal on this and again does not set a rigid and inflexible timetable. The document also

789
suggests that an objective over the five-year period should be an increase in the financial resources available to the Community. These refer specifically to regional policy, social policy, industrial policy and energy policy.
The two other main areas that the document covers are the completion of a single market and structural and social change. The completion of the single market covers such issues as tax harmonisation and freedom for internal capital movements as well as full exercise of the right of establishment. The suggestions on structural and social change cover the Commission's intentions for Community action in industrial policy, public investment and social policy.
It is the objective of each of the five one-year programmes to make specific proposals fitting in with the overall strategy of Document 620. This is what COM(78)52 sets out to do. It therefore has sections on convergence of the economies, the single market, structural policies and social policy. With the exception of the first section, on convergence, the Commission's document is basically a list of Community proposals, which in some cases have been on the table for many years and which the Commission would like the Council to agree in the course of 1978.
The section on convergence works through a similar analysis of the reasons why the European economies have in fact diverged and suggests ways in which greater convergence might be promoted. To some extent these represent a development on the Commission's thought in Document 443. For example, Document 443 calls for the extension of budgetary guidelines to the whole of the public sector. Recognising, as a result of discussion on this point, that this would be premature, Document 52 merely suggests some further work on qualitative or quantitative data as the first stage in extending the scope of these budgetary guidelines.
Following the discussion at the European Council of 6th December, Documents 620 and 443 were remitted for study by the various specialist economic and financial committees of the Community, and the convergence section of Document 52 has similarly been remitted. The rest of Document 52 has been remitted to the Committee of Permanent
790
Representatives. The attitude of the Government will be determined in the light of these studies and the views of Members.
Naturally, there is scope for considerable debate within the Community about the detail of some of the proposals. We and some of our Community colleagues have, for example, indicated that too much weight should not be put on the specific convergence of intermediate objectives such as monetary or fiscal or exchange rate policy. The important thing is for these all to be seen to be fully consistent with the overall objectives of the Community's economic policy. The discussions in the specialist economic committees so far show that this broad approach has a good deal of support. Member Governments of the Community are also thinking on these lines. My right hon. Friend the Chancellor took part in a wide-ranging debate at the Finance Council on 20th February, where the clear objective was to see how far co-ordinated action could usefully stimulate growth throughout Europe as part of the search for solutions which need to be on a world-wide scale.
I am, of course, aware that there are within the House differing views about the role that the EEC should play in these matters. I can only reiterate what my right hon. Friend the Prime Minister told the House on 7th December:
"Let us see how this new system can be of benefit to the United Kingdom in its recession as well as to Europe".—[Official Report, 7th December 1977; Vol. 940, c. 1395.]
Certainly, whatever our views about economic and monetary union, or about the EEC itself, there can be little doubt that action to stimulate growth at a Community level in the recession carries with it the prospect of greater effectiveness than action by individual Governments.
One solid achievement over the last year or so has been the agreement reached on the need for a new aid to help the relief of unemployment amongst the young. With the active participation of the trade union and employer organisations, studies are taking place on, among others, the employment effects of investment, and of work sharing. Work sharing, as the TUC recognises, is an area where unilateral moves by an individual country could undermine that country's

791
competitiveness. I am therefore pleased that this is an aspect of economic convergence which is due to be examined in the action programme for 1978.
Again, the European Council last December recognised that solutions to the structural problems which are common to some industries in all member States must increasingly be sought at Community level. This is particularly true of the iron and steel, textile and ship building industries. There are other spheres where a concerted response may pay dividends. Multinational corporations pose special problems. It is in no one's interest that they should seek to bid up investment aids by playing one country off against another. EEC ceilings on the amount of regional assistance that can be offered to such a project have an important part to play, while the different national systems of regional aids can take account of special national problems.
These are some of the positive ways in which the Community can help. We should not allow ourselves to be directed by irrelevant arguments about the unattainable. I firmly believe it is in our best interests, as well as those of the Community, that working together we seek common answers to the serious economic problems facing us. Provided we are vigilant about our national interests, I believe that we can shape the Community policies outlined in these documents to serve the interests of all the Community's members.
10.45 p.m.
Mr. Peter Tapsell: This brief debate on a "take-note" motion is obviously not the occasion for a lengthy examination of the immensely varied and complex issues raised by the concept of economic and monetary union. We only have to read the index of subject matters covered by the document dated 16th February 1978 to see the very extensive range of highly technical issues involved. Indeed, if we were to embark on a proper examination of all the issues raised in the three documents, there would scarcely be time for the House to do justice to them in the whole remaining part of this Session, let alone in the 90 minutes available to us tonight.
As the Conservative Front Bench spokesman, I shall be brief so that as many as possible of my right hon. and
792
hon. Friends who wish to make contributions are able to do so.
The complexity, variety and ambition of the documents are in a real sense the essence of the problem. The Continental European traditionally and historically favours the bold intellectual approach—the statement of resounding ambitions, the announcement of lofty and idealised goals. All that is very attractive, but the British approach traditionally is a good deal more cautious, more prosaic, and more empirical.
Mr. Wrigglesworth: Could the hon. Gentleman define the difference between Continental man, as in Italy, France, Denmark, Holland, Belgium and Ireland, and the British in the way he has described?
Mr. Tapsell: The only brief answer I could give the hon. Gentleman would be to suggest that he should read, first, Rousseau and then Locke. The pragmatic British and Conservative attitude to economic and monetary union was very well put by my right hon. and learned Friend the Member for Hexham (Mr. Rippon), leader of the Tory delegation to the European Assembly, on 26th September 1977, when he said, in a speech in Holland:
"Some joint economic and monetary policies are a matter of common sense. The likelihood—or the effectiveness—of a single master plan remains highly dubious. What is required—and possible—is a series of specific initiatives within the framework of a broadly agreed strategy."
That exactly expresses my own view. In so far as general agreement on this issue will ever be possible, I believe that it expresses the view of the great majority of those people in Britain who concern themselves with these matters. This need not make us, as a country, a less effective or in the long run a less sure member of the Community. Rather the contrary; we are a conspicuously stable member, as is becoming increasingly apparent with every passing year and, indeed, almost with every passing day.
Nor do we need to be unduly critical of much of the small print of the documents. Many British readers of them will find much to interest and appeal. For example, our farmers, certainly those in my constituency, will welcome the section on monetary compensatory amounts; our business men will welcome the section on

793
the liberalisation of capital movements. We should, in my judgment, seek to direct our minds to practical, limited specifics of this kind and see, at the end of the day, where they take us. That is the British way.
My right hon. Friend the Member for Knutsford (Mr. John Davies) put it very well in a recent article when he wrote:
"We believe in co-operation, not convergence."
Mr. Marten: Did he really?
Mr. Tapsell: Not only that; he wrote it in the Conservative Monthly News.
Mr. J. Enoch Powell: I thought I recollected—perhaps the hon. Gentleman will confirm whether I am right—that the right hon. Member for Sidcup (Mr. Heath), in September 1972, immediately after the European Communities Bill had passed through Parliament, signed an adherence, on behalf of this country, to the principle of economic and monetary union by 1980. Is this so or not?
Mr. Tapsell: I believe that that was the case, but I think that the likelihood of that being achieved in practice is becoming increasingly remote. The whole thrust of my speech, if I have succeeded in making myself clear to the right hon. Member for Down, South (Mr. Powell), would be that I think that we must deal with practicalities in these matters. In 1972, of course, even the right hon. Gentleman had probably not foreseen, despite his strong support for floating rates, the degree of turbulence in currencies, to take just one technical issue, which has made the achievement of those aims by 1980 very much more difficult than would otherwise have been the case.
My right hon. Friend the Member for Knutsford—who, after all, is a great supporter of the European ideal, as are so many of my hon. Friends—wrote as I have said:
"We believe in co-operation, not convergence."
I would add that, before we can even co-operate we must recuperate, and the starting point for all this, it seems to me, must surely be to put British economic affairs in order. Then we can begin to think realistically about our external relationships.
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When, for instance, our inflation rate and our productive growth rate are at least reasonably similar to those of West Germany, there may indeed be a case for our rejoining the Community monetary "snake". But practicalities, as the Minister pointed out in his opening speech, made it inevitable that Britain, like France and Italy, should leave the "snake" as our economic performance weakened.
Mr. Nick Budgen: Does my hon. Friend agree that the argument that he is now putting forward is that we ought to have convergence when we can have convergence, when our economy is in a sufficiently good state to allow it?
Mr. Tapsell: That is exactly what I am saying, and I go on to say that we shall remain outside convergence with the other currencies within the "snake" until the practicalities of the present situation change. Indeed, they are changing as a result of the International Monetary Fund having taken over control of our economic affairs, and as a result of North Sea oil and various other factors. When they have changed, the whole matter of monetary co-operation and the possibility of Britain re-entering the European snake will deserve and is certain to receive the most careful study.
To take the cautious and pragmatic view that I am advancing is not in any sense, I would argue, to adopt a position of hostility to British membership of the Community. All of us, after a few years in this House, have a past. Some of my hon. Friends might regard this as the shocking record of a misspent parliamentary youth, but I supported in this House the original initiative taken by Mr Harold Macmillan to join the Community in the early 1960s. I voted in favour of every stage of the European Communities Bill when it was before the House. I flew back specially from the Far East to vote "Yes" in the national referendum on the subject. I really cannot forget—even to please the right hon. Member for Down. South, whom I am always anxious to please—that that is my political background on these matters, and it would be wrong of me to try to conceal it from the House.
Indeed, I take the view that many of our problems—and many of the problems

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of the Community as a whole—stem precisely from the fact that we joined the Community far too late. With the wisdom of hindsight—I am bound to admit that it was not until the early 1960s that I formed this view—it seems to me now a thousand pities that we were not one of the founder members and one of the architects of the original Rome Treaty which, I suspect, would have been called the London Treaty and which, in respect of the CAP, fisheries and so on, would have been a very different document.
But politicians, as we all know to our cost, have to deal with situations as they are and not as they would prefer them to be. We should be wise to concentrate on working in ever closer co-operation with our European fellow members of the Community in the areas of economics and foreign affairs—the Middle East and Africa spring immediately to mind—and on those practical matters that seem best designed to bring prosperity, security and happiness to the peoples of Britain and Western Europe.
I feel that we should concentrate in particular on the practical benefits that may be derived by our people from our membership of the Community. Of those I put jobs at the very top of my list. As my hon. Friend the Member for Mid-Oxon (Mr. Hurd) has pointed out so well, speaking with his great authority in these matters, the greatest successes of the Community since Britain joined have passed almost unnoticed in this country. It is our duty as Members of this House to draw to the attention of our constituents the successes as well as the failures, because if we do not do so. we are failing in our duty.
In fact, the Community has had very considerable successes on behalf of the people of this country. It has increasingly succeeded in negotiating as a united body with the outside world in vital matters of trade and finance. For example, it is the EEC which has tried to establish world conditions in which the British steel industry can survive. It is the EEC which negotiates with the textile producers of the Far East under the Multi-Fibre Agreement so that the British textile industry can survive. It is the EEC which on behalf of its members conducts the multilateral trade negotiations in Geneva. It is the EEC which has just concluded a
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major trading agreement in China. It is the EEC which is about to negotiate a new Lomé Convention regarding our trade relations with the Third World—an aspect of our affairs in which I am particularly interested. Above all, it was the EEC which, in parallel with member States, discusses the vital European trading relationship with Japan.
Any hon. Member who has a commercial life as well as a political life will know that American and Japanese business men who come to this country and who are considering investment in this country—I believe that there will be a massive investment, particularly from the United States, in the next few years—do so primarily for two reasons; first, because we are a member of the EEC and, secondly, because they regard us as politically the most stable member of the EEC. All these matters have a most direct effect on the levels of employment in this country.
In a world that is moving deeper and deeper into recession, and with protectionism an increasingly attractive option and temptation for many other countries, we derive enormous additional strength both from having a market of 250 million people open to us on our doorstep—because for 600 years the whole of British history has been a fight to ensure that we have access to large, secure markets—and by negotiating with the outside world from a position of economic strength, which membership of the EEC brings with it.
These are the practical and immediate measures of co-operation on which we should be concentrating. If they are facilitated by ever closer co-operation on monetary and economic matters, so be it. But do not let us put the cart before the horse by arguing among ourselves about the far more distant possibilities of economic and monetary union. There is little prospect of that goal being attained in the near future while the performance of our economy differs so radically from that of West Germany. Let us put our own house in order and co-operate with our friends in Europe and see how matters develop from there.
11.1 p.m.
Mr. Douglas Jay: It is a pity that the hon. Member for Horncastle (Mr. Tapsell) departed from

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reality towards the end of his speech when he started to describe the blessings of EEC membership. Until then, I was thinking what a pleasure it was to have some signs of common sense emerging from the Opposition Front Bench on these matters—better the one sinner who repenteth than the ninety and nine who follow the party line.
This debate is typical of the methods by which we discuss Community legislation. We have 90 minutes, including Front Bench speeches, to debate papers on the prospects of economic and monetary union, improving the co-ordination of national economic policies, and the economic and monetary action programme for 1978. If the Government's decision to allow only 90 minutes to dispose of these topics means that they are treating all the papers with contempt and derision, I would not complain, but if that is not the reason, it illustrates again the inadequacy of our method of discussing such proposals.
Mr. Marten: As our debates are read most seriously by the Commission and other people in the Community headquarters in Brussels, perhaps it might be a good thing to put on the record that there are only two Members on the Government Front Bench and only three on the Opposition Front Bench. This shows almost a contempt for this whole process of economic and monetary union. I hope that those who read Hansard in Brussels will understand that there is a thin attendance for this debate.
Mr. Jay: It may be that the sparse attendance indicates the attitude to these matters suggested by the hon. Gentleman.
For the sake of brevity, I propose to confine my remarks to the paper on economic and monetary union, because, although all three papers contain a great deal of almost meaningless verbiage or actual nonsense, this paper involves, lurking amidst all the verbosity, serious long-term dangers for this country. I should also point out that hon. Members have noticed that even the action programme is, according to its authors, intended to pave the way for economic and monetary union.
The chief result for this country of such a union, in almost all foreseeable circumstances, would be greater unemployment and stagnation of production. I
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make just the one economic point that is decisive in the debate: when a stronger and a weaker economy are trading with each other, there must be some method of bringing the two into balance. The best and most workable method discovered in the practical world is by changing exchange rates. The adjustment made that way enables unemployment and heavy and persistent deficits to be avoided.
The weaker country's currency declines in relative values and the stronger country's currency rises. If that method of adjustment is made impossible by forcing the same currency on both, and this comparatively painless method of adjustment cannot take place, there is heavy and chronic unemployment in the weaker economy.
This has happened for many years past in Southern Italy, Northern Ireland, Western France and other parts of Western Europe. The non-competitive economy loses exports, imports too much, and unemployment grows. That, in my opinion on all the evidence, would happen in this country to a greater or lesser degree if we so took leave of our sense as to be ensnared in monetary union with the rest of the EEC.
The British economy has been seriously weakened by the common agricultural policy, and we have a huge deficit on visible trade with the EEC. Monetary union would force on us rising unemployment and worsening deficits. It would put us at the mercy of whatever authorities we were compelled to borrow from on the Continent.
The Brussels paper before us does not really make any pretence of putting forward a rational economic argument for economic and monetary union. The Commission regards monetary union not as a sensible economic policy that will do any good to anyone, but as a concealed way of pushing on towards political federation, thereby enhancing the power of the Commission.
The main paper admits this right at the start with the words:
"Economic and monetary union … is an integral part of the process leading to European Union."
That sentence is at least clear. All the economic arguments have to be twisted to use monetary union to establish political union by stealth. Hence we get a series

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of meaningless and nonsensical statements, of which I shall quote two:
"The prime objective to be pursued over the five-year period is the establishment of lasting convergence between the economies of the Member States."
One cannot have a lasting convergence of the economies of nine or 12 different States at totally different levels of economic development, because, for innumerable human and material reasons, economic forces are relatively changeable. One might as well talk about a lasting convergence of the weather in the North of Scotland and that of the South of Italy.
The other quote is:
"In the move to achieve greater convergence, a second line of action would be to ensure the return to greater cohesion between European currencies."
All that appears to mean is that although the economic realities do not and cannot converge, we shall pretend that they do by forcing on them an artificial identity of currency.
I hope that the Government will make it plain that this country will not succumb to any proposals of this kind. I hope that I am right in thinking that that is what the Minister said, even if it was couched in slightly more diplomatic language, and that we shall not get involved in economic and monetary union of this kind in future. We have had quite enough damage done to our economy already by EEC membership. I refer to Mr. Wynne Godley's analysis, which many hon. Members have mentioned already today.
Ten years ago we were told that this country was doing so badly that we had better take a leap in the dark and join this organisation without its being demonstrated that it would do us any economic good to do so. Exactly the same argument now seems to be used about economic monetary union. We are told "There is a great deal of unemployment in Europe, so let us do something different. Let us adopt this new policy." But that is being said without any sensible reason being advanced to show that the situation would be any better if we did. It is the same old argument all over again and the argument seems about as invalid as it could be. Therefore, I hope that the House will firmly reject these proposals tonight.
11.12 p.m.
Mr. Peter Brooke: The right hon. Member for Battersea, North (Mr. Jay) concentrated his remarks on European monetary union. He tilted his lance at that subject rather as though it were a windmill, even though it may be enshrined in one of the documents now before the House. I prefer to deal with the subject set out in the other two documents that are before the House and to return to EMU at the end.
As a wise man once said, if one does not know where one is going any road will get one there. In the context of the other two documents, it is worth remembering that Article 3 of the Treaty of Rome provides for the establishment of procedures to co-ordinate economic policies and to remedy balance of payments disequilibria. Articles 103 to 109 concentrate further on that subject, but there is no reference to EMU as an objective in the Treaty of Rome. In the various documents that have emerged since there is no great clarity in what is meant and envisaged by it.
The Minister in opening the debate talked of the developments immediately after The Hague meeting in 1969 and of what was envisaged as the objective at that stage. I am old enough to remember that when I had the pleasure and privilege of serving in Her Majesty's Forces, the Army Manual instructed the soldier what to do if he happened to meet King George VI in a narrow trench. In the period after 1969 one was subject to the same sort of inflexible type of instruction as in this Army one. Therefore, I am encouraged in the belief that the Commission is now adopting a much more flexible attitude and approach, more on a step-by-step basis, as its ultimate objective. There is much more emphasis on the single market and structural and social policies, whereas at the time of The Hague and subsequent reports these were regarded as secondary to the main directive.
The first directive passed in this step-by-step approach relates to the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of credit institutions in the licensing of banks. Last August the Commission published recommendations on a European code of conduct

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relating to transactions on transferable securities. A draft Commission proposal is being considered by the Council, together with a second directive concerning direct insurance, other than life insurance, to remove discriminatory restrictions on insurance business in the Community. This is all aimed at making the Community more of a single market.
In a world where much of Britain's business activity has become somewhat febrile, it will be seen that the one respect in which we have constantly and consistently been capable of being competitive is in those areas in the City of London which I have the privilege of representing. I have not consulted my constituents in the City of London on their attitude to EMU, and if I were to do so I should probably be faced with as many attitudes as I would in the House, but what is clear is that the City welcomes the increasing opportunity to be able to compete across the whole Continent of Europe, particularly since, whereas we in the City of London have been relatively unprotected by comparison with other aspects of British business, we know that financial institutions on the Continent are accustomed to being protected. Therefore, opportunities are opening up for a virile section of the British business community to compete in an area which, frankly, is vulnerable as a consequence of the protection that it has enjoyed in the past.
The progress towards EMU, if there is any—I share some of the doubts that have been expressed on that score—will be capable of being questioned at all stages along the way by its opponents. On the basis of what has happened since 1969 it does not seem as if progress will be fast.
The great Cato always used to end his speeches by saying that Carthage must be destroyed. I am conscious that certain hon. Members take the same view about Europe. They have the potential for a field day as we move down the road to EMU. However, if EMU were to arrive, it would be because the people of Europe wanted it to do so.
When Winston Churchill was asked why he always arrived on the platform just as the train was about to depart, he replied that he always wanted to give the train a sporting chance to get away. My view is that economic and monetary union has the same characteristic as the
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train, and that those who wish to prevent it will have plenty of opportunity to do so. If it does arrive, it will be because the people of Europe wish it.
11.16 p.m.
Mr. Ian Wrigglesworth: Those who wish to speak against economic and monetary union and who seek to justify and support the present exchange rate system, as did my right hon. Friend the Member for Battersea, North (Mr. Jay), need to explain how they will get rid of the 16 million unemployed in the OECD countries and the various other products of the economic malaise in which we find ourselves. They will have to do so if they are to sustain, as they seem to want to, the present economic system that we have in the Western world.
I am encouraged by the support that the Prime Minister, the Chancellor of the Exchequer, the Chancellor of the Duchy of Lancaster and other Ministers have been giving in recent months to the need for international action by the Governments of the Western world to overcome the problems that we are facing in far-flung places such as Japan, Hong Kong and the United States, as well as in Europe.
I begin my remarks by quoting what the Prime Minister had to say only this week to the Finance Houses Association when he was speaking about the need for more international co-operation and action. My right hon. Friend said:
"The leading nations of the world must decide to move forward in concert. We must act in partnership by taking measures that will reverse the present trends in trade, growth, instability and unemployment."
He added:
"One of the present ingredients in short supply throughout the world is confidence. Agreed international collective action will bring a new confidence to the world."
In my view the truth is that we are trapped in a vicious circle of demand deficiency, with reduced output and increased unemployment following on from that. We can free ourselves only by concerted international action. We need to create a new economic and monetary system that will be as successful in dealing with the problems of today and tomorrow as the Bretton Woods system was successful in coping with the problems of the post-war world. We need badly the

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sort of vision that led to the Marshall Plan in the late 1940s.
We need to help the hundreds of millions of people in the developing world, and the unemployed men and women in the developed world, by demonstrating practically that we have the political will to find new systems to overcome the economic malaise in the Western world. I believe that the practical steps that the Commission has proposed are taking us along the road to what I believe will be a great stabilising influence in the Western economic system, namely, economic and monetary union.
I agree with the Commission's approach of proposing practical means for greater co-ordination, co-operation and harmonisation. In that way, the problems to which my right hon. Friend the Member for Battersea, North referred, which are supposed to be taken care of by exchange rate policies, can be overcome. Indeed, that is how they are overcome in other countries that have single currencies. Such countries are able, within their currency borders, to take care of inequalities between one region and another. Therefore, the policies proposed by the Commission can lead to an ironing out of the differences and point us in the direction of economic and monetary union. In my view, that would give a tremendous boost to confidence in the Western economy and would underpin the stable conditions that must exist if we are to get growth.
As I said, economic and monetary union is a desirable objective in itself. I hope that the Government will therefore pursue it with vigour in the Council of Ministers. But, irrespective of the desired ends, it seems to me that the short-term steps proposed by the Commission are equally desirable in themselves and should be supported as the best policies to be followed to overcome the problems facing Europe now
For instance, the proposals to strengthen and clarify the role of the co-ordinating Committee on Economic and Monetary Affairs and to co-ordinate the budgetary, monetary and exchange rate policies by closer co-operation between the central monetary authorities and other economic bodies within the member States could be of enormous benefit to the whole of the Community.
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The proposal to establish a borrowing and loan facility for the Commission would be of enormous advantage. It would help to overcome the imbalances in the long term to which my right hon. Friend the Member for Battersea, North referred. Indeed, the kind of reserves that would be required centrally to go ahead with that proposals are tiny by comparison with the central reserves that exist in other large States. I do not think that hon. Members need be over worried about the proposals that the Commission has put forward in that respect.
I hope that the Government will keep their eyes on the long-term benefits that can accrue from the stability and growth that would follow from having a European reserve currency, Such a currency would balance the dollar within the Western economic system and provide much greater stability than we have at present.
Mr. Nigel Spearing: My hon. Friend mentioned the possibility of a currency. If there were growth, would not that single currency minimise the likelihood of that growth being equally spread throughout the Community? If so, that would not necessarily give the increase in employment and economic activity that we want to see in each part of the Community.
Mr. Wrigglesworth: It is for that very reason that the Commission is proposing practical steps for introducing regional and other policies to overcome the imbalances about which my hon. Friend is rightly worried. My hon. Friend is not acknowledging the practical proposals that have been made for overcoming the kind of problems about which he is talking, irrespective of economic and monetary union.
I might say that it is not only on this broad economic front that such a proposal would be popular. Recently, members of a Select Committee, of which I was one, were in Holland, and we had to travel down to Brussels. As we went over to Holland, we had to change all our currency into Dutch guilders. Then, on the train, we had to change it into Belgian francs. What about all the populations of the European countries having to do this, quite apart from the firms trading in these currencies? What an enormous benefit there would be and

