Sitting of 22 May 1978

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

    Civil Aircraft (Anglo-American Projects)
    Mr. Arnoldasked the Secretary of State for Industry what recent discussions he has had on future aircraft projects with representatives of Boeing, Lockheed and McDonnell Douglas; and if he will make a statement.
    Mr. Whiteheadasked the Secretary of State for Industry what communications he has received from the Boeing company about possible collaborative ventures with the British Aerospace Corporation.
    Mr. Tebbitasked the Secretary of State for Industry if he will make a statement upon his discussions with United States aerospace companies.
    Mr. Adleyasked the Secretary of State for Industry if he will make a statement on his recent discussions concerning the future of the British aircraft industry.
    The Secretary of State for Industry (Mr. Eric G. Varley): In order to secure first-hand information about the plans of the leading American civil aircraft manufacturers, I recently invited senior
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    management of the Boeing, Lockheed, and McDonnell Douglas companies to visit London for discussions. Those discussions were for information, and not in any sense negotiations. The results will form part of the Government's current consideration of future civil aircraft policy. The timing of decisions on aircraft projects will depend mainly on commercial factors.
    Mr. Arnold: How are the conflicting interests and ambitions of British Airways, British Aerospace and Rolls-Royce to be reconciled in these matters? Does the right hon. Gentleman agree that any future decisions should be based upon commercial criteria and upon the size of potential markets, since that would be the best way of securing employment opportunities and the interests of the taxpayer?
    Mr. Varley: I thought that I had made plain that the factors that have been taken into consideration are mainly commercial. Every corporation operates within the framework of its own legislation. We have to co-ordinate as best we can. However, the hon. Gentleman's point is very much borne in mind.
    Mr. Speaker: I shall call first those hon. Members whose Questions are being answered.
    Mr. Whitehead: Will my right hon. Friend bear in mind that some very seductive offers can be put forward by American manufacturers for the short term in order in the long term to kill off the design capacity of the European aircraft industry? Will he also bear in mind that it is not necessary for us to go ahead on the basis of a launch order from British Airways on any of these collaborative projects, and that the sure test of the collaborative project should be British participation in design leadership and engine supply throughout the production run?
    Mr. Varley: These are the factors which have been discussed with the American companies. British Aerospace has discussed them, too, with the European companies and interests. Tomorrow I shall be going to Bonn and Paris to take up these matters directly with German and French Ministers.
    Mr. Tebbit: We think that it is right that the Government should have engaged in these discussions in order to ensure that no options are foreclosed by the passage of time while British Aerospace is engaged in Europe. Will the right hon. Gentleman bear in mind that if he takes notice of what the hon. Member for Derby, North (Mr. Whitehead) said, not only about the necessity for British leadership in the design of the airframe, but about the fitting of British engines, he will be foreclosing on the options for doing a deal with the French, who are excessively attached to their own engine?
    Mr. Varley: I know something of the French aero engine industry, because in February I was able to go to SNECMA and take part in discussions. However, all these factors, particularly that just mentioned by the hon. Member for Chingford (Mr. Tebbit), will be borne in mind.
    Mr. Adley: Is it not a simple fact that when airlines order aircraft they specify the engine just as they specify the airframe? Is it not, therefore, a dangerous delusion to believe that, merely because British Airways might specify an aeroplane with a Rolls-Royce engine, Boeing will insist on all its other customers fitting their aircraft with the same engine? Is not a Boeing partnership with British Aerospace rather like a partnership between the wolf and Little Red Riding Hood? Ought we not to consider the possibility that the Boeing 999 might be the number we should be referring to as a warning of what could happen if, as the hon. Member for Derby, North (Mr. Whitehead) said, we allow our industry to be seduced in this way?
    Mr. Varley: I think that what we have to bear in mind is that no decisions have been taken at this stage, either by British Aerospace or by some of the other interests involved. I understand that British Aerospace is willing to discuss further with Boeing, but, of course, the top consideration of British Aerospace has to be given to the commitment that it has made to the European interest.
    As to the first part of the hon. Gentleman's supplementary question, I understand that there is some advantage—not a total advantage—in an engine being a lead engine in any new aircraft. There is
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    some advantage, but it is not absolutely crucial.
    Mr. Terry Walker: In view of the fact that every week we are given different accounts of what offers are being made to the British Government, and bearing in mind that the British Government have to finance these projects in any case, will my right hon. Friend give an assurance that a statement will be made to the House that will allay the fears of the workers before a final decision is made about this matter?
    Mr. Varley: There will certainly be a statement made to the House in due course. As to consultations with the work force, it is our intention to consult the aerospace committee of the Confederation of Shipbuilding and Engineering Unions. We plan to do that within the next few weeks.
    Mr. Cope: Will the Secretary of State ensure that in considering these matters and, for that matter, any shorter-term decisions on the future of the aircraft industry, the figures that are used to compare different projects are adjusted to ensure that they do not reflect the present disgraceful discrimination against British aircraft and in favour of American aircraft in the present set-up of our Customs duties?
    Mr. Varley: Again, this is one of the factors that is being examined by the Government in a co-ordinated way and by the interests involved, British Airways and British Aerospace.
    Mrs. Hayman: Does not my right hon. Friend agree, however, that the Government could accede to the request of British Aerospace for permission to go ahead with the HS146 without in any way prejudicing the options on the larger aircraft, and is it not true that it is an important commercial factor that delay is extremely damaging to the market prospects for the HS146? If my right hon. Friend does agree, when may we have the "Yes" that we need?
    Mr. Varley: I know my hon. Friend's interest in the HS146, and she will know, too, that proposals have been put to us by British Aerospace. These are under active consideration. A statement will be made in due course.
    Mr. Pattie: Does the Secretary of State agree that, in a complicated situation, the defence aspect is important? Bearing that in mind, does he agree that the Boeing Corporation does not seem to be the best of the American contenders, even assuming that one wants to have an American involvement at all?
    Mr. Varley: That is another part of this complicated matter. I think that Boeing has 60 per cent. of the world's civil or commercial airline interests, and other American companies, of course, are much more oriented towards military aircraft. We know that our aerospace industry is weighted in the military field, too. But I think that we must look at all these options and come to conclusions which are in the best interests of the British industry.
    Mr. Speaker: I shall call one more hon. Member from each side of the House on these Questions.
    Mr. Hoyle: Will my right hon. Friend say whether in considering the longer-term plans he has had any talks with British Airways about the BAC111 and the possibility of buying that aircraft instead of the Boeing, and whether failure to buy that aircraft could affect our plans to sell it to the Japanese?
    Mr. Varley: I am not responsible for British Airways. As my hon. Friend knows, that responsibility lies with my right hon. Friend the Secretary of State for Trade. However, I can tell my hon. Friend that I engaged in discussions with my right hon. Friend at a joint meeting that took place between British Airways and British Aerospace, at which we asked them to take this factor into account. I understand that both corporations are talking to one another.
    Mr. Rost: Why, in the meantime, is the Minister holding up finance for the development of the derivatives of the RB211 engine which will be needed in order to secure the future for Rolls-Royce in any case, whatever tie-up the Government finally agree with either American or European interests, or with both?
    Mr. Varley: We are not holding up finance for the further development of the RB211–535. It is wrong for the hon. Gentleman to suggest that we are doing that. We have received proposals by way
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    of the National Enterprise Board on the RB211–535. We are considering this. Of course, it is part of this whole question, as the House understands.

    Industrial Strategy
    Mr. Kenneth Clarkeasked the Secretary of State for Industry whether he will make a statement on the progress of the Government's industrial strategy.
    The Minister of State, Department of Industry (Mr. Alan Williams): Encouraging progress is being made in the development of the industrial strategy. The key task this year is to obtain action at company level on the findings and recommendations of sector working parties.
    Mr. Clarke: Why does it remain part of the Government's industrial strategy to persist in trying to find ways of allowing trade unions to put nominees on the boards of British companies? Does not the Minister recognise that the continued threat of legislation in this field is damaging confidence among British management and deterring many foreign investors from putting their money in this country?
    Mr. Williams: The hon. Gentleman should have spoken to the major multinational to which I spoke last week in the United States, which spoke glowingly of the prospects which it saw arising from the presence of worker representatives on the boards of its subsidiaries in Germany.
    Mr. Robinson: Does my right hon. Friend agree that a key element in the success of the Government's industrial strategy would be the success of the British-owned motor car industry? Does he further agree that its success is being gravely threatened by the growing level of imports from Japan, which seems to be in marked contradiction to the undertakings that the Japanese have given to the Government? Therefore, will he, together with his right hon. Friend the Secretary of State for Trade, take up this matter again with the Japanese and set up a system for monitoring shipments from Japan, because that is what will determine the level in the future?
    Mr. Williams: My hon. Friend can be assured that the Department of Trade and my Department are aware of the problem. But I think that it has to be

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    accepted that, because of the large existing levels of stock at the beginning of the year, it was perhaps inevitable that it would take a little time for the agreed figures to be attained. For that reason, we are doing exactly as my hon. Friend said. We are keeping a close check on shipments and on prospective future shipments.
    Mr. Alan Clark: When the Ministers consider the progress of the industrial strategy, do the right hon. Gentleman and his right hon. Friend ever reflect on the ease with which manufactured goods of foreign origin enter this country and the difficulties that are placed in the way of those who manufacture such goods in this country and wish to export them?
    Mr. Williams: Of course we do. That is why we are taking part in the multi-trade negotiations—to try to ensure that tariffs and barriers are removed wherever possible. Indeed, on a recent visit to Japan we discussed with MITI this very point—that there needed to be better access for British goods to the Japanese market.
    Mr. Roy Hughes: How many more factories have to close and how many more people have to be put on the dole before the Government finally act and introduce a policy of import controls, as put forward by the Cambridge Group of economists and backed by the trade union movement? Does not my right hon. Friend agree that, whether it be in cars, electronics or steel, in Britain's present economic circumstances a policy of free trade is no good for Britain?
    Mr. Williams: I think that my hon. Friend should understand one simple fact. A retreat from free trade would be in the worst interests of Britain, because Britain relies essentially on clear access to overseas markets. Action has been taken in relation to imports of cars and colour television sets from Japan. These actions have been taken at an industry level, and the Government are quite convinced that they will be satisfactory.
    Sir K. Joseph: Is it not humbug for Ministers to prate about an industrial strategy when excessive Government spending leading to excessive Government borrowing and excessive marginal rates of direct taxation, at all levels, is
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    doing such savage harm to jobs and activity in the economy?
    Mr. Williams: I admire the right hon. Gentleman's dedication to the gospel that he continually preaches. I would only point out that, in contradiction to the trends that one would expect if his gloom were justified, investment and production are rising, and inflation and unemployment are falling. That is not a bad attainment.

    Hull Telephone Department
    Mr. Neubertasked the Secretary of State for Industry whether he has reached a decision on his renewal of the operating licence for the Hull telephone department; and if he will make a statement.
    The Minister of State, Department of Industry (Mr. Gerald Kaufman): Discussions have been taking place between Kingston upon Hull City Council and the Post Office on detailed matters concerning the question of a long-term licence. A decision will be taken when we have been able to consider the outcome of these discussions.
    Mr. Neubert: As the continued independence of the Hull telephone department is a considerable asset as a test of efficiency and service to the public, by comparison with the nationalised monopoly, will the Minister ensure that a favourable decision is reached at the earliest opportunity to avoid further uncertainty and prejudice to forward planning?
    Mr. Kaufman: I am glad that the hon. Gentleman supports the Labour-controlled council's views. We are considering these matters carefully and shall announce a decision when we are ready.

    Aircraft and Shipbuilding (Trade Unions)
    Mr. Palmerasked the Secretary of State for Industry if he will make a statement on the recognition of trade unions for collective bargaining purposes under the Aircraft and Shipbuilding Industries Act, stating which unions, either at national or local level, have been recognised, the grades of employees covered in each case, the date when the agreement was made, and the grades of employees in each industry as yet not covered by agreements but where recognition has

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    been sought, either for all employees or for members of particular trade unions.
    The Under-Secretary of State for Industry (Mr. Les Huckfield): The recognition of trade unions is a matter for British Aerospace and British Shipbuilders.
    Mr. Palmer: That is excellent advice—that it is ultimately a matter for the boards of the industries concerned. However, may I take it that that is subject to the ever-ready advice of the Advisory, Conciliation and Arbitration Service?
    Mr. Huckfield: I take careful note of my hon. Friend's kind remarks. He is of course right. I should add that my right hon. Friend has no power to issue directions on this matter.
    Mr. Warren: What has happened to all the promises given by the Government about industrial democracy throughout the debates on the Bill which nationalised these industries? Is the hon. Gentleman aware that throughout the aerospace industry the shop floor is shocked that it is not being consulted on any future projects and that it feels that it is neglected by the Government that it put in power?
    Mr. Huckfield: The hon. Gentleman is a bit out of date. We have already received one report on industrial democracy, on 6th December, which was placed before the House. My right hon. Friend expects the second report before 30th June.

    British Productivity Council
    Mr. Durantasked the Secretary of State for Industry when he next plans to meet the chairman of the British Productivity Council.
    Mr. Les Huckfield: My right hon. Friend the Secretary of State has met the chairman of the British Productivity Council on a number of occasions, but there are at present no plans for a further meeting.
    Mr. Durant: Will the hon. Gentleman agree, in spite of the slight upturn in productivity, that there is an essential need to increase this nation's productivity, which is falling sadly behind? In his discussions with the chairman of the
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    council, will he discuss wage costs per unit, which are now escalating alarmingly in a way which will affect productivity and wage costs?
    Mr. Huckfield: I hope that the hon. Gentleman will recognise that our wage costs per unit are among the lowest in Europe. I hope that he will also take into account the fact that, with inflation down to 8 per cent., manufacturing investment up 14 per cent., our decline in the share of world trade halted and employment in manufacturing actually rising until February this year, that is not a bad record.
    Mr. Gwilym Roberts: But, in view of the important contribution to productivity made by sector working party reports, will my hon. Friend accept that there is some disappointment on both sides of industry and there is a feeling that the Department is passing the buck, since it has now suggested that many of the recommedations of those working parties should be worked out in the companies rather than being given a direct departmental lead?
    Mr. Huckfield: Although I take note of what my hon. Friend says, I cannot agree with him. I should not like him to think that my Department has in any way abandoned the sector working parties. It takes careful note of what they say and is anxious to ensure that their recommendations get down to company level.

    Lucas Aerospace (Shop Stewards' Proposals)
    Miss Joan Lestorasked the Secretary of State for Industry whether his Department is prepared to meet the combined shop stewards' committee of Lucas Aerospace.
    Mr. Hoyleasked the Secretary of State for Industry why his Department has consistently refused to meet the Lucas Aerospace combined shop stewards' committee in connection with job maintenance and job creation.
    Mr. Thorneasked the Secretary of State for Industry why his Department has not directly discussed the Lucas Aerospace combined shop stewards' committee's corporate plan in relation to the recent redundancy announcement of Lucas Aerospace management.
    Mr. Kaufman: I met members of the committee in a delegation brought to see me by my hon. Friend the Member for Birmingham, Yardley (Mr. Tierney) in December 1975. The recently announced proposals of Lucas Aerospace are being discussed with the proper negotiating body representing the interests of the Lucas Aerospace workers in all unions and at all sites, namely, the Confederation of Shipbuilding and Engineering Unions, with which Ministers are in frequent contact, and with which I have discussed the problems of Lucas Aerospace. Either side can propose topics for meetings and it is for the confederation to decide who will attend on its side.
    Miss Lestor: Will not my hon. Friend agree that, since the management of Lucas has consistently refused to meet the shop stewards' committee, it would be a good idea and also in the interests of industrial democracy if he could intercede and meet them directly himself?
    Mr. Kaufman: As I have explained to my hon. Friend, I have already met them myself. I have also interceded several times via the Confederation of Shipbuilding and Engineering Unions. The confederation, having met Lucas Aerospace last month, is due to meet it again next month. If it is appropriate for the combine to be represented there, of course the confederation will decide to do so.
    Mr. Hoyle: Will not my hon. Friend agree that there is some difficulty with the confederation in relation to this? Will he not try to bridge the gap by getting the Lucas directors to meet the shop stewards and perhaps implement this socially useful plan? Does this matter not also point to the need for workers' democracy, when the workers can produce such a useful plan which can be faulted by no one?
    Mr. Kaufman: I accept that these matters have not proceeded as satisfactorily as they might. However, my hon. Friend says that there are difficulties with the CSEU. He himself is an officer of one of the leading unions in the CSEU. The confederation has made it clear to Ministers time and again that it would very much resent it if its normal trade union machinery were bypassed. Indeed, only a short time ago, AUEW (TASS) issued a statement to its officials, in which it said:
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    "It is not in the interests of our common objectives to ignore the democratic procedures of our movement. Members of unions can win policies if they are prepared to use the democratic structures which exist in various forms, in every union."
    Mr. Thorne: Will not my hon. Friend recognise that, with the continuous threat of redundancy affecting the workers in Lucas Aerospace, it is the Government's responsibility to intervene, in spite of the usual institutional arguments that he now puts forward—that it might offend certain union leaders in the confederation?
    Mr. Kaufman: The "usual institutional arguments" are the normal procedures of the trade union movement. Although my hon. Friend may feel that he can set those procedures aside, I, as a member of the Government, have to work every day with the confederation. It is not possible for me to set aside its procedures in favour of any body which wishes to set them aside.
    Mr. Tebbit: Does the Minister understand that we do not want to intrude on this bureaucratic mumbo-jumbo of an argument between him and his trade union friends but that we would like him to come to the point behind these Questions? Does he think that the Lucas directors are perversely or malevolently throwing away the chance to enter into good business and make profits—or does he think that the truth is that those ideas are nothing more than another mare's nest dreamt up by his hon. Friends?
    Mr. Kaufman: The hon. Member seems, like his right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), to believe that private industry in this country operates in a state of perfect competition. If that were so, the kind of intervention for which his hon. Friends constantly ask would not be required from this Government. As it happens, when it comes, for example, to the question of proposed redundancies in Lucas Aerospace, we do intervene. I myself called in the management on that matter and made it clear to it that propoer consultation with the confederation and the work force was essential.
    Mr. Skinner: Will my hon. Friend concede that there are some occasions—perhaps not too many; some would argue about the balance—when the rank and file are just marginally in front of their

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    progressive leadership? Looking at the matter from that angle, will he not concede the argument in regard to the Lucas proposals?
    Mr. Kaufman: I know that my hon. Friend might take that view with regard to the NUM. I prefer the progressive leadership.
    Mr. Adley: Is not the Minister aware that these proposals have nothing to do with the level of productivity achieved by the work force over the years at Lucas? If the workers want to produce a new range of supersonic caravans, surely it is up to the Government, who are so profligate with taxpayers' money, to give them everything they want.
    Mr. Kaufman: The hon. Gentleman's derision does no justice to a series of very constructive proposals put forward by the Lucas work force. The problem is to ensure that those proposals are considered within the proper structure between the union and the trade union movement. His derision of those plans does him no credit

    National Economic Development Council
    Mr. Rookerasked the Secretary of State for Industry when he next expects to attend a meeting of NEDC.
    Mr. Varley: I will attend the NEDC's next meeting on 7th June.
    Mr. Rooker: In view of the totally unsatisfactory and negative nature of the answers to the previous Questions today, when my right hon. Friend next meets the NEDC will he ask for the Lucas problem and the urgency of the situation to be put on the agenda, and for the matter to be placed in the sector working party system?
    Mr. Varley: I doubt very much whether that matter will come up at the next meeting of the NEDC. I have nothing to add to the answers which have already been given by my hon. Friend the Minister of State.
    Mr. Michael Marshall: Will the Secretary of State take the opportunity when next he meets the NEDC of correcting the problem mentioned by the Minister of State this afternoon in describing the industrial strategy? The Minister of State,
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    in the optimistic view he advanced, based on the generosity of his American hosts, has confused the House and the country. Therefore, will the right hon. Gentleman define that industrial strategy?
    Mr. Varley: I have done so on previous occasions, and it would take a much longer time than Question Time to do so again now. One of the great strengths of the industrial strategy is that it has been put on a tripartite basis. I, along with the right hon. Member for Leeds, North-East (Sir K. Joseph) and others, was present last week when the president of the Confederation of British Industry paid tribute to all those taking part. He said that the CBI, in common with the TUC, was totally committed to that strategy. It is trying to reverse the relative decline that has taken place for 20 or 30 years or more. What is more, these efforts are beginning to succeed, and I hope that the system, provided it is given a chance, will succeed and that Members of the Conservative Party will start to pay tribute to it—and at the same time will pay tribute to the many Conservatives who are contributing to that policy.
    Mr. Ashley: Will my hon. Friend bear in mind when next he meets the NEDC that it is damaging to economic development if important regions are allowed to suffer severe plant closures without Government action or remedial measures being taken to prevent such closures? For example, does he appreciate that in North Staffordshire we are threatened with steel closures and bakery closures and that thousands of men and women are liable to become unemployed as a direct result of Government policy? Will the Secretary of State undertake a special investigation into the serious problems of North Staffordshire?
    Mr. Varley: Of course I shall take note of the serious problems of North Staffordshire. I know that there are further Questions on the Order Paper concerning the steel industry. I have had discussions with my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) and his colleagues in the West Midlands group of Labour MPs on the subject of Shelton and Bilston. I promise that the British Steel Corporation, in discussion with the TUC steel committee, will take fully into account the effect on the areas concerned.

    Northern Region
    Mr. Radiceasked the Secretary of State for Industry whether he is satisfied with industrial progress in the Northern Region.
    Mr. Alan Williams: We shall continue to do everything we can to promote investment and employment in the Northern Region.
    Mr. Radice: Does my right hon. Friend agree that, despite the considerable amount which has been achieved, the Northern Region is still suffering from very high unemployment and severe structural problems? Is he aware that at the meeting of the Northern Regional Council Labour Party last weekend unanimous support was given to a report calling for better co-ordination of regional policy? Will he examine the proposals in that report?
    Mr. Williams: I share and understand my hon. Friend's concern about the level of unemployment. I am encouraged by the fact that the rate of letting of Government factories has improved markedly in the Northern Region. Whereas only 11 were let in 1975–76, I understand that 21 were let in the following year and 41 last year. Already since 5th April nine of our factories in the region have been reserved. Clearly, I shall wish to examine the results of the conference to which my hon. Friend referred. If there is practicable action that can be taken to improve co-ordination, the Government will take such action. But we already have a planning board to co-ordinate the work of Government Departments in the region.
    Sir T. Kitson: Does not the Minister realise that when he removed a large part of North Yorkshire from development area status he only aggravated the situation in that area? Does he appreciate that many people from Teesside work in North Yorkshire and that many companies are not now going ahead with development plans in that area? Therefore, will he reconsider his decision?
    Mr. Williams: That is a completely different question. The Question relates to the Northern Region and not to the Yorkshire and Humberside Region. If the hon. Gentleman wishes to table a Question on that subject, he has the opportunity to do so. I have seen deputations
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    from North Yorkshire and we have discussed in detail the area's problems. As yet, there is no evidence to justify the hon. Gentleman's statement that projects in the area are being turned away. I am convinced that the selective approach still available to us and the area's current status are adequate.
    Mr. Conlan: Will my right hon. Friend reflect on the representations which he has already received on the establishment of a national boiler company? He will recognise that there is widespread concern in the Northern Region. Will he undertake to meet representatives from the region as soon as possible before further progress is made on these lines?
    Mr. Williams: My hon. Friend was kind enough to convey to me the concern of his constituents on various occasions about the possible impact of the proposals. I have had meetings with the CSEU, and should my hon. Friend wish to bring a group of his constituents to see me I shall be only too happy to talk to them.
    Sir W. Elliott: Will the Minister take note of the fact that in answer to a Question, in which I asked for the number of bodies other than direct arms of Government Departments in the NoNrthern Region receiving subsidies and how much they were receiving, I was told that no central information was available? Does he agree that, despite the amazingly high unemployment rate in the Northern Region, there is still a fantastic shortage of skills and a number of unfilled skilled vacancies?
    Mr. Williams: I shall bear those points in mind, and I shall convey them to the relevant Minister in the Department of Employment. I do not recollect the parliamentary reply to which the hon. Gentleman referred, but I shall examine it to see whether there is any further information I can provide.

    Lucas Aerospace (Shop Stewards' Proposals)
    Mr. Russell Kerrasked the Secretary of State for Industry whether he is prepared to support the development by workers at Lucas Aerospace of a powered wheel for aircraft which reduces noise and waste of fuel in taxi-ing operations in and around airports.
    Mr. Les Huckfield: My Department is willing to consider any specific proposals for Government support for research into new technology, or the development of new products, in the civil aerospace field.
    Mr. Kerr: That is a rather disappointing answer. In the meantime, will the Minister pay his tribute to the initiative and constructive proposals in the Lucas shop stewards' corporate plan?
    Mr. Huckfield: I thought I gave my hon. Friend a rather encouraging reply. If he examines the various aspects of work in the corporate plan, which I have studied in some detail, he will find that research and development work is already taking place in various Government Departments and organisations. These operations include solar heating, windmills, braking systems, electric vehicles, heat pumps, oceanics, applications of micro-processors, kidney machines, aids for the blind, aids for spina bifida patients, and powered undercarriages for aircraft.
    Mr. Biffen: Does the Minister know whether the Lucas aerospace combined shop stewards, who have featured so prominently in this afternoon's Question Time, have taken this proposed development to either the National Research Development Corporation or to the National Enterprise Board and, if so, with what consequences?
    Mr. Huckfield: I cannot give an up-to-date report on that matter without notice.

    Manufacturing (Investment)
    Mr. Knoxasked the Secretary of State for Industry whether he proposes to take any new measures to increase investment in manufacturing industry.
    Mr. Clemitsonasked the Secretary of State for Industry if he is satisfied with the current level of investment in manufacturing industry.
    Mr. Alan Williams: Manufacturing investment, excluding iron and steel, has increased considerably and encouragingly in the last 12 months.
    Mr. Knox: Does the Minister realise that the restoration of confidence in manufacturing industry and an increase in the demand for its products have far more to contribute to increasing investment
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    in manufacturing industry than schemes involving the direct use of Government money? When will the Government take steps to improve confidence in manufacturing industry and to increase the demand for its products?
    Mr. Williams: It is this complete lack of understanding of what is taking place in the economy that amazes me every time I hear the Opposition on this subject. They never seem to learn. The fact is that last year investment in the private sector increased by 14 per cent. In real terms—and the increase was in real terms—the investment was higher last year than it was under the Conservative Government in 1972 and 1973. If the guide is the way in which investment increases, I wish to make clear that the plans for the machine tool industry in the current year envisage a higher rate of investment than for any of the last eight years—in other words, since the Labour Party was last in Government. In the non-ferrous foundry sector, there are plans that will give a two-fold increase over the rate of investment in the last four years.
    Mr. Clemitson: While one agrees that we need more investment in industry, and while the latest figures are to be welcomed, will not the result of investment in industry often mean in the long run that there will be less employment in industry? Is it not essential therefore, if we are to reap the full benefits of increased investment in terms of increased wealth, to have, in parallel with the programme of increased investment, a programme of expanding job opportunities in the public service sector and the development of non-work alternatives for unemployment such as shorter working lives and greater educational opportunities?
    Mr. Williams: These alternatives are matters to which the Government have been giving attention; hence many of the proposals that have come from the Department of Employment. My hon. Friend is right in saying that implicit in many of these sectoral schemes is the proposition that productivity must improve and that therefore extra output may be attained without necessarily providing massively extra employment, though under the schemes that have been put forward so far 22,000 extra jobs will be created. More importantly, because

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    of the difference that the schemes will make to the balance of payments, they will enable the economy to be operated at a higher level and thereby indirectly create jobs.
    Mr. Kenneth Clarke: Does not the Minister accept that there is no investor who is not willing and able to raise his money on the market for a project so long as he has confidence that he has markets for his products and a return on his investment? Does he not accept that it is the failure of the Government to create that atmosphere of confidence which makes his various sectoral schemes necessary?
    Mr. Williams: My interpretation is different. My interpretation is that the level of investment under the Labour Administration is higher than it was under the Conservative Administration because business can see that we can run the economy better than can the Conservative Party. The Conservative Party should look at the facts. Under the industry schemes there has been E1·5 billion worth of new investment projects, and the Conservative Party is tonight to vote against more money for those very schemes.
    Mr. Ioan Evans: If we are to have increased investment in manufacturing industry, will my right hon. Friend use the instruments of the National Enterprise Board and the Welsh and Scottish Development Agencies, which are doing a grand job in this respect? If we are to give huge funds to the industry, will the Government ensure that we get a share of the equity of those enterprises for the benefit of the people?
    Mr. Williams: Where appropriate, equity participation is discussed with companies. My hon. Friend will see from forward projections of public expenditure that it is envisaged that the NEB and the Scottish and Welsh Development Agencies will continue to play a major role in the regeneration of industry.
    Mr. Hordern: Is it part of the Government's industrial strategy that the Government should have to increase interest rates almost to record levels in order to attract funds to the Government to fund their borrowing requirement and away from industry, to which otherwise the funds would have gone?
    Mr. Williams: It is shattering to find that, while the Conservative Front Bench seems to have no understanding of the domestic economy, those on the Conservative Back Benches have no understanding of the international economy. I should like to point to what has been happening to interest rates worldwide, particularly in relation to the United States. Perhaps when Conservative Members have done a little elementary homework they may understand what is happening.

    British Steel Corporation
    Mr. Michael Marshallasked the Secretary of State for Industry when he next expects to meet the chairman of the British Steel Corporation.
    Mr. John Ellisasked the Secretary of State for Industry when he next proposes to meet the chairman of the British Steel Corporation.
    Mr. Varley: On 26th May 1978.
    Mr. Marshall: Will the Secretary of State tell the chairman, when they meet, how much he approves of the recent joint venture between Redpath Dorman Long and the Dutch consortium which is to take over the metal oil platform erection business? Will he go further and say how much he would like the British Steel Corporation to seek more of these joint ventures, which will reduce the demand on the taxpayer and lead to a wider European framework of joint ventures for the corporation?
    Mr. Varley: I can do no better than pass on the hon. Gentleman's comments to the chairman of the British Steel Corporation.
    Mr. Ellis: When my right hon. Friend meets the chairman of the British Steel Corporation, will he make clear that he is looking to the chairman, in the current negotiations with the TUC steel committee, to come out of those discussions with full agreement with the trade union side? Does my right hon. Friend agree that it is highly desirable that he does not at the end of the day simply adopt the British Steel Corporation's ideas but should involve the trade union movement and should continue the discussions, and that any workers fighting to save their plants or looking for investment in their plants should be given the opportunity to put forward their case so that

    1105
    they may have some of the confidence that has been sadly lacking in the plans of the British Steel Corporation since the end of the war?
    Mr. Varley: I am not only meeting the chairman of the British Steel Corporation on Friday this week; I am meeting the TUC steel committee on Wednesday this week. One of the items on the agenda is the possibility of direct worker participation on the board of the British Steel Corporation in line with Government policy. I, like my hon. Friend, am keen that workers should participate.
    Sir A. Meyer: Will the right hon. Gentleman arrange for me to receive a reply to the question that I asked in the Second Reading debate on the Iron and Steel (Amendment) Bill on 11th May, namely, what has happened to the British Steel Corporation's calculation that an expanded Port Talbot would supply Shotton with hot rolled coil a great deal more cheaply than Shotton could possibly make it, now that the exanded Port Talbot scheme is not to go ahead?
    Mr. Varley: I recall the hon. Gentleman's speech on that occasion. I am sorry if he has not received a reply. I thought that during the debate I gave an undertaking to write to him. I will look into the matter. I have not been briefed on that aspect
    Mr. Roy Hughes: Will the Secretary of State impress upon the chairman of the BSC that the policy of closures and redundancies cannot continue indefinitely and that the strategy of the 1960s might not be relevant to the late 1970s? Does he not agree that a policy of flexibility is now needed in steel strategy together with a major cut-back in the 5 million tonnes or so of steel that is still coming into the country?
    Mr. Varley: The BSC must get its finances straight as quickly as is practicable. My hon. Friend will know that in the last financial year BSC, in common with many comparable steel companies overseas, lost money. It lost £440 million. Part of the Government's policy is that the financial objectives of the BSC should be to break even by the financial year 1979–80. We must approach these matters sensibly. One of the major factors is trying to bring demand into line with capacity. That will inevitably lead to
    1106
    some problems in some areas, but I think that the whole House will agree that we are dealing with the problem sensibly and humanely.

    European Community (Steel Industry)
    Mr. Dykesasked the Secretary of State for Industry when he next intends to meet Commissioner Davignon in Brussels to discuss problems affecting the steel industry in the EEC member States.
    Mr. Kaufman: At present my right hon. Friend has no plans to do so.
    Mr. Dykes: Does the Minister of State agree that the problem of over-capacity in European steel can be solved only in the EEC context and that already the suggestions made by Commissioner Davignon have been helpful in taking all the member States' steel industries forward together in a difficult climate? Does he agree that if redundancies are inevitable they must be carried out gradualistically and in a humane way in a European context and not just nationally?
    Mr. Kaufman: What the hon. Gentleman says is unexceptionable. We need to work within the Community for a sensible approach to the steel industry. The Davignon approach is helpful in many respects. I am glad about the hon. Gentleman's remarks about the need for generous redundancy payments where closures have taken place.
    Mr. Ashley: Is the Minister aware that he will be making a grave error of judgment if he condones the closure of Shotton steel works, because he will be defying steel workers, defying Members, of Parliament, defying the TUC steel committee and—because that steel works can be profitable with an arc furnace—defying logic?
    Mr. Kaufman: These are not matters which we have discussed with Commissioner Davignon. We stated our position in the White Paper, and discussions are taking place on that basis.
    Mr. Biffen: Is the hon. Gentleman aware that if one has to choose between the Continental aristocracy there is more to be said for the free trade views of Count Lambsdorff than for the protectionist and cartel attitude of Viscount Davignon?
    Mr. Kaufman: It ill becomes me to distinguish between one Continental aristocrat and another. They are all the same as aristocrats, but it just so happens that Commissioner Davignon's approach to the steel industry's problems has been helpful and we hope that it will continue to be so.
    Mr. Hardy: Is it not the case that, no matter from what source, there has been a great deal of progress in the last year or so? Could not that progress be even further encouraged if my hon. Friend's Department were a little more decisive in approving job evaluation schemes and other productivity deals, certainly in the South Yorkshire area?
    Mr. Kaufman: I well understand the problem to which my hon. Friend has drawn attention. We are doing our best to expedite these matters, but he will know that they have to be conducted within the framework of the Government's pay policy.

    Lucas Aerospace (Shop Stewards' Proposals)
    Mr. Maddenasked the Secretary of State for Industry what is his Department's policy in respect of the Lucas Aerospace workers' proposals for product diversification in that company.
    Mr. Kaufman: Ministers have consistently welcomed the initiative of the Lucas Aerospace shop stewards in preparing constructive proposals for the future of their company.
    Mr. Madden: Does my hon. Friend agree that it is entirely unacceptable for Lucas Aerospace to be expanding abroad while it is contracting at home, closing plants in Liverpool, Bradford and Shipley and smashing up the foremost design teams in the world? Does he believe that such actions run contrary to the national interest, and will he intervene to point out the national interest to the firm and that it should act in a way that is consistent with our best employment interests?
    Mr. Kaufman: I have done so. I have discussed these matters with Lucas Aerospace since it announced its proposals for redundancies, and I have drawn particular attention to the possible impact of those closures on areas of high and chronic unemployment in the North of England.
    1108
    As a result of my intervention, my officials are in discussion with the company to see if anything can be done to assist my hon. Friend's area and Merseyside.
    Mr. Alan Clark: Will the Minister agree that "pointing out" and "drawing attention to" are no substitute for the hard defence orders which would restore employment in this factory?
    Mr. Kaufman: They are also no substitute for the Government having the ability, as we have in the case of nationalised industries, to have some close influence on what takes place. As always, the hon. Gentleman is drawing attention to the inadequacies of private enterprise.
    Mr. Rooker: Is my hon. Friend aware that the Lucas Aerospace directors recently told some of my hon. Friends and myself that the Opposition spokesman on defence, the hon. Member for Stretford (Mr. Churchill), was directly responsible for Lucas losing a contract in the aerospace field, which put workers out of work? Is my hon. Friend aware also that Lucas has a part stake in a workers' co-operative in Yugoslavia, where there is workers self-management, and that is not exactly reciprocated in this country? Will he put that also to the Lucas directors the next time he meets them?
    Mr. Kaufman: I do not think that I could put it as well as my hon. Friend puts it, and I am grateful to him for drawing attention to the maverick activities of the hon. Member for Stretford (Mr. Churchill) and his lack of concern for the true interests of workers in Lancashire.

  DIRECTOR OF PUBLIC PROSECUTIONS
  Mr. Rookerasked the Attorney-General when he next expects to meet the Director of Public Prosecutions.
  Mr. Skinnerasked the Attorney-General when he next intends to meet the Director of Public Prosecutions.
  The Attorney-General (Mr. S. C. Silkin): Quite soon.
  Mr. Rooker: When my right hon and learned Friend next meets the DPP

  1109
  will he ask him to take action to interview the 1,960 people in Birmingham and the West Midlands who, in a recent court case, were alleged to have received gifts from the Bryant building company and, if necessary, set up a special office in Birmingham to do that job so that no judge in future can again describe Birmingham as a municipal Gomorrah?
  The Attorney-General: The Director of Public Prosecutions has already considered with very great care all the facts involved in that case, has had prolonged and very careful advice from counsel and has considered the matter with myself and my Department. I am quite satisfied that all that requires to be done in relation to prosecutions has already been done.
  Mr. Christopher Price: Will my right hon. and learned Friend consider, in relation to the case that finished on Friday in the Divisional Court, where it was found that a mere arrangement had been frustrated, whether his conversations with the DPP, which authorised the Director to use such phrases as
  "flouting the direction of the court"
  when there had been no such direction, were proper? Will he consider whether such statements, which were repeated in all the newspapers, when there was no direction of the court at all, were so prejudicial to the defendants as themselves to constitute contempt?
  The Attorney-General: I understand that there is a later Question on contempt of court on the Order Paper.
  Mr. Skinner: Can the Attorney-General tell us whether the DPP is pleased that some of the loose ends of some of the London and County scandals have been tied up with the arrest of Gerald Caplan and some of his associates? Would he be even more pleased if he were able to tie up some of the loose ends of the Poulson inquiries relating particularly to the Malta hospital contract and the question of arresting, or at least charging, Dr. Kenneth Williams, who was involved in that matter, along with some other notables?
  The Attorney-General: The London and County matter is sub judice and extradition proceedings are being taken. On the other matter to which my hon.
  1110
  Friend referred, I have already answered the same question from him not less than five times, and the answer remains the same.

  NORTHERN IRELAND
  Mr. Biggs-Davisonasked the Attorney-General what report he has had from the Director of Public Prosecutions for Northern Ireland about the operation of the Criminal Jurisdiction Act.
  The Attorney-General: The Director of Public Prosecutions for Northern Ireland has reported that one case has been instituted under the provisions of the Criminal Jurisdiction Act 1975. This case involves three persons who have been returned for trial to the Belfast City Commission for offences including the extraterritorial offence of murder in the Republic of Ireland and possession of firearms in that jurisdiction. The trial of these persons is pending.
  Mr. Biggs-Davison: In view of public concern about the number of fugitives from justice who find refuge in the Republic of Ireland, would the right hon. and learned Gentleman consider making, at his convenience, a full statement to the House on this matter, bearing in mind the assertion made by the Taoiseach that full use is not being made of this legislation and also his invitation to resort to the Offences Against the Person Act 1861 in cases of murder?
  The Attorney-General: On the question of a full statement, the hon. Gentleman knows that my right hon. Friend the Secretary of State for Northern Ireland has answered a number of questions on this subject and has made statements. There is co-operation. It is true that there are many fugitives from justice in the South, but the hon. Gentleman will also know that the vast majority of them are people who are alleged to have committed offences prior to 1st June 1976 and it is only in relation to offences since that date that the provisions concerning extraterritorial offences apply. I have every reason to believe that co-operation betflween ourselves and the South is good.
  Of course, we have always been able to take advantage of the 1861 Act in relation to the extra-territorial offences to

  1111
  which it relates and, where necessary, we shall use that in addition to, or in lieu of, the new Act.
  Mr. Gow: Is it not the case that the law of extradition as applied in the Republic to those whom we would wish to prosecute for alleged terrorist offences in the United Kingdom is unsatisfactory? Can the Attorney-General tell us that representations have been made and are being made through the Foreign Office that the Irish Government should alter their law in this regard?
  The Attorney-General: I do not think that it is for me to criticise the law of another country. Extradition is another matter with which my right hon. Friend the Secretary of State for Northern Ireland has dealt on a number of occasions. We are well aware of the use of the border, and we are doing our best, together with the South, to solve that problem.

  LAW OF CONTEMPT
  Mr. Christopher Priceasked the Attorney-General how many representations he has now received in response to the consultative document on the reform of the law on contempt.
  The Solicitor-General (Mr. Peter Archer): The Green Paper on contempt of court was published on 21st March and my noble Friend has received four representations to date; further time is bound to elapse before all comments on the Green Paper have been received.
  Mr. Price: I thank my right hon. and learned Friend for that reply and I hope that I may get something out of him that I failed to get out of his senior. In view of the case that finished on Friday, in which it was found that there was a mere arrangement that had been frustrated and that there never had been any direction of the court, and as statements from the DPP, which used phrases such as
  "flouting the direction of the court"
  and
  "contrary to the direction of the court"
  were authorised, does my right hon. and learned Friend think that those statements were so prejudicial in the run-up to the case that they could well constitute
  1112
  contempt of court themselves? Will he urge the Attorney-General judicially to consider that matter and pronounce upon it?
  The Solicitor-General: The Divisional Court found that the court had made its intentions quite clear. Beyond that, I ought to say that the proceedings to which my hon. Friend has referred are not yet resolved, so we have to be a little careful.

NATIONALISED INDUSTRIES (INFORMATION)
Mr. Adley: On a point of order, Mr. Speaker. May I seek your guidance relating to the slightly unusual situation in which we find ourselves as Members as a result of the conflicting advice which we receive from three different nationalised industries, namely, British Airways, British Aerospace and Rolls-Royce?
The Secretary of State for Industry made a perfectly reasonable and balanced assessment of the position this afternoon, but some of the things that he said are in marked contrast to a Press release or information sent to a number of hon. Members by Rolls-Royce, entitled "The Way Forward", included in which were some comments which, being generous, one would describe as wishful thinking and not the sort of specific information which Members would expect to receive from a nationalised industry unless it were absolutely certain of its facts. Included were such phrases as
"This would lead us to a very high penetration of the market"
and
"making a total United Kingdom content of 55 per cent."
According to the information that I have, both these statements are a matter of argument. Where does the House stand in relation to information sent to hon. Members from nationalised industries? Are we not entitled to expect more care in the provision of information on some of these controversial matters?
Mr. Speaker: I heard the hon. Gentleman out, but I think that he will realise that there is no point of order for me to settle regarding statements issued by nationalised industries.

BUSINESS OF THE HOUSE
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): With permission, Mr. Speaker, I should like to make a short Business Statement.
In addition to the business already announced for tomorrow, it is hoped that the House will agree to take the remaining stages of the Solomon Islands Bill [Lords.]

ZAIRE (BRITISH SUBJECTS)
The Minister of State, Foreign and Commonwealth Office (Mr. Edward Rowlands): I will, with permission, Mr. Speaker, make a statement on British citizens in Zaire.
My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs informed the House on 16th May about the situation of British citizens in Zaire.
I now have to tell the House with very deep regret that five British subjects must now be presumed to have been killed in the appalling atrocities which have taken place in Kolwezi in the past few days. An RAF officer, who was sent there yesterday as soon as the first information about British loss of life was received, has reported that he has firmly established the deaths of three of those concerned. We shall make every effort to confirm the position over the remaining two reported British victims as quickly as possible.
The remaining 19 United Kingdom citizens who were known to have been in Kolwezi are now safely accounted for. Some have already been evacuated to Europe and others are still in Zaire. The British Embassy at Kinshasa is doing everything it can to help. It has not, in the event, been necessary to use two British Army medical teams which were sent.
I am sure that the House will join with me in expressing deep sympathy to the families of those who have been so wantonly killed in these tragic events, as well as to all those of every nationality who have suffered in this terrible ordeal.
Mr. John Davies: First, may I associate the Opposition with the expression
1114
of sympathy and regret which the Minister of State has uttered? We all feel simply horrified at the spectacle of what has happened in the past few days. May I now put three questions?
Can the Minister assure the House that every step is taken not only to look after the remaining British citizens in Shaba and the area concerned but to look after those who may be in the path of the retreating guerrillas as they go to their countries whence they came, perhaps through Zambia and into Angola, in order to protect British lives in that area?
Secondly, can the Minister give the House some reassurance about the position of the European Community and other European powers in this matter? Does he recognise that the great history of European relationships with Africa and the current position wherein so many European people are employed in that continent are a cause for particular concern among European Powers? What steps is the Minister taking to try to ensure that there is some permanent and positive European co-operation with a view to insuring against the development of these fearful emergencies and to an effort to create some stability in Africa?
Thirdly, there can at this stage, I know, be only a presumption that Cubans, East Germans or Soviet forces or others are involved in this set of atrocities, but is it not more and more clear that the presence of these people in Africa constitutes a permanent threat to peace? Is it not time now to raise the matter with the Security Council, pointing out that the failure to withdraw these forces, still in Africa now after years and simply set upon destroying the future of Africa, cannot be allowed to continue?
Mr. Rowlands: I can certainly give the right hon. Gentleman the first assurance for which he asks. We are in close touch with the Zambian authorities about the possibility of British citizens, including children, being involved in the path of the retreating forces. As for the question of European co-operation, I think that there has never been closer co-operation within Europe on African matters, at all levels. Last weekend we had the meeting of EEC Foreign Ministers which discussed in considerable detail all aspects relating to Africa.

1115
I understand and appreciate the third point which the right hon. Gentleman makes, and in a recent speech my right hon. Friend raised the whole issue of Cuban and Soviet involvement. We have said previously, and we have repeated, that if we can gain the support of others, the matter can be taken to the Security Council, but we require such collective support to bring the matter to the Security Council effectively.
Mr. David Steel: I associate my right hon. Friend and hon. Friends and myself with the expressions of sympathy to the relatives of those who were killed in this tragic incident. May I press the Minister a little further on the first question raised by the right hon. Member for Knutsford (Mr. Davies), with reference to the missionaries and farmers, British citizens, in the north-west corner of Zambia? Is their safety assured should the rebel forces be crossing back through that region? Secondly, although I do not wish to go into the deep roots of this particular conflagration, since there seems to be no doubt that it started from Angola, will there at least be some protest by the British Government to the Government of Angola?
Thirdly, will the Minister, with his colleagues in Belgium and France, be reviewing the nature of this operation, since it appears that the lack of a news blackout gave forewarning of the operation, with tragic consequences?
Mr. Rowlands: On the first point, obviously, one cannot give an absolute assurance, but I assure the right hon. Gentleman that there are close consultations going on between our High Commission in Lusaka and the Zambian authorities on the possibilities which he has raised. On the second issue, I think that the Angolan Government are under no illusion about where we stand and where our partners stand on the role and function of the Cubans in Angola in this or any other episode outside their country.
As for reviewing the nature of the operation, it was in many respects an example of close co-operation among European partners, but, obviously, one learns from any particular incident or event.
Mr. Whitehead: Although, obviously, it is too early to go into the sequence of
1116
these tragic events, has my hon. Friend the Minister seen the reports in today's Press that at least some of the killings seem to have been carried out before the insurrectionary group started on the widespread massacre and pillage which took place in Kolwezi? Will my hon. Friend make a protest to President Mobutu's Government to make absolutely clear that we hold that Government and all others on the African continent responsible for the safety of expatriates who are in their territory?
Mr. Rowlands: The safety of any people working or living within a Government's boundaries is the responsibility of the Government concerned. I cannot confirm the reports to which my hon. Friend refers, although we are in touch with Kinshasha about this now.
Mr. John Page: Will the hon. Gentleman refer more directly to the question he was asked by the leader of the Liberal Party and consider whether a direct reproof to Angola should be given for its part in this incident, particularly remembering the position on the Angola border in connection with SWAPO and the Namibia affair, all of which is interknit?
Mr. Rowlands: The Angolan Government can be in no doubt about our position in respect of activities carried on outside Angola by Cuban forces based in Angola. But we have no evidence of the direct participation of Cuban forces in the Shaba province.
Mr. Newens: Whilst I utterly deplore the appalling atrocities, may I ask my hon. Friend to investigate the reports now being circulated that the killings were apparently begun by soldiers of General Mobutu's Government army? In these circumstances, would it not be totally premature to attempt to pin every atrocity that takes place on the Africa continent on the presence of Cuban troops in Angola, bearing in mind that many other people have also had troops in Africa over the years, troops who have been responsible, particularly in the Congo, for many other atrocities long before the Cubans arrived?
Mr. Rowlands: We have no confirmation of the report to which my hon. Friend refers. But what is not premature is to say that considerable massacre

1117
and acts of brutality were committed by the rebels in Shaba on the European and expatriate population in Kolwezi.
Mr. Rifkind: Do the Government yet have any information whether the objective of the rebel forces is to seek the secession of the Shaba province from the rest of Zaire or whether the intention is to try to topple the Zairian Government as a whole?
Mr. Rowlands: I do not think that it is possible on the basis of any evidence that we have to say what the particular objectives were, except the disruption and destruction of not only people but economic facilities and the economic infrastructure of the area concerned.
Mr. Grocott: Has my hon. Friend sought assurances from the French that their operation is restricted simply to securing the safety of citizens in Zaire and that there is no question of their involving themselves in any possible civil war in Zaire? Does my hon. Friend agree that we cannot possibly object to the troops of just one country involving themselves in Africa, and that our objection should be to any country—from East or West, Cuba, France or any other—involving itself in the internal affairs of Africa?
Mr. Rowlands: We do not have to seek assurances from the French Government. They have made a statement, with the Belgian Government, that their sole objective has been to help the evacuation of expatriates from the area concerned. Any sovereign Government are perfectly entitled to invite the support of someone from outside to assist them with any problems.
Mr. Blaker: If there has been Cuban involvement, at least in the preparation of the invasion, is not this incident another demonstration of the importance of the Western countries, including the United States and Britain, giving a demonstration to those countries in Africa which are well disposed towards us that we have some will to look after their and our interests?
Mr. Rowlands: I do not think that there is any question about that or about good will in all the discussions that we have, bilaterally and multilaterally, with African countries or Africa in general. We convey our support for a strong Organisation of African Unity, the principle
1118
of territorial integrity of African States, and acceptance that, as in Shaba, one cannot and must not try to change the situation by force, the consequences of which we have seen only too clearly in the past two weeks.
Mr. Evelyn King: Is it not a fact that the invasion troops came from Angola, and as Angola is Cuban-dominated, will the Minister state unequivocally that this incident could not have happened without Cuban connivance? Will the hon. Gentleman make that perfectly clear?
Secondly, is it not a fact that we approach the situation that at least among the smaller independent African States there is constant danger from Cuban forces? Will the Foreign and Commonwealth Office take that on board and realise that independence among the smaller African States is now everywhere at risk?
Mr. Rowlands: As to the hon. Gentleman's first point, all that I have been able to say is that we cannot confirm or prove that there has been any direct Cuban involvement in Shaba. That does not mean that there was not Cuban involvement in the military training, advice or assistance given to any group in Angola that went into Shaba. That is quite clear.
Mr. Alan Clark: Is not there considerable evidence that the private recrimination, mutual jealousies and general incompetence of the French and the Belgians in this case show that snap reactions by the Community are singularly ineffective? Leisurely consultations are all very well, but does not the Minister agree that in a crisis British subjects are likely to be save only by British Service men?
Mr. Rowlands: But for the intervention there could have been a much larger death toll of expatriates in the Kolwezi area. The action taken was designed to prevent the tragedies that had already occurred in that town to expatriate citizens—Belgian, French, British or any other.
Several Hon. Members rose—
Mr. Speaker: I shall call those hon. Members who have been rising to ask questions.
Mr. Hooson: Will the hon. Gentleman direct his mind to the third point put to

1119
him by my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel): did not the absence of a news blackout make it much more difficult for the troops going in? Does not the evidence suggest that it materially affected the attitude of the insurgents, because they heard over the radio that paratroopers were coming in, and that affected their attitude towards the white population?
Mr. Rowlands: Clearly, before this incident, large numbers of people had already been attacked and killed in one way or another. Everybody realises the extreme difficulty in a modern society of the movement of people or the planning of such movements in total secrecy.
Mr. Biggs-Davison: Will the European discussions which the Minister mentioned be directed towards removing the delays and rivalries which appear to have affected the Kolwezi operation? As for Cuban and therefore Soviet involvement, when the Foreign Office has some information to give us, may we please be given it?
Mr. Rowlands: When we get any detailed or concrete information, it can of course be provided through the normal ways and means of obtaining information from the Foreign and Commonwealth Office and from Ministers.
I think that I have answered the hon. Gentleman's first point three or four times. There was very close co-operation in the operation. Although one may learn from the experience, I think that it has succeeded in saving many people who would otherwise have been killed.
Mr. Fairbairn: Does the Minister appreciate that had matters been in reverse and the same number of black people rather than white people had been killed, we should have had massive protests from our Government, the United Nations, the Organisation of African Unity, Amnesty International and so on? May we have an indication that the Government regard the action as purely racist? Secondly, will the hon. Gentleman tell us to what extent British aid to Angola may have assisted? Thirdly, to what extent does he take the view that the invasion, whether or not it was
1120
successful, has successfully abolished the European presence which is essential to Zaire's economy?
Mr. Rowlands: Black and white have been killed in the atrocities of the past few days. There is no racist aspect to this. The brutalities of the invading group and the tragedies it caused are now, sadly, well known.
As to the hon. and learned Gentleman's other points, I think that he is off the beam. What we have been trying to do in conjunction with our European partners is to conduct successfully the evacuation of a significant group of expatriates who were working in the Shaba province. The hon. and learned Gentleman may be right—only time will tell—whether the effect on the economy of that province, which depended considerably on the presence of these people, with their technical expertise, will permanently damage the Zaire economy. These are matters that will have to be dealt in the months ahead.
Mr. Brotherton: Will the Minister tell us how many more such incidents there will have to be before the Government tell the Governments of such countries as Zambia, Angola and Mozambique that as long as those countries continue to harbour those who commit murder on the continent of Africa we shall not give them any more aid? Secondly, would the Minister of State not agree that this tragedy shows how it is now more than ever necessary for the Government to do all in their power to promote the internal settlement in Rhodesia?
Mr. Rowlands: The House should resent most bitterly the bracketing of the countries the hon. Gentleman has mentioned. The hon. Member has associated the Zambian Government with these issues when we know from the conversations that the Prime Minister had last week with President Kaunda that the Zambian authorities have done their utmost to help deal with the terrible problems and consequences of this incident.
Mr. Faulds: Since these tragic and ghastly incidents are likely to recur in other parts of Africa, largely because of the ex-colonial legacy, may I ask my hon. Friend to assure the House that if such incidents occur in a British ex-colonial territory, British forces will be

1121
sent with as much dispatch and determination as the French forces were sent to Kolwezi.
Mr. Rowlands: That is a hypothetical question. It is the responsibility of every Government to try to ensure the safety of their citizens at home and abroad.

STATUTORY INSTRUMENTS, &c.
Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. Are you aware that the Church of England (Miscellaneous Provisions) Measure referred to in the next motion is not available in the Vote Office? Have you any discretion to decline to put the Question when the promoters of this measure have not troubled themselves to place it in the Vote Office so that it is available for hon. Members on the day on which it appears on the Order Paper? If you have such a discretion, I would respectfuly ask you to use it so that you discourage what is at the best a gross discourtesy to the House and an inconvenience to hon. Members.
Mr. Speaker: I am much obliged to the hon. Gentleman. However, I do not have such a discretion. The House instructs me that the matter must be decided forthwith.
By leave of the House I will put both motions—
Hon. Members: Object.
Mr. Speaker: Very well. I will put the Questions separately.
Motion made, and Question put.
That the Church of England (Miscellaneous Provisions) Measure he referred to a Standing Committee on Statutory Instruments, &c.
Not less than 20 Members having risen in their places and signified their objection thereto, Mr. SPEAKER declared that the Noes had it, pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments &c.).
Ordered,
That the Valuation Lists (Postponement) Order 1978 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Foot.]

LUCAS AEROSPACE
Mr. Churchill: On a point of order, Mr. Speaker. I understand that in my absence, a few minutes ago, the hon. Member for Perry Barr (Mr. Rooker)—without observing the normal courtesies of the House of advising me that he intended to do so—made a personal attack on me. I am advised that he suggested that as a result of action that I had taken or as a result of matters that I had raised in this place or elsewhere—
Mr. Spriggs: On a point of order—
Mr. Speaker: Order. We must have one point of order at a time.
Mr. Churchill: —I had caused a contract to be lost for the workers and company of Lucas Aerospace. I further understand that the hon. Member did not specify what that contract was. Perhaps he would like to make that clear. I can only imagine that he is referring to a contract which would have provided for the improvement by high technologists in this country of the Kuznetsov NK144 engine, which is the engine that powers not only the Soviet supersonic Concordski but their supersonic nuclear strike bomber known as Backfire, which poses a grave threat to the people of this country and the NATO alliance as a whole. If I have played some part in quashing that deal I am delighted and proud to have done so.
Mr. Speaker: The hon. Member has used a point of order to answer a charge or a statement that has been made by an hon. Member. There is no point of order for me.
Mr. Skinner: What are you going to do?
Mr. Speaker: I am going to ask the Clerk to read the Orders of the Day.

ORDERS OF THE DAY
Mr. Spriggs rose—
Mr. Heffer rose—
Mr. Speaker: Mr. Spriggs, point of order.
Mr. Spriggs: On a point of order, Mr. Speaker. I raised this matter earlier and you ruled me out of order. Is it now the practice of this House that Mr. Speaker will allow hon. Members to raise on a point of order matters relating to something which was said in their absence and about which they are told later? Is this now to be in order?
Mr. Speaker: Did the hon. Member for Liverpool, Walton (Mr. Heffer) wish to raise the same point of order?
Mr. Heffer indicated assent.
Mr. Speaker: I know very well—the hon. Member for St. Helens (Mr. Spriggs) knows very well—that I exercised my discretion. When an hon. Member feels aggrieved about something which was said when he was not in the Chamber and seeks to raise the matter on a point of order, within the rules of order he is out of order. That is absolutely clear. I should have pulled up the hon. Member for Stretford (Mr. Churchill) in his tracks. There is no doubt about that. I allowed him to raise the matter, as I have allowed other hon. Members. I know the temperament of the hon. Member for St. Helens. If someone had said anything about him when he was not here, I have not the slightest doubt that I would have heard from the hon. Gentleman. I will bear in mind what he has said, because he is quite correct in his interpretation.
Mr. Rooker: Further to that point of order, Mr. Speaker. It will be within your knowledge that during the supplementary question I was asking I merely repeated what I had been told by the directors of a particular company. This is information which is within the knowledge of other hon. Members and is information which has been published.
Mr. Speaker: I am much obliged to the hon. Member. The Clerk has read the Orders of the Day.

ORDERS OF THE DAY
  SUPPLY
  [16TH ALLOTTED DAY]—considered.