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what enormous appeal to the citizens of Europe it would have if we could be done with this nonsense of having to swap currencies backwards and forwards for our personal needs and business transactions.
Mr. Marten: The hon. Member and I were in Brussels together as members of the Select Committee. Does he remember the conversation that we had with the official who said that the money supply in each country would be controlled by a board of finance, which would take decisions on a majority vote? If the hon. Gentleman were Chancellor of the Exchequer, as he obviously will be in some future Labour Government, would he enjoy that very much?
Mr. Wrigglesworth: The only way in which we can regain the sovereignty that we have lost as a result of the closer dependence of one economy on another is by ceding the powers which the hon. Member for Banbury (Mr Marten) wants to keep, under an illusion, in our Treasury. Neither the Chancellor of the Exchequer nor, even, the President of the United States in this day and age can control the destiny of his own economy in the way that he could in years gone by. If we are to regain some of that sovereignty, we must co-operate with other countries to overcome the problems facing us at present.
I believe that the practical proposals contained in this series of documents will be of benefit to the whole of the European Community in a very down-to-earth way. Therefore, I hope that the Government will support them for themselves and also that they will press ahead with the efforts to co-operate with other European countries and with other countries in the world, but especially through the European Community, to bring about what I believe could be an enormously helpful and stabilising influence in the world, leading in the long term—and it will take a considerable time—to economic and monetary union in Europe.
11.27 p.m.
Sir Anthony Meyer: The documents before us, especially No. 620, afford us a glimpse of the real world. It is one which, 15 years or so ago, most people regarded as being attainable in a decade or so, and the sort of world to
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which the logic of events pointed and which, it went without saying, was then desirable.
It is a real world in which the nations are interdependent and where living standards can be protected or raised only in an expanding economy, itself the consequence of trade becoming freer and freer, markets expanding, with an unimpeded evolution towards new means of producing goods and services.
Fifteen years later, all except four under the rule of the National Socialist Party—[HON. MEMBERS: "National?"] Yes, the National Socialist Party—the real world seems to many people now quite unattainable and, I fear, to a very large number also undesirable. Instead, our people have been bamboozled into believing that a mirage is nearer, more attainable and more desirable. It is the mirage to which the right hon. Member for Battersea, North (Mr. Jay) and my hon. Friend the Member for Banbury (Mr. Marten) are so wearisomely beckoning us as a place where even nations the size of Britain—or the size of Scotland—are able to sustain their own steel industry, their own car industry, and their own agriculture, with deficits financed either out of manna from Heaven or out of the shrinking tax yield of the contracting economy.
It is small wonder that so many who prefer this mirage to the reality, those whose job it is to tell us which is which —the Ministers—keep telling us that after all there is a lot to be said for the mirage. Some of them actually believe it. I am sure that the Minister did not, but he was insinuating by winks and nods that there was a good deal to be said for the mirage.
The programme set out in the documents may seem disagreeably strenuous because we have fed for so long on the illusion. The chances of its succeeding are small. If I am in a rowing boat being borne towards Niagara, I think that it is more sensible, even though it looks more comical, to try to row against the current than to drift towards the cloud of spray in front of me.
11.33 p.m.
Sir Brandon Rhys Williams: The right hon. Member for Batter-sea, North (Mr. Jay) gave us a rather unattractive picture of the economic

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future of Britain. He talked of divergence from our trading partners and a continuous depreciation of the currency. I do not feel that that is a recipe that is likely to encourage investment, cure inflation, or create opportunities for employment, but that does not mean that I necessarily think that the right hon. Gentleman in Brussels does know best.
President Jenkins has shown a great deal of courage in relaunching the idea of economic and monetary union, but his earlier statements last year on this subject seem to me to have had too academic a character.
I support my hon. Friend who opened from the Front Bench: we must look at the common sense and practical steps that can be taken to get ourselves out of our present economic difficulties. It is not as though we have not been over all this before. In the 1930s the world currency system also broke down and Governments pursued their best advantage—as they thought. The result was unemployment, loss of investment confidence, and so on.
Of course, the situation now is not precisely the same, but the pre-war currency crisis led to the setting up of the Bretton Woods agreement, which was an attempt to create a world economic and monetary union. A great deal of progress was made. Many people think that it was a pity that that system broke down because politicians had to meddle with the workings of their economies. Perhaps it would be better if politicians were not so set on meddling with the workings of their economies and if, instead, they were to try simple remedies such as getting back to policies of integrity and common sense.
I am not attracted by economic nationalism as a remedy for our present economic malaise. I know that it attracts several of my hon. Friends but I do not believe that Britain, going it alone, will be able to solve its problems. Nor, unfortunately, is it realistic to expect that we shall get back to a world currency system in the foreseeable future. But that is not a reason for total despair.
It is possible that currency zones will begin to operate. That is something that will be forced on us by market forces even if we do not work our way to it according to a plan. If the Western European countries which have close trading links
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become one of the world's currency zones, would it be possible to help such a system to work better by setting up some sort of organisation, or by consultation on policies, or by adoption of certain guidelines? It is easy to make mistakes in this field, but that is no reason why we should not make the effort. Much could be done by better exchanges of information and better publication of up-to-date information, so that businessmen would be able to make better-informed decisions.
If what we are trying to achieve is a framework in which business men can take decisions which normally prove right, we must try to arrange for exchanges of information, continuity of policy and a framework in which people can plan for themselves and for their businesses without the dreadful uncertainty which is created by the unpredictable political interference from each of the political capitals of the major Western eonomies.
The Commission makes a series of sensible recommendations in some of the latest documents. For instance, document 443 contains some excellent recommendations. If we were to co-operate, we would find that it was in this country's best interest.
On the capital account, the Commission recommends that there should be an issue of Community loans in order to put the financing of the regional and energy policies on a much more realistic footing. This seems to me a natural way of creating employment and of undertaking investments which are plainly necessary, and which, in the long run, will be of tremendous value to all Community countries.
A number of problems arise in connection with the question of Community loans. For instance, what currency should we use? I do not think that people would unite behind our using any one particular national currency of the Community by itself. Up to now the alternative currency of the Community has been the dollar, but the insecurity of the exchange rate with the dollar suggests that that would not be the ideal basis for long-term Community loans. Many experts think that world opinion is moving in favour of the use of SDRs, and possibly it would be advisable, in the first instance, if Community loans were to be

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issued in SDRs. But I should like some experiments to be carried out with the European unit of account and possibly with some other methods of calculating the eventual terms of repayment. There is a great deal of money looking for secure investment and it is not difficult for the Community to raise money and to experiment with different terms of repayment.
Mr. Marten: My hon. Friend says that there is a lot of money looking for secure investment via the Community. Will he comment on the fact that in 1977 the European Coal and Steel Community and the European Investment Bank lent £200 million to the British Steel Corporation when, as bankers, had they examined the books, as our Select Committee did, they might not have lent it? Should not they grow up before they lend money?
Sir B. Rhys Williams: I have not studied these particular investments that have been financed by the European Investment Bank. In the banking community it has a very high reputation for its shrewd lending policy. All bankers occasionally make mistakes. I know nothing about the particular projects that it has financed in the steel industry, but perhaps they were precisely what the industry needed if it is dependent on obsolete capital equipment and is in urgent need of modernisation, as I believe.
I do not want to say more about the capital account, but I have a few words to offer on the current account. Business people find that it is difficult to foresee what is likely to happen to exchange rates and to calculate their opportunities to trade across currency frontiers.
I welcome the announcement by the Treasury in the last few weeks that it is prepared to underwrite European Investment Bank loans at only 1 per cent. above interest rates, so that borrowers in this country will be safe in future from the exchange risk. We have to build on that kind of precedent so that people can enter securely into long-term transactions—I am not speaking only of very long-term transactions, but perhaps of up to three or five years which are commonplace in business—without having to bear the currency risk. Unless there is some kind of institutional intervention here we shall see a progressive loss of confidence and a decline in intra-European as well as world trade.
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In this short debate it would be wrong to try to dwell on all the other steps that the Commission is recommending, but I urge the House, particularly hon. Friends on this side of the House, to accept that we cannot go on as we are. The currency crisis is far too severe. Politicians created the situation and politicians will have to get the world out of it.
11.42 p.m.
Mr. Ian Gow: There will be agreement on at least one matter in this short debate, and that is that the question of economic and monetary union is one of the most fundamental and far-reaching importance. I agree with the right hon. Member for Battersea, North (Mr. Jay) that it is scandalous that we should have only 90 minutes in which to debate this matter, and that of that time 30 minutes have been taken up by the Front Benchers, no doubt with more to come.
I wish to direct my remarks only to the document about economic and monetary union, and I should be interested to have the guidance of the Minister of State as to the significance of the word "final" at the end of the designation of this document.
I noted with astonishment the date that appears on the explanatory memorandum issued by the Treasury and that on the Commission document itself. The criticism I am about to make applies to virtually all Commission documents. Nevertheless, the reality is that this House is debating a document that was published by Brussels on 17th November 1977. It has already been considered by the Councill of Ministers. That seems to be a crazy way for this House to exercise any influence upon the Council of Ministers. It would be much better if these documents could be dealt with by this House before they were considered by the Council of Ministers.
It was difficult to tell from the Minister of State's speech whether he was saying that the whole concept of economic and monetary union was dangerous nonsense or whether he was in the hands of those of his right hon. and hon. Friends—they are few in number; the hon. Member for Thornaby (Mr. Wrigglesworth) is one of them—who believe that economic and monetary union is an attainable goal. There are many of us who would treat

811
this whole debate as an exercise in nonsense were it not for the resistance of people such as the Chancellor of the Duchy of Lancaster and the hon. Member for Thornaby. Although I believe that EMU is a goal that is wholly unattainable, I fear that there are some members of the Government and some other hon. Members who will devote a great deal of time towards trying to achieve something that is unattainable and wholly undesirable.
In favour of the view that the Government Front Bench do not regard this as an exercise in total nonsense are the words of the explanatory memorandum issued by the Treasury. Paragraph 1 states:
"It is envisaged that the action programme would prepare the ground for decisive progress which would make union possible."
Turning to the last page of the document whose explanatory memorandum I have quoted, this is what we find in the conclusion:
"The pursuit of economic and monetary union would make a decisive contribution towards achieving the common goal of stability and growth …
In its principles, it is eminently political and must be transformed into acts."
This is the point upon which I wish to concentrate.
Economic and monetary union among a group of nine nation States whose rates of inflation and whose rates of economic growth are wholly different is quite impossible. To that impossibility will be added a further ingredient of impossibility when, as is envisaged, three other nations join the Community. Therefore, those who argue in favour of the attainment of EMU are arguing for something that is manifestly absurd.
However, I want to leave the economic and monetary feasibility and turn to the political implications of EMU. Those who argue for such a union are really saying that the nine nation States that make up the Community now and the 12 nation States that will make up the Community in the future will be so able to identify their economic and monetary policies with that of the whole that they will be in the same position as, say, Sussex, Northumberland or Scotland vis-à-vis the United Kingdom. That concept, is, of course, intensely political.
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I am an unashamed Gaullist in regard to the development of the Community. I want to see it develop as a voluntary cooperation among sovereign nation States which are able, when it suits them, to agree upon a certain harmonisation of policies. In so far as we can achieve it, I am certainly in favour of the free movement of capital, goods and people. If we are able to get rid of some of the formalities about passports and to have a currency that is readily exchangeable, and so on, all these things will be very welcome to me.
But the political consequences of EMU will mean that the power of this House and the power of the United Kingdom Government to determine our own fiscal and economic policies will have been surrendered to a new supranational authority—the Commission. It is to that surrender of the power of the Chancellor of the Exchequer, that power of this House ultimately to decide what ought to be our fiscal and monetary policies, that I am wholly opposed.
Furthermore, if we were to agree to EMU, as is proposed in the document, we would be doing something that would be bitterly resented by those whom we represent. If they were in disagreement with the fiscal policy that was being followed and they were to complain to their Members of Parliament, what could we say? We could say "It is nothing to do with us. Take your grievances to Brussels or Strasbourg". That would widen still further the gulf between people and Parliament—between Government and the governed.
I detected from the Minister of State that he really wanted to tell the House that the document that he was compelled to read, no doubt written for him by the cleverest that could be found in the Treasury, was nonsense.
The right hon. Gentleman's record upon these matters is one which has rightly shown the greatest scepticism about economic and monetary union. I hope that when the right hon. Gentleman replies he will tell us, and in the clearest terms, that the Government will have no part in this.
11.50 p.m.
Mr. Nick Budgen (Woverhampton, South-West): The right hon. Member for Battersea, North (Mr. Jay) made it very plain that the technical arguments

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against monetary union were so strong that anybody who thought that it would in any way be an advantage to this country was entirely mistaken. It has been argued by some—I believe that the right hon. Member for Down, South (Mr. Powell) has argued this—that if, for instance, Scotland had its own currency, it would be the most effective regional policy that Scotland could have. So it is argued, to me most persuasively, that on purely technical grounds monetary union is no solution to the British economic problem.
But the point that I wish to dwell on most is the Minister of State's argument that throughout all the documents that we have to consider tonight the objective of so-called economic convergence was the one which was highlighted. When we talk about economic convergence it is assumed that the nation States of Europe and of the EEC have common objectives. It is assumed that within France at any one time there will be the same attitude towards the trade-off between inflation and unemployment as in this country; that it is no more possible than it is possible for individual people to have the same ideas about inflation and unemployment. It is assumed that if all men of good will and equal intelligence throughout Europe consider economic problems they will come up with the same satisfactory technocratic solution.
In fact, the economic performance and the economic objectives of nation States are formed as a consequence of their national characteristics and their national history. It is no mere oddity, no mere quirk of history, that the German economy since 1945 has had as its primary objective the maintenance of sound money, for twice in this century the Germans have seen their money become worthless. It is equally no oddity of history that our most recent inflation has been caused by fear of 1 million unemployed, the inevitable consequence of the Jarrow marches, the high levels of unemployment which scarred many people in the 1920s and 1930s.
So it is that our economic performance and the economic performance of each of the nation States of Europe is the consequence of national characteristics and national history. It is idle to pretend that it is possible for some sort of supranational assessment upon economic ob-
814
jectives to emerge. It is idle even to pretend that the actual technocratic methods of creating—
Mr. Marten: Does not my hon. Friend realise that this whole project is really a last and rather pathetic gasp of a Community which knows that it is bound to disintegrate in the end?
Mr. Budgen: I shall conclude quickly by saying that I believe that economic unity is an impossibility—indeed, is worse than an impossibility. If it were tried, it would be an attempt to frustrate the democratic wishes of peoples within the nation States. People in each nation State in the Community are entitled, through their democratic systems, to say at one time whether they have a preference, for instance, for a high level of inflation or a high level of unemployment. They are entitled to express their economic preferences, and they are not to be forced into a common mould.
11.56 p.m.
Mr. Denzil Davies: In the short time left, perhaps I may deal briefly with the proposal by the Commission to establish guidelines for monetary aggregates and deficit financing. This is also an important part of the Commission's proposals.
It seems to the Government that the proposals for guidelines for monetary aggregates and deficit financing are impractical. We cannot see how such guidelines could be put into practical effect. Apart from that, leaving aside the practicality of the matter, it seems to us also that the Commission does not seem to realise that, once one is seeking to establish guidelines on monetary policy and deficit financing one is moving into the realm not only of monetary policy but of fiscal policy and exchange market intervention. That would be to encompass the whole field of economic activities.
Attempts to oblige different countries to run their economies so as to comply with a series of arbitrary numbers for a variety of different and immediate objectives offer no prospect of any real benefits and could lead to thoroughly inappropriate responses to economic changes as they occur.
Mr. Hugh Dykes Mr. Hugh Dykes (Harrow, East)rose—
Mr. Davies: I cannot give way. I have only two minutes left.

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There is, of course, much in this document which can be commended. The Community can make a contribution to improving the international monetary system, which is in great difficulty, but I am bound to say that I cannot see how any kind of union can be achieved without a central Government. That is basic.
Mr. Gow: On a point of order, Mr. Deputy Speaker. I submit that the time for the debate has not been adequate and that therefore it ought to be adjourned.
Mr. Deputy Speaker (Mr. Bryant God-man Irvine): Everyone who has appeared on the list I have compiled when he caught my eye has made a speech. As far as I know, with the possible exception of one or two, each has said everything that he wanted to say.
Mr. Marten: Further to that point of order, Mr. Deputy Speaker. I have not. I should like to have made a speech, but out of courtesy I did not rise.
Mr. Deputy Speaker: There was no indication by the hon. Gentleman that he wanted so to do.
Mr. Davies: As I was saying, I do not see how one can achieve any kind of monetary or economic union without a central Government or a central State. It may be a desirable thing to have a central European Government or State, but that is another argument. Then the question of monetary aggregates and exchange rate policy and the rest would follow. But I do not see how one can determine these matters—
It being one and half hours after the commencement of Proceedings on the motion, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted Business).
Question agreed to.
Resolved,
That this House takes note of EEC Commission Documents Nos. COM (77) 620 final, R/2355/77 and R/415/78 on Economic and Monetary Union and Co-ordination of National Economic Policies.

SELECT COMMITTEE ON SOUND BROADCASTING
Motion made:
That Miss Betty Boothroyd, Mr. Robert Cooke, Mr. Clement Freud, Mr. Robert
816
Mellish, Sir Anthony Royle and Mr. Nigel Spearing be Members of the Select Committee on Sound Broadcasting.—[Mr. Jim Marshall]
Hon. Members: Object.

DENTAL SERVICES (HAREFIELD)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]
12 midnight.
Mr. Michael Shersby: My reason for seeking the Adjournment this evening is that the National Health Service comes to an end this week, so far as dental services are concerned, in the village of Harefield, which is situated in my constituency. That means that the population of Harefield, which is between 8,000 and 9,000, will no longer be able to obtain dental treatment unless people are either prepared to seek private treatment or to travel at considerable inconvenience to Uxbrige, Ruislip or North-wood.
It will assist the House to appreciate the inconvenience to my constituents in having to seek National Health Service treatment in any of those towns if I explain that they are about three miles distant. I should also explain that Harefield, which many people still describe as the last village of Middlesex—and a very beautiful village it is—is separated from those towns by the green belt, in the form of several miles of open country, and that bus services to and from Uxbridge, Ruislip and Northwood are notorious for their unreliability. Sometimes, as my constituents know only too well, the services are non-existent.
The House will therefore appreciate that what seems but a short journey to the nearest large town is in reality a difficult one, particularly for elderly people and for parents with young families, and, of course, it is also an additional expense.
For several years past Harefield has been served by two dental practitioners, and occasionally by three. I was therefore surprised when in January my attention was drawn by several constituents to the fact that there would shortly be none.
To clarify the position, I put down a parliamentary Question to the Secretary of State for Social Services. I asked him

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how many dentists provided dental treatment under the National Health Service in Harefield and whether he was satisfied that the service provided was adequate for the area. In reply to my Question, the Minister of State said that three dentists provided National Health Service general dental services in Harefield and that he was not aware of any special difficulty in obtaining dental treatment there.
I can only tell you, Mr. Deputy Speaker, that my constituents who saw the Minister's reply knew different, and I was assured by them that he was wrong. I therefore pursued the matter with the area health authority and with the Hillingdon Area Family Practitioner Committee. On 13th February I was informed by Mr. Donald, the administrator of the family practitioner committee, of a very different situation from the one indicated in the Minister's reply.
I quote from Mr. Donald's letter:
"One practitioner left the area about 18 months ago without informing the family practitioner committee, and payments were still being authorised by the Dental Estimates Board until six months ago. His name has now been removed from the dental list. A further dentist intends to resign on 19th March 1978, and has directed his associate not to accept any more National Health Service patients, so there will be no National Health Service dental treatment provided in Harefield after that date. I am endeavouring to rectify the matter and have been in touch with various people, including Mr. W. F. Hollis, the Secretary of the Hillingdon Local Dental Committee. Although neither he nor the family practitioner committee has the authority to direct a person to the area to practise, Mr. Hollis is formulating plans with the hope of providing dental services again."
As I was about to telephone the Minister to tell him of the situation in Harefield, his private secretary telephoned mine to tell me that his original answer was indeed wrong, and he confirmed what the family practitioner committee had told me in the letter from Mr. Donald.
My next step was to raise the matter with Mr. Hollis, secretary of the Hillingdon Local Dental Committee. He confirmed that neither his committee nor the family practitioner committee had any jurisdiction over the placement of dental practitioners.
Mr. Hollis also told me—and I quote from his letter of 2nd March:
"While appreciating the difficulties—of the people of Harefield, we feel that this—sort of situation has arisen solely due to the—recalci-
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trance of the present ministerial policy and that it is indeed a mere forerunner of what may be anticipated nationally. No individual practitioner can be expected to invest the many thousands of pounds necessary to be put at risk in establishing a practice without a reasonable return for his endeavour. You will no doubt be aware of the bankruptcies of many such young practitioners who have endeavoured to get on their feet and finished in financial failure during this last twelve months.
The irreparable loss of initiative which this destruction induces leaves them with the alternatives of either emigration or the resignation of acceptance of a post of salaried service wherein their productivity to the nation is historically fractional to that which it is statistically proven to be in contractual service to the family practitioner committee.
I am directed to inform you that Harefield is symptomatic of what must inevitably be anticipated nationally while a ministerially maintained policy is so rigidly adhered to, which in itself necessitates the administration of treatments, the reward for which does not even meet the overheads incurred."
It is my understanding that there are two aspects of the dental practitioner NHS contract which it is essential to be aware of. First, dental practitioners are not State employees with a guaranteed income. They are self-employed, fee-earning professional people who finance and manage their own practices and who can face bankruptcy if income fails to cover outgoings. Secondly, they have an absolute contractual right to decline to treat patients under the NHS if the terms are unacceptable. If the terms are unrealistic, as the profession's leaders now believe, the dentists can no longer go on treating patients under the NHS at the expense of their own fivelihoods. It is because the terms are unrealistic that my constituents in Harefield will no longer be able to get treatment under the NHS after the end of this week.
Why are the terms unrealistic? Why cannot a person in Harefield get a tooth pulled after the end of this week? I have been doing a little research and have found out why. It is because, as I understand it, one key element of the present dispute between the dental profession and the Department of Health and Social Security is that the earnings of dentists have fallen behind comparable earnings. In fact, I find that there has been only a 3 per cent. increase in NHS fees since 1975 and that by April last year dentists' pay had fallen 19 per cent. behind comparable earnings. The gap is much more today.

819
There is also the rising cost of buying equipment which faces particularly the young dentist who is probably buying his home at the same time. A very recent estimate shows that the total cost of 10 basic surgery items necessary to practise dentistry has risen from £1,740 in 1969 to £6,697 today. That means that in 1969 the surgery cost in terms of NHS net income was 5·8 months, based on the target average NHS income of general dental practitioners of £3,590. Today it is 10 months, based on a target average income of £8,010.
It seems pretty clear that the fees are too low and that the cost of equipment is too high. An NHS dentist can no longer make an adequate return to meet his costs, let alone make a reasonable living. I understand also that dental mechanics are leaving their jobs in increasing numbers. This leads to even greater difficulties in getting work done on such things as false teeth.
What is to happen to my constituents in Harefield? What steps will the Minister and the Government take to ensure that the NHS continues to function in this last village in Middlesex so that the 9,000 people living there can receive the services towards which they have contributed for so many years?
Will the Minister consider, perhaps as a temporary measure, providing a mobile surgery, or will he issue advice to permit community dental officers in Hilling-don to give dental care and treatment to the pensioners in Harefield who find it difficult to travel elsewhere for treatment? If a mobile surgery is not the answer, perhaps a temporary service could be provided at a health centre.
In addition, will the Minister consider authorising the health authorities in Hillingdon, at their discretion, to provide facilities for the dental treatment of people in Harefield and to make use of any spare capacity there might be after the community dental staff have discharged their duties towards children and others for whom they are already responsible? I understand from a recent announcement in the House that they can now extend their service to the handicapped.
Finally, will the Minister give an assurance that the Government will take
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early action to implement the recommendations of the Doctors and Dentists Review Body so that we can once again have NHS dentists, not only in Harefield but in many other parts of the country where the dental service is on the point of collapse?
12.11 a.m.
The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): I am grateful to the hon. Member for Uxbridge (Mr. Shersby) for this opportunity to comment on a matter which is clearly of concern both to him and to many people in the Harefield district. I have carefully noted the points that he has raised. Before dealing with these points, and to put them into perspective, I should like to clarify a subject which is often misunderstood by patients and by the public, in general—that is the position of dentists in the NHS general dental services.
It is important to recognise that dentists in the general dental services are independent contractors with family practitioner committees, which are the local bodies responsible for administering all the family practitioner services. The dentists are self-employed professional men who apply to have their names entered on the family practitioner committee's dental list. Their being on the dental list means that they have agreed to provide dental treatment under NHS arrangements for the patients they accept for that purpose. They are bound by the general dental services regulations only in respect of the patients they accept for a course of treatment.
Dentists do not have "lists" of patients as doctors do, nor are patients "registered" with them. This is because in 1948 there were not enough dentists to guarantee a continuing service for the whole population. Even now, despite a steady annual increase in the number of dentists included in the dental list, there are still not enough to make it feasible to guarantee fully comprehensive NHS treatments on demand to all comers. This is why we have thought it important to provide, through the area health authorities' own services, a priority service for certain groups of patients.
Traditionally, health authorities have provided dental care for children and expectant and nursing mothers, and, as my right hon. Friend the Secretary of

821
State said in a Written Answer on 26th October 1977, we propose to allow health authorities, at their discretion, to extend this service to handicapped adults who, because of their handicap, are unable to obtain routine dental treatment from any other NHS source. It will be for each area health authority to assess the need in its area and to weigh this against the existing commitments of its community dental staff for the dental health of schoolchildren and other priority classes.
No one is registered with a dentist, but, having accepted a patient for a course of dental treatment, the dentist is obliged by his terms of service to provide, or arrange for the patient to have, all the treatment necessary for dental fitness which the patient is willing to undergo. His obligation to that patient is discharged when the course of treatment is complete. I am, of course, aware that many dentists treat regular patients on a continuing basis although they are under no obligation to do so.
I have gone into some detail in explaining the background to the nature of the dentist's contract in order to illustrate why a dentist on a family practitioner committee dental list is free to accept or refuse any patient for NHS treatment and to practise privately, and why, under existing legislation, neither FPCs nor my right hon. Friend the Secretary of State have the power to compel a dentist to accept any particular patient, to provide any particular item of treatment or to practise in any particular area.
Dentists who may have provided NHS treatment, even on a regular basis to some patients, are at liberty to give notice of removal of their names from a dental list at any time and henceforth to offer nothing but private treatment. This I understand to be the case with two dentists who are at present providing some NHS treatment in Harefield but will shortly be withdrawing their names.
Harefield is a somewhat isolated community in the north-west corner of the area administered by the Hillingdon Area Health Authority. It adjoins that of the Hertfordshire Area Health Authority.
The population of Harefield has in the past been fortunate in that full- or part-time general dental services have been provided in the locality by two or three practitioners, and I can understand the
822
misgivings felt by some residents now that the local coverage is diminishing. There are at the moment two practitioners with addresses in Harefield on the Hillingdon Family Practitioner Committee's dental list, but both have given the three months' notice of withdrawal which is required under their terms of service. Unless by June this year another dentist offers general dental services there, the dental list will no longer contain a Harefield address. I am indeed sorry that, even now, Harefield residents may not be able to obtain acceptance for another course of NHS treatment there and will have to seek treatment elsewhere.
Obtaining dental treatment at a surgery some miles from one's home or place of work is the experience of many, particularly in the less urbanised or rural areas, but I sympathise with those people whose routine of life is disturbed or who have to go to new lengths to obtain the dental treatment which they need.
However, those who have access to transport should find no difficulty in reaching a dentist Records show 68 practitoners providing general dental services on the dental list of the Hillingdon Family Practitioner Committee and in that area the ratio of dentists to population is better than the national average. Since Harefield is so close to Hertfordshire, it is worthy of note that the ratio of dentists to population in Hertfordshire Family Practitioner Committee's area is also appreciably better than the national average.
The problem which is brought to light in relation to Harefield is thus not so much that there are no dentists to treat the population but rather that there are no longer general dental services available, as it were, on the doorstep. It becomes a problem of transporation for those who do not normally move outside the confines of Harefield. I am given to understand that Harefield is not without a bus service, although I note the hon. Members comments about its inadequacy. Public transport apart, I should be surprised to find a community in which members, even the aged and infirm, could not be helped by family, friends or neighbours to travel the few miles to keep an appointment with a dentist in a nearby town.
I should also mention the provision in the general dental services for dentists

823
to visit patients in their own homes, up to five miles from the surgery, if the patients's condition so requires. Where any necessary dental treatment cannot be carried out at home, the ambulance authority is required to provide or arrange for suitable transport to the surgery if the patient is considered medically unfit to travel by any other means.
A service is provided in Harefield by the community dental service for schoolchildren and other priority patients. There is a single dental surgery in Harefield Health Centre. Until recently, this was operated for three days a week and demand was such that the area health authority had intended to make it a full-time clinic. Unfortunately, the dental officer employed there has recently left to return to hospital work. The health authority is seeking to recruit a full-time dental officer for the clinic and, as an interim measure, has put in a dental officer from another part of the area two days a week.
It is unfortunate that general dental practitioners in Harefield now providing NHS treatment are soon to withdraw their services, but I think it unlikely that patients will no be able to get the treat-men they require in neighbouring towns. NHS dental treatment is available three miles away in Rickmansworth, four miles away in Northwood and also at Uxbridge and Watford, which are both within five miles of Harefield. There are also surgeries throughout the London area at distances in the range of six to 15 miles. Patients having difficulty in finding a dentist should contact the administrators of Hillingdon and Hertfordshire Family Practitioner Committees, who, although having no power to compel a dentist to accept a particular patient, will always do their best to help.
It might be helpful if I mention the manpower situation generally. It has a bearing on the Harefield problem. The McNair Committee on Recruitment to the Dental Profession recommended in 1956 that the capacity of dental schools should be increased so that at least 800 new dentists qualified each year to achieve a long-term target of 20,000 dentists on the register. This target is about to be reached. The existing capacity of dental schools, together with further developments already in hand,
824
provide the prospect of a continuing rise in the numbers of dentists on the register. There have been indications in recent years that, as more and more dentists come into the general dental service, the cover provided throughout the country is improving.
We must remember that dentists are professional business men. As such, they will have a keen eye for places where they can be fairly confident that their services will be in demand. It seems reasonable to conclude that as their numbers continue to increase there will be a gradual redistribution of dental manpower throughout the country. This should benefit the more isolated areas. Thus, although I have said that we have no powers to compel a dentist to practise in a particular area, the forces of the market place should provide an incentive to improve the general distribution of dentists.
I now turn to the major point made by the hon. Gentleman about the present situation between the Department and dentists. The letter which he quoted does not represent a correct view of the situation, nor did his remarks on the point. For reasons which I hope will be obvious, I do not wish to say too much tonight about this matter, but I wish to say one or two things in response to the hon. Gentleman.
It is a fact that some, but by no means all, dentists are acting on the British Dental Association's advice to be selective about the provision of NHS treatment. This follows from the disagreement between Ministers and the British Dental Association over the recovery of overpaid expenses. It is too early to say what is the full effect of the dentists' action. There are pockets of difficulty, but generally there has been no serious deterioration. It is hoped that dentists are responding to the appeal, in the personal letter the Secretary of State sent to all practitioners, not to make patients suffer because of this dispute.
My right hon. Friend the Secretary of State has urged the British Dental Association to return to the dental rates study group so that the right level of expenses for 1977–78 can be determined. The Secretary of State offered to look at other ways of recovering the recently identified overpayments since the profession's representatives do not like the

825
alternative proposal put forward by the Health Departments. I assure the hon. Gentleman that we remain open to any reasonable approach which the British Dental Association cares to make. We have also sought the views of the independent Review Body on Doctors' and Dentists' Remuneration on the general principles involved.
We look forward to that report in due course. The Review Body is expected to report to the Prime Minister in April.
We believe that any problems arising from the dispute with the dentists are temporary and that once the dispute is settled there will be a speedy return to normal working. In the meantime, advice to patients having difficulty in obtaining NHS treatment is to contact the administrator of their local family practitioner committee.
I do not think I should go any further tonight on the dispute, but I thought that it was worth while responding to the hon. Gentleman's remarks because obviously he feels, and perhaps his constituents also feel that withdrawal of services in Hare-field is a direct consequence of the dispute. I am not in a position to say whether that is the case, since no reason need be given for the withdrawal of the
826
provision of general dental services in the NHS. Obviously, some dentists may decide in their own interests at any particular time that they might want to practise elsewhere or go over to private practice completely. There are a number of dentists throughout the country who are in that position. There will always be changes, but one should not draw conclusions from changes in particular areas.
I concede that, when a change takes place such as the one to which we have referred, it is only natural that there is suspicion in the minds of local people that it is related to the current dispute. I cannot say whether that is so. I hope that once the dispute is resolved—I am sure that it will soon be settled amicably, given the good will and understanding that exist on both sides—we shall soon see a restoration of general dental services and that we shall be able to satisfy the hon. Gentleman's constituents that the NHS is responding to their needs for making dental treatment available rather nearer to their locality than it is likely to be over the next few months.
Question put and agreed to.
Adjourned accordingly at twenty-five minutes past Twelve o'clock.

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  Charities (Expenditure)
EDUCATION AND SCIENCE
  Boarding Schools
  Boarding Schools
  Public Schools
  Public Schools
  Student Grants
  Student Grants
  Expenditure
  Expenditure
  Overseas Students (Grants)
  Overseas Students (Grants)
  School Meals
  School Meals
  Dyslexic Children
  Dyslexic Children
  Schools Council, and Further Education Curriculum Review and Development Unit
  Schools Council, and Further Education Curriculum Review and Development Unit
EMPLOYMENT
  Further Education Students
  Further Education Students
  Job Creation Programme
  Job Creation Programme
  Nurses
  Nurses
  Unemployment Benefit
  Unemployment Benefit
PRICES AND CONSUMER PROTECTION
  Football Association Cup Final (Admission Charges)
  Football Association Cup Final (Admission Charges)
ENERGY
  Oil Exploration (Solway Firth)
  Oil Exploration (Solway Firth)
  Vortometric Burners
  Vortometric Burners
  British National Oil Corporation
  British National Oil Corporation
SCOTLAND
  In-Patients
  In-Patients
  Disabled Persons
  Disabled Persons
  Sullom Voe Oil Terminal
  Sullom Voe Oil Terminal
TRADE
  Safe Containers (International Convention)
  Safe Containers (International Convention)
  BAC111 Aircraft
  BAC111 Aircraft
  Performing Right Society
  Performing Right Society
  South Africa
  South Africa
DEFENCE
  Service Personnel (Trade Union Membership)
  Service Personnel (Trade Union Membership)
  Rainham Marshes, Essex
  Rainham Marshes, Essex
  Workers' Rights (Civil Employment)
  Workers' Rights (Civil Employment)
  Army Personnel (Rent Allowance)
  Army Personnel (Rent Allowance)
  Expenditure
  Expenditure
  Pay
  Pay
  Ulster Defence Regiment
  Ulster Defence Regiment
  Royal Air Force Personnel (Premature Retirement)
  Royal Air Force Personnel (Premature Retirement)
SOCIAL SERVICES
  Environmental Health (Surrey)
  Environmental Health (Surrey)
  Revenue Allocations
  Revenue Allocations
  Retirement Pensions
  Retirement Pensions
  Mentally Handicapped Persons (Development Team)
  Mentally Handicapped Persons (Development Team)
  Nurses
  Nurses
  Antenatal Co-operation Cards
  Antenatal Co-operation Cards
  Dyslexic Children
  Dyslexic Children
  Royal Marsden Hospital
  Royal Marsden Hospital
  National Insurance Contributions
  National Insurance Contributions
  Resources Allocation
  Resources Allocation
OVERSEAS DEVELOPMENT
  South Africa
  South Africa
  Departmental Energy Usage
  Departmental Energy Usage
FOREIGN AND COMMONWEALTH AFFAIRS
  United States of America (Reciprocal Judgments Agreement)
  United States of America (Reciprocal Judgments Agreement)
  Falkland Islands (Oil Discoveries)
  Falkland Islands (Oil Discoveries)
  South Africa (British Embassy)
  South Africa (British Embassy)
  Armenian Cypriots (Entry Applications)
  Armenian Cypriots (Entry Applications)
  Secretary of State (Photographs)
  Secretary of State (Photographs)
ENVIRONMENT
  Commons Commissioners
  Commons Commissioners
  Rent Rebates
  Rent Rebates
  Chiswick House
  Chiswick House
  Rent and Rate Rebates (Pensioners)
  Rent and Rate Rebates (Pensioners)
  Community Services
  Community Services
  Council Houses (Sale)
  Council Houses (Sale)
  Compulsory Purchase Orders (Hillingdon)
  Compulsory Purchase Orders (Hillingdon)
  Gipsies
  Gipsies
  North Sea and Continental Shelf
  North Sea and Continental Shelf
NORTHERN IRELAND
  Community Halls (Derating)
  Community Halls (Derating)
  Terrorist Activities
  Terrorist Activities
  Social Services Drivers (Work-to-Rule)
  Social Services Drivers (Work-to-Rule)
  Dyslexia
  Dyslexia
WALES
  Rate Support Grant (Cardiff)
  Rate Support Grant (Cardiff)
  Industrial Development (Cardiff)
  Industrial Development (Cardiff)
  Schools (Staffing Ratios)
  Schools (Staffing Ratios)
  Wales Bill
  Wales Bill
TRANSPORT
  Vehicle Excise Duty
  Vehicle Excise Duty
  Traffic Signs (Expenditure)
  Traffic Signs (Expenditure)
  Departmental Contracts
  Departmental Contracts
  Bus Services
  Bus Services
  M4 (Chiswick—Heathrow)
  M4 (Chiswick—Heathrow)
  Concessionary Fares
  Concessionary Fares
  Heathrow Airport
  Heathrow Airport
NATIONAL FINANCE
  Tax Allowances
  Tax Allowances
  Tax Exemption Certificates
  Tax Exemption Certificates
  Lifeboat Scheme (Tax Deductions)
  Lifeboat Scheme (Tax Deductions)
  Value Added Tax
  Value Added Tax
  Corporation Tax
  Corporation Tax
  Imports (South Africa)
  Imports (South Africa)
  Personal Incomes
  Personal Incomes
  Economic Affairs
  Economic Affairs
  Tax Offices (Freefone Services)
  Tax Offices (Freefone Services)

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Oxford.
The Lord Grenfell—Sat first in Parliament after the death of his father.
The Lord Henley (Lord Northington)—Sat first in Parliament after the death of his father.

ARMED FORCES PAY
Earl CATHCART: My Lords, with his permission, I beg leave to ask the Question standing in the name of my noble friend Lord Gray, who is unavoidably prevented from attending your Lordships' House this afternoon:
The Question was as follows:
To ask Her Majesty's Government whether, on receipt of the recommendations of the Pay Review Board, they will as a matter of urgency introduce percentage increases in the pay of the Armed Forces comparable with the increases in earnings recently allowed to the firemen and miners.
Lord WINTERBOTTOM: My Lords, the Government will make their decision on the Forces' 1978 pay award once they have received the Armed Forces' Pay Review Body's report. No purpose is served by speculation at this stage about the content of the Review Body's report or the Government's final decision.
Earl CATHCART: My Lords, I thank the noble Lord for that reply, which of course does not take us very much further forward. Does he remember that on 24th November last a serving officer wrote to The Times saying that morale was low in the Armed Forces and that unless something was done about Forces' pay the numbers applying to leave would reach stampede proportions? Does the noble Lord also remember that in the defence debate which followed, on 7th December, which was initiated by my
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noble friend and Leader Lord Carrington, I referred to that letter in The Times and, while I agreed about the stampede, which I said had already begun, I did not accept that the morale of the Armed Forces was in any way impaired, because of their sense of discipline and the fact that their devotion was such as to be able to overcome it? Will the noble Lord give an assurance on behalf of the Government that they will give very detailed consideration to the pay of the Armed Forces to ensure that comparability with important parts of industry is established and that the X factor is given full consideration? I must tell the noble Lord that if this is not done—
Several noble Lords: Question!
Earl CATHCART: My Lords, does the Minister realise that if this is not done a very serious situation will arise in the Armed Forces and that one will not be able to say in future that morale is being maintained?
Lord WINTERBOTTOM: The concern expressed by the noble Earl, my Lords, is shared by all those who concern themselves with the interests of the Armed Forces. I can only repeat what has been said many times; namely, that the Government are pledged to restore the comparability of Service pay as soon as pay policy permits. As to the X factor, the Armed Forces' Pay Review Body may well make recommendations on this element of remuneration.
Lord MURRAY of GRAVESEND: My Lords, would my noble friend not agree that this constant harping by the Opposition on the results of the Pay Review Body before they are made public also helps to lower the morale of the Armed Forces?
Lord WINTERBOTTOM: My Lords, I said—
Earl CATHCART: Does the noble Lord appreciate—
Several noble Lords: Order!
Lord WINTERBOTTOM: I said that no purpose is served by speculation at this moment, my Lords. Noble Lords will not have to wait very long before we can talk about something concrete.
Baroness WARD of NORTH TYNESIDE: My Lords, will the Minister bear in mind—everybody in the country should know this—that most people in this House would like the Armed Forces to get more pay without delay and therefore as quickly as possible?
Lord MACKIE of BENSHIE: My Lords, may we have an assurance from the Minister that the Government will not on this occasion give with one hand and take away with the other? Is he aware that one of the major senses of annoyance to many members of the Forces is that pay rises are ostensibly given and then every form of perquisite—house and so on—is charged for at a higher rate?
Lord WINTERBOTTOM: My Lords, the matter of charges as well as pay will be covered in the Armed Forces' Pay Review Body's report.
Lord CHELWOOD: My Lords, do the Government accept that the number of officers and non-commissioned officers retiring voluntarily during the last six or eight months has reached serious proportions and that this is very worrying?
Lord WINTERBOTTOM: My Lords, this is something we must watch with care.
Lord CLIFFORD of CHUDLEIGH: My Lords, may we have an assurance that the noble Lord and all other Ministers dealing with the Forces have put the case for the Services very strongly to the Pay Review Body? Would the noble Lord take into consideration a suggestion I made in relation to an earlier Question; namely, that one way out of it would be, as one noble Lord intimated, to go back to the previous situation of not charging for rations and quarters?
Lord WINTERBOTTOM: My Lords, the recommendations of the heads of the three Armed Forces to the Pay Review Body must of course be confidential, but, knowing them, I am fairly certain that they have stated their views with some force.
Earl CATHCART: My Lords, is the Minister aware that what the noble Lord, Lord Murray of Gravesend, described as harping would be regarded almost as
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divine right if a trade union leader made the same remarks? Is he aware that what I am doing is not pretending to be a trade union leader for the Armed Forces, but trying to get a fair deal for the people with whom I served all my adult life?
Lord HEWLETT: My Lords, assuming, as Her Majesty's Government may do, that they may stay in office for longer than many of us think, surely there must be a target date for the restoration of complete and full comparability. Is the noble Lord aware that only a positive answer in this regard will allay the deepest fears of Servicemen? Will be therefore please state categorically what is the target date for the restoration of comparability?
Lord WINTERBOTTOM: My Lords, I said earlier that both I and others more competent to speak have given an assurance that the Government are pledged to restore the comparability of Service pay as soon as pay policy permits. I am certain that the opportunity will soon be given to your Lordships to discuss the actual proposals of the Pay Review Body and the Government's reaction to them.

THE POST OFFICE: CARTER REPORT
3.14 p.m.
Earl ALEXANDER of TUNIS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action has been taken since the publication of the Carter Report on the Post Office and the debate on the report's recommendations in this House on 16th November 1977.
Lord WINTERBOTTOM: My Lords, the period of public consultation which followed publication of the Carter Report ended in December 1977. All the comments are now being examined, together with the views expressed in the debate in this House, and in due course the Government will publish their conclusions in a White Paper.
Earl ALEXANDER of TUNIS: My Lords, I thank the Minister for that reply, and I should like to ask him one further question, about which I wrote to him yesterday. Should a strike by postal workers occur, could steps be taken to allow private carriers the right to deliver letters immediately the strike takes effect?
Lord WINTERBOTTOM: My Lords, I am grateful to the noble Earl for giving advance notice of his supplementary question. However, it does not really apply to the Carter Report. If the noble Earl will put down another Question, I shall endeavour to answer it.
Baroness BURTON of COVENTRY: My Lords, is my noble friend aware that many people in this House, and a great many of the general public outside, have greatly welcomed the attitude of Sir William Barlow since he became chairman of the Post Office? Is he also aware that I believe I speak for many people when I say that Sir William really seems to have a progressive attitude—and that customers do count?
Lord WINTERBOTTOM: My Lords, I am most grateful to my noble friend for that very helpful remark.
Lord TREFGARNE: My Lords, can the noble Lord explain why the Hull telephone service licence was recently renewed for only six months, and what is the nature of the reconsideration of the position in that connection of which the noble Lord informed me in a Written Answer last week?
Lord WINTERBOTTOM: My Lords, the Carter Report makes no mention of the Hull privately owned telephone exchange. If the noble Lord cares to put down another Question, I shall endeavour to answer it.
Lord TREFGARNE: My Lords, with respect to the noble Lord, I wish to point out that the debate on the 16th November did mention it, and that that is included in the Question on the Order Paper. Does the noble Lord not have the information?
Lord WINTERBOTTOM: My Lords, the Question is on the Carter Report.
Lord ORR-EWING: My Lords, will the noble Lord bear in mind that many conscientious people do a considerable amount of work to produce reports such as the Carter Report, and then there are months and sometimes years of delay before the recommendations are truly considered and implemented? Will he make it possible for a progress report to be given on how many of these recommendations have already been implemented by the admirable Sir William Barlow, and how many are still under consideration? We should like to have some progress after all the work that has been put into this report.
Lord WINTERBOTTOM: My Lords, I am certain that if the noble Lord will have a word with the usual channels we may find an opportunity for making a pr ogress report, but today is not the time.
Lord AIREDALE: My Lords, where the public corporation concerned has no Minister answerable for it to Parliament upon points of detail, is it too much to expect that the corporation, when its affairs are debated in either House, might go through the speeches and write to the individual Members dealing with the points of detail which they have raised in the debate?
Lord WINTERBOTTOM: My Lords, that is a very interesting point because the general philosophy behind the relationship between Parliament and the nationalised industries is that the day-to-day operations of those industries are a matter for the industries themselves. I am certain that if any noble Lord writes to the chairman of a nationalised industry he will receive a courteous reply, and probably an informative one. But the conventions are that the day-to-day running is a job for the boss.
Lord HAWKE: My Lords, in the effort to create more jobs, in which the Government are now engaged, would it not be cheaper to hand money to the Post Office to employ people to provide the service to which we used to be accustomed, rather than spend vast sums of money creating rather unnecessary jobs?
Lord WINTERBOTTOM: My Lords, surely at the moment we see that an attempt is being made to prevent featherbedding in any nationalised industry.

CAMBODIA AND VIETNAM: UN MEDIATION
3.18 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper, and I should like to make a correction of a slip which has occurred. The reference in my Question to "General Secretary" should, of course, read "Secretary-General".
The corrected Question was as follows:
To ask Her Majesty's Government whether they will ask the Security Council of the United Nations to instruct the Secretary-General to use his influence to end the war between Cambodia and Vietnam.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, I do not consider that an initiative would help at this stage, and I note that neither of the parties, nor other countries in the region who are immediately affected, have sought the Security Council's intervention.
Lord BROCKWAY: My Lords, in thanking the Minister for that reply, may I ask whether it is not the case that, since the end of December, Vietnam has proposed the immediate end to all hostilities, the withdrawal of the armies to five kilometres beyond the borders, and negotiations for a treaty recognising the existing borders under international supervision? When that proposal is made, should it not be for the United Nations to support it?
Lord GORONWY-ROBERTS: My Lords, it is perfectly true that the Vietnamese forces have withdrawn from the 30 kilometre line to which they had penetrated by January, and that was a hopeful sign. The Government of Vietnam have also made a three point proposal for the settlement of the dispute. At the moment fighting appears to have died down; it is somewhat intermittent. While the Cambodians have not yet accepted the Vietnamese proposal, there may be hope that they will. I think it is best to await a local settlement of what is, after all, a local dispute, rather than to complicate matters by proceeding to the Security Council at this stage.
Baroness GAITSKELL: My Lords, may I ask the Minister whether it is not unwise, and even misleading, to imply that the UN has the power to do this, or that we or any other Government have the power to instruct the Secretary-General to do such-and-such a thing?
Lord GORONWY-ROBERTS: My Lords, the United Nations is the sum of its members, and to my knowledge no member or group of members so far has decided that it would be helpful to invite the Secretary-General to take the course suggested by my noble friend Lord Brockway. To that extent, certainly, my noble friend Lady Gaitskell is absolutely right.
Lord MACKIE of BENSHIE: My Lords, would the Minister care to define when a war is a war and not a local dispute?
Lord GORONWY-ROBERTS: My Lords, a local dispute qualifies for the description of a war equally with a continental hostility.
Lord BROCKWAY: My Lords, may I ask the Minister whether there is not a danger that other Powers may become involved in what he has described as "a local dispute"?
Lord GORONWY-ROBERTS: My Lords, there is always that danger. Most wide-ranging wars, in the sense that the noble Lord had in mind, have indeed arisen from local disputes. This is local in the sense that it is long-standing and deep-seated as between these two national communities. The fact that they are both Communist countries does not in any way erode the nationalistic hostilities which subsist at present, as they have done for many years in the past. It is local in that sense. If your Lordships would prefer, shall we call it "a regional dispute"?