  ARMED FORCES (PAY)
  3.57 p.m.
  Sir Ian Gilmour: I beg to move,
  That the salary of the Secretary of State for Defence should be reduced by half.
  The bleak background to this debate is the dangerous drain of men from the Armed Services. I very much hope that the Secretary of State will be able to give us some more encouraging news about the exodus than anything which I or anyone else have been able to glean from elsewhere. In any case, I assume that the right hon. Gentleman will not attempt to deny that what has happened is desperately serious.
  The immediate cause of the motion and the debate is the Government's pay award to the Armed Services and its consequences. I will return to the Secretary of State before long, but it is only fair to him to point out that the malaise in the forces and the disastrous state of our defences date from well before his arrival at the Ministry of Defence. They go back four years. It is important to realise that the present crisis is not just a matter of pay. It goes far deeper than that. It concerns the vast cuts which the Government have made in defence. It concerns the fundamental attitude of the Labour Party to the defence of this country and to the British Armed Services. It concerns the way in which the Labour Government have, for the past four years, treated defence and the Armed Services.
  Because of the Government's treatment of the Services and because of the growing disillusionment that they have suffered, the Services have begun to lose confidence in the system. As part of a general shift to the Ieft when in opposition the Labour Party decided to launch an unprovoked attack upon our defences and our Armed Forces. When Labour came into power in 1974 it proceeded to carry out its obsessive aggression, with disastrous consequences. The Labour Government have cut, or planned to cut, £10 billion off our defences. Naturally, they have pretended that they were not

  1125
  doing enormous damage. The cover story was that our contribution to NATO was not being cut—that it was the so-called tail and not the so-called teeth that were being trimmed.
  But the Armed Services were not fooled. They knew perfectly well what was going on. Dr. Luns, the secretary-general of NATO, the all-party defence committee of this House, the Conservative Opposition and the Press have all stripped away the layers of deceit and have revealed the dangerous truth. Those cuts were, of course, very damaging to Service morale.
  The Services have seen time and again that they and Britain's defences come right at the bottom of Labour's list of priorities. In consequence, there is a shortage of virtually everything—men, modern equipment, spares, training, transport. A classic example of this is that at a time when the Russian superiority in tanks is nearly three to one, 56 of our Chieftain tanks in BAOR have had to be put in mothballs because of the shortage of men. The Secretary of State could hardly want a more apt or damaging comment on his stewardship.
  We on this side of the House are the first to agree that Labour Secretaries of State for Defence have many difficulties—and nearly all those difficulties sit below the Gangway opposite. [HON. MEMBERS: "Oh."] There are certainly two exceptions there, as I readily concede. In one sense, of course, the right hon. Gentleman is helped by the Tribune Group, just as his Labour predecessors were. He can always say to the forces "You may think that what I am doing is terrible, but if you look at the policy of my Left wing you will realise that it could be very much worse." That may help the right hon. Gentleman, as it did his predecessor, but it does not help the country.
  The pronouncements and attitude of the Left-wing do nothing to improve Service morale. As far as I can see, the Tribune Group is prepared to march anywhere in favour of any cause except the defence of this country. Its members are never happier than when they are trying to dismantle the defences of the country. The Left consistently welcomes cuts in defence expenditure, even though those cuts make their constituents unemployed.
  Mr. Eric S. Heffer: Some of my hon. Friends are saying "Do
  1126
  not bother to interrupt, he is not worth it". But it is an important matter when a right hon. Gentleman in this House has the audacity to suggest that Members on this side of the House with whom he does not agree politically are not concerned with the defence of their own country. If he will check up on the Army, RAF and Royal Navy records of Members in the Tribune Group he will discover that a considerable number of us spent many years in the Armed Forces and passionately believe in the defence of our country, while at the same time accepting Labour's view that we ought not to be spending more on defence than our NATO allies, which is precisely the policy that we have adopted—nothing more and nothing less. I ask the right hon. Gentleman not to go on making statements of that kind, which are a deliberate falsification about the attitude of hon. Members on this side of the House.
  Sir I. Gilmour: That was an extremely long-winded intervention which had very little to do with what I was saying. I am not disputing the hon. Gentleman's war record, which I am sure was very good. My comments were purely directed towards the political attitudes to defence taken by the Tribune Group. I shall now expand on those comments, and perhaps I can carry the hon. Gentleman with me.
  The Government's defence policy has already cost 150,000 jobs, and it will be over 200,000 before long. Why is it that the Tribune Group is so anxious to disarm this country while the Soviet Union devotes more and more of its resources to the production of offensive weapons? Perhaps the hon. Gentleman will answer that. Presumably Members of the Tribune Group are fully aware of Russia's vast rearmament programme.
  The Tribune Group even admits to being hostile to NATO and wants to end Britain's commitment to the alliance. Since NATO has undoubtedly preserved the freedom and integrity of Western Europe for 30 years, that is surely an odd attitude of anyone who is in favour of freedom and of a free Western Europe. Of course, it is perfectly possible to be very Left wing and not he opposed to Europe. That is the attitude of the Italian Communist Party. But perhaps the Tribune Group regards the Italian Communist Party as not being

  1127
  sufficiently Left-wing and as lacking in Socialist zeal and Socialist purpose.
  Mr. Heffer: Will the right hon. Gentleman now read chapter and verse of where the Tribune Group has actually said that Britain should withdraw from NATO? If he has such chapter and verse, it is something that has escaped me. There are one or two of my hon. Friends who, honestly and openly in the House, have said that they are not in favour of Britain being in NATO, but I do not remember a particular statement by the Tribune Group where the group as such has said so.
  Sir I. Gilmour: I am happy to jog the hon. Member's memory. I refer to "Statement on Defence and Foreign Policy", subtitled "A Critique of Policy for 1976", by the Tribune Group and embargoed for 11 a.m. Friday, 9th July. It says:
  "In the long run, however, it is our view that British defence expenditure should be related to the pursuit of a socialist foreign policy, and there is a contradiction between many of the aims outlined in the document"
  that is, Labour's Programme for Britain 1976—
  "and the fundamental commitment, accepted by all British Governments for the past quarter of a century, to NATO and other military alliances. These are designed to achieve security and stability for existing regimes which are situated within the western sphere of influence. This end is in many cases incompatible with support for movements seeking to achieve radical social change."
  By that I take it that it means Communist revolution. It goes on:
  "in the absence of positive steps towards mutual and concurrent phasing out of NATO we consider that Britain should progressively reduce her commitment to NATO.
  The adoption of this policy would represent a decisive shift in the direction of non-alignment in international affairs."
  Mr. Heffer: Will the right hon. Gentleman now explain to the House—
  Mr. Stephen Hastings: On a point of order, Mr. Speaker. How many speeches do we have to listen to from the hon. Member for Liverpool, Walton (Mr. Heffer)?
  Mr. Speaker: Order. The right hon. Member for Chesham and Amersham (Sir I. Gilmour) courteously gave way to the
  1128
  hon. Member for Liverpool, Walton (Mr. Heffer).
  Mr. Heffer: Will the right hon. Gentleman explain where in the document it is said that we ought to come out of NATO? What the document says is perfectly clear, and it does not say that.
  Sir I. Gilmour: I said in my original remarks that the Tribune Group was hostile to NATO. I then pointed out that it had said that we should substantially reduce our commitment to NATO. Obviously, the second statement proves the first. If the hon. Gentleman disagrees with that policy, he should get together with his friends in the Tribune Group and alter it, but he should not complain about my enunciating it.
  At best, the policy of the Tribune Group can charitably be described as being neutral against the West, or maybe it is even simpler than that. Since, obviously, members of the Tribune Group do not see Russia and the Warsaw Pact as a threat, perhaps they see them as a promise. Such an interpretation is supported by "Labour's Programme for Britain 1976", which was strongly opposed by the Left wing and which called for further massive cuts in Britain's defence expenditure. Although the then Secretary of State for Defence said that at best such cuts would mean a policy of neutrality and at worst surrender and would cost another 300,000 jobs, the Left wing and, indeed, the entire Labour Party conference voted for it by about 98 to one.
  So our Armed Forces are well aware that there is a substantial body of opinion in the Labour Party which is fundamentally opposed to what they are doing and what they stand for, and that is not likely to raise their morale. Nevertheless, the antics of the Left wing and the Labour Party cannot absolve the right hon. Gentleman and the Government generally from responsibility for national security, and it is the systematic neglect of the Armed Forces by the Government which has made the present crisis infinitely worse than it would otherwise have been.
  Napoleon once said:
  "The morale is to the material as three is to one."
  The Labour Government do not worry about such niceties; they clobber both—morale by their treatment of the Armed

  1129
  Forces over pay and conditions and material by depriving them of sufficient equipment. Had the Services been treated properly in other ways they would still, rightly, have complained about their pay and conditions, but their morale would have been much higher than it is now, and the number leaving in disgust would have been very much lower.
  In censuring the Secretary of State it is no part of my case to claim that at the very last moment the right hon. Gentleman did not do his best to try to get a square deal for the Services. I am sure that at that time he did, and that he was supported by those Ministers in the Cabinet, who are quite interested in the defence of this country. I think that there are three or four of them. Neverthless, the indictment against the Secretary of State is a heavy one.
  First, he was, for a very long time, inexcusably complacent about the matter. Secondly, he has broken a pledge that he gave to the forces and to the House. Thirdly, he totally failed to get a square deal for the forces. Therefore, the only proper course for him was to have resigned.
  After all, this is not something that has suddenly emerged out of the blue. The Secretary of State had plenty of time to understand its seriousness, but he did not do so. That was shown by his extraordinary action in joining the picket line at Grunwick. If he had realised the extent of the resentment in the forces against last year's Irishman's rise, he would not have been so insensitive as to show himself more active in support of strikers in his own union than he was on behalf of non-strikers in the Armed Services, whom he is supposed to look after.
  This time last year we had a debate on forces' pay. The Opposition have been extremely forbearing on this matter, perhaps too much so. We did not force a Division, but we tried to alert the Government to the gravity of the situation. Unfortunately, the Secretary of State was unalertable.
  I warned the Secretary of State then of the steep rise in the numbers of those wishing to leave the forces. What was his answer? He talked about the satisfactory level of recruiting and re-engagement. I asked him how he proposed to restore the
  1130
  morale of the forces and remedy justified grievances. He gave no answer to that.
  Even after that debate the Secretary of State did nothing. For some reason he thought that the issue would go to sleep. He did nothing despite the plain words at the end of the Armed Forces Pay Review Body's report for 1977 which, after referring to the shortfall in forces' pay, said:
  "We have drawn attention to the fact that the current measures prevent any steps from being taken to reduce that shortfall. We see this as the most important single issue which will face us in the coming year … We attach particular importance to the need for a measure of flexibility in the period after 1st August 1977 in a form that is directly relevant to the Armed Forces pay system."
  The Secretary of State still did nothing, despite what he told the forces when the Irishman's rise was announced. He said then:
  "The rigid nature of the first two rounds of the present incomes policy has produced distortions in some pay structures in the professions, industry and other occupations. The Government hope that it will be possible to put these right under future stages of the policy, and I will ensure that the needs of the Armed Forces are fully taken into account."
  That is not exactly a ringing declaration, but it is surely one which committed the Secretary of State at least to some activity.
  In fact, the Government's pay policy did nothing to meet the Review Body's call for a measure of flexibility. Far from the needs of the Armed Forces being taken into account, as the Secretary of State promised, the Government's pay policy, in allowing productivity deals, discriminated against the Services, which have no possibility of making such deals.
  The Secretary of State still did nothing, despite a debate initiated by my right hon. Friend the Member for Crosby (Mr. Page), despite many speeches and Questions from my hon. Friends and myself, and despite many articles in the Press. The Secretary of State remained in his habitual condition of complacent confusion, or perhaps it is confused cornplacency—either will do. While he was doing nothing whatever, the Secretary of State knew full well that the position was deteriorating fast. He must have known that at least since the firemen's strike last year. He must have known that what previously had been grave was now disastrous. Yet by his remarks on pay during that strike he made matters even worse.

  1131
  Last January my hon. Friend the Member for Richmond, Yorks (Sir T. Kitson) wrote to the Secretary of State to tell him of the disturbing situation at Catterick. He gave examples of the financial strains on married soldiers, and said that it was essential that the Secretary of State should go there. He did not go there and he did not even bother to send the Under-Secretary—not that that would have done any good. However, surely one of them should have gone.
  The Secretary of State has known at least for the last six months that morale has been growing increasingly brittle and that an alarming number of highly trained and skilled officers and men are intent on leaving the Forces. I asked him a Question in February when the Answer showed that the number of Army captains who had resigned had gone up between 1976 and 1977 by more than 60 per cent. There is plenty of other information to the same effect that has been elicited by questions from my right hon. Friends the Members for Stretford (Mr. Churchill), Woking (Mr. Onslow), Chertsey and Walton (Mr. Pattie), Christchurch and Lymington (Mr. Adley), Tynemouth (Mr. Trotter), Workington (Mr. Page) and others.
  Mr. John Cronin: The right hon. Gentleman has made the point that the Secretary of State should have done something during the last six months. Are we to understand that he should have done something without waiting for the report from the Armed Forces Pay Review Body?
  Sir I. Gilmour: The Secretary of State should have told the Armed Forces Pay Review Body that it could have leave to depart from the Government's pay policy. In spite of what the Prime Minister, the Secretary of State and the Minister of State said about the Review Body being independent, in fact it is not independent of the Government's pay policy. It was not independent under us and it is not independent under them. They knew that perfectly well. Therefore my contention is that, in view of the gravity of the situation, the Government should have given directions to the Review Body telling it that it was not bound by the Government's
  1132
  pay policy. They should have done that before it reported.
  The situation was deteriorating. Even in the debate on the Defence White Paper two months ago, the Secretary of State remained complacent. I warned him then of the serious exodus from the Services of skilled and experienced officers and men, and so did all my hon. Friends. But nothing happened.
  That brings me to the report of the Review Body and the period when the right hon. Gentleman at last abandoned his complacency—far too late—and tried to get a square deal for the forces. Unfortunately for them, the complacency which was abandoned by the Secretary of State was taken up immediately by the Prime Minister, who then added to it ignorance and petulance. That is not quite the image of him that the Government propaganda machine is currently trying to project.
  The Press Association gave figures from the Ministry of Defence showing the alarming stampede out of the forces by Service men, and because The Times published the Prime Minister's failure to see the Chiefs of Staff, the Prime Minister smeared the Ministry of Defence and accused it of mischief making, and as a result elaborate investigations took place.
  Let us have a brief look at the record of the man who has been making such a fuss about leaks and alleged mischief making. For that we can scarcely do better than turn to the last volume of the Crossman diaries. Here it is said:
  "Jim can be two-faced, but his fault is perhaps that he does far too much talking for a really successful Machiavellian politician, round the smoking room, round the tea room, dashing away with all the boys. He is a tremendous chatterer with the Press … and he is a compulsive a communicator with the Press as I am, and a great deal more leaky."
  In 1969 of course the Prime Minister was leaking in his own interest and not in the public interest.
  In contrast, the Press Association's publication of the figures of the exodus of officers and experienced and skilled NCOs from the Services was very much in the public interest. Moreover, the basic fact of the exodus was, as I have shown, already public knowledge. Only the most furtive politician could see anything sinister in the British people being told the truth about this vital matter. Indeed,

  1133
  when I first read the report on the tapes I assumed that the Secretary of State himself had been responsible for the timely release of the figures.
  We now know that he was not intelligent enough to do that and that the information came from the Chiefs of Staff. Because of the Prime Minister's pique, the Secretary of State was ordered, absurdly, to rebuke them and to say that they should have sought the authority of Ministers in this matter.
  This raises a key and interesting question. If the Chiefs of Staff had sought the authority of the Secretary of State, would he have given it? Or is he as opposed as the Prime Minister to the truth being told?
  In an answer to me a week ago the Secretary of State was forced to admit that there was no information in that report which carried even the lowest security classification. Nor did the report over-estimate the gravity of the exodus, in spite of what the Prime Minister said in the House. In a parliamentary Answer the Minister of State fully confirmed what had been said. The Secretary of State was thus reduced to accusing the Chiefs of Staff of being selective. That was merely a transparent attempt to save the Prime Minister's face. In this context the word "selective" should be translated as meaning inconvenient to the Prime Minister and the Government.
  Would the Secretary of State have authorised the issue of the figures in the report? If not, why not? If "Yes" what was all the fuss about? The answer is that the fuss was caused by the Prime Minister losing his head at Question Time and lashing out, quite wrongly, at the Ministry of Defence. In any case, the right hon. Gentleman's attempted rebuke to the Chiefs of Staff was completely unjustified. I have no doubt that he is now thoroughly ashamed of having given it. The right hon. Gentleman should have refused to do the Prime Minister's dirty work for him.
  The Prime Minister was even more piqued by the publication in The Times of his refusal to see the Chiefs of Staff at the proper time. Evidently he believed that that refusal should remain an official secret. Some of us might wish that the Prime Minister's bad manners had been reserved for the visit of Mr. Ponomaryov.
  1134
  At any rate, the Chiefs of Staff are in good company. The only other person the Prime Minister is on record as having refused to see at the proper time is the Archbishop of Canterbury.
  To summarise, the Chiefs of Staff were prevented from telling the Prime Minister the truth about the crisis in the Armed Forces before the Cabinet's decision on pay was made. Instead, they were rebuked by the Prime Minister's sidekick for telling the truth about the crisis to the British people. We may all congratulate the Chiefs of Staff on loyally accepting such outrageous treatment. Indeed, that treatment well symbolises the Labour Government's neglect of the Armed Forces during the past four years.
  The distinguishing mark of the pay award is that for the next year it leaves the pay of the Armed Forces just as far behind what it should be as it has been for the past 12 months. It moves them not one inch toward comparability. Plainly that is not a square deal. Let us test the right hon. Gentleman's pledge to the Forces a year ago against what he has now accepted for them. He said:
  "I will ensure that the needs of the Armed Forces are taken fully into account."
  If when he made that pledge a year ago he had told Service men and their wives that for the whole of the following two years they would be relatively just as badly off as they were then, does he think that one Service man or his wife would have thought that he had fully safeguarded his or her interests? No one would have thought that. Everyone would have thought that he had fully sacrificed the interests of Service men. In fact, that is what he has done and that is what has happened.
  The harsh and undoubted truth is that a great many Service men are living in poverty and will continue to do so after this award. Much of the unrest in the Services during the past year or so has been caused not merely because their pay has fallen behind others but because they have been suffering hardship.
  In view of the question asked by the hon. and learned Member for Montgomery (Mr. Hooson), and in view of the Prime Minister's answer, the House may find it instructive to compare what happened under the Conservative Government with what has happened under the

  1135
  Labour Government. I accept responsibility for the period down to and including the 1974 Pay Review Body report. However, the great inflation unscrupulously set off by the Chancellor and the so-called social contract after that time are obviously the responsibility of the Labour Government. That is demonstrable.
  I rely largely on the figures provided last week thoughtfully by the Minister of State to my hon. Friend the Member for Stretford. The figures indicate that under the Tory Government Armed Forces' pay fell 7·6 per cent. behind average earnings. That was almost entirely due to the jump in outside earnings between the 1972 Review Body's report and the start of the incomes policy in November. However, phase 3 was designed to help the Armed Forces through its provisions for unsocial hours.
  Moreover, those in the Armed Forces, like those in other sectors, were getting better off under the Tory Government. Under our administration real disposable income rose by 4 per cent. a year. Finally, morale was very high throughout our period of office. Defence Ministers could visit, quite happily, all defence establishments. That is not always the position now.
  In contrast, during the administration of the Labour Government the Armed Forces have fallen behind by another 13·3 per cent. and are now 22 per cent. behind average earnings. The longer such disparities persist, obviously the more damaging and resented they are. Besides, under Labour, as opposed to the Tories, the forces, like everybody else, have not been getting better off. Far from there having been a considerable increase in real disposable income, there has, been no increase at all since 1974. The Armed Forces have suffered a decline. Last November, in answer to my hon. Friend the Member for Woking, the Government admitted that the real value of the forces' basic pay in 1977 was between 18 per cent. and 8 per cent. lower than it was in 1974. Therefore, under Labour the forces have lost both relatively and absolutely and morale has suffered predictably and accordingly.
  If, therefore, the Liberal Party was hoping to use what happened under the Conservative
  1136
  Government as an excuse for voting tonight in accordance with the Lib-Lab pact, I am afraid that it will have to try to dredge up another reason.
  Mr. Emlyn Hooson: The case can be made on the right hon. Gentleman's own figures. In 1972 there was parity, but there was a loss of about 7·4 per cent. in about 15 months under the Conservatives.
  Sir I. Gilmour: But even to the Liberal mind there is quite a difference between 7·6 per cent. and 22 per cent. Further, those in the forces were getting better off under the Conservative Government whereas they have been getting worse off under the Labour Government. I understand that the hon. and learned Gentleman may not pay much attention to these matters. He is not bound by the rationale, but surely the figures make it clear that he does not have a case.
  The Secretary of State for Defence (Mr. Frederick Mulley): I hope that the right hon. Gentleman will recall that it took a 29 per cent. increase for the Labour Government to restore comparability in 1975.
  Sir I. Gilmour: On the Minister of State's figures, that increase did not have that effect. Average earnings increased by 27 per cent. in the same year. Therefore, comparability was restored for about three weeks at the most. In 1975 those in the Armed Forces received a 29·5 per cent. pay increase while average earnings rose by 27·5 per cent. Those figures do not help the Secretary of State.
  The forces, alas, will continue to suffer hardship, as is conclusively proved by the figures given by the Secretary of State in answer to my hon. Friend the Member for Norfolk, North (Mr. Howell). The most conspicuous example is the private IV (scale A) who is married with two children, who will be 1·8 per cent. better off. I concede that luckily there are very few in that category. All the same, there are many others who fare almost as badly. For example, a corporal 1 (band 2, scale C) with four children is only 5·9 per cent. better off.
  A deputation of wives from RAF Waddington came to see me last week. The wives in that area feel so strongly about the pay award that they paid the

  1137
  railway fares to London of the deputation. They gave me figures, which showed that a senior aircraftsman (scale B, band 1) with two children is less than £2 a week better off and now ends up with £43·47 a week. That is about £5 more than he would have if he were unemployed and living on supplementary benefit.
  A LAC (scale B, band 1) with two children is even worse off. He gets only £1·58 a week more than before. One wife reckoned that her husband, a very skilled man with many years' service, who, like many Service men, works extremely long hours, gets about 50p an hour, about half the going rate of an office cleaner. I was told of people on the station who pretend to be separated so that the wife can go back and get a council house and live on supplementary benefit. One girl goes back with her husband to stay with her parents in Lincoln for the last week of every month as they cannot afford to live by themselves for the whole month. Probably the majority of families at Waddington are living on handouts from their parents.
  That sort of thing is happening throughout the Armed Services. That is the position in which they have been for some time, and that is the situation in which the right hon. Gentleman has ordained they should remain for another 12 months. It is no wonder that so many Service men are leaving. Equally, it is no wonder that so many are fed up.
  Mrs. Winifred Ewing: In view of the right hon. Gentleman's recent remarks, will he explain the nature of the Conservative proposal? Would it meet right away the whole of the 32 per cent. that on average the forces have fallen behind?
  Sir I. Gilmour: I shall come to that in in about 30 seconds or one minute.
  The local overseas allowance in Germany is now about 40 per cent. of a Service man's take-home pay. If the cut that the Treasury wanted last year was made this autumn, the 13 per cent. pay award would be wiped out, with possibly catastrophic effects. There is great worry about that, and what the Government spokesman said in another place on Thursday did nothing whatever to allay that worry. I hope that the Secretary of State will give an unequivocal assurance
  1138
  today that there will be no reduction in the LOA this year.
  The Government have said that comparability will be achieved, but only in the two years after 1978 and by the next Government. They have not a shadow of excuse for not starting the process this year.
  The Review Body clearly would have liked comparability to be achieved this year and in strict justice that is what should have happened. But it would have been reasonable to restore comparability in two years. Those two years should have been this year and next, not 1979 and 1980. A post-dated cheque is usually a sign either of insolvency or dishonesty. In this case, it is a sign of political cowardice and of indifference to the interests of the Services.
  Because the Secretary of State has failed to achieve any step towards comparability this year, and because he has left Service men and their wives in such penury, he has failed in his duty. It was his responsibility to look after the Services. When he was unable to persuade his colleagues to give them a square deal he should have resigned. He should have left it to his successor to defend what he knows is not defensible.
  The case for a large move towards comparability this year would have been overwhelming, even if it had depended just on the money that the Services have lost during the last three years or on the hardships they have suffered. As The Guardian said, the award
  "does nothing to compensate them for the injustice they suffered under phases one and two."
  The case does not depend on those things alone. An even more crucial reason for a move towards comparability now was the imperative need to reverse the present stampede out of the forces. I hope that the stampede will now slow to a trot or, better still, cease altogether. Unfortunately, there are few signs of that. What was needed was to reverse the stampede. This inadequate down payment and heavily post-dated cheque will certainly not do that. The Government have taken a quite unjustifiable risk over the nation's security and over the morale of the Services.
  My right hon. Friend the Leader of the Opposition has said that we shall restore

  1139
  comparability more quickly. I have said that it should have been restored this year and next year. The Government have failed the forces this year. I give this pledge to the Armed Forces: the Conservative Government will restore full comparability next year and we shall never let this sort of thing happen again.
  Apart from anything else, the Government's shoddy behaviour has been economically foolish. According to the Review Body's report it now costs £1 million to train a jet pilot. The training of other skilled men is also extremely expensive. Yet, through their neglect of the forces, the Government drive hundreds of skilled men out of the Services and they will now have to pay enormous sums to train their replacements—if they can get them.
  On all grounds the Government and the Secretary of State stand condemned. By their folly and neglect they have jeopardised the security of the country. They have battered the morale of the Services. They have acted with political cowardice, economic folly and neglect of the national security.
  The Labour Government have given the Services the worst four years that they have suffered in modern times. Service men's wives have shown by their voices what they think of the treatment that they have received. Service men have shown what they think by voting with their feet. Not only are the Government at fault over pay, they are guilty right across the entire field of defence. Wherever one looks they have done damage.
  They have disarmed the country unilaterally and they have put our forces into disarray. They have done all this, not in a time of peace and security, but at a time when the Russians have been growing ever stronger and the dangers to the West have been steadily and manifestly increasing. Even allowing for the Government's dreadful performance elsewhere, what they have done and failed to do in defence will prove to be the blackest part of their black record.
  Of course the Prime Minister and the whole Labour Government are guilty and must bear the blame. But the Secretary of State bears the immediate responsibility. That is why we have censured him and why I ask the House to support the motion.
  4.34 p.m.
  The Secretary of State for Defence (Mr. Frederick Mulley): I am grateful to the right hon. Member for Chesham and Amersham (Sir I. Gilmour) and the Opposition for giving us an opportunity to discuss the pay and conditions of the Armed Forces. I share the Opposition's opinion that this is an important matter. The right hon. Gentleman's speech clearly indicates that there are still many misunderstandings to be cleared up.
  I am sure that it will come as no surprise to the House that I cannot recommend the motion. The House should note that it is an extremely notable motion because it represents the first precise proposal of the Opposition to cut public expenditure that I have noticed. There are plenty of general declarations about cutting public expenditure but they never relate to a particular case. I found the right hon. Gentleman's speech a little in contrast to what the right hon. and learned Member for Surrey, East (Sir G. Howe) said on television after the Budget. He said that of course we want higher pensions, better schools, better hospitals, stronger defence forces but we have to earn the money to pay for them first before the Government can spend it.
  Although the right hon. Member for Chesham and Amersham was not precise, he talked vaguely about restoring £10 billion in defence expenditure. It is important to know this background to our consideration of defence expenditure.
  The right hon. Gentleman was right to draw the attention of the House and the public to the number of hard cases in the Armed Forces, particularly among those with large families. But the Opposition took a different approach to the question of taxation when that was before the House. Those on the lowest levels of income did not attract the Opposition's attention. It is fair to say that the Opposition have been concerned to squeeze the last drop of political advantage out of the situation in the Armed Forces. They have been doing that thoughout the last year.
  Against the constant reiteration of every complaint that they can lay their hands on, it was a matter of satisfaction to me—although I am not in any sense cornplacent—that the engagement figures for 1977 in the Royal Navy and the RAF

  1141
  were a little better than in 1976. The figures for the Army were about the same.
  At the beginning of his book "Inside Right" the right hon. Member for Chesham and Amersham talks about the virtue of moderation and prudence, just as he began his speech today. But he would do better to show an example rather than to rely on precepts.
  Perhaps we should not expect too much because in "Inside Right" he jostles his hon. Friend the Member for Stretford (Mr. Churchill) on the Right wing so much that they take the ball out of play between them without help from anybody else. They probably receive the accolade of the Leader of the Opposition because she has a favourite player who is not on the pitch.
  Mr. Heffer: Worse than Jordan.
  Mr. Mulley: Using football terms for political activity is dangerous. Reading that the hon. Member for Brent, North (Dr. Boyson), who speaks on education matters, describes himself as a centre forward I wonder whether it has any relevance to political philosophy.
  Mr. Cranley Onslow: I wish that the Secretary of State would drop that tired metaphor. If he sets much store by precision and facts why has he no means of knowing, and appears not to care to know, how many science graduates have left the forces in each of the last four years? How many skilled men have left? Why does he not take the trouble to find out these facts before he comes to the House?
  Mr. Mulley: A vast amount of information has been given. I cannot give a precise number. The hon. Gentleman has asked a number of questions and he has been given answers. If he was so curious, why did he not put down that Question along with the others?
  Mr. Onslow: I have in my pocket the very Question. I was told in reply that this information was not readily available and could not be provided "without disproportionate effort". We want some proportionate effort from the little man.
  Mr. Mulley: If hon. Members cease to put down at two days' notice Questions seeking a great deal of information
  1142
  we should be able to do a great deal more.
  There may be differences of policy, but I do not think there is any difference between us as to the importance of the work of the Armed Forces. The Government have a good record in what they have been able to do for the terms of service and pay of the Services. The right hon. Member for Chesham and Amersham was referring to the unsocial hours provision of 1973–74. Under the Conservative Government's policy it was permissible to make a special payment on this score. But it was the Labour Government who, immediately upon taking office, brought in a special 50p-a-day payment for those in Northern Ireland.
  Sir Ian Gilmour: That was recommended by the Armed Forces Pay Review Body.
  Mr. Mulley: That was recommended in May and the Government took office at the beginning of March. In 1975 we restored comparability. Last year, as part of their campaign, the Opposition attacked the Government because we were not going to do the right thing about gratuities for people on short-term commissions. The actual terms were very fair and favourable. Last May there was proper concern about conditions for families in Northern Ireland. That was met by putting resident forces, as well as the men on four-month tours, on field conditions.
  This has had some consequences for the Ulster Defence Regiment. I have had representations that it may be slipping behind. We have looked into this matter, and in one or two respects we can certainly go some way towards restoring the ratio between the pay of the Regular Army and that of the UDR. Certainly, since hon. Members will want to raise this matter, I can say now that we shall want to consider it very sympathetically. I have been concerned, as a result of what I was able to do last year for the Regular Army in Northern Ireland, that the relativity between it an the UDR has been eroded.
  In last year's Finance Bill special exemption was made for members of the Armed Forces so that they would not be taxed on their leave warrants or their

  1143
  travel to work. This point had the support of the Liberal Party, which has taken a constructive interest in Service matters. In contrast to the attitude of the Opposition, the Liberals have not wanted to make political capital out of the situation but have made proposals that would help Service men. This is a different story from the alarm and despondency that day in, day out the Conservatives have been preaching inside and outside Parliament which by itself is bound to have damaged the morale of the forces.
  What worries me is that I am not at all sure what the Conservatives want in terms of pay. I am not sure that they know either. It seems that all they are after is votes. In the last two years the maximum award consistent with pay policy has been implemented, and so have the recommendations of the Armed Forces Pay Review Body. This year in particular the Government have fully recognised the unique value of the Armed Forces and their special tasks and responsibilities by giving them an award which averages a good deal more than other groups, particularly those in the public sector, are receiving.
  Rear-Admiral Morgan Giles: The right hon. Gentleman asks what we want. I can tell him in one word—comparability, as the forces were promised.
  Mr. Mulley: This raises a very important question. Does the Opposition believe that pay policy should be totally abandoned or that it should apply to everyone but the Armed Services? Certainly that was not their view in respect of their pay policy. In the wider context, it is about time that we knew whether they were proposing to have some form of guidelines on pay, should the dire con sequence hit the country of their becoming responsible for our nation's affairs.
  Mr. Hooson: Is it not correct that under the last Conservative Government's pay policy there were no exceptions for the Armed Forces or anyone else? Are the Conservatives now suggesting that there should be exceptions to pay policy?
  Mr. Mulley: To the best of my knowledge that is true. Under their policy there was a possible exception for unsocial hours, but they sought not to exercise it on behalf of the Armed Forces.
  Sir Ian Gilmour: Under the Conservative Government there was a statutory policy which the Liberal Party then supported. That is very different from a non-statutory policy. The Chancellor of the Exchequer has said that there would be exceptions under this Government's policy. These have been applied to people such as the Ford workers and others with industrial muscle. Secondly, irrespective of the sort of incomes policy in force, it is common ground between the two parties that the Armed Forces will get more next year. Even on the Prime Minister's view that is so. The right hon. Gentleman is waffling on irrelevantly, because the Armed Forces will get more over the odds next year anyway.
  Mr. Mulley: The Armed Forces are getting more over the odds, as the right hon. Gentleman puts it, this year. The going rate in the public sector is 10 per cent.
  Mr. Norman Tebbit: Will the Secretary of State repeat what he said? I understand him to say that the going rate in the public sector is 10 per cent. Is that the Government's policy? I thought that there was a 10 per cent. limit, except in the Prime Minister's constituency, where it is 12 per cent. for Ford.
  Mr. Mulley: I should have known better than to give way to the hon. Member for Chingford (Mr. Tebbit). It is news to me that the public services embrace a Ford manufacturing concern. I said that in the public services 10 per cent. was the rate.
  There is vast criticism of the Armed Forces Pay Review Body. We obviously would look at alternatives, but it is only right that we should pay our tribute to that body for the immense amount of work that it does. It does not have an easy task, and is unremunerated. We are hearing a different story today from our last debate when there was severe criticism of that body and charges that it did not have an independent status. Not only does it compare pay in the forces with pay in civilian jobs of a similar kind; it also takes account of overtime, pension rights, and other non-wage benefits in the comparable occupations. It receives a mass of evidence, directly from senior officials and officers in the Ministry

  1145
  of Defence, and it visits the forces and discusses with Service men and thir wives pay and related matters.
  With this information the review body is able to construct the appropriate levels of earnings for the Services which reflect the rank, trade skills, period of service, and so on. The X factor, generally 10 per cent. for men, is added to these levels of earnings in recognition of the unique features of Service life, including a requirement to work long and often unsocial hours, and to reflect the balance of advantage and disadvantage of Service over civilian life.
  Mrs. Winifred Ewing: Does the right hon. Member consider that the mushroom growth of the forces wives' associations, including a very strong one in my constituency, is an expression of a real sense of growing hardship under all the headings that he has given? There is great fear that any increase will be swept away immediately by rent increases. Is the right hon. Member aware of the tremendous demand in the North-East of Scotland for a cost of living allowance because the cost of living there is even higher than that in the London area?
  Mr. Mulley: I can give the hon. Lady the assurance that there will be no increases in married quarter rents in the coming year. As to the question of the cost of living, there are no special cost of living allowances for Service men serving in the United Kingdom.
  As I was saying, the Review Body makes recommendations about not only pay but also accommodation and food charges. These also are based on a comparison with civilian life.
  As I have made absolutely clear, the Review Body, in making its assessments and inquiries, is supported by a staff that is totally independent of the Government. Obviously, however, it takes into account any incomes policy which may be in operation at the time. I think that it would be quite irresponsible for any independent review body not to do so if it expects its recommendations to carry real weight and authority, and if it is not simply to be regarded as a pressure group. I assume that the right hon. Member for Chesham and Amersham thinks so, too, despite the views of some of his colleagues, because this convention was established when he
  1146
  himself was a Defence Minister in the previous Conservative Government.
  Mr. F. A. Burden: Are we to understand, then, that for the next two years there will be no need to call upon the Review Body because the Government are determined to bring the pay of the forces up to complete comparability? Therefore, surely there is no need for any intervention or anything else from the Review Body.
  Mr. Mulley: It is the job of the Review Body to assess comparable terms. I want to spell this out because there is much misunderstanding as to how it will work between 1979 and 1980.
  The Review Body has taken account of pay policy in formulating its recommendations, but it has also drawn up scales of pay that are justified by outside evidence, and it has made absolutely clear what is needed to restore the Services to full pay comparability at a current date. The Review Body has produced the evidence this year to support the views that it expressed but did not quantify in its last two reports—that the Services, as we know, have fallen significantly behind their comparators since April 1975.
  Mr. Burden: So we can take it—
  Mr. Mulley: I shall explain the situation. Opposition Members seem to know everything, although they do not present their knowledge when they make speeches outside the House.
  The spread of the lack of comparability was between 19 per cent. and 38 per cent.—
  Mr. Churchill: Disgraceful!
  Mr. Mulley: —with an average increase of 32 per cent. being necessary to restore it. But as the Review Body recognised in its 1977 report, one of the main reasons for this was that the pay for the Services becomes due in April each year, and there was a gap between April 1975 and immediately before pay policy was introduced.
  Mr. Churchill: That is no excuse.
  Mr. Mulley: I know that the hon. Gentleman has a public reputation to sustain—he was described by someone the other day as brash and loud-mouthed—but he can do it in his own speeches

  1147
  without having to interrupt from a sedentary position in those of others.
  Therefore, there was that element as well as the other factors that I have discussed. But the Review Body made it absolutely clear that the Government were not expected and could not be expected to make up the shortfall at once. We have to consider Armed Forces' pay in the wider context of pay policy and economic strategies generally. Nevertheless, the Government have accepted the recommendations of the Review Body that the Services should be given a firm commitment that the fully comparable rates of pay will be introduced over the next two years regardless of economic circumstances and regardless of the provisions of any pay policy which might be in operation over that period
  This is a firm commitment which my right hon. Friend the Prime Minister has given to the House—which the House will recollect—that we shall restore Services' pay to full comparability, in two equal stages, by April 1980, and I regard it as the most important outcome of this Armed Forces pay review.
  Mr. Victor Goodhew: Will the Secretary of State give way?
  Mr. Mulley: I have given way very generously. All right.
  Mr. Goodhew: Is the Secretary of State aware that the Top Salaries Review Body, which deals with Ministers' pay and the pay of Members of Parliament, is not required to say over what period it thinks that increases should be spread? It says what it thinks Members of Parliament and Ministers should get and leaves it to the Government to accept responsibility. Why is the Secretary of State leaning on the Armed Forces Pay Review Body and telling it to say over what period increases should be spread? This is a matter for the Government and not for the Review Body.
  Mr. Mulley: We are still awaiting the report of the Top Salaries Review Body, as I understand it. I did not tell the Armed Forces Pay Review Body anything. I did not lean on it in any way. It was the Review Body's recommendation that the increases should be spread over two years. I accept the other point, of
  1148
  course, that the actual decision is ultimately a matter for the Government, and I accept that responsibility.
  What we need to make clear, because there is much misunderstanding about how this division is to be made—because the commitment is to full comparability on 1st April 1980; fully comparable with their comparators at that time—is that on 1st April next year, the Services will have a pay increase which will consist broadly of half the amount required to bring them up to the full military salary for April this year, together with whatever amount is required to update the award to April 1979. This, of course, will arise from a further recommendation in the AFPRB's 1979 report.
  In 1980, the Services will receive the remaining half to bring them up to the full military salary assessed for April this year together with the appropriate updating between April 1979 and April 1980. The result will be that in April 1980 the Armed Forces will have the full military salary fully updated to the then current levels.
  As to the immediate increase for this year, the Armed Forces have received the full 10 per cent. under the current guide-lines, together with an additional percentage representing a move towards the restoration of the full X factor in the military salary recommended by the Review Body. Other changes in allowances, and the holding of accommodation charges at their present level pending further review—which will be of especial benefit to the younger married men though it will apply also to all who live in quarters or single accommodation in barracks—will have the effect of adding a further 1 per cent. to the settlement. The result should ensure that Service pay does not fall further behind before the catching-up process begins next year.
  It is nonsense for the right hon. Member for Chesham and Amersham to say that after this year's award the Services are still 32 per cent. behind. We are, in fact, acting in the full spirit of the recommendations of the Review Body.
  Mr. Eldon Griffiths: I am grateful to the right hon. Gentleman for being so generous in yielding to interruptions. Is it his judgment that the measures that he has described will do the job? In other words, on the

  1149
  best advice available to him, does he expect that the painful number of men who are now asking to leave the forces prematurely will be stopped by these measures?
  Mr. Mulley: I hope so, but this is the difficulty in giving way. Hon. Members want me to condense the whole speech into one paragraph. I am coming to some considerations of the special problems of recruiting and PVR. As I say, I hope so, but it would be helped if the Conservative Party took a much more responsible view.
  In its report the Review Body expressed some doubt about the basis of the rent element of the accommodation charges and has undertaken to look further into that. The Government have therefore decided that there should be no increase in charges in the meantime. This standstill will last until the Review Body has submitted further recommendations. I suspect that that will take at least a year.
  We also decided to go further than the Review Body in increasing two allowances which are particularly important to Service men employed on emergency duty. We are doubling the Northern Ireland pay from 50p to £1 a day and increasing the rate of separation allowances by two-thirds of its present rate, that is by 66 per cent. It is absolutely right to do this, because these are the areas of extra duty where particular overstrain is felt. I thought it right to give them priority in this matter.
  Also, as part of the 13 per cent. kitty, we have increased the additional pay—flying pay, submarine pay and the pay of parachutists, divers and hydrographers—to the full comparability of their additional pay.
  Mr. Geoffrey Pattie: On the Northern Ireland point, can the Secretary of State say whether he thinks it fair that troops sent from BAOR to Northern Ireland should find that their families cease to receive the local overseas living allowance in Germany? Could not something be done about that?
  Mr. Mulley: That is not strictly accurate. The families remaining in Germany receive the local overseas allowance. The soldier does not get his
  1150
  because one cannot have an overseas allowance while serving in the United Kingdom. Of course, he immediately gets the Northern Ireland allowance and the separation allowance. That is one of the reasons why I was so anxious to increase both.
  Although this year's immediate award is not as generous as some Conservative Members would have liked, it is important to realise that it helps considerably. Privates will get increases of between £5 and £8 per week; corporals, increases of between £8 and £10; warrant officers, £10 to £14. Among officers, majors' salaries will be increased by between £673 and £841 per year and the salaries of colonels by between £1,057 and £1,325.
  These increases are obviously substantial and are made more significant by the changes in income tax which the Chancellor introduced in his Budget and which were intended, as in previous years of pay policy, to give real increases in take-home pay without adding to the inflationary pressure in the economy.
  There is another feature of this settlement that I should mention. It has been decided that for those who retire from the Armed Forces between April 1978 and April 1980 their pensions will be calculated on the basis of the fully comparable rates of pay which the Government have acknowledged are appropriate and would have introduced but for the requirements of pay policy. There are several precedents for treating pensions in this way, although none, I think, under the last Conservative Government.
  This decision will mean, for example, that a retiring corporal aged 40 with 22 years' service will get an extra £241 on his pension; a warrant officer aged 50 with 32 years' service will get £426; a major aged 50 with 29 years' service will get an extra £524. In addition, there are significant improvements in terminal grants—for example, in the case of a corporal, an extra £723. These decisions will add 14 per cent. to the Armed Forces' pay bill and I am sure that the country and this House agree that they represent a fair deal for the Armed Forces. It is a deal which recognises the Armed Forces' unique position, and it is a deal which treats them exceptionally at a time when virtually all pay settlements in this round have been at or below 10 per

  1151
  cent. I think it is the most which the Government could have been expected to do, and I hope that the Services will recognise, and take heart from, the exceptional way in which they are being treated, both in the increase they will receive this year and in the commitment they have been given for the next two years. Indeed, the pension arrangements underline the full commitment of the Government.
  One difficulty in selling this forward policy has been doubt in the Services—if there is an election and the Conservatives should come in—about whether the Conservatives would carry out the promises which they make today. I hope that the event will not happen, but I have said that, if it should happen—if the country were to go mad again as it did in 1970—I believe that the Conservatives are so committed that they cannot run away. However, many people remember the election promises of 1970 about the slashing of prices at a stroke.
  Therefore, the utterances of the Opposition, which the soldiers can see through as political manoeuvring, are one of the problems. I hope that the right hon. Member for Chesham and Amersham has full authority for the commitment that he has given today and I hope that he will also say that they will do it regardless of the economic circumstances. If they do become the Government, in the light of the way in which, in three-and-a-half years, they frittered away the sound economic position which this Government left in 1970, anything could happen.
  Mr. Tebbit: He has got a sense of humour afer all, this fellow.
  The Prime Minister (Mr. James Callaghan): Order, order—do not be so damned rude.
  Mr. Mulley: I want now to turn to the point which is of great importance—the disturbing increase in the number of officers and men applying to leave the Services prematurely. As I have told hon. Members many times, we are watching the situation very carefully. Chapter 4 of the Statement on the Defence Estimates 1978 drew attention to the significant increase in the number of trained officers and men who had applied for PVR in the Army and RAF and stressed the experience and skill of those leaving.
  1152
  Between 15th February and 15th May, Ministers replied to 37 parliamentary Questions on all aspects of the outflow from the Services and the information requested was always supplied if it was readily available. The figures give cause for concern, particularly as it is often highly skilled and experienced men such as aircrew and technicians who have been seeking to leave.
  However, I believe that this should be viewed in its proper context. About 40,000 people leave the Armed Forces every year, most of them in the normal way, on completing their engagements. The number leaving prematurely at their own request regularly make up between 20 and 30 per cent. of that figure, so we are not talking about a new phenomenon.
  The Government recognise that uncertainty of pay and conditions of service has been a significant consideration in individual decisions to leave the Services. I said, and I say again, that the re-engagement rates for the Navy and Air Force in 1977 were favourable compared with the year before, 1976, and in the Army they were about the same. I am sure that this pay award and the commitment to restore full comparability within two years will have relieved this uncertainty. I hope that it will have the effect of reversing the recent trend and will reassure those who may be considering joining the Armed Forces that the Services continue to offer an excellent career to suitable young people.
  Hon. Members will be aware that we have given priority to those with particular skills by increasing by 50 per cent. the major forms of additional pay, such as flying, submarine and diving pay. To give some examples, a flight lieutenant in the Royal Air Force with two years' seniority will receive an addition of £427 to his flying pay which, taken together with his increased military salary, will give him an extra £991 per year. A submarine commander with two years' service will receive an increase of £376 in his submariner's pay which, taken together with the other increases, will give him an extra £1,307 per year. These are significant increases, but it will be some weeks before it will be possible to draw any conclusions about the numbers seeking to leave since the latest pay award was

  1153
  made, although the first reactions have been quite encouraging.
  As the right hon. Gentleman pointed out, pay is only one of many factors which enter into a man's consideration whether he should join or remain in the Services. The report has, I believe, done much to re-establish the confidence of the forces in the Armed Forces Pay Review Body. The general verdict on the settlement seems to have been that more could not reasonably have been expected, given the need for continued pay restraint. Obviously, the forces would have preferred an early return to full pay comparability, but I have made clear again this afternoon the firm nature of the Government's commitment, which has been underscored by the decision to base pensions on the full rate. This decision was very well received.
  Although Opposition Members may scoff, I stress that there has not been the same copper-bottomed commitment by the Conservative Party. Its record over the years in keeping its promises has not been impressive. As Aneurin Bevan used to ask, "Why gaze into the crystal ball when one can read the book?".
  Sir Ian Gilmour: The right hon. Gentleman has now said the same thing twice, and he was wrong both times. Plainly, our pledge is rather more copper-bottomed than is the Government's, our record in respect of the Armed Forces is much better than Labour's, and we have said that we will restore comparability next year, which is considerably better than 1980. As there is considerable interest in the way the right hon. Gentleman and the Prime Minister have treated the Chiefs of Staff, I hope that he will not skate out of answering questions which I put to him on that matter.
  Mr. Mulley: I can answer shortly and simply. I am very surprised that the right hon. Gentleman should have given public utterance immediately, and has subsequently repeated it, to a doctrine which, on reflection, I am sure he will feel unwise—that is, that public servants, whether military or civil, should have the right, if they so decide, politically to express themselves as to views or to be involved in public controversey against the Government. This is a constitutional point of very great importance.
  1154
  The information was certainly not classified. The information would certainly have been very appropriately given at the time the Government's decision was made. On the question of the Chiefs of Staff not having their points of view and their very important considerations before the Cabinet, I would point out that, as the Prime Minister disclosed, he read a long submission from the Chiefs of Staff. He did not read the document to himself, but read the whole of it to the Cabinet so that they were fully informed as to the concerns of the Chiefs of Staff. But if the Conservatives are ever to form another Government and intend to license the whole of the public service to issue anything they like and to give any briefings they like on matters of party political controversy, I think they will live to regret it.
  Sir Ian Gilmour: The right hon. Gentleman is not answering the point.
  Mr. Mulley: I do not answer hypothetical questions. If the Chiefs of Staff had wished to brief the Press about matters of a factual character of this sort, I should have been sympathetic to that request. The question of when they would have done it would be another matter. The figures have been given and will be given in the ordinary way in answer to Questions, Government statements and so on.
  To conclude, I wish to point out that there is no difference on this side of the House about the vital role which the Armed Forces have to play in the country's defence and the valuable contribution they make to the life of our community in many other respects. I wish to pay tribute once again to the dedication, skill and courage of our Armed Forces in their important role. I wish to convey on behalf of the whole House the appreciation of the Government and right hon. and hon. Members in all parts of the House to the Armed Forces for the work which they undertake.
  Although it has not been possible in this pay settlement to award the Armed Services financially as much as they deserve, I am sure that the Service personnel understand the need for pay policy and the importance of its success to the economic future of the country and in providing the necessary defence expenditure. On these grounds I ask the House to reject the motion.
  5.17 p.m
  Mr. J. Enoch Powell: I make no apology for the fact that my contribution to this debate will be limited to matters affecting the Ulster Defence Regiment. That is not in reality a limitation at all, since the Ulster Defence Regiment is an integral part of the Army, and the function which it performs and the burdens which it carries relieve proportionately the demands placed upon the rest of the Regular Army.
  It has been the development of the Ulster Defence Regiment which, along with the strengthening of the Royal Ulster Constabulary, has made it possible to limit the prejudice which service in Northern Ireland does to the training and commitments of the Army elsewhere. My hon. Friends and I look forward to the role of the regular Army in Northern Ireland progressively becoming more normal, in the sense that tours there will be longer and that the units stationed in Northern Ireland will be able to carry out their normal training as part of general service. If this is to continue—and it will be the continuation of an existing trend—the Ulster Defence Regiment must not only maintain its existing strength but the full-time element must become increasingly important.
  It was the object of my hon. Friends and myself at the beginning of this Parliament to see the regular full-time element of the Ulster Defence Regiment greatly expanded. In fact—I think, in one of the earliest relevant debates—we specified as the appropriate aim a proportion of one company per battalion of full-time UDR to the UDR as a whole. Something approaching that proportion has been attained in the last two years, and this increase in the full-time element of the UDR has been one of the most favourable aspects of the development of the security forces in Northern Ireland.
  It was therefore appropriate that the Secretary of State in his speech should make specific reference to the conditions and pay of the UDR, because it will be upon the comparability—that is a word which has been much used already in the debate—of the conditions and pay of the full-time UDR men and women with the corresponding pay and conditions of the rest of the Regular Army that our hopes must rest for not merely maintaining
  1156
  but improving the performance and numbers of the full-time element of the Ulster Defence Regiment. Important—indeed, overwhelming—though the part-time element of the UDR is, the effectiveness and functioning of the part-time element is dependent upon the full-time cadre and its availability throughout the 24 hours and in all parts of the Province.
  We recently brought to the attention of the Government—not for the first time—in prospect of the defence review report and of the decisions being taken upon pay, three specific respects in which the position of the full-time UDR member differed unfavourably from that of the Regular soldiers with whom he was serving side by side in Northern Ireland.
  Service for the full-time UDR means not merely exposure to the same risks as the Regular forces there but exposure to a certain higher level of risk. The UDR live as members of the general population, and their families live at home all over the Province. They are thus much more vulnerable than the members of the Regular forces to attempts—which have hitherto been strikingly unsuccessful—to dissuade citizens by murder and violence from joining the UDR or continuing to serve in it. In my own constituency I can think of a number of men, some of them Roman Catholics, who have set at naught threats backed by force and acts of violence, which were designed to deter them from remaining members of the UDR and carrying out their duties in it.
  Three repects in which the UDR is still at an unfair disadvantage with the Regular Army are as follows.
  Until recently, there was a rule whereby the basic pay of the UDR for ranks above corporal was 95 per cent. only of the corresponding pay for the Regular forces. I am not clear how far this situation has been modified as a result of the recent pay review and the decisions which have been taken following it. Figures which have become available in the last day or two—I am obliged to the Secretary of State for supplying my hon. Friends and myself with details—appear to indicate percentage increases for the UDR which will diminish the anomaly to which I have referred, an undefensible anomaly, since, if it be argued that the 5 per cent. represents the whole or part of the famous X-factor in the pay of the Regular soldier, the conditions which the X-factor was

  1157
  designed to offset apply equally above or below the rank of corporal.
  It would be helpful if, when the Minister winds up the debate, the percentage increases could be inverted so as to indicate the degree, if any, of disparity which will still exist between the basic pay of the UDR and that of the Regular forces at different levels. That is the first element of difference which we would wish to see greatly reduced, if not eliminated.
  The second element relates to the cost of living which has to be confronted by the full-time member of the UDR as by the Regular Army serving in Northern Ireland. It is probably widely known, but perhaps not as widely known as it should be, that the cost of living for ordinary people in Northern Ireland is higher than in any other part of the United Kingdom. Steps have been taken increasingly in recent years to protect the Regular Army serving in Northern Ireland from the impact of those conditions.
  I refer to two aspects of the cost of living against which the two forces have been very differently protected. I deal first with food. In the Regular Army all single soldiers receive their food free and all married soldiers receive a food allowance of 50p per day. On the other hand single full-time UDR men receive only a 50p per day food allowance, compared with the full cost of food of which the coresponding Regular soldier is relieved. Thus, the unmarried full-time UDR man is at a disadvantage compared with his Regular comrade in respect of food.
  It may be said that that does not apply to the married UDR man. However, the family of the married Regular soldier normally has access to the NAAFI, and I think it would be admitted that, compared with the levels of prices prevailing generally in the different parts of the Province, the family of the Regular soldier stationed in Northern Ireland has a decided shopping advantage over the family of a Regular UDR man living at home, wherever that may be. There is, therefore, a distinct gap—though it affects differently the single and the married man—as to the cost of food. We contend that the full-time member of the UDR is entitled to the same protection as his Regular equivalent against the high cost of that element of the cost-of-living index.
  1158
  More serious is the position as regards rent. The full-time UDR man receives nothing in respect of rent—neither his own rent if he is single nor, if he is married, the proportion of the rent paid for his family and himself which is attributable to his own needs; and it is worth remembering that at present the Housing Executive rents—it is on local authority or Housing Executive rents that rent costs for the Armed Forces are by agreement calculated—are being annually and rapidly increased.
  The position of the Regular soldier serving in Northern Ireland presents a complete contrast. The Regular soldier receives free accommodation with, in Northern Ireland, no offset against his pay. So there is a big difference in the real remuneration of the single full-time UDR man and the single Regular soldiers. The married Regular soldier, for his part, receives an allowance which puts his element of the cost of rent of his family in the same position as it would be if he were single: he receives an allowance which cancels out his element in the rent costs for his family. Thus we have, in effect, relieved the Regular soldier serving in Northern Ireland of the whole burden of rent in respect of himself whether he is married or single, while his UDR comrade, serving side by side with him, is carrying the full burden of rent.
  Mr. David Walder: In a sense, I am seeking information from the right hon. Gentleman. Is there no discernible difference due to the fact that the married UDR soldier is living at home, whereas the Regular soldier in Northern Ireland is obviously living not at home but in rented accommodation?
  Mr. Powell: Most of the regular UDR men are living in Housing Executive rented accommodation; and I have referred to the recent and successive adjustments of those rents. It is true that the UDR man lives in his permanent home; but that does not serve to protect him against the levels of rent and living costs prevailing in Northern Ireland and therefore leaves intact our claim that while we have protected the Regular Army serving in Northern Ireland against these factors, the full-time UDR man is largely, and in respect of rent for himself wholly, unprotected.

  1159
  We believe that this is a gap which needs to be closed. If we are to go on relying increasingly in Northern Ireland upon the UDR and therefore upon retaining and recruiting a full-time UDR, we cannot carry on with this degree of differential, I was interested to notice the undertaking of the Secretary of State in his speech that the differences to which I have drawn attention—and I have not gone over the full gamut—would be considered by the Government "very sympathetically". I noted that expression, but it can mean something or nothing.
  Mr. Michael Mates: Nothing.
  Mr. Powell: I would not wish to take that view, but I expect that when the Minister winds up the debate, specific reference should be made to the lack of comparability between the UDR and the Regular Army and that the assurance which I believe was sincerely and practically meant by the Secretary of State should be reinforced.
  I close by reiterating that what is done for the UDR is done for the Army as a whole. It is in the interests of the defence effort as a whole that the UDR in Northern Ireland should have maximum efficiency. The Secretary of State understands that, and he now needs to accompany that understanding by further steps to remove the disparity between two forces which, in Northern Ireland, are doing the same work and doing it together.
  Mr. Mulley: I certainly endorse what the right hon. Gentleman has said in tribute to the UDR. We all remember unhappily that of the nine members of the Armed Forces killed this year four have been members of the UDR. I have the greatest admiration for the courage and devotion to duty of the UDR.
  Certainly we shall examine what the right hon. Gentleman has said. As a result of correspondence and previous discussions, I announced help over one of the difficulties that arose from the conditions of last year, namely, that members of the UDR can have food free at public expense without losing their 50p a day allowance.
  However, perhaps it might be better for my right hon. Friend to try to deal
  1160
  with the points raised by the right hon. Gentleman when he winds up the debate. I am not sure, though, that in the course of the rest of today we can settle all the points that the right hon. Gentleman has raised.
  Mr. Powell: I am obliged for that intervention. Of course I do not expect the Secretary of State or his right hon. Friend to stand up today and read out a specific detailed response. However, it is necessary, and has been rendered more necessary by the generous words the right hon. Gentleman used about the UDR—that the urgency of doing something to remove the disparities should be recognised. If it is recognised, action should follow.
  5.36 p.m.
  Mr. J. P. W. Mallalieu: I very much hope that my right hon. Friend will take some action about the anomalies affecting the UDR which have been put so cogently and without rancour by the right hon. Member for Down, South (Mr. Powell).
  The right hon. Gentleman's speech was in striking contrast to that of the hon. Member for Chesham and Amersham (Sir I. Gilmour). I see that he is a Privy Councillor. I should have referred to him as a right hon. Gentleman and after the courage he showed in attacking Aneurin Bevan, Richard Crossman and Morgan Phillips, when they are safely dead, the right hon. Gentleman will expect me to give him the title of "gallant" as well.
  In fact, the best title for the right hon. Gentleman is one that he gave himself. When, in gentlemanly fashion, he appointed a new editor of the Spectator without troubling to mention to the existing incumbent that he was to be sacked, the right hon. Gentleman said publicly:
  "I know that I have behaved like a …".
  Here he used a four-letter word that I must not inflict upon the House. I am sorry that I cannot use that word because it describes exactly and precisely what I think of the right hon. and gallant Gentleman.
  It is extraordinary that a great party such as the Conservative Party should choose as its spokesman on a matter of such importance as defence a Member such as the right hon. Member for

  1161
  Chesham and Amersham and should couple him with his noisy little chum the hon. Member for Stretford (Mr. Churchill).
  The fact that those two have been chosen to speak for the Conservative Party on defence would justify our believing that the Conservative Party does not take defence seriously and has no interest in the welfare of Service men. I know that this is not true. I have listened to enough debates and heard enough Conservative Members speak to know that many of them have a great interest in and knowledge of this subject.
  I can only assume that the fact that the great reserves of talent on defence that exist on the Conservative Benches have been ignored in favour of these two is another example of the gross errors of judgment to which the Leader of the Opposition is, unfortunately, so prone.
  We heard again from the right hon. Gentleman the dreadful myth—the mischievous and malignant myth—that we on these Labour Benches do not care for the welfare of Service men. It is totally untrue. But what I fear is true is that, although the improvements in Service conditions have been great in many ways since the last war, neither Labour nor Conservative Governments have ever succeeded in producing real justice for the men in our Armed Forces.
  The original ideas which lay behind the restructuring of Service pay in 1968, 1969 and 1970 were sound. The idea of having a military salary in place of the hotch potch of pay and allowances which then existed, so that Service men would know exactly what they were getting, was a good idea. It was a good idea to have job evaluation so that it would be possible to have some knowledge of corn parability between the job which a man did in the Services and a similar job done by civilians outside, and some recognition of comparability between their rates of pay.
  It was a good idea to have the X factor to make up for the balance of disadvantage, if disadvantage it was, of being a Service man as opposed to being a civilian.
  The snag is that it has not worked out right. These good ideas have been in part defeated, partly by various pay
  1162
  policies but much more by the regular and persistent wages drift, to use the current jargon, since pay policy refers to basic wage rates, not to earnings, and earnings in civilian life can be increased by overtime, by night shifts or by productivity agreements but earnings in the Services cannot be so increased. Inevitably, therefore, again and again, although one may have comparability at the start, as a result of wages drift the disparities widen between Service pay and pay for comparable jobs in civilian life.
  We shall not get this matter right simply by increases in the basic pay of Service men. We must make sure that an allowance is made in Service pay for this wages drift. In my view, the way to do it is to increase the X factor to a certain extent. Each year, we ought to make an estimate of what will be the increase in earnings—earnings, not basic pay—in civilian life—in other words, what will be the wages drift—and put that, or a proportion of it, into the X factor.
  If we do that, it will probably mean that for a time during the course of 12 months Service pay will actually be higher than the comparable rate of civilian pay, and then, towards the end of the year, it may well come below comparability again, but over the 12 months we shall have equality. I do not believe that it is possible to overcome the constant problem of the widening gap, the problem that, after every attempt of the Government of the day, whichever party is in power, to narrow the gap, we see it widening once again, unless we employ some such system as the one which I have suggested and put that consideration into the X factor.
  When I last addressed the House upon defence matters I made a mistake. I said that it would be the last time that I should speak, and I am sorry that I have not kept my word. But I am not myself one who favours the idea of having a trade union in the Armed Forces. I have listened and shall listen to the arguments, but I am not convinced that it would be right. But until some such thing is done, until we have trade unionism in the forces, we must rely for justice for our Service men on two bodies. One is the Review Body, which, as we all think, does an admirable job. The other is the House of Commons.