LOTTERIES: USE OF SURPLUS FUNDS
3.22 p.m.
Lord SHINWELL: 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 how many local authorities have initiated lotteries and whether if a surplus remains after meeting expenses it is intended to use it to reduce rates.
Lord WELLS-PESTELL: My Lords, I understand that by 14th March 1978—namely, last Tuesday—246 local authorities had registered lottery schemes with the Gaming Board for Great Britain, and that 87 of these had submitted accounts of lotteries actually held. The Lotteries and Amusements Act 1976 requires a local authority to apply money accruing from a local lottery only to the particular purpose or purposes for which it had been promoted.
Lord SHINWELL: My Lords, I thank my noble friend very much for that information, which is somewhat inadequate. What are these particular purposes to which my noble friend refers? Is it not in order to help to reduce rates, or perhaps provide more amenities, or something of the sort? What does this ambiguous phrase, "particular purposes" mean?
Lord WELLS-PESTELL: My Lords, I do not think there is any ambiguity at all. A local authority can promote a lottery for any purpose in respect of which it has power to incur expenditure under any enactment. It may well be that a local authority would want to run a lottery to construct a swimming pool or open a recreation ground. It can raise money to do all these things because they are purposes for which it has power to incur expenditure under an enactment. It is for the local authority to decide on the various schemes that it wants. It may well be that, having done so, and having got enough money in to erect the particular building that it wants, inevitably that will work towards the reduction of rates because the cost of it would not have to be found out of normal rate income. But it is important that the local authority clearly indicates the purpose. It is not sufficient for a local authority to say, "We want to run a lottery for social, cultural, environmental or recreational facilities, or for the public welfare", or to say "for something not yet determined ". It must clearly decide and indicate the particular project for which it wants the lottery money.
Lord SHINWELL: My Lords, I am now grateful to my noble friend for the information he has given. Why was he keeping it up his sleeve? Why could he not have told me in the first place what he meant by "particular purposes "? Now I will ask him this question: Is there anything improper in using the surplus for the purpose of reducing the rates? Would it not be very desirable to encourage other local authorities to follow the lead to which my noble friend has referred? As a result of these lotteries some people may lose money and some may gain some money, but if the general result leads to some reduction in rates would that not be desirable?
Lord WELLS-PESTELL: My Lords, I do not want to quarrel with my noble friend, but I in fact answered his Question, which was,
"… whether if a surplus remains after meeting expenses it is intended to use it to reduce rates?".
If money has been raised for a specific purpose, I think the implication is that it must be used for that purpose and can be used for some other purpose only if the local authority gets the specific consent of the Secretary of State to apply any surplus for any other purpose.
Lord HALE: My Lords, could the noble Lord say whether the figures of the results of these lotteries, as they are completed from time to time, are going to be published and available for inspection?
Lord WELLS-PESTELL: My Lords, I imagine there will be a responsibility on the local authorities to publish them, but I cannot recall (simply because I cannot remember the Act in its entirety) whether it is an obligation on them. I should have thought that, in the circumstances, there would be an obligation to do so.
Lord SHINWELL: My Lords, perhaps my noble friend would forgive a final question now that he has referred to the Secretary of State. Can we not ask his right honourable friend the Secretary of State to empower the local authorities to use some of the surplus for the purpose of reducing rates?
Lord WELLS-PESTELL: My Lords, I am obliged to my noble friend, and I will bring his remarks to the attention of my right honourable friend.
Lord SKELMERSDALE: My Lords, could the noble Lord say whether to run a lottery for the sole purpose of reducing the rate burden in a particular place would be a proper purpose?
Lord WELLS-PESTELL: My Lords, my understanding—and I will write to the noble Lord if I am wrong—is that it would not be proper to do that, to run a lottery merely to reduce the rates, because as I understand the situation a local authority can run a lottery only for a purpose in respect of which it has power to incur expenditure under any particular enactment.
Lord HAWKE: My Lords, when will Her Majesty's Government pluck up their courage and have a national lottery in aid of the National Health Service, which is so badly in need of money?
Lord WELLS-PESTELL: My Lords, apart from the fact that that is another question, I would want to think very carefully before answering it.
The Earl of KINTORE: My Lords, if there is a surplus on some capital project—a swimming bath, a health centre or something of this sort—would it be legitimate to use that surplus for the annual running costs until such time as the balance was exhausted?
Lord WELLS-PESTELL: My Lords, I do not think I ought to give what would appear to be an authoritative reply, because I just do not know; but if money were raised for the purpose of providing the community with a special facility I should have thought that any money left over could be used for its maintenance.

CIVIL LIABILITY: ROYAL COMMISSION REPORT
3.29 p.m.
Lord STRABOLGI: My Lords, with the leave of the House, at a convenient moment after 3.30 this afternoon my noble and learned friend the Lord
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Chancellor will repeat a Statement being made in another place on the Report of the Royal Commission on Civil Liability.

EUROPEAN COMMUNITY COMMITTEE
The CHAIRMAN of COMMITTEES (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, on behalf of the Committee of Selection, that the Earl of Onslow be added to the Select Committee in the place of the Lord Vernon.—(Lord Aberdare.)
On Question, Motion agreed to.

STATE IMMUNITY BILL
3.31 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(The Lord Chancellor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Lord Aberdare in the Chair.]
Clause 1 agreed to.
Clause 2 [Submission to jurisdiction]:
Baroness ELLES Baroness ELLES moved Amendment No. 1:
Page 2, line 1, after (" submit ") insert (" (a)").
The noble Baroness said: With the leave of the Committee, I will discuss Amendments Nos. 1, 2 and 3 together. First, I think it should be clarified that all the Amendments put down in my name on the Marshalled List are on the assumption that the Government will be making a declaration under Article 24 and, therefore, that the provisions of this Bill do not have necessarily to follow within the precise meaning of Articles 1 to 13 of the Convention. Secondly, as the United States' Foreign Service Immunities Act was recently passed by Congress, it has provided guidelines for some of the

1481
clauses which will be considered this afternoon, and therefore some of the Amendments, the ones that I have put down, have been drawn from that Act.
Amendment No. 3—Amendments Nos. 1 and 2 are paving Amendments to Amendment No. 6—concerns the waiver of immunity by a foreign State from the jurisdiction of a United Kingdom court prior to submission. This introduces a welcome change in the law in relation to decisions made in a series of cases such as the Duff Development Company and Kahan v. The Federation of Pakistan. This will be welcomed.
The United States Act in Section 1605A referred to a waiver, "either explicitly or implicitly "; that is, the necessity for a provision in a written agreement specifically referring to waiver would not be necessary in order to remove a State's immunity. Nor would that have to be a written agreement. Not all agreements are concluded in written form and not all dealings with foreign States may contain a written agreement as to waiver. There may be sufficient evidence for a court to conclude that the State had the intention of submitting to a United Kingdom court at the time that the agreement was concluded. As to the manner of concluding agreements, they can be concluded nowadays even on the telephone or by telex. Would the conclusion of an agreement by telex be a written agreement? That would need clarification.
Secondly, on the very nature of agreements between States and foreign individuals or companies, certain types of cases have been established where the intention to submit to the jurisdiction may be implied and not necessarily relating only to the commercial activities which would fall within Clauses 3 and 5 of the Bill as they stand.
Therefore it should be asked whether the fact that a prior agreement to waive immunity is not in writing would protect absolutely a foreign State from submitting to the jurisdiction. It has been said in a work by Professor O'Connell that a waiver can now not only be antecedent but in any form. This is confirmed in the wording of the United States Act. I should be grateful if the noble and learned Lord would comment on these three Amendments. I beg to move.
The LORD CHANCELLOR: As I understand it, we are now discussing Amendments Nos. 1, 2 and 6 and possibly Amendment No. 3 as well. The object of Amendments Nos. 1, 2 and 6, as I understand them, is to ensure that a waiver of immunity cannot later be withdrawn except in accordance with any provisions agreed at the time that the waiver was made. The subsection provides for waiver by written agreement. Where there has been such an agreement, it of course becomes binding on the parties and cannot be altered unilaterally. A waiver of immunity is no different from any other agreement; nor is a State in a better position than an individual which would allow it unilaterally to break its contracts. Accordingly, I do not think that Amendments Nos. 1, 2 and 6 are necessary. Indeed, my respectful submission is that they are otiose for the reasons I have given.
With regard to Amendment No. 3, this seeks to enable States to waive immunity from jurisdiction by prior oral agreement; whereas subsection (2) of Clause 2, as it now stands, requires a written agreement. The subsection accords with Article 2 of the European Convention, which provides that a State cannot claim immunity if it has undertaken to submit to the jurisdiction of a court by an express term contained in a contract in writing. It seems not unreasonable that waiver of immunity should be made in a formal manner, of which writing is normally the best evidence. If the Government's main Amendments (to which we shall be coming in due course) are adopted, immunity will, by and large, remain only in respect of Acts of a sovereign nature. States would expect to be immune in respect of such Acts and the courts which, under our law, accord immunity of their own motion will expect them to have it.
In those circumstances, it is not, I think, unreasonable to expect a plaintiff who wishes to have his proceedings entertained, to be able to produce the State's written agreement. It may be argued, and it has been suggested already, that many international transactions (including those which States may engage in) are habitually made by telex, by telephone, even by word of mouth or in a form which attracts a jurisdiction clause

1483
only indirectly by reference to some standard terms referred to in the contract.
It is true that, for such transactions, written agreements may be inappropriate. Indeed, the United Kingdom has pressed strongly in other international contexts for the recognition of informal agreements on jurisdiction. But all relevant agreements that we are concerned in in the Bill are likely to be of a commercial or similar nature and will come under the new clause in Amendment No. 9, which will greatly limit the sphere of immunity and which I shall be inserting in due course. Amendment No. 9, which will come after Clause 2, defines where States will have no immunity. In the circumstances, therefore, I hope that the noble Baroness may think that what is already provided for in the Bill is reasonable for general and normal purposes.
Lord DENNING: I would support the Amendment. This is a most important part of the Bill because, by a decision in 1954, a State could not give its consent to the jurisdiction of our courts by a prior agreement. It could only be done in the course of the court proceedings by submission to the appearance of the court. Our jurisdiction has been hampered in that way. In the United States, they have a much wider jurisdiction, allowing a State, by agreement, to submit to the jurisdiction of the courts.
We ought to do the same. Otherwise, our city of London may, in some circumstances, not be able to compete with the United States in some of these contractual dealings—loans, and the like. There is no reason whatever, it seems to me, why it should be confined to a written agreement. If there is an agreement, whether it be orally, on the telephone, or whatever, and whether it be in a case of a commercial nature or in a case of another nature, and a person agrees beforehand to submit to the jurisdiction of our courts, I see no reason why that person should not be held to the agreement. Therefore, I would submit the Amendment without the qualifications which the noble and learned Lord the Lord Chancellor has put forward.
3.41 p.m.
Lord WILBERFORCE: My Lords, I, too, ask the noble and learned Lord the
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Lord Chancellor whether he will think again about this. I do not believe that this is a question of wording so that what the noble Baroness has proposed is otiose. On the contrary, there is a serious point of principle here which lies near the heart of this Bill. The principle is whether we follow the traditional system which says that the State can submit to the jurisdiction of the court by appearing before it, and so on, and that submission at any one stage does not carry submission at a later stage (you have to submit at every successive stage before you can enforce anything), or whether, on the contrary, you go over to the more modern system which I believe has been followed by the United States. That contemplates that States may, when entering into an agreement, then and there decide to waive their immunity and then provide, as the United States does, and as Amendment No. 6 does, that you cannot withdraw a waiver which you have once given unless you have so provided in the terms of the waiver. That this is not theoretical can be shown by the terms of a typical clause which I am told is used in a great many agreements of a commercial character. This has been supplied to me by those who are familiar with this type of business. This is dealing with loan agreements.
"To the extent that the Borrower may in any jurisdiction in which the proceedings are at any time taken for the enforcement of this Agreement claim for itself or its assets immunity from suit, execution … and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed) "—
Now come the important words—
"the Borrower hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction."
It is that type of clause, which I believe is not at all uncommon, which the noble Baroness is evidently thinking about in her Amendment No. 6. It is a different system, as noble Lords will see, from the traditional one of submitting to jurisdiction as the Bill at present provides. It says that certain things are submissions and certain things are not submissions, and when you submit for one purpose you have to submit for another. It is a different system from that which enables States to waive immunity and says that if they once waive immunity then they are stuck with it unless they reserve the right to resile at a later stage. There are

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important consequences later on when one deals with enforcement. I want to show my hand completely on this matter: I know that the noble and learned Lord does not think the same as some of us about it.
This has important consequences when one tries to get enforcement against assets under the Amendment of the noble Baroness as provided in other Amendments. This paves the way for possible enforcement of judgments against States unless, in the initial waiver of jurisdiction, they have expressly provided that the waiver does not extend to enforcement, or whatever it is. Fully recognising that this is a question of principle and not of drafting, I would, with great respect, ask the noble and learned Lord to see whether he can come some way to meet the proposed Amendment, whether the waiver is written or not. I have nothing to add to what my noble and learned friend Lord Denning and the noble Baroness have said.
The LORD CHANCELLOR: While I submit that nearly all the agreements that we are talking about are likely to be of a commercial or similar nature, and by reason of the considerable limitations which the Bill, with the proposed Amendments, will impose on State immunity, I still doubt whether these Amendments are really necessary. However, in the light of the submissions which have been made, I am very willing to consider them again. Perhaps we can return to them at a later stage if the noble Baroness is disposed not to press Amendments Nos. 1, 2, 3 and 6.
Baroness ELLES: I thank the noble and learned Lord for the way in which he has dealt with these particular Amendments. I am happy to withdraw them, by leave of the Committee, if he will reconsider them in the light of the statements of the noble and learned Lords, Lord Denning and Lord Wilberforce.
Amendment, by leave, withdrawn.
[Amendments Nos. 2 and 3 not moved.]
Lord STRABOLGI: My Lords, with the leave of the Committee, I suggest that this may be a good moment to hear the Statement which is being made in another place. I beg to move that the House do now resume.
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Moved, that the House do now resume.—(Lord Strabolgi.)
On Question, Motion agreed to.
House resumed.

CIVIL LIABILITY: ROYAL COMMISSION REPORT
3.46 p.m.
The LORD CHANCELLOR: My Lords, with the leave of the House I wish to repeat a Statement being made in another place by my right honourable friend the Prime Minister. The report of the Royal Commission on Civil Liability and Compensation for Personal Injury has been published today and copies are now available in the Printed Paper Office. The Statement reads as follows:
"The Royal Commission was established five years ago to examine our present practice for compensation for personal injuries, including the particular concern felt about children injured through thalidomide.
"The Government are grateful to Lord Pearson and his colleagues for the work and for the comprehensive report which they have now produced. It contains numerous recommendations for change. The main ones are that:
the two systems of compensation for personal injury through civil liability and through social security should continue to exist side-by-side but with an altered relationship, and that social security should be recognised as the principal means of compensation;
a no fault scheme of State compensation should be introduced for road accidents, to be financed by a levy on petrol: this would provide benefit in respect of injuries, irrespective of blame;
manufacturers should be strictly liable (that is, without proof of negligence) for injuries caused by defective products;
a new State benefit should be introduced for all severely handicapped children whatever the cause of their handicap;

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the Government or local authority concerned should be strictly liable for severe damage caused by vaccination where vaccination was recommended in the interests of the community;
the industrial injuries scheme should be extended to cover the self-employed and certain benefits of the scheme should be increased at the expense of employers; and
social security benefits should be fully offset in assessing damages awarded by the courts for personal injuries.
"The Royal Commission's proposals are far-reaching and have important implications. Their implementation would affect consumers, manufacturers, employers, employees, trade unions, motorists, insurers and handicapped children. The Government will therefore study the recommendations with care and urgency and consult interested organisations as appropriate. In reaching their decisions, the Government will have regard to the public expenditure cost of implementing the proposals, which could be considerable.
"As the House will recall, the Government have already announced their commitment to introduce a scheme of payments for severe damage caused by vaccination. Decisions on the form of the scheme have been awaiting the Royal Commission's report. As soon as the relevant recommendations have been considered—and this will be done as a matter of urgency—my right honourable friend the Secretary of State for Social Services will make a further Statement."
That ends the Prime Minister's Statement.
3.52 p.m.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I know the House will wish me to thank the noble and learned Lord the Lord Chancellor, for that very important Statement and to congratulate the Commission on the conclusion of five very strenuous years' work. I was in a sense—I do not think I am being unduly egotistical in saying this—the parent of this inquiry, because it was set up during Mr. Heath's Government and
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it was carried through very largely on my recommendation and despite departmental opposition from other Departments; so I think that the Lord Chancellor's office also deserves a word of praise about it.
I do not quite agree with the statement that it was primarily set off by the thalidomide damage. That was one factor, but only one among others which led the Government to set up the inquiry. It was intended from the first to have the wide-ranging scope that it evidently has had from the nature of the Statement which has been made. I can well understand why the Government wish to reflect upon the importance of these recommendations before acting on any except that to which they are already committed to act upon; namely, the vaccination State benefit. I believe that has already been made the subject of a Government pledge, which I personally welcome. Obviously, that will be the position of the Opposition Parties, too; they will want to reflect upon these wide-ranging recommendations. Of course, they are to some extent independent of one another—for instance, the scheme concerning product liability is independent of the scheme for motorists, as is the scheme for extending social security benefits to the self-employed.
I should like to ask the noble and learned Lord whether the report contains any estimate of the net cost to the motorist of the road accident scheme. Obviously, to the extent that the cost to the motorist is now to be financed out of a levy on petrol, the insurance premium ought to go down in so far as that risk is insured from another source. On the other hand, we do not know from what the noble and learned Lord has said—and perhaps he could tell us about this—whether the basis of compensation is going to remain the same; that is to say, that there is to be the same standard of damages or compensation as is now awarded by the civil courts. It might be that the scheme would be very restricted, and perhaps the noble and learned Lord could tell us about that.
I personally welcome these proposals. I cannot say, of course, what I or my Party will do about them because the implications are so very wide and the legal profession will be profoundly affected by what is proposed, if these proposals were to be put into law. A great deal of the income of the practising members of the

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solicitors' and barristers' professions comes from certain types of liability. Will the noble and learned Lord perhaps confirm my impression, gained from a first reading, that the employer's liability remains more or less the same?—that is to say, Factory Act cases and employers' negligence do not seem to be affected, at first sight; nor, I think, is professional liability or negligence.
I should like to have the answers to these questions. If the noble and learned Lord feels that I am pressing him too hard, he knows I shall not persist in harassing him; but these may be questions to which he has an answer.
Lord BANKS: My Lords, I, too, should like to thank the noble and learned Lord for repeating the Statement which was made in the other place. We on these Benches welcome the publication of the report of the Royal Commission and, like the noble and learned Lord, Lord Hailsham of Saint Marylebone, we shall want to consider these proposals most carefully; but the general tone of the report, as expressed in the Statement, is acceptable to us.
The altered relationship which is proposed between civil liability and social security, with social security as the principal means of compensation, is something which we would welcome. I should also like to welcome two other proposals: first, that there should be a new State benefit for all severely handicapped children; and, secondly, the proposal that the industrial injuries scheme should be extended to the self-employed. We shall certainly await with great interest the proposals which the Government will bring forward eventually. I should like to ask the noble and learned Lord whether the Government have any timetable for consultations and for the eventual production of proposals.
3.56 p.m.
The LORD CHANCELLOR: My Lords, I am grateful to the noble Lords for speaking; and for their expressions of gratitude to the members of the Royal Commission for undertaking this monumental task and for producing a report which, as the noble and learned Lord, Lord Hailsham, said, is one of great importance and significance. Indeed, it
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is happy that he is here today, as being in a sense the father of the proposals, although, as he has said, he is not committing himself to accepting them all. We shall have to examine them all in detail and with considerable care. I assure the noble Lord, Lord Banks, that this work will be done as a matter of urgency, particularly of course as regards the proposals in respect of the children who have suffered vaccine damage. I am afraid I cannot give a time estimate on this, but clearly a great deal of the work is of great importance. I assure noble Lords that we shall waste no time in examining the proposals and reaching conclusions upon them. A number of Departments are of course concerned, and co-ordination between the Ministers responsible is being provided for and the machinery is being set up.
I cannot undertake to answer all the questions put to me by the noble and learned Lord, Lord Hailsham, but with regard to the cost of the proposals in respect of road injuries it may well be that an estimate is to be found in volume 2 of the report. Unhappily, I do not have that in my immediate possession, so I cannot give an answer about it. However, I can say that the no-fault compensation scheme recommended for motor vehicle injuries should be modelled, so the Royal Commission recommend, on the scheme proposed for work injuries, with benefits fixed at broadly the same level. They recommend that special provision should be made for children and non-earners, including housewives and retirement pensioners. The scheme they recommend should be administered by the Department of Health and Social Security and should be financed by a levy of about I penny a gallon on petrol. I can see that that will not be regarded as an uncontroversial suggestion.
The improved industrial injury scheme recommended in the report is proposed as the basis for the no-fault scheme for road injuries, but we will no doubt have an opportunity of considering all these matters in detail when an opportunity for further examination arises. The position with regard to injuries in the course of employment is that the basic structure of the current systems of compensation would be retained. I do not think there is to be any substantial departure from that. I have little doubt that when your

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Lordships, and indeed, if I may say so, I myself, have had greater opportunity of considering this great report which has only just come into my hands, not only shall I be able to answer the questions more, I hope, effectively but we shall be able to have a full discussion of what is proposed.

EMPLOYMENT SUBSIDIES BILL
Brought from the Commons; read 1a, and to be printed

STATE IMMUNITY BILL [H.L.]
4.3 p.m.
House again in Committee.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 4:
Page 2, line 2, leave out from (" agreement ") to (" but ") in line 3.
The noble and learned Lord said: I was venturing to say that I myself had in mind applying for a mobility allowance after my recent movements. The purpose of this Amendment is to delete the requirement that the prior written agreement to the waiver of immunity by the State must be between the parties to the dispute. The written agreement to waiver could have been made between the State concerned and the parties to the original contract. The right in that contract could have been acquired by another person either by assignment or succession, and that person might wish to sue the State on the basis of the original waiver. We now think that there is no reason, as a matter either of general principle or under the Convention, why this waiver must be contained in an agreement between the parties.
As to leaving out the words, "or by an international agreement ", the qualifying phrase in Clause 2 (2) is more likely to apply to ordinary written agreements rather than international agreements. Therefore, it is better to bring that qualifying phrase into closer proximity with the type of written agreement to which it is intended to refer. It is also awkward to retain the reference in subsection (2) to an international agreement since it is itself a written agreement. Consequently, we now think it better to delete the reference to an international agreement in subsection
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(2) and have a further subsection at the end of Clause 18(1), providing that in Clauses 2(2) and 14(4) the word "agreement" includes an international agreement to which the State concerned is a party. When we come to it we will see that this has been sought to be done in Amendment 34 to Clause 18. Although international agreements are normally between States they can, of course, be between international organisations and States. I do not think it has more significance than being merely a tidying up provision. I beg to move.
Lord WILBERFORCE: I am not sure whether what I want to say arises under this Amendment or under Amendment No. 34, but since the words "international agreement" appear in Clause 2(2) perhaps I might ask the noble and learned Lord the Lord Chancellor what the expression means. I confess I find it puzzling. An agreement between States I can see as an international agreement, but from what the noble and learned Lord just said it seemed that he was including within international agreements agreements other than those between States. If so, I find the words a little lacking in precision. If the noble and learned Lord prefers to help me when we come to Amendment No. 34 I shall be equally happy.
The LORD CHANCELLOR: Perhaps we can revert to the point when we come to Amendment No. 34.
On Question, Amendment agreed to.
Baroness ELLES Baroness ELLES moved Amendment No. 5:
Page 2, line 3, leave out from ("agreement;") to end of line 5.
The noble Baroness said: The words that this Amendment seeks to delete refer to a provision in an agreement which has been governed by the law of the United Kingdom which is not to be regarded as a submission. In my submission these two lines are retrogressive and no longer reflective of the current position in international law. Provision for an agreement to be governed by a particular legal system—and we are, after all, discussing agreements which will be governed by municipal law and not by national law—may not be identical with or subsumed to submission to the jurisdiction of the courts applying that law, but it surely may be one of the elements

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that the court may take into account when considering the intentions of the parties as to interpretation, jurisdiction or validity of an agreement.
If the words which the Amendment seeks to delete remain in the Bill it seems to me—and of course I may be wrong—that it would mean that where there is a choice of clause the State party to the agreement may not be sued in an English court unless the agreement falls within Clauses 3 to 5 of the Bill as it now stands. Surely that cannot be the intended effect. A more helpful view in the light of current international practice would be to include a new conditional clause governing prior agreement or prior written agreement by which it is expressly understood that where an agreement is to be governed by the law of the United Kingdom that would be an implied waiver of immunity from suit. I think this would be very much more in line with current practice, and I would welcome the consideration of the noble and learned Lord to that suggestion. If we are to follow the less narrow concept of the United States Act which refers to a prior agreement to submit, whether explicit or implicit, the choice of law governing the agreement must be one of the conditions which will be taken into account. Surely this is a reasonable concept or assumption for a court to make.
Finally, is it not time that if a State trading company is going to engage as a private individual it should be treated as any other private individual in the English courts? I refer now to the provision of Order 11, rule 1(f)(iii) of the Supreme Court where it is written:
"It is within the court's jurisdiction to order service abroad of a writ where a contract is by its terms or by implication to be governed by English law."
Every contract has a proper law. It is a law which the parties, either expressly or implied, have chosen to govern their contractual relationships. It would seem right that these words to which I have referred should be deleted, and either no comment is made in the Bill, or some alternative, such as I have proposed, should be considered. I beg to move.
The LORD CHANCELLOR: As the noble Baroness, Lady Elles, has said, the Amendment seeks to omit from Clause 2(2), which deals with waiver of immunity, words which provide that a term in a
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contract that it is to be governed by United Kingdom law are not to be regarded as a submission to United Kingdom jurisdiction. The effect of the Amendment is, I imagine, intended to be that an agreement by a foreign State that a contract is to be governed by the law of the United Kingdom is to be treated as an agreement to waive immunity from the jurisdiction of United Kingdom courts. It is doubtful whether the Amendment would have that effect. The mere omission of the words in Clause 2(2), which at present provide that such an agreement is not to be regarded as a submission, would not, I think, by itself turn such an agreement into a submission. But perhaps that point could be looked at.
But looking at it as a matter of principle, English law treats a provision in a contract that it is to be governed by English law as an implied agreement that the contract is to be adjudicated upon by English courts. However, I am advised that that rule is a peculiarity of English law which is not widely found elsewhere. There is not an equivalent rule in Scotland—and I say this in fear and trembling, in the presence of the Solicitor-General for Scotland. The assumption of jurisdiction by English courts, on the basis of such a contractual term—for instance, as the noble Baroness said, under Order 11, rule 1(1)(f) of the Rules of the Supreme Court—is apparently widely regarded abroad as an excessive assumption of jurisdiction.
The proposed Amendment, which has been moved, would go a step further and imply that an agreement that a contract is to be governed by English law is not only to be treated as an agreement to the jurisdiction of our courts but is to be treated as such by a State which would otherwise be immune from that jurisdiction. Internationally, we feel that this would be difficult to justify, more particularly since, if the Government Amendment No. 9, which is the crucial Amendment of those in my name and which I shall be moving before long, is accepted, immunity will in practice apply only to certain sovereign acts, and the waiver of immunity from jurisdiction would accordingly be inferred in relation to such a sovereign act. My submission is that where a foreign State acts in a sovereign capacity, and not in a commercial capacity, nothing less than an express waiver of its immunity from

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jurisdiction should be effective. I am sorry to sound so unpatriotic and unloyal in my commitment to the English view on this but we are dealing here very much with the international scene and the need for international comity.
Lord DENNING: I would join forces with the Amendment. I do not agree with the noble and learned Lord the Lord Chancellor when he says that, when an agreement is to be governed by English law, it necessarily means that the parties submit to the jurisdiction of the English courts—quite the contrary. We have had cases in which there was an agreement to be governed by English law, which would not necessarily be by arbitration in London. So I do not agree with the premise on which the noble and learned Lord makes his objection. But apart from that, it is surely sufficient just to have an agreement to submit to the English courts. That is good enough without having this qualification that it is not to be a submission; it is to be governed by English law. I see no reason whatever for this qualification. If it is, expressedly or impliedly, a submission to the jurisdiction, that should be good enough. So that I support the Amendment.
Lord WILBERFORCE: I find myself in agreement with the noble and learned Lord, Lord Denning. There is liable to be confusion on this subject, between jurisdiction and immunity. They are two quite different things. Order 11, to which the noble and learned Lord the Lord Chancellor referred, is not dealing with immunity; it is dealing with conditions by which foreigners, foreign States or individuals can be brought by service before English courts. Even when that order has been complied with, it is still possible for the person concerned to raise the question of immunity. The two questions are quite different.
Therefore, I rather agree that the last two lines of subsection (2) are inappropriate here. They are words appropriate to jurisdiction, but not to immunity. They are tied up, to a very large extent, with the bigger question of waiver and submission. If the noble and learned Lord is not able to accept the Amendment, perhaps he will, at least, be willing to say that he will take account of what has been said
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in his reconsideration of the waiver submission argument, which we have already had.
The LORD CHANCELLOR: Of course, I am willing to consider that. In the face of such a barrage of legal authority, who am I to refuse even to consider what is suggested? Of course, I will willingly consider it; and, indeed, it might have been very helpful if I had had a conference with noble and learned Lords, before I embarked upon these Amendments.
Baroness ELLES: Here, again, I think that it would be advisable for me to withdraw my Amendment, in order for the noble and learned Lord the Lord Chancellor to consult with his colleagues inside or outside of the Supreme Court of the House of Lords, and perhaps we can come to a conclusion on this matter at the next stage. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendment No. 6 not moved.]
4.17 p.m.
Lord WILBERFORCE Lord WILBERFORCE moved Amendment No. 7:
Page 2, line 16, leave out subsection (5).
The noble and learned Lord said: This is really a probing Amendment, simply because, no doubt through some frailty, I do not understand subsection (5). It relates back to subsection (3)(b), which deals with intervening or taking steps in the proceedings, which is normally treated as a submission. It then states that that does not apply if the State is in ignorance of facts entitling it to immunity. I do not understand how a State can be in ignorance of the facts. A State is entitled to immunity, in principle, under Clause 1, and then there are certain exceptions. Though, of course, one does not want anybody to be prejudiced by something of which he is reasonably not aware, I do not see how a State, an organ of a State or a Department of State can fall within this subsection. It may be that it is based upon some case of which I am unaware, or some doctrine of which I am ignorant, and I should be very grateful for enlightenment. I beg to move.
The LORD CHANCELLOR: Subsection (5) of Clause 2 provides that a State

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shall not be deemed to have submitted if it has taken any step in the proceedings in ignorance of facts entitling it to immunity if those facts could not reasonably have been ascertained and immunity is claimed as soon as reasonably practicable. I am advised that it is based on the second sentence in Article 3, paragraph 1, of the European Convention, which reads as follows:
"However, if the State satisfies the court that it could not have acquired knowledge of facts on which a claim to immunity can be based until after it has taken such a step, it can claim immunity based on these facts if it does so at the earliest possible moment."
As State immunity will be considerably curtailed by the new clause which is found in Amendment No. 9, the incidence of cases where this subsection is invoked will be very rare. Therefore, its importance is marginal. On the other hand, the immunity which will be at stake will almost certainly be that in respect of acts done in the exercise of sovereign authority.
Whether it is necessary to provide for this expressly in the clause is a matter which I should be very willing to consider—and, of course, to consider the Amendment that has been moved. In the absence of subsection (5), the common law would probably continue to apply and to determine what constitutes an effective submission. It may be that the existing common law is sufficient for most cases. At common law, for instance, an authorised appearance entered by an agent is not sufficient. That was the decision in the case of The Jassy. In the case of the Republic of Bolivia Exploration Syndicate Limited and Baccus—a most attractive title for litigation—v. Servicio Nacional Del Trigo, immunity was successfully claimed after an unconditional appearance. In the Baccus case, it was held that the entry of an unconditional appearance did not necessarily imply a waiver, except with the full authority of the sovereign, and in this case the entry was made by a subordinate officer who wrongly believed that he had authority to do so without consulting his superiors. The case is not conclusive, as it could be argued to be concerned with ignorance of legal rights rather than ignorance of material facts, but I am advised that it is thought to point strongly to the existence of a doctrine in our law that reasonably justifiable ignorance of relevant factors vitiates a submission.
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These are interesting matters and there are a number of cases. However, time is short and Spring is nearly here. I shall certainly be willing to consider the Amendment again.
Lord DENNING: May I say that I thought and have said that the Baccus case was wrongly decided. Therefore I should like to support the Amendment by saying that it is much better to leave it to the common law than to read in these matters.
Lord WILBERFORCE: My Lords, I am very grateful to the noble and learned Lord for his reply, which has been extremely full. I had not appreciated that it came from Article 3 of the Strasbourg Convention. I yield to nobody in my desire to fall in with international agreements and to be full of an international spirit. If the noble and learned Lord believes that our relations with other European States would be improved by keeping it in, even though to me it is incomprehensible and unnecsesary, I am quite willing to leave the matter there and not to press the Amendment. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.23 p.m.
Baroness ELLES Baroness ELLES moved Amendment No. 8:
Page 2, line 21, leave out from ("appeal") to end of line 22 and insert ("and to any counter-claim—

(a) which may arise where if the proceedings had been instituted against a State as a principal claim that State would not have been immune in accordance with the provisions of this Act; or

(b) which arises out of the transaction or occurrence which s the subject matter of the claim of the State").

The noble Baroness said: This Amendment seeks to widen the grounds upon which a counterclaim may be made by a defendant. The subsection is considerably narrower than the Convention which we are seeking to be able to ratify If I may quote from page 3, under Article 1(2)(b) the Convention allows a counterclaim to be made,
"if, according to the provisions of this Convention, it would not have been entitled to invoke immunity in respect of that counterclaim had separate proceedings been brought against it in those courts."

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The first part of the Amendment seeks to paraphrase that provision. I accept that it may need to be redrafted or reworded, but I should like the noble and learned Lord at least to consider the spirit in which the Amendment is put forward.
As the Bill now stands, it seems to me that it is not possible for a counterclaim on a separate issue to be made available. That is in line with a decision in a case which took place some years ago and which I submit is no longer relevant. Under the Crown Proceedings Act 1947, a person may, with leave of the court, avail himself under Section 35(1)(g) of a counterclaim in a very wide number of circumstances. There are no grounds for treating a foreign State any better or any worse than our own State in our own courts, in particular when the cause of action arises from an activity which could be carried out by an individual who would not in similar circumstances be prevented from seeking to bring such a counterclaim.
Paragraph (b) seeks to avert the difficulty caused by the term "the same legal relationship" in subsection (6). The words proposed follow closely those, used in paragraph 1607B of the United States Act. I should be grateful if the noble and learned Lord would consider the Amendment in that spirit and give an explanation of what is meant by the term "the same legal relationship" in subsection (6). I accept that there is another condition which is common to counterclaims in this kind of situation; namely that the relief demanded should not exceed the amount of the original claim. If the Amendment is accepted in either an amended or a reworded form, perhaps my last comment could be taken into account. I beg to move.
The LORD CHANCELLOR: The object of the Amendment appears to be to widen the classes of counterclaim to which a State is taken to have submitted by taking certain procedural steps, like instituting proceedings or intervening in them. By so doing, the State, in accordance with Clause 2(6), also submits to any counterclaim but only, as the subsection stands, if it arises out of the same legal relationship or facts as the claim. The Amendment would expose the State to any counterclaim which either (a) relates
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to a matter in respect of which the State is not immune from jurisdiction or (b) arises out of the transaction or occurrence which is the subject matter of the claim. That is the Amendment which is proposed.
As the noble Baroness has said, the second proposition, (b), seems to be a rephrasing of what is already contained in the subsection. However, it is in a slightly narrower form than that which is contained in the subsection, and this may well be unintended. The noble Baroness seeks not to narrow but rather to widen the subsection. However, the effect of what the noble Baroness has proposed is to narrow it. At present, the subsection covers counterclaims arising out of the same legal relationship—for example, agency or a course of trading—which would not be covered by the Amendment words "transaction or occurrence which is the subject matter of the claim".
As to paragraph (a) of the Amendment, I venture to submit that it is unnecessary. If a counterclaim relates to a matter as regards which the State enjoys no immunity from jurisdiction, then the State is clearly subjected to it, just like any other litigant. Clause 2(6) is concerned with circumstances where, in order to establish jurisdiction against a State, the plaintiff needs to rely upon the State's voluntary submission to the jurisdiction. That, I submit, cannot arise under proposal (a) where the counterclaim relates to matters in respect of which the State would not have been immune, in accordance with the provisions of the Bill. Therefore, I venture to submit, if I may do so without impertinence, that perhaps these Amendments do not quite achieve the purpose which is intended.
Baroness ELLES: I thank the noble and learned Lord for that explanation. I am not sure that the words of which I sought to find the meaning, "the same legal relationship", have been fully explained, but I will study the noble and learned Lord's words carefully. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 2, as amended, agreed to.
4.30 p.m.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 9:
After Clause 2, insert the following new clause:
Commercial transactions and contracts to be performed in United Kingdom
(".—(1) A State is not immune as respects proceedings relating to—

(a) a commercial transaction entered into by the State; or

(b) an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom.

(2) This section does not apply if the parties to the dispute are States or have otherwise agreed in writing; and subsection (1)(b) above does not apply if the contract (not being a commercial transaction) was made in the territory of the State concerned and the obligation in question is governed by its administrative law.
(3) In this section "commercial transaction" means any transaction or activity (whether of a commercial, industrial, financial or other similar character) in which a State engages otherwise than in the exercise of sovereign authority and, in particular, includes—

(a) any contract for the supply of goods or services to a State irrespective of the purposes for which the goods or services are required; and

(b) any loan raised by a State irrespective of the purposes for which the borrowed money is to be applied;

but neither paragraph of subsection (1) above applies to a contract of employment between a State and an individual.")
The noble and learned Lord said: This is probably the most important Amendment that my noble and learned friend and I will move. Its purpose is to meet the very substantial criticisms that were made by the noble and learned Lords, Lord Denning and Lord Wilberforce, during the Second Reading debate in your Lordships' House on 17th January of this year. It was said that it was important in a commercial context not to give any greater immunity in our courts to foreign States or foreign States' trading agencies than is recognised by international law generally. In the Trendtex case the Court of Appeal found that in international law a State did not enjoy immunity in respect of commercial transactions. In the circumstances, the noble and learned Lords that I have mentioned thought it was a mistake to limit the cases of non-immunity to those where the jurisdictional links set out in the European Convention were satisfied. Such links, although they
1502
might be acceptable in a European context, were, it was pointed out, not acceptable on a worldwide basis.
There was some pressure to defer the Bill until your Lordships' House had given a decision in Trendtex, but I ventured then, and I take the same view now, to suggest that it is inadvisable to do so for various reasons. The Bill, for instance, does deal with a number of matters which are not likely to be dealt with in any judgment which noble and learned Lords would give in the Trendtex case; for example, the circumstances in which there should not be immunity even in noncommercial transactions—and these are dealt with in Clauses 5 to 11 of the Bill.
There is also strong pressure for early legislation because the United Kingdom is now—as was pointed out then, and I think it is so—at a distinct disadvantage compared with the United States, which has recently passed the Foreign Sovereign Immunities Act 1976. This is particularly apparent in financial and commodity markets. It has been urged on the Government that bankers and traders who deal with States want to have the assurance that any dispute will be capable of litigation in the courts. They now have that assurance in the United States, but will not have it in the United Kingdom until this Bill is passed. Meanwhile, I am advised that important business could pass from London to New York. Unless the present Bill reaches another place early after the Easter Recess the Bill is not likely to complete its course in another place, and it is difficult to see, frankly, when it could again be reintroduced. The decision in Trendtex is not expected until, at the earliest, the end of May 1978, and in any event it is not impossible—I will not put it higher than that—that the case may be settled and may never come before your Lordships' House at all.
The general effect of the Amendment, which I hope will now give noble and learned Lords, and indeed the Committee generally, more confidence in supporting the Bill, is that it substitutes a new clause for the clause removing immunity from commercial activities conducted through establishments in the United Kingdom (Clause 3) and the clause which removes it from contracts to be performed in the United Kingdom (Clause 4). The range of commercial transactions which are

1503
no longer immune is accordingly greatly widened by the removal of the requirement of an establishment in the United Kingdom and the addition of a definition, in subsection (3) of the new clause, which covers all activities not done in the exercise of sovereign authority. State loans are singled out for express inclusion in the definition in subsection (3)(b), and by implication so are supplies for the Armed Forces. Lastly, the exceptions which are presently found in Clause 3(2) and Clause 4(2) for contrary agreements of contracts between States or governed by administrative law are preserved in subsection (2) of the new clause.
So far as the detailed provisions are concerned—and I apologise for taking a little time over this important Amendment—subsection (1)(a), as your Lordships will see, provides that
"A State is not immune as respects proceedings relating to a commercial transaction entered into by the State."
That is stated boldly and clearly. The term "commercial transaction" is defined in the new subsection (3). After consultations with City and other interests, it has been decided that it would be best now to provide by Statute that a State is not immune in respect of any commercial transactions. That is the view apparently of the City. In this respect, at any rate, the new clause does accord with the majority view in the Court of Appeal in Trendtex. No qualifications, no jurisdictional links with the United Kingdom are to be required.
Subsection (1)(b) provides that,
"A State is not immune as respects proceedings relating to—an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom".
This is the old Clause 4(1), which in turn reflects Article 4, paragraph 1 of the European Convention. It seems appropriate to retain the jurisdictional links here, because the paragraph will be invoked mainly in relation to contracts made in the exercise of sovereign authority, all others being also covered by paragraph (1)(a). It is not so easy to justify internationally the assumption of jurisdiction over contracts which are not to be performed here.
The jurisdiction with regard to contracts which may be exercised on other grounds
1504
under Order 11 of the Rules of the Supreme Court is considered in many foreign countries to be excessive. It is not without doubt whether we could justify the assumption of jurisdiction so widely over contracts of a sovereign nature. There will, for instance, be no immunity if the contract is to build a fighter plane or a battleship and the construction takes place in the United Kingdom. But, I submit, there would be no basis in public international law for the assumption of jurisdiction where the construction was to take place elsewhere, unless the foreign State had agreed on jurisdiction by the United Kingdom courts. Contracts not included in the exercise of sovereign authority will in the main be commercial transactions as defined in subsection (3), for which, I submit, no jurisdictional link is necessary.
Subsection (2) provides that the clause does not apply
"if the parties to the dispute are States or have otherwise agreed in writing."
This qualification appeared in the original Clause 3(2) and Clause 4(2). Subsection (3) defines what is meant by "commercial transaction". It means:
"Any transaction or activity (whether of a commercial, industrial, financial or other similar character) in which a State engages otherwise than in the exercise of sovereign authority".
As your Lordships will see, the term includes in particular:
"(a) any contract for the supply of goods or services to a State irrespective of the purposes for which the goods or services are required; and
(b) any loan raised by a State irrespective of the purposes for which the borrowed money is to be applied".
That wide definition of "commercial transaction" will mean that the clause will cover practically all the cases where a State can be said to be acting jure gestionis, that is to say, in the same manner as a private person. Subsection 3(a) and (b) are intended to remove possible doubt from the classes of transactions of common occurrence which can be argued to fall into either class—sovereign or non-sovereign—and about which, indeed, the courts of different countries have come to different conclusions.
The subsection equates all non-sovereign acts of a commercial, industrial, financial or similar character with commercial activities. It is thus the nature of the

1505
exercise of the activity which is to determine whether there should be immunity or not. It will be for the courts to decide in any particular circumstances, having regard to criteria laid down in the Bill, whether a particular transaction is "commercial" or not and thus its immunity from the jurisdiction or otherwise. That, I am advised, is similar to the approach adopted in the United States' Sovereign Immunities Act 1976, which provides that the commercial character of an activity is to be determined by its nature rather than by its purpose.
Subsection (3) also provides that neither paragraph of subsection (1) applies to a contract of employment between a State and an individual. A similar exception was found in Clause 4(1), but it is now confined to employment of individuals. Contracts of employment between a State and an individual are dealt with in Clause 5 of the Bill, and are intended to be excluded from the new clause.
I apologise for the length of that explanation, but I greatly hope that we have now, by this endeavour, met at any rate the major criticisms that were so effectively addressed to me on Second Reading. I beg to move.
4.43 p.m.
Lord DENNING: I should like to thank the noble and learned Lord the Lord Chancellor very much for this Amendment. We had many misgivings about the Bill when it was first introduced to the House. Indeed, it seemed to be on a retrograde line because 100 years ago, and right up until recently, a State could claim immunity for not only sovereign acts but also commercial acts, and in these days, when so many States engage in commercial transactions, it is very important that they should not be immune from the jurisdiction of the courts. For the past 20 or 30 years judges have been gradually working that way, not only in this country but in many others.
The clause, as it now stands, seems to me to bring our international law on this subject very much in line with the international law of so many other great countries of the world. It clears up many outstanding points, such as, what kind of contracts may be of sovereign authority—
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for example, the supply of boots for the Forces and so forth. All such matters have been cleared up. I very much support the Amendment and I thank the noble and learned Lord the Lord Chancellor for introducing it.
Lord WILBERFORCE: I entirely endorse what my noble and learned friend Lord Denning has said, We are very grateful to the noble and learned Lord the Lord Chancellor, and to those who help him in his Department, for the trouble they have taken to get this clause in order. I welcome it without any reservation except one which the noble and learned Lord will see reflected in my proposed Amendment No. 10. I shall discuss the matter now very briefly, because the noble and learned Lord has dealt with it by anticipation.
I still think that subsection 1(b) of the new clause is too narrowly expressed and is based upon the jurisdictional confusion to which I have already referred, because
"performed wholly or partly in the United Kingdom"
is a jurisdictional concept and not an immunity concept. I fear that the clause may leave out a certain number of obligations which fall neither within (a) nor within (b). However, the noble and learned Lord has come so very far to meet the representations we made on Second Reading that I would propose—unless other noble Lords wish to take up my Amendment—to rest satisfied with the new Clause 9 as it is, and not to gild the lily too much by pressing my Amendment No. 10 which, however unrepentantly, I think would be an improvement to the noble and learned Lord's subsection (1)(b).
4.46 p.m.
Lord O'BRIEN of LOTHBURY: I confess that I rise with some trepidation believing myself to be the only Member of this Committee totally unlearned in the law who has so far ventured to intervene in this debate or, indeed, in the debate on Second Reading. I was by chance present during the Second Reading debate and I was elevated, as no doubt everyone else was, by the erudite contributions by all the noble and learned Lords who took part in that debate. However, at the end I felt that it was pity that there was no one who had some connection with the people

1507
mainly affected by the proposed Bill who could say how they would feel about it.
After the Second Reading debate I consulted some of my friends in the City. They did not feel very happy about the Bill as then drafted, although they were very much in favour of the proposal to have an Act in due course on this subject. I understand that since that time they have been received with great courtesy by the noble and learned Lord the Lord Chancellor, and by his officers, who have listened to their representations with great sympathy and understanding. I believe that as a result of those consultations and many others, and what has been said in your Lordships' House, we now have the revised clause to the Bill.
As the noble and learned Lord the Lord Chancellor has said, I am sure that this is the most important Amendment of the draft which first appeared before us. I am glad to know that it is welcomed by noble and learned Lords because I certainly welcome it very much indeed. I should like to take up a moment of your Lordships' time by pointing out how it affects the banking institutions, in particular in the City of London.
The development of the international capital markets over the past 15 years has probably been the most striking development in the financial world in my more than 50 years in the City. Although it has produced problems for national authorities and for others, its beneficent effect, generally speaking, is every great indeed. In those markets very large sums have been raised for many borrowers of all kinds and in particular for States, for parastatal organisations and for organisations that States are prepared to guarantee. Most of the obligations are denominated in US dollars, to some substantial extent in other currencies, but only very little in sterling. So, it is business which is, in effect, carried on outside the United Kingdom, although despite the economic troubles through which this country has passed during the past 15 years, the City of London has, to a very large extent, monopolised the business. Its expertise has been quite outstanding and the banking community has been enormously enlarged by important banks coming to London to participate in the work which is done here. The only other rival is
1508
New York. One cannot say which is the greater, but it does not matter because they are two great centres.
As the noble and learned Lord the Lord Chancellor has said, these contracts which, are very large must be governed by law. I think that most of those who take part in them would prefer them to be governed by English law, which is fair, sophisticated, and administered impartially, and the practititioners of the law have great expertise. But, with the passing of the United States Sovereign Immunities Act 1976, we have undoubtedly been placed at a great disadvantage, because, whereas the position of State immunity in this country and under British law is at best a matter of great uncertainty, it is now certain in America and the American legal profession has not hesitated to point out to people wanting to enter into these very large contracts that they can secure their position with greater certainty if they make American law the law which governs them.
American banks, which play a large part in this business and which perhaps have more reason to fear their stockholders than British banks, have endorsed these feelings. So the business is already passing. Once it has passed, it is very difficult to get back. Therefore, the passage of this Bill is extremely important to the City of London. One must remember that in the future we shall have to rely more, not less, on the invisible earnings of the City of London—which, despite our other troubles, are growing—especially at a time when the difficulty of making our manufacturing products competitive in the outside world is growing because of the competition of cheaper and more productive labour in many other countries, some of them under-developed.
Therefore, I believe that this Bill is a very important Bill for the practitioners in the City of London who bring great benefits to this country. I strongly endorse what the noble and learned Lord the Lord Chancellor has said: the passing of the Bill is not only important, but its early passing is very important indeed, otherwise a great deal of business will be lost, not to return. I very much welcome the response so far in favour of the Amendments made to the Bill and thank the noble and learned Lord the Lord Chancellor again for this particular Amendment