  1163
  That is why I think it important—I congratulate them at least on this—that the Opposition have given up a Supply Day for a debate upon the welfare and pay of the Services. It is important that we should regularly have defence debates separate from defence policy. We should have debates here in the House about the welfare of the men who serve our country in the Armed Forces. I therefore hope that this semi-precedent which has been set today will establish a regular pattern for the House of Commons.
  5.47 p.m.
  Mr. Emlyn Hooson: I am sure that I speak for the whole House when I say how greatly we enjoyed hearing the hon.—and, may I add, gallant—Member for Huddersfield East (Mr. Mallalieu) on this important subject. He did well to explode the myth, which I hate as much as he does. Everyone who served during the last war, as the hon. Gentleman did so gallantly, knows perfectly well that it is pure myth that only the Tory Party is interested in the welfare of the Services. It is a myth, and one greatly resents its exploitation.
  In common, I think, with most right hon. and hon. Members, though not all, I wish to see this country with well-equipped, well-paid and well-trained Armed Forces, modern forces suitable for the defence of this country in association with our allies. What I hate to see is the political exploitation of the Armed Forces for party purposes, and at times recently the Conservative Party has at least come desperately close to appearing to give the impression that that is what it wants to do.
  I do not share the low opinion of the right hon. Member for Chesham and Amersham (Sir I. Gilmour) which was expressed by the hon. Member for Huddersfield, East, but I thought that he fell below his usual standard today and made what I felt was a rather deplorable speech. It gave me the impression that the orange has been squeezed almost until it is absolutely clear of juice and he is now concerned to squeeze the pips to see whether there is anything left.
  The question of the Armed Forces in a society such as ours is of great importance. It is no use hon. Members referring, say, to the Tribune Group, for it is well
  1164
  known that there are a number of pacifists in its membership and there are a number of other members who, though not pacifists, do not agree that Britain should be associated with NATO. One might as well bring in the speech of the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) the other day when he threw doubt on the reliability of the United States as an ally. Does that represent Conservative policy or the official view? Of course it does not.
  On whichever side of the House they sit, the majority of hon. Members believe in NATO and this country's association with it, and they appreciate the need for having forces of high morale to fulfil our obligations to NATO. But in these debates many tend to overlook the fact that expenditure on the Armed Forces is public expenditure. In no way can it be dissociated from the country's economic state. When Conservative Members argue the great need for stringency in public expenditure and the need to curtail it, they never specify which particular aspects of public expenditure they have in mind. But one very important aspect of public expenditure is defence.
  I believe that the greatest threat to the West is internal, and that if we allowed our economy to get into decay or there was a serious disparity in the ratio between defence expenditure and the country's economic welfare, we should be in great danger. I believe that the situation in Italy at present and the situation that prevailed in Spain and Portugal in the course of the past two or three years are sufficient warning to all of us that the great danger to our country and the whole of the West is insurrection from inside coupled with military pressure from outside. We must safeguard ourselves against both.
  I turn to the particular question of Services pay. When I was Liberal defence spokesman on a previous occasion I had reason to attack the Conservative Party for its failure to maintain adequate Services pay. The truth is that under the Conservative pay policy in 1973, just as under phase 1 and phase 2 of this Government's policy, the Services fell sadly behind, as did many other groups. The police have fallen behind, as have the firemen, the doctors and the dentists. Many special groups have fallen behind.
  Mr. Churchill: None by as much.
  Mr. Hooson: The righ hon. Gentleman, who takes up so much time on his own speeches and makes such a noise now, might at least spare me whilst I am making my speech.
  Under any pay policy—which, after all, is designed to safeguard the country's economy—productive industry tends, because of the very nature of bargaining within it, to have advantages which accrue to the public services only at times of greater economic equilibrium. At a time of economic equilibrium the public services are normally in a stronger position to put pressure on the Government, and then productive industry is often in a less favourable position. I think that that has been the experience with pay policy under Conservative and Labour Governments. Those with industrial muscle tend to gain the advantage while the pay pause or the pay policy is on, because they risk breaking the policy, whereas it is very difficult in the public services to do so.
  That is why in the spring of 1975 when the Pay Review Body was reviewing Services' pay, it found that the Services had fallen way behind in comparability over two or three years. As the Secretary of State pointed out, the Government did something about it. The same thing has happened again. What is more, the present Government instituted a number of cuts in their first two or three year in office which affected the morale of the Services. I thoroughly disapproved of those cuts. But exactly the same thing happened under the Conservative Government in 1972–73. There was a series of unheralded cuts.
  Sir Ian Gilmour: No, not in 1972.
  Mr. Hooson: There were, and the right hon. Gentleman knows it.
  Mr. Mulley: May I remind the hon. and learned Gentleman that there were three cuts in 1973, and in total, at current prices, they amounted to more than those I have made since I have been in office?
  Mr. Hooson: The truth is that it is easier for an Opposition to try to exploit the Services, as the Conservatives are
  1166
  doing now. When a Tory Party is in Opposition it is a better friend of the Services than when it is in power.
  Is it possible to restore the comparability of pay in the Armed Services before 1980. That is the issue before the House. Is it sensible from the point of view of the country to do so? Can the risk be taken? I do not think that it can, for this reason—
  Sir Ian Gilmour: The Lib-Lab pact.
  Mr. Hooson: In the right hon. Gentleman's absence I described his speech as most mischievous. It fell far below his usual standard. I want to say this to his face, because he was not here when I began my speech. He gave me the impression that he was trying to exploit the Services politically for party purposes. I think that that is a shocking thing to do.
  The right hon. Gentleman was a supporter of the right hon. Member for Sidcup (Mr. Heath) when he introduced a pay policy. As I recollect it, the right hon. Gentleman was one of the fervent supporters of his right hon. Friend. Yet today he was saying things about the Government's pay policy which he would have disdained had they come from the then Labour Opposition, as indeed they did when the right hon. Member for Sidcup was trying to implement his pay policy.
  One of the things that is reprehensible about this country is that when in Opposition the Conservative Party and Labour Party have been trying to shoot down each other's pay policy, against the country's interest, for small, short-term party advantage.
  Everybody is aware that there has been a crisis of morale in the Services.
  Mr. Eldon Griffiths: There still is.
  Mr. Hooson: There was, and these crises do not disappear overnight, as the hon. Gentleman knows perfectly well.
  I recently saw figures from the United States and learnt of the great concern there over the loss of skilled personnel from the Armed Services. Highly trained, technically highly skilled personnel are at a premium in industry. They are easily absorbed into and tempted away from the Armed Services.

  1167
  The same thing happens in this country. I suppose that that is why the Government have found it necessary to increase by 50 per cent. such items as flying pay, submariner's pay, diver's pay and so on, for exactly the same kind of reason as has been found necessary in the United States.
  The issue before the House is whether it is possible to restore the Armed Services to full comparability in the next year as opposed to 1980. I do not think it is worth taking the risk. Hon. Members know perfectly well that if it were done for the Armed Forces it would be regarded as a precedent for every other pressure group in the country. The hon. Member for Bury St. Edmunds (Mr. Griffiths) represents the police. If the Edmund-Davies Committee recommended less than was recommended for the Armed Forces, would not the hon. Gentleman regard it as a precedent? Would not Labour Members below the Gangway, who exerted so much pressure on behalf of the firemen and so on, regard it as a precedent? Of course they would.
  Mr. Eldon Griffiths: May I explain the matter to the hon. and learned Gentleman very simply? There is an independent Armed Forces Pay Review Body. There is now, I am glad to say, an independent Police Pay Review Body. I believe that it is right for the Government of the day to accept the objective, independent and impartial findings of those bodies and implement them.
  Mr. Hooson: That is what the Government are doing with regard to the Review Body recommendations. Over what period it is to be implemented is a question that must rest with the Government. If the hon. Gentleman is saying that any Government—Conservative, Labour or whatever complexion—can implement these matters with regard to the economic state of the country, he is not living in a state of political reality.
  There has been a considerable change of heart by this Government in the past year as compared with their record between 1974 and 1977 with regard to the Armed Forces. We welcome that. There is a gradual restoration of morale and my colleagues and I in the Liberal Party will certainly do all that we can to
  1168
  make sure that the process is continued. We shall give full support to getting the Services back to full comparability in pay.
  My experience, and I have a number of friends in the Armed Forces, is that they do not want special treatment; they want fair treatment. They realise that there are many groups in the country who think that they have had unfair treatment in the past few years. They do not want to be singled out for special treatment. What they want to do is to make sure that they are in no way handicapped by the fact that they are in the Armed Forces and that they have a deal similar to that awarded to the other special cases we have all heard about. I believe that they will get such a deal, and I shall support it.
  6.0 p.m.
  Mr. Alan Lee Williams: I find myself, not for the first time, in complete agreement with the hon. and learned Member for Montgomery (Mr. Hooson) over the way in which he has presented his case. I share his apprehension about the way in which the Opposition have introduced the subject. The way in which they have tackled this issue throughout is damaging to Service morale. I congratulate my right hon. Friend on the modest way in which he spoke against provocation of the most extreme kind.
  I hope that the right hon. Member for Chesham and Amersham (Sir I. Gilmour)—whose speeches in the past on this subject have always been models of responsibility—will consider matters carefully before making another speech on the lines which he took this afternoon. I am beginning to wonder why the right hon. Gentleman is making such speeches. The last two speeches which he has delivered from the Dispatch Box have begun to disintegrate. I believe that this has something to do with his right hon. and hon. Friends who surround him on the Opposition Front Bench. I warn the right hon. Gentleman that he will lose respect in all quarters of the House if he pursues that line.
  I agree with my hon. Friend the Member for Huddersfield, East (Mr. Mallalieu), who spoke earlier in the debate, that justice for the Armed Forces is not a narrow party matter. Feeling for the Services runs equally on both sides of

  1169
  the House. The pressures of incomes policy have made it difficult for the independent Review Body to make recommendations which the Government could readily accept.
  I firmly believe that the independent element is right. What concerns me is that the Services appear to have no confidence in the independent review structure, which seems to be a sorry state of affairs. Above all, they seem to be deeply suspicious of the Chiefs of Staff. The view that has been expressed to me by Service men is that they believe that the Chiefs of Staff were not strong enough or tough enough in their attitude towards salaries and conditions. In part this explains the rather defensive way in which the Chiefs of Staff have reacted.
  The course of action of the Chiefs of Staff in leaking certain information—not highly classified information, since my right hon. Friend has admitted that it could have been obtained by parliamentary Questions—is highly damaging to the stature of Chiefs of Staff. Such action is damaging not only in respect of their relationships with Ministers but in respect of their relationships with Parliament and, through Parliament, with the Crown. I hope that when my right hon. Friend spoke to the Chiefs of Staff he made it quite clear that any repetition of this attitude would bring swift retribution.
  If the Chiefs of Staff were concerned about the position and felt that in all the circumstances the Government did not intend to do the right thing, they had one honourable course open to them, namely to resign—
  Mr. Churchill: The Secretary of State is the one who should resign.
  Mr. Mates rose—
  Mr. Williams: The Chiefs of Staff chose not to resign.
  Mr. Mates rose—
  Mr. Deputy Speaker (Sir Myer Galpern): Order. If the hon. Member for Hornchurch (Mr. Williams) does not give way, the hon. Member for Peters-field (Mr. Mates) must resume his seat.
  Mr. Williams: I fully understand why the Chiefs of Staff chose not to resign.
  Mr. Mates rose—
  Mr. Williams: That was a mistake. I believe that in matters of this sort the tradition which has recently grown up of not resigning is a dangerous one. If the Chiefs of Staff felt as they did, that was the honourable course for them to pursue. I look upon this matter as a grave one, irrespective of whether the information they leaked was classified.
  Mr. Mates: The hon. Gentleman is wrong. The Chiefs of Staff had two options open to them. Written into the constitution of their office is the right of direct access to the Prime Minister, the right to address him on matters which, in their view, seriously affect either the morale or the efficiency of the Services. Does the hon. Gentleman approve when that option is taken away from them?
  Mr. Williams: That is an erroneous point. It does not detract from what I was saying.
  Mr. Mates: Why is it erroneous?
  Mr. Williams: I was making the simple proposition that if the Chiefs of Staff were so unhappy about the position, they had one course open to them—
  Mr. Mates: Two.
  Mr. Williams: They did not choose to take that course. I go further and say that they have done damage to the constitutional proprieties. I believe that they will regret their decision.
  Above all, it is the Armed Forces about which we ought to be concerned. We ought to be concerned about the attitude and the suspicion that somehow they believe there is a conspiracy on the part of both sides of the House to reach an agreement at their expense. They have a deep cynicism and suspicion about both sides of the House. My hon. Friend the Member for Huddesfield East referred to that when he said that, in the light of history, there was some justification for that attitude. If we are to reassure the Armed Services we need a better input in respect of their grievances and how they see them. I disagree with some of my hon. Friends who say that the only way to overcome the difficulty is to argue the case for trade unions in the Services.
  Mr. Doug Hoyle: I shall be arguing that case.
  Mr. Williams: I believe that argument to be as dangerous as the behaviour of

  1171
  the Chiefs of Staff. It is totally unnecessary to introduce trade unions into the Armed Services. I profoundly believe that we have to introduce into the process some means of representation for those below the rank or brigadier. I am sure that there are many ways in which that could be done and I do not intend to outline them this afternoon. The criticism made by officers and men below the rank of brigadier is such that in some way or other machinery must be found for them to put their view as vigorously as possible.
  Mr. Mallalieu: Would it not be possible to have a serving officer, say a major or colonel, plus one other rank on the Review Body, to serve for a term of two years?
  Mr. Williams: That is an excellent suggestion. I hope that my right hon. Friend will have something to say about that. It is important that the Armed Services feel that their point of view is being represented in the highest councils. At present they do not believe that. Rightly or wrongly, they do not have confidence in the present procedure.
  I realise that some of the things that I have said may be looked upon as being rather harsh on the Chiefs of Staff—
  Mr. Eldon Griffiths: Irresponsible.
  Mr. Williams: I do not believe them to be irresponsible. I believe that I have spoken with some reflection and measure. The Chiefs of Staff at present enjoy my confidence and, I think, the confidence of both sides of the House. There is nothing incompatible in that with what I said earlier. I believe that they made a mistake in the way they leaked information in the Press, but that does not mean that I have no confidence in them.
  What I have to say must not be represented as an attack on the Chiefs of Staff. I fully understand that they cannot reply publicly to these matters. But the gravity of the way in which they have behaved must be brought home to them, and I think it right to speak out forthrightly from this side of the House.
  6.10 p.m.
  Colonel Sir Harwood Harrison: The Prime Minister and his Government have, in my view, failed in the delay that
  1172
  they have imposed on the Services. Perhaps it is a case of too little, too late. The Prime Minister himself comes from a Navy background, and I am sure that he must have been aware of the feelings in the Services. He saw to it that people like the police, the firemen and the miners were given their awards, and he should have brought forward the report of the Review Body so that the Cabinet could have acted upon it at once. In the light of the views expressed throughout the House, I am sure that he would have got the support of the whole House for such action.
  This is a human problem—a problem of men, their wives and their children. The real difficulty is not so much pay as the things associated with it. Our Services are full of patriotic men. I see a lot of them. They want the new weapons almost as much as they want the pay. If they cannot get those weapons, it is perhaps natural that they should begin to talk more about pay. A number of points have been made about pay, but I think that they need to be repeated and can bear repetition.
  One thing that annoys Service men is the fact that the military forwarding organisation baggage allowance has been frozen for many years and is now totally inadequate. Then there is the fact that Service men abroad, with limited exceptions, cannot claim unemployment benefit for dependants; nor can they claim family income supplement. There are many places in the world where the Army has to be sent. Perhaps they are used to their wives going out to work when they are in England, but there is no opportunity for them to do so in Germany or Ireland.
  Then there is the fact that Service men lose their entitlement to local government overseas allowance for dependants over 16 when they would be entitled to draw supplementary benefits in the United Kingdom. There is also the fact that a Service man cannot claim allowance for storing furniture in his own home or claim for the payment of rates. Again, pensions linked to pay rates have been severely restrained, and I was glad to hear from the Secretary of State today that this will not be so in future. We are all grateful for that.
  Surely all that has happened in Zaire in the last few days should have made us

  1173
  realise more than ever our responsibilities for our Services. Perhaps there should have been some criticism—but I will not enter into this—because we did not send forces as France and Belgium did to get out their nationals, although I know that some of our nationals could come back in the planes which took out medical supplies. We do not always want to be dependent entirely upon other countries.
  Although I do not want to label the Government with full responsibility for all the inflation we have had, they must reflect that if that inflation had not been there we should not have had this outcry about Service pay. Perhaps it was the firemen's strike more than anything else that brought the public to realise the low state of pay of the Services, with Service men acting as firemen for less pay than the firemen were getting at that time and over which they were striking.
  In previous pay reviews, something has always been taken off, either as rent for quarters or for food. I am delighted to hear that there are no strings attached this time to the pay increase as recommended by the Government. But it is so much below the 32 per cent. recommended by the Review Body, and by the time it is implemented it may well be that in such conditions the Review Body would have recommended instead 45 per cent.
  In voting for the motion tonight, I bear no personal animosity towards the Secretary of State for Defence. But I record my vote as happily as I have ever done because that is our parliamentary way of expressing our great belief in our Armed Forces and the men who serve in them, with all the valuable work they do, and also our support for their wives, who have to go out and do the shopping, and their children.
  6.18 p.m.
  Mr. Bernard Conlan: I begin by making a firm declaration that I stand second to no one in support of the Armed Forces. I find it sickening to listen to Conservative spokesmen railing at us about their patriotism and their support for the Armed Forces, casting insinuations against Labour Members. Our support of the Armed Forces is as strong and equally as determined as the Conservatives' will ever be.
  1174
  When I listen to Conservatives rail at us about our lack of support for the Armed Forces, I get the impression that it is synthetic anger. They know full well that the pay agreement just announced is as much as the Armed Forces expected. The right hon. Member for Chesham and Amersham (Sir I. Gilmour) laughs, but he visits the Armed Forces probably as often as if not more than I do. If he were sincere and accurately reflected the conversations he has had with soldiers, sailors and airmen in the weeks preceding the Government's announcement, he would have got a clear message that they are saying, "We know the Government have their guidelines; we know that in this round we shall get the 10 per cent." In fact, my right hon. Friend has made it clear that they have got more than that, but that is what they were expecting. I think that the Armed Forces will be satisfied with the Government's firm commitment that comparability will be achieved at the end of the next two years.
  I am never surprised by anything that the Conservatives do. They will spend virtually anything on defence or on the police, but we have heard their firm declarations time and again, month after month and year after year, that they would slash expenditure in every way—on social services, the hospitals, the schools, the roads—with the exception of defence and the police. There is a great deal of hypocrisy in this.
  It is recognised that the Services feel that they have had a raw deal. But almost all sections of the community these days feel that as a result of the Government's pay policy they have had a rough deal. It is not only the Services. One finds the same feelings among engineers, nurses, hospital consultants, managing directors, and middle-range management. They all feel they have had a rough deal because of the incomes policy.
  However, the sacrifices have been necessary. The news last week—and this will not cheer the Opposition—that the inflation rate has fallen below 8 per cent. makes all the sacrifice worth while.
  We all recall that in the balmy days of the free for all, with everyone going for what he could get, Mr. Frank Cousins said that if there was to be a free for all, members of the TGWU were part of it. I turn that coin on the other side. If the nation is required to make a

  1175
  sacrifice to get the rate of inflation down, it must be a sacrifice by all, and the Services are part of that "all". Therefore, it is not unreasonable to expect that they will make their contribution to reducing inflation. They have done so up to now, and will continue to do so for the next two years.
  Why do the Opposition merely proclaim the demands for the Services and not other groups? Their reasons are obvious—
  Sir Ian Gilmour: I shall answer that question by asking another question. Does the hon. Member for Gateshead, East (Mr. Conlan) know of any other group that is suffering such an exodus because it is not properly paid? Does he know another group that has fallen 32 per cent. behind what it should have?
  Mr. Conlan: On the question of the exodus, I think that in making his weekend speeches on this subject the right hon. Member for Chesham and Amersham has been exaggerating. Admittedly there have been premature resignations, but, as the Secretary of State made clear, this is normal. These premature resignations represent between 25 per cent. and 30 per cent. of people leaving the Armed Forces.
  It may well be that the pressures on the Armed Forces have been highlighted rather more than in the past. At least I agree with part of what the right hon. Gentleman has said. There is a great deal of discontent among the Forces. It expresses itself in complaints about pay, but I am not altogether sure that pay is the only reason for discontent.
  I believe that we are getting perilously near a situation in which successive cuts in defence expenditure are affecting the teeth arms. That is due not only to this Government because it is not only this Government who have reduced defence expenditure. We all recall when the present Lord Barber was Chancellor of the Exchequer and he contributed his share to the cuts because of the economic circumstances. It is not just one Government who have been responsible for cutting defence expenditure.
  As a result of economic circumstances we have had to make cuts, but we have
  1176
  always attempted to protect the teeth arms, and make the cuts where they will be the least painful. By and large this has been achieved, but we are now reaching the stage where any further cuts in defence expenditure can be made only at the expense of the teeth arms.
  Recently I visited Germany with the Defence and External Affairs Sub-Committee. I came across instance after instance where the troops were complaining that although they had some of the most sophisticated equipment of any modern Army, they did not have enough of it. Also there were difficulties in getting certain classes of spares. This situation had arisen directly out of successive defence cuts. If there are any further cuts they will damage that element that we must keep strong. I warn my right hon. Friend the Secretary of State that he must resist the pressures to which he will be subjected for further cuts in defence expenditure.
  The right hon. Member for Chesham and Amersham and his hon. Friends have raised this issue today and in recent public speeches simply because they think that there are votes to be gained from it. They are using this exercise for political purposes. However, they will find that this political exercise, instead of strengthening the forces, will weaken them.
  Service men will be encouraged by the Opposition's speeches and irresponsibility prematurely to leave the Armed Forces. Conservatives will regret the sort of speeches they have been making. We should be encouraging the forces to remain at their posts, and the Government to resist further demands for defence cuts. We should recognise that the deal that the Government are giving to the forces now is the best that can be made and is a firm commitment to 1980.
  6.28 p.m.
  Mr. Dennis Walters: It would be difficult to disagree with the concluding remarks of the hon. Member for Gateshead, East (Mr. Conlan). He made one point earlier on in his speech which had also been made by several hon. Members opposite about accusations from our side that Labour Members are not interested in defence. Our accusation is that some Members opposite put a very low priority on defence. My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) singled out

  1177
  particularly the Tribune Group and he had considerable and powerful evidence to back up his accusation.
  The hon. Member for Huddersfield, East (Mr. Mallalieu) made a most intemperate, unjustified and thoroughly inaccurate attack on my right hon. Friend the Member for Chesham and Amersham. He also repeated the canard about the Spectator libelling the dead. There was never any question of the Spectator libelling the dead. The accusation made at the time my right hon. Friend was editor of that publication was about people who were very much alive. It was Dick Crossman who revived the issue in his book some time ago when he wrote that the original accusation had been correct and more recently it was Mr. Auberon Waugh who revived it in an article. It was not my right hon. Friend. I hope that the hon. Member for Huddersfield, East, who is a distinguished Member, will have the courtesy in due course, when he has reflected on this matter, to apologise and withdraw.
  As the Regular Commission Board is situated at Westbury and the School of Infantry is at Warmingster—both in my constituency—the question of Armed Forces pay, morale, and defence in general is and has been very much on my mind. I have visited the School of Infantry on several occasions and have always come away greatly impressed by what I saw. The skill, dedication and intelligence of all those with whom I came into contact was of the highest order. The courses of the School of Infantry are attended by Service men from countries throughout the world and the school rightly enjoys a superb reputation. However, when I spoke to a cross-section of Service personnel and their wives during my most recent visit, the seriousness of the situation was dramatically brought home to me. The skill, dedication and intelligence was not any less than on previous occasions, but exasperation at the neglect that Service men had suffered from the Government had clearly reached worrying proportions and was seriously affecting morale.
  The depth of feeling expressed was entirely understandable for the reasons that have been given this afternoon. Our Forces have been abominably treated in the past few years. As my right hon. Friend the Member for Chesham and
  1178
  Amersham (Sir I. Gilmour) said in a previous speech and repeated today, the Forces are voting with their feet against the Government's indifference to their treatment. At Warminster I experienced the accuracy of that statement and, anyone concerned with defence could only be very preoccupied with what he heard.
  Pay was not the only aspect troubling those with whom I spoke at Warminster. It was apparent that morale generally had been affected and I became aware of the fact that there was not enough ammunition, fuel and spares with which to train properly. Like all hon. Members, I hope that the recent award has done something dramatic to reverse the trend and halt the frightening exodus from the Armed Forces. However, it is my hunch that the clear and specific pledge given this afternoon by my right hon. Friend on comparability being introduced by a Conservative Government next year will do a great deal more to restore morale than anything said by the Government.
  We must also bear in mind that we are dealing with intelligent people. It is hardly surprising that they are anxious and perplexed when they observe that at a time when it is beyond dispute that the armed might of the Soviet Union has been increasing in a spectacular and alarming manner our defence capability has been continuously and dangerously eroded by a Government who have given defence an intolerably low priority.
  Defence cuts have done grave damage to our forces and have undermined NATO, as the secretary-general of NATO so graphically pointed out in September 1977. When we consider the state of the world we notice worrying manifestations of American isolationism. More than ever before we realise the need—
  Mr. Alan Lee Williams: Does the hon. Gentleman agree that America, since President Carter came into power, has greatly increased its contribution to the North Atlantic Alliance?
  Mr. Walters: Overall I believe that that is not so. The post-Vietnam neurosis, which can be seen in American reaction to events in Africa, is not encouraging and the lesson that we should draw is that Britain and Europe should develop

  1179
  their defences and become increasingly self-reliant in defence. Wherever we look in the world in the spheres of defence and foreign affairs it is clear that British policy at present is weak and ineffectual. It needs a new Government to reverse the defeatist trend and to begin to put things right.
  6.34 p.m.
  Mr. John Cronin: I agreed with the hon. Member for Westbury (Mr. Walters) only when he referred to the American post-Vietnam neurosis. At present that is a real psychological factor in defence. There is a reluctance on the part of the United States to get itself involved in anything outside the United States. That is an unfortunate world situation.
  I refer now to the speech of the right hon. Member for Chesham and Amersham (Sir I. Gilmour). I must express some gratitude to him that a Supply Day has been given for the debate. It is important that we ensure that we debate frequently conditions of service in the Armed Forces. The more frequently the House does so, within reason, the better.
  I am sorry that the problems of the Armed Forces have been used for political exploitation by the Conservative Party. The right hon. Gentleman's remarks did nothing to dispel that fear. Much of what he said was irresponsible, although he did not achieve the heights of irresponsibility of the hon. Member for Stretford (Mr. Churchill) in his speech of December 1977 when we discussed the motion of the right hon. Member for Crosby (Mr. Page). However, knowing the hon. Gentleman's inability to restrain himself. I have no doubt that he will achieve the same feat this evening.
  The right hon. Member for Chesham and Amersham introduced a new and extraordinary constitutional doctrine this afternoon, if I understood him aright. He seemed to say that the Chiefs of Staff had a right to publicise their views if they disagreed with the Government's policy. In so many words, that is what the right hon. Gentleman said.
  Sir Ian Gilmour: Will the hon. Gentleman try to elaborate that charge? I said that the exodus was well known. The Secretary of State agreed that the information
  1180
  given was not classified. I asked the right hon. Gentleman whether he would have authorised that information being given had he been asked. He did not give a clear answer. All that I am saying—and the hon. Gentleman knows this perfectly well—is that information coming out of ministries is not normally authorised by Ministers. If that were not so, Ministers would spend the whole day authorising information. What came out was largely known before. The action of the Chiefs of Staff was totally responsible and totally in the public interest. There was not one word of opinion in it. The hon. Gentleman is badly on the wrong track.
  Mr. Cronin: I am glad that the right hon. Gentleman has, to some extent, cleared up the matter. I had the impression—I think that some of my hon. Friends had it—that he thought the Chiefs of Staff should give their point of view irrespective of what the Minister thought. I am glad that the right hon. Gentleman has made his view clear. Two hours ago it was far from clear. The Chiefs of Staff have no right to give any political opinions. Their only sanctions are to seek an audience with the Prime Minister or to resign. They are in the same position as the head of any Government Department.
  The right hon. Gentleman tried to perpetuate the extraordinary idea that the Conservative Party is in some way the tutelary party of the Armed Forces. He tries to suggest that it always looks after their interests. That is what we always hear when the Conservative Party is in opposition. However, nobody in the Armed Forces can point to any occasion when a special benefit has been given to the forces by a Conservative Government. It may be that we shall hear more about that when the hon. Member for Stretford speaks.
  The right hon. Gentleman did the usual thing of a Conservative Front Bench spokesman. He indicated that more money would be spent—this time on forces' pay. However, no indication was given from where the money would come.
  I understand that it is current Conservative orthodox doctrine that any increase in expenditure may be met by cuts in Government expenditure. Presumably, the extra money spent on forces'

  1181
  pay will be met by cuts in social services.
  Mr. Churchill: There will be cuts in Socialism.
  Mr. Cronin: What does the hon. Gentleman mean by Socialism? Cuts in what?
  Mr. Churchill: £600 million steel cuts.
  Mr. Cronin: The Opposition are talking of some form of proposed Government expenditure. The Conservative Party and the people who support them will not suffer any financial hardship from their proposed generosity, because it will come from Government expenditure.
  Hon. Members have rightly drawn attention to the serious increase last year in applications for premature voluntary release. These figures are disturbing. We should consider them carefully. But they are not relevant to this debate. These figures will change completely as a result of the new measures announced by the Prime Minister on 25th April. It is irrelevant to quote figures showing the number of people who are seeking to leave the forces before that statement was made.
  The right hon. Member for Chesham and Amersham repeatedly said that the Government should have taken action on Services pay during the last six months. We all accept that during the last six months there has been more and more information indicating that morale in the forces has been disturbed. But is the right hon. Gentleman suggesting that the Government should have taken action before receiving the report of the Armed Forces Pay Review Body? How can any responsible Government deal with such a complex and multitudinously problematic affair without having had the opinion of this specialist body? It is completely independent of the Government. Surely before any Government takes action they must consult the views of that body which was set up for that purpose. It was set up as an independent body with its own secretariat and is completely free of all Government pressure. Perhaps the right hon. Gentleman can say whether he accepts its views?
  Sir Ian Gilmour: I do not blame the hon. Member for not listening to a word
  1182
  of my speech, which he obviously did not. I made this clear. Of course, it is plain from the report that the Review Body would have liked to restore comparability this year. It said that the latest date should be April 1980. The body wished comparability to be restored immediately. It even gave the cost, and it is not all that expensive. Of course, I agree with what the AFPRB would have liked to have done.
  Mr. Cronin: I am becoming really worried about the right hon. Gentleman because he has not even troubled to read this important document. I refer the right hon. Gentleman to paragraph 63, which states:
  "We consider that the balance required to bring pay fully up-to-date ought to be paid as soon as possible and, in any event, not later than 1 April 1980. Implementation of pay levels that are justified now at a date so far ahead of course implies the need to bring the levels fully up-to-date again on each occasion when a stage is implemented. It would in our view also be essential to make substantial progress towards fully up-to-date scales at the then current levels in 1979 and, if there were still an outstanding balance, to bring pay fully up-to-date at the then current levels in 1980."
  That is exactly the terms of the Prime Minister's statement on 25th April.
  Sir Ian Gilmour: The hon. Gentleman should read more carefully. Paragraph 60 states:
  "Our recommendation cannot be other than that these levels should be brought into effect at the earliest possible date."
  Does the hon. Member really think that April 1980 is the earliest possible date?
  Mr. Cronin: The two paragraphs must be read in conjunction. It is clear that the Review Body regards 1980 as being the date when the situation should be rectified. That is there in plain English. The right hon. Gentleman and the Opposition should not take such a severe view of the Government for putting into effect the recommendations of the body.
  Sir Ian Gilmour: The hon. Member started by getting it wrong when he talked about the independence of the Review Body. In my speech I admitted that it had not been independent of pay policy under our Government. It is not independent of pay policy under the present Government. The hon. Member does not seem to realise the background against which the Review Body is working.
  Mr. Cronin: I do not accept that. The Review Body accepts independent evidence. For example, it accepts the report of the Adjutant-General of the Army on pay and morale and reports from similar officers in the RAF and the Royal Navy. It gives its unbiased opinion. It is absurd to have a debate in which hon. Members attack actions of the Government which follow exactly the recommendations of the body which has been set up as an independent body to examine the matter.
  It is common ground on both sides of the House that the Armed Forces have felt a real sense of grievance over the last year. But it is important that we do not consider this grievance in isolation. No section of the community can be outside the general welfare of the community. It is important to realise that the Armed Forces must be treated approximately in conformity with the Government's incomes policy. That policy has brought inflation down to single figures. Nobody can deny that. Members of the Armed Forces and their wives and families have as much interest in reducing inflation as anyone else. The Opposition seem to forget that Navy, Army and RAF wives who set out with their shopping baskets are seriously concerned about inflation. Their husbands have to pay increased bills. They have an interest in containing inflation.
  Several hon. Members have spoken about morale. There is no doubt that there was some diminution of morale, but the situation has probably greatly improved as a result of the Government's measures. The hon. Member for Westbury said that he has direct access to an Army establishment in his constituency. Many hon. Members have visited Army establishments recently.
  The state of morale in the Armed Forces before the Prime Minister's statement is not relevant to the debate. We should be concerned about what morale will be like in the future and what it has been like since the Prime Minister made his statement. It is difficult for us to assess this because such a short time has elapsed since the Government's policy was announced.
  I have the good fortune to visit the establishment of a fighting unit twice a week. I have opportunities to talk to all ranks, from troopers to field marshals.
  1184
  My impression is that since 25th April the Armed Forces realise that the Government could not give them more than they have done this year. The real grievance is that it will take two years before comparability is reached. I hope that the Government will do something more about this.
  But, so far, the Government's policy has been correct. The Government have taken the views of the independent Review Body, accepted its recommendations and implemented them. That is the correct approach which is not easy to criticise unless, like the right hon. Member for Chesham and Amersham, one ignores the facts and does not read the relevant document.
  Sir Ian Gilmour: Let me quote to the hon. Member what the report said:
  "Our recommendation cannot be other than that these levels should be brought into effect at the earliest possible date. The Prime Minister has drawn our attention to the Government's expectation that increases which exceeded the guidelines would need to be staged."
  Does the hon. Member still say that the Armed Forces Pay Review Body was free to do what it wanted?
  Mr. Cronin: Yes, of course. The Review Body is perfectly entitled to listen to the Prime Minister's opinion, just as it listens to the opinion of the Adjutant-General in the Army and his equivalents in the Navy and the Air Force. Listening to the views of someone else does not impair one's independence. Surely the right hon. Gentleman accepts that.
  Although the Government have behaved correctly, they have not behaved generously. More could be done for the Armed Forces than has been done in conformity with the Prime Minister's statement. The Armed Forces have unquestionably suffered considerable hardship in the last year. One of the problems pointed out by my hon. Friend the Member for Huddersfield, East (Mr. Mallalieu) is that Armed Forces' pay always lags behind the pay of civilian counterparts. This gievance has persisted under Governments of both parties.
  The Armed Forces should be given more than they are being given at present, and rather more quickly. There is a case for that, bearing in mind their exceptional situation and difficulties. There is no escaping the fact that we depend a great deal upon the Armed Forces. The

  1185
  Army alone is preventing Northern Ireland from dissolving into a chaotic bloodbath. The Army and the Air Force in Western Germany stand between the hordes of Soviet tanks and fighting aircraft and Western Europe. The Royal Navy carries most of the burden of the defence of the sea routes to Western Europe.
  I suggest to my right hon. Friend the Secretary of State that it is most important that we should bear in mind that our standards of democracy and our way of life ultimately depend upon the loyalty, efficiency and morale of the Armed Forces. I suggest, therefore, that there is a case for treating them not merely correctly and justly, as the Government have done, but also generously.
  6.54 p.m.
  Sir Timothy Kitson: I fully agree with the last few sentences of the hon. Member for Loughborough (Mr. Cronin). This debate must be going rather well for the Opposition because so many hon. and right hon. Labour Members have spent a good deal of their time attacking the way in which my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) presented his case. Generally, when people attack someone who has presented a case, it means that they are worried that he has deployed it too well. I felt that this afternoon my right hon. Friend deployed the Conservative Party case very successfully and probably put home a good number of shots of which Labour Members disapprove.
  Like other Members of Parliament who represent constituencies that contain Service establishments, as I do with Catterick Camp and Catterick Royal Air Force station being located in the Richmond Division, I have become increasingly aware in the last two years, and particularly in the last six months, of the worry and concern expressed to me by Service men and their families about their general position. This afternoon we are discussing not only Service pay and the large exodus of Service men from all three Services but the lack of confidence and morale within the Armed Forces generally.
  This is a lack of confidence not by Service men in themselves, but, as my right hon. Friend said, in the system generally. They have confidence in themselves
  1186
  and in their units to do the job that we expect of them. But they are not satisfied or happy about the uncertainty that has hung over their heads for the last two years—uncertainty about their pay and pension structure, and particularly about the shortage of equipment and material with which adequately to train.
  The professional pride of our Service men has been affected by limitations that we have placed upon them. They are controlled in the amount of practice they may have in using their weaponry and equipment by restrictions on spares, fuel and ammunition. For example, in Catterick there is very limited tank mileage and a limit on the number of rounds that may be fired. Some sophisticated weapons are hardly ever fired. One soldier said to me recently that he joined the Army not to clean a tank but to drive one. The severe reduction in track mileage of tanks is almost a laughing stock. Recently there has been a shortage of anti-tank rounds for training. Because of the lack of stores and the shortage of ammunition in the pipeline, it takes some time before equipment is available if some of it is found to be sub-standard.
  In the last few months I have had discussions with many Service men about their pay and conditions, and it is no exaggeration to say of many young married soldiers living in Army quarters that they are only just surviving on the bread line. The hon. Member for Loughborough said that Service men and their families were concerned to see a reduction in inflation. Of course they are. He spoke of Service wives going shopping.
  I am not exaggerating when I say that in Catterick Camp I have been into the houses of Service men, with wives who are unable to go out to work and children, where there has been no joint on the table for periods of up to six months, and where the only meat that is eaten is a little bit of mince once a week. Many of them have had to standardise on what they put into their shopping baskets. A milkman told me that Catterick Camp is the only place where he has to take with him an empty bottle because on certain occasions he must share two pints of milk among three families. That is how serious the situation is in some parts.

  1187
  I take the example of a signalman with a wife and two children, living in a "B" type quarter on a six-year engagement and on pay band 1. His old rate of pay was £43·36 and his new rate of pay is £48·74. After income tax and deductions of £2·35 at the old rate and £3·89 at the new rate, national insurance contribution on the old rate of £2·17, and on the new rate of £2·04, with quartering charges that have not altered, his net entitlement has risen from £30·58 to £34·55. He had a rent rebates of £4·26 on the old rate but receives only £2·65 on the new rate. His child allowance has risen from £2·50 to £4·60. This means that his net total his risen from £37·70 to £41·80, an increase of £4–10. He is then £2·50 better off than if he were on the dole and social security. But if he were on social security, he would have the advantage of free prescriptions, free milk and help with his fuel bills. Even on the new rates of pay, he is not in a very satisfactory situation.
  It has recently been indicated that those leaving the forces will be able to draw a pension at the fully increased figure of 30 per cent. This, of course, is morally right, but the practical effect is that the number of Service men intending to leave in early 1980 will get this pension increase now and may well decide to take it rather than wait for 18 months.
  That is why what my right hon. Friend the Member for Chesham and Amersham has said this afternoon—that we intend to achieve comparability within a year—is so important. I doubt very much whether the general exodus will be slowed down in view of the 14 per cent. increase when there is a pension availability of a 30 per cent. increase taken as from now.
  Mr. Mulley: I intervene to make the matter clear, because I am sure that the hon. Gentleman does not want to mislead. Obviously, as he said, it is absolutely right that the full comparability should be granted now in regard to pensions. But since there will be increases in pay next year and in 1980, those who retire in 1980 will do so at a higher pension level than those who take the current comparability without the additions that are still to come.
  Sir T. Kitson: That is quite true, but men will still take the pension at the fully
  1188
  increased rate now and be in a better position than they would if they had had to wait until 1980. It is quite correct that the Government have decided to pay it in full. I do not disagree with that. But that may speed up the numbers leaving the Army over the next few months. Whether the Government have done enough for Service salaries by the increases can be judged only when the numbers leaving the forces over the next six months to a year are known to Parliament.
  The Secretary of State said only last week that members of the Armed Forces must not engage in public discussions and politically controversial issues. But it seems to me that if Service men do not see that their case is being argued forcefully by the Secretary of State and his junior Ministers they are bound to put forward some of their problems to others when the situation becomes as serious as I believe it has done over the last few months.
  It is because of the lack of leadership by the Ministers that senior Service officers and others have been commenting in what I believe is an unprecedented way over recent weeks and months. The Secretary of State has a great deal of responsibility to bear for the present situation. When he last gave an increase of pay to Service men, he took most of the increase away by increasing charges for their quarters and food. Until this year, over a period of some two years, they have had little or no increase, and I believe that the reduction in taxation in this year's Budget will do almost as much to assist them as the pay increase that has been announced.
  One particularly depressing factor has been the way that the Minister seems to have avoided getting involved in these problems. Catterick Camp is the second largest military esablishment in the United Kingdom. Some 8,500 uniformed troops are stationed there. With wives, families and civilian back-up, some 24,000 people are on the camp. Yet neither the Secretary of State nor the Minister of State, nor the Under-Secretary of State for Defence for the Army could find the time to visit them in the last 18 months. I encouraged the Secretary of State or one of his Ministers to come, as my right hon Friend mentioned, on several occasions. We are still waiting.

  1189
  We should be foolish if we did not recognise the fall in the morale of our forces. We should be foolish if we thought that the recent awards would overcome all of their present difficulties. We should be foolish if we did not recognise that a lot of the problem is the responsibility of the Secretary of State himself. It is for that reason that I have no hesitation in supporting the motion.
  7.4 p.m.
  Mr. Doug Hoyle: Because of some of the things that I shall be saying a little later, I had better declare an interest as the president of the Association of Scientific, Technical and Managerial Staffs.
  Listening to the debate, I was rather sad in two respects. This may well be the last occasion on which we shall hear speeches from the hon. and gallant Member for Eye (Sir H. Harrison) and from my hon.—and gallant—Friend the Member for Huddersfield, East (Mr. Mallalieu). I think that we shall miss them greatly in the House. Whatever has been said today in a partisan fashion, there is no doubt whatsoever that over the years both of them have made their contributions with the well-being of all the people in the Services in mind. I thank them both very much for what they have done.
  Having said that, I shall now completely disagree with everything that has been said in the debate. There has been an awful lot of sham fighting this evening. We have heard cries from the Opposition. The Secretary of State was quite right to say that if by some mischance—though I do not think there is any danger of this at all—the Opposition were to come to office, they would not be found to be champions of the Armed Services, as they have been posing today. I think that we should find them guilty of not carrying out some of the words that they have uttered today.
  Members of the Armed Forces have been victims of the pay policy along with many sections of the population. As one who does not believe in pay policy—not many hon. Members, on either side of the House, can say that—I can truthfully say that it makes some very harsh cases. That is one reason why I do not believe that there is any substitute for free collective bargaining. I do not think that there is any other way in which one can get around this problem.
  1190
  I know that it does not find favour in certain quarters, but I shall continue to say this until common sense dawns on some members of some Government—that this is the right way forward.
  I shall now say something else that will not be very popular with many hon. Members who have spoken in the debate. I think that the Review Body is a thing of the past rather than something of the future. It has served its time. It has pointed the way on many occasions. It has many well-meaning members. Many of them are very elderly, but they are well meaning, nevertheless. They have produced a report that shows up deficiencies. However, I do not believe that this is the right way to go forward. Nor is it the direction that we should be following.
  Mr. Hooson: Will the hon. Member explain to the House how he would get free collective bargaining in the Armed Forces and what would happen if they did not agree?
  Mr. Hoyle: I shall be doing just that. I know that the hon. and learned Member will give me time. If he wants to come back on the matter later, so be it.
  I think that the pay of the Forces should reflect three things. First, it should be high enough to retain people in the Forces. That is quite obvious. Many hon. Members have pointed to the deficiency that people are leaving the Forces in great numbers at present.
  Secondly, I think that it should reflect the comparable rates in civilian life. It is far easier now to move across because many of the jobs done in the Armed Forces have an equivalent in civilian life.
  Thirdly, pay should be high enough to take into account the special features of forces life. The danger element, for instance, has been referred to as part of the X factor.
  All these considerations must be taken into account. I believe that the only way in which we shall be able to do that is by having professional negotiators—not the Review Body—working on behalf of the Armed Forces. The professional negotiators to whom I shall be referring are mostly the trade unions. They are the people who have the members in civilian life and who can see what the comparable rates are and the amounts that members of the Armed Forces ought to be paid. In moving to free collective

  1191
  bargaining we may be able to get that kind of cross reference. I do not think that we shall be able to get it in any other way. In any other way, the forces will continue to lag behind.
  It is not only in rates of pay that the trade unions are needed in the Armed Forces. They are needed in every aspect of pay and conditions. They are needed if only to draw up disciplinary and appeals procedures in which they are expert in civilian life. That would bring democracy into the Armed Forces and safeguard personnel against unfair and arbitrary decisions. They would be able to have professional representation at all stages. At a court martial, they would be able to have not only a trade union officer to represent them, but someone to represent them legally.
  Mr. David Walder: Is the hon. Gentleman under the impression that soldiers before courts martial cannot be legally represented?
  Mr. Hoyle: The hon. Gentleman knows that I am well aware that they can. I am saying that we should bring in independent expertise, covering many fields outside as well as within the Armed Services.
  Mr. Alan Lee Williams: Does my hon. Friend agree that there is a political danger here? His trade union is, rightly, affiliated to the TUC and close to the Labour Party. Would it not be highly dangerous for the Armed Forces to be represented by a union with such close political associations?
  Mr. Hoyle: No, I do not agree with my hon. Friend, although I always respect his views. I have always realised, for instance, that the forces would not be free to pay the political levy. If we followed the example of unions in other NATO forces, they would not have the right to strike. That would make them different from the people in civilian life for whom we are accustomed to bargain. But, with those restrictions, they would benefit greatly from the expertise of union such as mine and many others.
  There are unions now representing the Civil Service, including top civil servants. They are also interested in recruitment in the Armed Services. A number of unions would be competing which are
  1192
  accustomed to the kind of safeguards for which my hon. Friend asks. I do not know why—it always rouses Tory anger when I say this—other NATO countries can have unions to represent their armed services but the idea is considered the last thing that we should have in this country.
  I believe that one of the main objections is to the effect of the unions on discipline. But how is that coped with—and very adequately coped with—in Holland, West Germany, Belgium, Denmark, Norway and Luxembourg, which all have trade unions—and with an identity of membership higher than is achieved in civilian life?
  A survey in 1977 by the American Federation of Government Employees looked into unions in the forces in Europe. It found that the unions concerned
  "confine their activities to matters of compensation and conditions of service and avoid involvement in larger political issues."
  The survey felt that the unions improved internal communications and morale—something that we have discussed tonight. It said that they
  "created a more democratic and enlightened form of service and … improved the attractiveness of a military career."
  I concluded that, although bringing in democracy in this way is a major challenge to the leadership of the Armed Forces.
  "there is no other choice if motivation and discipline are to be maintained in today's army".
  If that can happen with our NATO allies, why can it not happen in this country? Why does the idea arouse such resentment?
  Mr. Robert Banks: Does not the hon. Gentleman recognise that there is no evidence whatsoever that the members of the Armed Forces want to join trade unions and that this is the key to this matter? The divisional system in our Armed Forces provides for a free expression and representation to be transmitted through to the Service chiefs. The problem with this Government is that the Prime Minister refused to listen to the Service chiefs when they called to see him.
  Mr. Hoyle: The hon. Member is confusing several things. First, he says that there is no demand. How does he know,

  1193
  when the unions are not allowed to recruit—
  Mr. Banks: Ask the Services.
  Mr. Hoyle: We will ask them. If we were given the opportunity, I am sure that many people would be recruited into unions. Many people have written to us expressing an interest, and we have some members in the Armed Forces at the moment. My view is as good as that of the hon. Member, and I believe that if we had the chance we should find that many members of the Forces wished to join.
  My criticism of the Review Body is that it deals only with ranks below major-general. What an archaic system. Surely there should be an input from the Armed Forces themselves. My hon. Friend the Member for Huddersfield, East accepted that there might be a role on the Review Body for serving soldiers—he had lieutenant-colonels and majors in mind as possible members. I would take it one step further and allow bargaining for these people as we do for others in a democratic society. There is nothing wrong with that. I can see no objection when top civil servants in the Ministry of Defence are members of a union affiliated to the TUC.
  There is no comparison between our rates of pay and those of the forces of countries that allow unions. A private here, without the present increase, gets about £52 a week. In West Germany, he would get £76, in Norway £102 and in Denmark £122. A staff sergeant in this country would get £84, before the increases; in West Germany, he would get £108, in Luxembourg £115 and in Denmark £139. A commissioned officer or lieutenant would get £77 here, £120 in Belgium, £165 in Luxembourg and £164 in Denmark. All those countries allow unions. The hon. Member for Stretford (Mr. Churchill) smiles at that. I thought that he was a friend of the forces and wanted them to have more pay. When he is told how that can be achieved through collective bargaining he sneers. As I said earlier, the Tories are engaging in a lot of sham fighting. They are trying to stir up sympathy for their point of view without being prepared to do anything for the Armed Forces.
  Not only would the Colonel Blimps in their wheelchairs be startled at the suggestions
  1194
  that trade unions were to be introduced into the Services, but it would be a challenge to the established order in the Forces and to the present structure. However, we should be bringing in a measure of democracy—democracy that is now being denied to Service personnel. It is a challenge that will have to be faced, if not now, at some time in the future. The challenge will not go away. I believe that the demand to be represented by trade unions will grow. But the sooner that is realised the better.
  In conclusion, I wish to quote the words of a West German army sergeant, who, incidentally, is a trade union member. He said:
  "In a democratic country an Army which rejects the concept of democratic thought is itself a threat to democracy."
  7.22 p.m.
  Mr. Peter Viggers: The Opposition are censuring the Secretary of State for Defence because he allowed Service pay to fall so badly behind. I support the motion for that reason.
  There are many ways in which the world has changed around the Armed Forces, leaving them in a position where their rates of pay for the job they do is no longer defensible. The increase of pay will not take place for some time, and a large number of people have been allowed by the Secretary of State for Defence and other Ministers to lose out because of the delay in bringing in an uprating of pay levels. Those who retired through to March 1978 have retired on pensions which are 32 per cent. behind the rate they should be. This is now admitted by the Government. Those personnel have been permanently damaged because their pensions will also reflect a diminution in pay. There is nothing we can now do to put that situation right because the Government have allowed it to happen.
  Similarly, local overseas allowances have not been reviewed since November 1976. May I give an example as related to Service men in Gibraltar? Service men's local overseas allowances there have remained static since November 1976, whereas civilians working there with them have seen the foreign service allowance increased by anything from 50 per cent. to 84 per cent. Moreover, civil servants who are on foreign service allowance for

  1195
  some reason that remains incomprehensible to me receive London weighting for working in Gibraltar. That is a straight comparison, and the Secretary of State for Defence is guilty in not allowing his personnel to benefit from increases enjoyed by civil servants in Gibraltar.
  If I may follow the theme of showing the way in which the world has changed around Service men, I emphasise that many people joined the Services thinking that they would enjoy travel and the opportunity of carrying out a variety of tasks. However, the personnel serving in the Royal Navy now see their role restricted to serving in Rosyth, Faslane, Plymouth, Portsmouth or Chatham. They have lost one of the main reasons for which they joined the Service, namely, the concept of the challenge of travel and a varied life.
  Service men have been left behind in another area through a change in domestic circumstances. Many people in the Royal Navy have been helped by the long service advance of pay to enable them to buy their own homes, but they have found that when they have bought their own homes and wish to move to take up married quarters after posting to another establishment the amount they receive from letting their houses is taxed at the unearned income rate and that the net amount they receive as a result of letting their houses is not sufficient to enable them to pay the cost of their married quarters.
  I am not suggesting that it is the Secretary of State for Defence who has brought about this anomaly, but the situation has evolved and the Government should have taken cognisance of the fact that Service men are losing out in this way.
  Service men of all ranks have an opportunity to receive educational grants and boarding allowances to enable them to board out their children. Many Service men take advantage of them. If the Minister thinks that it is only the officers who take advantage of this necessary benefit in a Service career, I refer him to a gentleman in my constituency, a sergeant, who had four children at boarding school. These benefits in educational grants are paid in the form of a grossing up. The result is that an individual officer or man in the Services has the
  1196
  grossed-up amount of educational benefit added to his total income. When that is added to the unearned income he receives by letting his house, one finds that the most modest ranks can be taxed at astronomical rates.
  I was given an example involving a Royal Navy commander who was taxed on the assumption that he was receiving about £15,000 a year, because his educational grant was added gross to his income. Furthermore, a sergeant or corporal can find that he is being taxed at the highest rates because of the grossing up of the educational grant. This means that the wife of the sergeant or corporal will need to work to supplement his income. The "Catch 22" situation then arises because the wife's income is also added to the grossed-up amount of income. The result is that the net income to the family is very small.
  These issues are not matters for which the Government are directly responsible, but the Government should take cognisance of these facts and their consequent effect on Service men's pay.
  It is important that we should not underestimate the extent to which the Services care deeply about the use of ships, aircraft and military exercises and the other effects of defence cut after defence cut. People do not join the Services because it is just another job. They join because they believe that defence is important and that the role should be carried out effectively.
  Although I believe morale to be extremely high, it has been damaged by defence cuts which have restricted the level at which ships can be used and the speed at which they can steam. Defence cuts have restricted the amount of operational activity given to the aircraft in the RAF. They have also reduced the amount of money which may be spent on the military exercises which are so necessary to enable the forces to keep in trim.
  Even the decision not to proceed with the neutron bomb has had some effect on morale. There is a feeling that the saddest and most feeble boast of all was that the defence cuts were to be in the tail rather than in the teeth of defence. The final result of this category of disadvantages which have been suffered by the Services is that recruiting is now abysmal and that departures from the Services are

  1197
  worrying and will undoubtedly increase because of the enhanced pensions that are now available. Those concerned may well feel that they will take advantage of those pensions now rather than in a year or two.
  The role of the Services has remained the same in a changing world, but the Service men have been hit by inflation, tax rates, Rent Acts and pay policy. All have conspired to damage their interest. The Armed Services feel that their service is taken for granted, and the evidence supports that view. There is a growing feeling that the authentic voice of many in the Labour Party is that of the hon. Member for Nelson and Colne (Mr. Hoyle).
  Mr. Robert Mellish: No, it is not.
  Mr. Viggers: There is a growing feeling in the Services that the Government would be prepared to see a growth of trade union activity in the Services.
  Mr. Hoyle: Why not?
  Mr. Viggers: I assure the hon. Member for Nelson and Colne—and I base my view on hundreds of conversations with Service personnel—that the last thing they wish to see is the Socialists press-ganging them into trade unions. They feel that the Government have a special duty to do right by their most loyal servants in the Armed Forces. The Secretary of State and his ministerial colleagues should ensure that the Services are fairly treated. In my view, they have failed to do so, and for that reason I happily support the motion.
  7.30 p.m.
  Mr. Michael Stewart: I have listened with great interest to the speech of the hon. Member for Gosport (Mr. Viggers). I hope that the Government spokesman will carefully consider particularly the points made by the hon. Member about the effect of income tax, educational allowances and so on. I noticed the point that he made about the general effect on morale of the total amount of money which the nation is prepared to devote to defence and the effect that that has on the use of weapons. I shall say something about that later.
  I comment on what was said about the independence of the Review Body. It is
  1198
  the job of the Review Body, having gone through the process of job evaluation, allowed for the X factor and taken all the relevant considerations into account, to decide what ought to be the level of pay for the Armed Forces. The Review Body does that independently. The figure that it arrives at and which is in its report is the figure that is believed to be the right one on the premises from which it starts—the job evaluation, the X factor, and so on. It is not the figure which the Government necessarily wanted or a figure suggested to the Review Body by the Government. It is the Review Body's own independent judgment.
  The Government inescapably come in at this point: "Granted that that is the figure that we want, how soon do we get there?". No Government would say or ever have said to an independent body that such a body should not only tell the Government the figure but order them to implement it at a certain point. No responsible Government could hand away that degree of their authority.
  The present Government have decided to reach that figure in 1980, which is the last date that the Review Body mentioned. The Government are not flouting the Review Body. They are using, I admit, the maximum amount of latitude given to them by the Review Body, but they are within that latitude. The argument of the Conservative Party is that we should reach the Review Body's figures of pay earlier than 1980. It has not specified how much earlier. The impression created is that the Conservative Party thinks that the process of getting to the Review Body's figures should be complete by 1979 rather than by 1980. We are arguing about a year's difference. I am not sure that that merits all the vituperation in the speech of the right hon. Member for Chesham and Amersham (Sir I. Gilmour).
  There are one or two reasons why the Conservative Party is not in a strong position to argue that the date should be brought forward. The first is that at the moment the Conservative Party is arguing for treatment that will help the Armed Forces, but not long ago, during the firemen's strike, the leader of the Conservative Party said that the firemen should be treated as a special case and given more than a 10 per cent. settlement, which

  1199
  amounted to encouragement to them to prolong the dispute.
  If the Conservative Party, when it feels that there is a popular cry, is always to say that a particular group ought to have more, we shall not have a responsible Government. The Conservative Party ought to learn a greater sense of responsibility before it demands that the Government should reach these figures in 1979 instead of 1980.
  Mr. Julian Critchley: If that is true, why did not the right hon. Gentleman, as a Minister, and others of his colleagues in the early 1970s, support phases 1 and 2?
  Mr. Stewart: I was not a Minister in the early 1970s. I ceased to be a Minister in 1970. One of the pleasures of not being a Minister is that one has a greater freedom in what one can say on a number of matters. The Government which came into power in 1970 pursued, in matters other than pay, a policy which systematically benefited better-off people. They were not, therefore, in a position to make an appeal for national unity. That is true over and over again with Conservative Governments.
  A further reason why the Conservative Party is not in a strong position to press for the figures to be reached by 1979 is its general attitude towards pay policy. We have been told recently that the Conservative Party does not approve of incomes policies in general but that any Government must have some sort of policy towards the pay of its employees. That is the latest pronouncement of the Conservative view on pay policy.
  What does that mean? It means that if there is any difficulty in reconciling all the total demands for wages with what the national economy can afford it will be the public employees who will suffer. Now the Conservative Party has told us that the Armed Forces must not suffer, nor the firemen, nor the police. That means that nurses and cleaners and Government Departments will have a pretty thin time, and it will arouse considerable bitterness—which, above all, we want to avoid—between the Armed Forces and the other public services. The Conservative Party must think out its pay policy more clearly before beginning to demand special treatment for those in the Armed Forces.
  1200
  The Conservative Party's third unanswered question is that if we are to spend more on pay for the Armed Forces and, as the Conservative Party is arguing, more on defence generally, where is it to come from? That is not an unanswerable question. I shall have a suggestion to make about it later. We have not yet had an answer from the Conservative Party. There is the answer "Cut the social services." That means that the money has to come from those of our fellow citizens who are less well off because they have greater need to use the social services. That will not do. It is not the way to get a united nation in improving the national defence.
  The hon. Member for Stretford (Mr. Churchill) always says that we should do it by stopping Socialism. When he was pressed today, he mentioned the steel industry. If the Government were spending less in helping the steel industry than they are, the steel industry, which, like steel industries all over the world, is in great difficulty, would have to be cut in size far more drastically than it has been cut. I do not believe that drastically cutting the steel industry is a recipe for a more secure national defence. I know that it is a large sum of money that is involved, but it is not an answer to the question of paying for defence.
  Mr. Eldon Griffiths: What is the right hon. Gentleman's view on giving orders to the steel industry for weapons, particularly tanks and frigates? Surely that would be beneficial to the steel industry, apart from simply giving it subsidies to close works.
  Mr. Stewart: I think that the hon. Gentleman will agree that even then the steel industry will expect to be paid for what it makes. Surely there will still be the question of where the money is to come from. More money will be spent in that way than on having to subsidise it.
  Mr. Eldon Griffiths: We would get something for it.
  Mr. Stewart: Yes, but we would still spend more. There is still the question of finding it. I shall make a suggestion about that which is more socially just than what usually comes from the Conservative Party and more sense than usually comes from the hon. Member for Stretford.

  1201
  My hon. Friend the Member for Huddersfield, East (Mr. Mallalieu) was right in saying that the X factor ought to take into account the fact that civilian pay is increased by wages drift and productivity agreements in a way that the pay of the Armed Forces cannot be increased. He urged that there should be representatives of the junior officer ranks on the Review Body. My hon. Friend the Member for Horn-church (Mr. Williams) extended that argument to other ranks as well.
  During the last war and for a period afterwards the Army had to deal with the bitterly contested question of in what circumstances a man on active service overseas could be given compassionate leave. As might be expected, the number of requests for compassionate leave was much greater than the number that could be granted. A committee on which all ranks were represented was established to evaluate the different claims, and it worked extremely well. The suggestions of my hon. Friends the Members for Huddersfield, East and Hornchurch in regard to the composition of the Review Body need to be looked at.
  I must confess that my hon. Friend the Member for Nelson and Colne (Mr. Hoyle) does not convince me that the right answer is to have a trade union in the Armed Forces. I have not thought out how it is to be done, but I am certain that there ought to be closer contact between those who are concerned with Army pay and the trade union movement as a whole.
  There is always a danger that the feeling will grow up in the Armed Forces that men in civilian life have it easy and that they have only to threaten to strike and they get all they demand. Of course, that is not true, but it can be believed and some of the remarks of Conservative Members about miners and Ford workers give colour to that view. If men in the forces knew more about what trade union bargaining is really like, that would help towards a better understanding.
  Conversely, there is sometimes among civilian workers a failure to understand the value to the nation and the great difficulties and dangers of work in the Armed Forces. It would be useful for
  1202
  men with experience in the civilian trade union world to have a closer contact with men who know what life is like in the Armed Forces. I throw that half-formed suggestion to the Government as an idea that is worth consideration. There is more chance of progress on those lines than in trying to form the Armed Forces into trade unions.
  I have been giving thought to the question how we are to pay for the increased expenditure on defence—including forces' pay and equipment—that is needed to help with morale and the national defence. I have been concerned about what has happened to defence budgets in the 1970s, not only under this Government, but their Conservative predecessors.
  We may have to consider an increase in expenditure on defence, but this must be done in a way that makes clear to everyone that the whole nation is in this. We cannot do it by restricting the growth of social services much more because those who rely most heavily on them have already borne their share of difficulty—as is shown in many of the letters in our postbags. We cannot ask too much of the civilian wage earner because, for the most part, he has been observing the pay policy of the Government with great self-restraint. He has been right to do so, but it has required a degree of effort on his part.
  We must, therefore, bring in the better-off sections of the community. That is why, incidentally, I believe that it was a mistake to take a penny off the standard rate of income tax, but that is another story.
  If we are really concerned about defence, could we not consider an idea adopted for a short time many years ago by the Conservative Government of a special national defence contribution? A citizen with a post-tax income of, say, £5,000 a year would be the starting point for the contribution and my formula would be to take the number of thousands of pounds in a person's income, square it and multiply the result by four. For a man with an income of £5,000, that formula would produce a contribution of £100—five times five equals 25, four times 25 equals 100. A man with an income of £10,000 would pay £400 and a man with £20,000 a year income would pay £1,600.