1509
which is so important, particularly to the City. I hope that the Bill will have an easy and swift passage.
Although it is perhaps not germane to this particular Amendment, I should like to make one final point. Later on, there is a provision that the Bill should be made retrospective. I wonder whether that is wise, given the repugnance which one normally feels for the use of retrospection, and the fact that respect for British law might be harmed if this provision were included.
Lord DENNING: I should like to add a few words because my noble and learned friend Lord Wilberforce mentioned Amendment No. 10. In view of what my noble friend Lord O'Brien has just said, it would be very useful to have Amendment No. 10 which states:
"which is governed by the law of the United Kingdom".
As we have just heard, many of these transactions are, in fact, governed by the law of the United Kingdom; in their terms they often strike out
"governed by the law of the United States"
and insert
"governed by the law of the United Kingdom".
I did not know whether this would be mentioned again, but I should like to support what my noble and learned friend Lord Wilberforce said about it.
Baroness ELLES: May I join with the noble and learned Lords who have spoken in thanking the noble and learned Lord the Lord Chancellor, and particularly the members of his Office who have been extremely helpful in drafting and redrafting the Amendments to the Bill. I certainly support Amendment No. 9 as it is at present drafted.
There is only one minor point that I should like to raise and I hope that the noble and learned Lord will not consider it churlish if I mention it, considering how we have received this new Amendment. It is a point that has been mentioned to me by our friends in the City and relates to subsection (3), line 3, where there are the words:
"in which a State engages".
It has been brought to my notice that a State may intend to engage in a commercial activity, and may thereby undertake
1510
certain contractual obligations in the City—such as employing legal services, documentation and suchlike, which involve expenses—and then may possibly withdraw from the actual commercial activity because for some reason or other it decides that it is not practicable. Nevertheless, obligations of a contractual and financial kind have been involved, although the commercial activity within the definition of subsection (3) would not, I think, cover this particular situation. I am not asking the noble and learned Lord to reply immediately, but I should be most grateful if he would be good enough to write to me on this point so that I can take it up again on the next stage of the Bill.
The LORD CHANCELLOR: I am most grateful to noble Lords who have expressed gratitude to the members of my staff who, if I may say so, will feel compensated for all the arduous work that they have done at rather short notice by the observations that have fallen from the noble Lord, Lord O'Brien. I am grateful for the importance which the noble Lord, with his great expertise and wide experience not only of the City but of the rest of the world, attaches not only to this Bill becoming law, but to it becoming law as timelessly as the procedures of Parliament will permit. I hope that when the matter comes before the House on Report there will not be too many complaints if that Report stage takes place before the Easter Recess. However, that is really the motivation behind it, and I thought it right to include that little bit of prejudice in favour of speaking at this point in time.
I am most grateful for and gratified by the encouragement that the noble Lord, Lord O'Brien, has given. I certainly share the gratitude that has been expressed to those advising me. I shall certainly look carefully at the point which the noble Lord made about the later provision in the Bill which has a retrospective element, because what might be gained on the swings might well be lost on the roundabouts of lack of respect or confidence in us. I shall certainly approach that with an open mind when we come to it.
I shall look at the word "engages" once again in case it may be possible to

1511
find a more engaging word for the purposes of the situation to which the noble Baroness, Lady Elles, referred. As to Amendment No. 10, which the noble and learned Lord, Lord Wilberforce, did not seek to press, I shall certainly look at that again, particularly as it was supported by the noble and learned Lord, the Master of the Rolls.
Lord WILBERFORCE: with the noble and learned Lord's permission, may I say that he cited an example about building battleships which I thought very picturesque as I did not know that any were being built nowadays. I have some examples here about other recondite types of contract in which I am sure the noble Lord, Lord O'Brien will be interested. I do not think it right to inflict them on the House at this stage, but perhaps I may send them to the noble and learned Lord to compare with his battleships and we might see whether or not my Amendment is necessary.
On Question, Amendment agreed to.
[Amendment No. 10 not moved.]
Clause 3 [Commercial, industrial and financial activities]:
On Question, Clause 3 disagreed to.
Clause 4 [Contracts to be performed in United Kingdom]:
On Question, Clause 4 disagreed to.
Clause 5 [Contracts of employment]:
5 p.m.
Baroness ELLES Baroness ELLES moved Amendment No. 11:
Page 3, line 7, at end insert ("or where the employee was recruited in the United Kingdom and was ordinarily resident there when recruited or where the contract of employment was made in the United Kingdom.").
The noble Baroness said: As it is now worded the clause only covers contracts of employment which are wholly, or partly, performed in the United Kingdom. But there is an increasing number of cases of contracts of employment, generally made in the United Kingdom and involving British citizens, where British citizens are being recruited by reason of their special scientific or technological knowledge or administrative capability, or for any other specific reason, and are invited to undertake
1512
employment abroad and to perform their duties in another country outside the United Kingdom, and particularly, I should add, in less developed countries.
If the United Kingdom is being asked to contribute to the development of these areas of the world, and I think it is right that it should be, it is not for the United Kingdom to consider that its citizens are expendable and not be prepared to give them adequate protection when they undertake this kind of work. Diplomatic protection in these cases is not an adequate safeguard in the circumstances we are now considering.
I wonder, with the permission of your Lordships' Committee, whether I could quote briefly the kind of case I have in mind, where somebody is employed, for instance, in one of the Services and is pressed by the head of, say, Ruritania, to undertake a job at £20,000 a year, and a house to be provided with a car and all the "perks" which go with this kind of job. The officer concerned has doubts because he has to give up the chance of getting a redundancy payment and even has to lose part of his pension, but he is persuaded that the job is pressing and that the job is waiting for him. He therefore leaves the Forces, loses his right to part of a pension, and certainly his right to redundancy pay, and goes abroad to the State concerned, in this case Ruritania.
When he gets there there is no house, and he has to stay in an hotel. The Head of State refuses to see him and puts it off for about three months. At the end of the three months, during which time the officer has run up a very large bill in this, or another hotel, the officer is then told that there is no job after all because the State cannot afford that salary. The officer, therefore, obviously has no right of redress in that State because that State would not entertain such an action. But is it right that the United Kingdom should allow anybody, whether he is an officer of the Forces or whoever he may be, who is ordinarily resident in this country and recruited in this country, not to have any right of redress against that State?
This is a case where the United Kingdom should insist that a State must waive its immunity and come before United Kingdom courts to honour that particular contract, or to give adequate damages in compensation. I have quoted a particular

1513
case but, as noble Lords will know from their own experience, there are many similar cases which have arisen. We will have known personally many people who have gone out to less developed parts of the world, believing that they are contributing to the betterment of mankind and their economic development, and who find themselves in similar situations; but the only link with the United Kingdom is the fact that they have been recruited here. I beg to move this Amendment, and earnestly ask the noble and learned Lord the Lord Chancellor to consider it.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): May I answer the noble Baroness. First, I am grateful for the explanation she has given. In the course of it she has shattered one of my illusions. I always thought that Ruritania was an attractive place, and I shall have to rethink that.
At the present time, if the defendant is not in the United Kingdom, as a foreign State never could be, I am advised that English courts will assume jurisdiction over a contract if it is made in the jurisdiction, broken within the jurisdiction, or by its terms or implication governed by English law (Rules of the Supreme Court, Order 11, Rule 1(1)(f) and (g)). Scottish law is similar though not the same. The first part of the Amendment therefore covers a case where the English and Scottish courts have no jurisdiction. The fact that in a contract of employment the employee was recruited in the United Kingdom at a time when resident there does not give our courts jurisdiction over the case. It therefore seems pointless to enact that in such circumstances there is to be immunity from jurisdiction. If the noble Baroness, Lady Elles, intends that our courts should actually assume jurisdiction in such circumstances, that would appear to require a change of our general law which it would not be possible to justify. Therefore, we are not disposed to accept the Amendment in relation to that aspect of it.
As regards the second part, where the contract of employment was made in the United Kingdom, the fact that a contract (whether of employment or otherwise) was made in the United Kingdom is a ground on which United Kingdom courts will assume jurisdiction over that contract. It is not, however, a ground which is
1514
internationally recognised. The courts of most countries, at any rate outside the common law area, do not assume jurisdiction on this ground. United Kingdom judgments based on such an assumption of jurisdiction are generally not recognised abroad. Under the EEC Jurisdiction and Judgments Convention we will have to give up this basis of jurisdiction in relation to the rest of the EEC. That is not, however, a compelling reason for preserving the immunity of foreign States in relation to such proceedings. They do he against private individuals and it can be argued that foreign States should be in no better position in this respect than private individuals. Accordingly, in relation to that, I am able to say that we shall be happy to consider that aspect of the Amendment.
Baroness ELLES: I thank the noble and learned Lord for that reply, and for agreeing to consider the second aspect of my Amendment. As he will have realised, I feel very much more strongly about the first part of the Amendment. I shall study his reply carefully and see whether I can raise it again at the next stage of the Bill.
Amendment, by leave, withdrawn.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 12:
Page 3, line 17, leave out from ("for") to ("subsection") in line 18 and insert ("an office, agency or establishment maintained by the State in the United Kingdom for commercial purposes")
The noble and learned Lord said: Amendment No. 12 is consequential on the deletion of Clause 3 from the Bill. I beg to move.
On Question, Amendment agreed to.
Clause 5, as amended, agreed to.
Clause 6 [Personal injuries and damage to property]:
5.8 p.m.
Lord WILBERFORCE Lord WILBERFORCE moved Amendment No. 13:
Page 3, line 39, after ("to") insert ("or loss of")
The noble and learned Lord said: This is a very modest Amendment which almost speaks for itself. Clause 6, which I think is based on the European Convention, is in any case an unscientific

1515
section because it talks about an act or omission in the United Kingdom, whereas a great many acts or omissions are composite and sometimes occur partly inside and partly outside. I have not sought to clarify or clear that because it would involve too radical a reconstruction. I did, however, venture to suggest that one should not limit this to damage to tangible property but should extend it to loss. It is either right or wrong, but it does not need a speech in support of it. I beg to move.
The LORD CHANCELLOR: I think that this is a helpful improvement, and I am happy to accept the Amendment.
On Question, Amendment agreed to.
Clause 6, as amended, agreed to.
Clause 7 [Ownership, possession and use of property]:
5.10 p.m.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 14:
Page 4, line 15, leave out ("except in a case where the State is trustee").
The noble and learned Lord said: Clause 7(3) provides that a court is not to be prevented from exercising any jurisdiction in relation
"to the estates of deceased persons or persons of unsound mind or to insolvency, the winding up of companies or, except in a case where the State is trustee, the administration of trusts"
by the fact that the State has a claim to some interest in the property concerned. The subsection enacts the existing law in the United Kingdom. The immunity enjoyed by States is not allowed to stand in the way of the exercise of any such jurisdiction, since the court would otherwise be prevented from dealing with a property altogether and determining the rights and duties not only of the State concerned but of all other persons who have an interest in it. But there is authority to the effect that where the State itself is the trustee, proceedings cannot be brought against it in that capacity.
Article 14 of the European Convention similarly preserves the ability of courts of Contracting States to administer property of this kind, but does not contain an express exception where the foreign State
1516
is trustee. Although such cases will be rare, representations received from City solicitors indicate that there are instances where property in the United Kingdom is held by foreign States as trustees, or where the trust is expressly governed by English law. There is no sufficient reason for preserving the immunity of a foreign State in such a case and the deletion of the exception of the case where the State is trustee has the further advantage of bringing the text more completely into line with Article 14 of the Convention.
On Question, Amendment agreed to.
On Question, Whether Clause 7, as amended, shall stand part of the Bill?
Lord WILBERFORCE: Just before we dispose of this clause I cannot forbear from registering a little regret that subsection (4) is in the clause. It aims at preserving in effect the decision of this House in Dolfus Mieg v. the Bank of England, a case in which I had a certain interest at one time. I know there have been discussions about this and that representations have been made to the effect that the rule should be changed, but that the noble and learned Lord has hardened his heart against it. I simply wish to register regret that this provision is included, but I suppose it is a waste of all our time to try to bring about a change at this point.
Clause 7, as amended, agreed to.
Clauses 8 and 9 agreed to.
Clause 10 [Arbitrations]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 15:
Page 5, line 13, leave out subsection (2).
The noble and learned Lord said: This Amendment is intended to remove the immunity currently enjoyed by States from proceedings to enforce arbitration awards given against them. Clause 10(1) removes immunity from proceedings relating to arbitration where the State had submitted to the arbitration in the United Kingdom, or according to United Kingdom law, but by subsection (2) enforcement proceedings are excepted; that exception is now to be removed. If the Government Amendments to Clause 14 are accepted, the property of a State which is for the time being in use or

1517
intended for commercial purposes will become amenable to execution to satisfy an arbitration award. However, it would not be possible to proceed to such execution without first bringing enforcement proceedings to turn the award into an order of the court on which the execution could be levied, and unless the State had waived its immunity to enforcement, Clause 10(2) would prevent the necessary steps being taken. This Amendment will delete the subsection.
On Question, Amendment agreed to.
Clause 10, as amended, agreed to.
Clause 11 [Ships used for commercial purposes]:
5.15 p.m.
Lord MCCLUSKEY Lord MCCLUSKEY moved Amendments Nos. 16 to 20:
Page 5, line 22, leave out from ("respects") to ("was") in line 24 and insert—
("(a) an action in rem against a ship belonging to that State;
(b) an action in personam for enforcing a claim in connection with such a ship, if, at the time when the cause of action arose, the ship")
Page 5, line 26, leave out from ("ship") to ("both") in line 29 and insert ("belonging to a State for enforcing a claim in connection with another ship belonging to that State, subsection (2)(a) above does not apply as respects the first-mentioned ship unless, at the time when the cause of action relating to the other ship arose")
Page 5, line 31, leave out from ("respects") to ("both") in line 33 and insert—
("(a) an action in rem against a cargo belonging to that State if")
Page 5, line 35, leave out from ("purposes") to end of line 38 and insert—
("(b) an action in personam for enforcing a claim in connection with such a cargo if the ship carrying it was then in use or intended for use as aforesaid.")
Page 5, line 39, leave out ("Subject") and insert ("In the foregoing provisions references to a ship or cargo belonging to a State include references to a ship or cargo in its possession or control or in which it claims an interest; and, subject.").
The noble and learned Lord said: The drafting of Clause 11 has been particularly difficult because of the desire to achieve a number of different objectives, which objectives are not always easy to reconcile, and I will list them. First, that ships used for commercial purposes should not be immune; secondly that the provisions should be such as would enable the United Kingdom to ratify the Brussels Convention for the unification of certain
1518
rules concerning the immunity of State-owned ships, a Convention which is of unusual complexity and involved language; thirdly, that immunity should not be accorded even to State-owned ships used for non-commercial purposes where immunity could be denied in accordance with both the Brussels Convention and the European Convention; fourthly, to ensure that the working is wide enough to cover not only ships owned by States but also any interests which States might have in ships; and, fifthly, to apply these principles to actions in rem and actions in personam alike, and to apply them to cargoes in the complex circumstances stipulated in the Brussels Convention.
The drafting in Clause 11 was adopted in an attempt to satisfy thse objectives, but it is open to a number of criticisms. The Amendments do not make any changes of substance to the provision but are intended to achieve greater precision and clearer effects, and I will list these as briefly as I can: exemptions from immunity in Clause 11 should be as respects proceedings in connection with a ship or cargo and not as respects the ship or cargo itself; the consequences which flow from writs and judgments in actions in rem and in personam respectively are so different that separate treatment is needed to produce precision; subsection (2) could be interpreted to be wide enough to cover proceedings against a sister ship, in which event it overlaps with subsection (3); and there is an inelegance in Clause 11(4) where lines 31 to 32 and 36 to 37 read consecutively produce a contradiction. The Amendments, it is thought, will improve the clause in all these respects and should provide a clearer text, while still meeting the complex objectives we seek to achieve.
Baroness ELLES: I wish at the outset to raise a minor point which seems to have escaped the draftsman, though I may be wrong about it. Under Amendment No. 19 the word "or" would be left out so that provisions (a) and (b) would appear with no "or" between them. Perhaps the noble and learned Lord would look at what is obviously a minor drafting point.
The LORD CHANCELLOR: I thank the noble Baroness for raising that matter.
Baroness ELLES: The next point I wish to raise concerns the words "intended for use for commercial purposes" in subsection (3):
"ships were in use or intended for use for commercial purposes".
My argument here applies wherever those words are used. The noble and learned Lord said it had been extremely difficult to draft this clause to meet the obligations under the Brussels Convention. There seems to be a lacuna in this drafting because it appears possible for a ship to have been intended to be used as a passenger ship but it is in fact being used as a troop ship. Under the Brussels Convention if it is a troop ship it would be immune from suit, and that surely is not the intention of the Bill—to achieve the objective which it has in fact achieved. Can the noble and learned Lord look at this point, and see whether it needs redrafting, or whether there is something which I have missed, so that it means in fact what it is intended to mean.
Lord McCLUSKEY: I am grateful to the noble Baroness for her assistance in this matter. We shall certainly look at both points.
On Question, Amendments agreed to.
Clause 11, as amended, agreed to.
Clause 12 agreed to.
Clause 13 [Service of process and judgments in default of appearance]:
5.20 p.m.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 21:
Page 6, line 32, at end insert—
("( ) Subsection (1) above does not prevent the service of a writ or other document in any manner to which the State has agreed and subsections (2) and (4) above do not apply where service is effected in any such manner.").
The noble and learned Lord said: Clause 13 provides a special method for serving process on foreign States. The Amendment adds as an alternative to the method of service there set out, any other manner of service to which the State has agreed. I beg to move.
Lord WILBERFORCE: This is a very beneficial Amendment. It is undoubtedly greatly desired by those who work in this field, by solicitors, and by the City. In
1520
fact, they provide always for their own method of service, and that gets rid of all the complicated rules which apply only if they have not agreed. I very much welcome the Amendment and thank the Lord Chancellor for introducing it.
On Question, Amendment agreed to.
Clause 13, as amended, agreed to.
Clause 14 [Other procedural privileges]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 22:
Page 6, line 38, leave out subsection (1).
The noble and learned Lord said: Subsection (14)(1), as it now stands, provides that a State shall not be required to give security for costs. That was thought to be in accordance with the requirements of Article 17 of the Convention. Under the common law a foreign State may be required to furnish security for costs. In the Second Reading debate, the noble Baroness said, as reported at column 62 of the Official Report of 17th January, in relation to security of costs:
"In the European Convention, the Article dealing with this particular matter leaves the question open, and I think that the Bill should take a more robust line on this particular aspect."
I am always open to take advice on robustness from the noble Baroness, and we have therefore gone to the extremity of robustness in this Amendment by leaving the subsection out altogether. I beg to move.
Baroness ELLES: I wish to express my gratitude to the noble and learned Lord for being robust, and for the Amendment which he has proposed.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 23:
Page 7, line 1, leave out subsections (3) to (5) and insert—
("(3) Subject to subsections (4) and (5) below—

(a) relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and

(b) the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale;

1521
and for the purposes of paragraph (b) above funds belonging to a State's central bank or other monetary authority shall be regarded as property of the State.
(4) Subsection (3) above does not prevent the giving of any relief or the issue of any process with the written consent of the State concerned; and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally; but a provision merely submitting to the jurisdiction of the courts is not to be regarded as a consent for the purposes of this subsection.
(5) Subsection (3)(b) above does not prevent the issue of any process in respect of property (not being funds belcnging to a central bank or monetary authority) which is for the time being in use or intended for use for commercial purposes; but, in a case not falling within section 11 above, this subsection applies to property of a State party to the European Convention on State Immunity only if the State has made a declaration under Article 24 of the Convention and the process is for enforcing a judgment which is final within the meaning of section 19(1)(b) below.").
The noble and learned Lord said: This another important Amendment on execution. Subsections (3) to (5) of Clause 14 prevent the issue of injunctions, orders for specific performance, orders for the recovery of property, and of any process of execution, except in proceedings relating to ships or cargoes. In all other cases, therefore, as it stands, States will remain immune from execution being levied against their property. These provisions were very strongly criticised from almost all quarters in the Second Reading debate, and so this Amendment is now moved.
In one respect the critics have suggested that the Bill goes too far. There should be a provision in the Bill that funds belonging to a State central bank, or other monetary authority, should be immune from execution, except with the State's consent. The United States Foreign Sovereign Immunities Act exempts such property from execution. The Amendment is intended to meet the criticisms made on Second Reading.
The new subsection (3) restates the general rule that injunctions and similar orders, and processes of execution, do not lie against States, and spells out especially that the funds of central State banks are to be regarded as State property, against which execution may not be levied. But this general rule of immunity is made subject to the important exceptions in subsections (4) and (5). It will be noted that subsection (3)(a) is similar to the present
1522
subsection (3), but the rest of the subsection is new. Whereas the present subsection (4) provides that no persons shall be issued for enforcing a judgment against the State, subsection (3)(b) provides that the property of a State shall not be subject to any such process. This formulation is chosen to fit all kinds of judgments, those given against the State (in actions in personam) and those given against property (like actions in rem against ships). Arbitration awards are also now expressly provided for.
Subsection (4) concerns what may nevertheless be done with the State's consent. It resembles the present Clause 14(4)(a), but goes much further, to provide that the general rule against injunctions, execution, and other process against States in subsection (3) is not to prevent the giving of any relief, or the issue of any process, with the written consent of the State concerned, and any such consent (which may be contained in the prior agreement) may be expressed so as to apply to a limited extent or generally.
Subsection (4) enables the relief or process to be given or issued with the written consent of the State concerned. It emphasises that the consent may be contained in a prior agreement. In this connection I draw attention to Amendment No. 34, to Clause 18, which provides that a reference to an agreement includes reference to an international agreement to which the State concerned is a party. It is also intended to ensure that agreements containing general waiver clauses covering consent to execution or other relief can be invoked against any claim to immunity under subsection (3).
Subsection (5) presents an important and major change in our law. It in effect permits execution against property of a State which is used, or intended for use, for commercial purposes. That was the matter which was most strongly pressed for in the earlier debate. The new subsection states that subsection (3)(b) is not to prevent
"… the issue of any process in respect of property (not being funds belonging to a central bank or monetary authority) which is for the time being in use or intended for use for commercial purposes …".
It then goes on to make special provision for the property of States which are parties to the European Convention.
The power to enforce judgments and arbitral awards against the property of a State will be very wide, wider even than that under the United States Act. I hope accordingly that this considerable change, which has again been introduced to meet the criticisms raised on an earlier occasion, will be welcome to your Lordships. I beg to move.
The DEPUTY CHAIRMAN of COMMITTEES (Earl Cathcart): The question is that this Amendment be agreed to?—
Lord WILBERFORCE: I wonder whether the noble Earl is to call my Amendments Nos. 24 and 25 at this point, or later.
Lord HAILSHAM of SAINT MARYLEBONE: I think that the correct procedure may be if the noble Earl in the Chair were now to call Amendment No. 24, because that involves omitting words from Amendment No. 23, and if Amendment No. 23 were now passed the other Amendment would fall.
The DEPUTY CHAIRMAN of COMMITTEES: I now call Amendment No. 24.
Lord WILBERFORCE Lord WILBERFORCE moved, as an Amendment to the Amendment, Amendment No. 24:
Line 13, leave out from ("process") to end of subsection (4) and insert ("where the State concerned has waived immunity in accordance with section 2(2)(b) except in accordance with the terms of the waiver.").
The noble and learned Lord said: Fortunately, I shall not have to detain the Committee for long on this matter. This relates to subsection (4) of the amended clause, and it would have the effect that that would read:
"Subsection (3) … does not prevent the giving of … relief or the issue of any process …";
and then we go to my Amendment—
"where the State concerned has waived immunity in accordance with section 2(2)(b) except in accordance with the terms of the waiver."
That, of course, was drafted on the assumption that the noble Baroness's Amendment to Clause 2 would be carried. But it has not been carried; the noble and learned Lord has agreed to reconsider this question of "waiver" versus "submission".
Therefore, I would be quite prepared to have this Amendment dealt with in the
1524
same way, although the noble and learned Lord might be able to persuade me that the existing draft of his subsection (4) is sufficient, because it does say "with the written consent of the State concerned" and that any such consent "may be contained in a prior agreement". So we may be reaching for the same objective by the use of different words; but the substance of what I am trying to do in my Amendment is to enable process to be issued in a case in which a State has waived immunity unless at the time of waiving immunity it has declared that it does not waive immunity to execution, and that is part of the general philosophy concerning waiver about which I have already spoken. I certainly attach importance to the principle of it, but I am rather in the hands of the noble and learned Lord the Lord Chancellor as to how to deal with it at this time. I beg to move.
The LORD CHANCELLOR: This Amendment attributes effects to a waiver of immunity from jurisdiction which would often go far beyond what the State intended. I question whether it is right that waiver of immunity from execution should be implied, especially since, as the new clause is drafted, it could apply only to property held for sovereign purposes. Under the new subsection (5), execution will lie against property which is for the time being in use or intended for use for commercial purposes, at least so far as States which are not parties to the European Convention are concerned.
I am advised that the effect of this Amendment would mean that execution could also take place against State property which is not in use or intended for use for commercial purposes if the State had agreed to submit to the jurisdiction of the court and had not made any express reservation with regard to execution. I think the better course for me to follow is to say that I will look at the Amendment again—I think we are after the same objective—and, if the noble and learned Lord is content that I should do that, then I shall be glad to do so; but I have certainly had no encouragement from those advising me that I should accept the Amendment.
Baroness ELLES: I should like to express my gratitude to the noble and learned Lord for the Amendment, which

1525
has gone a very long way to meet the objections to what is contained in the Bill; and, once again, I should like to express my gratitude to those in the noble and learned Lord's Department who have been so helpful in this matter. There are just two points which I should like to raise. There may be a satisfactory answer to them, but I would be glad if the noble and learned Lord would consider them. In the first place, after referring to "the property of a State" in subsection (3)(b), it goes on:
"… for the purposes of paragraph (b) above funds belonging to a State's central bank or other monetary authority shall be regarded as property of the State."
There is no mention of funds which are retained by a foreign State for diplomatic purposes; that is, for the maintenance of an embassy or for their diplomatic staff. There was, I understand, a recent case in Germany where there was some considerable difficulty over identifying funds held in a bank in the name of a State. Obviously, those funds which are held for diplomatic purposes would, by normal standards, be immune. I wondered whether the noble and learned Lord would consider whether there should be express mention in this clause, or whether it is covered later on in the Bill.
The second point I should like to raise concerns the fourth line of subsection (5) of the Amendment, where reference is made to
"in use or intended for use for commercial purposes".
There are, as the noble and learned Lord will know, and doubtless your Lordships will know, many foreign Heads of State who in fact have houses in this country for purely social purposes. They undoubtedly should be considered as being available for attachment or execution in any case which is brought against these particular individuals in a matter where immunity has been waived and where they come within the jurisdiction of the United Kingdom courts. There may be a way round this, and any Amendment need not be necessary, but I would be grateful if the noble and learned Lord would give some answer to this, either in writing or at the next stage of the Bill.
The LORD CHANCELLOR: On the question of funds held for diplomatic purposes, these are immune under the
1526
provisions of Clause 17(1) of the Bill, but I will certainly look at the other point. As I have said in relation to Amendment No. 24, which we are immediately discussing, I will certainly look at it again, and perhaps we can return to it at a later stage. I am grateful for the welcome which has been given to Amendment No. 23.
Lord WILBERFORCE: I am very grateful to the noble and learned Lord. On that understanding, I am happy to withdraw Amendment No. 24. I hope that the noble Earl in the Chair will not forget that I have Amendment No. 25 before we pass from this clause.
Amendment to the Amendment, by leave, withdrawn.
5.36 p.m.
Lord WILBERFORCE Lord WILBERFORCE moved, as an Amendment to the Amendment, Amendment No. 25:
Line 19, after ("(3)") insert ("(a)or").
The noble and learned Lord said: This Amendment looks innocuous, but it is in fact not so at all. It perhaps raises a point of some importance. It relates to the top line on page 5 of the Marshalled List of Amendments, which at the moment reads:
"Subsection (3)(b) above does not prevent the issue of any process in respect of property"
held for commercial purposes. My Amendment proposes to insert "(a)or", so that it would read:
"Subsection (3)(a) or (b) above does not prevent the issue of any process …".
That throws one back to subsection (3)(a), which says that
"relief shall not be given against a State by way of injunction,"
and goes on,
or order for specific performance …".
The essential object of my Amendment is to enable injunctions to be given against State property used for commercial purposes and not, of course, being funds belonging to a central bank or monetary authority.
My noble and learned friend Lord Denning is a much greater authority on injunctions than I am, but it clearly is a very important part of the armoury of British courts that they should be able to issue injunctions, holding in this country

1527
property of a State or of a State agency which is in use or intended for use for commercial purposes, of course in a case where jurisdiction exists and not just in a case in order to create jurisdiction. I know that there are these frightening injunctions called Mareva injunctions, which the noble and learned Lord the Master of the Rolls has been using with great skill recently, and I know that they create apprehension in some circles. But apart from that particular kind of injunction, I would suggest that it is important, if English courts are to have jurisdiction over assets used for commercial purposes and are to be able ultimately to lay hands on them at the suit of a British company, that in a suitable case, and of course subject to reservations, jurisdiction should exist to grant injunctions. That is excluded by the new subsection (5) as drafted, and the object of my Amendment is to give to the courts the power in a suitable case, which may not be very common but which may be quite important when it arises, to grant an injunction. I beg to move.
Lord DENNING: I should like to support this. As my noble and learned friend has said, we grant injunctions, and if we have jurisdiction over a State and can grant injunctions we ought to be able to enforce them. Otherwise, our order is a useless order.
Lord WILBERFORCE: Interlocutory ones, too.
Lord DENNING: Interlocutory ones we quite often grant, and usually they are obeyed, or we hope they are. But if they are not, we ought to have this power to our elbow, given us by way of execution. Therefore, I certainly support what my noble and learned friend has said. Let us have paragraph (a) in as well as paragraph (b).
Lord McCLUSKEY: If I may answer on this particular matter, I think it will be well understood by noble and learned Lords, and indeed others, that remedies of a personal nature like injunctions or orders for specific performance are not appropriate against States. The ultimate sanction for such orders lies in contempt. Clearly the processes for punishing contempt cannot be used against a foreign
1528
State. As we know, such remedies are not available in proceedings against the Crown and are no more appropriate against a foreign State. However, having regard to what has been said about Mareva injunctions, I think the appropriate course here is to reconsider this particular matter and I would ask the noble and learned Lord, Lord Wilberforce, not to press the matter at this time and to withdraw his Amendment so that it may be reconsidered in the light of what he has said.
Lord WILBERFORCE: I am grateful to the noble and learned Lord for what he has said. I would venture to point out that subsection (5) is drafted in a very circumspect way:
"the issue of any process in respect of property";
and that what very often would be possible would be to grant an injunction against someone holding an asset without an order directly against a sovereign State. As well as sovereign States, there is also the case of State agencies or State trading bodies which, although they have immunity under this Convention and under general law, are not themselves States and therefore one has not got the prospect of dragging an ambassador from his coach or arresting a crowned head. This is a most important matter and I should be grateful if the noble and learned Lord were to reconsider it. I beg leave to withdraw the Amendment at this stage, on that understanding.
Amendment to the Amendment, by leave, withdrawn.
On Question, Amendment agreed to.
5.43 p.m.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 26:
Page 7, line 20, leave out from ("that") to ("purposes") in line 21 and insert ("any property is not in use or intended for use by or on behalf of the State for commercial").
The noble and learned Lord said: This Amendment is consequential upon the provision in the new subsection (5) that execution is to be permitted against the property of a State used, or intended for use, for commercial purposes. I beg to move.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 27:
Page 7, line 24, leave out subsection (7) and insert—
("( ) In the application of this section to Scotland—

(a) the reference to "injunction" shall be construed as a reference to "interdict";

(b) for paragraph (b) of subsection (3) above there shall be substituted the following paragraph—
"(b) the property of a State shall not be subject to any diligence for enforcing a judgment or order of a court or a decree arbitral or, in an action in rem, to arrestment or sale."; and

(c) any reference to "process" shall be construed as a reference to "diligence" and any reference to "the issue of any process" as a reference to "the doing of diligence".").

The noble and learned Lord said: The purpose of this Amendment is to adapt certain expressions used in Clause 14 into terms appropriate for Scotland. It replaces the existing provision in Clause 14(7) which has been rendered inappropriate in view of the other Amendments made to Clause 14. I will not at this late hour venture into the mysteries of multiplepoinding or other such terms. I beg to move.
On Question, Amendment agreed to.
Clause 14, as amended, agreed to.
Clause 15 [States entitled to immunities and privileges]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 28:
Page 7, line 39, leave out ("under the law of that State").
The noble and learned Lord said: It may be convenient to consider with this Amendment, Amendment No 29; and I am delighted to find that I am in harness with the noble Baroness in proposing these two Amendments. Obviously, I am in robust company. Clause 15(1) provides inter alia that references to a State are not to include references to any entity
"which under the law of that State is distinct from the State and capable of suing or being sued".
Consequently, the immunity which States will continue to enjoy as a result of Clause 1 will not be enjoyed by such entities (which are called "separate entities").
The definition is important because many trading, industrial or financial activities carried out on behalf of States are done by entities of this kind, so that the wider the definition, the less scope remains for States invoking immunity. The present wording has been rightly criticised as leaving too much scope for State agencies being identified with the State and not treated as separate entities. The Amendments do, and are intended to, widen the definition. I beg to move.
Lord DENNING: I should like to say how much I welcome this Amendment. We have had in many cases the lawyers of a foreign State or the ambassador or someone else saying: "This is not a separate organ of the State; it is part of the State itself", and so forth. There is more than one case in which the lawyers or the ambassadors or others have endeavoured to get immunity on that ground. I very much welcome this Amendment; it is a great improvement to the law.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 29:
Page 7, line 39, after ("from") insert ("the executive organs of the government of").
On Question, Amendment agreed to.
Clause 15, as amended, agreed to.
Clause 16 [Restriction and extension of immunities and privileges]:
Baroness ELLES Baroness ELLES moved Amendment No. 30:
Page 8, line 26, after ("appropriate") insert—
("(2) No recommendation shall be made to Her Majesty in Council to make an order under this section unless a draft thereof has been laid before Parliament and approved by resolutions of each House of Parliament.").
The noble Baroness said: The purpose of this Amendment is clear. It is intended that any change in the law with regard to the scope of a restriction or extension of immunity should be by affirmative Resolution of both Houses of Parliament. It is clear that the lengthy discussions in this House now and those that undoubtedly will take place in another place, and the decisions in the courts as to the immunity from suit, would be overridden by the Executive if this Amendment were not accepted—and without any check or control or even debate.
It has been suggested already by the noble Lord, Lord O'Brien, that any changes in the law should not be retrospective so as to affect existing agreements and arrangements. If there is any change in the law by an Order in Council, this House and another place should have the possibility of debating such changes, thereby ensuring that if that is the will of Parliament these changes should not be made retrospective. I beg to move.
The LORD CHANCELLOR: The Amendment proposes that an Affirmiative Resolution should be required if it was sought to restrict or extend immunities and privileges. The difficulty really is that Parliamentary procedures, especially Affirmative Resolution procedures, do impose delays; and there could be circumstances of urgency and speed could be important; for example, where, under Clause 16(a), it is intended to withdraw immunity in retaliation for a denial of immunity to the United Kingdom by the State in question, and proceedings against that State in a United Kingdom court are imminent.
The Affirmative Resolution procedure is one which takes a great deal of time. Perhaps, if noble Lords think that the Order in Council procedure would not suffice, we might compromise by providing for Negative Resolution or annulment procedure which reduces the pressure on Parliamentary time and might provide that saving consideration of any matter of importance by Parliament itself.
Baroness ELLES: I thank the noble and learned Lord for his remarks. I should be happy to accept the Negative Resolution so long as there is some form of Resolution which comes before Parliament. In the light of what has been said, and the considerations of time which may indeed be of the essence, I should be happy to accept the Negative Resolution procedure.
The LORD CHANCELLOR: May I give further consideration to that, if the noble Baroness will withdraw it at this stage?
Baroness ELLES: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
1532
Clause 16 agreed to.
Clause 17 [Excluded matters]:
5.52 p.m.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 31:
Page 8, line 38, leave out from ("mission") to end of line 39.
The noble and learned Lord said: This Amendment is purely consequential upon the deletion of subsection (3) of Clause 21 which is proposed by Amendment No. 40. I will in due course come to that. I have to speak to it at some time and it might be appropriate to deal with it in connection with the present Amendment.
The deletion of subsection (3) removes an unnecessary express provision on the treatment to be accorded to the principal residence in the United Kingdom of a Head of State and to certain other real property he may own here. The present subsection (3) is intended to accord to a foreign Head of State the same protection in respect of his principal residence in the United Kingdom as is enjoyed by an ambassador. It does so by adapting relevant provisions of the Schedule to the Diplomatic Privileges Act 1964 and applying them to a residence of a foreign Head of State in the United Kingdom and other real property owned by him in the United Kingdom as if they were premises of diplomatic missions or used for official State purposes.
On further reflection, it appears unnecessary to make such specific provision. The general provision in the amended Clause 21(1) applying to Heads of State immunities and privileges enjoyed by ambassadors seems adequate for the purpose. The "principal residence" of a head of State will only ever be temporarily in the United Kingdom and always in such cases he will be here officially. In these cases the Head of State will have the immunities and privileges conferred by Part I of the Act by virtue of subsection (1)(a) of Clause 15.
Any other residence in which he is actually living when visiting the United Kingdom privately will be entitled to inviolability under Article 30 of the Vienna Convention. As regards immunity from suit, he will be immune in regard to embassy premises, should these be held

1533
by him privately (which seems very unlikely), and his private holdings would be governed by the provisions of Article 31(1), which seems to produce a satisfactory result. He will not enjoy any immunity from jurisdiction in real actions relating to private premises.
We may come back to these matters on Amendment No. 40, but I thought it right, in dealing with the consequential provision, to explain that part of Amendment No. 40 at this stage. I beg to move.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 32:
Line 41, leave out ("the armed forces of a State") and insert ("anything done by or in relation to the armed forces of a State while present in the United Kingdom").
The noble and learned Lord said: Clause 17(2) provides that the Bill is not to apply to proceedings relating to the armed forces of a State. It is intended to relate to the activities of forces stationed in the United Kingdom and their supplies, but it could be read to cover also any purchases made here for a foreign State's forces elsewhere. That is not what is intended or is required by the relevant Article of the European Convention (Article 31).
The Amendments will remove only things done by or in relation to Armed Forces in the United Kingdom from the operation of the Bill, so that purchases made by a State for the use of its armed forces elsewhere (whether of supplies or military equipment) will fall under Part I and enjoy no immunity. For instance, subsection 3(a) of the new clause inserted after Clause 2 will apply to such transactions. I beg to move.
On Question, Amendment agreed to.
Clause 17, as amended, agreed to.
Clause 18 [Interpretation of Part I]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 33:
Page 9, line 10, at end insert—
(""commercial purposes" means purposes of such transactions or activities as are mentioned in section (Commercial transactions and contracts to be performed in the United Kingdom)(3) above;").
The noble and learned Lord said: This is a new provision which is in part consequential on the adoption of the new clause after Clause 2 and links the term "commercial purposes" with the definition of "commercial transaction" in the new clause. I beg to move.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 34:
Page 9, line 11, at end insert—
("( ) In sections 2(2) and 14(4) above references to an agreement include references to an international agreement to which the State concerned is a party.").
The noble and learned Lord said: This Amendment was dealt with in part in relation with Amendment No. 24. I then explained why the words "or by an international agreement" were omitted from Clause 2, page 2, line 3, and the desirability of having a separate clause providing that references to an agreement include references to an international agreement.
Under the proposed new Clause 14(4), relief by way of injunction or order for specific performance or for the recovery of land or other property and the issue of process for the enforcement of a judgment or arbitration award may be given with the written consent of the State concerned and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally. It is thought that such a prior agreement should include an international agreement which a State has entered into with another State or international organisation. This explains the reference to Clause 14(4) in the proposed new clause.
I am advised that, if a definition of an international agreement is sought, an international agreement is an agreement between two or more subjects of public international law which is governed by public international law and which creates rights and obligations under public international law. As a matter of general acceptance in international relations, an international agreement is one made between parties which are the subjects of public international law. I have no doubt that the noble and learned Lord could devise a more satisfactory definition

1535
than that, but I hope that that may explain what we have in mind. I beg to move.
Lord WILBERFORCE: I am grateful to the noble and learned Lord who has honoured his promise give on the earlier clause to give an explanation of this rather mysterious expression "international agreement". I understood the words to mean an agreement between two subjects of international law, which means either States or some body having its existence under international law. Therefore it would not, as I understand it, include agreements between a State and, say, a British company or individual. If that is so, I begin to have some doubts about it, particularly as it applies in either Clause 2(2) or in Clause 14, I think that this probably requires some thinking out. I shall have to reserve my position on this. It may be too narrow in its scope if it is confined to agreements between subjects of international law, which in effect means States.
The LORD CHANCELLOR: As I am advised, as a result of more recent developments of international law, international organisations set up by States could also have the capacity to enter into international treaties and could therefore be included in the conception of being parties to an international agreement. I do not know whether that helps matters; but, if the noble and learned Lord is not happy about this, I am willing to revert to it again at Report stage.
Lord WILBERFORCE: I am very grateful to the noble and learned Lord.
Baroness ELLES: I wonder whether the noble and learned Lord will allow me to complicate matters a little further. May I ask whether these international agreements are only those which are registrable under Article 102 of the UN Charter? Would it in fact cover other international agreements? As this would also be relevant, will the noble and learned Lord, when he is giving a further explanation on this, include consideration of that in his answer?
The LORD CHANCELLOR: In the circumstances, I beg leave to withdraw this Amendment so that we can return to the point at a later stage.
Amendment by leave, withdrawn.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 35:
Line 12, leave out ("3") and insert ("(Commercial transactions and contracts to be performed in the United Kingdom)").
The noble and learned Lord said: This is consequential upon the introduction of the new clause after Clause 2 and the deletion of Clause 3. I beg to move.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 36:
Line 16, leave out ("4(1), 5(1) and 6") and insert ("(Commercial transactions and contracts to be performed in the United Kingdom)(1), 5(1), 6 and 17(2)").
The noble and learned Lord said: This again is consequential on the insertion of the new clause after Clause 2. I beg to move.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 37:
Line 19, at end insert—
("(4) In relation to Scotland in this Part of this Act "action in rem" means such an action only in relation to Admiralty proceedings.").
The noble and learned Lord said: This is a drafting Amendment to clarify the meaning of the words "action in rem" as regards Scotland. In Scotland, the term is used to designate Admiralty actions, but it is also used to designate certain actions related to ownership of other property, and in particular the action of multiplepoinding—which I hope the Hansard reporter can spell—to determine between competing claims to movable property. In the context of Part 1 of this Bill, the term "action in rem" always means an Admiralty action in rem, and the Amendment makes this meaning clear so far as Scotland is concerned. I beg to move.
On Question, Amendment agreed to.
Clause 18, as amended, agreed to.
Clauses 19 and 20 agreed to.
Clause 21 [Visiting heads of State].
6.4 p.m.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 38:
Page 11, line 16, leave out from ("State") to end of line 18.
The noble and learned Lord said: I should like to speak to Amendments Nos. 38 and 39 together. Clause 21 is intended to lay down in statutory form the immunities and privileges enjoyed by foreign heads of State in their private capacities, their families and their households. The position of such heads is governed by customary international law which is not yet embodied in any international convention. The law lacks the precision which is now given to the law concerning practically all other persons who enjoy international immunities and privileges, namely diplomats, consular officers and persons on diplomatic missions, by international Conventions and United Kingdom legislation giving effect to them.
This clause takes the immunities and privileges of heads of State on the analogy of the immunities and privileges of heads of diplomatic missions, which are already covered by legislation in the Diplomatic Privileges Act 1964, and so can readily be attracted. Problems about the position of heads of State rarely arise except when they visit the United Kingdom, and the analogy of the head of a diplomatic mission in the United Kingdom fits naturally for a visiting head of State. The clause has therefore been drafted for such visitors only. However, this method of legislating leaves an unsatisfactory doubt about the position of heads of State who are not in the United Kingdom, which cannot be left unresolved. It could be argued that, with visitors covered, others have no immunity at all. In any event, the uncertainties of the customary international law would remain in respect of property owned here by foreign heads of State or services supplied to them or their families while the head of State is not in the United Kingdom.
These Amendments therefore will ensure that heads of State and members of their families forming part of their households will, irrespective of presence in or absence from the United Kingdom, be treated as regards immunities and privileges like the heads of diplomatic missions and members of their families. I. beg to move.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 39:
Line 20, leave out from beginning to (" and")
The noble and learned Lord said: I beg to move.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 40:
Page 11, line 29, leave out subsection (3) and insert—
(" ( ) Subject to any direction to the contrary by the Secretary of State, a person on whom immunities and privileges are conferred by virtue of subsection (1) above shall be entitled to the exemption conferred by section 8(3) of the Immigration Act 1971.
( ) Except as respects value added tax and duties of customs or excise, this section does not affect any question whether a person is exempt from, or immune as respects proceedings relating to, taxation.")
The noble and learned Lord said: Your Lordships will recall that I spoke to the reasons lying behind this Amendment just a moment ago. I therefore beg to move this Amendment formally.
On Question, Amendment agreed to.
Clause 21, as amended, agreed to.
Clause 22 [Evidence by certificate]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 41:
Page 12, line 16, after ("Immunity") insert (", whether it has made a declaration under Article 24 of that Convention").
The noble and learned Lord said: This is a new provision consequential on the introduction of new clause 14(5), providing for the exclusion of property in use or intended for use for commercial purposes, belonging to a State which is a party to the European Convention only if that State has made a declaration under Article 24 of the Convention. The Secretary of State will be able to give a certificate, which will provide conclusive evidence that such a declaration has been made by a specified foreign State. I beg to move.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 42:
Line 20, after (" 13 ") insert (" (1) or (5) ").
The noble and learned Lord said: Amendment No. 42 is consequential on the

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Amendment to Clause 13, page 6, line 32. The Secretary of State can issue conclusive certificates to determine whether and, if so, when a document has been served or received where it has been transmitted through the Foreign and Commonwealth Office to the foreign Ministry of Foreign Affairs. He cannot issue such a certificate in respect of service effected under the agreed method of service which has now been added as an alternative method by the new subsection of Clause 13. I beg to move.
On Question, Amendment agreed to.
Clause 22, as amended, agreed to.
Clause 23 agreed to.
Clause 24 [Short title, repeals, commencement and extent]:
Baroness ELLES Baroness ELLES moved Amendment No. 43:
Page 13, line 10, leave out (" 16th May 1972 ") and insert (" the coming into force of this Act; ").
The noble Baroness said: As has already been stated by the noble Lord, Lord O'Brien, there is considerable anxiety in the City, and particularly among financial and commercial institutions dealing with foreign States and the State trading companies of foreign States. The relationship is based very largely on trust and in the belief that in the United Kingdom we have a fair legal system. A change in the law of the United Kingdom, such as will obviously be the outcome of this Bill, may modify or even extinguish existing contractual obligations. It will certainly affect them in a major way and it would seem quite unprincipled that the United Kingdom should be seen to be acting in such a way as to bring in retrospective legislation which would alter the terms and conditions of existing agreements.
In the Convention itself, in Article 35(3), the date of 16th May 1972 is the earliest date at which the Bill could take effect, but there is nothing in the Convention that I can find which makes that an obligatory date. Therefore, I should like to suggest that the noble and learned Lord should consider my Amendment so that the Bill would not apply not only to proceedings instituted before the coming into force of the Convention but also to
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proceedings in respect of matters that occurred before the coming into force of this Act. I beg to move.
The LORD CHANCELLOR: In view of the anxiety expressed by the noble Lord, Lord O'Brien—and the matter has now been underlined by the noble Baroness—I am certainly very willing to give further consideration to this matter if the noble Baroness will withdraw the Amendment.
Baroness ELLES: On the undertaking from the noble and learned Lord, I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn. Clause 24 agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 44:
In the Title, line 7, leave out (" visiting ").
The noble and learned Lord said: This Amendment is consequential on Government Amendments to Clause 21. That Clause, as amended, now makes provision for immunity of heads of State irrespective of whether or not they are visiting the United Kingdom. Therefore, the adjective "visiting" has to be deleted before "heads of State". I beg to move.
On Question, Amendment agreed to.
House resumed: Bill reported with the Amendments.

SHIPBUILDING (REDUNDANCY PAYMENTS) BILL
6.11 p.m.
Report received.
Clause 1 [Payments to redundant workers in the shipbuilding industry]:
Lord McCLUSKEY Lord McCLUSKEY had given notice of his intention to move Amendment No. 1:
Page 1, line 22, leave out from (" Shipbuilders ") to second (" and ") on page 2, line 11.
The noble and learned Lord said: My Lords, the Amendments in my name on the Order Paper fall into two groups.