  1203
  The Treasury would have to get to work to see how much these contributions would bring in. It might be quite a lot, certainly at least enough to advance the Review Body's recommendations by one year.
  That formula would not be asking for an intolerable sacrifice. If we say that there is a need to look at the nation's defence, but claim that such a formula would be a dreadful check on incentives and that we cannot expect people to save, invest and organise industries well if we tax them in this way, we can pack up any idea of making a serious national defence effort. This should be something that every taxpayer should decide to meet not by saving less but by deliberately denying himself things. That is what a real effort for national defence means.
  The Opposition may not agree with my figures—I accept that they need to be examined in detail—but unless they are prepared to support some such scheme, all their talk about more expenditure on Army pay or other defence matters will completely lack credibility.
  7.46 p.m.
  Mr. Iain MacCormick: When I came to the House today, I was at least disposed to advise my hon. Friends to support the Leader of the Opposition's motion. But, having heard the speech of the right hon. Member for Chesham and Amersham (Sir I. Gilmour), I am extremely disappointed. The right hon. Gentleman had the opportunity of presenting a positive case in favour of those who man our Armed Forces, but he took a mean alternative course of attacking the Tribune Group of the Labour Party and trying to bring discredit on the whole Government side of the House. That was a mean effort, but many of the following speeches, even those from the Conservative Benches, have been much more positive and thoughtful.
  I advise the right hon. Member to look at some of the remarks of the hon. Member for Huddersfield, East (Mr. Mallalieu). One of the most telling things that the hon. Gentleman said was that we must be careful in debates relating to defence to distinguish between debates on the whole policy underlying our defence structure and debates such as this which have to do with the payment of those who have to put into operation the policies
  1204
  decided, legitimately, in the political hurly-burly of the House.
  This is not one of those occasions, because we are speaking only about the payment of a complete cross-section of the British nation, ranging from brigadiers to privates. It is a matter that should be debated and decided without the rancour that was definitely associated with the speech of the right hon. Member for Chesham and Amersham.
  Mr. Churchill: Possibly the hon. Gentleman missed the important positive statement of my right hon. Friend to the effect that the next Conservative Government will grant full comparability of pay to the Armed Forces in 1979, not in 1980.
  Mr. MacCormick: The right hon. Gentleman referred to the post-dated cheque that the Government are offering and to his own post-dated cheque of a rather different date. I shall return to that shortly.
  I was about to say that any Member representing a Scottish constituency has a special right to speak on the whole subject of the remuneration of our Services since Scotland has made so great a contribution, especially in personnel, to all the Services. Indeed, not only has Scotland made that contribution in personnel but it has made a contribution also, albeit perforce, in the provision of such unpopular facilities as the nuclear submarine base and so on.
  We in Scotland often feel—I am sure that this applies to Members of all parties who represent Scottish constituencies—that the contributions which we make are not altogether balanced or fairly balanced by what we get back. For example—I have said this previously in the House—the level of defence expenditure in Scotland is unfairly low and always has been. We wonder about the future of the dockyard at Rosyth. We wonder whether in years to come it will maintain its present position in the Royal Navy. We wonder also about the dispersal of jobs in the Ministry of Defence, which is all part and parcel of what one can fairly expect to get back from the great contribution which we in Scotland have always made.
  I shall not take much longer because, as I said at the outset, I regard this as a relatively simple matter, although it is of

  1205
  the utmost importance to those who serve in the Armed Forces. The chairman of the district council which lies in the constituency which I have the honour to represent has just come back from visiting the Argyll and Sutherland Highlanders in Germany, and he tells me that there is grave unrest among certain of the soldiers there about their conditions. Clearly, the Argylls form a regiment which has always in the past—as it always will—served the country without allowing such conditions to affect the effort through which it expresses its loyalty, but one cannot but be concerned when one hears such reports.
  I was shocked to read in The Scotsman last year that 120 privates and lance-corporals serving at that time in Edinburgh had to be recipients of rent and rate rebates. I have always felt that, should we ever reach such a state of affairs, we ought to take immediate steps to ensure that it stopped and that such a situation never occurred again.
  Although 100 years ago we should have regarded ourselves as living in the greatest empire in the world and as citizens of the greatest Power in the world, and at that time we were prepared to accept or were able to accept into our forces people not very high in the scale of intelligence, now that we are a secondary Power, with the threat against us much greater, we must have Service men who are certainly not at the lower end of the intelligence scale—men who are, at the very least, blue-collar workers in terms of the expertise needed to operate the equipment with which the Army and the other Services are now supplied. In these circumstances, we must ensure that the reward which such Service men receive is comparable with the effort, education and skills which they deploy in our defence.
  At the outset of my speech, I expressed my deep disappointment at the way in which the Front-Bench Opposition spokesman presented his argument. Nevertheless, I am convinced that what my right hon. Friend the Member for Western Isles (Mr. Stewart) said on 25th April still holds good. He said that if the Armed Forces had fallen behind, they should be paid now, and he added:
  1206
  "the Armed Forces and, indeed, the police as well, should be outside the restraints of incomes policy."—[Official Report, 25th April 1978; Vol. 948, c. 1183.]
  Notwithstanding what several hon. Members on the Government Benches have said about trade union representation, I go along with the opinion of the hon. Member for Huddersfield, East that we in the House of Commons are the trade union representatives, the shop stewards, of the Armed Forces. My advice to my hon. Friends must remain that we support the motion tonight.
  7.54 p.m.
  Mr. Julian Critchley: The right hon. Member for Fulham (Mr. Stewart) was both right and reasonable to raise the question how the Conservative Party, when it forms the Government in October, will find the money for additional defence expenditure. We are committed to more money, more quickly, for Service pay. We are committed to an increase in defence expenditure anyway. We have to consider the problem of finding a replacement for Polaris. We have to decide whether we shall replace it, and if we do replace it that will mean additional expense. Clearly, therefore, the right hon. Gentleman has raised a reasonable though rather difficult subject, and I shall make one or two suggestions in that respect.
  It should be said, first, that if we are to increase defence expenditure, we must explain to the country at large why it is necessary. The threat has to be explained, and explained reasonably. As I am sure the right hon. Gentleman will acknowledge, it is a growing threat. That is the first part of the process.
  The second part of the process is obvious but more difficult. We have to get the economy moving again, for unless we can do precisely that our defence effort will be less effective than we would wish.
  I suppose that as the trade unions have become the strongest estate of the realm, there is therefore a sinister logic behind the argument of those who advocate that the Armed Services should become unionised. But I believe that the great majority of hon. Members on both sides devoutly hope that the Armed Services have not become so weakened as to fall victim to the ambitions of the hon. Member for Nelson and Colne (Mr. Hoyle).

  1207
  One of the disadvantages of middle life—and there are many—is that things are not what they used to be. I think that this is equally true of speeches in the House, although, to be fair, the speech of the Secretary of State was every bit as eloquent this afternoon as I remember it to have been in the past. But where I find a falling off in the standard is in the speeches by the representative of the Liberal Party who is instructed to speak upon defence.
  Mr. Patrick Wall: Where is the Liberal Party?
  Mr. Critchley: The hon. and learned Member for Montgomery (Mr. Hooson) is not here at the moment, but, with any luck, he may return. It was not so long ago that the Liberal defence spokesman was the hon. Member for Inverness (Mr. Johnston), and his speeches were written with the help of the professor of international relations at the University of Surrey. The combination was really quite good. The speeches were invigorating, they presented an independent point of view, and they were always worth listening to. I do not think that the hon. Member for Inverness would have slavishly followed the Lib-Lab pact were he in the position now held by the hon. and learned Member for Montgomery, whose speech writer, unfortunately, is not the professor of international relations at the University of Surrey.
  I wish briefly to widen the debate, not because Service pay and remuneration are unimportant but because that subject is related to other perhaps equally important, or more important, matters. Clearly, in recent years there has been a weakening of our forces in numbers and in morale. As to numbers, the reduction can be demonstrated. The Armed Forces and their civil servants are 51,000 fewer in number than they were in 1975. It is more difficult to prove an assertion that morale has fallen, but as the Member for Aldershot I am in contact with the Armed Forces and I fear that I have to say that morale has fallen considerably.
  Over and above the reduction of numbers and the fall in morale, there is also the whole litany of defeat, as it were—shortage of ammunition, of spares, of fuel and of money for exercises, with expenditure cuts, actual or planned, of
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  about £9,000 million over a decade—and all happening at a time when Soviet rearmament is growing apace. In fact, there is no obvious ceiling or limit to the whole process of Soviet rearmament, and it is this, I think, which is the most important fact of international life, because Soviet rearmament has, or should have, obliged us to examine NATO's strategy once again, in one last attempt, perhaps, to get it right.
  NATO strategy, relying as it does upon early warning, is still based on the notion of the long war. Here is our dilemma. On the one hand we see the growth of the Soviet submarine fleet and its menace. The logic of that is that the Soviets would wish to fight a relatively long war to starve us out. On the other hand, there is Soviet rearmament in Central Europe, redeployment of the Soviet air force, re-equipment and so on, which argue very strongly for a short war. Clearly, the West must budget against each eventuality. Here is one of our many dilemmas.
  But with the recasting of Soviet forces the warning time in Central Europe of an attack has dropped as low as 48 hours, according to General Haig. That is the minimum warning time. It means that preparation time, assuming that the politicians are prepared to give the authority necessary to reinforce and deploy forward, is now virtually non-existent.
  We are now faced, for the first time I believe, with the spectre of a Soviet surprise attack. Surprise is a paramount principle of war. If we briefly examine the historical examples of surprise in the 20th century alone, we begin to extract from those examples lessons that are very sinister in their implications for today.
  For example, these are assumptions that were fed into the general staffs and the leaderships of various countries at various times. In 1940 the French General Staff believed that the Ardennes was hopeless for the use of armoured vehicles. That assumption was fed into the French General Staff.
  My next example is the Soviet Union in 1941. Stalin refused to believe all the evidence that the Germans were about to launch a war against the Soviet Union. Why did he refuse to believe the evidence from our own intelligence services, the United States intelligence services and, most important of all, his own? He did

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  so because as a good Marxist he felt that Hitler, a rational human being, would not start one war before he had finished another. Therefore, all the evidence that was reaching the Soviet Union of the German attack was dismissed by Stalin on the ground that the West was muddying the water between the Soviet Union and its German ally. The assumption fed into the machine was that no rational human being would start one war before he had finished another.
  My third example—and there are many—is the Arab-Israeli War of 1973, the Yom Kippur war. Here the assumption fed into the Israeli Cabinet was that the Egyptians would not attack the Israelis until and unless they had achieved air superiority. Thus, all the evidence coming from Israeli intelligence and from American satellites of Egyptian movement forward was regarded as yet another Egyptian exercise, or was dismissed by the Israelis on the grounds that the Arabs did not have air superiority.
  Another example is 7th December 1941, Japan's attack on Pearl Harbour. For a year and a half the Americans had read all the codes that the Japanese sent to their embassies throughout the world. Despite the fact that they could read all diplomatic communications, they still got it wrong. They were right, in that they saw an attack by Japan happening within the week of 1st December to 8th December, but the conclusion that Washington reached was that the Japanese attack would be against the British and the Dutch and not against themselves.
  Therefore, with that assumption fed into the American machine, the Americans were compelled to accept the first blow at Pearl Harbour and the destruction of the Pacific fleet. It was only by tremendously good fortune that the American aircraft carrier squadron was at sea and not in Pearl Harbour when the Japanese struck.
  More modern, and perhaps more relevant, is the example of 1968, the Soviet invasion of Czechoslovakia. As NATO has no intelligence service of its own and has to depend upon national intelligence services for its information, the NATO Council found itself having to choose between a report of the CIA, which said that the Soviets would not invade Czechoslovakia, and a report of our intelligence which said that they would.
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  The NATO Council picked the CIA report, and was caught with its trousers down. This was clearly another preconception, another assumption, fed into the machine.
  The only time in recent years when something has happened which has surprised everybody and for which there was no advance warning was on 13th August 1961, the building of the Berlin Wall. There was no advance information to any intelligence service in the West that that was about to happen. But that is exceptional. In every other example there was no shortage of information. The warning is always there. What happens is that it is filtered out through the preconceptions of the people who happen to be watching.
  If the questions about the possibility of war in Central Europe were to be posed in this House, the answer of perhaps all of us would be that war in Europe was unthinkable, despite the fact that in Central Europe there is the greatest concentration of armed force that has ever been seen. Yet that assumption, that war in Europe is unthinkable, is still being fed into our machine and is the assumption which may block our own decision-makers from understanding warning when it comes.
  As Soviet strength increases, so NATO has come increasingly to rely on reserves and reinforcements. Their activation must depend on adequate warning, but will the warning ever be acted on in time? We can no longer expect a slow build-up of crisis, a stately process leading to a declaration of war. The last time war was declared as such was 8th December 1941, when the British Government declared war on Japan. The next war, if it happens, will be undeclared.
  Mr. Michael Stewart: I am trying with some difficulty to follow the hon. Gentleman all around the world. I think that he said that Stalin made the mistake of not believing reports that he received because he was a good Marxist. The hon. Gentleman subsequently pointed out that the same mistake was made by the American Government, the Israeli Government, and the NATO Council. Were they all Marxists?
  Mr. Critchley: I should hate to have to go through all my examples again. I refuse to yield to that temptation. The right hon. Gentleman clearly failed to

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  understand the distinction in what I was trying to describe. In each case the result was the same, but the reasons were different.
  If the next war is to be undeclared and there is to be no stately process towards declaration of war, how will it be fought? Clearly, it will be fought in three stages in Central Europe. It will be fought first as a holding operation, with the light screen of armoured cavalry supposedly there to hold the Soviet attack, which will withdraw quickly.
  The second stage will be the major battle fought with conventional weapons. Were that major battle to be lost by NATO, then and only than would the NATO Council consider whether to introduce into the battle battlefield nuclear weapons. That is the pattern under "flexible response" whereby the war would be fought.
  It is crazy to assume that the weaker of the two sides will necessarily win stage 2, the major battle. The West must be prepared to use its tactical nuclear weapons not simply first, which we would be prepared to do now, but first and early rather than first and late. It is no good introducing tactical nuclear weapons into a battlefield which is already lost.
  Mr. Wall: I follow my hon. Friend's thesis. I entirely agree with him. Would he not agree, however, that there are two alternative scenarios? One is an attack on the northern flank, on Northern Norway, to draw off all of our reserves and then blitzkrieg through the centre, possibly without nuclear weapons, or alternatively, the cutting of our sea communications and the flow of vital minerals and fuel which come round the Cape, in which case they would not have to kill a single soldier but would win hands down?
  Mr. Critchley: There are many alternative scenarios and one of the problems which NATO faces is that it has to plan to meet all these eventualities. Were war to break out, it would clearly be short and violent and result in the defeat of the weaker side, which is the most important point. As long as our side remains the weaker side we are clearly faced with the prospect of defeat under the circumstances I have described. It is no good holding on to one's theatre nuclear weapons for use only after we have lost the
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  conventional battle. They have to be used first and early.
  Mr. Pattie: Could my hon. Friend tell the House at what point during the scenario he is describing the forces might expect to get their pay rise?
  Mr. Critchley: I can only hope that, given the somewhat nightmare circumstances which I have described, our great Conservative Party would have been returned to office and the hon. Member for Chertsey and Walton (Mr. Pattie) would not be at the Ministry of Defence.
  We have to restore theatre nuclear deterrence, which means that we have to adopt the enhanced radiation warhead and the cruise missile system if we are to deter. At the same time we have to rely upon forces in being in Central Europe rather than rely upon reinforcements and reserves, because there will not be time to bring them in. If we do those two things, and only if we do them, shall we be able to shore up our defences, thus ensuring that war will never happen.
  8.12 p.m.
  Mr. Robert Mellish: I confess that I spent only six years in the Army and, although I went through the ranks, I never did get beyond the rank of major. I can tell the hon. Member for Aldershot (Mr. Critchley) that while I was in the Army no one ever talked to me about strategy. They told me the things to do and I went out and did them. I was never at that level where great matters of strategy were discussed.
  I thought that we were talking today about the Armed Forces and their pay rather than how wars should be won or lost. I know nothing of the strategic arguments about which the hon. Member for Aldershot is obviously knowledgeable. He gave me the impression at one time in his speech that if only he had been involved in the strategy of the last two world wars—if that could have been possible—we would have done rather better than we did. I do not understand these great matters and I would not get into arguments with anyone who does.
  Something that appeals to me as an ordinary bloke is that Russia is an aggressor nation. Any nation that is an aggressor nation is in an entirely different position from a nation such as ours which

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  does not want to fight anyone at any time. It is against that background that all strategy has to be poised. The right hon. Member for Down, South (Mr. Powell) does not appear to agree with me.
  Mr. Powell: I thought that I heard the right hon. Gentleman say that Russia was an aggressor nation. It seems to me that that flies in the face of almost the whole history of the Russian people.
  Mr. Mellish: The right hon. Member is a man of great intellect, but he has only to look at the buffer States around Russia, at their attitude and behaviour and at the build-up of arms to see what I mean. If that is not being aggressive, I should like to know what is. Besides, as I see it, a nation that does not want anyone else's territory does not want armed forces, massive Polaris weapons and the rest.
  I came into this debate for a simple reason. Obviously I am for the Armed Forces. That does not make me a better British citizen than anyone else. As a member of the Labour Party, I have always resented the few individuals of my party why convey the impression that they speak for the Labour movement and take great pleasure in seeking to cut back on Armed Forces expenditure of any kind and who seem to preach a doctrine which says that the nation cannot and must not be defended. I have never approved of that. I have said that Russia and others are aggressor nations and that we must have adequate defence, within our means.
  The hon. Member for Aldershot, in reply to my right hon. Friend the Member for Fulham (Mr. Stewart), said that no doubt the next Conservative Government—if there is one, and I pray that there is not—would substantially increase the pay of the Armed Forces by 1979. He went on to say that we would get the money by expanding our economy. He put his full stop there and went on to talk about the strategic argument. The next General Election will be all about how to expand our economy and what sort of Government is best equipped to do it. I will wait until the appropriate time to express a few remarks about the Conservative Party, its performance and possibilities.
  Earlier this year I went aboard HMS "Tiger". I had the privilege of being entertained by the captain and the officers.
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  They suggested to me, rightly, that I should go down to the petty officers' mess and listen to the lads, and hear what they had to say. I was delighted to do so. I went to the petty officers' mess and we had a long discussion. They began by being truculent and difficult, understandably. After about an hour we were beginning to see each other's point of view. I did not concede to them that automatically and overnight they must get a vast amount of extra pay. I discussed with them—and they were patient enough to listen—the problems which I saw the Government facing in Britain in the battle against inflation. I thought that all parties were united in agreeing that inflation is a curse and a menace which has to be controlled and which, unless it is controlled, will affect every stratum of society, none more so than the forces.
  I put it to these people that whatever the Government may or may not have done they had at least shown guts in trying to deal with the problem of inflation and in doing so had made themselves extremely unpopular, especially with the Armed Forces. I pointed out to them the battle that the Government were having with the firemen at that time. My hon. Friend the Member for Peckham (Mr. Lamborn) and I were involved in this. We had a great deal of sympathy with the firemen. I do not think that there were many hon. Members who did not have some sympathy with them. The Government refused to pay more than the 10 per cent. basic rate to the firemen. The firemen wanted more, and I think that they had a good case.
  I told the men on HMS "Tiger" that it would be an odd Member of Parliament who came aboard a ship of that kind, recognising the heartaches and difficulties of the men, and said that, in spite of what we were saying to the firemen and to the police and many other sections of the community, the Armed Forces were in a separate category and, somehow, the Government would find money for them. If I had said that, they would never have believed it. The men in the Armed Forces are not made up of that type of person. They wanted this argument. They wanted to get it out. This provided them with an opportunity to get a lot of things off their chests. My record was known to a few of these people and they had it out with me.

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  At that time we were expecting the Review Body's report, and the big question was what would be in it. I did not know and I hope that my right hon. Friend did not know. The Review Body was impartial. I told the men that whatever happened the Government would not increase their basic rate by more than 10 per cent. I said that the Government could not do so. But I did agree — and here is the argument for these lads—that we had to do a great deal more in the interim period by way of what I call fringe benefits, rent allowances, overseas allowances and the rest. Where we could make an immediate impact we should do so.
  I explained, and I think it was accepted, that if the Government decided that the Armed Forces were a special case and gave them much more than 10 per cent. there would be a reaction in industry. I can say sincerely, looking back at that conversation, that I did not meet anyone who was not expecting what the Government have now proposed, that is, the basic rate of 10 per cent.—indeed a bit more. I want to know whether the Government have gone to the fullest extent for the Armed Forces within the restrictions of the pay policy that we have been applying to the rest of the community. Have we gone far enough? What more can we do?
  I take the point that we are perhaps reaching the stage in the argument where the men at the bottom should be heard more. That should certainly be looked at. However, I do not agree with the argument that everybody should be in a union with branches all over the place. I can imagine that situation. It would be a hell of a job trying to work that lot out, especially on the smaller charges, with a man appearing before the commanding officer and getting seven days CB. I can imagine that, by the time he had gone through all the trade union ritual, the officer commanding would wish that he had never even seen him. So it is not a practical argument, and I do not accept it.
  Nevertheless, in modern times, the relationships are different. I have been a Member of this House for 32 years and have listened to many arguments about defence and the pay of the Armed Forces.
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  At no time have we paid them enough—there is no question of that. They have never been properly paid for their work for the nation. But when the time comes the nation tells them how grateful it is—we hear all the stuff and nonsense about the debt we owe. But in peacetime never do we pay them enough.
  Nor are their conditions ever as good as they should be, although they are far better than they used to be. Back in history, when we were a great Power—perhaps the greatest—the conditions in our Armed Forces, then the Royal Navy and the Army, were pretty grim and disgraceful. We have never paid our people in the Armed Forces their full worth. As has been said, any man who joins the Armed Forces is a man who has our full and greatest respect and admiration. He has guts. He cannot know what the history will be, but if there is trouble he is the first to be involved. He deserves the best that the nation can give him. In that sense, I ask for greater understanding of the problems of Service men.
  When I was Minister of Public Building and Works—I was only in the job for about a year and was fairly bright in it—I did something of which I am proud. We came to a special understanding with the War Office that, when a man was due to leave the Army, a year or so beforehand he would let his commanding officer know, and the commanding officer would arrange to get him in touch with the local authority where the man came from originally. We had an understanding that the local authority would then automatically put that man and his family on the housing waiting list. How far has that scheme gone? What has been the result? Does it still apply?
  We ought to be able to give a man who is due to finish his service in the Armed Forces an absolute assurance that the local authority from which he came will give him a place. A man who has served in the Armed Forces for seven years or more should not have to come out and take his place in the housing queue with some wretched local authority. He is surely entitled to go to the top of the queue and take preference—I do not care who hears me saying that. That was the principle I followed in those negotiations with the War Office. What success have we had?

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  These are fringe benefits that the Armed Forces would like to hear more about. A man should know that, having served in the Armed Forces for seven or more years, he will be guaranteed being placed at the top of the local housing authority's waiting list. I know that at one stage the scheme was running rather well, because, as Minister, I was writing to one or two local authorities that I will not name telling them where to leap because they had written to me complaining because they had had to give a soldier this or that preference.
  I want more done for our people. I believe that what has been done is within the limits of the pay policy. The vast majority of the people in the Armed Forces are intelligent and decent people and did not expect more than 10 per cent. I put it to the Conservatives that they will get no votes out of exploiting the Armed Forces and saying "We are the party which truly represents you, whereas Labour does not." That argument is regarded as a lot of eyewash.
  The people in the Armed Forces are as concerned as anyone else about the state of their nation. The Conservatives should not underrate them. They know precisely what the arguments are. The idea that they have been put in a special category is not what they expect. They expect to have comparability, yes, but they do not expect to be in a special case which makes them better than the firemen or the policemen—and, incidentally, I think that these days it is more dangerous to be a policemen than a soldier on the streets of London, for example.
  I hope that a message will go out from this House not on a party political basis—"Vote Tory and you get a couple of bob for the Armed Forces"—but from a united House determined that the Armed Forces will get not only value for money but the pay and conditions that they have a right to expect.
  8.28 p.m.
  Mr. David Walder: There was a nasty moment. Mr. Deputy Speaker, about 10 minutes ago when I thought that the debate might have got out of hand—though I hasten to add that it had nothing to do with you. But with the contribution by the right hon. Member for Bermondsey (Mr. Mellish) we have now
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  got back to pay and conditions. I was thinking that we might get right back to the whole basis of the debate, because it is on a motion to reduce the salary of the Secretary of State for Defence by a half, and, having heard his arguments, fighting for his life and for half of his own salary, one concludes that perhaps there might be some explanation of the poor showing that he has made in the Cabinet in arguing for the Armed Forces. The right hon. Gentleman was not at his best today.
  The right hon. Gentleman suggested—and it was followed up by two of his hon. Friends—that in some way the Conservatives are wrong to talk about a decline in morale, that we are perhaps exploiting the situation. But the Under-Secretary of State for Defence for the Royal Air Force said about a month ago that morale was not all that he would like it to be. I do not know what the Under-Secretary of State's standards are, but there is at least a minimal assessment.
  All of us know that there has Peen a significant decline in the morale of the Armed Forces, attributable to conditions, to pay and to defence cuts, although I agree with the right hon. Member for Bermondsey that, in a sense, all Service men will always grumble and that no Government have ever paid them their proper due. I accept that as a limitation, but undoubtedly in the last 12 months there has been an acceleration of discontent among Service men and their families. It may be that conditions in Northern Ireland, over-stretch and the rest have exacerbated the situation.
  The X factor, I suspect, is the clue to the argument that we have put that the Armed forces should be considered, in the context of the Government's own pay policy, as "a special case". Over the last two years the Government have given the impression—rightly or wrongly—that they and their Labour Party colleagues were not particularly concerned with the Armed Services. They have given the impression that they are more interested in defence cuts than in supporting the Services. They have given the impression also that they have finally, rather grudgingly, admitted some part of the Review Body's recommendations, later rather than sooner. This is the issue between us—whether the Government should have dealt with the matter immediately or acted as they did.

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  The hon. Member for Loughborough (Mr. Cronin) always provides some consolation for us when he takes his weekly rides at Knightsbridge Barracks and assures us that the Life Guards, the Blues and the Royals are not in an active state of mutiny. He said that the Review Body was totally independent. But this body has to consider Government policy, and its recommendations disappointed the Services. We have now reached the stage where the Services are disappointed with politicians generally and even with Governments. Of course there is nothing surprising in that—most of the population is disappointed.
  But the Services are disillusioned with the Review Body itself. Therefore, I believe that we should look at the Review Body's composition and sphere of operations to see whether it is possible to give Service men a much stronger impression that its members keep in touch with the real grievances, that they are really pushing at the Government and are not just creatures of the Government.
  I have wondered how many people in the Services will read the recommendations The Review Body's report was not an easy document to read. It reminded me of criticisms made by one of my English masters at school who said "For God's sake, chop your sentences." Many of the sentences in the report are incredibly lengthy and not as meaningful as they might be.
  We should think in terms of improving the Review Body. It has lost face with the Services for a variety of reasons. Labour Members seem to think that the Government's acceptance of some of its recommendations will produce a situation in which Service men throw their hats in the air for joy and their wives wave their head-scarves. They think that this will halt immediately the exodus from the Armed Forces. I should like to think that would happen, but I suspect that if one thinks in these highly optimistic terms one is failing to understand the mentality and psychology of the Service man.
  He is not in a job where he can simply walk out, down tools and leave tomorrow. He tends to think of the advantages and the excitement of Service life. In the past one of the advantages has been a
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  certain amount of what I would call "security of tenure". But this has been threatened and diminished by the defence cuts.
  The idea that a man and his wife make up their collective mind to leave the Services on an impulse and that they will change it again on another impulse is totally false. A lot of Service men have been saying over the past two years that the forces do not provide the sort of career that they chose originally when they joined. They have become disappointed, and they take the view that the Government are indifferent. They have come slowly to the conclusion to leave the Services after a lot of consideration. The idea that the Government in putting up their remuneration—rather grudgingly—will stop the outflow is wildly optimistic.
  I do not glory in that. I do not enjoy that situation, and I do not think that what I have said is an example of an Opposition speaker making political capital out of it. I deplore the fact that that is so. I think that it will take a considerable time to restore the Service man's confidence in any Government, and that it will take a long time indeed to restore the confidence of the Services in a Government of the nature and the political complexion of that on the Benches opposite.
  I do not suggest that this situation is the fault of the Service Ministers themselves. No doubt they do the best job of which they are capable. But there is a feeling that the Labour Party is not sufficiently interested in the Service man's task and does not provide the sort of support that he would appreciate and welcome. Service men cannot strike, and they cannot leave their jobs immediately, but I suggest that they, like the old soldier, will continue to fade away, and I must confess that, on the Secretary of State's showing at the Dispatch Box today, I take the view that about all he can do is to stand idly by and wave farewell.
  Several Hon. Members rose—
  Mr. Deputy Speaker: I do not like doing this, but I feel that it will be helpful to the House. About six hon. Members are anxious to take part in the debate. They could all be called if speeches were confined to five minutes'

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  duration. Everyone would be happy if that were done, but this is, of course, a matter for hon. Members themselves.
  8.36 p.m.
  Mr. John Roper: I agree with two of the points made by the hon. Member for Clitheroe (Mr. Walder). I agree, first, with what he said about the style of the Review Body's report. Having read and enjoyed some of the hon. Gentleman's novels and his histories, I think that the Ministry of Defence might consider commissioning him to write a popular version of the Armed Forces Pay Review Body's Report which will be understood and make my right hon. Friend more popular amongst Service men.
  The other matter on which I agree with the hon. Gentleman—I shall return to this because I regard it as important—is that pay is only one factor, and there are a number of other grievances—one or two of which are referred to in the Review Body's report—on which I hope my right hon. Friend will take action in the near future and go some way towards meeting the general grievances that exist.
  Inevitably in a debate of this sort there have been a number of predictable speeches and the creation of a certain amount of synthetic emotion, but I believe that, given the difficulties that face my right hon. Friends in the Government at this stage, the decision that has been taken this year has been understood by many people in the Armed Forces.
  I believe that what has been done—and this is where I disagree with the hon. Member for Clitheroe—has treated the Armed Forces as a special case. They have been given a 13 per cent. pay award, which is 3 per cent. above the amount that was set for this year, plus a guarantee of comparability within two years. That makes the Armed Forces a special case and, in the circumstances, was as generous an award as one could expect the Government to make at this time.
  I was, however, particularly pleased that my right hon. Friend was able to refer to the arrangements that are proposed for pensions in future. As I understand it from what he said, pensions for those up to the rank of brigadier will be on the same basis as we in this House have granted to ourselves, which is that we are pensioned on a notional salary which is comparable with that paid elsewhere,
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  even though we are paid only about three-quarters of that salary.
  I am anxious to discover whether the concession that was announced by my right hon. Friend will apply only to those officers and Service men who are covered by the Review Body—that is only those up to the rank of brigadier—or whether the arrangement will apply also to senior officers above that rank. The impact of the pay freeze above that rank means that pension distortions for senior officers have been even more serious in recent years. I should be glad to know whether some—
  Mr. Mulley: The pay of officers above the rank of brigadier and their equivalents comes within the responsibility of the Top Salary Review Body. Previously the same principle has applied, for example, to senior officers and civil servants. As my hon. Friend will know, we have not yet had the report of the Top Salary Review Body.
  Mr. Roper: I was directing my remarks to pensions. As I understand it the concession that my right hon. Friend announced this afternoon will apply only to those covered by the present proposals of the Pay Review Body. Will all categories be covered?
  Mr. Mulley: That is right. In order to have an enhanced pension it is necessary to have a comparable rate against which to measure. Until the Top Salary Review Body's report is available, we shall not know what recommendation has been made for senior officers. That matter has still to be settled.
  Mr. Roper: I gather from the attitude that my right hon. Friend indicated that the Government will be sympathetic in considering a possible extension to cover other officers.
  I shall raise one or two other matters of concern that I feel could be tackled by the Ministry of Defence in dealing with the conditions of Service men. There is one such matter that is referred to in paragraph 9 of the Review Body's report, dealing with baggage allowances. Apparently the cash allowances has been frozen and kept at a relatively low level. I hope that that issue will be considered. It is a matter that has been brought to the attention of many of us when we have

  1223
  visited Service men abroad. It is something that could be tackled with relatively little difficulty and little expense.
  Similarly, there are a number of housing factors that should be given further consideration, including some of the points raised by my right hon. Friend the Member for Bermondsey (Mr. Mellish) and those met by Service men returning to Britain and having difficulty in getting back their houses. There is the difficulty of meeting the costs involved. It would be interesting to know whether the Ministry of Defence would be able to assist in that direction.
  I raise two further issues that have been brought to the attention of a number of hon. Members who have recently been in Germany. First, there is concern about the application of the family income supplement to Service men. It is unfortunate that Service men should require the supplement and it is unsatisfactory that, owing to disagreement between the Treasury and the Department of Health and Social Security, it is impossible for the supplement to be payable to Service men when they are in Germany.
  Finally, there is the question of the overseas allowance for the 16 to 18-yearold children of Service men who have left school and may not have returned to the United Kingdom. That is an issue that merits further consideration. The resolving of it would not cost a great deal of money and would deal with a serious problem affecting senior NCOs in British Army of the Rhine. I consider the settlement to be generous. I hope that many of those who are considering leaving the Services will reconsider their position.
  Before concluding I make one or two remarks about the recent behaviour of the Chiefs of Staff, which was referred to by the right hon. Member for Chesham and Amersham (Sir I. Gilmour). I realise that the Chiefs of Staff face a dilemma. In a sense, they are public servants, but as they see themselves they have two roles—one of acting as principal advisers to Ministers in defence matters and, secondly, one as acting as the representatives of the forces in the absence of trade unions in the Armed Forces. They believe that they have to do the best that
  1224
  they can to ensure that those who serve in the forces under their command are as well treated as possible. I feel that they find themselves in a dilemma on certain occasions. Certainly that would appear to have been the position recently.
  Given the restraints resulting from their first responsibility as public servants and as advisers to my right hon. and hon. Friends, I am not quite sure how they can demonstrate to those in the forces that they are necessarily doing their job of representing them as well as they would like to carry it out. No one would deny that this dilemma and ambiguous role presents a problem for the Chiefs of Staff. They do not enhance their effectiveness in representing the Armed Forces by breaking the rules and leaking information to the Press.
  The settlement has to be seen in the context of a number of settlements in the public sector with which the Government have had to deal in recent months. In the light of the picture as a whole it will be seen that they have struck the right balance in this case. That will be recognised not only in the House but in the country and the Armed Forces.
  8.46 p.m.
  Miss Janet Fooks: I suppose that I have been on as many visits to defence establishments as any Back Bench Member in recent years. Two striking features came out of those visits. First, when those visits have been all-party, nearly always there has been a shortfall of Labour Members. That is an indication in practical terms of how much interest is taken. Above all, those who seem to be most anxious to cut defence expenditure are never seen on those visits.
  The second feature is the universal pre-occupation with pay and conditions and the discontent with them. This was particularly apparent when I visited the submarine "Orpheus" at sea for a whole day. Cooped up as I was, there was no getting away from the grievances that were trotted out in no uncertain terms. What really got the men was that when the military salary was introduced in 1970 there was an understanding that there would be comparability with outside occupations in return for realistic assessments of accommodation and charges. In practice, what happened was that to comply

  1225
  with pay policy they fell further and further behind outside occupations. But the Government exacted their pound of flesh when they increased charges for food and accommodation. This was the real grievance and bone of contention.
  More alarming was the lack of confidence in the Review Body. After my visit to the submarine, I wrote to Sir Harold Atcherley, the chairman, and told him, in slightly toned-down terms, what had been said to me by the submariners.
  It is refreshing that the Review Body has now taken a more robust approach in its present report. The report states what many of us have been saying for months. It is summed up on page 1, where it admits
  "On two occasions only—in 1972 in our First Report and in 1975 in our Fourth Report—have we been able to base our recommendations wholly on the principles and considerations that we regard as appropriate to recognise and reward the many and varied tasks carried out by the Services and on those principles and considerations alone."
  That is an admission that it has been constrained by considerations of the Government's policy.
  It is pleasing that there is at least a promise of comparability in two years but it is felt amongst the forces that this is not good enough and that they require comparability to be reached in a shorter time. That is certainly the view expressed in no uncertain terms by the Forces Wives' Association. I am proud that this organisation sprang up in the Plymouth area as a result of the desperation of wives who felt that perhaps they could speak out more than their Service husbands. But what an indictment of Government policy that that should be necessary.
  They also showed commendable initiative in bearding the Prime Minister himself when he paid a recent visit to open the Fleet maintenance base at Devonport dockyard. They are not satisfied with the present arrangements, and they told the Prime Minister that quite definitely. They regard them, in homely terms, as "jam tomorrow" and, to use another expression, tomorrow, they feel, never comes.
  After the years of oppression that they have suffered it will take more than one report to restore their faith and confidence in the Government's intentions. That is
  1226
  a most important point. However, there are other grievances that assume greater significance when they are added to the general discontent.
  One Labour Member made the point about baggage allowances. The arrangement here stems from the curious principle that a non-wage benefit has to be offset by the wages and salaries paid. That seems a very niggardly and mean approach. The position on baggage allowances is not improved when the Service men abroad see that their civilian counterparts, say, in the Ministry of Defence, have more generous allowances. I gather that this applies where accommodation entitlement is frozen, and again that has to be set against wages and salaries paid. I therefore ask the Minister who is to reply seriously to reconsider this point.
  My hon. Friend the Member for Gosport (Mr. Viggers) touched on another grievance relating to income tax. In view of your plea, Mr. Deputy Speaker, that we should keep our speeches short, I shall not dwell on this aspect except heartily to endorse what my hon. Friend said. I do so from my experience of talking to Service men and their families. There is considerable discontent about various aspects of the impact of income tax on them.
  The position on Services pay was summarised perfectly in a letter that I received this morning from a member of the Forces Wives' Association writing from my constituency. I shall not quote the whole of it, although the whole of it is worth quoting. She wrote:
  "My husband is a Chief Petty Officer of some 10 years service. He is a skilled man with considerable experience in his field. To him, words such as productivity deals, bonus, incentive schemes, profit sharing, working to rule and overtime pay, etc., are a foreign language. It is quite normal for him to work 36 hours or more continuously, tea breaks or lunch breaks frequently missed out. Colds and tummy upsets are not allowed to interfere."
  She refers to the amount of separation of her husband from her and her family for months at a time. She continues:
  "The general feeling among the servicemen I have spoken to is one of bitterness at being taken advantage of, and insulted with an inadequate pay increase of only 10% with no compensation for separation or unsociable hours. The result is undeserved financial hardship for families of professional men."

  1227
  She says at the end:
  "One can only hope that in the foreseeable future a man will be paid what he is worth."
  This state of affairs has considerable implications for Service morale and Service effectiveness, a factor that has already been discussed in the debate. We have witnessed alarming figures for the departure of many officers, and I am not very hopeful that we shall see a slackening of that exodus as a result of the present pay rise. I hope that I shall be proved wrong, but I think that it will take more than this one declaration to offset the disillusion of several years.
  In many respects it is a false economy when one considers the cost of the skill that is required to train a jet pilot, for example. Perhaps the Minister will give us the figure tonight. I believe it to be in excess of £500,000, but no doubt he will correct me if I am wrong.
  Therefore, I feel that the Services still have a grievance, and I hope that before too long it will be put right.
  Several Hon. Members rose—
  Mr. Deputy Speaker: Order. The Front Bench speakers have very generously agreed to postpone the commencement of the winding up speeches until 9.15 p.m. Four other hon. Members still wish to take part in the debate. If they take five minutes apiece, they will all be called.
  8.56 p.m.
  Mr. Geoffrey Pattie: This debate is not just about pay; it is also about morale. Morale is something which is apparently always excellent. It is rather like the Chancellor in the days of fixed parities who denied that a devaluation was about to happen until it happened. So we have no gradations on the scale of morale. From excellent we move straight to mutiny—or more properly described in the age of the volunteer as premature voluntary release.
  The Prime Minister is fond of saying that all sections of the community must contribute in the battle against inflation and that we must beware of making various groups of special exceptions. However, I should like to know, as would the House, how many groups in society have the kind of liability that requires instant
  1228
  mobilisation to Belfast or Belize, with lives possibly at stake, and unlimited hours of work in difficult conditions.
  Service men take on this liability because of a genuine love of the Service. But the only Service men who want to stay in the Services now are either those with so much service that they are too committed to leave, or those with so little service that they can stay a little while, enjoy themselves and then go. The people in the middle, the leaders of tomorrow, are getting out as fast as they can.
  As my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) said, the facts speak for themselves. Why is this happening? Pay is an important element, but it is only one of the elements, because pay levels give a man an idea of how he is valued by society. But there are several other problems. The working of the Rent Act 1974, for example, has caused problems for Service men trying to repossess their property from recalcitrant tenants. This in turn leads to family separation and empty married quarters at various stations while the wife remains in the marital home.
  Baggage allowance has been mentioned, so I shall not repeat that point.
  The Service man, as the right hon. Member for Bermondsey (Mr. Mellish) said, is not looking for perks and bonuses, but he feels that he is getting a raw deal whichever way he turns. Pension calculations are also suffering from the restrictions in pay, apart from those who will be retiring in the next two years.
  All this adds up to a tremendous battering on the domestic front, particularly from the wives, as my hon. Friend the Member for Plymouth, Drake (Miss Fookes) mentioned. The Service man can withstand this for a while and up to a point because he has always had his professionalism to fall back on. But can he still do that? It is unlikely that any Government, even a future Conservative Government, could afford the level of expenditure necessary to provide what one might call a de luxe level of equipment. Indeed, it can be a challenge for individual units to have to make do and mend from time to time. But when it becomes standard practice for vehicle windscreens to be awaiting replacement

  1229
  for, say, six months and tank engines continually to fail, morale suffers because the Service men are unable to be professional.
  A young Army officer in BAOR recently said:
  "The pursuit of military excellence is no longer possible."
  If the House reflects on that phrase, it will realise that it is a very chilling condemnation of the present situation in the forces, as it is a special kind of humiliation attendant upon any position and situation if British equipment fails because it is either obsolescent or incapable of proper maintenance. That is particularly so as our forces serve alongside NATO allies, who are always looking at this kind of thing.
  I happen to know that in a recent exercise a British armoured unit was ordered to pull to the roadside to allow a Belgian armoured unit to go through because the NATO commander placed greater reliance on the Belgians reaching the deployment zone on time whereas the British would be prone to mechanical breakdown and delay. Although throughout our history we have often asked the Services to cope with inadequate resources, we cannot do that any more in an age of high technology.
  The malaise that the Government have produced in the Services is particularly insidious because it is not only morale that is being undermined but discipline. It is hard for officers to keep up the spirits of the troops when they continually find that they cannot get the equipment in service or carry out the training they need. The present Ministry of Defence team of Ministers must surely be the most muddled, incompetent and inadequate since the Crimean War.
  9.0 p.m.
  Rear-Admiral Morgan-Giles: The tenor of speeches from the Secretary of State and every other right hon. and hon. Member on the Government Benches has been that the forces cannot be a special case. That is the crux of the argument, because comparability is not a special case. It is something in its own right. The forces do not want to be a special case, but nor do they want to be left completely behind. The Government are saying in effect that the
  1230
  forces must be the only people to be left behind.
  The purpose of the Review Body is to see what has happened with all other groups and then say that the forces should have a certain figure. It is bogus for the Secretary of State or anyone else to say that the forces would be a special case. Because they have been left behind in the last few years, they should not be left even further behind now. I agree with the hon. Member for Huddersfield, East (Mr. Mallalieu) that the X factor would provide a perfect way of bringing up the pay if the Government wished to do so and the Secretary of State had sufficient clout in the Cabinet.
  In previous debates I have defended the morale of the forces and said that, despite everything, it had not been damaged. I am sorry that I must say today that since the latest pay announcement I agree with my hon. Friends who say that it has been damaged. That is my information. As for unions, I can sum up the position there, from my knowledge of the forces, by saying that they would sooner starve.
  The forces feel that they have been given a post-dated cheque. That might or might not be all right, but cheques from that source have bounced before. Can the Minister give one categorical assurance? Will the Prime Minister's promise that comparability will be restored within two years be fulfilled regardless of incomes policy of any sort? Without that assurance, the forces will feel that they have had no assurance at all. They may be given the same old line all over again.
  Of course, it is not only forces' pay which worries Service men but disarmament in the face of Soviet growth. Soviet adventurism in Africa, in Zaire, is in the headlines this very day. Western countries, including Britain, must be prepared to face intervention in Africa and in other parts of the world to protect Europeans and the independence of African countries.
  I forecast that British troops will be needed in Rhodesia unless the Government support the internal settlement now and remove sanctions forthwith. I suppose that that will take place within the next year.
  I am afraid that the Government's defence policy has failed. The Secretary

  1231
  of State is the responsible Minister and he should certainly have his salary cut. In fact, in my opinion, he should resign.
  9.5 p.m.
  Mr. Patrick Wall: The interesting aspect of this debate is that nobody has argued about figures. We all agree that the standard of living at every level of society has been cut by a considerable amount, in recent years. We know that the standard of living of the troops has been cut by 32 per cent. under the lower national standard. The Government are making this up by a figure of 14 per cent., leaving 18 per cent. still to be made up. The important point made by the Secretary of State today was that this figure would include inflation. In other words, they will go back to the full level of comparability in two years.
  The Secretary of State will remember that it was the Labour Government who introduced the military salary. I was always opposed to that concept, but the X factor was brought in to keep the Services at a higher rate than the average wage in industry. Yet in the last five years the Services have been paid at a considerable lower rate. Even after a wait of a further two years, they will not be back to the full comparability that they were promised in earlier days. No industry with a strong trade union would ever have allowed that to happen to its workers.
  The result is shown in the recent figures given to me by the Secretary of State. In 1977–78, 1,993 officers applied for voluntary release and 1,368 actually left. That is a total of 3,361 officers who will leave the Services in one year. I regard that as catastrophic for the future of the Services. At the same time, in the same year 8,752 other ranks left. Comparing this with what happened last year, it means that the numbers leaving the Navy have risen by 68 per cent., the Army by 100 per cent., and the RAF by 77 per cent. I hope that these figures will improve, but I doubt it.
  What will be the effect, for example, on the Navy? I understand that the small number of helicopters we now possess, which have been cut considerably by the recent measures, do not have sufficient pilots to operate them. The pilots are leaving the Service because they can
  1232
  obtain very high rates of pay on oil rigs and in the Gulf. Is the right hon. Gentleman able to tell the House that all existing helicopters can be manned? I understand that it will be very difficult to man HMS "Bulwark." Even though "Tiger" and "Ark Royal" are being paid off with a surplus of 3,000 men, yet I understand that it will be very difficult to man this ship, even apart from air crew.
  The important point to note is that those who are going are the skilled men—those who can obtain good wages in civil life. The Royal Navy is now badly over-stretched. Those who stay on in the Navy are also suffering because of that degree of over-stretch. They think that they are being treated unfairly. I remind the right hon. Gentleman that the last time we had a combination of unfairness and cuts in pay we had Invergordon, which had serious effects on Herr Hitler's ideas about Britain and therefore on the start of the Second World War.
  The Army is also over-stretched. In Northern Ireland, for a tour of duty of 116 hours per week, men are being paid £23·70. That is quite appalling. The Army are also concerned about the whole question of status. The status argument also applies to the RAF. I refer to status vis-à-vis the Civil Service. Civil Service staff in Germany enjoy far more perks than the Army or the RAF.
  Let us take the status of Service personnel in embassies. We know how military attaches are treated alongside the diplomats. The diplomats are given all the perks. The military attaches receives only some perks while they are there, but are treated very much as inferior beings.
  All this is known in the Services, and particularly in the Army and RAF, whose personnel associate closely with the Civil Service and who resent it very strongly. I hope that the Secretary of State will be able to do something about the situation.
  The most important factor in regard to the Royal Air Force is the maintenance of its aircraft. The right hon. Gentleman knows very well that skilled technicians and mechanics are leaving the RAF at a very fast rate. It is very doubtful whether even the reduced number of aircraft which we now have to defend this country could be maintained in time of war.

  1233
  On the subject of welfare, how many Service officers in all three Services are living in the quarters to which they are assigned? I understand that a large number cannot afford the quarters that are given to them. This is an important factor. Some of them are having to turn their quarters into officers' messes to make the grade. A total of 40 per cent. of troops are said to be on rent rebates and a number on family income supplement. The Secretary of State will know that, if pay is increased, it has an effect on FIS and in the end the man concerned may not benefit by a penny. These effects will continue, on the Secretary of State's own admission, for the next two years.
  The difference between the two sides of the House can be summed up in a Question I put to the Prime Minister. I asked whether he regarded the Services and the police as special cases. Those are the two organisations which do not have the right to strike and therefore depend on the protection of the Government. They are the two vital organisations which protect us against internal subversion and external attack. Therefore, they should be the first priority of any Government. The Prime Minister does not regard them as a special case.
  That is the difference between the two sides of the House. That is why I believe that the Government and, indirectly, the Secretary of State have failed to maintain the status which our troops are entitled to enjoy.
  9.10 p.m.
  Mr. Eldon Griffiths: I have no personal wish to impoverish my friend, the Secretary of State. However, I shall vote for the motion for three reasons. Two of the reasons are far too large to deploy in five minutes and one of them concerns the Royal Air Force, which is heavily concentrated in my constituency. I mention the two large reasons. I hope that the Secretary of State will understand that brevity makes it impossible to deploy them in full.
  The cruise missile and the neutron warhead are indispensable to the effective defence of the West. I am sorry that President Carter, misguidedly, has decided not to proceed for the time being with the development of both these weapons. The Secretary of State, who well understands
  1234
  the whole strategic balance, understands the pluses and minuses of the argument for both of these terrifying systems. It was his duty to press more vigorously than he did upon our American allies the importance of proceeding with the development and deployment of both the weapons. I am sorry that he did not do so. I refer him to the debate in the American Congress and to the publication "The Cruise Missile" which no doubt he has seen. I hope that he will give careful thought to the importance to NATO of developing the cruise and the neutron warhead.
  Like my hon. and gallant Friend the Member for Winchester (Rear-Admiral Morgan-Giles)—who came to the House on the same day as I did—I think of the situation in Zaire. Having travelled widely in Africa, I am certain that this country will be called upon from time to time to rescue its nationals, whether in Rhodesia or anywhere else. We have more trade, more investment and more technicians, teachers and engineers engaged in that large and complex continent than any other country. The time will come when we shall need to go to the assistance of our nationals.
  I wondered today, coming to the House, whether if the call had come we would have the aircraft. I fear not. We have stood down the long-range element of Transport Command. The Hercules, though an admirable aircraft, does not have the lift capacity to deal with distances of the type involved. I wondered also whether we would have the pilots. We might at a stretch, but it would be only at the cost of removing them from other areas of deployment which are equally vital to the country. I wondered whether we would have the paratroops. The Parachute Brigade has been far too severely cut. We would find it almost impossible to do this particular job. Would we have the will to do it? It is the will that matters most.
  One of the reasons that I shall vote for the motion is that in similar circumstances to those faced by our French and Belgian allies, this Government would not have had the guts or the courage to undertake the operation.
  The Royal Air Force is more heavily concentrated in my constituency than in almost any other. During NATO exercises we have more flights than London

  1235
  Airport. I went to see the wives, the officers and the airmen in my constituency and I spoke to them. I listened to them and I went to the Secretary of State who, as he always does, courteously agreed to listen. I am grateful to him and to his Under-Secretary for having given consideration to what I had to say about the wives and airmen of RAF Honington. I hope that they will take back the suggestion that somehow it is making party politics if a Member of Parliament, having listened to his constituents, honourably goes to a Minister first and explains to him in detail how they feel.
  The Secretary of State and his Under-Secretary know that large numbers of young men who went into the Services not for money but to serve their country out of pride and patriotism, with their wives, are now disillusioned and impoverished. They asked for bread. This review has given them a stone.
  The truth is that those of us who honourably represented to the Government the feelings of our constituents in this matter, far from playing party politics, did what we conceived to be a public service. I regret that the Secretary of State, who, no doubt, fought as well as he could within the Cabinet, did not get a fair deal for our Service men. Consequently, the motion should be passed.
  9.15 p.m.
  Mr. Churchill: We have had an important and useful debate. Hon Members on both sides have expressed their concern over the pay and welfare of the forces and they will shortly have the opportunity of reflecting that concern in the Division Lobbies.
  I wish to begin by paying tribute to the Armed Forces of the Crown for the exemplary way in which they have served the nation over the past year, often under very trying circumstances. The Jubilee reviews, in which the three Services proudly paid homage to their commander-in-chief, inspired the nation and commanded the attention of the entire world, though it is fair to point out that they imposed a heavy work load on the forces.
  The terror and violence have continued unabated in Northern Ireland and yet, in spite of the dangers, the long hours and the miserable conditions, the Army, assisted by the Royal Navy, the Royal Marines, the Royal Air Force, the Ulster
  1236
  Defence Regiment and the women's Services, have carried out their duty without question or complaint, and with a courage, skill and restraint that could not be achieved by the military of any other nation.
  The right hon. Member for Down, South (Mr. Powell) paid tribute to the courage of the men and women of the UDR and to their refusal to be intimidated. Having had the privilege of going out on patrol with them one evening recently, I wish fully to associate myself and the Opposition with his remarks.
  In addition to commitments in Belize and Bermuda, the forces have had to carry the full burden of the firemen's strike, in which they saved many lives.
  On top of all this, they have had to cope with the purely political decisions of the Government—the defence review, the restructuring of British forces in Germany, which involved the moving of 18,000 men and their families, the massive rundown in manpower, which has imposed heavier work loads, and the enforced redundancies.
  I do not know what the Prime Minister had in mind when he said on Independent Television News on 26th April:
  "The Armed Forces have security in their jobs."
  Does he not know that 570 men from the RAF and 1,653 soldiers from the Army have been sacked by his Government in the past year? These were not cases of premature retirement. These men were physically sacked. Yet the Prime Minister tells them that they have "security in their jobs". The Armed Forces have borne all this with loyalty, devotion to duty, even cheerfulness, and the nation's admiration and gratitude to these men and women knows no bounds.
  But how do the Government propose to honour this debt of gratitude? Sad to say, they propose an insult. Last year the Prime Minister slipped in his announcement about Armed Forces pay surreptitiously in a Written Answer to a planted Question. But that was before the broadcasting of Parliament. This year, almost every Service man and his wife heard the Prime Minister live on the radio telling them that they had received a "square deal" and should be grateful for it.

  1237
  Since that announcement, I have had the opportunity of visiting British Forces in Germany and I must say that the Service men could not believe their ears at the cavalier way in which the Prime Minister, with scarcely a passing word of thanks, informed them that, although common justice would require that they should be given increases of "up to 38 per cent.", they would have to make do with no more than 13 per cent.
  The Government have insisted that the Services have been given a square deal. But is it a square deal? The Armed Forces Pay Review Body, which in its excellent and outspoken report this year has redeemed its most inadequate report of last year, made the point that the Armed Forces should not be treated any less favourably than the rest of the community. Regrettably, and to their undying shame, this Labour Government insist that they should be treated worse.
  The Chief of the Naval Staff, Sir Terence Lewin, writing in the current issue of Navy News, points out that the 32 per cent. award indicated
  "the extent to which you have been less favourably treated under Government pay policy than your civilian equivalents in the past two years."
  Is not the Government's policy supposed to apply equally to all? How, then, have the forces fallen so far behind? It has come about because, despite all the claptrap and humbug about social justice of which we hear so much from this Government, their policy has been most unfair and most unequal in its application.
  The Armed Forces have been tied down to the letter of the policy under which, since April 1975 until March this year, they had received increases totalling only 14·9 per cent., while average earnings had raced ahead by no less than 49·2 per cent.—more than three times as much.
  It is well known of course—as the Prime Minister has pointed out—that on quitting office in 1974 the Tories left behind a massive shortfall in Armed Forces pay. That has been the assertion made, too, by the hon. and learned Member for Montgomery (Mr. Hooson) the only representative of the Liberal Party present all day today and by the Secretary of State. But what are the facts? The truth is
  1238
  that this is just another subterfuge of the Prime Minister's.
  In reply to a leading question from the Liberal Party's defence spokesman, the Prime Minister said on 25th April:
  "The hon. and learned Member for Montgomery has correctly called attention to the fact that in 1975 the Armed Forces Pay Review Body specifically commented that the Armed Forces had fallen seriously short as a result of pay policy in the years when the Opposition were in office."—[Official Report, 25th April 1978; Vol. 948, c. 1183.]
  I have to tell the House that the Armed Forces Pay Review Body said no such thing. Anyway, the facts speak for themselves.
  The 1978 report makes clear that in 1975 full comparability of pay was reestablished. It is instructive, therefore, to inquire what was the shortfall which had to be made up, and how much of that shortfall had arisen during the period of Tory Government and how much under the Labour Government.
  I am obliged to the right hon. Gentleman the Minister of State for giving me the Answer, in a parliamentary reply last Friday. That reply shows that the shortfall was 29·5 per cent., and all but 2 per cent. of that figure was accounted for by the wage inflation unleashed by the Labour Government over the previous year in order to win the October 1974 election. The inflation of pay that year was 27·5 per cent. Perhaps the Prime Minister and the hon. and learned Member who speaks for the Liberal Party would now care to apologise for misleading the House on that point.
  But nothing is to be achieved by haggling over the past or about who can do worse for the Armed Forces. What is important is to put this matter right. What, then, is the Government's excuse for refusing full comparability of pay now? Their answer is the pay code, and it carries with it the implication that if the forces were to be accorded the full 32 per cent. of their award, this would in some way be unfair to others. Indeed, the hon. and learned Members for Montgomery took that view on behalf of his party when he asked this afternoon whether "the risk" could be taken to give comparability to the forces before 1980 and concluded very definitely that, in his judgment, it could not.
  That argument is patently false and fraudulent, for it is the same pay code

  1239
  which has allowed others—indeed, the majority in our industrial society—to race far ahead of the Armed Forces, as my hon. and learned Friend the Member for Winchester (Rear-Admiral Morgan-Giles) pointed out.
  Therefore, the proposition the Government are asking the House and the Armed Forces to accept is that because the Forces have fallen behind by an average of more than 15 per cent. in each of the past three years, they must now accept being kept 25 per cent. behind this year and 15 per cent. behind in the following year. In effect, if the Government have their way, the Armed Forces will have lost the equivalent of an entire year's pay between 1975 and 1980. It is wholly wrong that they should be penalised in this way.
  Mr. Cronin: The hon. Gentleman is speaking very strongly about the Government's pattern of behaviour. But what the Government are doing is totally consistent with the review by the Armed Forces Pay Review Body.
  Mr. Churchill: It is not, as my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) pointed out this afternoon. The Pay Review Body made its recommendations, and those recommendations were for full comparability as soon as possible. Out of deference to the Government's pay policy, it produced an alternative scheme which was in accordance with the terms of that pay policy. But it is clear to anyone reading the report that if the matter were left to the Review Body it would favour full comparability now.
  It seems that there has been a "mischief-maker" abroad who has leaked to the Press, or at least to the Review Body, the fact that the emperor has no clothes. An elaborate exercise is now being mounted on the instructions of Emperor Jim himself, who wishes it to be made clear that any suggestion that Socialist pay policy is unfair is totally without foundation, and that if any group publicly claims to have fallen behind by "up to 38 per cent." it must be punished for lçsemajestç of the Socialist State.
  It is not as if the men and women of whom we speak are in any way well-to-do. The great majority subsist on less than average earnings. For example, this very night there are soldiers patrolling the
  1240
  streets of Belfast who, after their pay rise, after the doubling of the Northern Ireland allowance, are being paid no more than 50p per hour before tax, for working a 110-hour week—and that to face IRA bullets.
  In our debate on 9th December I defied the Minister of State to find one capitalist employer so hard-faced, so demanding and so mean as the Secretary of State for Defence. I gave the undertaking that if he could, I would be the first to stand in that picket line. I renew that challenge to him tonight.
  Perhaps, in passing, the Minister of State would explain why the food charges for the forces have been increased by more than 20 per cent. this year, when only this evening I received a reply from the Minister of Prices and Consumer Protection which makes it clear that in the 12 months to April 1978 the retail food index increased by only 6·3 per cent.—one-third of the amount by which the right hon. Gentleman is planning to increase the food charges.
  In last year's Armed Forces pay debate, the Secretary of State concluded his speech with a solemn undertaking:
  "it is our intention that the rigid nature of the first two pay rounds, which have produced distortion in some pay structures in the professions, industry and other fields, including the Armed Forces, will—although we do not know yet the shape of round 3—be put right in future rounds of the policy. I shall ensure that the needs of the Armed Forces are taken into Account. I also give that assurance to the House."—[Official Report, 16th June 1977; Vol. 933, c. 610]
  The Secretary of State has utterly failed to deliver on that undertaking, and the course of honour requires that he should resign. I doubt that anyone would insist that he, unlike certain officers in the Royal Air Force, should stay on in his post for eight years.
  The Armed Forces Pay Review Body administered a stinging rebuke to the Secretary of State when it declared in paragraph 55 of its report:
  "we cannot but be dismayed by the absence of further flexibility in a form that is directly relevant to the armed forces pay system. We focused attention on the need for this in our Sixth Report."
  Yet once again the Secretary of State has failed to protect the interests of those for whom he has the honour to be responsible.

  1241
  The Secretary of State and the Prime Minister assure us that the Armed Forces have got the best possible settlement under stage 3 with their 12·8 per cent. Indeed, the Prime Minister declared on 25th April that these increases of £6 to £8 per week for a private and £9 to £11 per week for a sergeant
  "should not be sneezed at." [Official Report, 25th April 1978; Vol. 948, c. 1182.]
  But is it really the very best settlement possible? Some seem to be doing rather better. For example, there are the power workers with 18 per cent.
  I have recently been in correspondence with the chairman of the National Coal Board, who tells me that a face-working miner has received under stage 3 an average increase of no less than £29·60. That indeed is a figure "not to be sneezed at", to use the Prime Minister's phrase. It represents an increase in gross weekly earnings of no less than 36·5 per cent. That is not only three times more than the Armed Forces' increase but it even exceeds what the forces have been promised by 1980.
  Where is the fairness and the social justice in all this? Even before their productivity deal the miners were earning above average earnings while the majority of the forces were below. That is yet another case of the rich getting richer and the poor getting poorer.
  I wish to make it clear that I do not grudge the miners their productivity deal. They do a skilled, arduous and dangerous job. If they dig the coal, they deserve every penny they earn.
  But the Armed Forces also do a skilled, arduous and dangerous job. Why should the Government treat these two categories so differently? The answer is clear although somewhat paradoxical. With this Government it is the miners, not the forces, who mount the big guns.
  The right hon. Member for Cardiff, South-East (Mr. Callaghan) may be no better a Prime Minister than the right hon. Member for Huyton (Sir H. Wilson), but he is certainly even more accomplished in the role of the Artful Dodger. He knew, when formulating the stage 3 guidelines, that if he sought to ram down the throats of the miners a miserly, miserable 12·8 per cent. there was a better-than-even money chance that the Government would have to face a fully fledged
  1242
  miners' strike before the winter was out. Horror of horrors—and in an election year! The word went out forthwith from 10 Downing Street "Buy the boys off: 36 per cent. should do it."
  Why should not the Armed Forces also benefit from a productivity deal? The Armed Forces Review Body says in paragraph 56 of its report:
  "We are, however, in no doubt that, in almost any other working environment, the reduction in Service manpower consequent on the Defence Review and the working flexibility inherent in the Services' capacity to take on civil emergency tasks in addition to their mililtary role would provide the basis for a productivity agreement that would have to be paid for directly in increased earnings."
  It could well be that Ministers are so out of touch that they do not realise the hardship which their policies have imposed and, which, unless modified, will continue to impose for the next two years. Perhaps they have not hoisted on board the full implications for our national defences of the fact that nearly 2,000 officers—1,992 to be precise—applied to leave prematurely last year. This represents an 88 per cent. increase over the years of Conservative Government—indeed, a 110 per cent. increase in the case of the Royal Air Force. Perhaps Ministers are unaware that 20,000 Service men also decided to vote with their feet last year.
  Despite the absurd attempts of Ministers to conceal the facts from the British public it has now become known that the Rhine Army is so short of manpower that 15 per cent. of even the small number of Chieftain tanks that we are allowed to have, have had to be put in mothballs because of the manpower crisis. Now all these facts are known, the Government have no excuse for not introducing forthwith a supplementary pay deal for the Armed Forces based on their unequalled productivity. The Government cannot even hide behind their very nebulous pay policy for, as the Armed Forces Review Body makes clear in paragraph 55, such a productivity scheme would be entirely
  "outside the requirements of the 12 months rule'."
  There is no reason why the Government should not award the Armed Forces a 20 per cent. increase forthwith under such a scheme. Even if they were to do so, the forces would still be getting a stage 3 settlement less, both in cash and in percentage terms, than the miners.