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Nos. 1, 2, 4, 6, 7, 9, 10 and 11 all raise matters which the House discussed at the Committee Stage. There have been discussions about these Amendments in the course of the day through the usual channels, and I understand that it is agreed, certainly, with the noble Lord, Lord Campbell of Croy, that it would be for the convenience of the House if we did not discuss this group today. Accordingly, I shall not be moving them. The other group of Amendments—Nos. 3, 5, and 8—deal with a quite separate issue of a relatively technical character and I understand that there is no difficulty about our discussing this group today. Accordingly, with that explanation, Amendment No. 1 is not moved.
[Amendment No. 2 not moved.]
Clause 2 [Supplementary provisions relating to schemes]:
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 3:
Page 3, line 9, leave out subsection (2).
The noble and learned Lord said: My Lords, with Amendment No. 3 I should like to consider Amendments Nos. 5 and 8. These Amendments are of a minor and technical character and are for the purpose of clearing up doubt about the powers of the Secretary of State to make a provision in the scheme which he has already announced his intention to make. Noble Lords will recall that the Government published an outline of the scheme which it intends to make under the Bill. It was published in a Written Answer in another place on 7th February. As I think your Lordships will know, you will find it in the Commons Hansard of that date, in columns 475 to 478. That outline included a provision (paragraph 11) reading—
"Re-employment of a beneficiary under the scheme by a relevant company would be conditional upon the refund by the employee of a proportion of any lump sum payment calculated in proportion to the length of time for which the employee has been redundant".
The method of calculating the amount to be repaid is a little complex, but the purpose the Government have in mind is quite clear. As the House knows, the Bill is intended to alleviate hardship for those who lose their jobs because of the crisis in demand for large ocean-going ships. Given the nature of the crisis, it
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is to be expected that once a shipbuilding worker has become redundant there will be no opportunity for him to return to the industry in the foreseeable future. Nevertheless, it is not inconceivable that the occasional individual may return to another job in his trade with another company coming within the terms of the Bill, and that within a short time. If this were, exceptionally, to happen it would obviously be absurd for him to retain the whole of the sum of public money—in some cases quite a large sum—which was paid in recognition of the permanent loss of his job.
We do not expect this to happen except in the rarest of cases but I am sure that noble Lords will agree that it is right for the Government to provide against this contingency by requiring that an appropriate portion of the redundancy payment be repaid in such circumstances. That is the object of the provision to which I have referred.
As already indicated, it is the Government's intention to include an appropriate article in the order making the scheme under the Bill. However, I am advised that there is serious doubt whether this could effectively be done in the order without some specific enabling power in the Bill itself. The proposed Amendment, which would add a new subsection (7)(a) to Clause 2 of the Bill, is intended to clear up that doubt. That is the Amendment No. 5.
The other two related Amendments are consequential upon the main Amendment. Their purpose is to define the word "prescribed"—that is prescribed in the order making the scheme wherever it occurs in Clause 2, amended as proposed. At this stage I beg to move Amendment No. 3.
Lord CAMPBELL of CROY: My Lords, I shall start by expressing gratitude to the noble and learned Lord, Lord McCluskey, and also to other noble Lords on the Government Front Bench, for having agreed not to move today the group of Amendments to which the noble and learned Lord referred. I shall say no more than that, no doubt because of printing difficulties, we heard about these only yesterday afternoon and many of my noble friends did not know about them until late today.

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The three Amendments Nos. 3, 5 and 8 to which the noble and learned Lord has addressed his remarks are straightforward and not controversial and I can tell my noble friends that I think they are necessary and will be a good addition to the Bill. I therefore commend them to your Lordships' House.
Viscount SIMON: My Lords, I thank the noble and learned Lord and his colleagues for the action they have taken. My noble friends would also be very happy with the three Amendments which he is proposing to press upon us.
On Question, Amendment agreed to.
[Amendment No. 4 not moved.]
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 5:
Line 34, at end insert—
(" (7A) A scheme under this Act may provide that where any person—

(a) is made redundant by a relevant company;

(b) receives payments under the scheme; and

(c) is subsequently re-employed by a relevant company within such period, begitnning with the date of his redundancy, as may be prescribed,

that person shall be required to make such repayment of the sums paid to him under the scheme as may be prescribed and to such person as may be prescribed.")
On Question, Amendment agreed to.
[Amendments Nos. 6 and 7 not moved.]
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 8:
Page 4, line 19, at end insert—
("(11) In this section "prescribed", in relation to a scheme under this Act, means prescribed by the scheme in question.")
The noble and learned Lord said: My Lords, I have already spoken to this with previous Amendments. I beg to move.
On Question, Amendment agreed to.
Clause 3 [Financial Provisions]:
[Amendments Nos. 9 to 11 not moved].

IMPORT OF LIVE FISH (SCOTLAND) BILL [H.L.]
6.20 p.m.
Viscount THURSO: My Lords, I beg to move that this Bill be now read a second time. This Bill is exactly the same Bill as that which came before your Lordships, was amended by your Lordships, and was subsequently passed by your Lordships last year, in the last Session of Parliament. It found favour with your Lordships, but unfortunately failed in another place. But I think that the principle which it sought to establish, and the powers which it sought to give to the Secretary of State for Scotland, found favour with the Secretary of State and his Department.
I therefore waited a while to see whether the Government would, in fact, bring forward similar legislation, which I have no doubt the noble Lord, Lord Kirkhill, will tell us was at one time their intention. Unfortunately, however, it does not seem that this legislation is coming forward and, in the circumstances, if the powers are to be given in time to the Secretary of State for Scotland, it seemed to me necessary to move again a Bill similar to the one which your Lordships considered before. That is the one which your Lordships now have before you, and which I ask your Lordships to read a second time.
It is only fair to mention that, when this Bill comes to the Committee stage, I may well seek to make Amendments to it. Obviously, one of the reasons why a Private Member's Bill of this kind can fail, is that it imposes the necessity upon the Government to provide money to carry it out, and I am advised that, if this Bill has a compensation clause still in it, it will be necessary to provide money for compensation and expenses, if claimed. On the other hand, my advice is also that, if the compensation clause and the expenses clause are taken out of the Bill, it will then not require money and it might be possible for this Bill to go to another place and to succeed. I put it no higher than that. In the meantime, however, I urge upon your Lordships all the arguments which I adduced last time towards this Bill—the necessity of it in order to protect our stocks of native fish, and in order to give powers to the

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Secretary of State to make orders to protect our stocks of native fish. I commend the Bill to your Lordships. My Lords, I beg to move.
Moved, That the Bill be now read 2a—(Viscount Thurso.)
6.23 p.m.
Lord CAMPBELL of CROY: My Lords, I congratulate the noble Viscount, Lord Thurso, on introducing his Bill again in this Session. We discussed it through various stages in your Lordships' House in the last Session, and considerable amendment was made to the first version. I am glad that one or two of the suggestions that I made on Second Reading were, in fact, incorporated in Amendments. But one of the strange things that happened was that the Bill expanded from less than a page to about four pages during the course of being amended. I understand that most of the additional material was provided on the suggestion of the Government, because they thought that more provisions were necessary to produce a scheme which would be comprehensive.
The noble Viscount has explained, both on those occasions and again, briefly, today, that the Bill will provide safeguards against any ill consequences to indigenous fish from the imports of strange fish—sometimes known as exotic fish—from abroad, which are not natives of the British Isles. In particular, the Coho salmon has been imported, and many were worried that it might have an ill effect up on our own native salmon, which would have very serious consequences for Scotland. As I pointed out in the debates in the last Session, the salmon rivers in Scotland provide, through the rating system, a great deal towards local finance. Therefore, if visitors from abroad come and pay a great deal for fishing on prolific salmon rivers in Scotland, they are paying money which goes almost directly into the coffers of local government.
I must declare an interest, as I have in the past, that I own some fishing on the river that flows past my own house. I may say that it is not a pecuniary interest, from an income point of view, because I have a system of fishing permits for local people and bona fide visiting fishermen, and the fishing is free. Indeed, I have to pay rates to the local council, which are
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based upon the average catch of salmon during the previous five years, so that it is far from being a pecuniary interest. But I have an interest in the preservation of salmon.
I shall not repeat what was said about this Bill in the last Session by other noble Lords, and what I said. I would just put one question, which is really for the Government and not for the noble Viscount who has introduced the Bill, because he has given the necessary explanations in the past. This Bill cannot succeed in this Session of Parliament, unless it gets a successful passage through another place. But it is unlikely to get any time in another place, because it is very difficult even for Members of another place to get time for a Private Member's Bill, unless they are successful in the annual ballot and are in the first eight. Therefore, I must ask the Government whether they support this Bill sufficiently to be able to provide some time in another place.
Secondly, if the other place allowed the Bill to go through on the "nod", as it were—that is, without debate at all, which could be possible if nobody objected to its going through without debate at, for example, four o'clock on a Friday—does the Government's support of it extend to the financial part? I ask that question, because the Bill calls for some impositions on the public purse, and, therefore, only the Government can provide the necessary support in the form of a Money Resolution, if it is to pass through another place.
6.28 p.m.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill): My Lords, I should like to congratulate the noble Viscount on the presentation of his views in moving the Second Reading of his Bill on this subject for a second time. When the noble Viscount introduced his Bill last year, the Government pledged support for the aim of the Bill—to provide powers to control the introduction of species of fish which could harm stock already established in this country, either native or well-established immigrants. That Bill fell in the other place, as we know.
There is no need to repeat all that was said in your Lordships' House last year, during the passage of the Bill. I should

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only like to note that, although such powers have existed for mammals since 1932, when the Destructive Imported Animals Act was introduced, no such powers exist for fish, except in relation to disease. The import of a consignment of eggs of Coho salmon in 1976 brought the issue to public notice. We need not go into detail about the pros and cons that were discussed. I only wish to emphasise the need to keep an open mind, when it comes to considering the case for and against the entry of any particular species. As I said at the time, any legislation aimed at controls of this type must be framed in a way which provides for a balanced judgment being taken.
Care must be taken not to create a situation which is prejudicial to sensible and valuable introductions. Powers such as the noble Lord's Bill provides could have been invoked, had they existed, to prevent the introduction, for example, of rainbow trout—a fish which has proved of great value to us both in the table market and for sporting purposes.
The current progress of the import of Coho which was allowed under a conditional licence issued by my Department under the Diseases of Fish Act is that the fish hatched from the imported eggs have since been held in absolute quarantine. The effluent is sterilised in order to ensure that no live fish or diseased organisms can escape to the outside environment. They are regularly monitored by my Department and to date no trace of disease has been found. The fish have made growth and it is possible that some may mature for spawning towards the end of this year. No broodstock will survive after spawning, but if by then they are found to have remained clear of disease there would be no powers in the existing legislation on disease to control the progeny of the stock. That, of course, is the problem.
Our scientific advice is that the possibility of damage to our native salmonid stocks, especially salmon, should Coho be brought into use in this country for fish farming purposes, cannot be regarded as negligible. This should not be interpreted as meaning that damage would definitely occur, but simply that the possibility of its occurring cannot be ruled out. It is not possible to say how great is the risk as it is governed by the scale of
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importations and by a number of practical and biological factors, the combined effects of which cannot be quantified from scientific information at present available; neither does this establish an undeniable case for an all-out ban on future importations of Coho.
But whatever the strength or weakness of the case against Coho salmon in 1978, the need for control of entry of—to use the phrase of the noble Lord, Lord Campbell of Croy—exotic species of all kinds is undeniable. The Government acknowledge the need to have control powers, and I reaffirm the Government's support for the principle underlying the noble Lord's Bill. There are, however, pressing Parliamentary commitments in another place and I can give no undertaking about the Bill's passage in that place.
Regarding the query raised by the noble Lord, Lord Campbell of Croy, as to whether or not the Government will undertake to move a Money Resolution in the other place, again I have to emphasise that the Government are not in a position tonight to give an undertaking as to the passage of the Bill. However, I shall report the points which have been raised this evening to my right honourable friend the Secretary of State for Scotland.
Viscount THURSO: My Lords, may I thank the noble Lord, Lord Campbell of Croy, and the noble Lord, Lord Kirkhill, for joining in this debate and for their kind words about the Bill. I realise that there are doubts as to the passage of the Bill, but I do not think that they should deter us from giving it a Second Reading. Accordingly, I beg to move.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

THE UNITED NATIONS UNIVERSITY
6.34 p.m.
Lord BEAUMONT of WHITLEY Lord BEAUMONT of WHITLEY rose to ask Her Majesty's Government what support, financial and otherwise, they propose giving to the United Nations University. The noble Lord said: My Lords, the idea of a United Nations University was first mooted by Dr. U Thant

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in 1969, and in 1973 it received its Charter. This makes it a very young infant in the United Nations field. Since then the University has progressed quite fast, and thanks to very generous help indeed from the Japanese Government a headquarters has been set up in Tokyo. I say "a headquarters" because it is not the kind of university which has a campus. The whole of the globe is its campus.
The University has as its object the harnessing of scholarship to global problems in order to fill a gap which I think it is necessary to fill and in order to link up the work which is being done on global problems in different parts of the world. Its projects are concerned with identifying these problems, and for these projects it has advisers all over the world. It attempts to fill the gaps in the knowledge that we have of the various problems of the world, in particular of the underdeveloped world, and it stimulates research in developing countries. To that extent it may be considered to be a kind of reverse brain-drain that enables academic research to be continued in places from which it might otherwise be attracted away.
The University disseminates its results in two ways. First, it disseminates them through the academic world. It keeps people who are working in the same field, and also those in different and complex fields, in touch with each other so that they know what is going on. Possibly even more usefully, the University exists to pass on in a usable form the information which it obtains from its research to people who can use it for the good of developing countries and for solving problems thoughout the world. Above all, it is an institution which is devoted to solving some of the most difficult and vital problems that the world has to face. Its three particular priorities are world hunger, natural resources—what they consist of and how they can best be used and not wasted—and the development of man and society, with particular reference to the underdeveloped or the developing world.
This University is worthy of support. It faces financial danger at the moment, as a result of which it may not flourish, and may not even continue to exist. One of its virtues is that it is one of the very
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few United Nations organisations which is not inter-governmental. It is separate; it has its own Charter and it is not dependent upon Governments for the day-to-day running of its affairs. Nor can the University be influenced by Governments. The University works within the true traditions of the academic world. But the corollary is that Governments are not so interested in helping to support it, and this may be one of the reasons why there are financial problems.
A number of nations have contributed towards the University, some of them extremely generously. I have already mentioned Japan. Obviously what is needed is a major contribution from the United States of America. However, the USA are getting a little tired of the fact that everybody seems to want them always to take the lead in matters of this kind, a lead which other nations will then follow. Congressmen and Senators have been heard to say that it is time other people, particularly in Europe, took the lead.
This country does not have a bad record, although it is not so good as it might be, on these questions of aid and help to the developing world. We are associated with the University. The noble Lord, Lord Briggs, is on its council — and he is very sorry that he is unable to be here today to address your Lordships. At least one of our institutes is taking part in the work of the University; namely, the Tropical Products Institute. I acknowledge the help which that institute has given to the University.
I believe that thin University is infinitely worth while. It is the right kind of project; it is pump-priming; it is seed growing. This is not a question of giving out to developing countries money which might or might not be wasted. It is not the spending of money on a once-and-forall basis. The money is being invested in that most precious of all commodities—knowledge and the spreading of knowledge throughout the world on a number of very vital topics.
It is my earnest hope—and, I think, the hope of a number of noble Lords and Members of another place—that, now that there is somewhat more money available than there was a year or so ago, the field

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of aid, particularly, would be an area where it would be absolutely right if Her Majesty's Government could see their way to giving a significant grant to the endowment fund, or in some other way helping this university which is doing such good work. I hope that the noble Lord who speaks for the Government will be able to give such good news, so that we can help in that way in the very near future.
6.41 p.m.
Baroness ELLES: My Lords, I am sure all noble Lords would wish me to thank the noble Lord, Lord Beaumont of Whitley, for raising the question of the United Nations University, an organisation or institution which does not get very much attention either in your Lordships' House or elsewhere in the world, as indeed the noble Lord pointed out. I am sure the Minister will listen with sympathy to the remarks and requests made by the noble Lord.
I have some personal memories of the United Nations University, because I was the United Kingdom delegate at the United Nations in 1972, when the resolution was passed in the General Assembly, in the Third Committee, to which I was a delegate, relating to the setting up of the University and the future adoption of its charter. So I have taken an interest in its initiation and the continuation of its work. The charter was adopted in 1973, and the United Kingdom voted in favour of the United Nations University, with 117 other Member States.
At that time the Secretary-General agreed that there was a need for an endowment fund so that the University should have stable conditions, and this must be one of the essentials of an institution of this kind. Obviously, it operates, as the noble Lord has described, in a different way from an ordinary university; but it is quite clear that, in order to get the academic excellence which would be demanded of an institution of that kind, funds must be available, and they must be guaranteed for at least a minimum period. No professor or senior academic would be able to leave his position in any university for any length
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of time without some guarantee of financial reward; that is clear.
Nevertheless, my own view of the United Nations University, certainly when it was debated in 1972, was that it was not so much to be undertaking research work but to be a meeting place for the youth of the world. It was with that ideal in view that the resolution went forward from the General Assembly which I attended. But I have seen no evidence in the programme or in the activities of the University as it has been conducted so far which in any way attempts to realise those ideals which I thought were quite excellent. This would be one of the only areas in the world where youth from all quarters of the globe, from all groups of society, of every nation, could meet to undertake some form of joint effort in the development of culture and science. There is no evidence at all that the United Nations University, as it now is proceeding in its activities, is in any way making a contribution in this way.
The last amount allocated to the University, so far as I have been able to find, was the sum of 790,000 dollars. Admittedly, it is not very much in world terms; but, when you look at what it is being spent on, you see that 200,000 of those comparatively few dollars are being spent on regional meetings. Before one volunteers that the United Kingdom should be contributing more funds, I think one ought to inquire what kinds of regional meetings are these and who attends them, because very often they just become joy rides for people who are on the inner circuit, as we know very well. Another 190,000 dollars are going for world hunger purposes. Nobody in your Lordships' House would deny that world hunger is one of the major subjects which should be studied, but there is already an expert organisation, the FAO, to say nothing of the new World Food Fund which has been set up, which have financial resources to make these kinds of studies. I wonder, therefore, whether the sums which have been allocated to the United Nations University are being spent wisely or with the purposes in view for which the University was originally set up.
This is in no way to decry the excellent work and the opportunities that the

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University may hold for youth in the world today. I would ask the Minister whether any proposals have been made by the Government at the last General Assembly—presumably particularly in the Third Committee—with regard to the future programme of the United Nations University, and as to the way the money that is available to the University has been spent and is going to be spent. I should also like to know whether the Government have, through their delegate at the United Nations, made any proposals as to the kind of programmes on which perhaps the University could be better spending its time—or, at any rate, the persons employed by the University—making a greater contribution to world resources.
Perhaps I may say that I am very sorry the noble Baroness, Lady Gaitskell, is not here tonight; no doubt she had a pressing engagement. Undoubtedly she would have taken an interest in the activities of the University when she was a delegate at the last General Assembly in New York. I would conclude by saying that I am very grateful to the noble Lord, Lord Beaumont of Whitley, for having raised this matter. I think it is a matter not only of principle—as to how far and how much the Government are prepared to co-operate in such United Nations institutions as this University—but it also raises prospects which could hold out a great contribution for peace if the Governments and Member States of the United Nations are prepared to co-operate in this great venture.
6.48 p.m.
Lord ORAM: My Lords, I am sure we all appreciate the fact that the noble Lord, Lord Beaumont of Whitley, asked this Question this evening, and thereby drew attention to an important matter which, I would agree with him and with the noble Baroness, has not received the amount of public attention in this country and perhaps elsewhere that it really deserves. If I may respond immediately to the queries of the noble Baroness, so far as I am aware, we have not directly put forward proposals in the United Nations fora, but, as I shall describe in due course, we have been actively engaged in discussions about the University's programme in various consultative conferences.
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Since the creation of the United Nations University was approved, in the United Nations General Assembly resolution which was adopted without opposition in 1972, Her Majesty's Government have been watching its progress with interest and with sympathy. Ministers have indicated on more than one occasion that the United Nations University has the support of Her Majesty's Government, that British academic and intellectual resources are there to be drawn on by the University, and that Her Majesty's Government will do all they can to maximise co-operation with the University.
The resolution which approved the creation of the University provided that it should take the form of an administrative and co-ordinating centre to which existing academic institutions in various countries would be affiliated, and that it would be funded by voluntary contributions. The function of the University was not closely defined, but the general intention was that it should initiate and co-ordinate research into world problems.
A charter for the United Nations University was drafted by a committee of experts and, as the noble Baroness pointed out, adopted by the United Nations General Assembly at the end of 1973. The Secretary-General of the United Nations and the Director General of UNESCO then invited 24 eminent persons to serve on the council of the University. As the noble Lord, Lord Beaumont of Whitley, informed your Lordships, we are glad that the noble Lord, Lord Briggs, of Worcester College, Oxford, was among those. Dr. James Hester of New York University was appointed the first Rector of the United Nations University in November 1974.
I understand that during the first year of the University's activities—that is, 1975 to I 976—its first programmes were planned, its first associations were explored and contributions to its Endowment Fund were solicited. Its headquarters opened fully in September 1975 and are, at the invitation of the Government of Japan, in Tokyo. The programme of work of the University is being defined by a series of consultative meetings of experts in various fields. In October 1976, the then Minister for Overseas Development opened such a meeting held at the Royal

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Society in London. About 100 academics, scientists and officials, not all from the United Kingdom, attended that meeting. There were similar consultations in Paris, Bonn, Stockholm and Kuala Lumpur in 1977. Altogether some 480 participants drawn from 30 countries have participated in these meetings. Plans have been made for further consultative meetings to be held in various parts of the world during this year.
The concept that has now emerged is centred on the basic premise of the University that global interdependence is a fact. The United Nations University recognises that it is different from other universities in that it has no campus, no degree students of its own and no teaching faculty in the familiar sense. It sees its special role as increasing the understanding and alleviation of major world problems without duplicating or competing with existing institutions. The noble Baroness, Lady Elles, urged us to approach this matter with some interrogation and caution, and I think that another cautionary note that one needs to strike is to watch that there is not unnecessary competition with already existing facilities.
The role that I have described lies in the combination of five closely related functions—in the first instance identifying pressing global problems; co-ordinating international research and advanced training; strengthening research and advanced training resources in developing countries; disseminating research results, and encouraging problem-oriented multidisciplinary research and advanced training.
During this initial phase of the University's development its council has agreed that activities and associations should be focused on three broad programme areas, each of which deals with aspects of the human condition. While the University is seeking to maximise intereactions among these programmes, each has a distinctive emphasis. The World Hunger Programme is directed towards the need to provide adequate nourishment for all human beings; the Human and Social Development Programme towards strengthening such development throughout the world; and the Programme on the Use and Management of Natural Resources is concentrated on the physical conditions
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in which we live and the natural resources available to us to improve life.
To finance the operations of the University and to guarantee the University's stability and objectivity an endowment fund has been set up. The University is aiming at a target of 500 million U.S. dollars by 1981 to provide an annual income which, depending of course upon interest rates, could range between 25 million and 40 million U.S. dollars. The income from 1981 would be used for headquarters operations which would be some 12 per cent. and for programme activities in the field which would be some 88 per cent. A second source of financial support is derived from contributions by Governments and non-governmental sources for the support of specific projects and programme activities.
The University has reported that, at the end of 1977, a total of 126 million US dollars had been pledged or contributed by 16 Governments. The Government of Japan had pledged 100 million US dollars of this, over a 5-year period and had paid 60 million US dollars out of some 64 million US dollars which have actually been contributed. So we see the very leading part that Japan has played in instituting this University.
My Lords, Her Majesty's Government are currently considering a request from the University that a contribution to the endowment fund should be made. Other than the moral support to which I referred earlier, the University has so far not received from Her Majesty's Government any support, either financial or in kind, beyond that which was mentioned by the noble Lord, Lord Beaumont of Whitley, which has already been made available through the Tropical Products Institute which is an out-station of the Ministry of Overseas Development. The Tropical Products Institute has agreed to accept a number of United Nations University study fellows for studies concerning food loss and food conservation. The agreements have recently been signed and exchanged.
As part of its desire to co-operate with the University, Her Majesty's Government have arranged a series of detailed discussions between the Ministry of Overseas Development and officers of the University. To date, such discussions

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have been held with Dr. Kwapong, the Vice-Rector for Planning and Development and Dr. Manshard, Vice-Rector for the Use and Management of Natural Resources Programme. The results of these meetings have encouraged those concerned to complete the series by arranging discussions with Dr. Mushakoji, Vice-Rector for the Human and Social Development Programme and Dr. Scrimshaw, Senior Adviser to the Rector on the World Hunger Programme. It is hoped that these further meetings will take place within the next few weeks.
During this round of contacts it has been learned that the University's endowment fund has been divided into two parts: the income from one part will be used to finance the general work of the University and the income from the other part will he used to finance only work connected with developing countries, with which, understandably, the initial programmes of the University are overwhelmingly concerned.
It is the belief of Her Majesty's Government that the discussions with University officers and the details of the revised financial structure of the endowment fund will provide the effective and up-to-date information which is needed before any decisions can be taken regarding support for the United Nations University by Her Majesty's Government and what form that support might take.
In conclusion, I again express my appreciation to the noble Lord, Lord Beaumont of Whitley, for having raised this subject and given me an opportunity to put before the House information which I feel will be broadly appreciated.

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