  1243
  How much longer are the Government going to run our defence affairs in such an Alice-in-Wonderland way that, through their failure to pay pilots the extra £1,500 per annum due to them, we are losing men whom it has cost the taxpayer, according to an interesting footnote on page 4 of the Review Body's report, £1 million each to train?
  Various of my right hon. and hon. Friends have drawn attention to the way in which welfare benefits for which the Service man pays through his taxes and his earnings-related national insurance contributions are denied to him when he is serving overseas. This is a serious matter, and I hope that we shall hear more about it from the Minister of State.
  But of all the allowances, none is more important than the local overseas allowance. It is of the utmost importance that the Minister should give an undertaking that there will be no adverse change in the local overseas allowance at least until full comparability of pay is restored. I hope also that the Minister will also make some comment on the important point raised by my hon. Friend the Member for Gosport (Mr. Viggers), who drew attention to the fact that NCOs are being charged tax at a very high rate indeed on their education allowance.
  But, as several of my hon. Friends have pointed out, the crisis of morale in the forces derives by no means exclusively from dissatisfaction over pay. As much it stems from the collapse of our defences that they see going on around them all the time. This point was made strongly by my hon. Friends the Members for Westbury (Mr. Walters) and Richmond, Yorks (Sir T. Kitson), particularly in regard to the restrictions on training. My hon. and gallant Friend the Member for Eye (Sir H. Harrison) drew attention to the lamentable lack of modern weapons.
  These men in the forces know the facts. They see the Chieftains being mothballed—indeed, they are having to do it on ministerial instructions. They know that guarding our shores tonight are fewer than 100 aircraft and that many of them are unserviceable through shortage of spare parts, which have to be cannibalised from other aircraft. We have heard of the "Few" who saved Britain in 1940, but they were a few hundred. Then we had in
  1244
  Fighter Command 60 squadrons with more than 900 aircraft—10 times what we have today against a far more formidable potential enemy.
  If the Chiefs of Staff appear to the Government to be somewhat frustrated and even outspoken, it is not through concern over their own pay or even solely over the pay of their men. It derives from the fact that here we have a Government the principle members of which, to use a senior officer's phrase, have been "briefed to the eyeballs" about the nature and extent of the Soviet threat yet, with utter resolution, they insist on ignoring it.
  The Government have been briefed with a detail and precision never possible to Prime Ministers in the 1930s, and about an enemy thousands of times more potent than Hitler's Nazi Germany. They know that the Soviet Union has so many tanks—no fewer than 17 times as many as Hitler—that if they were put end to end they would stretch all the way from London to Edinburgh. They know that the Soviets are deploying each week four inter-continental ballistic missiles. They know that even if an entire Soviet tank army were to be removed from the group of Soviet Forces in Germany tomorrow, there would still be hundreds more Soviet tanks in East Germany than when we embarked on the mutually balanced force reduction talks in good faith.
  Where is this supposed "detente" to be found? Do we find it is the Soviet Union, where those who have sought to monitor the Helsinki agreements are sentenced to brutal terms of hard labour following a rigged show trial? Do we find it is Africa of which several of my hon. Friends have spoken? Certainly no hint or murmur of detente has been communicated to the Red Army nor to the workers in the Soviet munitions factories.
  The Foreign Secretary has said that the sentence on Yuri Orlov is "endangering detente". What detente? There is no detente, except in his own mind and the minds of equally feeble, woolly headed leaders in the West. How long will it be before this Government wake up from their sleeping sickness and tell the British people the truth—that now is no time to cut our defences, but it is of the utmost urgency to strengthen them?
  It may have given gleeful pleasure to the Kremlin and its front men in this

  1245
  House to hear that the Secretary of State had, on the Prime Minister's instruction, carpeted the Chiefs of Staff and reprimanded the Chief of the Defence Staff. But this grotesque spectacle did not amuse the British people in the least. It is shaming that men of such distinction, courage and patriotism, whose loyalty to the Crown and the British people is unquestioned, and who seek no more than to ensure that our defences are not neglected—which is both their right and their duty—should be abused and humiliated in this way by Ministers whose commitment to our defences is dubious, who leak these reprimands to the Press in order to appease those who would dismantle our defences and who would conclude a treaty of friendship with the oppressors of Yuri Orlov.
  9.41 p.m.
  The Minister of State, Ministry of Defence (Dr. John Gilbert): Perhaps I could start by illuminating one or two recesses for the hon. Member for Stretford (Mr. Churchill). He asked why food charges had been raised to the extent that they had been. The answer is that it is one of the recommendations of the Review Body. It appears in paragraph 45, which says:
  "In our view the charge is reasonable and the food that it purchases is very good value for money."
  Perhaps the hon. Member has not read as far as paragraph 45.
  It is difficult to reply to a debate when one is rather embarrassed on behalf of the right hon. Member for Chesham and Amersham (Sir I. Gilmour). He must have perpetrated one of his worst speeches ever. He has been attacked not only by my hon. Friends but by Members from various parties on the other side of the House. He spoke for more than a quarter of an hour before he mentioned pay, and he was rebuked by the hon. Member for Argyll (Mr. MacCormick) for a speech full of rancour.
  It was not just a rancorous speech; it was a remarkable speech. The right hon. Gentleman talked of depriving the Services of sufficient equipment and spoke of the Government having disarmed the country unilaterally. It is difficult to take seriously a man who is supposed to be an expert on defence matters, although he spent only 56 days as Secretary of State, 21 of which he spent electioneering and
  1246
  five more waiting for his right hon. Friend to get out of office. He knows full well that there is a major equipment programme for all three Services.
  The right hon. Gentleman went on to talk about a great many Service men living in poverty and claimed that they would continue to live in poverty. I have no doubt that he was referring to those members of the Armed Forces who are entitled to family income supplement.
  Sir Ian Gilmour indicated dissent.
  Dr. Gilbert: I am so glad that he has finally come off that horse. The Review Body's last report makes it clear in paragraph 17 that the extent to which Service men make use of the FIS system is sometimes presented as evidence that the earnings of those Service men are below the poverty line, and that this is a stigma. This is wrong.
  Mr. Churchill: Is the Minister on FIS?
  Dr. Gilbert: If the right hon. Member for Chesham and Amersham wants to say that Service men who are not on FIS are below the poverty line, then I would be very happy to be instructed by him who they are, where they are and precisely how they got there, if they are not entitled to FIS.
  My hon. Friend the Member for Farnworth (Mr. Roper) mentioned FIS and the fact that it did not apply abroad. I recognise the point that he makes. Very few personnel in the Services are entitled to FIS, even in the United Kingdom. Payment of this benefit is a matter for the Department of Health and Social Security, which estimated that in December 1977 only 190 families were drawing FIS in a group including Service men, policemen, firemen and certain others. We recognise that there is hardship in some cases, but to use the extravagant language that the right hon. Gentleman used in his introductory speech today does no service to the forces, nor to their cause.
  Mr. Kenneth Lewis rose—
  Dr. Gilbert: No.
  Mr. Kenneth Lewis rose—
  Mr. Speaker: Order. If the Minister does not give way, the hon. Member for

  1247
  Rutland and Stamford (Mr. Lewis) must resume his seat.
  Dr. Gilbert: The House knows that I usually give way to an hon. Member who wants to intervene, but not to an hon. Member who walks in right at the end of the debate.
  Mr. Kenneth Lewis: I sat through the early speeches of the debate, and I have been here since.
  Dr. Gilbert: It is a pleasure to turn to some of the more constructive speeches, particularly that of my hon. Friend the Member for Hornchurch (Mr. Williams) who raised questions about the membership of the AFPRB, as did my hon. Friend the Member for Farnworth and my right hon. Friend the Member for Fulham (Mr. Stewart).
  Membership of the AFPRB is a matter for the Prime Minister, and not for me. It has, however, always been the view of the Government that it would not be appropriate for serving members of the Armed Forces to be members of a body concerned with their own pay and conditions. Nevertheless, the membership of the AFPRB includes a retired officer with wide experience of Service pay and conditions, and the AFPRB makes visits to various Service units and establishments to hear at first hand the views of officers and of individual Service men and their wives. I believe, therefore, that the AFPRB has every opportunity to hear about grievances over Service pay and conditions, both from its visits and from formal evidence prepared by the Ministry of Defence. In fact, AFPRB commented upon this in the introduction to its 1978 report.
  It is important that the AFPRB should continue to be seen as a fully independent body which is free to make its recommendations on pay and allowances for the Services, and this is best achieved without Service men actually being members of the body. However, I take seriously the point made by my hon. Friend and by my right hon. Friend the Member for Fulham about whether there ought to be closer liaison between the organised trade union movement and those responsible for making recommendations on forces' pay and conditions.
  1248
  I should want to look more closely into that most helpful suggestion.
  I am able to toss at least one bouquet to the right hon. Gentleman on his performance this afternoon. It was pleasant, at long last, to hear him acknowledge the value of the work of the AFPRB which, contrary to what he said, is not a puppet of this Government or of any other.
  My hon. Friend the Member for Farnworth, the hon. and gallant Member for Eye (Sir H. Harrison) and the hon. Member for Plymouth, Drake (Miss Fookes) mentioned the question of the baggage allowance. This is not a satisfactory state of affairs, and I should not for one moment pretend that it was. I have made that clear in answers to Questions. We are not satisfied about the present level of entitlements, and I think that it is a reflection on all Governments that these have been virtually unchanged since the war. I do not know how that state of affairs has come about, but we intend to make improvements as soon as pay policy will permit.
  I have to honour an undertaking that my hon. Friend gave to the right hon. Member for Down, South (Mr. Powell) and say a word or two about the affairs of the Ulster Defence Regiment.
  Mr. Churchill: Before the right hon. Gentleman leaves the question of allowances, will he confirm that he appreciates that no allowance is more important to the forces than the local overseas allowance, and that if the Government's proposals of last year were to be implemented in October of this year the whole of the 13 per cent. pay rise would go out of the window? Will he now give a categorical undertaking that there will be no adverse change in LOA prior to full comparability?
  Dr. Gilbert: What the hon. Gentleman is asking me to do is to give an undertaking with respect to the operation of a formula that was designed by his right hon. Friends, the present Opposition. It is the Government who have taken care of LOA. I am not in a position to give any guarantee on LOA—[HON. MEMBERS: "Oh".] No Minister could do so. No Minister could give a guarantee for LOA two years in advance. The hon. Member for Stretford may be obtuse enough not to recognise that, but his

  1249
  right hon. Friend the Member for Chesham and Amersham recognises it perfectly well. He knows that we have protected the forces against LOA.
  Mr. Philip Goodhart rose—
  Dr. Gilbert: No, I must get on. I have only 10 minutes left and I must deal with some other matters.
  I am sure that the right hon. Member for Down, South will understand if I stick closely to my brief. As he knows, I am not responsible on a day-to-day basis for matters in the Province. I understand that the permanent cadre of the UDR continues to grow at a satisfactory rate, although some part of the increase is as expected at the expense of part-time personnel. We are continuing the present recruiting campaign. We recognise, as my right hon. Friend has said, that the men and women of the UDR work in the most difficult of circumstances. We have been considering whether any parts of their conditions of service need reviewing.
  The waiving or abatement of accommodation or quartering charges and the award of free food for members of the Regular Army in Northern Ireland has no connection with the cost of living in the Province. The Ministry of Defence has always opposed any suggestion that special financial arrangements, with the possible exception of London where circumstances are unique, should be made to deal with the varying costs of living in different parts of the country.
  We have been considering the conditions of service of those in the UDR. As a result, my right hon. Friend has approved that where UDR members are separated from their families they will be eligible for separation allowance under exactly the same rules that apply to members of the Regular Army. This improvement in their conditions of service will not normally affect large numbers of the permanent cadre, but where it does apply it could carry quite significant financial advantages.
  The House will remember that in this year's pay award the rate of the separation allowance was increased by about two-thirds. When members of the UDR are on operational duties away from their homes at meal times and are able to use Service messes or canteens, they may now
  1250
  be provided with meals at public expense. That will not be at the expense of their normal daily food allowance. It will bring them into line with members of the Regular Army.
  I hope that I have said enough to demonstrate to the right hon. Gentleman the relationship between the remuneration of the Army and that of the UDR permanent cadre. I hope that I have been able to show that that is not affected by the introduction of the field condition allowance for the forces. The new pay scales introduced from 1st April maintain the previous ratio. However, if there are points of detail on which I have not satisfied the right hon. Gentleman. I shall be happy to do so either by correspondence or in answer to Questions.
  One thing that the debate has clarified is the Opposition's final view on what forces' pay should be. The House could be excused for having a little vagueness on the subject. For example, on 14th March 1978 the hon. Member for Stretford said:
  "The Opposition are asking for a return to full comparability"—
  [HON. MEMBERS: "Hear, hear."]—
  in a time scale no less favourable than that accorded by the Government to the firemen."—[Official Report, 14th March 1978; Vol. 946, c. 362.]
  I did not hear a "Hear, hear" to that, but that is what the hon. Gentleman said on that occasion. However, when it was leaked shortly before the announcement was made that that might well be what the Government were to award to the Armed Forces, the hon. Gentleman immediately upped his bid and said "Let them have full comparability today". Why not?
  Mr. Churchill: Yes, why not?
  Dr. Gilbert: "Why not now?" I am glad that that is still his view. We read in The Times that he was disavowed by his right hon. Friend the Leader of the Opposition. It seemed that his views were not the right hon. Lady's.
  Mr. Churchill: That was before the report was published. It was known that the forces had fallen behind by up to 38 per cent. What possible justification can there be for punishing the forces over the next two years for the fact that they have fallen behind over three years?
  Dr. Gilbert: I should have thought that the hon. Member for Stretford would stick to his guns if he felt that strongly about it. He said that the forces should have full comparability immediately. But then the right hon. Member for Chesham and Amersham, whom we understand is putting forward the official Conservative view, said that comparability should come over a period of two years but that the two years should end in 1979.
  It is not clear who is in charge of Conservative policy in these matters. We know that the right hon. Member for Chesham and Amersham does not like dealing in figures. That is understandable when one considers the mess that he made of his attempts to tell my right hon. Friend that he should increase the defence budget by more than 1 per cent. but on a base about which no one was clear. Finally, the right hon. Gentleman gave the whole thing up and said that he wished that he had not quoted a figure in the first place. That was a stirring example of leadership if ever we saw one.
  The Tory defence policy team reminds one of an ancient penny-farthing. Lest anyone has forgotten, a penny-farthing is one of those elegant contraptions on which the bigger wheel is in front and goes rather slower than the little wheel in order to cover the same distance. The difference with the Tory penny-farthing is that the little wheel is in front. We are not sure where the steering is, but we are absolutely sure where the horn is.
  It must be embarrassing for the right hon. Gentleman, weekend after weekend, to see, not himself, but his hon. Friend's pictures in the papers and on television telling everyone what Tory policy is when no one is paying any attention to the somnolent and right hon. Gentleman. I am glad that the hon. Member for Stretford has woken up to that.
  My right hon. Friend told the House how many Questions had been tabled on pay, conditions, re-engagements, PVR applications and recruiting in the last several weeks. The hon. Member for Stretford asked many of those Questions, as he is entitled to do. Being a fastidious
  fellow, the hon. Member chose to quote from only a few of the replies that he has received. The House might be interested to hear the answer to another Question which he received a couple of days ago. He has not sought to publicise it. He asked the Secretary of State for Defence
  "if … he will now list the percentage increases in Armed Forces pay, average industrial earnings, Service pensions, and cost of living for the period 1st April 1977 to 1st April 1978".
  The answer was that the retail price index rose by 9·1 per cent., that average earnings in manufacturing industry rose by 11·8 per cent., that the average increase in the basic military salary was 12·8 per cent., that the balance of total increase on total earnings for the Armed Forces was 13 per cent.—covering increases in major forms of additional pay. Service pensions rose by 17·7 per cent. and basic Service pensions for those retiring on or after 1st April 1978 will be increased by an average of 32 per cent.
  In other words, the Services pay increases and their pension increases are far in excess of the increase in the retail price index. They are far in excess of the average increase in industrial earnings. That is contrary to all the accusations that the right hon. Member for Chesham and Amersham and the hon. Member for Stretford have made from the Dispatch Box.
  As my hon. Friend the Member for Huddersfield, East (Mr. Mallalieu) made clear, the mischievous and malicious nonsense from the Opposition suggesting that hon. Members on this side of the House do not care about the country's defences—
  Mr. Humphrey Atkins rose in his place and claimed to move, That the Question be now put.
  Question, That the Question be now put, put and agreed to.
  Question put accordingly,
  That the salary of the Secretary of State for Defence should be reduced by half:
  The House divided: Ayes 267, Noes 281.

  Division No. 221]

  AYES

  [10.00 p.m.

  Adley, Robert

  Awdry, Daniel

  Bennett, Sir Frederic (Torbay)

  Aitken, Jonathan

  Bain, Mrs Margaret

  Bennett, Dr Reginald (Fareham)

  Alison, Michael

  Baker, Kenneth

  Benyon, W.

  Arnold, Tom

  Banks, Robert

  Berry, Hon Anthony

  Atkins, Rt Hon H. (Spelthorne)

  Bell, Ronald

  Biffen, John

  Atkinson, David (Bournemouth, East)

  Bendall, Vivian (Ilford North)

  Biggs-Davison, John

  Blaker, Peter

  Hayhoe, Barney

  Paisley, Rev Ian

  Body, Richard

  Heath, Rt Hon Edward

  Pattie, Geoffrey

  Boscawen, Hon Robert

  Henderson, Douglas

  Percival, Ian

  Bowden, A. (Brighton, Kemptown)

  Hicks, Robert

  Peyton, Rt Hon John

  Boyson, Dr Rhodes (Brent)

  Higgins, Terence L.

  Pink, R. Bonner

  Braine, Sir Bernard

  Hodgson, Robin

  Prentice, Rt Hon Reg

  Brittan, Leon

  Holland, Philip

  Price, David (Eastleigh)

  Brooke, Peter

  Hordern, Peter

  Prior, Rt Hon James

  Brotherton, Michael

  Howell, David (Guildford)

  Pym, Rt Hon Francis

  Brown, Sir Edward (Bath)

  Howell, Ralph (North Norfolk)

  Raison, Timothy

  Bryan, Sir Paul

  Hunt, David (Wirral)

  Rathbone, Tim

  Buchanan-Smith, Alick

  Hunt, John (Bromley)

  Rees, Peter (Dover & Deal)

  Buck, Antony

  Hurd, Douglas

  Rees-Davies, W. R.

  Budgen, Nick

  Irving, Charles (Cheltenham)

  Reid, George

  Bulmer, Esmond

  James, David

  Renton, Rt Hon Sir D. (Hunts)

  Burden, F. A.

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

  Renton, Tim (Mid-Sussex)

  Butler, Adam (Bosworth)

  Jessel, Toby

  Rhodes, James R.

  Carlisle, Mark

  Johnson Smith, G. (E Grinstead)

  Rhys Williams, Sir Brandon

  Channon, Paul

  Jones, Arthur (Daventry)

  Ridley, Hon Nicholas

  Churchill, W. S.

  Joseph, Rt Hon Sir Keith

  Rifkind, Malcolm

  Clark, Alan (Plymouth, Sutton)

  Kaberry, Sir Donald

  Roberts, Wyn (Conway)

  Clark, William (Croydon S)

  Kellett-Bowman, Mrs Elaine

  Rodgers, Sir John (Sevenoaks)

  Clarke, Kenneth (Rushcliffe)

  Kershaw, Anthony

  Rossi, Hugh (Hornsey)

  Cooke, Robert (Bristol W)

  Kilfedder, James

  Rost, Peter (SE Derbyshire)

  Cope, John

  Kimball, Marcus

  Royle, Sir Anthony

  Cormack, Patrick

  King, Evelyn (South Dorset)

  Sainsbury, Tim

  Corrie, John

  King, Tom (Bridgwater)

  Scott, Nicholas

  Costain, A. P.

  Kitson, Sir Timothy

  Scott-Hopkins, James

  Crawford, Douglas

  Knight, Mrs Jill

  Shaw, Giles (Pudsey)

  Critchley, Julian

  Knox, David

  Shaw, Michael (Scarborough)

  Crowder, F. P.

  Langford-Holt, Sir John

  Shelton, William (Streatham)

  Davies, Rt Hon J. (Knutsford)

  Latham, Michael (Melton)

  Shepherd, Colin

  Dodsworth, Geoffrey

  Lawson, Nigel

  Shersby, Michael

  Douglas-Hamilton, Lord James

  Lester, Jim (Beeston)

  Silvester, Fred

  Drayson, Burnaby

  Lewis, Kenneth (Rutland)

  Sims, Roger

  du Cann, Rt Hon Edward

  Lloyd, Ian

  Sinclair, Sir George

  Durant, Tony

  Loveridge, John

  Smith, Dudley (Warwick)

  Dykes, Hugh

  Luce, Richard

  Smith, Timothy John (Ashfield)

  Eden, Rt Hon Sir John

  McAdden, Sir Stephen

  Speed, Keith

  Edwards, Nicholas (Pembroke)

  MacCormick, Iain

  Spence, John

  Elliott, Sir William

  McCrindle, Robert

  Spicer, Michael (S Worcester)

  Ewing, Mrs Winifred (Moray)

  Macfarlane, Neil

  Sproat, Iain

  Eyre, Reginald

  MacGregor, John

  Stainton, Keith

  Fairbairn, Nicholas

  MacKay, Andrew (Stechford)

  Stanbrook, Ivor

  Fairgrieve, Russell

  Macmillan, Rt Hon M. (Farnham)

  Stanley, John

  Farr, John

  McNair-Wilson, M. (Newbury)

  Steen, Anthony (Wavertree)

  Fell, Anthony

  McNair-Wilson, P. (New Forest)

  Stewart, Donald (Western Isles)

  Finsberg, Geoffrey

  Madel, David

  Stewart, Ian (Hitchin)

  Fisher, Sir Nigel

  Marshall, Michael (Arundel)

  Stokes, John

  Fletcher, Alex (Edinburgh N)

  Marten, Neil

  Stradling, Thomas, J.

  Fookes, Miss Janet

  Mates, Michael

  Tapsell, Peter

  Forman, Nigel

  Mather, Carol

  Taylor, R. (Croydon NW)

  Fowler, Norman (Sutton C'f'd)

  Maude, Angus

  Taylor, Teddy (Cathcart)

  Fox, Marcus

  Maudling, Rt Hon Reginald

  Tebbit, Norman

  Fraser, Rt Hon H. (Stafford & St)

  Mawby, Ray

  Temple-Morris, Peter

  Fry, Peter

  Maxwell-Hyslop, Robin

  Thatcher, Rt Hon Margaret

  Galbraith, Hon T. G. D.

  Mayhew, Patrick

  Thomas, Rt Hon P. (Hendon S)

  Gardiner, George (Reigate)

  Meyer, Sir Anthony

  Thompson, George

  Gardner, Edward (S Fylde)

  Miller, Hal (Bromsgrove)

  Townsend, Cyril D.

  Gilmour, Rt Hon Ian (Chesham)

  Mills, Peter

  Trotter, Neville

  Gilmour, Sir John (East Fife)

  Miscampbell, Norman

  van Straubenzee, W. R.

  Glyn, Dr Alan

  Mitchell, David (Basingstoke)

  Vaughan, Dr Gerard

  Godber, Rt Hon Joseph

  Moate, Roger

  Viggers, Peter

  Goodhart, Philip

  Monro, Hector

  Wakeham, John

  Goodhew, Victor

  Montgomery, Fergus

  Walder, David (Clitheroe)

  Goodlad, Alastair

  Moore, John (Croydon C)

  Walker, Rt Hon P. (Worcester)

  Gorst, John

  More, Jasper (Ludlow)

  Wall, Patrick

  Gow, Ian (Eastbourne)

  Morgan, Geraint

  Walters, Dennis

  Gower, Sir Raymond (Barry)

  Morgan-Giles, Rear-Admiral

  Warren, Kenneth

  Grant, Anthony (Harrow C)

  Morris, Michael (Northampton S)

  Watt, Hamish

  Gray, Hamish

  Morrison, Charles (Devizes)

  Weatherill, Bernard

  Grieve, Percy

  Morrison, Hon Peter (Chester)

  Wells, John

  Griffiths, Eldon

  Mudd, David

  Welsh, Andrew

  Grist, Ian

  Neave, Airey

  Whitelaw, Rt Hon William

  Grylls, Michael

  Nelson, Anthony

  Whitney, Raymond (Wycombe)

  Hall-Davis, A. G. F.

  Neubert, Michael

  Wiggin, Jerry

  Hamilton, Archibald (Epsom & Ewell)

  Newton, Tony

  Wood, Rt Hon Richard

  Hamilton, Michael (Salisbury)

  Normanton, Tom

  Young, Sir G. (Ealing, Acton)

  Hampson, Dr Keith

  Nott, John

  Younger, Hon George

  Hannam, John

  Onslow, Cranley

  Harrison, Col Sir Harwood (Eye)

  Oppenheim, Mrs Sally

  TELLERS FOR THE AYES:

  Haselhurst, Alan

  Osborn, John

  Mr. Spencer Le Marchant and

  Hastings, Stephen

  Page, John (Harrow West)

  Mr. Michael Roberts.

  Havers, Sir Michael

  Page, Rt Hon R. Graham (Crosby)

  Hawkins, Paul

  Page, Richard (Workington)

  NOES

  Abse, Leo

  Fitch, Alan (Wigan)

  Marks, Kenneth

  Allaun, Frank

  Fitt, Gerard (Belfast W)

  Marshall, Dr Edmund (Goole)

  Anderson, Donald

  Flannery, Martin

  Marshall, Jim (Leicester S)

  Archer, Peter

  Fletcher, Ted (Darlington)

  Maynard, Miss Joan

  Armstrong, Ernest

  Foot, Rt Hon Michael

  Meacher, Michael

  Ashley, Jack

  Ford, Ben

  Mellish, Rt Hon Robert

  Ashton, Joe

  Forrester, John

  Mikardo, Ian

  Atkins, Ronald (Preston N)

  Fowler, Gerald (The Wrekin)

  Millan, Rt Hon Bruce

  Atkinson, Norman

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

  Miller, Dr M. S. (E Kilbride)

  Barnett, Guy (Greenwich)

  Freeson, Rt Hon Reginald

  Mitchell, Austin

  Barnett, Rt Hon Joel (Heywood)

  George, Bruce

  Mitchell, R. C. (Soton, Itchen)

  Bates, Alf

  Gilbert, Rt Hon Dr John

  Molloy, William

  Bean, R. E.

  Ginsburg, David

  Moonman, Eric

  Beith, A. J.

  Golding, John

  Morris, Alfred (Wythenshawe)

  Benn, Rt Hon Anthony Wedgwood

  Gould, Bryan

  Morris, Rt Hon Charles R.

  Bennett, Andrew (Stockport N)

  Gourlay, Harry

  Morris, Rt Hon J. (Aberavon)

  Bidwell, Sydney

  Graham, Ted

  Moyle, Roland

  Bishop, E. S.

  Grant, John (Islington C)

  Mulley, Rt Hon Frederick

  Blenkinsop, Arthur

  Grimond, Rt Hon J.

  Murray, Rt Hon Ronald King

  Boardman, H.

  Grocott, Bruce

  Newens, Stanley

  Booth, Rt Hon Albert

  Hamilton, W. W. (Central Fife)

  Noble, Mike

  Boothroyd, Miss Betty

  Hardy, Peter

  Oakes, Gordon

  Bottomley, Rt Hon Arthur

  Harrison, Rt Hon Walter

  Ogden, Eric

  Boyden, James (Bish Auck)

  Hart, Rt Hon Judith

  O'Halloran, Michael

  Bradley, Tom

  Hattersley, Rt Hon Roy

  Orbach, Maurice

  Bray, Dr Jeremy

  Hayman, Mrs Helene

  Orme, Rt Hon Stanley

  Broughton, Sir Alfred

  Healey, Rt Hon Denis

  Ovenden, John

  Brown, Hugh D. (Provan)

  Heffer, Eric S.

  Padley, Walter

  Brown, Robert C. (Newcastle W)

  Hooson, Emlyn

  Palmer, Arthur

  Buchan, Norman

  Horam, John

  Park, George

  Butler, Mrs Joyce (Wood Green)

  Ho well, Rt Hon Denis (B'ham, Sm H)

  Parker, John

  Callaghan, Rt Hon J. (Cardiff SE)

  Howells, Geraint (Cardigan)

  Pavitt, Laurie

  Callaghan, Jim (Middleton & P)

  Hoyle, Doug (Nelson)

  Pendry, Tom

  Campbell, Ian

  Huckfield, Les

  Phipps, Dr Colin

  Canavan, Dennis

  Hughes, Rt Hon C. (Anglesey)

  Prescott, John

  Cant, R. B.

  Hughes, Mark (Durham)

  Price, C. (Lewisham W)

  Carmichael, Neil

  Hughes, Robert (Aberdeen N)

  Price, William (Rugby)

  Carter, Ray

  Hughes, Roy (Newport)

  Radice, Giles

  Carter-Jones, Lewis

  Rees, Rt Hon Merlyn (Leeds S)

  Cartwright, John

  Hunter, Adam

  Richardson, Miss Jo

  Clemitson, Ivor

  Irving, Rt Hon Sir A. (Edge Hill)

  Roberts, Albert (Normanton)

  Cocks, Rt Hon Michael (Bristol S)

  Irving, Rt Hon S. (Dartford)

  Roberts, Gwilym (Cannock)

  Cohen, Stanley

  Jackson, Miss Margaret (Lincoln)

  Robinson, Geoffrey

  Coleman, Donald

  Janner, Greville

  Roderick, Caerwyn

  Concannon, Rt Hon John

  Jay, Rt Hon Douglas

  Rodgers, George (Chorley)

  Conlan, Bernard

  Jeger, Mrs Lena

  Rodgers, Rt Hon William (Stockton)

  Cook, Robin F. (Edin C)

  Jenkins, Hugh (Putney)

  Rocker, J. W.

  Corbett, Robin

  John, Brynmor

  Roper, John

  Cowans, Harry

  Johnson, Walter (Derby S)

  Rose, Paul B.

  Cox, Thomas (Tooting)

  Jones, Alec (Rhondda)

  Ross, Rt Hon W. (Kilmarnock)

  Craigen, Jim (Maryhill)

  Jones, Barry (East Flint)

  Rowlands, Ted

  Crawshaw, Richard

  Jones, Dan (Burnley)

  Ryman, John

  Cronin, John

  Judd, Frank

  Sandelson, Neville

  Crowther, Stan (Rotherham)

  Kaufman, Gerald

  Sedgemore, Brian

  Cryer, Bob

  Kelley, Richard

  Selby, Harry

  Cunningham, G. (Islington S)

  Kerr, Russell

  Sever, John

  Cunningham, Dr J. (Whiteh)

  Kilroy-Silk, Robert

  Shaw, Arnold (Ilford South)

  Dalyell, Tam

  Kinnock, Neil

  Sheldon, Rt Hon Robert

  Davidson, Arthur

  Lambie, David

  Shore, Rt Hon Peter

  Davies, Bryan (Enfield N)

  Lamborn, Harry

  Silkin, Rt Hon John (Deptford)

  Davies, Rt Hon Denzil

  Latham, Arthur (Paddington)

  Silkin, Rt Hon S. C. (Dulwich)

  Davies, Ifor (Gower)

  Leadbitter, Ted

  Sillars, James

  Davis, Clinton (Hackney C)

  Lestor, Miss Joan (Eton & Slough)

  Silverman, Julius

  Deakins, Eric

  Lever, Rt Hon Harold

  Skinner, Dennis

  Dell, Rt Hon Edmund

  Lewis, Ron (Carlisle)

  Smith, John (N Lanarkshire)

  Dempsey, James

  Litterick, Tom

  Snape, Peter

  Dewar, Donald

  Lomas, Kenneth

  Spearing, Nigel

  Doig, Peter

  Loyden, Eddie

  Spriggs, Leslie

  Dormand, J. D.

  Luard, Evan

  Stallard, A. W.

  Douglas-Mann, Bruce

  Lyon, Alexander (York)

  Steel, Rt Hon David

  Duffy, A. E. P.

  Lyons, Edward (Bradford W)

  Stewart, Rt Hon M. (Fulham)

  Dunn, James A.

  Mabon, Rt Hon Dr J. Dickson

  Stoddart, David

  Dunnett, Jack

  McCartney, Hugh

  Stott, Roger

  Dunwoody, Mrs Gwyneth

  McDonald, Dr Oonagh

  Strang, Gavin

  Eadie, Alex

  McElhone, Frank

  Strauss, Rt Hon G. R.

  Edge, Geoff

  MacFarquhar, Roderick

  Summerskill, Hon Dr Shirley

  Ellis, John (Brigg & Scun)

  McGuire, Michael (Ince)

  Swain, Thomas

  English, Michael

  MacKenzie, Gregor

  Thomas, Jeffrey (Abertillery)

  Evans, Fred (Caerphilly)

  Maclennan, Robert

  Thomas, Mike (Newcastle E)

  Evans, Ioan (Aberdare)

  McMillan, Tom (Glasgow C)

  Thomas, Ron (Bristol NW)

  Evans, John (Newton)

  Madden, Max

  Thorne, Stan (Preston South)

  Ewing, Harry (Stirling)

  Magee, Bryan

  Thorpe, Rt Hon Jeremy (N Devon)

  Faulds, Andrew

  Mahon, Simon

  Tierney, Sydney

  Fernyhough, Rt Hon E.

  Mallalieu, J. P. W.

  Tilley, John (Lambeth, Central)

  1256

  1257

  Tinn, James

  Weitzman, David

  Wilson, William (Coventry SE)

  Tomlinson, John

  Wellbeloved, James

  Wise, Mrs Audrey

  Tomney, Frank

  White, Frank R. (Bury)

  Woodall, Alec

  Torney, Tom

  White, James (Pollok)

  Woof, Robert

  Tuck, Raphael

  Whitehead, Phillip

  Wrigglesworth, Ian

  Urwin, T. W.

  Whitlock, William

  Young, David (Bolton E)

  Varley, Rt Hon Eric G.

  Willey, Rt Hon Frederick

  Walker, Harold (Doncaster)

  Williams, Alan (Swansea W)

  TELLERS FOR THE NOES:

  Walker, Terry (Kingswood)

  Williams, Alan Lee (Hornch'ch)

  Mr. James Hamilton and

  Watkins, David

  Williams, Rt Hon Shirley (Hertford)

  Mr. Joseph Harper.

  Watkinson, John

  Williams, Sir Thomas (Warrington)

  Weetch, Ken

  Wilson, Rt Hon Sir Harold (Huyton)

  Question accordingly negatived.

  INDUSTRY (FINANCIAL ASSISTANCE)
  10.17 p.m.
  The Minister of State, Department of Industry (Mr. Alan Williams): I beg to move,
  That the draft Financial Assistance for Industry (Increase of Limit) Order 1978, which was laid before this House on 28th April, be approved.
  This order will have the effect of increasing the limit under Section 8 of the Industry Act from the present figure of £850 million to £1,100 million. Hon. Members will recollect that under that Act the initial tranche of grant was raised to £600 million, with the possibility of four further grants each of £250 million. On 27th June last year the House approved the first such tranche. Therefore, since June we have had £850 million available.
  I wish first to repeat the explanation which the House has had before, since this is relevant to the assessment of the need for this order. In arriving at our aggregate under the Act we take into account not only the sums paid but liabilities such as guarantees which have been entered into and which may become future calls on the finance available. But we deduct from this the payment of loans or principal sums in relation to guarantees. It follows that since the guarantees are merely possible calls on resources and since loans and grants are phased over the period of the development of the project, commitments would at any time normally run substantially ahead of and above the level of actual payments. Payments under the legislation at the moment amount to £330 million but commitments amount to £775 million. Therefore, at this stage we have £75 million of the current tranche available. I shall explain to the House why the extra amount is needed.
  Of the commitments that have already been entered into about half relate to individual companies and nearly £390 million is attributed to various Section 8 schemes, namely, the off-shore scheme, accelerated projects, selective investment and the 15 sectoral industry schemes. I think that I owe it to the House to explain what has happened in terms of commitments
  1260
  within the last 11 months since the approval was given to the last tranche. The new commitments during this period amount to £275 million. Of this, £150 million went towards Leyland's capital reconstruction, which was approved by the House without a Division. Under the sectoral schemes, £90 million has been further committed, £20 million under the selective investment scheme and £15 million on the offshore investment scheme.
  I apologise for the fact that my speech will be fairly statistical. When the matter was previously debated the House showed an almost masochistic wish for facts and statistics. I shall impose the suffering at this stage and trust that we shall get down to the political hurly-burly later.
  As hon. Members will be aware, the sectoral schemes are intended, first, to deal with historic weaknesses in certain sectors of industry, such as textiles and footwear, emergent weaknesses such as those appearing in instrumentation and automation, and in the electronics sector, when we see what is happening in competitor nations overseas. The sectoral schemes are also intended to meet the requirements of the EEC and to provide adjustment finance. This is the case with the poultry scheme and with the red meat scheme, both of which are to help to meet the hygiene standards which have to be conformed to under the EEC regulations. The sectoral schemes are also intended to encourage the use of indigenous resources. This is the thesis behind the paper and board scheme, which is intended to encourage the use of domestic waste paper.
  Under the sectoral schemes, £141 million has been offered to companies for 1,300 projects and these projects are worth £675 million. So virtually five times the project value has arisen from the offer that has been made by the Government. We still have over 1,000 applications in consideration under the various sectoral headings, and seven of these schemes remain open.
  I shall give the House an up-to-date report on a few of the schemes. I shall not go through every one of them. The ferrous foundry industry, as hon. Members from industrial constituencies will know, was grossly under-capitalised and had very out-of-date equipment yet played

  1261
  a key role in supplying components to other industries which are essential if we are to attain our marketing objectives under the industrial strategy. By the completion £78 million was offered under the ferrous foundries scheme, generating £360 million worth of investment, which will lead to the modernisation of 350 foundries in this country. This has been one of the most successful of all the schemes and one of the most important in its strategic role in relation to other industries to which it is a feeder industry.
  Similarly, after a disappointingly slow start, the machine tool industry scheme has become another major success. A total of £16 million has been committed so far in support of 150 projects which will give rise to £80 million worth of investment in the industry. It is particularly encouraging that one-third of these projects are in support of new products. I am sure that this will be encouraging to hon. Members who have been aware of the shortcomings of our machine tool industry in bringing on new products over decades.
  We still have a further 230 schemes under consideration in the machine tool industry and the result is that the industry now has a higher projected investment for the current year than it has had for any of the last eight years. That is a notable achievement in a sector where we would all wish to see further investment.
  Mr. Kenneth Clarke: I had hoped that the Minister had finished touching on one or two of the sectoral schemes, but was still anxious to give us some factual information. Could he take the opportunity to correct the impression he gave at Question Time today, that, as a result of the various schemes he is describing, the level of investment in industry in this country is higher now than it was under the Conservative Government?
  The Minister obviously had in mind the trough year of 1973, but would he not agree that in 1977, the last full year, gross fixed investment in manufacturing industry in this country was substantially below the levels of 1974, 1971 and 1970, so that the schemes of investment assistance that he is outlining have not had a very encouraging effect upon the level of investment in industry as a whole?
  Mr. Williams: The hon. Gentleman seems completely to misunderstand the situation in relation to investment. In 1970, when the then Chancellor made, unfortunately, one of his last speeches from this Dispatch Box, almost the first announcement of the incoming Conservative Administration was that investment grants would be abandoned. That decision could not have come at a worse time. It looked as though investment might have been reaching a plateau anyway and the switch to an allowance system, which was dependent on high profits, when the country was faced with the possibility of a downturn in investment, was an incredible error of judgment.
  Investment under the Conservative Government never equalled the level it attained, in real terms, in 1970. It slipped in 1971 and 1972 and was much the same in 1973. Far from my having misled the House, I reiterate what I said earlier. In 1972 and 1973, when the then Chancellor of the Exchequer had indulged in a catastrophic policy of taking off all credit controls, which drew in all the imports and destroyed our balance of payments and when the Government were going for growth and world economy was buoyant, the level of investment in those last two full years of the Conservative Government was lower than the level of last year. I accept that it was only marginally lower, but it was lower in a context of buoyant world trade, compared with last year's context of the worst recession since the 1930s. Whatever the hon. Member for Rushcliffe (Mr. Clarke) does, he should not lecture us on investment, because our record is far better than that of the Conservatives.
  I apologise for diverging somewhat, and I now return to the order before us. Seven of the schemes are still open, and certain of them are due to conclude—I say "due to", but there are always possibilities that some of them may need to be extended—in June and July of this year.
  We are pleased that the paper and board scheme, which is one of the schemes still open, to ensure use of indigenous waste materials, has already attracted considerable support, and £12 million has been offered under it. Forty projects are under support, and the import saving from projects already in hand will amount to £100 million a year. Regardless of one's view—I know their

  1263
  views on industry schemes—I should have thought that the Opposition would welcome the contribution which is being made by this scheme to the positive side of our balance of payments.
  The recent schemes—instrumentation and automation, drop forging and footwear—have all made encouraging starts. I am sure that the House will accept that we are at an early stage in the sense that what tends to happen is that it takes companies several months to evaluate the possibilities for themselves under a scheme, they then submit their proposals, and we usually get a surge of proposals towards the closing date of a scheme.
  Mr. Stephen Ross: Do the Government intend to lower the limit of £500,000 which, I think, applies to Section 8 schemes? I have in mind an electronics components firm in my constituency where I saw only today a very worthwhile export project. Manufacture can be done in America and the company in this country would merely get royalties, but it would rather manufacture here. But the scheme is worth only £70,000 to £100,000.
  Mr. Williams: If the hon. Gentleman would care to telephone my office tomorrow morning with the details, I shall look at it, because the £500,000 applies to only one of the schemes in operation. The threshold in each sectoral scheme is pitched at a level which is relevant to the individual industry sector. For example, in the case of clothing—I am speaking from memory here—I think that it is down around the £10,000 mark, because one is dealing with very small firms which will be putting forward relatively small projects.
  A further point which is not always realised is that companies do not have to put forward a single project to meet the threshold. They can roll together a programme for the next two or three years and, as long as that meets the threshold level, they will qualify for support. But I shall gladly look at the proposition if the hon. Gentleman will telephone my office.
  Mr. Max Madden: My right hon. Friend mentioned the clothing scheme. As he rightly said, the original scheme made a most disappointing start and the threshold was lowered. Can he
  1264
  say what the response to the scheme is now, because it has been in operation for quite some time?
  Mr. Williams: I know of the interest in my hon. Friend's constituency in just this scheme, and I can tell him that 425 projects have now been approved under this sector scheme. The Government have offered £7½ million, giving rise to £31 million of investment in a sector of the industry which desperately needed extra investment. There are 550 more projects under consideration, so that virtually 1,000 companies stand to benefit under this scheme.
  I am sure that that will be welcome news to my hon. Friend, and welcome to the House also, perhaps, will be the fact that many of the projects are from small firms for consultancy support. This is a facility which has not in the past always been available to them, and our assessment of those projects currently approved is that there will be not only substantial new investment in this section but higher productivity.
  If I may revert for a moment to the scheme to which the hon. Member for Isle of Wight (Mr. Ross) referred, there are several schemes within the electronics sector, and the threshold of those would be way below the £500,000, but the scheme which has the threshold of £500,000 is the selective investment scheme. This is for major projects which will have significant economic benefit for the country, and these projects have to be on a different time scale or on a different investment scale or of a different nature from what they would have been had the scheme not been in operation.
  The allocation has had to be increased from £100 million to £125 million to meet the prospective demand. Already £34 million has been approved under the scheme, including the £20 million in the past 11 months to which I referred, and 66 projects have been supported which will give rise to £340 million-worth of investment.
  Therefore, although there is still much more to come, the scheme is already a major generator of new nationally important investment. Indeed, there are another 154 schemes under consideration and if they are all approved—I would not suggest that they will; a substantial number are turned down because they may

  1265
  not meet the criterion of additionality—they will give rise to another £1,600 million worth of investment. With that has been approved and what is under consideration, there is £2,000 million-worth of investment projects arising from the scheme and more projects are expected to appear in the future, because we are not yet at the closing date. Those already approved will have a positive balance of payments benefit of £200 million a year.
  I turn finally, because I know that this matter is of interest and concern to hon. Members on both sides of the House, to the employment and investment benefits of Section 8 schemes. I must emphasise that, as I pointed out at Question Time, they are not in themselves linked to job creation. Job creation is incidental rather than the prime purpose, which is to achieve higher efficiency and higher productivity, and in some sectors and on some individual investments this may actually work against employment levels.
  It is important to stress that in applying these schemes and in making firms more competitive and improving their productivity we therefore secure the jobs of those who remain in the industry. Far from having a negative effect on total employment, the schemes have given rise, though they are not specifically intended to do so, to 22,000 prospective new jobs. They will also preserve or give rise to jobs in those supplying industries from which the firms will order their plant, equipment and buildings. The departmental estimate is that 170,000 man-years of work will arise from the orders that will be placed with suppliers in the United Kingdom to meet the needs of those receiving the grants under the scheme.
  Mr. Giles Shaw: Will the right hon. Gentleman comment on how far he is satisfied that, with schemes under the section proceeding, his colleagues in the Department of Trade are seized of the important consequences? Does he not agree that in many instances, certainly in wool textiles, for example, industry schemes have been enacted but problems have arisen in trading arrangements which may make the investment abortive?
  Mr. Williams: I am sure that the hon. Gentleman will have noted with pleasure the success of the Governments of the Common Market in the recently agreed Multi-Fibre Arrangement. He will know that the industry, both on the employers'
  1266
  and the trade union side, has gone out of its way publicly to express thanks and congratulations to the Government and to the EEC negotiators for the form of that agreement. They feel that the MFA as now negotiated gives them the breathing space in which they can begin to exploit the competitive edge which their investments under the wool textile scheme, mark I and mark II, have given. Therefore, I think that the hon. Gentleman can be assured that we are well apprised of these needs and have already acted upon them, particularly at the request of a sector working party under the industrial strategy, which for some reason is so disparaged by Conservative Members.
  I re-emphasise the point that, despite the world recession, these schemes have given rise to £1½ billion worth of investment. Yet Conservative Members, purporting to care about investment, clearly intend to vote against this legislation tonight. This level of investment means that, for example, last year, when we deduct iron and steel, investment in the United Kingdom, in the depths of international depression, rose by 14 per cent. Manufacturing investment is expected to rise by between 10 per cent. and 13 per cent. during the current year.
  It seems that the Opposition are absolutely intent on repeating the follies of 1970. I listen to the comments of the Opposition Front Bench spokesmen and it seems that, like us, they do not wish to support firms which cannot be viable. On the other hand, however, they say that if a firm is viable they do not want to give it support. I find it difficult to understand the logic of their analysis. Their policy is never fully spelled out.
  Industrialists in this country and abroad frequently ask me what on earth is the policy of the alternative Government and I have to tell them that I have no idea. I only know that if the thinking which is expressed from the Opposition Front Bench were carried through, the Ford development would now be taking place in Southern Ireland and not in this country.
  Under the legislation we have commitments of £775 million, which leaves only £75 million under the present tranche. Potential commitments under the existing selective investment scheme and the sectoral schemes—that is, taking account of those applications which are in, but

  1267
  not yet fully processed—amount to about £225 million. We are likely to be £150 million short of requirements, even assuming that there is no further demand on the off-shore supply scheme—and I would have thought that it is highly likely that there will be some—and assuming that there are no extensions of these schemes or that thereis no requirement for funds outside purposes such as, for example, substantial rescue cases.
  I hope that the House will appreciate that we are going through a ritualistic process involving the Conservatives in which they blindly seek to destroy one of the most successful instruments of policy, an instrument which has worked despite the efforts of those who introduced it. The Industry Act was introduced by a Conservative Government. Having introduced it, the Conservatives have the impudence to boast from their Front Bench that by the time they left office they had spent only £10 million under the Section 8 powers. That, perhaps, explains why investment collapsed under the Conservative Administration.
  10.43 p.m.
  Mr. Kenneth Clarke: I agree with the Minister that the Government are spending money under Section 8 of the Industry Act so quickly that we are in danger of getting into an annual ritual with these orders, with the Government coming back for more money. Although the Minister has updated the contents of his speech, the style remains the same in that there is a series of statistical claims updated for the various sector schemes which the Government are sponsoring under Section 8.
  The Minister then concluded with the same peroration as last year by affecting to express disbelief at our voting against the order. He says that somehow we are seeking to damage the level of investment of successful industry. The Minister knows that that is not the case. He knows why we are against this order. We oppose it because of the amount of taxpayers' money involved, which is being fed directly into industry. We are in no way opposed, at all times and in all circumstances on principle, to the application of public funds for investment in industry. We feel, however, that the need for grants of taxpayers' money to industry of any kind will arise only in
  1268
  rare and special cases. We believe that if the economic climate were put right, the need would dwindle almost to vanishing point, because the market would satisfy the needs of successful industry.
  We are certainly opposed—[Interruption.] With respect, the Under-Secretary of State does not know his figures as well as the Minister does. He does not know that the Minister consistently leaves out the year 1974, when the Conservatives left office. When the present Government get back to the levels of investment achieved during the year we left office, he will be more entitled to sit there and laugh.
  In our opinion it is right to oppose the profligate pouring of taxpayers' money into sectors of industry chosen by Ministers and civil servants to the tune of £250 million each year. That is what this order represents. We believe that what industry needs above all else is not ever-greater expenditure on grants of this kind, but a reduction in its tax burden. That is the main way to stimulate industry and stimulate investment in industry. Unnecessary spending and borrowing by Government, even on Industry Act aids under the so-called industrial strategy, actually prevent that stimulus.
  This year we have additional reasons for voting against the order. There has been a change of policy since last year, which was not even remotely touched on by the Minister. We are particularly hostile to the way in which the Government propose to disburse these Industry Act funds from now on, because grants to projects which otherwise would qualify under all the criteria laid down in the 1972 Act are now being refused where applicants will not accept the pay policy conditions which the Government lay down. So the amount the House is being asked to approve of this year will not only be expended in large quantities under Section 8 but will be disbursed on conditions which are quite possibly illegal and which are certainly, in our view, arbitrary and unfair and an improper use of Industry Act powers.
  I begin with the scale of Government expenditure, but I shall not take too long because otherwise the Front Benches will have taken too much time in the debate and I shall have fallen into the trap that the Minister fell into—that of repeating last year's speech.
  Mr. Leslie Spriggs (St. Helens)rose—
  Mr. Clarke: I shall not give way to the hon. Gentleman now, but a bit later on. This debate lasts only one and a half hours and the Minister took 25 minutes.
  The Government have transformed our 1972 Act completely. We have no regrets about the authorship of the Act. We have no intention of seeking to repeal the Section 8 powers. But the use of these powers has been quite transformed by the Government. As the Minister has reminded us, by 1974 we had expended £6·3 million only under the powers that we had taken under Section 8, although there were, of course, commitments in addition to that.
  Since that time the Act has been used as a way of pouring totally different sums of money into industry by way of direct grant. The Industry (Amendment) Act 1976 changed the overall financial limits of our 1972 Act from a total contemplated of £559 million to one of £1,900 million, and the powers that the Government took were for £600 million straight away, followed by four increases of up to £250 million each.
  This is the second successive year that application has been made to the House for £250 million. So the level of expenditure involved is beyond anything contemplated by the Conservative Government, and beyond anything contemplated by the House, when the 1972 Act was passed. The Government say that it is all very valuable and necessary, and the Minister justifies this expenditure by producing dull but worthy lists of the expenditure under various projects which he hopes are calculated to appeal to the constituency interests of such Members as are in the Chamber.
  We face up, of course, to the prospects of what would happen to investment if these grants were substantially reduced and the scale of expenditure were taken back to where it was contemplated. It remains our firm belief, when the Minister is talking about worthwhile investment in industry, that the overwhelming majority of the projects he has described would go ahead with financial aid from the market. The fact that the change in expenditure under Section 8 has produced no significant difference in the overall level of investment in manufacturing industry, which remains below that of
  1270
  1970–71 and 1974, supports that case. We believe that there are very few projects with good commercial prospects of success that cannot raise finance in the market.
  Whenever I meet industrialists who are in companies which obtain grants under Section 8 of the Industry Act, I ask them in confidence what the future would have been for the project for which they received assistance had they not received the Government grant. That is a perfectly legitimate question for an Opposition spokesman. So far I have not met a solitary industrialist who has not told me that his project would have gone ahead in any event, even without the Government investment.
  Mr. J. W. Rooker: Who are they? Name them.
  Mr. Clarke: Some may have deceived me, of course, and I quite accept that the rules of the scheme are supposed to be—
  Mr. Alan Williams: The hon. Member has made a very serious allegation. He is alleging dishonesty with public funds by an apparently large number of firms which he has consulted. He has a responsibility to the taxpayer. Will he elaborate in greater detail how many such companies have indicated this to him out of the hundreds that have received support under the scheme? Also, what does he intend to do to ensure that abuses of the type that he alleges—of course we have no way of checking them, because he will not give us the names—are dealt with appropriately? Otherwise, he surely is conspiring in an illegal act.
  Mr. Clarke: If the Government would follow their own criteria for assistance under the Industry Act with any accuracy, there might be more justification for making a request of that kind. The Minister is using his own discretion in an arbitrary way, not authorised by Parliament at all on pay policy conditions. We have consistently made this point throughout, and we believe that if he made a serious investigation into the investment policies of industry, the Minister would discover that scarcely a project exists that would not have gone ahead anyway and that is conditioned solely by the grant.
  I shall try to justify what I have said by asking hon. Members opposite to contemplate the basis upon which they think

  1271
  investment decisions are made by investors in industry. There is not an investor alive—or if there is, he will not make much money—who makes an investment because a Government grant is available for that particular project.
  The idea that investors see the existence of the ferrous foundry scheme and think that because of that scheme they will now look for ways of investing in the modernisation of their ferrous foundry plant is a Mickey Mouse concept of how investment is made. The position is that an investor will not invest, whatever party is in office and whatever is being done through the Department of Industry, unless he first assesses his market and can see that there is a proper market for his product.
  He then assesses the return on his capital and looks at the likely return to his investors in relation to the risk. He sees whether he will have satisfactory industrial relations in his firm with the new scheme that he is undertaking. He sees what improvements in his productivity he might achieve and the competitive position of his company. He looks at the economic and political climate, because any investor needs a stable and encouraging economic and political environment for investment.
  Those are the criteria that any sensible investor applies to a project in his company. It is only if the answer on all those grounds is "Yes", and it is a wise decision to make the investment, that he then looks around to see whether there is any Government grant available which he can claim as a contribution towards his investment. That goes on on a considerable scale at present.
  I accept that the existence of grants of one kind or another may on occasions influence the timing of an investment project and may influence the location of a project. But that is more likely to happen under Section 1 or Section 7 of the Industry Act on regional policy, not Section 8, which is all-embracing and national.
  That is the essence of the process, and it means that the figures produced by the Minister, the so-called millions of pounds of investment provoked by his grants, the number of jobs created and the figures he puts upon them, are totally myth-making.
  1272
  It is investment that would have gone on anyway. They are jobs that would have been created anyway.
  Some industrialists selected by the right hon. Gentleman's Department and his civil servants are getting a contribution from the taxpayer towards an investment that would otherwise have been financed solely from the market. If a few investments would not have gone ahead in those circumstances, we beg leave to doubt whether they are reasonable investments. If that is not so, it means that there has to be a Section 8 scheme before such investment will go ahead.
  Mr. Rooker: I only want to help the hon. Gentleman. It is within the knowledge of the House that from time to time the Front Benches correspond in private. That is supposed to be kept confidential. That is how things work in this place. I invite the hon. Gentleman to write to my right hon. Friend in confidence naming the firms that he has alleged have lied and cheated to get their hands on public money.
  Mr. Clarke: The Minister in confidence, without telling me or the House, refuses grants to companies that will not abide by his pay policy conditions. They are not even allowed to know the conditions that apply. They are asked to sign blank undertakings before they get grants. There is no kind of confidential correspondence of the sort to which the hon. Gentleman refers in which I propose to indulge.
  If the point of the Labour attacks is to suggest that there is some investment which would not go ahead but for the sectoral schemes under Section 8, I doubt the wisdom of that investment. Investment in itself is not an end in itself. It is not the sheer quantity of investment in industry that matters but the use of that investment in improving the position of industry.
  The Government's emphasis—it was brought out again in the Minister's speech with his list of figures—on the quantity of investment regardless of the return on it has reached absurd lengths. Investment in projects that are not economically viable will not benefit the economy in the long run.
  Most of the investment projects we are considering tonight are economically viable and, we hope, desirable. We need investment that will increase efficiency,

  1273
  productivity and the competitiveness of our industry. That is the sort of investment that we need. However, we cannot believe that there are many industrialists who cannot finance that sort of investment from the market.
  Why are we so anxious to vote against the order and thereby reduce public expenditure, to reduce to some extent—the extent of £250 million is not to be sneezed at—the Government's borrowing requirement and, I hope, to pave the way for reducing taxation? We are aiming to achieve that effect so as to regenerate British industry and to fulfil the purposes that the Minister has set out.
  Sometimes a false choice is set out by Labour Members from the Prime Minister downwards, and occasionally even the Press outside, about the alternative facing Britain. The alternative is most often posed when we come to consider the use that we should make of North Sea oil revenue. The choice is meant to be whether we use the revenues to put them into industry or indulge in tax cuts. Those who pose the alternative in that way make it sound as though tax cuts will lead to some guilty squandering of the money that is available and that putting money directly into industry is a more worthwhile use to make of it.
  We do not see the latter approach as an alternative in that sense if the purpose is to use what resources we have for the benefit of industry. Investment in industry and tax cuts are not alternatives in our opinion. Investment in industry will come if the climate for investment is created that is needed, and reducing taxation is one of the greatest single factors that will have to be achieved if we are to produce a climate for investment. If the climate is made right, the private investment will come forward, as it was when the Labour Government took over in 1974. The money poured directly into investment is inimical to the main purpose that the Government profess in so far as it adds to their borrowings, public expenditure and, thereby, taxation.
  My final point may commend itself to Labour Members and make them worry about voting for the order. The additional feature this year is that large sums are to be disbursed in an extremely arbitrary and unfair fashion because pay policy conditions are being attached to
  1274
  Industry Act grants. This was outside Parliament's contemplation when the Industry Act was passed. I can imagine the outcry if in 1972, the then Conservative Government had stated to the then Labour Opposition that it was proposed to use the discretion set out in the 1972 Act as part of a instrument of pay policy—and a covert instrument at that.
  I am not concerned tonight with the merits of pay policy. I do not argue that the Government should not take a view on pay. But I argue strongly that the Industry Act was never designed for this purpose. A pay policy backed by secret sanctions is wholly undesirable and will not serve its purpose.
  Industrialists who apply for assistance under the 1972 Act are supposed to turn to the criteria for assistance under that Act published in December 1975, which is available to all hon. Members. That is a comprehensive list of criteria for assistance to industry which has not been amended. It contains not a word nor hint of any use of ministerial discretion over and above that of assessing viability and the worthwhile nature of the proposed investment in order to enforce whatever might be the pay policy at that time.
  Only gradually, over the past few months, have we extracted from the Government any acknowledgement of the existence of pay policy conditions when making grants to industry under Section 8. The Government began by saying that compliance with pay policy would be a factor in exercising their discretion. By that they were understood to mean that where a company had not complied with existing pay policies and was already in dispute with the Department of Employment, that would be a factor in deciding whether to make a grant. But the Government have gone far beyond that. They have never declared their policy to the House.
  Now, when offers of grants under the Industry Act are being made, it is policy to attach conditions. Those conditions do not refer to compliance with past or existing pay policies. Those conditions seek an understaking that the applicant will comply with such future pay guidelines as any Government might issue. But the nature of those guidelines is of course unknown to the applicant when he makes his application.

  1275
  Conditions are being attached that not only will the applicant comply, but he will take such steps as the Government direct to ensure that any sub-contractors are also brought into line with Government pay policies in the future. Those who will benefit from the £250 million for which the Government are asking this year should know that they will be expected to give a blanket understanding that they will adhere to any future pay policy. Therefore, they will have to launch into a project knowing that the grant might be stopped at any stage because the Secretary of State has decided that they are no longer complying with the pay policy. Unknown conditions are being applied to each grant.
  I should have thought that hon. Members who express such concern for the clothing industry would be interested to know what conditions affecting the pay of their constituents are being attached to the grants for which they are so grateful. They might ask about the form of these conditions. They might think that there is a set form which someone can see. But there is no such form. The form of conditions is open to negotiation in each case.
  Negotiations are going on as a result of an application by Schreibers under Section 7 of the Industry Act. In reply to a Question which I tabled the Under-Secretary of State said of Industry Act grants
  "The precise terms of individual offers are negotiated in each case with the applicant company and are not disclosed."—[Official Report, 18th May 1978; Vol. 950, c. 268.]
  The position of an applicant company under this policy depends entirely upon its clout and negotiating position with the Government. Sir Arnold Weinstock, through Schreibers, which is owned by GEC, was prepared to argue about the conditions, and negotiations are proceeding. That firm made a public fuss about the conditions that it was being asked to accept. But for every giant company like GEC that is prepared to do battle there are countless small firms that will not because they fear reprisals from the Government, who are making use of their discretionary powers in such an arbitrary way, and because they may wish to apply for grant, public contracts or other Government largesse.
  Mr. Kenneth Warren: Is my hon. Friend aware that the situation is far worse than he has described? American or any other foreign companies are in no way subject to these guidelines, whether they are sub-contractors or direct contractors to the Government.
  Mr. Clarke: I am sure that the situation could be far worse than I described and even far worse than my hon. Friend the Member for Hastings (Mr. Warren) knows, but I am certain that the Minister will not tell us very much about it. Large sums are now being disbursed subject to these conditions. Most firms are signing on the dotted line, but the precise nature of the conditions is not being dislcosed to anyone. That is a grossly arbitrary way of operating the distribution of largesse under the Industry Act.
  This sums up for us the dangers of a Government taking upon themselves the disbursement of considerable sums under the 1972 Act on a scale that was never contemplated. They realise that it provides for their machine a power and supervision over the practices of companies which they would otherwise lack. Not only are they disbursing money lavishly, about which we have complained in the past, but they are disbursing it unfairly and subject to secret conditions.
  In those circumstances the burden of my case about excessive and unnecessary expenditure to stimulate investment remains the same as last year. But, unlike the Minister, I have a different peroration, because in the last year he has made his policy worse. This year we certainly have no intention of allowing £250 million of taxpayers' money to be spent not only unnecessarily but in a disgraceful manner by Ministers who are misusing their legal powers under the Act.
  11.7 p.m.
  Mr. Douglas Crawford: The Opposition Front Bench said it would take no more time than the Minister. The Minister took 24 minutes, and the hon. Member for Rushcliffe (Mr. Clarke) took 24 minutes.
  There are many misapprehensions about what creates new jobs, which are what we are discussing tonight. There was a survey in the late 1960s by the

  1277
  Scottish Council (Development and Industry) which laid out criteria for the creation and attraction of new jobs in Scotland. These were the availability of skilled labour, amenities, ease of transportation, telecommunications, grants and a thing called a common language. I can assure hon. Members that we certainly speak the common language in Scotland.
  I agree with the hon. Member for Rushcliffe that grants are very low in the list of priorities. Therefore, the availability of money does not create—I emphasise that word—new jobs. It is important that the Government, the development agencies and, perhaps, the NEB realise that. It is important to realise, too, that the days of footloose industry are over. The Honeywells, the Burroughs, the NCRs, the General Motors and the IBMs will not come to the South-East or the North-West of England, to Scotland, Wales or Northern Ireland any more.
  The important lesson may be learnt from the Republic of Ireland, which has discovered that industrial expansion and the creation of new jobs come from existing industries, whether they be indigenous or whether they were attracted during the 1950s and 1960s from overseas.
  The availability of State money, however, may—this is why my party will vote with the Government tonight—keep existing jobs. In the short term, the job creation programme has helped to keep existing jobs.
  On a second point—this refers to the Conservative Party—the existence of regional employment premium has helped to keep existing jobs, because industrialists in Scotland—I can speak only for Scotland—regarded REP as part of their current cash flow. That was very important. Perhaps the Government Front Bench will tell us tonight whether they have any alternative to REP to offer in development areas such as Scotland, and the North-East, the North-West and the West of England.
  In Scotland, money does not create jobs, but it helps to keep jobs. I speak for a country called Scotland. I am delighted with the laughter of hon. Members behind me. The country for which I happen to be speaking has a higher unemployment percentage than any other
  1278
  country within the British Isles, apart from Northern Ireland—if Northern Ireland is a country.
  Mr. Madden: Did the hon. Member hear a BBC "World at One" programme on Sunday, in which a number of leading Scottish industrialists said that a separate Scotland would be a serious deterrent to new investment and the creation of jobs in Scotland?
  Mr. Crawford: I am delighted to hear the hon. Member speak on the side of senior Scottish industrialist members of the CBI. I am very glad that the hon. Member is now taking the side of the CBI.
  Mr. Robert Adley: Answer the point.
  Mr. Crawford: I am answering the hon. Member for Sowerby (Mr. Madden). Once again, I am glad to have the unanimity of the Conservative and Labour Parties on Scottish self-government.
  If the hon. Member for Sowerby and the House will let me proceed, I should like to say that I agree with the hon. Member on this point. Scotland has an unemployment rate of between 8 per cent. and 9 per cent.—200,000 people. It is larger than the unemployment percentage in England. I believe that it is very important for Scottish investment and employment that the Government be allowed the powers that they are seeking.
  However, only with self-government shall we be able to create the long-lasting and rewarding new jobs that we need. In the short term, for Scotland—I wish the hon. Member for Glasgow, Cathcart (Mr. Taylor) would hold his horses for a minute, because, although he does not appreciate it, my party is in favour of the Government on this issue. If the hon. Member wishes to say how the Conservatives are in favour of jobs in Chrysler and British Leyland, I should be delighted to hear it.
  Mr. Teddy Taylor: The hon. Member must know that when the Conservatives are in power the outlook for jobs in Scotland is always better.
  Mr. Crawford: In that case, why did the Conservatives vote against additional money for Chrysler? If that had not gone

  1279
  through, there would have been no jobs in Linwood tonight.
  Mr. Taylor rose—
  Mr. Crawford: No, it is too late, It is for the sake of existing jobs, not for new jobs—
  Mr. Taylor rose—
  Mr. Crawford: No, I am sorry. I like the hon. Member very much, but he has only just come in.
  It is for the sake of existing Scottish jobs that my party will be voting for the Government motion tonight.
  Mr. Adley: Margo has got the message.
  Mr. Crawford: She will soon be with the hon. Member.
  In his 1974 election manifesto, the hon. Member for Cathcart actually wished for a Scottish Assembly with economic powers.
  We can afford the extension of the powers of the Secretary of State for Industry in the Scottish context. As I say, these powers would be even greater in the context of a Scottish Government.
  11.14 p.m.
  Mr. J. W. Rooker: I shall speak briefly, simply because there is not a great deal of time left. I should like to make two points.
  The first concerns the issue of the conditions attached to this money. There are not enough conditions attached to it. My right hon. and hon. Friends the Ministers will know that. I should like to see attached to this money the condition that it could go only to factories that carry out good safety policies and factories that employ only competent management and not to some of the old boys from public schools who run many sectors of manufacturing industry. I should like the Government to use the money as an impetus for changing these aspects of industry. There would be no complaint from me if there were a problem in a factory, even if it were in my constituency in the West Midlands, because the pressure on the Government using that policy would bring about a change in the companies concerned.
  Mr. Robert Kilroy-Silk: Does my hon. Friend also accept that a
  1280
  very good condition, which the hon. Member for Rushcliffe (Mr. Clarke) did not mention, was that the amount of money going to each company should be made public? He is very concerned about the so-called "secret" clauses which companies have to sign which are not publicly known and debatable, but he makes no complaint at all about the amount of taxpayers' money going to each company and the companies themselves refusing—though the Government do not—to make those sums publicly known.
  Mr. Kenneth Clarke: It is known.
  Mr. Rooker: I am grateful to my hon. Friend. The hon. Member for Rushcliffe (Mr. Clarke) says that it is known. But it never was when the Conservatives were in power. It is only since this Government have been in power that details of assistance to industry have been published if it is above £25,000—which is a small sum compared with these figures. The Opposition kept secret all the money they gave to industry, with no intention of publishing it. One presumes that if they were returned to power they would still disburse some money to industry. Will they publish the amounts on a company-by-company basis?
  Mr. Kilroy-Silk: They have not said so.
  Mr. Rooker: Of course they have not said so. This is an invitation to them to let us know.
  Monstrous allegations were made by the hon. Member for Rushcliffe about abuse, fraud, cheating and lying by manufacturing industry to get their hands on grants. Hansard will show that he said that companies that he has visited as an official Opposition spokesman admitted to him in confidence that the projects concerned would have gone ahead anyway and that the timing was not influenced in any way by Government grants.
  The hon. Gentleman did not accept my invitation, but on the basis that the diary of an Opposition spokesman should not be a State secret, I invite the hon. Member—or I shall write and ask him or his chief, the right hon. Member for Leeds, North-East (Sir K. Joseph), who has now left—to publish a list of his industrial visits over the last 12 months. If he does not do it, I shall ask Tory Central Office to publish it.
  Mr. Kenneth Clarke rose—
  Mr. Rooker: Is the hon. Gentleman seeking to intervene? It took him a long while to give way to me earlier in the debate.
  Mr. Clarke: First, I assure the hon. Member that we shall continue to publish the names of companies which receive grants. But there was a different atmosphere when we were in power and disbursing 12 grants a year at the most, and in one year no grants at all, from that which obtains when we are talking about £250 million. There is no intention at all to publish my diary. I invite the hon. Member, when he next visits a firm which has had a grant under the Industry Act, to make some inquiries, as I have done, and to discover whether he can adhere to his belief that they are making investment solely because they have had a section 8 grant—investment which would not have happened but for that grant.
  Mr. Rooker: When I speak to members of companies, those are the kinds of questions I ask, anyway. If I found a management which said "We lied and cheated the taxpayer", I would report it to the Department of Industry. Members of the Tory Party laugh—
  Mr. Brian Sedgemore: The party of organised fraud.
  Mr. Kilroy-Silk: It is all right if it is a Tory fiddle.
  Mr. Rooker: That is a typical reaction of them, because they are the party that protects big business when it wants to cheat the taxpayer. They laughed last week when we discussed tax abuse on Scotch whisky and they are laughing again tonight.
  I stand by what I said—I would report it if anyone cheated. For that reason, of course, managements would not tell me the truth. It is only because they know that the Tory Party is in their pockets and that the Opposition will not report these companies to the Ministers responsible for making sure that taxpayers' money is spent wisely that they make these statements to them.
  I do not see why there should be any secrecy about the diary of an Opposition spokesman who makes the claim that he goes around industry as an Opposition spokesman. I shall invite Tory Central
  1282
  Office to make it public. Certainly the rest of the trivia is published. I do not see why the hon. Gentleman's programme should not be published.
  Mr. Clarke: The hon. Member is using words such as "lying" and "cheating" as if there are some firmly laid down criteria which it is illegal not to follow. What I am saying is that they do not follow the criteria which the Minister says they follow when making their decisions. If he wants to know what they comply with, will he study paragraph 9 of the criteria laid down by the Government? It says:
  "There are circumstances in which company profits and losses are not a wholly accurate measure of resource costs and benefits, because there are costs … and benefits … which accrue to the community as a whole and not to the individual enterprise. In these situations there are grounds for setting out to redress that divergence between money costs and benefits and social costs and benefits, where by taxation, planning controls or subsidies."
  I am saying that the criteria include meaningless verbiage of that kind which allows the Minister and anybody else at his discretion to do what he chooses.
  Mr. Rooker: Hansard will show that the hon. Gentleman admitted that firms were fraudulently claiming the grants. If that is not lying and cheating to get their grubby little hands on taxpayers' money, I do not know what is.
  I know that the hon. Gentleman will come to regret the language that he used. That is why he is trying to wriggle out of it. I hope that my Labour colleagues in this debate will push home this point. The hon. Gentleman has offered us a hook on which we can hang him and the rest of the Tory Party.
  11.27 p.m.
  Mr. Nick Budgen: My hon. Friend the Member for Rushcliffe (Mr. Clark) is well able to look after himself in answering the allegations which have so falsely been made against him.
  I want to deal with the Minister's allegation that the Opposition are being niggardly in talking so meanly about a little matter of £250 million. It has been said that we should let this go through "on the nod". What is £250 million between friends? It is only something that the taxpayer can cough up. But

  1283
  Opposition Members believe that in dealing with the taxpayers' money, a little care should be given to these matters. It is interesting to examine some of the things that have happened since we last discussed the disbursement of the taxpayers' money in very large sums.
  On 10th April last we discussed support for industry, and more particularly investment in British Leyland, against the whole context of the money that was being spewed out by the National Enterprise Board. It was said by the Secretary of State for Industry that in every respect the Government were being most careful with the taxpayers' money. Yet in the month or so that has followed we find that in two important respects the way in which the Secretary of State presented his case has been confounded by the facts.
  I noted his reference to the foundry industry, because it so happens that I recently inherited a few shares in a foundry. [HON. MEMBERS: "Oh".] There is nothing wrong with that, so far as I know. They are only a few shares and, unhappily, they do not yield much income. I learned from my holding in that foundry that those in the foundry industry regarded the ferrous foundry scheme with considerable amusement and contempt, because there was gross overcapacity in that industry. While they were collecting the cash off the Government, they were anxious to say how useful the scheme was, but all they were doing was in some instances preventing firms going out of business which should have gone out of business, thus reducing the capacity of the industry, or in other instances providing cheap money which could have come from ordinary private sources but for the fact that the taxpayer was making it available.
  Before the British Leyland debate, I heard a lot of concern expressed in the West Midlands that British Leyland might acquire its own foundries, but, of course, that matter was very well dealt with by the Secretary of State during the debate, on 10th April, when he said:
  "Even the provision of £450 million, which the National Enterprise Board has determined, after careful consideration, is the sum required for 1978, means that some desired programmes have had to be cut back—for example, the foundry modernisation programme."
  But what do we find in today's Financial Times? British Leyland is undertaking
  1284
  its own investment programme in foundries at a cost of £27 million. So much for the Secretary of State's assertions and so much for the fears that he was trying to allay in the West Midlands foundry industry.
  Mr. Adley: I merely wish to confirm that my hon. Friend is correct. I was invited to meet the trade unionists at Wellworthy Engineering, the largest employers in my constituency, and they pleaded with me to make sure that the Government did not allow British Leyland to go into the components business because they did not want to see their worthwhile jobs in a profitable private enterprise company swamped by public money and publicly subsidised companies such as British Leyland.
  Mr. Budgen: I am grateful to my hon. Friend. I have no doubt that he will send his informants a copy of the back page of today's Financial Times.
  Mr. Adley: And my hon. Friend's speech.
  Mr. Budgen: I am grateful to my hon. Friend. The second indication of the sloppy way in which the Government are handing out taxpayers' money can be shown in the answer to a question I asked during the debate last month. I asked the Secretary of State why there could not be a more modest objective for the NEB and why successful firms such as Ferranti could not be sold. He replied:
  "I do not know whether the hon. Gentleman was in the House earlier when this question was raised."
  I think that I was, but let it be assumed against me that I did not properly take in the earlier remarks. Perhaps I was sleeping, stupid, or whatever, but I invite the House to listen to these words of the Secretary of State:
  "I made it plain that none of the NEB's profitable companies, particularly those making up British Leyland, are for sale. I do not think that that would be the way to go about it. That is not recommended by the NEB, which consists of senior industrialists and senior trade unionists. It is not recommended by the board of British Leyland. That would serve only to demoralise existing management and create unnecessary fears."—[Official Report, 10th April 1978; Vol. 947, cc. 100, 1009.]
  But what do I read in The Times of 6th May, just a month after that splendid and clear-cut assertion of the Secretary

  1285
  of State that no part of the NEB portfolio was for sale? Under the heading:
  "Ferranti ready for Stock Exchange listing"
  there is a story that reads:
  "Merchant bankers Barings, who are working on the return of electronics group Ferranti to the Stock Market have not yet decided whether to advise a listing in july.
  Work is well advanced on the introduction of 1,333,333 shares to be offered by the National Enterprise Board, which now owns 62.5 per cent of Ferranti. It is known that Barings have been advising Ferranti for some time, but key details have still to be settled."
  Yet the Secretary of State had the effrontery to tell the House that no part of the NEB portfolio was for sale or was contemplated as being for sale. He said that any such sale would discourage existing management. Are the Opposition not right to say that a little care, a little truth and a little precision is required when taxpayers' money is being dished out?
  11.30 p.m.
  Mr. Ted Leadbitter: I wish only to put to the House what I consider to be a small but important, pertinent matter of fact.
  The hon. Member for Rushcliffe (Mr. Clarke), unfortunately, made a regrettable statement. He said that in the case of all the companies which he had visited the industrialist who had gained financial support under Section 8 had clearly and distinctly said that if he had not had the money the schemes would still have gone on. One of the conditions which must be met in writing in order to qualify for assistance under Section 8 is that the industrialist must say that without the aid the schemes would not go on.
  It is clear that there is an allegation of misrepresentation, to say the least, or of fraud. Therefore, I must ask, not the hon. Gentleman but the Minister, whether this important matter will be taken up through the usual channels so that the House may be satisfied about it.
  Mr. Alan Williams: My hon. Friend has asked me a question and I shall mention it in my reply, but I draw to his attention the fact that an imputation has been made, by implication, against a firm in his constituency. Tioxide, in Hartlepool, has indicated that it is willing to say publicly that it conforms to all the guidelines. I wonder what my hon. Friend's view is about the fact that a firm in his
  1286
  constituency which has received Government support has been maligned by a member of the Opposition Front Bench.
  Mr. Kilroy-Silk: Does my hon. Friend also appreciate that the attitude of the hon. Member for Rushcliffe (Mr Clarke) demonstrates the traditional double standards of the Tories on this issue? They will complain about social security scroungers, with whom none of us has sympathy and whom we want prosecuted, but the hon. Gentleman tonight has clearly announced that he knows of several industrialists who have told him that they have perpetrated fraud with taxpayers' money involving several million pounds, and yet he laughs. He is either a liar—he does not have the evidence—
  Mr. Deputy Speaker (Mr. Oscar Murton): Order. I hope that the hon. Gentleman was not accusing the hon. Member for Rushcliffe (Mr Clarke) of being a liar. The hon. Gentleman will confirm to me that he was not using that expression in connection with the hon. Member.
  Mr. Kilroy-Silk: The hon. Gentleman either has the evidence or he is an accomplice. He is either a liar or he is an accomplice.
  Mr. Deputy Speaker: Order. I have warned the hon. Gentlemen that if he is using that expression in connection with the hon. Member for Rushcliffe, he must withdraw it.
  Mr. Sedgemore: He is an accomplice to crime.
  Mr. Kilroy-Silk: I am perfectly happy to withdraw the imputation that the hon. Gentleman is a liar. He is therefore an accomplice—
  Mr. Sedgemore: —to crime.
  Mr. Kenneth Clarke rose—
  Mr. Leadbitter: No. I shall not give way to the hon. Gentleman, because there are ways in the House in which these matters can be settled. They can be settled by means of the custom that if a statement has been made which is seen in the light of discussion not to be true the hon. Member concerned is given the opportunity to correct it.
  Mr. Ian Gow: On a point of order, Mr. Deputy Speaker.

  1287
  The hon. Member for Luton, West (Mr. Sedgemore) accused my hon. Friend the Member for Rushcliffe (Mr. Clarke) of being an accomplice to crime. Is not that out of order?
  Mr. Deputy Speaker: No remark must be made which casts any imputation on the honour of an hon. Member. I hope that the hon. Gentleman did not in fact use that expression, because the Chair did not hear it. [HON. MEMBERS: "He did."] The hon. Gentleman must withdraw any comment which has any imputation on the honour of any other hon. Member.
  Mr. Kilroy-Silk: Further to that point of order, Mr. Deputy Speaker—
  Mr. Deputy Speaker: Order. I am asking the hon. Member for Luton, West (Mr. Sedgemore) to withdraw any such remark.
  Mr. Kilroy-Silk: It was I, not my hon. Friend the Member for Luton, West (Mr. Sedgemore), who made the allegation, Mr. Deputy Speaker. The hon. Member for Rushcliffe clearly made the allegation against himself when he said that he knew of many industrialists who had told him that they had taken taxpayers' money and they did not need that money. They had therefore lied to the Department of Industry in purporting to fulfil the criteria, and the hon. Member either does not have the evidence, in which case he is lying, or he is an accomplice to the criminal acts of others.
  Mr. Deputy Speaker: Order. The hon. Member is compounding what I have already told him was wrong. He must make no imputation on the honour of any other hon. Members, and he must withdraw the allegations forthwith.
  Mr. Kilroy-Silk: I have no wish to pursue this, Mr. Deputy Speaker, and I shall certainly withdraw both the allegations in the sure knowledge and confidence that the hon. Member for Rushcliffe made both the allegations about himself, and that they will be on the record in Hansard.
  Mr. Leadbitter: I do not want to follow the level or form of discussion at this stage on the matter which has developed—
  Mr. Kenneth Clarke rose—
  Mr. Leadbitter: I shall give way in a moment [HON. MEMBERS: "Give way now."] No.
  Mr. Deputy Speaker: Order. The hon. Member who has the Floor cannot be pressed to give way unless or until he is prepared to do so.
  Mr. Leadbitter: I have given way reasonably sufficiently on what I call—
  Mr. Clarke: On a point of order, Mr. Deputy Speaker. I am grateful to you for giving me protection against the allegations by the hon. Member for Luton, West (Mr. Sedgemore), who was not here earlier, and by the hon. Member for Ormskirk (Mr. Kilroy-Silk), who did not seem to have listened to the earlier stages of the debate. But as for the hon. Member for Hartlepool (Mr. Leadbitter), am I entitled to some protection against this tremendous concoction of a speech which he is producing, all based on an interpretation of what I am supposed to have said, which I did not in fact say, when it is within the recollection of the House that I accused nobody in the firms I visited of crime or fraud. No crime or fraud has been spelt out, and therefore there is no question of my being party to any of the matters which the hon. Member for Hartlepool is describing.
  Mr. Leadbitter: Apart from lowering the tone of the debate, the hon. Member knows full well what he is now doing. It is not for me to challenge the Chair, but I make the point that the hon. Member is abusing the privileges of the House, because that was not a point of order.
  I want to make this clear. In my constituency there is a firm which is benefiting from aid under Section 8 of the Act. I will not stand aside and allow an industrialist to be accused in the manner in which the hon. Member accused such a person, knowing full well that the conditions upon which that industrialist gets aid under the Act are set down in writing and he makes the claim that if he does not get the aid the schemes will not go on. That is the issue.
  Mr. Clarke: On a point of order, Mr. Deputy Speaker. Is the hon. Member entitled to accuse me of accusing a firm in his constituency of crime?
  Mr. Leadbitter: The hon. Gentleman should visit Hartlepool.
  Mr. Clarke: I have visited Hartlepool—I do not whether the hon. Gentleman has—with the past year, but I did not visit the particular firm.
  Mr. Deputy Speaker: Order. I think that a large misconception is growing in the House. We had better return to the subject of the debate.
  Mr. Leadbitter: This is an important matter. No hon. Members would say that they wanted firms in their constituencies to be deprived of the aid. When we support it, we have a right to ask whether the Opposition Front Bench has sufficiently attuned itself to the needs of industry, rather than making misrepresentations about industrialists.
  If it is a condition that an industrialist who receives aid under the Act must put in writing the fact that if he does not receive the money the scheme does not go ahead, anyone who says that he takes the money in spite of that, in the way that the hon. Gentleman did, is saying that such an industrialist is not fair.
  I close on this point, because I want to hear what my right hon. Friend the Minister has to say. The hon. Gentleman went further and said, in effect, that because industrialists received the aid in any case there were conditions attached on incomes policy. Surely he understands that if they do not want to be tied to any conditions, if they exist, they need not take the money.
  In my constituency 17 per cent. of the men are out of work and far too many young children have left school without a chance of a job. The House would be wise to support any steps taken by the Government to pump investment into industry in the regions that I help represent—Merseyside, Scotland, Wales and the North-East.
  11.42 p.m.
  Mr. Alan Williams: With permission, I should like to reply.
  Without wishing to inflate the importance of what has happened tonight, I think that we have had an example of silliness on the part of the Opposition Front Bench, which they will probably regret later. No matter how he wriggles, the hon. Member for Rushcliffe (Mr. Clarke) said in his speech that all the firms to which he had spoken which had received assistance from Government said
  1290
  that their projects would have gone ahead regardless of that assistance.
  That was said despite the fact that, for example, under the selective assistance scheme additionality is a clear requirement in the published rules related to the scheme. I am forced to wonder whether the hon. Gentleman realises the seriousness of making allegations that firms such as Wedgwood, Tioxide, in the constituency of my hon. Friend the Member for Hartlepool (Mr. Lead bitter), Vickers, Albright and Wilson and Ham-worthy Engineering have deliberately lied to Government and deliberately taken taxpayers' money unduly.
  The hon. Gentleman has a choice. He is caught over his own barrel. If he says that every firm mentioned by me was not covered, his argument is basically invalid, because obviously the schemes have been highly effective. Therefore, if he wants to perpetuate his argument he must be able to show that in most cases the argument that he put forward is true. Let me demonstrate that it clearly is not true.
  This is not a case of civil servants unversed in the ways of industry being misled by industry. The Industrial Development Unit in our Department consists of financial specialists brought from the private sector of industry to assess these projects. Under the selective investment scheme, while 66 schemes have been approved, 50 having been turned down, most of them because those concerned were not able to convince us that they met our requirements.
  Mr. Kenneth Clarke rose—
  Mr. Williams: I do not intend to give way to the hon. Gentleman.
  Mr. Clarke: Give way.
  Mr. Williams: I have no intention of giving way, with three minutes to go. It is easy to see why industry is frightened of the Opposition. The Opposition are playing politics with a matter of extreme importance to the survival of industry and to employment.
  Mr. Clarke rose—
  Mr. Williams: When they were last in Government the Opposition were completely incapable of stimulating investment. It fell year by year while they were in office. The then Prime Minister

  1291
  berated industry. The right hon. Member for Leeds, North-East (Sir K. Joseph) was a member of that Cabinet. He will recollect the then Prime Minister's speech. Did not the then Prime Minister say that industry had refused to respond to all the measures which a Conservative Government had introduced to stimulate investment? They were furious with industry. By the time the Tories left office they had failed to equal the level of investment attained in the year in which the previous Labour Administration had left office
  Mr. Clarke rose—
  Mr. Williams: Conservative Members are making the same worrying noises they made in 1969. They are speaking against the whole principle of the grants system. Let us remember that they abolished grants, discovered their error, and, two years later, reintroduced them. In those two years they destroyed the growth in industry which had taken place under a Labour Government. They were never able to bring it to life again. This Government have been left with the task of trying to regenerate the investment which industry desperately needs and from the lack of which it suffered when the Conservatives were in office.
  What are we being accused of tonight? Wasting Government money in what way?
  By stimulating £1,500 million worth of investment by these schemes; by getting a £200 million positive advantage on the balance of payments from the schemes we put forward; by creating extra jobs in the sectors where schemes apply and by creating extra jobs in industries which supply those sectors. These are apparently the sins of which Conservative Members accuse us. The fact is that under this Government productivity is rising again. The Opposition do not like that and do not want to recognise it. Investment is rising again. Private sector investment rose by 14 per cent. last year, something which Conservative Members never attained when in Government. All that they have to do is talk to people in the City and industry and find out what confidence there is in the Opposition.
  Look at the share index—316 when the Tories left office, now nearly 500. Look at what happened when it appeared likely that the Government might suffer defeat—£1,000 million was wiped off the value of shares—
  It being one and a half hours after the commencement of proceedings on the Motion, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business).
  The House divided: Ayes 234, Noes 211.

  Division No. 222]

  AYES

  [11.48 p.m.

  Abse, Leo

  Conlan, Bernard

  Ewing, Mrs Winifred (Moray)

  Anderson, Donald

  Cook, Robin F. (Edin C)

  Faulds, Andrew

  Archer, Rt Hon Peter

  Cowans, Harry

  Fernyhough, Rt Hon E.

  Armstrong, Ernest

  Cox, Thomas (Tooting)

  Fitt, Gerard (Belfast W)

  Ashley, Jack

  Craigen, Jim (Maryhill)

  Flannery, Martin

  Atkins, Ronald (Preston N)

  Crawford, Douglas

  Fletcher, Ted (Darlington)

  Atkinson, Norman

  Crawshaw, Richard

  Forrester, John

  Bain, Mrs Margaret

  Cronin, John

  Fowler, Gerald (The Wrekin)

  Barnett, Guy (Greenwich)

  Crowther, Stan (Rotherham)

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

  Bates, Alf

  Cryer, Bob

  Freeson, Rt Hon Reginald

  Bean, R. E.

  Cunningham, G. (Islington S)

  Gilbert, Rt Hon Dr John

  Beith, A. J.

  Cunningham, Dr J. (Whiteh)

  Ginsburg, David

  Benn, Rt Hon Anthony Wedgwood

  Dalyell, Tarn

  Golding, John

  Bennett, Andrew (Stockport N)

  Davidson, Arthur

  Gould, Bryan

  Bidwell, Sydney

  Davies, Bryan (Enfield N)

  Graham, Ted

  Bishop, Rt Hon Edward

  Davies, Ifor (Gower)

  Grant, John (Islington C)

  Blenkinsop, Arthur

  Davis, Clinton (Hackney C)

  Grocott, Bruce

  Boardman, H.

  Deakins, Eric

  Hardy, Peter

  Boothroyd, Miss Betty

  Dell, Rt Hon Edmund

  Harrison, Rt Hon Walter

  Bradley, Tom

  Doig, Peter

  Hart, Rt Hon Judith

  Brown, Robert C. (Newcastle W)

  Dormand, J. D.

  Hattersley, Rt Hon Roy

  Buchan, Norman

  Douglas-Mann, Bruce

  Hayman, Mrs Helena

  Butler, Mrs Joyce (Wood Green)

  Duffy, A. E. P.

  Heffer, Eric S.

  Callaghan, Jim (Middleton & P)

  Dunn, James A.

  Henderson, Douglas

  Campbell, Ian

  Dunnett, Jack

  Horam, John

  Canavan, Dennis

  Dunwoody, Mrs Gwyneth

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

  Carmichael, Neil

  Eadie, Alex

  Howells, Geraint (Cardigan)

  Cartwright, John

  Edge, Geoff

  Hoyle, Doug (Nelson)

  Clemitson, Ivor

  Ellis, John (Brigg & Scun)

  Huckfield, Les

  Cocks, Rt Hon Michael (Bristol S)

  English, Michael

  Hughes, Rt Hon C. (Anglesey)

  Cohen, Stanley

  Evans, Ioan (Aberdare)

  Hughes, Mark (Durham)

  Coleman, Donald

  Evans, John (Newton)

  Hughes, Robert (Aberdeen N)

  Concannon, Rt Hon John

  Ewing, Harry (Stirling)

  Hunter, Adam

  Irvine, Rt Hon Sir A. (Edge Hill)

  Morris. Rt Hon Charles R.

  Spearing, Nigel

  Irving, Rt Hon S. (Dartford)

  Morris, Rt Hon J. (Aberavon)

  Spriggs, Leslie

  Jackson, Miss Margaret (Lincoln)

  Moyle, Roland

  Stallard, A. W.

  Jeger, Mrs Lena

  Murray, Rt Hon Ronald King

  Stewart, Rt Hon Donald

  Jenkins, Hugh (Putney)

  Newens, Stanley

  Stewart, Rt Hon M. (Fulham)

  Johnson, Walter (Derby S)

  Noble, Mike

  Stoddart, David

  Jones, Alec (Rhondda)

  Oakes, Gordon

  Stott, Roger

  Jones, Barry (East Flint)

  Ogden, Eric

  Strang, Gavin

  Jones, Dan (Burnley)

  Orbach, Maurice

  Strauss, Rt Hon G. R.

  Judd, Frank

  Orme, Rt Hon Stanley

  Summerskill, Hon Dr Shirley

  Kaufman, Gerald

  Ovenden, John

  Swain, Thomas

  Kerr, Russell

  Palmer, Arthur

  Thomas, Jeffrey (Abertillery)

  Kilroy-Silk, Robert

  Park, George

  Thomas, Ron (Bristol NW)

  Lamborn, Harry

  Parker, John

  Thompson, George

  Latham, Arthur (Paddington)

  Pavitt, Laurie

  Thorne, Stan (Preston South)

  Leadbitter, Ted

  Pendry, Tom

  Tierney, Sydney

  Lestor, Miss Joan (Eton & Slough)

  Phipps, Dr Colin

  Tilley, John (Lambeth, Central)

  Lewis, Ron (Carlisle)

  Prescott, John

  Tinn, James

  Lomas, Kenneth

  Price, C. (Lewisham W)

  Tomlinson, John

  Loyden, Eddie

  Price, William (Rugby)

  Urwin, T. W.

  Luard, Evan

  Radice, Giles

  Varley, Rt Hon Eric G.

  Lyon, Alexander (York)

  Rees, Rt Hon Merlyn (Leeds S)

  Wainwright, Edwin (Dearne V)

  Lyons, Edward (Bradford W)

  Richardson, Miss Jo

  Walker, Harold (Doncaster)

  Mabon, Rt Hon Dr J. Dickson

  Roberts, Albert (Normanton)

  Walker, Terry (Kingswood)

  McCartney, Hugh

  Roberts, Gwilym (Cannock)

  Watkins, David

  McDonald, Dr Oonagh

  Robinson, Geoffrey

  Watkinson, John

  McElhone, Frank

  Roderick, Caerwyn

  Watt, Hamish

  MacFarquhar, Roderick

  Rodgers, George (Chorley)

  Wellbeloved, James

  McGuire, Michael (Ince)

  Rodgers, Rt Hon William (Stockton)

  Welsh, Andrew

  MacKenzie, Rt Hon Gregor

  Rooker, J. W.

  White, Frank R. (Bury)

  Maclennan, Robert

  Roper, John

  White, James (Pollok)

  Madden, Max

  Rose, Paul B.

  Whitehead, Phillip

  Magee, Bryan

  Ross, Stephen (Isle of Wight)

  Whitlock, William

  Mahon, Simon

  Rowlands, Ted

  Williams, Rt Hon Alan (Swansea W)

  Mallalieu, J. P. W.

  Ryman, John

  Williams, Alan Lee (Hornch'ch)

  Marks, Kenneth

  Sandelson, Neville

  Wilson, William (Coventry SE)

  Marshall, Dr Edmund (Goole)

  Sedgemore, Brian

  Wise, Mrs Audrey

  Marshall, Jim (Leicester S)

  Sever, John

  Woodall, Alec

  Maynard, Miss Joan

  Shaw, Arnold (Ilford South)

  Woof, Robert

  Mellish, Rt Hon Robert

  Sheldon, Rt Hon Robert

  Wrigglesworth, Ian

  Mikardo, Ian

  Shore, Rt Hon Peter

  Young, David (Bolton E)

  Millan, Rt Hon Bruce

  Silkin, Rt Hon John (Deptford)

  Miller, Dr M. S. (E Kilbride)

  Silkin, Rt Hon S. C. (Dulwich)

  TELLERS FOR THE AYES:

  Mitchell, Austin

  Silverman, Julius

  Mr. Joseph Harper and

  Mitchell, R. C. (Soton, Itchen)

  Skinner, Dennis

  Mr. James Hamilton.

  Moorman, Eric

  Smith, John (N Lanarkshire)

  Morris, Alfred (Wythenshawe)

  Snape, Peter

  NOES

  Adley, Robert

  Critchley, Julian

  Hampson, Dr Keith

  Aitken, Jonathan

  Davies, Rt Hon J. (Knutsford)

  Hannam, John

  Alison, Michael

  Dodsworth, Geoffrey

  Harrison, Col Sir Harwood (Eye)

  Arnold, Tom

  du Cann, Rt Hon Edward

  Haselhurst, Alan

  Atkins, Rt Hon H. (Spelthorne)

  Dunlop, John

  Hawkins, Paul

  Atkinson, David (Bournemouth, East)

  Durant, Tony

  Hayhoe, Barney

  Awdry, Daniel

  Dykes, Hugh

  Hicks, Robert

  Banks, Robert

  Eden, Rt Hon Sir John

  Higgins, Terence L.

  Bendall, Vivian (Ilford North)

  Edwards, Nicholas (Pembroke)

  Hodgson, Robin

  Bennett, Sir Frederic (Torbay)

  Elliott, Sir William

  Holland, Philip

  Benyon, W.

  Eyre, Reginald

  Hordern, Peter

  Berry, Hon Anthony

  Fairbairn, Nicholas

  Howell, David (Guildford)

  Biffen, John

  Fairgrieve, Russell

  Howell, Ralph (North Norfolk)

  Biggs-Davison, John

  Farr, John

  Hunt, David (Wirral)

  Blaker, Peter

  Finsberg, Geoffrey

  Hunt, John (Bromley)

  Body, Richard

  Fisher, Sir Nigel

  Hurd, Douglas

  Boscawen, Hon Robert

  Fletcher, Alex (Edinburgh N)

  James, David

  Boyson, Dr Rhodes (Brent)

  Forman, Nigel

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

  Brittan, Leon

  Fowler, Norman (Sutton C'f'd)

  Jessel, Toby

  Brooke, Peter

  Fox, Marcus

  Jones, Arthur (Daventry)

  Brotherton, Michael

  Fraser, Rt Hon H. (Stafford & St)

  Joseph, Rt Hon Sir Keith

  Brown, Sir Edward (Bath)

  Fry, Peter

  Kaberry, Sir Donald

  Buck, Antony

  Galbraith, Hon T. G. D.

  Kellett-Bowman, Mrs Elaine

  Budgen, Nick

  Gardiner, George (Reigate)

  Kershaw, Anthony

  Burden, F. A.

  Gardner, Edward (S Fylde)

  Kimball, Marcus

  Butler, Adam (Bosworth)

  Godber, Rt Hon Joseph

  King, Evelyn (South Dorset)

  Carlisle, Mark

  Goodhart, Philip

  King, Tom (Bridgwater)

  Channon, Paul

  Goodhew, Victor

  Kitson, Sir Timothy

  Churchill, W. S.

  Gorst, John

  Knight, Mrs Jill

  Clark, Alan (Plymouth, Sutton)

  Gow, Ian (Eastbourne)

  Knox, David

  Clarke, Kenneth (Rushcliffe)

  Gower, Sir Raymond (Barry)

  Latham, Michael (Melton)

  Cooke, Robert (Bristol W)

  Grieve, Percy

  Lawson, Nigel

  Cope, John

  Griffiths, Eldon

  Le Merchant, Spencer

  Cormack, Patrick

  Grist, Ian

  Lester, Jim (Beeston)

  Corrie, John

  Hamilton, Archibald (Epsom & Ewell)

  Lewis, Kenneth (Rutland)

  Costain, A. P.

  Hamilton, Michael (Salisbury)

  Lloyd, Ian

  Loveridge, John

  Nott, John

  Smith, Dudley (Warwick)

  Luce, Richard

  Onslow, Cranley

  Smith, Timothy John (Ashfield)

  McCrindle, Robert

  Osborn, John

  Speed, Keith

  Macfarlane, Neil

  Page, John (Harrow West)

  Spence, John

  MacGregor, John

  Page, Rt Hon R. Graham (Crosby)

  Spicer, Michael (S Worcester)

  MacKay, Andrew (Stechford)

  Page, Richard (Workington)

  Sproat, Iain

  Macmillan, Rt Hon M. (Farnham)

  Pattie, Geoffrey

  Stainton, Keith

  McNair-Wilson, M. (Newbury)

  Percival, Ian

  Stanbrook, Ivor

  McNair-Wilson, P. (New Forest)

  Peyton, Rt Hon John

  Stanley, John

  Marshall, Michael (Arundel)

  Pink, R. Bonner

  Steen, Anthony (Wavertree)

  Mates, Michael

  Powell, Rt Hon J. Enoch

  Stokes, John

  Mather, Carol

  Prentice, Rt Hon Reg

  Stradling, Thomas, J.

  Mawby, Ray

  Price, David (Eastleigh)

  Taylor, Teddy (Cathcart)

  Maxwell-Hyslop, Robin

  Prior, Rt Hon James

  Tebbit, Norman

  Mayhew, Patrick

  Raison, Timothy

  Temple-Morris, Peter

  Meyer, Sir Anthony

  Rathbone, Tim

  Thomas, Rt Hon P. (Hendon S)

  Miller, Hal (Bromsgrove)

  Renton, Rt Hon Sir D. (Hunts)

  Townsend, Cyril D.

  Mills, Peter

  Renton, Tim (Mid-Sussex)

  van Straubenzee, W. R.

  Miscampbell, Norman

  Rhodes James, R.

  Vaughan, Dr Gerard

  Mitchell, David (Basingstoke)

  Rhys Williams, Sir Brandon

  Viggers, Peter

  Moate, Roger

  Ridley, Hon Nicholas

  Wakeham, John

  Molyneaux, James

  Roberts, Michael (Cardiff NW)

  Walder, David (Clitheroe)

  Monro, Hector

  Roberts, Wyn (Conway)

  Walker, Rt Hon P. (Worcester)

  Montgomery, Fergus

  Ross William (Londonderry)

  Warren, Kenneth

  Moore, John (Croydon C)

  Rossi, Hugh (Hornsey)

  Weatherill, Bernard

  Morgan, Geraint

  Royle, Sir Anthony

  Wells, John

  Morgan-Giles, Rear-Admiral

  Sainsbury, Tim

  Whitelaw, Rt Hon William

  Morris, Michael (Northampton S)

  Scott, Nicholas

  Whitney, Raymond (Wycombe)

  Morrison, Charles (Devizes)

  Scott-Hopkins, James

  Wiggin, Jerry

  Morrison, Hon Peter (Chester)

  Shaw, Giles (Pudsey)

  Wood, Rt Hon Richard

  Mudd, David

  Shaw, Michael (Scarborough)

  Younger, Hon George

  Neave, Airey

  Shelton, William (Streatham)

  Nelson, Anthony

  Shepherd, Colin

  TELLERS FOR THE NOES:

  Neubert, Michael

  Shersby, Michael

  Sir George Young and

  Newton, Tony

  Silvester, Fred

  Lord James Douglas-Hamilton.

  Normanton, Tom

  Sims, Roger

  Question accordingly agreed to.
  Resolved,
  That the draft Financial Assistance for industry (Increase of Limit) Order 1978, which was laid before this House on 28th April, be approved.

  EXPENDITURE
  Ordered,
  That the Standing Order of 18th November 1974 relating to the nomination of the Expenditure Committee be amended by leaving out Mr Max Madden and inserting Dr. Jeremy Bray.—[Mr. Walter Harrison.]

  KEPONE (INCINERATION)
  Motion made, and Question proposed,
  That this House do now adjourn. [Mr. Snape.]
  12.3 a.m.
  Mr. Leo Abse: No one—certainly not one of my constituents—doubts the compelling necessity to have controlled disposal centres to deal with the problems of toxic waste disgorged by modern industry. As a result of the initiatives coming from the Department of the Environment no one doubts that many problems that would otherwise have arisen have been contained. For that the Department deserves high praise. However,
  1296
  the encouragement given by the Department to waste disposal industries must not be so generously given that citizens in areas where such plants are sited may come to the conclusion that the Government are more concerned about the needs of industry than the needs of men and women.
  If the waste disposal plants are so conducted that they provoke resentment, hositilty and fear from those who live for miles around their curtilage, the good work of the Department may be undone by the irresponsibility of the management. That, unhappily, is what has happened in my constituency.
  Re-Chem International Ltd., a waste disposal firm, backed by the huge resources of its parent company, British Electric Traction, six years ago applied for planning permission to a non-suspecting small district council—the Torfaen District Council. Eager, as are all South Wales councils in areas threatened by or enduring high unemployment, to welcome new work into the district, the council gave it permission. The company obtained its planning permission by deception or by its overweening misplaced confidence in its own technological capacities, for it assured the council that the works would in no way impinge upon the amenity of the nearby estates.

  1297
  Almost from the time that the works commenced operation a yawning gap appeared between the company's promises and its performance. Noxious fumes, smokes and smells regurgitated out of the stack, sometimes by day and sometimes by night. Protests mounted from residents in the area as all the claimed modifications to the incinerator plant resulted in no material diminution in the grave inconveniences being suffered.
  The Welsh Office, at my request, with the aid of my hon. Friend the Under-Secretary of State for the Environment—the Member for Manchester, Gorton (Mr. Marks)—co-operated, by means of the participation of the Alkali Inspectorate, in a liaison committee which included representatives of the local authority, of Re-Chem, and of the residents' environmental association. However, despite the monitoring and the promises of further avoiding action by the company, that has been of no avail. The nuisance continues, with the residents collecting funds to commence legal action against the company.
  The local authority is inhibited from suspending the company's licence only by fear that that may result in millions of pounds worth of compensation having to be paid by hapless ratepayers. That would be payment to swell BET profits, which Sir John Spencer Wills, the company's chairman, recently told shareholders rose to a record figure of £55 million. When Mr. Wills announced the profits he complained bitterly about the time that his company wasted on dealing with the controlling legislation that had come from the Labour Government, and declared that
  "Profits are the lifeblood of the nation."
  At the same time he announced the company's usual annual subsidy to the Conservative Party.
  In the light of experience my constituents believe that their lives would be happier if there were more controls on this company and less profit. I should have thought that with two Tory ex-Ministers on the Board—Viscount Colville and Christopher Chataway—the company would have sufficient political sensitivity not to inflame an already highly combustible situation which many of us have sought to contain in recent years.
  But the company's avid and reckless search for profits continues unabated. Now it has provocatively announced its
  1298
  decision to import from the United States of America for incineration at Pontypool a deadly pesticide which has wrought such havoc in the Virginia-Maryland coastland region by its release into the estuarine atmospheric environment that its use has been banned in the United States as it has been here.
  The two companies which manufacture this insecticide have received the highest fines for pollution ever imposed in the United States—$13·2 million and $3·8 million. The people of the United States have been so shocked by the disaster, made so aware of the serious illnesses. including sterility, among the workers and their families at the Kepone manufacturing plant, and are so fearful that it might cause cancer, through dissemination in the food chain—as stated by distinguished scientists—that no state in America is prepared to be the site at which an attempt can be made to dispose of the stocks that have accumulated.
  In the United States, the most highly developed technological country in the world, no state is prepared to permit an attempt to dispose of the material on its soil. But that does not deter Re-Chem with its insouciance and rare arrogance. It claims, despite its wretched track record at Pontypool and despite being convicted only a few weeks ago, in Scotland, for its reckless pollution at the plant in the constituency of my hon. Friend the Member for West Stirlingshire (Mr. Canavan), that it alone has perfected the technology to dispose of this poison and wishes to import 1½ tons for a trial run. After what is necessarily an innovatory experiment it proposes to import another 35 tons.
  It is my duty to warn the Minister that my constituents are not prepared to be guinea-pigs. With Government aid, Wales is only just clearing away the debris and tips which an irresponsible British capitalism left behind. South Wales is not prepared to become a receptacle for the excreta of an incontinent sector of American capitalism. No Minister, no Health and Safety Executive, no company can give a 100 per cent. guarantee that the incineration of Kepone will have no attendant environmental risks, because it has never been done on this scale before.
  If Re-Chem has the technology, let the Government tell it to sell it to the United States. Let Kepone be incinerated on American soil or waters. The Secretary

  1299
  of State has the power to make regulations forbidding the import of such poisons. If he exercises that power he will have the full support of the House. If he does not, and Kepone makes its way to my constituency, a confrontation will take place with the whole of the community.
  Womens' institutes, Methodist chapels, union branches, my constituency party and council, apart from the environmental associations, urge me to persuade the Minister to ban Kepone's entry. We have too many unfulfilled promises from BET, the parent company of Re-Chem.
  One of its subsidiaries, Rediffusion, came into my constituency with full support from the Government, the new town corporation and myself, deceiving us into the belief that its advanced technology was so certain that it would expand rapidly in the field of navigational satellite-assisted aid. The advanced technology ended in a shambles and led to the closure of the works, with hundreds of my constituents being made brutally redundant. The technological and safety skills now being pleaded by BET's Re-Chem subsidiary understandably, therefore, fall on deaf ears.
  I appreciate that the Department of the Environment has a difficult task trying to persuade people that modern industry must have the facilities with which to dispose of its wastes. Acceptance that that need exists can be secured only by the community's gaining increased confidence that it can be done safely and without disruption. The past record of Re-Chem at Pontypool has caused that confidence to be forfeited, and the Department would be unwise to give the company the opportunity to challenge the community's view.
  If Kepone came to Ponytpool I would regard it as my duty, as my mayor regards it as his, to picket the factory in a bid to stop its entry to the incinerator plant. I do not doubt that my constituents, of all political views, would join me. In the eastern valley we are a law-abiding community, and therefore we look to the Minister to use to the full the powers of the law that are at his disposal.
  12.11 a.m.
  Mr. Dennis Canavan: I also declare a constituency interest, in that the company referred to
  1300
  by my hon. Friend the Member for Pontypool (Mr. Abse) also has a disposal plant in my constituency at Bonnybridge. Since the plant was built there, and since I became the Member of Parliament for West Stirlingshire, I have received many complaints from constituents about the atmospheric pollution caused by it. I suspect that part of the reason for this has been that initially the company received the co-operation of the local planning authority, which was deeply concerned to secure the creation of jobs. There is no doubt that my hon. Friend the Member for Pontypool had that concern in respect of his area.
  It is clear now that the planning decision by the former Stirling County Council was a bad one, in that the plant is located in a low-lying hollow and that it is therefore difficult adequately to disperse the fumes that it produces.
  Although measures have recently been taken by the company to increase the length of the chimney stack, constituents still complain to me. Recently, after I reported certain matters to the inspectorate based in the Scottish Office, certain steps were taken and suggestions were made to the company, but a prosecution against the firm has been carried out at Falkirk sheriff court.
  In addition to these problems, there is now the threat at Bonnybridge of the importation of this dangerous chemical Kepone. I have tabled Questions to the Department of the Environment and the Scottish Office on the matter. On 5th May I received a reply from the Department of the Environment, telling me that the Health and Safety Executive had issued a prohibition notice to prevent the disposal of the chemical at the Pontypool plant, for which it had been destined. That information perturbed me somewhat. I thought that it was reasonable enough to prohibit the importation of the chemical into Pontypool, but I was anxious lest Bonnybridge would then be chosen as the place at which it should be disposed of.
  I therefore tabled a Question to my right hon. Friend the Secretary of State for Scotland and was told on 9th May that the Secretary of State,
  "has informed the company that he will issue a prohibition notice to prevent the disposal of Kepone at its Bonnybridge works unless and until he is fully satisfied that the disposal

  1301
  could go ahead without causing any environmental damage."—[Official Report 9th May 1978; Vol. 949, c. 483–4.]
  It appears from the difference in tenses used by the two Departments in those replies that before I had tabled my Question to the Scottish Office no prohibition order had been issued by my right hon. Friend the Secretary of State for Scotland. I should be grateful for clarification of that tonight.
  My constituents, like those at Pontypool, want an assurance about this matter. It is true that we are concerned about jobs. I would not like to see the plant close down in my constituency, because jobs are at stake. I am also in continuous contact with the trade unions within the company. Nevertheless, we want an assurance not just about jobs but about the safety precautions which are absolutely essential not only for the workers in the plant itself but also for the people in the wider community.
  12.15 a.m.
  Mr. Bryan Gould: I am grateful to my hon. Friend the Member for Pontypool (Mr. Abse) not only for raising this important matter but for generously allowing me a few minutes in which to make some remarks.
  The issue is of concern to my constituents, because one of the three plants operated by Re-Chem is at Fawley, just outside my constituency, which is the centre for a large population in Southampton. My constituents were naturally alarmed when they were led to believe, initially, that Kepone was to be brought to Fawley for incineration. I made a public statement expressing alarm at this possibility. This prompted a telephone call from the chairman of the company, who assured me that whatever else may happen, Kepone would not come to Fawley.
  I accepted that assurance. I imagine that it still governs the situation. Therefore, I take it—I wish my hon. Friends all the luck in resisting the bringing of Kepone to Pontypool and Bonnybridge—that whatever may happen at those sites, Kepone is not coming to Fawley.
  Nevertheless, although the immediate danger has been averted for my constituents, I believe that there are wider
  1302
  issues, some of which I have already raised in a letter to my hon. Friend the Secretary of State. I am satisfied by the terms of his reply that he is taking the matter seriously.
  I do not intend to traverse all the ground covered by my hon. Friend the Member for Pontypool, but there some specific questions which I hope my hon. Friend the Under-Secretary will be able to answer.
  First, we are told—most improbably, it seems to me—that there is simply no one in the United States with the competence and technical capacity to deal with the incineration of this chemical. I believe that that is so unlikely that it cannot possibly be true. Surely the more likely explanation is that after the frightening, terrifying experience with this chemical in Virginia, no one in America is prepared to have anything further to do with it.
  If we in this country, and Re-Chem in particular, are persuaded that we ought to have something to do with it, on the basis of the assurances given to us by the American company concerned with its manufacture, Allied Chemicals, let us be very careful indeed about that, because on this issue Allied Chemicals has a record of total irresponsibility. Indeed, it is still engaged in massive litigation in the United States, where it is denying responsibility for the tremendous damage which the chemical has caused.
  The second question is, if Kepone is in fact, as I believe, so dangerous that no one in the whole of the vast United States is prepared to deal with it, how is it that Re-Chem can be so confident, since it has never dealt with it itself, that it can deal with it without danger to the public? If, again, Re-Chem is relying on assurances about the composition of the chemical and the ease of its destruction—assurances obtained from Allied Chemicals—I insist that those assurances be regarded with the greatest scepticism.
  Finally, I urge my hon. Friend the Under-Secretary to take the point that although it is true that the public must be protected, it is equally true that the public must be seen to be protected. Therefore, if there is any doubt at all on this issue, I urge him to err on the side of safety.
  12.17 a.m.
  The Under-Secretary of State for the the Environment (Mr. Kenneth Marks): My hon. Friends the Members for Pontypool (Mr. Abse), Southampton, Test (Mr. Gould) and West Stirlingshire (Mr. Canavan) have raised for debate a matter of great importance to their constituents. It is a matter with national and international implications, too. My hon. Friend the Member for Pontypool talked about hostility, resentment and fear. We have heard the real concern expressed that a toxic substance, produced abroad, should be allowed to come into this country for disposal. We have had an account of the problems which Kepone caused in America and fears of what might happen if it were allowed into this country.
  I fully understand why my hon. Friends should feel so strongly. It is right and proper that they should. I myself would not for one moment wish any disposal operation to go ahead if it appeared to pose an unwarranted risk to public health or to the environment. My right hon. Friend the Secretary of State for the Environment has powers, which he would not hesitate to use, to prohibit the importation of any substance if he considered it necessary for the purpose of protecting public health or the environment. He would be required to lay an order before the House for approval, so it is important to consider the facts carefully.
  First, no decision has yet been made on whether or not the proposed incineration will go ahead. The proposal is at present the subject of a prohibition notice served by the Health and Safety Executive. This will not be lifted until the Executive has agreed on a safe system of work with the disposal company. I understand that discussions are going on between the firm and the Executive, but that it may take a considerable time before any decision is reached. This is, of course, a matter for my right hon. Friend the Secretary of State for Employment, who has responsibility for the Health and Safety Executive.
  I urge my hon. Friends to put any facts they have—including any information from environmental health officers or councils in their constituencies—to the Executive and to the Secretaries of State for the Environment, for Wales and, now that my hon. Friend the Member for West Stirlingshire has intervened, for
  1304
  Scotland. In the meantime, the consignment of Kepone is in Baltimore, Maryland. We have been given assurances that the firm has no intention of bringing it into this country until the necessary consents have been received.
  Kepone is undoubtedly toxic and environmentally persistent. It is the trade name for the chemical chlordecone, which is used as a pesticide, primarily in the form of an ant and cockroach bait. It was manufactured in the United States of America for about 10 years by the Allied Chemicals Corporation, apparently without incident. Then, in 1974, Allied Chemicals transferred its manufacture to the Life Science Product Company.
  By all accounts this was a very poorly managed operation; the manufacturing process itself was virtually uncontrolled. As a result, several employees suffered from Kepone poisoning. The health effects included disorders of the nervous system, liver, kidneys and testes. In addition the James River, in which there were important shellfish colonies, was extensively polluted.
  In considering these alarming facts it is important to bear in mind that the work force at Life Science was permitted to remain in continuous and direct contact with the Kepone for over a year, and that the company discharged untreated Kepone waste direct to the sewerage system. This would not, of course, be the case if disposal went ahead in this country. The statutory controls on which we rely are extensive, as I shall remind the House in a moment.
  The manufacture, sale and use of Kepone was banned in the United States in 1975, although I understand that the sale of existing stocks of ant and cockroach bait containing Kepone is still permitted. The Allied Chemical Corporation now apparently has for disposal about 60 tons of Kepone-contaminated waste. I am informed that although the States of Virginia and Maryland have prohibited the disposal of Kepone in their territories, there is no Federal ban on incinerating the substance.
  Incineration of Kepone at 500 degrees to 700 degrees Centigrade for one second is quoted in the literature as sufficient for its safe destruction. The residues after incineration are carbon dioxide and a

  1305
  solution of common salt and sodium carbonate in water. Some of the carbon dioxide would be discharged to atmosphere and the liquid effluent, after treatment, into the sewage system.
  I must now attempt to answer the perfectly reasonable question why should we in this country have to dispose of American Kepone which they themselves consider too dangerous to handle?
  In the first place we do not have to. There is no question of a dangerous substance being foisted on us. Re-Chem International Ltd, the United Kingdom waste disposal firm, entered into a voluntary arrangement with Allied Chemicals. The proposal was for a trial incineration of 10 tons of waste containing rather less than 1.5 tons of Kepone. While it is not my business to plead its case, Re-Chem is a reputable firm whose technical expertise and wide experience made it natural for Allied Chemicals to approach it. Its incinerator is capable of sustaining 1000 degrees c—as against the 500–700 degrees c quoted for the destruction of Kepone—for a longer burn than the one second also quoted. It seems unlikely that any comparable facilities in the United States are commercially available. The transfer could therefore, on a world basis, make environmental as well as economic sense.
  I turn to the question of safety during transportation of the waste. The Kepone is at present packed in two inner polythene bags within a steel drum with a secure lid. The drums are stacked in threes on a pallet which is shrink-wrapped in polythene. Twenty-six such pallets, comprising 78 drums, are packed in a steel container which would not be unpacked until it reached its destination.
  I turn to the controls which would apply. Under the Control of Pollution Act 1974, waste disposal plants and facilities in the United Kingdom are subject to licensing by the waste disposal authorities. In Wales and Scotland these are the district councils, and in England the county councils. Before issuing a licence a waste disposal authority is required to refer the proposals to certain statutory consultees, including the water authority and the Health and Safety Executive. The waste disposal authority may specify operating conditions in its licence. I am told that the Pontypool plant of Re-Chem International Ltd. has a valid disposal licence
  1306
  whose terms would permit the incineration of Kepone and that no legal proceedings have ever been brought against the firm in respect of the operation of its Pontypool plant. My hon. Friend the Member for West Stirlingshire was right to say that the firm was fined £50 for incinerating iodine.
  A waste disposal authority, however, is empowered under the Act to modify or revoke its disposal licence, and no doubt the Torfaen District Council will consider this course. It would obviously have to have solid grounds for doing so within the terms of the Act, and the firm would have a right of appeal, but the possibility is there.
  The disposal licence, however, is not the only control. Effluent discharges must have the consent of the regional water authority; gaseous emissions are controlled by the alkali inspectorate and the Executive's factory inspectorate also needs to be satisfied about the safety of the work force and of the general public. Transport also has to be under stringent safeguards. Every phase of the operation would therefore be subject to control.
  To sum up; at the moment the disposal is prevented by a prohibition notice issued by the Health and Safety Executive. It will not be lifted unless and until my right hon. Friend the Secretary of State for the Environment and my right hon. Friend the Secretary of State for Wales, and the Health and Safety Executive themselves are fully satisfied that the waste can be transported and disposed of without danger to health. Until it is lifted, there is no question of the waste being moved to this country. We shall not hesitate to use the powers available to us to prevent the import if they prove to be justified. But, equally, we could not apply them if a rigorous examination of the facts showed no unwarranted risk to be involved.
  Finally, I wish to inform my hon. Friend the Member for Pontypool that I have received a request for a deputation to be seen by my Department, and I assure him that my hon. Friend the Under-Secretary of State and I will be glad to see them on this matter as soon as it can be arranged.
  Question put and agreed to.
  Adjourned accordingly at twenty-nine minutes past Twelve o'clock.

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

BANABAN COMMUNITY: CONTROL OF COMPENSATION
Lord BROCKWAY: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will accord the Banaban people, through their elected representative Council, the control of the expenditure of the ex gratia offer made to them in compensation for the damage to their island homeland.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, we have proposed to the Banabans that the ex gratia offer of 10 million Australian dollars to provide for the future of the Banaban community should be discussed through legal channels, and they have welcomed the suggestion. Her Majesty's Government have no wish to be involved in the administration of the fund once it has been established.
Lord BROCKWAY: My Lords, while appreciating that reply, and being a little surprised by it, may I ask whether the ex gratia payment of £6¼ million is not a fraction of the benefit which Great Britain, Australia and New Zealand have received from the phosphates that have been supplied? Will Her Majesty's Government resist any idea of appointing a trust fund from which the Banabans would receive only interest, rather than having control of this fund by the capable, elected representatives of the Banaban people?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I have already said that Her Majesty's Government have no interest at all in administering the
700
fund once it has been set up, but I would remind my noble friend that the Rabi Council has just changed hands and that of the old Council only two members are left. There might possibly be a difference of view, therefore. There might quite easily not be, but that is something we have to consider.

ARMS SALES RESTRAINTS: THIRD WORLD
2.38 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will indicate their willingness to join the United States and the Soviet Union in discussions to restrain the sale of arms to the Third World countries in view of the agreement between the Governments of the United States and the Soviet Union to do so.
Baroness LLEWELYN-DAVIES of HASTOE: Yes, my Lords, and with any other concerned Government. My noble friend Lord Goronwy-Roberts is today attending the United Nations Special Session on Disarmament. Her Majesty's Government, together with nine other Western countries, have tabled a draft programme which calls for a United Nations study into ways of limiting the worldwide build-up of conventional arms. A copy of the programme has been placed in the Library.
Lord BROCKWAY: My Lords, in welcoming that Answer, and on this occasion not being surprised, may I ask whether it is not a fact that the cost of major weapons to Third World countries, excluding the Vietnam war, rose between 1956 and 1976 from 1,293 million dollars to 7,312 million dollars? Is that not a terrible cost for the poverty-stricken areas of Africa and Asia to bear?
Baroness LLEWELLYN-DAVIES of Hastoe: My Lords, without confirming my noble friend's figures, it is undoubtedly true that defence costs have risen very considerably in the Third World. This is one of the reasons why Her Majesty's

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Government are taking part in the United Nations Special Session on Disarmament. We bear it very much in mind.
Baroness GAITSKELL: My Lords, may I ask the noble Baroness this: Is it not a great mistake to bracket the United States and the Soviet Union in this way? —when we consider that the Soviet Union only gives aid in the form of arms, whereas at least the United States gives both arms and development aid.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, my noble friend speaks with great experience from sessions at the United Nations.
Lord BROCKWAY: My Lords, is it not very significant indeed that it should be the unaligned nations which have initiated a Disarmament Conference?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I am so sorry; I am afraid I did not hear my noble friend.
Viscount ST. DAVIDS: My Lords, has the noble Baroness any figures she can give to the House as to who are the major providers of arms, so that we may know where most of the arms come from?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, the United Kingdom provides about 5 per cent. of the arms. The two major donors are the United States and the USSR.
Lord BROCKWAY: My Lords, without defending in the least the Soviet arms, is it not a fact that the Soviet Government have contributed greatly to development aid in Africa?
Baroness LLEWELYN-DAVIES of HASTOE: I think that is true selectively, my Lords.
Baroness ELLES: My Lords, would the Minister be able to give figures of how much the Soviet Union has contributed to Africa in terms of aid, compared with what the United Kingdom, and particularly the European Community, has done?
Baroness LLEWELYN-DAVIES of HASTOE: Not without notice, my Lords; but if a Question is put down I will answer it.

ZAIRE: PROTECTION OF UK CITIZENS
2.42 p.m.
Lord CAMPBELL of CROY: 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 they are taking to protect the safety and interests of United Kingdom citizens in Zaire.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the noble Lord, Lord Campbell, and of the House, at a convenient moment after 3.30 p.m. I will reply to this Question by repeating a Statement being made in another place.

BUSINESS OF THE HOUSE
The LORD PRIVY SEAL (Lord Peart): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That leave be given to the Lord Wallace of Coslany to advance the Second Reading of the Co-operative Development Agency Bill from Thursday the 25th to Wednesday the 24th of May.—(Lord Peart.)
On Question, Motion agreed to.

NORTH SEA OIL: LICENSING
2.43 p.m.
The Earl of GOWRIE The Earl of GOWRIE rose to call attention to the policies of Her Majesty's Government in respect of North Sea oil and with special reference to the document: United Kingdom Offshore Petroleum Production Licensing: Sixth Round; and to move for Papers. The noble Earl said: My Lords, in recent months we have debated the present and likely effects of North Sea oil on our economy, and we

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have debated our need to use this windfall as an opportunity to concentrate on those alternative forms of energy which will become even more important to us as our oil stocks are depleted. These are of course great national issues and will remain so, and I am quite certain that we shall return to them under the terms of some Motion or another. But in moving this Motion this afternoon, I want to try to narrow the issues just a little, so as to concentrate them and, perhaps, so as to be able to concentrate upon them, because I am convinced that all our attempts to deploy this marvellous national resource to the end of national economic renewal will, in fact, founder unless we get right our policies of extracting and exploiting the oil.
I believe that at the moment we are well on the way to getting our policies wrong. Of course, we all have an interest in North Sea oil which is wider and more profound than our individual political viewpoints—energy, in one form or another, is life itself—and we should strive for as wide a political consensus as possible on a resource that affects us all so acutely. But politics are in the end about choices, and in our democratic system choices are about politics.
So I believe that the opportunities and chances for our political economy, which the discovery of North Sea oil now offers, are unfortunately receiving the wrong response, and that the response is damaging and dangerous to our national interest. I say that because it seems to me that, if we get our sums wrong, if we make the wrong decisions now, we shall effectively have thrown away what is unquestionably the greatest chance we have had since the first industrial revolution to revitalise our economy and make it more responsive to the needs of our people. I therefore make no apology for trying to narrow, in order really to define, the policies open to us.
It would be naive, too, not to acknowledge that a General Election is less than 12 months away. It seems to me—and I do not know whether other noble Lords on all sides share this opinion—that there exists some confusion among the public as to where the two leading Parties stand on this critical issue, and as to what the choices actually are. I hope that one of the effects of this afternoon's debate
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may be that the Government will have to state a little more clearly what they are up to, and that, indeed, we on this side will be able to dispel a few myths and a few rumours that have been going the rounds about our own position.
Let me try, if I may, to give a brief outline of the Government's policies for North Sea oil, as I understand them. I am sure that the noble Lord, Lord Strabolgi, when he comes to speak—whether it is in his opening speech or whether, by leave, it is in his winding-up speech—will, in his usual courteous and always friendly way, tell me that I am over-simplifying, but at least that will give us a chance to get the Government's own account. It seems to me rather appropriate that we should hear the Government's account of their policies on North Sea oil here in the House of Lords, because, of the three principal architects of the policy, two are Members of your Lordships' House and one should be.
The fine Hungarian hand of the noble Lord, Lord Balogh, who, unfortunately, through no fault of his own, cannot contribute to the debate this afternoon is, I think, everywhere apparent in the policy. The chief executive of the policy is the noble Lord, Lord Kearton, and in my respectful, but also, as I hope will become apparent, critical view, he is one of the ablest Members of your Lordships' House. And the Secretary of State for Energy, Mr. Benn, is only a "Mr." through his own considerable resources and skill. In case your Lordships think that I may be straying into the minefield of personalities, let me be very clear that there is absolutely no way around this. Her Majesty's Government's policy for the extraction and exploitation of North Sea oil is inextricable from the beliefs and talents of these three remarkable men, and we must at least pay them the compliment of not underestimating their rôle and their importance.
The linch-pin of the Government's policy, and nowhere is it more apparent than in the Consultative Document referred to in the terms of my Motion, is the creation and expansion of the British National Oil Corporation. The argument associated with its creation, and with the thinking of the noble Lord, Lord Balogh, is as follows. Britain's considerable oil resources have not been,

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and perhaps could not be, developed without the involvement of the major international oil companies, including, of course, one and a half British companies—that is, BP and Royal Dutch Shell—and indeed one British nationalised corporation, the Gas Board.
These companies are adept at bringing pressure to bear on sovereign States, so the argument goes, many of whom start life, in economic terms, poorer than the companies themselves. They are adept at tax avoidance and they know a good deal more about the fiscal dimension of their activities than anyone from the Inland Revenue. As the noble Lord, Lord Balogh, said on a public occasion, the Inland Revenue is in the tax business; the oil people are in the oil business. They are too useful, the argument goes on, to exclude and they are too powerful—that is, too profit orientated—to tame.
The thing to do, therefore, is to join them in a set of partnership or participation agreements. This has precedent on its side because all oil-producing countries, except America, have national oil corporations. Indeed, the great oil companies expect such participation and, with more or less grumbling, have learned to live with it. In addition, only actually working in energy industries gives a nation the necessary expertise to deploy what may be its greatest national asset. That, briefly, but I think accurately, is the economic argument.
The political argument is not dissimilar. Indeed, from the Government's point of view there is a certain rather pleasing symmetry to it. A mixture of exigency, the International Monetary Fund and the personal tastes of senior Ministers—as well, of course, as of electoral considerations—has spelled a swing to the point of view of the capitalist end of the mixed economy after our acute inflation and currency crisis of 1975–76. But the Labour Party—as it should be, as it is perfectly respectable and proper that it should be—is a Socialist as well as a national Party, and many members of the Party inside Parliament and outside it were clearly dissatisfied at this swing. So nationalising North Sea oil, whether by the front or the back door, and putting a leading Socialist Minister at the Department of Energy, was a welcome move for the Left. But since nationalisation, in
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the sense of the overt purchase or the overt confiscation of assets, would be both economically impracticable and electorally unpopular, the rapid rise of a dynamic State-owned corporation, operating to some degree as partner and to some degree as referee of international capital, would do the trick. Therefore Mr. Benn and Lord Kearton went through the international energy industries like Bonnie and Clyde went through the Southern States' banks in the early 1930s. In case again that your Lordships think I may be giving a partial or personal view of this, the latter intention has been clearly spelled out by Mr. Benn and others in political papers and political meetings which I have attended.
I need not rehearse in this context the rapid rise of BNOC in response to this partly political and partly economic programme. Certainly it could not have taken place without the formidable talents of Lord Kearton, and again I should like to pay tribute to those talents, if not to the ends to which they are being put. The history of State entrepreneurism in this country is not a particularly happy one. In general, it has been the case that the best men have stuck to the private sector, but Lord Kearton is clearly an exception and Lord Robens comes to my mind as another. Noble Lords on all sides of the House will probably think of their own examples.
At present, BNOC has achieved a remarkable left-and-right in emasculating the Department of Energy and the large oil companies simultaneously. The former has lost the real powers of regulating oil activity by co-ordinating what is actually going on. It has also lost experienced personnel to BNOC. The large companies are stuck with a partner who is also a referee whom they declare publicly they trust—because they need the licences—but whom privately they say that they do not trust. As an instance of this anomaly, consider the case of Mr. Bob McAllister of Occidental Oil and Mr. George Keller of Chevron. Mr. Keller was the man who, in the appropriately Coleridge-like imagery of our cold North Sea, called BNOC an albatross hung around the oil industry's neck and immediately had to retract so saying. Mr. McAllister was the man who dared to say that BNOC was a device to put the

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private oil companies out of business in the United Kingdom. Terrified of ruffling feathers while the sixth round allocations were still a gleam in the Secretary of State's and Lord Kearton's eyes, Dr. Armand Hammer, the head of Occidental, hustled Mr. McAllister off to Canada, rather as Lord Lundy's grandfather sent him off to govern New South Wales.
The position, therefore, at present is that BNOC, under Lord Kearton, is a crude oil producer in its own right; that it is entitled to participate as a 51 per cent. partner in all the current or fifth round of licences for exploration and development; that it is entitled to negotiate an option to buy—a straight purchase—51 per cent. of the oil from the fields discovered before round five and, indeed, before BNOC came itself into existence; that it is, under the Secretary of State's announcement of 5th April last and under the present Consultative Document, formally awarded also 100 per cent. ownership of nine more blocks for which no other company is allowed to apply.
Further, if we read paragraph 5 in this Consultative Document we see that:
"The Secretary of State will expect BNOC to be operator for the exploration phase in six blocks, the selection of which will be made after applications have been received".
The point of this, surely, is to give BNOC the chance of seeing which are the most popular blocks—that is, which are likely to be the most fruitful—in order to nab them. By itself, that seems to me to be a nice little piece of real politik; but, whatever one thinks of it, it does make rather a nonsense of the 51 per cent. participation of taxpayers' money in what BNOC deems to be less promising fields for exploration.
Lastly, the Corporation is at present causing frenzied anxiety about the clash between its role as the manager of the Government's participation interests—as the adviser of the Secretary of State, if you like—and its role as an "eighth sister": a dynamic and growing oil company moving into downstream activities; that is, the refining and marketing of oil in competition with the private sector.
At this point I want to make it very clear that on this side of the House our objections to BNOC's growth of powers
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are not a simple or philosophic matter of the State sector—a nationalised industry, if you like—versus the private sector. Other things being equal, putting the national cat among the multinational pigeons may even be a desirable thing to do. This is not the moment nor the debate for political science, but too often is there confusion between the Conservative tradition and the Liberal or Whig tradition. Tories have always been interventionist, and no doubt they will be again. What we object to is the old confusion generated here between the interests of the State and the interests of a particular State body. In short, the cat is in the process of becoming the pigeon.
Britain's interest in her oil is not, in our view, the same thing as the interest of the large oil companies, although it occasionally overlaps with their interest; but nor is Britain's interest in her oil the same thing as the interests of the British National Oil Corporation, which is rapidly coming to assume the character and ambitions of the companies that it deems to regulate. This is the crux of the matter. As we see it, Britain's overriding interest is to use the cut in the oil imports bill—to use improvement in the balance-of-payments position—to obtain the breathing space needed for repairing the damage to her real economy.
It is the real economy that makes things, that sells them and that enables us to buy what we need and to give our people the jobs that they need. I contend that nothing in the Government's policy, nothing in the ambitions of BNOC to become a multinational among multinationals—and what a strange Socialist ambition this is, my Lords!—is adding one penny of revenue which could not be achieved in another way more rapidly and which could not be achieved in another way more simply. Nothing that BNOC is doing is adding to the private domestic sector, to British business and British industry which, by the Government's own admission—at least in the person of Mr. Harold Lever—is the only begetter of employment and prosperity.
In the last debate that we had on North Sea oil I asked your Lordships rhetorically but not, I think, fancifully, to imagine the situation where Japan had discovered oil on her off shores. I postulated that within ten or twenty years Japanese home-based oil industries would have been active

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and operational around the world. How on earth is BNOC helping our native oil industries? There is urgent need to restore confidence and open dealing to the oil industry. The industry needs to know where the Government stand—where any Government stand—and how they define their share and their interest in the resources for which they are accountable. This knowledge should not come from a competitor—from a hived-off and barely accountable corporation—but from a Minister in overall charge of a Department of State and accountable for his Department in Parliament.
At present, it is incredibly difficult to get information about BNOC's activities or intentions, as anyone who works in the oil industry will tell you. Herbert Morrison's concept of the public corporation as a legally independent entity established by Parliament but not directly responsible to it, and with large but quite unspecified powers of ministerial invervention, is not only, it seems to me, out of date but has a record of proven disaster. Witness the dislike of even Labour supporters for the nationalised industries. Consider British Steel. Remember what happens in this House as well as in another place when anyone asks a question about the Post Office or when someone like the noble Baroness, Lady Burton of Coventry, has a go at the airport facilities. The phrase, "that is a matter for the commercial judgment or day-to-day management of BNOC", is not what one looks forward to hearing from the Dispatch Box, from either side of the House.
The oil industry is terrified to criticise BNOC publicly or even to ask it questions for clarification in public because of the Corporation's powers to influence the award of leases. In preparing for this debate your Lordships would hardly credit how many oil "rabbits" I met. I practically had to put on a false moustache and a plain mackintosh to go into some of their company offices.
I want to repeat that what is good for a private oil company is not necessarily good for Britain. Uncertainty and delay and the non-accountability of publicly financed bodies is even worse and I must also add that BNOC's association with the Secretary of State—the apostle of open government—seems to us to be a nauseat-
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ing hypocrisy. There is the urgent need to reduce delays in the exploration of off-shore hydrocarbons. We must not confuse delays with a policy for depletion. I shall be absolutely emphatic that there is no such thing as a free market for a finite and indeed diminishing energy resource. The success of British agriculture, as noble Lords on this side of the House will know, was not built up through free markets. The national interest, and therefore the Government's interest, so long as the Government are properly accountable, are always involved with questions of pricing (which the nation cannot always control) and with questions of depletion and conservation (which it usually can control). But we cannot conserve what we do not know is there. The detailed intervention by BNOC in every operating agreement, the persistent upping of the ante in BNOC's favour once agreement has been reached, so new discussions towards yet another agreement have to take place, have reduced exploration for North Sea oil to the speed of a submarine snail. Under round four, the Conservatives' last licensing round, so often derided by the noble Lord, Lord Balogh, and Mr. Benn, drilling on several blocks had begun within two months of the allocation of licences: the present rate is nearly two years. If BNOC had been in control of round four I think that, as a nation, we should still be snipping around the perimeter of the Forties field. I do not think this is a small or a niggling point. The average size of the 14 oil fields at present in production is slightly over 600 million barrels a day; the projected average size of the next 10 fields is 300 million barrels a day and, as we go on into the 'eighties and' nineties, the average size of field will go down as well as occurring in even deeper water. So we must make it worth while and make it a national priority to find out what we have got. Only then can we decide what we should do with it.
I cannot see the case either—but perhaps the noble Lord, Lord Strabolgi, will give it—for the involvement of the public sector in oil speculation and in trading. The noble Lord, Lord Kearton's conception of BNOC as a multinational oil company dealing, albeit on unequal terms, with other multinational oil companies, seems to me to be not merely dubious in

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terms of commercial morality and constitutional propriety but altogether unnecessary as well. Why should public money be committed to the exploration of fields before we know what is in them? Why do we have to take a 51 per cent. participation in the "dud" fields? Again, there is a fundamental difference here between the concept of the State as a regulator and protector of what it deems to be the national interest and the concept of the State as an entrepreneur. We passionately defend the former; we shall have to be very powerfully persuaded indeed not to put an end to the latter. If I were the noble Lord, Lord Kearton, I should make sure to light a candle for a Labour victory at the next election.
At present, BNOC is using public money to buy large quantities of crude oil. It has borrowed 825 million dollars against future oil receipts in money markets here and abroad without Treasury indemnity and therefore without ministerial control. I wonder whether the noble Lord, Lord Strabolgi, can tell us in his winding-up speech what the Treasury thinks of that particular activity. I understand that most of the money is earmarked for the exploration of fields which the oil companies themselves are committed to drill in any case, so where is the sense and where the justification for this? How ironic, too, that the Corporation should be forced by price mechanisms which its own activities are affecting to make distress sales of stock-piled crude. It seems to me that Governments, unlike oil companies, are in a "no lose" position where oil is concerned. When we form a Government we shall put an immediate end to gambling and commercial indisciplines of this kind.
Other speakers in the debate will no doubt touch on, and bring their own experience to, other aspects of policy. I am thinking in particular of some of the international and strategic implications of North Sea oil and I am glad to see that the noble Lord, Lord Chalfont, in what I hope is merely an intermediate stage of his Western journey round the Chamber, has put his name down to speak. I am also glad to see that the noble Lord, Lord Vaizey, who has long, in print at any rate, been a mentor of mine has not only put his name down to speak but is
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also making a step in the right direction. Also, I look forward very much to the maiden speech of the—as yet—still loyal noble Lord, Lord Hatch.
For my part, the most useful thing that I believe I can do from these Benches this afternoon is to put an end to the myth that is going about in the Press and elsewhere that in some way the next Conservative Government will not, or will not be able to, put an end to BNOC as it is at present constituted. We shall do so. We shall start by making it immediately and uncontrovertibly clear that the advisory and regulatory section of BNOC's activities will be returned to the Department of Energy; we shall put an end to the large discretionary powers of the Department and of BNOC; we shall see that any powers of participation that remain to BNOC are authorised by Parliament and we shall tax BNOC like the other companies. It should not therefore be taken for granted that BNOC will automatically survive a change of Government any more than the major oil companies should take it for granted that there will be a continuation of the principles of round five when not one of the smaller independent British companies was cast in an operating rôle.
We on this side of the House are not beholden to the oil companies and we will not be beholden to BNOC. Our only objective is to see how the resources of the North Sea, which cannot by themselves solve anything, can buy sufficient time to get the industrial economy of Britain on to a sound footing, to restore profitability and incentive and lower unemployment levels, and to give back to the British people confidence not simply in a diminishing asset but in themselves. My Lords, I beg to move for Papers.
3.10 p.m.
Lord TANLAW: My Lords, it is always a difficult task to follow the noble Earl, Lord Gowrie, especially when he makes such a brilliant and detailed presentation of the oil industry as he sees it today. It reminds me in fact of a very famous night club pianist whose playing of melodious tunes brought him instant success throughout London. The secret of his success was not so much the notes he played but the ones he left out, which

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gave him a unique and interesting combination of musical skill. The noble Earl has put a case and put it extremely well. I feel that in some ways the case may be slightly over-biased in favour of the large multinational oil companies, although I am convinced that the noble Earl may well deny this in his winding up.
If we go back in history just a very short period, it is not so long ago when the question of licences came up in your Lordships' House, and these were being given away rather like pieces of sliced bread at a soup kitchen. There was no negotiation. It was the noble Lord, Lord Balogh, and also some noble Lords, including myself, on these Benches, who drew attention to some of the things that were going on. It was out of debates in this Chamber that BNOC was formed and some of its policy was formulated. It has only been the activities of the noble Lord, Lord Kearton, the noble Lord, Lord Balogh, and other noble Lords, as well as others outside this House, that have put the United Kingdom's position in terms of the North Sea oil industry on a basis so that we can negotiate, even now, on only semi-equal terms with those multinational companies which would have wished, given the opportunity, to take a far greater slice of the cake than would have been advantageous for the taxpayers of this country.
It was not just a question of nationalised greed, as the noble Earl implied. The position was that there was a serious lack of knowledge in the Departments in Whitehall involved with energy as a whole. There was not even a Department when I originated one of the early debates in your Lordships' House, and as a result of the OPEC crisis a new Department of Energy was formed. But that was only a few years ago, and I think we should put some of the remarks presented by the noble Earl, Lord Gowrie, in historical perspective before we focus in detail on the main part of this debate, which is the terms of the sixth round licences.
The BNOC is a creature of government and it was established to tame the tigers that had dominated the arena of international oil trade. I take the point the noble Earl made as to whether BNOC will still retain what I believe to be its benign intentions in the years to come when
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it reaches maturity, or whether it will turn instead into an animal which is almost indistinguishable from those it set out to tame in the first place. I sincerely hope not, and provided that there are adequate financial checks on the way it operates its accounts and on the terms on which it raises its money I see no threat either to the multinational oil companies or to our existence here in the United Kingdom as consumers of energy.
If we look at the terms in which BNOC was created, there is a note in its accounts which says that according to Section 15 of the Petroleum and Submarine Pipelines Act 1975 the chairman is responsible to the Minister for Energy. So I do not share the extent of the fears the noble Earl has that the chairman of BNOC is able to act too much in his own right to the exclusion of the Minister, who is, after all, his master in this situation. I do object, however, that there are no shareholders in BNOC; the annual general meeting, if I can call it that, is replaced by a Press conference. At the same time, the Minister presents the accounts, not at an annual general meeting but on the Table in another place, before Parliament. This offers some opportunity to study these accounts, but in the years to come it may not be quite enough.
I am concerned with only one aspect, which is that it is not that there are not enough masters but there are almost too many masters of BNOC. The detailed scrutiny of the accounts is primarily the responsibility of the Select Committee on Nationalised Industries, which is in this case indirectly responsible to the Public Accounts Committee through its supervision by the Auditor General of the National Loan Fund and the National Oil Account, which are the sole sources of income and finance for the Corporation. I should like the noble Lord who will be replying to the debate to bring some clarification to this. There is quite a possibility, a danger, of overlapping here: when we consider the magnitude of the figures that will be involved in terms of income and royalty income not so many years hence, there could be a danger that these various sources of control will overlap to the extent to allow some funds to get through unaccounted. I do not want to go into details of this, but it was a very similar arrangement that brought about the muddle over the Crown Agents'

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financial situation. I personally would be much happier if there were some clearer mechanism of accountability than we have at the moment.
If I may turn to the life of the BNOC, I had prepared a note to say that it was a short one, but I did not realise it was going to be quite so short until I heard the noble Earl say that its future would possibly be in doubt if there were a change of Administration. But the life of BNOC can only be about 15 years. If we refer to Cmnd. 7101 we see that the United Kingdom becomes once again a net importer of crude oil, and presumably by that time there will be no more oil to discover and no more licences to be given out or negotiated. What this gives us in this country is 10 more years. And the European Economic Community, according to some calculations, will be forced to import most of, if not all, of its oil requirements by 1985. Bearing this in mind, we should look very carefully at what BNOC's future will be in 15 or 20 years time. I assume that it will then develop and graduate into the distribution business and become a familiar sign on the roadside alongside Shell and Esso and other signs which are so familiar today, in which case I believe there is a very different set of arguments and a very different set of parameters to put to its activities.
But at this point of time we are not concerned with distribution but with exploration and the trading in crude oil. Another point mentioned by the noble Earl was the slowness in giving out these exploration licences. I accept that there has been some slowness, but I am not sure that that is a bad thing. There seems to be far too much crude oil in world markets at the moment. The international oil companies and BNOC itself are awash with crude oil which they cannot sell at the price at which they would like to sell at the moment. I think there is a case for going a little slowly rather than adding to the problem and depressing prices artificially, as they would be if exploration rates were increased rather violently in the next two years. That would create another crisis of its own.
When we consider oil—and I said this four years ago in an energy debate—we are, in terms, considering money or
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currency. It is, as it were, a form of black currency. If we create an artificial reduction in price at this stage it will have effects far outside the parameters of an energy debate or an energy Minister.
Lord ORR-EWING: My Lords, would the noble Lord not agree that the case which he is making out—the case, that there is currently a surplus of oil—makes it all the less desirable that the BNOC should be stockpiling oil at today's prices which it may have to unload at cheaper prices tomorrow and thus cost the taxpayer sorely?
Lord TANLAW: My Lords, the point that I was attempting to make was that if BNOC unloaded it now the problem would be a reduction in price. There is a case for retaining it and, hopefully, maintaining the price of oil at the same time.
I should like to revert to some words which were used by the noble Earl when he opened the debate. He used the phrase "terrified oil companies". That, in my view, is a very rare state for oil companies of the size that were mentioned by the noble Earl. These "terrified oil companies" have managed to exercise a control on the President of the United States of America. Some of the major policy decisions of the United States have been greatly affected by the attitude of the oil companies. The power that they have is out of all proportion to the number of people involved. We do not want that situation to occur here. I do not believe that these are small men frightened of a national oil company that has only 750 employees. This is the only time that I have heard of an oil corporation of the size of Shell or Esso being described as "terrified".
The Earl of GOWRIE: My Lords. I am grateful to the noble Lord, Lord Tanlaw, for giving way, but he is misquoting me. I said that the oil companies were terrified to criticise BNOC policies publicly. That is different from saying that they are generally speaking terrified.
Lord TANLOW: My Lords, it is a free country.
The Earl of GOWRIE: My Lords, that is just the point—it is becoming increasingly less so.
Lord TANLAW: My Lords, let us get back to the terms of the debate. I still believe that the day is not yet here—and may it never be for anyone on these Benches to say that it will come—when the chairman of an oil company is for one reason or another unable to unburden himself in public in this country. He can do it in Hyde Park if he is frightened to do it in the papers. I simply do not accept the argument.
I am totally against nationalisation but I believe that without the BNOC this country, in terms of its executive and, indeed, in terms of this Chamber and Her Majesty's Government, would not have the expertise or knowledge to know that we were not, in fact, being "done" by the oil companies. We took far too much for granted before the formation of the BNOC. Although I think that we should watch very carefully that as it grows it does not become out of hand and does not enter into the kind of agreements or practices which the noble Earl suggested that it could or might do—I would join him in opposing such movements in that direction—at this stage of the game I think that we should try to help preserve and cultivate it, but at the same time keep an eye on it.
I eventually return to the point that I have been attempting to establish. Very early in his remarks the noble Earl mentioned the worry that these oil companies might have as regards a nationalised agency. It so happens that I heard, I think it was yesterday, that a Chinese language newspaper in Hong Kong put down the fall of sterling relative to the Hong Kong dollar as being solely because the British Government had sold the North Sea assets out to overseas and multinational operators. That is the kind of story that gets around. I believe that it is less likely to get around if the BNOC is given some structure and some guts to take on these giants in the multinational oil field at something like their own level. It is not a perfect organisation and I have already added to the criticisms that have been made by the noble Earl. Indeed, I shall continue to do so, especially in terms of its accountability and money raising facilities. Nevertheless, at present—this being the time of the sixth round of exploration licences—with the reservations that I have made, I, from these Benches, am happy to see
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the BNOC go ahead, and I wish it well at this stage.
3.25 p.m.
Lord STRABOLGI: My Lords, I am very glad that the noble Earl, Lord Gowrie, put down this Motion for debate and has afforded us the opportunity of a wide-ranging discussion on offshore oil policy. It has also provided the noble Earl with the opportunity to show the differences of approach which noble Lords opposite and the Government have to the matter of safeguarding the benefits of this vital resource for the nation. I noted carefully what the noble Earl said and I shall, at this stage, review briefly the policy of Her Majesty's Government and the results of our North Sea policies. At the end of the debate, as the noble Earl surmised, I shall deal with some of the points of detail, like Britoil to which he referred. However, I find myself in much more agreement with the speech of the noble Lord, Lord Tanlaw, who I thought had a much clearer appreciation of some of the difficulties involved.
Our two major objectives were set out in the White Paper of July 1974; they were, first, to secure a fairer share of profits for the nation and to maximise the gain to the balance of payments. There needed to be a big increase in Government revenue from the Continental Shelf, although we recognised then, and continue to recognise, that the companies must have a suitable return on their capital investment. Secondly, it was necessary to assert greater public control in order to protect the public interest.
In pursuance of those objectives, we have introduced the petroleum revenue tax and a "ring fence" to safeguard corporation tax on North Sea profits. The "ring fence" prevents the companies setting off losses unrelated to the North Sea against profits made from the North Sea, and thus protects for the nation its proper share of the profits. These measures were essential to correct the inadequacies of the tax and licensing regime which we inherited from the previous Conservative Administration and which would have led to substantial losses in tax. I should remind your Lordships of some of the remarks made

719
in the 1973 report of the Public Accounts Committee on the loose arrangements which the previous Government had made and the lack of tax and the losses. The measures that we have introduced will help to increase the nation's share of North Sea profits to around 85 per cent. from fifth round licences, when due account is taken of the State's equity share in the licences. I was very glad that the noble Lord, Lord Tanlaw, agreed with the very necessary measures that we took.
We have succeeded in negotiating participation by BNOC in all discoveries made under the first to fourth round licences. We have established a State oil company which in a mere two years' existence has achieved a notable entry into offshore exploration, development and production. In the last year it has, for example, brought into production a major North Sea oilfield—Thistle—and has contributed to over one-fifth of all exploration and appraisal drilling in that time.
The corporation has become a source of valuable advice to the Government on oil matters. That in turn has assisted the Government in the use of their regulatory powers over offshore activity, and I should emphasise to the noble Earl that they are the Government's powers. I should like to repeat what I said in the participation agreements debates: BNOC is not—and I repeat, not—a regulatory agency. We have also introduced into existing licences conditions which enable the Government to exercise a more effective control over operations including such vital matters as development programmes and rates of depletion.
Under the previous Administration there was no effective control; so long as the companies prepared plans which were technically sound they could have drained the oilfields at once, or put down as few platforms as they liked, and have recovered as little oil as possible to give themselves the maximum rate of return. It is the Government's effort which has returned to the State full control over these matters—a control which is vital to retain the essential flexibility to meet future circumstances. These controls were included in the fifth round licences, and we propose that they shall be included also in the sixth round licences.
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I do not want to go into the question of depletion which was referred to by both noble Lords. The arguments for and against early depletion are set out very fully and interestingly in chapter 7 of the February Green Paper on energy policy and also in annex 2. As the Green Paper points out, these are probably decisions that need not be made until the early 1980s. The point I want to make here is that whatever we decide to do with this very important depletion policy we must be able to control it. The Opposition continue to believe that we can control production in the North Sea through taxation. It seems that they have learned nothing and forgotten nothing.
Having established a rôgime which fully recognises the national interest in licences, we have already moved forward and licensed new territory. In doing so we have adopted a more orderly approach and have arranged that the State shall have an assured majority equity stake in each new licence. What response have the Opposition made to these policies? They have crtiicised and they have fought them. They have declared time after time that we are driving the oil companies away and the noble Earl returned to the charge this afternoon. But what is the true picture? The true picture is that the companies continue to be interested in the North Sea. The fifth round demonstrated that. And in respect of the earlier licences, where our first target is to ensure the development of our resources so that we become self-sufficient in oil, we are well on the way to achieve this by 1980.
North Sea oil production last year amounted to nearly 38 million tonnes, equivalent to almost half our national requirement. This was achieved only two years after the first oil came ashore from the Argyll and Forties fields. Thistle, which came on stream recently, became the ninth oilfield in production and there are eight more oilfields currently under development. This year's estimate of total possible oil reserves from existing finds at 2,620 million tonnes is 120 million tonnes higher than the previous year's estimate. Since the first natural gas came ashore in 1967, gas production from the North Sea has increased to the point where we now take it for granted that the gas industry depends almost entirely on our indigenous natural gas. In 1977 the Frigg gasfield on

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the median line with Norway became the first Northern basin gasfield to come on stream with gas being delivered by pipeline to a new terminal at St. Fergus which the Queen opened earlier this month.
Our North Sea oil and gas made a major contribution to the United Kingdom economy in 1977, leading particularly to significant improvements in the balance of payments. North Sea oil production last year was valued at over £2 billion and indigenous natural gas production was also worth in the order of about £2 billion. By 1980 our national income arising directly from oil production in the North Sea is expected to be about £4½ billion (at 1977 prices) or rather more than 3 per cent. of gross national product. By 1980 it is estimated that the overall benefit to our balance of payments should be about £5½ billion (at 1977 prices). I submit that all this is evidence of the success of our policy of ensuring the rapid development of our Continental Shelf oil and gas resources.
The Motion before the House makes special reference to the document United Kingdom Offshore Petroleum Production Licensing: Sixth Round, and the noble Earl has made a number of comments about the document which I shall deal with shortly. First, I should like to say that the document has been published by my right honourable friend the Secretary of State for Energy to whom I should like to pay a tribute, together with my noble friend Lord Balogh, who is very sorry that he cannot be here today, as a basis for consultations about the arrangements for the round.
The Opposition allege that the Government do not appreciate the contribution made by the oil companies, both large and small, to the exploration and development of our Continental Shelf. Nothing could be further from the truth. My right honourable friend the Secretary of State has on numerous occasions made quite clear that the Government recognise and indeed welcome that contribution; the expertise and investment they have brought to bear on this exacting task has been invaluable. But recognition of that contribution does not mean that we should refrain from asserting proper and legitimate control over the extraction of these vital resources.
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The companies are in business and their financial interest is to make as much profit from the North Sea as they can, and the more profit they make the less the return to the nation for the resources that belong to the nation. So clearly the protection of the national interest demands that the Government become involved in and can control these activities in the recognition of that fact which distinguishes us from the previous Conservative Government who, as I have said, were so profligate in dispensing with the rights of the nations' precious oil reserves to the extent indeed of offering these rights on a free-for-all basis, as the noble Lord, Lord Tanlaw, said, and for some fourth round blocks offering them to the highest bidder. It is in this light that the Government's development of their licensing policy should be seen.
We are determined that the new round should be used to strengthen British control over its offshore oil resources. But we have not sought to make numerous or substantial changes to the fifth round arrangements. I should like to demonstrate this by describing the principal features of the proposal. We propose that the round should be of about 40 blocks and should continue our strategy of a more orderly pattern of licensing, with smaller amounts of territory being made available at more frequent intervals than in the past. We have no intention of repeating massive rounds like the fourth; the associated peaks and troughs of activity would be entirely unhelpful to our offshore supplies industry, which is also a very important aspect of this which the noble Earl did not deal with.
There will be no discrimination in regard to the nationality of applicant companies. That is surely right and proper in the light of our international obligations. BNOC is to have a 51 per cent. minimum interest in each licence—except where British Gas is also a partner, in which case the combined interests of the State corporations will he 51 per cent. Thus we can ensure that the nation has an appropriate stake in every licence. It follows that all initial awards of licences would be subject to such matters as BNOC and the private sector companies settling joint operating agreements. There is no alternative to such agreements to regulate affairs between partners in the licence.

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The noble Earl accused BNOC of being responsible for delays. Of course, settlements take time, but there has been no undue delay in the conclusion of the joint operating agreements for the fifth round. Both sides in these agreements have interests which, quite properly, need to he protected. The arrangements, after all, may have to stand the test of time for nearly 40 years. Our proposal to limit approval of operators to the exploration phase has given rise to some comment by the noble Earl, Lord Gowrie. We have given much thought to the massive demands which the development of discoveries inevitably places on resources of manpower and technical capability. There is no escape from this. It seems only sensible therefore that the decision about the operatorship under the continuing licence—and I would stress this, in view of what the noble Earl said—for the development phase should be left to be decided in the light of resources available at the time; and this could be to the advantage of the smaller companies.
While I am commenting on the matter of operators, noble Lords will know that BNOC has been appointed operator in six fifth round blocks. The Government's view is that there would be a similar arrangement for the sixth round. BNOC will, it is proposed, be operator on six blocks on this occasion, also. We believe it very important that BNOC should have a stake in its own blocks. It may be necessary not to exploit a block, for example, as part of our depletion policy. On the other hand, we might want to exploit it very fully. Those are decisions that we can only really take if certain blocks are given entirely to BNOC. That is the reason for that policy.
Our proposals for the sixth round are that the criteria to be used for assessing applications should, in general, be on the same lines as in the fifth round. They would include such matters as the technical and financial standing of the applicant, his contribution to the British economy, provisions concerning the participation policy and opportunities for British industry to compete for orders for off-shore work, and provisions concerning the proper representation of trades unions off-shore. We are proposing for the sixth round to add a new criterion about applicants' efforts in the important area of
724
training. This would, we hope, lead to an increase in the number of skilled people available for work off-shore, and, through this increase in competence, to an improvement in safety.
The plans for the round include one novel feature— the introduction of optional arrangements. We are proposing—as the noble Earl alluded—that applicants should be given the opportunity under the round of offering to carry the Corporation for all or part of its costs during the exploration and appraisal phase. There would also be provisions enabling applicants to offer to BNOC an equity share greater than the standard 51 per cent. and to offer BNOC the option to buy at market price from its partners a proportion of their oil, or to sell—and also at the market price—a proportion of the Corporation's oil to the applicants, or indeed options on both these matters.
It is our belief that each of these optional arrangements could benefit this country either financially, or in access to oil, or in flexibility for the disposal of oil; and it is for those reasons that they have been included. The assessment of applications would be undertaken by reference to the offers made by applicants under these special arrangements and the standard criteria all taken together.
All these proposals are tabled as a basis for consultation. My right honourable friend the Secretary of State regards this as essential. The organisations chiefly concerned have already been asked for any views or suggestions they may have. Careful consideration will be given to any comment they, or indeed any other interested party, may wish to make. The Government will not take their final decision about the arrangements for the sixth round until the process of consultation and consideration has been completed. I may also say that careful note will be had of all the points made by your Lordships in this debate.
We believe that the Government's North Sea policies show a fair and evenhanded treatment of the public and private sectors. Of course, we recognise that the private sector, with its particular commercial interests, would prefer that the privileged position it obtained under previous rounds of licensing—particularly the fourth, as I have said—should be

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maintained. However, that is not to be. Her Majesty's Government have not flinched from the policies necessary to redress the disregard of the national interest shown by the previous Conservative Administration.
We make no apologies for continuing to seek ways to increase the national benefit from licences. We note that each step we take has been greeted by complaints that we are being too severe and that we are removing all encouragement. That was so with the introduction of PRT, with the improvement of licence controls in the Petroleum and Submarine Pipelines Act—which was surely a very necessary and essential measure—and with the provision of an equity role for the State in each fifth round licence. Yet we notice that the industry's interest does not diminish. The Government are confident that, when the process of consultation and consideration is completed, the sixth round will demonstrate that the companies continue to regard the United Kingdom Continental Shelf as an attractive oil province, having a licensing regime which properly respects their position, while at the same time protecting the legitimate national interest, which should be paramount.

ZAIRE: PROTECTION OF UK CITIZENS
3.47 p.m.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House I shall now repeat a Statement being made in another place by my honourable friend Mr. Rowlands. The Statement is as follows:
"My right honourable friend the Secretary of State for Foreign and Commonwealth Affairs made a Statement in another place on 16th May about the situation of British citizens in Zaire. I now have to tell noble Lords, with very deep regret, that five British subjects must now be presumed to have been killed in the appalling atrocities which have taken place in Kolwezi in the past few days.
"An RAF officer, who was sent there yesterday, as soon as the first information about British loss of life was received, has reported that he has
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firmly established the deaths of three of those concerned. We shall make every effort to confirm the position over the remaining two reported British victims as quickly as possible.
"The remaining 19 United Kingdom citizens who were known to have been in Kolwezi are now safely accounted for. Some have already been evacuated to Europe and others are still in Zaire. The British Embassy at Kinshasa are doing everything they can to help them. Fortunately it has not, in the event, been necessary to use the two British Army medical teams which were sent to Lusaka.
"I am sure noble Lords will wish to join me in expressing deep sympathy to the families of those who have been so wantonly killed in these tragic events, as well as to all of those, of every nationality, who have suffered this terrible ordeal".
3.49 p.m.
Lord CARRINGTON: My Lords, everybody on this side of the House would join the noble Baroness in sending our sympathy to the families of those who have been killed—and not just the British families but all those who have been killed in this appalling incident.
I wonder whether the noble Baroness can say whether the Government feel that the international arrangements which exist for evacuation of families in these circumstances are really adequate, and whether or not there might be something to be said for having some kind of standing machinery in the EEC, or perhaps in NATO, whereby it would be possible very quickly to arrange for an evacuation of this kind. I also wonder whether the noble Baroness would suggest to her right honourable friend the Foreign Secretary that perhaps one of the lessons of this particular episode is that there should be a greater effort to concert European foreign policy in matters concerning Southern Africa, which have a very great effect on the Western economy and which, even now, seem to be altogether too haphazard.
Lord AVEBURY: My Lords, I also join with the expressions of sympathy that have been paid to relatives of the

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victims—including those many citizens of Zaire who have been killed by the rebels—by the noble Baroness, Lady Llewelyn-Davies of Hastoe, and by the noble Lord, Lord Carrington. Is there any indication so far from where the rebels obtained their arms and of who trained them? If it turns out to be fact that these rebels were aided and abetted by Angola, will Her Majesty's Government seek to obtain redress from the Angolan Government for the dreadful atrocities committed against our own citizens? Although our own citizens may not require the assistance of the Army medical teams which were sent to Lusaka, could not the Government in this emergency offer them to the Zairean authorities for assistance to their own citizens?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, in answer to the noble Lord, Lord Carrington, these things blow up overnight. This has shown that at short notice the Western countries can act decisively. However, I think that his suggestion of special machinery is a very interesting one and I shall, of course, bring it to the attention of my right honourable friend, as I shall also the question of concerting European foreign policy in Southern Africa. As the House well knows, it is not all that easy to concert European policy on a great many things, but I shall certainly bring that to my right honourable friend's attention.
The noble Lord, Lord Avebury, raised the whole question of the training of the rebels and from where they obtained their arms. Obviously they were in Angola; they must have obtained the arms there. As for the training, they received their training there. I do not think that there has been any time at all to consider the question of redress for the damage which the rebels caused to human life and property. The main effort has been to rescue the expatriates and to restore order so that the Zaireans themselves can live in security.
Lord AVEBURY: My Lords, I also asked whether the medical teams which we sent to help our citizens could be used to help the Zaireans.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, the Zaireans know
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that any sort of help that we can give we shall give. On the other hand, all the arrangements were made in connection with the evacuation of expatriates and all countries have said that they will return home those who are sent as soon as there is no need for them.
Lord CLITHEROE: My Lords, may we also be allowed to express our sympathy to our Belgian friends?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, yes, indeed; their suffering has been very great.
Lord WIGG: My Lords, is my noble friend aware that there have been reports that Cuban, Russian and East German troops have been involved in this operation and that now there are fairly authoritative reports that much of the shooting and pillaging was carried out by Mobutu's Zairean army? Is my noble friend in a position to give any authoritative indication of the truth of these stories?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I am afraid that I am not in a position to give any confirmation of the behaviour of the Zairean troops. As I am sure the House will realise, the situation is extremely confused. Reports of direct Cuban involvement have not been confirmed and the Cuban Government have specifically denied involvement in this operation. The rebel force may have received training in Angola, where there is a large Cuban force, but I have no evidence of direct Soviet or East German involvement in the operation.
Lord WIGG: My Lords, can my noble friend say anything about East German involvement? What evidence is there for her to say that the rebels received training in and were supplied with arms from Angola?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I mentioned that there was no evidence of direct East German involvement. As my right honourable friend has said, it is a very serious matter indeed for outside Powers to exploit these difficult situations for their own ends.
Lord ALPORT: My Lords, will the noble Baroness accept that the situation in Kolwezi is the predictable result of decisions made in the early 1960s with regard to the Katanga conflict? Will she accept that those decisions were largely dictated by the United States Government of the day and that, therefore, the present United States Government have a moral responsibility to help the situation which exists in that part of Africa; and that those of us who were concerned with this find it rather sad that the United States Government have so far appeared to wash their hands of the whole situation there?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, the immediate necessity is to save lives, both black and white, and not to indulge in historical recriminations. We have throughout been in close touch with the Belgian, French and United States Governments.
Lord CHALFONT: My Lords, although, of course, one is in full sympathy with her view that there are immediate problems and that we should not indulge in historical recriminations, and although I am sure that noble Lords would agree that her answers both to the noble Lord, Lord Avebury, and to her noble friend Lord Wigg have been restrained and statesmanlike, will the noble Baroness not agree that the fact which is now established, that the rebels involved in the Shaba incident came from Angola, were clearly trained in Angola and came with arms that had been furnished for them in Angola—which is now a republic totally dominated by the Soviet Union—has considerable implications for the strategic future of the whole of Africa?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I should like to repeat that this is a tragic moment. It has come after a very sudden and dreadful happening. The situation is totally confused. We cannot confirm particular rumours of any kind. I am sure that the whole House has noted what the noble Lord, with his great experience in these matters, has said. I should not like to go further than that.
Lord GORE-BOOTH: My Lords, I should like to join with other noble Lords in expressing sympathy to those who have
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been killed, injured and otherwise damaged in this horrible occurrence. With reference to the question just asked by the noble Lord, Lord Chalfont, would my noble friend be prepared to go as far as to say that the Government are taking into consideration that we may be in the presence of something like a rather major effort of imperialism in Africa?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, unfortunately Africa has been subject to imperialism of very different kinds over many centuries.
Lord MORRIS: My Lords, may I ask the noble Baroness whether we have consular representation in Zaire, and if not, why not? If we have representation there, why do Her Majesty's Government appear to know so very little about what is going on there at the present time?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I must say I think that that is a rather unfair suggestion. We have a High Commission in Zaire. We are constantly in touch with it and it is in touch with the High Commissions of all the other countries involved. It is in touch with the Zambians, who have given us a great deal of help. The fact that the situation is confused is surely understandable in itself.
Lord PARRY: My Lords, would it not be to the credit of this House and this nation if there went out from it at this time a solid acceptance of that work which has been done on behalf of this House and this nation by the people resident in Zaire, showing that they have the support of this House? And have not the answers given by my noble friend gone as far as anyone can be expected to go in this complicated moment of world history?
Lord PEART: My Lords, I think that we should proceed.

NORTH SEA OIL: LICENSING
Debate resumed.
3.59 p.m.
The Earl of LAUDERDALE: My Lords, reverting to the debate initiated

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by my noble friend Lord Gowrie on the policies of Her Majesty's Government regarding North Sea oil, with special reference to the document, United Kingdom Offshore Petroleum Production Licensing, et cetera, may I first express an apology. I was informed that this debate was coming on only in the middle of last week when I was clogged up with engagements which had long been established. Therefore, my own attention to preparing the speech has had to be short, hurried and sketchy. I ask your Lordships to be even more indulgent than you normally are when I speak because what I have to say is correspondingly disjointed, and I apologise. Secondly, for the same reason I am afraid that I shall have to leave the Chamber at about half-past five to fulfil a previous engagement. Once again, I apologise because if there is one debate more than another that I should like to have sat through to the end it is certainly this one.
It is always a pleasure to hear the noble Lord, Lord Strabolgi, in good heart and good voice. He was in good form this afternoon. In fact, I do not think that I have ever heard him speak so well, so effectively—I might almost say so boisterously. At any rate, he was not slow in claiming for the Government the benefits that have accrued to our country through the discovery and development of hydrocarbons beneath the North Sea. I think perhaps it might have been as well had he tempered his criticism of Tory disregard of the national interest in the past by some recognition that the benefits we now enjoy are the results of work begun many years ago.
It is not my purpose to tease or taunt the noble Lord, Lord Strabolgi—not that he minds that, because we frequently do it to one another. This is a serious debate, but I confess that I must confine myself largely to matters that puzzle me very much indeed. The noble Lord referred to the balance of payments. I shall be reverting to that. He referred to the inequities, as he described them, of the tax situation which the Government inherited. To that also I shall refer.
I am obliged to him for having referred to the Third Report of the Public Accounts Committee because that gives me the text which I otherwise lacked for referring not
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to the Third but to the Eighth Report of the same Public Accounts Committee. There is a reference there which it is perhaps worth while bearing in mind as we come to the 51 per cent. participation proposals that are outlined in the Discussion paper before us. The Eighth Report of the Public Accounts Committee concluded with these words:
"It would be more in keeping with the concept of Parliamentary control in relation to the taking of a State share in oil resources, and with the spirit of the Act, if an Order were laid in respect of the broad financial effects of any agreement providing for State participation with existing licences".
Then it goes on, and I continue:
"We recommend therefore that the Department should reconsider the desirability of laying such Orders before concluding the agreements".
One of the factors in the Paper before us that requires some examination is of course the automatic assumption of a 51 per cent. participation on an equity basis by the BNOC in the future licences.
There is only one other matter to which the noble Lord referred that I think I also must mention before I pass on, and that is that he said there had been no effective control of our oil developments hitherto. Well, I think one must say that of course the stimulating sea breeze of an oncoming general election has clearly had its effect on the noble Lord, as it certainly is having on our Benches, because as we look forward with zest and eagerness to this conflict, so they as well as we are naturally deploying our arguments as well as we can. If we have a chance of perhaps understating the position of our opponents, we occasionally fall for that temptation.
With regard to this document I am befogged and puzzled; indeed, I am reminded of that saying of the British, "They never draw a line without blurring it." So far as the policy that is laid before us is concerned, I recall the late Sir Winston Churchill's words in 1936. He said:
"So the Governments go on in strange paradox; decided only to be undecided; resolved to be irresolute; adamant for drift; solid for fluidity; all-powerful for impotence".
When we look at this whole subject we must consider what is our overall object. Our wealth—our position as a great industrial power—was built up on the availability of cheap energy. Today, something like one-eighth of the national

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effort—12 per cent. or 13 per cent. of the GNP, if one likes to use that crude measurement—is actually spent on providing the energy to fuel the rest. That is a very different situation to the one on which our industrial greatness was built up. But of course with the prospect that many of us can foresee—and that many great experts in energy policy worldwide foresee—that in 15 to 25 years' time there will be a net shortage of available energy at anything like current prices in the western world, we must also pursue the consequential danger that instead of spending one-fifth we might well have to spend up to one-quarter of our total national effort generating the energy on which the rest depends. If anything remotely like that is in prospect (and I believe, seriously speaking, that that is the case), then our object at this time in looking at the North Sea as a whole should really be quite simple.
May I say here that although—I might almost say for a bit of fun—we throw political balls and brickbats at one another, what we ought really to be concerned with, and what I certainly am concerned with and I am quite certain that the noble Lord, Lord Strabolgi is concerned with, is this: that the policy that emerges is one that will survive at least half a dozen General Elections. That is what is important. I am not concerned, beyond the bit of fun which we have between ourselves, to make Party points. I am concerned that, as we come into a run-up to a serious energy situation anything from 15 to 25 years hence, we should try to approach this without too much Party bias, and with an endeavour to bring together thinking that will survive a good half-dozen general elections.
Taking that as my basis, I believe that our overall object must be not so much to secure now as much energy as possible but to secure and establish the means for it when it is needed, consistent of course with a prudent depletion policy, which is another matter. Where hydrocarbons under the North Sea are concerned our real concern must be to encourage the maximum amount of exploration.
The Government are to be congratulated on the general approach of going for smaller and more frequent rounds. One effect of the smaller and more frequent
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rounds is to step up the pace of progress towards completion of programmes already agreed under previous rounds. It is also prudent—and again the Government are to be congratulated for it—that there should be taken into consideration an applicant's record in regard to providing training for technicians trying to learn about the industry. Those are positive, serious and real improvements.
However, I find that the document has certain shortcomings because on the face of it—the noble Lord may be able to correct such misunderstandings as have fallen my way—three clear points stand out. First, it would seem that BNOC will have a 51 per cent. equity share in each licence. As I read the document, however—I am thinking in particular of paragraph 9(b)(1)—it would appear that the applicant provides the capital. I may be wrong about that, and if the Minister wishes to correct me I will gladly give way. If it is the case that BNOC gets a 51 per cent. equity share and the applicant provides the capital, that would seem a very serious disadvantage.
The second disadvantage seems to follow, in that the policy for operating each licence is to be determined by an operators' committee. That is fair enough, but, as I read the document, that operators' committee is to reflect not the paid up capital of the participants but the equity interest including BNOC's unpaid 51 per cent. That is how I read the guidelines and I should like to be told I am wrong; I hope for the Government's sake and Britain's sake that I am wrong. If, however, I am right, we shall have BNOC not only enjoying a 51 per cent. equity share for free but also a 51 per cent. vote in the policy operating committee. That is a very serious difficulty indeed and I put it no worse than that.
Then we come to the third difficulty, and the noble Lord alluded to this in passing—I would say sideways—and he may say more when he replies. It appears that there is no certainty that a successful exploration operator will be accepted as licensee for the subsequent development, once again, if I have read the paper wrongly I am ready to be corrected. Thus, there would seem to be three straightforward difficulties: first, BNOC gets a 51 per cent. equity share for free;

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secondly, consequent upon that they get a 51 per cent. say in the operation of the licence; and thirdly, the operator, if the exploration is successful, will not necessarily be successful in getting a subsequent licence for development.
I mention another point in passing: the document tells us that the operating committees must meet in Glasgow. I am all in favour of Glasgow; it is a wonderful, great and beautiful city, a wonderful city in which to get drunk if not quite such a good city in which to be sober. It is also a great city in which to have friends. But I cannot for the life of me see why all the operating committees have to meet in Glasgow, where BNOC has 230-odd employees, rather than in Aberdeen, where it has more than 300. That may be a detail which will come out in the wash. It is not a major point but it puzzles me.
Whatever else the Consultative Document about the next round does, it shows how to make history. When I was a newspaperman I was told that one must have a nose for news and that if a dog wags a tail that is not news, but if a tail wags a dog that is news, and that is what is happening here; a 51 per cent. unpaid subscriber to the equity will control the policy. In this case the tail is wagging the dog.
So far as incentives for greater exploration are concerned, there is nothing said in the document to foreshadow any change in the taxation approach. The noble Lord is proud of the Government's tax policy. I would only say that I can see nothing whatever to be proud of and, apparently, if things go on as they are, each field is still to be taxed as a separate taxable unit, so that if one loses badly on one field one cannot set that off later against success on another. That in itself is a disincentive and has been so described by the companies many times.
Apparently also there is still to be no relief enabling interest payments to be deducted in computing company profits. Yet a great part of the funding of any exploration or development operation is loan capital. Moreover, it is largely funded by the operator, not by BNOC. But, if the heavy interest charges on those loans are not to be set off against profits,
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then we have yet another disincentive. My complaint therefore is that not only is this a project where the tail wags the dog, but it is a project where exploration will enjoy no greater incentive than hitherto.
The noble Lord told us with some pride—he reminded me of a father with his first child; our first child is always the best baby ever—about BNOC, almost as though it were his own baby. He said that BNOC had contributed to one-fifth of the appraisal drilling—I take it he meant over the past year—and that it had brought the Thistle field on stream. But unless I am completely mistaken—and I may be wrong because I have not had as much time as I should have liked in which to prepare this speech—The fact is that what BNOC has done is to take over the assets of Burmah and the National Coal Board oil development enterprise, and those are the ones that have been effective. In fact, the amount of drilling that is attributable to what I would call BNOC pure and simple—the corporation that has been built up in the last 18 months—is virtually nil.
When I put a Question to the noble Lord earlier this year about drilling in 1977 it emerged then that some 55 per cent. of the drilling in the British sector of the North Sea was by major companies on their own account, some 45 per cent. by majors on farm-ins, and nil per cent. by BNOC. Thus, whether BNOC has any drilling experience of its own, other than that acquired through the assets of Burmah and the ex-NBC interests, I do not know. One might enquire whether BNOC—so active, so zestful, so youthful, so full of enthusiasm for exploring on behalf of British interests, so full of enterprise and headed by such a magnificent capitalist pirate as the noble Lord, Lord Kearton—has drilled any of the blocks that were not taken up in the last round. What, for example, of 83/24 South West of the Scillies, or 86/12, 14 and 15, 88/2, 95/27, South of Lands End? Has BNOC drilled on any of these? They were all excluded by other companies in the last round. BNOC, which is full of energy and full of zest, might perhaps have had a go at them, but I understand not. In any case, for the future, when BNOC is to be the operator, will it be an operator in the sense of ex-Burmah or ex-National Coal Board oil interests being the operator,

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or is BNOC going to contract either with the major, or with other companies to do their drilling for them?
I shall look forward to reading (because I shall not be here) and I am sure that the House will look forward to hearing, what the noble Lord says in his reply about the increased opportunity which he forecasts for the smaller companies. This is another feature of the noble Lord's speech which I found good as far as it went, and I hope that when he replies he will be able to say more about that. But the fact of the situation now is that the pressures of taxation and the difficulties of raising funds have meant so far that the majors become more important and the minors become less important because the minors have been found to farm out their interests to the majors as being the only ones who could raise the cash and face the taxation difficulties that are now adding to their problems.
The tax burden is a penal burden, and when the noble Lord previously says that there is still interest in the North Sea, I should hope that there is. If there is oil underneath it, or natural gas or coal—and we believe that all those are there in varying amounts—of course the oil companies are interested. But having applied for licences to take them up, whether there will be as much competition for licences as before will depend very much on the state of the game in other parts of the world and on the competition in other parts of the world for the limited number of exploration rigs and teams that are available.
This business about the smaller companies is very serious from the viewpoint of our national interest. I have in front of me now a report compiled by Gaffney, Cline and Associates, well known consultants in the oil business. Some time ago they wrote the following:
"The cost of these uncertainties"—
they are referring to tax and other uncertainties—
"is felt in many directions. The industry as a whole is well able to quantify these risks, but the sheer exposure to drilling and development costs in the North Sea is forcing out many exploration companies. The absence of the smaller companies will deny the United Kingdom much of the imaginative and entrepreneurial flavour which is so essential to the world wide industry. Reliance on purely the major companies will merely polarise North Sea developments towards a handful of groups.
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"It is regrettable that 1977 may well see a significant reduction in the holdings of smaller companies as they farm out portions of their interests to the larger concerns, given the overall record of these companies in completing their exploration commitments. Notwithstanding the continuing excellent discovery ratio, it is important that the widest spread of drilling is maintained for many years to come so that a thorough appraisal of the potential offshore North West Europe and the United Kingdom in particular can be under, taken. Only in this way can the optimum energy policies for the region be adopted".
My Lords, I have spoken longer than I intended and I must apologise for the fact that I did not notice the clock until now. I wanted to ask one or two questions about refining. There is no reference in the document to the Government's refining policy. The noble Lord will be aware that there has been a certain amount of boasting on behalf of BNOC that it has or it can look forward to having about 14 million barrels of oil a day in a few years' time. Of course, anyone with 14 million dollars a day can have 14 million barrels of oil a day. That is simply a question of money. But under existing agreements BNOC already has the right to acquire about 10 million tons (200,000 barrels a day) which would be enough to fuel a large refinery. This is a serious point on which I hope the noble Lord may be able to comment when he winds up. With about 200,000 barrels a day (10 million tons a year) of oil available to BNOC, that is enough to support BNOC's own refinery. With its own refinery it could if it wished undercut its commercial rivals in the downstream market and play havoc.
What I should like to know is what is BNOC's attitude towards refining. Are the Government using BNOC to influence the refining policies of the other companies? Are the Government trying to compel the other companies when they export their product to export it as a white product and not as crude? Are the Government in fact prepared to play ball (if I may put it that way) with the European Community in regard to refining policy generally?
The great difficulty that we are in about BNOC is that it is really neither fish, flesh nor fowl. It is a kind of hybrid, because, on the one hand, it is an attempt to enter the oil business commercially and, on the other hand, it is the chosen instrument of Government policy. It is really two things at once. One might

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even say that it is an attempt to mix oil and water. BNOC is rather like the question that was put by Fawcett to Cook on one occasion:
"How are you this morning?"
The reply was:
"Not at all myself".
The answer to that was:
"Then I congratulate you, for whoever else you will be, you will be the gainer by the transaction".
4.28 p.m.
Lord HATCH of LUSBY: My Lords, may I ask the indulgence of your Lordships as traditionally given to one speaking for the first time in this House. However, I am not a complete stranger to your Lordships' House. I have spent many hours below the Bar here, as well as in a similar position in another place, associated with a variety of debates over many years. I should like to thank both present and past Members of this House, and of the other place, for the courtesy and helpfulness that they showed to me in that responsibility. I hope that that may add a little to my contribution to the work of your Lordships' House. If there is one thing that I discovered during my experience both in this place and in another place, it is that at least so long as this House exists as it is today, it is more appropriate and more possible to discuss wide and profound issues here than in the other place. The noble Earl who opened this debate will forgive me if I do not follow him by confining my contribution to this debate to the narrow issues of this Paper, but try to broaden them out to the wider issues which we have to have in mind in regard to our North Sea oil revenues and in regard to energy as a whole.
Oil has already played a crucial part in the character of our world society. I believe it will play an even greater part in the character of the society that our children and grandchildren will live in; and, in being accepted as a Member of this House, I regard my responsibility as being to the world that will be inhabited by my grandchildren. Oil is a part of man-controlled, man-directed energy, and that we may regard as the capital of mankind; whereas the income of mankind is comprised of the other forms of energy which are generated by the sun constantly.
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My Lords, I fear that since the end of the Second World War we have been using that capital in a wasteful, profligate manner. It has been estimated that our consumption of fuel reserves since the end of the war has risen at a rate of 1·9 per cent. per annum, which means that they are being consumed at double the rate every 37 years.
In support of this part of my argument, I should like to quote from a distinguished scientist, the Astronomer Royal, Professor Sir Martin Ryle, who wrote just last year:
"We have become accustomed to believing that our standard of living and full employment both depend on an ever-increasing consumption of energy—to heat our homes, to provide more transport and, especially, to provide increasing quantities of manufactured articles which consume both energy and other mineral resources, some of which have limited reserves. If we continue in this belief the energy shortage initiated by the exhaustion of the world's oil reserves will, by the end of the century, forcibly curtail the present trends in the worst crisis civilisation has yet experienced".
I believe this wasteful use of our energy capital is closely associated with our obsession with consumption, which is another feature of this same period; and I believe that it may well be the task of this country and of other, similar minded countries to try to persuade people to limit consumption, in place of the common assumption made by all Parties that growth is the panacea for the future of Great Britain.
However, there is a wider, deeper and more crucial issue than arises from the use of energy in our century, and it comes from the fact that 80 per cent. of the energy now being used in the world is used by only 20 per cent. of the world's population; that the vast majority of mankind has to make do with one-fifth of our energy uses—and I am sure we have all seen the consequences of this imbalance. I have spent many years in the United States of America, and I am told by my American friends that more oil-produced fertiliser is used on their golf courses than is used throughout the whole sub-continent of India. We have seen these vast contrasts widening and deepening as more and more energy is used for useless or frivolous purposes. We have seen this wasteful use of energy at a time w hen but a little energy could save, not just the luxury life of mankind but life itself. Every minute that I am speaking here this

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afternoon, 30 people somewhere in the world are dying for lack of food. That, surely, is a sufficient challenge to our prospects as a nation to make us ask ourselves: How should our new resource be used if it is to contribute to the kind of world that we want to see our children and grandchildren living in?
My point to your Lordships this after-noon is that the possession of North Sea oil gives this country a brief opportunity to turn into new, constructive channels and to restructure the industry of this country, in association and cooperation with countries of the Third World, the untapped markets of the world, to provide them with what they need and to receive from them what they can produce—and obviously there will be opportunities for going more deeply into that issue. But, also associated with the refurbishing and restructuring of our industry, the redesigning of the direction of our industry, there should be our leadership, our persuasion, our education, to set up a new set of values among the people of this country. It is a very difficult task for politicians to call on their electorate to reduce consumption. I believe we have to do it; and for the past 18 months I have been a member of a committee of the Ministry of Overseas Development which has been looking at this very issue—the issue of how we inculcate into our educational system the basic needs to fit our children and our grandchildren to become citizens of the world.
I am glad to see that the Government have been spending an increasing amount of money on research into alternative sources of energy; and I am glad to see from this Paper that the Government believe that there must be a control over the depletion of our North Sea oil—a control and the direction of that depletion, just as, fortunately, the Norwegians have shown it can be done. But if we are to take on this new rôle, if we are to contribute to an international society where energy can be used equitably, then, with the help of our friends, we have both the responsibility and the opportunity, provided we are determined to use our new revenues for this purpose, to use the breathing space that we have been accorded, to control both the revenues and the extraction of the oil and to channel this new resource into the central purpose; that is, to create a world, which has be-
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come a village, the resources of which can be used for the benefit of all mankind.
4.41 p.m.
Lord CHALFONT: My Lords, it may surprise those of your Lordships who know me to find that I am attempting to contribute to a debate of this kind which is concerned with such abstruse, esoteric and technical matters but, like the noble Lord who has spoken before me, I should like to broaden the debate a little beyond the document which the noble Earl has mentioned in his opening speech and beyond the question of BNOC and its achievements and deficiencies. I should like to confine myself to two major points about the oil policy of Her Majesty's Government. They are points concerning military security and the impact of our national oil policy on our national security and our collective security. This, I hope, will be a speech which has no Party connotation of any kind. I believe and hope that it will raise points of national importance. The two issues that I want to raise are issues concerning the security of supplies of North Sea oil and the implications of North Sea oil for the military security of Western Europe.
Before doing this, it would clearly be not only discourteous but ridiculous of me not to refer to the distinguished maiden speech to which we have just listened. The speech of the noble Lord, Lord Hatch of Lusby, was modest; it was constructive, thoughtful, compassionate. It was, I believe, in the best tradition not only of maiden speeches in this House but of speeches in this House generally. He referred to Professor Martin Ryle's comments on the uses of energy generally. I believe that I am right in saying that the words he quoted are also quoted at the beginning of an extremely interesting pamphlet on the alternative uses of energy and the alternative sources of energy issued by an extremely interesting organisation in Wales which is devoted entirely to the investigation of alternative sources of energy. I believe that the noble Lord, in a maiden speech of remarkable impact, has opened for us a number of avenues of investigation and approach for the future. He is right in saying that our supplies of oil and reserves are not endless and that we must examine not only ways of finding alternative sources but other ways of using our energy. I, personally,

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am deeply grateful to the noble Lord for his contribution and like other Members of your Lordships' House I think that we shall look forward with lively interest to his future contributions to our debates.
As I say, I want to confine myself to two issues of security. The first is the issue of the security of our own North Sea oil. There are two possible threats against our supplies of North Sea oil. The first is posed by the alarming growth of international terrorism. I believe that no one who has followed international events over the last few months and years will deny that there is a widespread and growing network of international terrorism, that is highly organised, and is recruited in many nations of the world. It is trained in ruthless, destructive and lethal methods of terrorism. It is often trained—and there is reason to believe that the terrorists who attacked and murdered Aldo Moro in Italy recently had been trained—in East European and other Communist countries. The principal targets of these international terrorist groups are the countries of the Western democratic world. Just look at where all the recent attacks have taken place: in West Germany, in Italy, in France, in Holland and in Denmark. There have been even the earliest signs of terrorist activity in this country—so far, thank Heaven! comparatively mild if one relates them to the appalling things which have taken place in Italy, Holland and Germany.
It seems to me—and this is where I come to the specific subject of the debate—that these oil installations of ours, the platforms in the North Sea, the way in which that oil is brought ashore and the installations ashore that process it, are obvious targets for any international terrorist group, not from the point of view of taking hostages (although that may be the case) but specifically from the point of view of sabotage. Here is the one way in which an international terrorist group could strike at the very economic and political heart of this country. I believe that the Government, Her Majesty's Ministers, are already aware of this threat. One has seen reports in the Press of exercises that have taken place which are alleged to be exercises of a counterterrorist type. I say—at the moment without any sense of criticism—that my own information about these exercises is
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that they really do not inspire any confidence that they would be effective against the kind of ruthless and highly-organised international terrorist organisations which are abroad at the moment. I may be wrong.
I shall not ask Her Majesty's Government for any details of their defensive arrangements. That would be foolish and irresponsible. I ask only for assurance that Her Majesty's Government are satisfied that they have the resources to deal with possible terrorist attacks of this kind; that they have, or believe they have, the intelligence resources to warn them of possible attacks and that they have the resolution to defeat those attacks with a ruthlessness which is equal to that which I assure Her Majesty's Government will be applied by those who mount those attacks.
There is a second threat. It is the threat of the vulnerability of these installations in time of war or of confrontation. The interruption of oil supplies is an obvious strategy for any potential enemy. I have to be very careful nowadays about using the word, "enemy"; so I shall say, with great care, "potential enemy". I shall remind your Lordships' House, in the context of potential enemies, of the extraordinary growth of the Soviet Navy over recent years, especially in its capacity for submarine warfare. Again, I shall ask Her Majesty's Government for no details; for matters of defence are, quite rightly, matters that are secret in many cases and matters Her Majesty's Government have every right to keep in detail to themselves. I would only ask to be assured that this threat is recognised and that there are within the Western Alliance plans and resources to meet it.
I come now to the second of my points. It is the implications of North Sea oil for the general defence and security of Western Europe. Leaving aside the problem of whether or not we can secure our own supplies of oil, what is our policy about those supplies in the context of the defence of Western Europe and, by extension, the defence of this country against possible attack from outside? I am talking now of military security; I am not talking of the effect which oil embargoes and other outside action can have on the standard of living and the economic prosperity of Western Europe; I am talking specifically about our military security. The present

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positition is that Western Europe is to a very high degree dependent upon the primary fuels, especially upon oil. It is a generally known fact that, as a region, after the United States of America, Western Europe is the second largest oil consumer in the world. It has—and this is again a glimpse of the obvious—a very limited oil production of its own. So the first point that I should like to make in this argument is that over the next decade or so North Sea oil is likely to be a product of crucial significance to Western Europe.
We know that Western Europe has recognised the importance of oil, has recognised the unreliability of external sources of oil, and is planning to cut its energy requirements by something of the order of 10 per cent. Having considered its general energy requirements it is also planning to supply those reduced energy requirements from sources other than oil. One of those other sources—indeed, the principal one—is nuclear energy. We all know the profound and passionate arguments that are going on at the moment about the future of the peaceful uses of nuclear energy, arguments to do with the pollution of the environment, arguments of a real and serious kind about the implications of nuclear energy on the possible spread and proliferation of nuclear weapons. I am not proposing today to go into those arguments. I will only say that, whatever may be the outcome of those discussions, it seems to me—and this I believe is a generally held belief—that up to the end of this century Western Europe is likely to he still very, very heavily dependent upon the supplies of oil.
The supplies of oil from Arab countries are notoriously unreliable, so I just make this point as a step to my next argument that, although North Sea oil may be only a tiny proportion of the oil reserves of the whole world—some people estimate it at about 2 per cent.—it is still going to be of considerable importance to Western Europe. I mean importance not only to the economy of Western Europe, to the prosperity and to the quality of its life, but of vital importance in one respect which I think has been very largely ignored in the public debate, and that is our military security, the defence of Western Europe.
The major point that I want to make in this debate this afternoon is that the
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effective military defence of Western Europe, and therefore of this country by extension, depends to an almost total extent upon reliable supplies of oil. Without it, all our tanks, our guns, our vehicles, our aircraft and our ships will become, after quite a short period of time, useless hunks of metal. They will not be weapons of war any longer without reliable and continuing supplies of oil. In passing, let me note here that in the context of which I am speaking—which is the remote context, one which we must all think about and plan for—of a major war in which we are involved, we may be totally cut off from supplies of oil from the major supplying area of the world, the Middle East. Those people who are pretending or purporting at the moment to be complaisant about what is going on in Southern Africa, and what is going on in the Horn of Africa, had better well remember that if all that goes wrong, if the worst happens in the Continent of Africa, quite apart from what may happen to the people of Africa, we in Western Europe will be cut off from the vital supplies of oil upon which not only the economy but the defence of Western Europe will depend.
Furthermore, there is another point; it may be a technical point but it is a real one on which I think my friends on the Government Benches may care to ponder. The only weapons which are not made totally ineffective by deprivation of supplies of oil are nuclear weapons: the nuclear powered submarines and the nuclear missiles. So I elide a very complicated tactical argument here, but I ask you to believe it. If you do not believe it from me, I ask you to investigate it for yourselves. One of the effects of depriving Western Europe of its essential supplies of oil in time of war is to make the use of nuclear weapons more likely. That I believe is something which no one in your Lordships' House—and certainly no one sitting behind the Government Front Bench—would wish to contemplate.
I should like to ask the Government what their policy is regarding North Sea oil and Western Europe; I might remark in passing—although I do not wish to make a great point of this—that under the provisions of the Treaty of Rome we are supposed to have a common market in energy; but my argument goes deeper

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than that. I am asking Her Majesty's Government to give an assurance to your Lordships' House that, when we have our full supplies of North Sea oil, we shall not adopt the policy usually characterised by that well-known phrase: "I'm all right Jack". We are members now of a European Community. Europe needs a common energy policy. It needs many other things as well; it needs a common foreign policy and an economic and monetary union, but these are matters which are outside the context of this debate. I only recall for your Lordships as a lesson the disarray that disfigured the face of Europe at the time of the Arab oil embargo after the Yom Kippur war in 1973, when instead of facing this problem collectively and resolutely, all the countries of Europe rushed around like demented chickens in a thunderstorm, all pursuing what they perceived as their own national interests without any concern at all for what was the long-term interests of Western Europe.
Britain now has an opportunity to give a lead. With a co-operative and common energy policy in Europe not only shall we have negotiating strength in the future political and diplomatic crises that lie ahead, but we shall have—and this is the point of my remarks today—a more effective military security against external threat. The Common Market is the best market for any surplus products that are likely to be available from North Sea oil in the 1980s but only if there is a total energy policy and a common energy policy in Western Europe. I should like in passing to ask the Government to bear in mind something which has already been mentioned by one noble Lord. I think the noble Lord, Lord Orr-Ewing, in an intervention earlier mentioned the possibility of a dramatic fall in oil prices, and the impact that that would have on our policies.
I pass now to my conclusion, which is to ask Her Majesty's Government for a number of assurances. These, I believe, are constructive. They are not in any way abrasive or polemical, and I know that the noble Lord, Lord Strabolgi, who will answer the debate, is very much concerned with these matters. I should like to ask, first, whether we can be assured that there are resources and there are plans available to protect our North Sea oil against
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international terrorism and that Her Majesty's Government are satisfied with those resources and those plans. I would ask whether the Government are satisfied with the plans to defend the supplies of North Sea oil in times of crisis or of limited war, whoever may be the enemy.
I should like to ask whether Her Majesty's Government would agree that Western Europe and the Common Market will have priority of claim on any surplus of supplies that may arise from our North Sea oil operations. I should like to ask whether Her Majesty's Government, as a net exporter of oil in the 1980s, will take the lead—this may be a more difficult question—in helping to formulate an effective common energy policy for Western Europe. Finally, I should like to ask for an assurance to be given to your Lordships' House that Her Majesty's Government is giving due importance to the need for a common energy policy for Europe in the context of the military defence of Western Europe against a possible attack from outside. Perhaps I might end with a quotation from a monograph published by the Stockholm International Peace Research Institute—not a hawkish body by any means, but a body devoted to, and committed to, the principles of international co-operation and disarmament. The publication is called Oil and Security, and what it says is this:
"Oil is a commodity of basic stragegic importance. No modern defence system can be maintained and no war can be fought without a great supply of oil. A matter of vital importance for those responsible for planning national security, then, is the assurance that the country can count on sufficient supplies of oil to sustain its defence."
What that says about a country can be said equally of Western Europe. This is a truth of vital importance to Western Europe and I am grateful for the opportunity to take advantage of this short debate, initiated by the noble Earl. Perhaps I might say in passing that I listened with great care to his speech and found it not only a literate, thoughtful and constructive speech but one that is refreshingly candid and frank about the plans of a possible Conservative Government for the future. I should like also to take advantage of this debate to ask Her Majesty's Government, when they consider all the long-term implications of their future policies and when they are thinking about the implications, political, economic

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and military, of their policies in respect of North Sea oil, to bear in mind the security of this country and the security of Western Europe.
5.4 p.m.
Lord COCKFIELD: My Lords, having myself so very recently faced the same ordeal as the noble Lord, Lord Hatch, may I join in congratulating him on a most interesting and informative contribution to the debate. It has sketched in the picture against which the problems set by the Consultative Document need to be considered. I must apologise to the House for the fact that I, too, may have to leave before the end of the debate owing to a long-standing engagement which was entered into before this debate was arranged.
May I be forgiven for starting with a personal reminiscence: my own involvement in the problems of the oil industry, primarily from the taxation point of view, first arose in the early 1950s when I was working for the noble Lord, Lord Butler of Saffron Walden, who at that time was Chancellor of the Exchequer. More recently, in the period of four and a half years between 1973 and 1977, I was very directly concerned with the prices and profits of the oil industry and of all the major oil companies operating in the United Kingdom. I mention this experience, extending, as it does, over a period of some 25 years, because it is directly relevant to what I shall be saying later. I mention it also because, looking back over this period, one sees the great improvements which have occurred in the quality and availability of information about oil companies and their operations; and one has also seen a great growth in expertise and knowledge within the Government and within the Government agencies.
There are two quite separate aspects of the problems of North Sea oil. There is, first of all, the question of winning the wealth; that is, obtaining the wealth from the North Sea. Secondly, there is the question of utilising wealth; that is, what we do with it once it has been obtained. The winning of the wealth is, of course, of crucial importance because until we win it we cannot spend it and until we win it we cannot achieve the strategic aims of the noble Lord, Lord Chalfont.
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The Consultative Document deals with the question of winning the wealth, and what we have to ask ourselves is whether the proposals it contains represent the best and the most efficient way of winning the wealth. I suggest that they do not and I propose taking three specific provisions in the Consultative Document where the proposals do in fact differ from those in earlier rounds.
First, the terms proposed for BNOC's equity participation and for its carried interest are such that the bigger the share of the burden the licensee is prepared to carry and the smaller the proportion of the reward he is prepared to accept, the more likely he is to be granted the licence. In short, the licensee is being squeezed from both ends. This is highly ingenious. It may secure for BNOC the maximum share of what oil does happen to be discovered, but as a means of ensuring the maximum effort in exploration and discovery it is the exact reverse of what is required. It maximises the cost of failure to the licensee and minimises the reward of success. It is difficult to avoid the conclusion that these particular arrangements are designed primarily to promote the position of BNOC.
Secondly, for the first time, the licence to operate is to be separated from the licence to explore. The licence to operate will be granted only once a discovery has been made and the decision as to who is to be the operator will not be made until that time. It follows that the identity of the operator, which is a matter of considerable, if not crucial, importance, cannot be known when the original licence is applied for. This introduces a new and undesirable element of uncertainty into all the arrangements. The reasons given in the Consultative Document are not convincing. They would justify deferring the appointment of the operator where the applicant so wished, but not where the original licensee and the ultimate operator wished to he appointed together from the outset. Here, again, the suspicion must be that the arrangements are essentially a device to enable BNOC to extend its operations still further, if it is in a position to do so once a discovery is made.
Thirdly, for the first time, there are proposals to give BNOC the option to buy the licensee's share of the oil produced, and for BNOC—again, at its

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option—to sell its share of the oil to the licensee. Presumably, these arrangements are designed to ensure that BNOC becomes a major dealer in crude oil. But I think it is important that we should know whether they are also designed to enable BNOC to enter the downstream market. Are we to see BNOC refineries, despite the surplus capacity which exists at the moment? Are we to see BNOC garages selling BNOC petrol, despite the fact that there are already too many garages? I think that some enlightenment on these points really is required.
One would have thought that the national interest demanded, first, that the best qualified applicant should be selected; and, secondly, that the applicant, once selected, should be enabled to explore, to develop and to operate to the maximum advantage, both for himself and for the nation. The proposals in the Consultative Document are not designed to achieve these ends.
The inescapable conclusion is that their real objective is to build up the position of BNOC, as part of an active and aggressive policy of expanding the public sector at the expense of the private sector. I know it is argued that this is essential to enable the country to secure its fair share of the oil revenues, and it is claimed that without the entrenched position of BNOC as an operator, as a regulatory agency and now, as proposed, as a dealer in crude oil—
Lord STRABOLGI: My Lords, I am sorry to interrupt the noble Lord, but I said—and I emphasised it—that BNOC is not a regulatory agency.
Lord COCKFIELD: My Lords, I am most grateful to the noble Lord. But it carries out certain functions which are essentially functions of a regulatory agency. The noble Lord is entitled to apply whatever description he wishes. I am trying to ask: what is the reason for these proposals? The point that I really want to develop is that the argument is, I gather, that it would be impossible for the Government to ensure that they were receiving their due share of the revenues of the North Sea unless BNOC was put in the position into which it has been put —a position which it is proposed to extend under the terms of the Consultative Document.
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I know that it is also argued—and I am familiar with this argument, because it is one with which I had to deal—that profits can be manipulated by the under-statement of revenue and the over-statement of costs, with the result that it would be impossible, it is claimed, for the country to secure its rightful share of the revenues through the mechanism of taxation. I simply do not accept these arguments. In the 1950s, and to a lesser degree in the 1960s, there was a tradition of secrecy in the industry and information was hard to come by. But this has long since ceased to be so. It proved perfectly possible, during the lifetime of the 1973 price control, to get all the information which was needed about costs and prices, as well as about profits. There was no insuperable problem in checking the broad accuracy of the information from independent sources, and we were able satisfactorily to monitor performance after the event.
I see no reason to suppose that a taxation solution to the problem cannot be made to work. The Inland Revenue have greatly increased powers to deal with transfer pricing. It is, of course, essential that all the information needed should be made available, but it is quite unnecessary to set up BNOC as a major dealer in crude oil, in order to obtain this information.
I would go further than that and say that the argument that the Government neither have the information and cannot get it, nor have the expertise and cannot get it, is quite inconsistent with the argument that sufficient information and expertise is available within the ambit of Government to enable BNOC to enter into the trade of crude oil dealing. The only reservation which I should like to make is that if BNOC, nevertheless, ends up by buying too dear and selling too cheap, the net result of its activities will be to add a loss of tax revenue to a loss of trading income. Therefore, as a route to solving this problem, I cannot see that it has any very great advantage.
I do not propose repeating the arguments put forward by my noble friend Lord Gowrie, all of which called into question the present rôle of BNOC. There must, I suggest, be a better way of managing our affairs than through the further extension of BNOC's powers, as

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envisaged in the Consultative Document. We need to find the best and most efficient way of winning the wealth. We need to find the most efficient way of securing for the nation its proper share of the wealth. But a massive extension of the public sector will not, in my view, achieve either of these ends.
Lord DAVIES of LEEK: My Lords, before the noble Lord leaves that interesting argument, may I, as one who is aware of his expertise in this direction, put this point to him? Before the Thistle field could go on with exploration, it had to borrow some £70 million-odd from the Government, and the only argument that I have to put forward is that most of this major exploration is due to the fact that Government loans have been willingly given for the expertise. Consequently, Government organisations and the public should have a return on those loans, but that point has been completely missed.
Lord COCKFIELD: My Lords, I do not follow the noble Lord in his suggestion that the point has been completely missed. I specifically stated that, in my view, the problem of the nation acquiring its proper share of the wealth was one which could be tackled through the mechanism of taxation, and that it did not need an extension of the field of activities of BNOC to achieve this end. But the noble Lord has also confirmed—and I find this most interesting—that the exploration is done by the private sector and not by BNOC.
5.19 p.m.
Lord KALDOR: My Lords, if I may borrow for a moment the jargon of the United States Senate, I consider myself to be the junior Member of this House from Hungary. The senior Member, the noble Lord, Lord Balogh, cannot, as the noble Earl, Lord Gowrie, explained earlier this afternoon, be present at this debate because he is abroad. I should not like to say that I deputise for him; it would be quite wrong of me to do so. Nevertheless, I hope that what I have to say will not contain anything with which he would strongly disagree. But I should like to say that I was very greatly pleased and gratified by the tributes that were paid to the noble Lord, Lord Balogh, from all sides of the House, for the important
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work which he has done in connection with the development of Government policies and with the successful exploitation of North Sea oil.
Before I begin my speech, I should like to associate myself with the complimentary remarks made by the noble Lord, Lord Cockfield, about the maiden speech of my noble friend Lord Hatch. The views and the sentiments which my noble friend expressed about the excessive exploitation by the world of its exhaustible resources and the very unequal incidence of that exploitation command, I believe, universal agreement. I hope that my noble friend will forgive me if I do not follow his general thoughts but, at a more mundane and controversial level, concentrate my remarks upon the points which have been raised by the Opposition. Although I shall not directly begin by taking up the arguments of the previous speaker, the noble Lord, Lord Cockfield, I think that he will find in my remarks that there will be both implicit and explicit references to what he said.
The history of the exploitation of North Sea gas and oil reflects the shifting emphasis given to the public interest and to the private interest of the oil companies as Governments of different colour have alternated in power. During the last Conservative Government, the interests of the oil companies were favoured in two major ways. In the first place, although an experiment was conducted in putting licences up to tender, which showed that the companies would have been ready to pay very large sums for them, the great majority of licences were allotted on a discretionary basis. In June 1971, tenders were put out for 15 out of the 436 blocks for which applications were invited.
According to the First Report of the Public Accounts Committee, the tenders received on the 15 blocks, to be awarded by auction, were surprisingly large. They totalled £135 million for the 15 blocks from 30 applicants, the sum of the highest premiums hid for each of the blocks totalling £37 million. This was very much greater than had been expected. As the Committee records:
"Ministers were immediately informed but the policy decision to allocate other territory on a discretionary basis was not reopened."
Thus, after receiving £27 million on 15 blocks—far more than was anticipated—

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this experiment, which was intended to be only an initial step, was not followed up. Subsequently, the Government allotted 267 licences without any charge.
The second advantage enjoyed by the oil companies was that the only financial gain which accrued to the Government under the terms of these licences was a royalty payment of 12½ per cent. of the value of the oil brought ashore. This compared with the over 80 per cent. share which was secured at about the same time from private oil companies by the Norwegian Government on their part of the North Sea. It is true that the representatives of the Department of Trade and Industry maintained in their evidence to the Public Accounts Committee that the residual 87½ per cent. was subject to corporation tax at 50 per cent. so, taking the two together, 50 per cent. to 60 per cent. of the profit would accrue to the Government. But this claim was a hollow one.
As the subsequent testimony of a representative of the Inland Revenue before the Public Accounts Committee showed, under the then existing arrangements the oil companies could set off against their profits from the North Sea accumulated unabsorbed losses from their overseas operations to the tune of £1,500 million, a sum which was then increasing at the rate of about £500 million a year. That was on a pre-1973 basis, when the price of oil was only two dollars a barrel. At post-1973 prices, the rate of accumulation of losses to be set off against any possible tax liability of North Sea operators might have been very much greater. This meant that there was no chance that any benefit would accrue to the Exchequer other than the 12½ per cent. royalty payment. So far as the oil companies were concerned, whether or not this was fully known to the Government—and if I were to follow the argument of the noble Lord, Lord Cockfield, the Government must have fully known about it—the 50 per cent. corporation tax was a purely cosmetic tax.
Since then, the situation has been radically transformed. On the taxation side, as my noble friend Lord Strabolgi explained earlier this afternoon, the Government introduced a petroleum revenue tax of 45 per cent. which constitutes a first claim on the profits from North
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Sea oil. In addition, for the purposes of corporation tax, a ring fence was created around the North Sea which made it very difficult, if not quite impossible, to reduce corporation tax liabilities on the companies' North Sea operations on account of unabsorbed losses elsewhere. There were, however, very generous provisions for depreciation. Operating companies are entitled to write off 175 per cent. on all costs incurred on the exploration and development of any particular field before any tax is payable. I regret that the noble Earl, Lord Lauderdale, is not here, because this is the answer to his point that no interest is allowed against profits. The extra 75 per cent. was meant to represent, in a rough and ready but generous way, the interest accruing on amounts spent upon exploration and operations.
Further, to ensure that the taxation should not act as too much of a disincentive—we hear very much about the disincentive effects of taxation, and I was very surprised that the noble Lord, Lord Cockfield, who is such an expert on taxation, carefully avoided any reference to these effects when he said that all that we need to do is to tax profits sufficiently to prevent companies from obtaining an unreasonable return—and that companies did obtain a reasonable return on their investment, the first 1 million tons extracted per year from any one field was to be free of tax. If my memory serves me correctly, there is a further provision which ensures that a certain minimum rate of return on the capital invested is free of any tax, so as not to discourage companies, on account of taxation, from exploring and opening up less promising fields in the North Sea.
But no less important than these changes in tax provisions was the creation of the British National Oil Corporation, which was to be a partner, or at least a collaborator, of private companies in all North Sea operations. It is the existence and the activities of this Corporation which the large international oil companies regard as the main obstacle to the unhampered pursuit of their interests, and as we heard from several speeches this afternoon, these oil companies are not without their supporters.
In fact Britain treats the international oil companies—and this is something we

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have not heard mentioned today—more generously than most other countries where oil is produced: more generously than Norway, for example, and far more generously than the other main oil producing countries in the Middle East, in Africa or in Latin America, in all of which the oil industry has been completely nationalised. Even Canada has now set up a publicly-owned operating company. The only country where the oil industry is fully in private ownership and where the Government try to do everything through taxation and regulation, or through non-taxation and ineffective regulation, is the United States of America. It is certainly not an example for us to follow. Noble Lords opposite will not find there the harmonious relations between the oil companies and the Government which they apparently believe would exist here if the BNOC were abolished.
In this country the existence of BNOC is invaluable in helping to secure an overall policy which is in the best interests of the nation. There is first of all the fact that the Government through BNOC have potential control over the destination and use of at least 50 per cent. of the oil extracted from the North Sea, which may prove an invaluable safeguard in many of the situations which the noble Lord, Lord Chalfont, this afternoon envisaged as something which cannot be ruled out of court. Further, as an operating company, they acquire the know-how and the necessary experience without which civil servants would have to depend upon information supplied to them by private companies—a dependence which is dangerous since civil servants can scarcely spend their time eliciting information and giving advice to Ministers that is not in the interests of the supplier of that information. They can only pass on information which they receive.
It is the accumulating experience, both through its direct operational role in the Thistle field and through its representation on the committees of the operating companies, whether as an observer or as a participant, that permits BNOC to know not only what is happening but also what is not happening. In the absence of BNOC the only controls which the Government could exert, whether through taxation or through regulation, would be
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essentially of a negative character. They could discourage things or they could prevent them, but they could not ensure that oil from the North Sea was used to the best advantage both in the short run and in the long run.
It is the existence of BNOC, and that alone, which makes it possible for the Government to receive unbiased technical advice about the probable effects of any measure under consideration for example, a proposal to cut back production, or to leave particular fields as a reserve for future use, or to change methods of taxation, and so on. All this is the kind of technical knowledge and information which is very different from the kind of information that an accountant receives or the head of the Prices Commission receives in arriving at reasonable profit margins on costs or prices. It is therefore quite different from the sort of information which the noble Lord, Lord Cockfield, suggested that the Government possess already in ample measure.
At the same time it is not accurate to say, as was said by the noble Earl, Lord Gowrie, in a previous debate and implicitly at least repeated today, that BNOC operates as a regulatory body and therefore has a dual rôle; it acts both as a referee as well as being a participant in the game. What BNOC does is not to regulate but to acquire knowledge and thereby enable the Government to act upon advice that is both comprehensive and balanced. I regret to say that I detected almost a flavour of sour grapes in the opening speech made by the noble Earl, Lord Gowrie, this afternoon when he described, almost in tones of regret, what a dynamic institution BNOC has become; how much it achieved in the first two years of its operation, and how it secured one of our ablest business leaders for the head of its operations.
I also detected a note of regret that BNOC, being an operating company, fails to behave like a private operating company and fails to participate in that silent conspiracy of not telling the Government anything which it is not in the interests of this whole industry for the Government to know. I also detected a certain amount of regret or criticism in the remarks made by the noble Earl when he said that BNOC and the Government have tried to have the best of both

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worlds. They are trying to get all the knowledge, the expertise and the money of private industry and at the same time to secure the advantages of public enterprise and to safeguard the national interest in a way that only public enterprise can do.
The Earl of GOWRIE: My Lords, if the noble Lord will give way, as he was referring to me would he like to tell us this: since the formation of BNOC, since the fifth round licensing system, what single new or independent British company or single small company has been in any way encouraged to operate in the North Sea by the presence of BNOC?
Lord KALDOR: My Lords, I am afraid I am not able to give this information, but I should like to know whether, prior to the formation of BNOC, Governments have done anything to encourage the formulation of small new private companies? What have they done about it? All I wish to say is that in some ways the noble Earl is right; we are trying to have the best of both worlds. But since in this case "we" are the nation, what is wrong with trying to have the best of both worlds—what is against it? Of course, there are those who think—and the noble Earl, Lord Gowrie, as he made clear, is not among them—that there can be no conflict between private interests and public interests, the attitude which is epitomised by the well-known saying that "what is good for General Motors is good for the United States". Those who believe that will not, of course, perceive or acknowledge that there can be a problem here. If they believe that an invisible hand will compel the majority of the multinational oil companies to behave in the same way as if they were publicly owned, all I can say is that this is a very naive view which is not shared by those who are familiar with the oil industry either here or in other countries.
Much has been made of the fact or rather the allegation that the Consultative Document concerning the sixth round of allocations suggests additional criteria of preference in making awards that are far more onerous to the oil companies than the criteria of the previous round had been. All that the Consultative Document suggests by way of new criteria is, first,
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that in making awards preference should be given to applicants who are ready to offer training facilities for work on offshore installations. I cannot see that there is anything to be objected to in that; that is a most valuable suggestion which in no way can be regarded as unfair or onerous. Secondly, preference should be given to applicants who are prepared to be more flexible in accepting equity participation for BNOC or in meeting more than their share of exploration and appraisal costs. But we must not misunderstand the nature of the suggestions in the way the noble Earl, Loud Lauderdale, has done this afternoon—and I regret that he is no longer in his place to hear this. It is not true to say that BNOC will retain 51 per cent. equity interest and thus could receive 51 per cent, of the profits without contributing anything to the costs. What these propositions amount to is what is technically called "carried interest". BNOC has an option to acquire 51 per cent. of the equity, but if it exercises its option it must, of course, recompense the other operating companies in the consortium for its share of all the exploration, appraisal and development costs incurred. There is no question that it is going to try to get something for nothing. Carried interest means simply that if it has an option to acquire a participation, then, of course, if it does so, it must pay its due share of the costs. The third criterion is in granting options either to sell oil to BNOC in excess of BNOC's share or to buy oil in excess of the applicant's share, both at market prices.
The noble Lord, Lord Cockfield, characterised these proposals as grossly unfair, meaning as compelling the companies—I hope he will correct me if my memory is wrong—to minimise the rewards of success and to maximise the cost of failure. What he did not say, my Lords, is that no company needs to conform to any of these criteria if they do not want to. They are only suggestions; that is, that preference will he given to those companies who accept such criteria if they do. But if they do, it is either because they are not really regarded as so onerous as noble Lords opposite make out, or else they fear that their competitors will not regard them as so onerous. But, in either case, if they do in their application offer to give these preferences, this in itself is a sure indication that the terms offered are not

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terms with which companies would not willingly comply rather than lose the business. If, with all these conditions, they go on applying, it is because they expect that the net chance of profit is sufficient to undertake the venture. I should like to remind noble Lords that it is not our purpose, either on this side of the House or on the other side, to make profits as large as possible. Profit, as the great American economist, the late Henry Simons said, is a gift from the community given in order to operate the market mechanism in an efficient way. But the less profit you need to pay in order to obtain this service the better it is from the point of view of the community. It is, therefore, not a valid criticism, as the noble Lord, Lord Cock-field, says, that these provisions are bound to make the profits lower than they would have been if the provisions had not been made in the Consultative Document. Of course they do, but so what. We are speaking about the national interest and not the interest of shareholders, which is a very specific partial interest.

The major oil companies have been called the barons of the modern world. That may be an over-colourful expression. But certainly their power is such that a countervailing force is needed if the national interest is to be upheld. BNOC is such a force. Our main concern should be not to cut it down but to ensure that it is given sufficient resources and strength to do its job properly.
5.48 p.m.
The Earl of HALSBURY: My Lords, if my opening remarks appear to your Lordships not to be entirely to the point I hope that I may have your patience, because they will become more and more relevant as they proceed. I seek to persuade the noble Earl—for whose Motion we are all grateful since it gives us the opportunity to debate it this afternoon—equally with the noble Lord, Lord Strabolgi, who replies for the Government, not to peer down their microscopes at the contractual subsoil, but to stand up and turn their telescopes on to the horizon, where they will descry the monuments of past folly. I am sorry the noble Earl has just left the Chamber, but no doubt his noble friends will remind him of what I have said or he will read it tomorrow in Hansard. In particular, I want to draw your Lordships'
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attention to the possibility of using round six as a lever to renegotiate the disastrous terms on which we are being supplied with natural gas.
At this point your Lordships might well say, "This is a debate about oil. Why bring gas into it?" But, my Lords, you cannot discuss one without the other. An oil well is like a magnum of champagne, a bottle of Guinness or a syphon of soda water. It is under the pressure of the surrounding country rock. Release that pressure and it fizzes just like champagne, Guinness or soda water, and the fizz is the gas. You have a complete spectrum of wells, from wells with a very little gas to wells with a lot of gas, and wells which are almost entirely gas. Almost all natural gas wells will in fact produce a condensate if you reduce the pressure on them.
In our folly we have contracted to the supply of natural gas on terms which secure its wastage exactly on the lines described by the noble Lord, Lord Hatch of Lusby, in a remarkable maiden speech which was both knowledgeable and temperate—two qualities which always endear themselves to your Lordships' House.
Let me explain how the system malfunctions at present. The British Gas Corporation has contracted to take the output of natural gas from the North Sea. No matter how much gas is produced the British Gas Corporation is contracted to take it. Years ago, for ideological reasons, the production companies were screwed down on price. So if we put those two disastrous conditions together, how do they recover the interest on their investment? Simply by over-producing. What can the British Gas Corporation do except to sell that gas for purposes for which gas ought not be be sold.
I was horrified in the days when I was a member of the North Thames Gas Board—I was a member for 12 years—because towards the end of my term I found that we were almost under instructions from the Gas Council to supply interruptable gas to the Slough Trading Estate at very little more than a penny a therm in order to get rid of it—and, of course, the penny would have been marginal profits.
Gas is the ideal material for domestic use: in the kitchen, by the hearthside and

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even for central heating. It leaves no poisonous residues about and it produces nothing corrosive to pollute the atmosphere. The natural gas reserves in the North Sea are the heritage of our children and we ought not to be squandering them in industrial process heating which is a direct result of the terms of the contracts which have been entered into.
Something must be done and round six could easily be a lever—if people would wake up to the possibilities of this—to renegotiate those original contracts and limit the supplies of natural gas which must be taken up by the British Gas Corporation. There are two very differ-rent situations here. I recently went up to Sullom Voe because I like seeing things for myself. There they are building the world's biggest oil terminal in the Shetland Islands and I know roughly what will occur there, where the gas is a by-product.
The oil will be landed. The crude will be, as it is called, "topped"—that is, the gas and the volatiles will be taken out of it. They will be separated into their constituents. The liquefiable gases will be pressurised into containers and transshipped for sale, and the non-liquefiable gases will be burned in gas turbines to provide the power station requirements for the management of this big oil terminal. There may be some methane and ethane left over at the end. If there is sufficient, then it may pay to liquefy it and transport it to Canvey Island or it may not, in which case it may have to be flared or possibly become the basis of an indigenous gas supply for Lerwick and other places in the Shetland Islands. However, because the oil is the main product and the gas is the by-product there is no serious question of squandering resources of natural gas from that source.
But, in the southern North Sea where we are dealing primarily with gas fields we only have so much gas there and it ought not to be squandered by being burned in industrial process heat boilers. That squandering is the direct result of the foolish contractual terms that have been entered into. Therefore, I say again that we ought to use round six as a lever to renegotiate the terms on which we are buying natural gas from the Southern part of the North Sea.
5.54 p.m.
The Earl of LIMERICK: My Lords, I much enjoyed the speech of the noble Earl, Lord Halsbury. He will understand if I do not follow him in that way—indeed, there is no one, I think, who could follow him in that way. I propose to take a rather different line, but before doing so I should declare an interest in the debate as a director of two companies with small minority interests in North Sea blocks in both exploration and development stages.
I should like to apologise to my noble friend Lord Gowrie, on whose initiative we are debating this subject this afternoon, for the fact that owing to a prior engagement I missed the first few minutes of his speech.
I should also like to refer to the very notable maiden speech from the noble Lord, Lord Hatch of Lusby. He displayed a very thoughtful and sensitive approach to the subject and I should like to follow him in one of his thoughts. I agreed with him very strongly on the question of limitation of energy use. I share his concern about the rate of consumption of hydrocarbons and about the rate of economic growth of which this world is capable.
Our democratic systems are founded not so much upon economic growth as upon the expectation of economic growth. Even a small shortfall can spell discontent and finally may spell revolution. Therefore, it must be a matter of concern to us all to note the percentage of the growth of which the world is capable which is pre-empted by researching and producing new energy sources. We hope to hear the noble Lord again often.
Against the background of this debate and my own knowledge I am taking no doctrinaire line against a national oil company. I should contend that a national oil company is not necessary to secure a major British share in North Sea hydrocarbons—which were already vested in the Crown—and, of course, all oil companies operating in the North Sea, including BNOC, under the terms of their licences have only the right to produce the oil. Nevertheless, BNOC exists and it will not cease to exist.
Several speakers failed to acknowledge, or perhaps were unaware of, the inevitability of change in terms of the licensing

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rounds as the North Sea geology became better understood. I thought that the noble Lord, Lord Strabolgi, was perhaps a little guilty in that regard. The object of the fourth round—quite properly and desirably in the national interest at that time—was to encourage and accelerate what was high risk exploration in very largely unknown areas. Speed was then of the essence and speedy exploration was what was achieved. It was right then and it worked to our national benefit. To look back now with all the advantages of hindsight and to say that the fourth round was too generous is as futile as it is easy.
Of course, the fifth and now the sixth round can be negotiated in terms more favourable to the owner as against the concessionary, because on the basis of great and very rapid increases in geological knowledge, the odds of securing an acceptable return on investment are now quite different from what they were all those years ago. I make no complaint about the stiffening of terms in the fifth and sixth rounds. On the contrary, I should be complaining if they had not been stiffened. However, to complain retrospectively that the fourth round was too generous is, I think, claiming too much knowledge.
There was no shortage of applicants for the fifth round and on present evidence it seems unlikely that applicants will be lacking for the sixth round. Personally, I see nothing impossible about the terms proposed in the Consultative Document, provided—and this is the main point to which I shall return—there is confidence in the regulatory authority both in negotiation and in the procedure for licences granted under this round.
The question is: shall we get the best applications, and will the licences be awarded in response be on suitable terms so as to maximise our unrepeatable short-term national advantage represented by the hydrocarbons in the North Sea? The central point here is, I believe, the role of BNOC. The noble Lord, Lord Strabolgi, stressed that BNOC is not a regulatory body. In statutory terms, of course, he is absolutely correct. There can be no argument. A practical question, however, is to what extent, owing to its ambivalent relationship with the
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Secretary of State for Energy and his Department, it is able to influence or even indirectly, de facto, to exercise the role of such a regulatory body.
In another context recently Mr. Tom King commented:
"The basic structure in which oil companies do not know whether they are dealing with a competitor, a partner, or a boss, is at the root of this hostility to BNOC".
How real is this hostility and how justified might it be? I should like to cite five cases of what I think could be described as reasonable doubt or concern about the manner in which BNOC is exercising its triple role as competitor, as partner and as adviser to the regulatory authority. All the North Sea licensees with interests in producing fields were invited to negotiate participation on a "voluntary" basis. I place the word "voluntary" in inverted commas. It was also made clear that the companies who did not volunteer to negotiate participation would not be considered in any further applications for exploration licences either in the fifth round or in any subsequent round. Negotiations for fifth round participation were conducted by joint teams made up of BNOC personnel and nominees from the Department of Energy. For all practical purposes, this was a situation where the Government were negotiating direct with the private sector and it could hardly properly be described as a purely commercial negotiation at arm's length. I have heard first-hand accounts of negotiations in which the attitude adopted was that the terms of participation were standard, and that the other party could take it or leave it; hence the widely reported frustration and delay.
Secondly, prior to starting on participation negotiations, the Government imposed an embargo on all farm-outs. This delayed a considerable amount of exploration activity in the North Sea, much of which depended on the ability to farm into a favourable exploration situation or alternatively to farm out prospects judged to be marginal or high risk. Farming out is such a fundamental activity that any embargo on it is bound to have a strongly inhibiting effect on exploration. I think it became apparent why the Government had done this when they started to tell companies that they would only agree farm-outs if the applicant

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company was prepared to state its willingness to negotiate participation on the Government's terms. I have heard of a case in which two oil companies had agreed with the Department of Energy to the issue of a joint licence, which, on a technicality, involved the part assignment of a licence by one of them. Although the whole thing had been agreed in principle, BNOC withheld consent to the farm-out and made it clear that signing a participation agreement in BNOC's favour would be a precondition of its consent to a farm-out. I can think of no clearer example of negotiation under duress.
Another problem arose over the principle of the Area of Mutual Interest. This is a fundamental concept of the industry. It recognises the fact that geological work, whether seismic or drilling, conducted within a block may yield information of great commercial value in respect to a contiguous block. When companies joint venture to explore contiguous blocks they therefore agree that the contiguous blocks fall within an AMI, and also agree that no member of the joint venture will apply for an open acreage in contiguous blocks except in conjunction with or by agreement with the other joint venturers. BNOC has refused to endorse this principle, which means that it can apply at any time for open acreage on a basis of geological information leading to the expenditure by other parties.
The normal arrangements for licence allocation in Britain have up to now been that companies may only apply for licence areas on invitation from the Minister. Where, as is usually the case, there are competing applicants, the Minister will use his discretion to decide which applicant has the greater merit. Quite often in the past the Minister has advised the applicants to reach a joint venture agreement among themselves and to apply jointly for the licence. We now have a situation where BNOC and, incidentally, the British Gas Corporation can apply for any open acreage on an uninvited application basis. This gives BNOC a major competitive advantage over the private sector, especially bearing in mind its refusal to endorse the AMI principle to which I have referred.
My last example of non-commercial discrimination is that BNOC has sought
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and in many cases obtained a pre-emptive right in respect of the sale of licence interest. Normally where acreage is the subject of the licence held jointly be several parties there is agreement between them to the effect that a party wishing to sell its interest will offer it to the other parties pro rata. BNOC is demanding that the party wishing to sell should offer the whole interest to BNOC before offering it to the other licensees.
As a footnote to those points I reflect that, up to and including the fourth round allocation, a high degree of trust existed between representatives of the industry and officials administering North Sea oil. The officials have been increasingly involved in one-sided take-it-or-leave-it type discussions passing for negotiations with industry. A number of them have found it distateful and the old bonds of trust and confidence have been eroded. I cannot believe that it is in the long-term interest of the country that a major industry and the sponsoring Department should regard each other as adversaries.
Like my noble friend Lord Lauderdale, I endorse the principle of smaller and more frequent rounds. I suggest that the way to maximise benefit is fully to harness the skills and risk-taking proclivities of smaller as well as larger oil companies. Prima facie, Clause 4 of the Consultative Document is favourable to the smaller companies. The designation as operators can be for the exploration phrase only, in contrast with the fifth round, in which it was only BP among the United Kingdom oil companies which was named as the operator of a block. But there is a sting in the tail. It comes in Clause 9, where there is proposed—on an optional basis, I concede at once—a Dutch auction-type procedure as to who is prepared to give BNOC a more than 51 per cent. interest and/or carry some or all of BNOC's exploration costs.
The Dutch in fact do it differently and, in my opinion, better. They have a regime under which the oil companies carry all the exploration costs—and I see nothing wrong with the principle that the exploration costs should be borne by the private sector, provided that the companies are clear as to the terms on which the Government interest is going to "back in", as it is called later on. In the case of the

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Dutch State oil company, when they back in on certifying that a hydrocarbon discovery is commercial for development, they refund retrospectively their 40 per cent. share of the exploration costs and pick up a full interest from that point. That seems a sensible way of going on.
Lord KALDOR: My Lords, I am sorry to interrupt the noble Earl. I understand that this is also the case in this country and that if subsequently BNOC wishes to acquire its option of an equity interest, it will refund the share retrospectively.
The Earl of LIMERICK: Yes, my Lords, but there are two differences. One is that to get to this position now the British company must go through the Dutch-auction procedure. It cannot be certain that a licence will be awarded to it, other things being equal and satisfactory, unless it offers more than 51 per cent., or offers a carried interest, which is not required of it in the basic conditions of the round. This is the point of difficulty. Also, in relation to the fifth round, there was no procedure for retrospective refunding of exploration costs. What companies have found, as they have required consents for alterations in the licences or whatever it may be, is that it is being insisted that they sign a consent to participation by BNOC in terms of which, under the fifth round, they cannot get any refund of the exploration costs. That is why I think the Dutch system is superior.
These are the matters—and I recite them without pleasure—which raise suspicions of unfairness in this competitive, as I have called it, Dutch-auction, except that it is not Dutch: "Will you carry Big Brother, or will you be willing to make him even bigger?" It appears at least possible that it is an aim of current Government policy—it is at least inherent in the policies currently being applied—that the smaller companies should be squeezed out of the North Sea exploration business. If this is so, there would be no sense in the policy, since the industry has always functioned effectively on the basis of large and small companies operating in competion.
There is no monopoly of originality in the larger companies. Much exploration which is successful can be attributed to
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ideas of small companies, which are willing to take proportionately large risks. To the extent that companies are squeezed out, the parties involved in the North Sea will increasingly be BNOC, on the one hand, and the international majors, on the other. I doubt whether any limitation of competition of this kind would be in the longer-term national interest.
Like my noble friend Lord Gowrie, I am very conscious of the value of building up Britain's offshore technology. But this technology and expertise does not reside in Whitehall, in Glasgow, in Aberdeen, or in Peterhead. It resides on the oil rigs, in the design offices and workshops of numerous companies, nearly all of which are private and many of which are small. The point of acquiring technology for a company with 20 years of life might be debated. I could see a lot of point in it if it were to open up substantial export opportunities. However, this, I think, must be in doubt, because as a national oil company by definition BNOC will actually be precluded from participating in offshore concessions in many parts of the world—a case in point being Venezuela. The small companies feel, rightly or wrongly—and some of the evidence suggests rightly—that they are being leant on unnecessarily, or even unfairly, by Big Brother, who is counsel, judge and jury.
I should like to end with a suggestion. I apologise to the noble Lord, Lord Strabolgi, that I did not have the opportunity of putting this to him before. If he is unable to respond to it this afternoon, I shall understand. I hope that it will be seriously considered. I attach the highest importance to getting a sense of confidence, partnership and participation back into the whole business of exploiting this tremendous national resource which we have. My suggestion is that part of the disaffection sterns from the fact that there is no court of appeal. There is a Consultative Document which is larded with phrases such as, "in the opinion of", "subject to the consent of", and "if appropriate". The person who is the arbiter in every case is the Secretary of State. What would do immeasurable good in restoring confidence would be the appointment of some independent Commission or Commissioner on the lines of

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the Ombudsman, to whom cases of alleged unfair influence could be referred. If the policy is as Her Majesty's Government have stated, they have nothing to fear from such a procedure. It would greatly restore the confidence of those dealing with BNOC.
6.16 p.m.
Lord WYNNE-JONES: My Lords, this debate has been fascinating. It has been made notable by the maiden speech of my noble friend Lord Hatch, who contributed a new point of view to our discussions, and one which is certainly of great importance to us. The noble Earl, Lord Halsbury, took up this point later in his speech, where he had a suggestion to make which I think is an interesting one. I agree with him that the wastage of natural gas is really a tragedy. That is true, of course, of all our fuels. That is really, I suppose, what this debate is about. We are concerned with the oil in the North Sea.
In this country we are in a better position today than probably any country in the world, not in the extent of our resources but in the fact that we are trying to do something in the way of planning the use of those resources. Taking up Lord Halsbury's point, it refers to coal and gas. It also refers to nuclear power. It refers very much to oil. If one compares what is done here with what is done in America, for example, one finds that the planning for oil there is absolutely hamstrung by the fact that they have not got the ability to enforce a national oil policy in America. Of course, they have fiscal methods of doing it; but that is all. They have no other way of doing it. In consequence they have failed to get any effective policy. This has spread over the whole of their energy field and has obviously been a great worry to President Carter.
We may not have a perfect or a complete energy policy, but we at least have the elements of an energy policy which is much more effective than elsewhere. One of those elements—and an important one—is precisely oil, the very element which the Opposition would strike away, and from which they would remove the effective control. Yes, they will put on a fiscal control. They have already
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said that. They have been saying that for years. But the noble Earl, Lord Limerick, who in a speech of considerable moderation discussed this subject, said that we should not go back with hindsight and decide what might have been done. I do not go back with hindsight. I go back to Hansard of 7th June 1972, when the noble Lord, Lord Balogh, and the noble Lord, Lord Tanlaw, and others, took part in a debate in this House and pointed out the disastrous policy then being followed. They pointed out how our resources were being thrown away and that the oil companies were being made a present of thousands of millions of pounds.
The noble Lord, Lord Orr-Ewing, shakes his head. But may I quote the figures? He would like the figures, no doubt. The figures are as follows. Mr. Wadhams, who had been with Shell, made the following statement about the financial consequences to the oil companies of the method of taxation. He said that on an annual production of 1 billion barrels of oil the Government would receive, under the scheme in operation then, £30 million in taxation, whereas, for exactly the same amount, under the same conditions, Libya received £850 million in taxation from the oil companies. When one country taxes the oil companies to the extent of 30 times more—not 30 per cent. more—and yet is able to get the oil produced, one has to admit that we were being rather ridiculous in throwing away all this, and making a present to the oil companies.
Lord ORR-EWING: My Lords, I do not think that the noble Lord is comparing like with like. In the case of Libya, they are on-shore wells which have been in production for many many years; one would not expect there to be very much risk now. However, in the North Sea one was pioneering deep exploration wells which were very expensive and not altogether successful in the early phases. Therefore, the two are not of like character at all.
Lord WYNNE-JONES: My Lords, I was hoping that the noble Lord would say that because that is precisely the point to which I was about to come. The point is that, at the time, in 1972, just before the debate took place here, in the North

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Sea—not in Libya—the Conoco Oil Company announced that it had sunk nine wells and that six of them were successful. At the same time it was being put round by the public relations officers of the oil companies that only one in 20 wells was successful. However, the figures that they were using were the figures that applied to the Gulf of Mexico and not the figures that applied here. It has turned out to be a fact that the success rate in the North Sea has been far higher than it has been anywhere else.
The Earl of GOWRIE: My Lords, I am most grateful to the noble Lord for giving way. He is being so controversial that it is impossible not to leap up and down at him, and I hope that he will forgive me for interrupting. The fact is that in 1972—before a 400 per cent. increase in the oil prices and with a resource that was not known or widely understood—the situation was almost entirely different. As I said in my opening remarks—and this is the only point I make on this—if we had pursued what the noble Lord, Lord Balogh, and others wished us to do in 1972, with a bit of luck we should still be sniffing round the perimeters of the Forties Field. The whole show would not have got on the road. The noble Lord, Lord Wynne-Jones, knows that very well.
Lord WYNNE-JONES: My Lords, the real difference was that in 1972 there was a Conservative Government; since then there has been a Labour Government, and it is the Labour Government that has made all the difference.
The Earl of GOWRIE: My Lords—
Lord WYNNE-JONES: My Lords, the noble Earl has already interrupted me several times. It is precisely the fact that the Labour Government took a positive oil policy; it is precisely the fact that they introduced the idea of BNOC; it is precisely the drive that they put in it; and, if I may say so in the absence of the one who was largely responsible, the noble Lord, Lord Balogh, probably played a more important part in all this than anyone else in this country and I believe that the country owes a great deal to him for what he did.
Lord KALDOR: My Lords, perhaps I could interrupt in reply to the comment made by the noble Earl, Lord Gowrie. He spoke of 1972. The events which I described in my speech took place in 1971, a year earlier, and showed that in the very few cases—and they were by way of an experiment—the Government were willing to put up licences to auction or to tender on a competitive basis; and the companies were willing to bid enormous sums in order to get those licences. That was in 1971. Nevertheless, the experiment was not followed up.
Lord WYNNE-JONES: My Lords, I agree with what my noble friend has just said. Perhaps I could refer once more to what the noble Lord, Lord Orr-Ewing, said. He referred to the great expenditure of the oil companies. In a decade the Shell Company spent £250 million on a certain development. The return that it received afterwards was between £80 million and £120 million per annum. That is not exactly penury for the company; it is not exactly a return which is so small that it does not encourage the company to continue. In fact, even today, when the taxation is a good deal higher, they still want to do on.
What did Mr. McAllister of the Occidental Oil Company say only the other day, for which he was sent away to Canada? He stated that the Government had been too slow in allowing them to go ahead and develop. In other words, he did not want to pull out; he wanted to go ahead faster. But this is exactly the point; it is exactly the reason why we need a national control. This is precisely where the advice of BNOC becomes so important. Who knows what is the right rate of development? It is estimated that in the 1980s there will be so much oil about that there will be a glut on the market. Does it make sense to go ahead now with rapid development in order to contribute to that glut? Or is it more reasonable to look at the matter properly from a national point of view?
If we produce the oil for the early 1980s, when there is almost certain to be a glut, either we shall have difficulty in getting rid of it and we shall have to store it, or we shall have to sell it at a cheaper price. On the other hand, if we hold back our rate of development, there will certainly be a shortage of oil in the 1990s.

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No one can be certain of the exact date at which any of these things will happen. In fact, a letter on this very matter by Professor Peter Odell is published in today's issue of The Times. In his letter Professor Odell says that from its own production and from participation BNOC has more than enough crude oil to meet all possible short or medium-term sales opportunities, but that BNOC believes that the oil will be scarce by the late 1980s. Odell himself states that he does not believe this. This is obviously a matter which has to be looked into.
But how can one look into this unless one has an operator like BNOC which can supply the information to the Government? The Government themselves cannot obtain this information; they are not explorers. So BNOC will play a vital part in determining Government policy. If the noble Earl, Lord Gowrie, following usual Conservative policy, says: "When we get back we shall wipe out everything that Labour has done"—
The Earl of GOWRIE: My Lords, the noble Lord must not make unjustified accusations. That is not what I said.
Lord WYNNE-JONES: My Lords, the noble Earl said quite definitely that they would remove the advisory power from BNOC. That is what I was talking about. If the noble Earl chooses to interrupt me, he might at least interrupt me on a point where I said what he thinks I said, but I did not. It is really quite essential that if we are to have a proper control of oil policy—and gas policy comes into this—there should be active Government participation. Without that we shall not get control; without that the country will suffer, I, personally, hope that BNOC will continue to thrive and do the excellent job that it has begun.
6.29 p.m.
Lord ORR-EWING: My Lords, I should like to start with an apology. I understood that this would be a short debate with short speeches. It has been a debate with very well-informed speeches, but not all noble Lords have set the fine example of the last speaker in being short. I hope that it is not too discourteous, but I have a commitment at 7.15 p.m. which
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means that I may have to leave if I am not to avoid losing my wife—not for the reasons that noble Lords may think, but I have a date to take her out!
I should like to add my congratulations to those already offered to the noble Lord, Lord Hatch. Everything that has been said about him has been said with justice, and we hope to hear him again. I should also like to add my congratulations to the noble Earl, Lord Gowrie. He has chosen a subject with good timing because it lines up not only with the Government's White Paper but also with the publication last Friday of this admirable document, the 1977 British National Oil Corporation's annual report. I commend it. There are plenty of copies in the Printed Paper Office. It has been difficult to get from the other place because I think the demand has been high.
I am sorry that the noble Lord, Lord Kearton, probably through business, has not been able to be with us. I realise that he would not be able to take part in the debate, but as there is no annual general meeting where he can be questioned, or could listen to what shareholders say, I hoped that he might be here in a listening capacity. We miss him just as much as we miss the noble Lord, Lord Balogh, on this occasion. Perhaps on a future occasion they will both be here.
I wanted to concentrate briefly on the expansion, plans of BNOC, which I think I would describe as a "sprint for growth": secondly, on the pressures that they are exercising on private sector companies—and my noble friend Lord Limerick's speech was so powerful, and the instances so applicable, that I shall not have to dot the i's and cross the t's in that area; thirdly, on the effect their plans have on capital expenditure and, above all, on their cash flow, neither of which are set out in any detail in their report.
There is evidence that BNOC is spending taxpayers' money at an enormous, and I believe unjustifiable, rate. There are strong signs that the Benn/Kearton axis is now aiming at a sprint for growth, and I cannot help wondering whether that is because a General Election might change their powers in the future. In this sprint BNOC leans over backwards to help the powerful multinationals, and God help any small British company which is trying to get licences and to make its

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presence felt. The multinationals are known, as so many noble Lords know, as the "Seven Sisters". By 1980, at the present rate, BNOC's ambition seems to be that it shall become the eighth. It could do it. BP, worldwide, produce 1½ million barrels of oil a day, and BNOC could, through its 51 per cent. participation agreements, market 1 million barrels a day by 1980. If it is allowed to carry on with its ambitious plans, I ask myself: how is it going to finance the operation?
My noble friends may have seen the article in the Sunday Times of yesterday where it showed the growth of expenditure in a useful graph, and showed aptly and clearly that BNOC itself would be producing from its own wells about 100,000 barrels a day, but showed an enormous expansion of the oil it would be purchasing. In a year or two it would be purchasing 600,000 barrels a day of crude; that is six times as much. This would be bought from other companies who are obliged to sell it. This surely is going to bring about a tremendous cash flow problem, and I wonder whether both Houses are going to be asked, as a Parliament, to grant further cash for this expansion.
In the fifth round BNOC got 40 blocks. The cost of drilling a well now is around £4 million, and on one site normally at least two wells are drilled. Half the cost on a site would be borne by BNOC. So if it has 40, it would necessarily have to spend another £160 million on all this other expenditure if it is going to make use of the oil on those 40 blocks.
On 5th April there was announced yet another allocation; this time a further nine blocks. I think that this one should be called the fifth and a half round, because there was the fifth round and we are coming to the sixth round. This was an interim round with extremely unusual conditions, because nine blocks were let to BNOC with no competitive tendering, with none of the qualifications that we were always assured were going to take place; a straight allocation. Many of these blocks were very promising. Therefore, from what my noble friend Lord Limerick has said, none of us can help wondering whether some of the information that it gained as an operator has come from private sector companies, and that it knew that these were promising wells and it went for them direct with none
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of the normal tendering procedures. A suspicion that it got some of this basic information from those private sector companies must exist. My noble friend Lord Limerick pointed out, chapter and verse, why those suspicions arise.
We now learn that in round six BNOC will get priority on six blocks. Why, again, overriding priority? When the other tenders are in, BNOC is going to be able to select its six blocks. This is not fair competition by any standards. These are the points that we made throughout the debate on the Pipelines Bill. We kept saying, "Right, we go along with the idea that there should be a public oil company; but how are you going to ensure that there is fair competition between the two sides in every respect?" The examples we have had this afternoon certainly suggest that this is not to he. They prove that BNOC has increasingly crept in as a regulatory body and, at the same time, as an operating competitor.
I think that the Tory policy, which is flexible and was well set out by my noble friend in his opening speech, is to appoint either a regulatory agency which is separate from the producing company or, alternatively, again to rebuild the energy department in the Ministry. It is perfectly capable of undertaking it, and we should like to see responsibility pinned on the Secretary of State so that we may question and examine him. I think that there is something in the suggestion at the end of my noble friend's speech, that perhaps there ought to be some arbitration body which is called upon when there is any doubt about fairness.
I believe that this sprint for growth shows itself in the tremendous growth in the staff. There have now been recruited 745 people. I believe that many of them have been recruited from competitor oil companies and, of course, they have been tempted away, or bribed away, with higher salaries. Certainly, if noble Lords will turn to page 41 of the BNOC report, they will find that a very large percentage of that small number of 745 is very highly paid indeed. There are 106 people listed there who are paid between £10,000 and £15,000 a year; there are 17 people who are paid between £15,000 and £25,000 a year. This is a fairly small company, of 750 people. Admittedly, the sums are big; but surely one wants real experts with a

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knowledge of the industry, and not large numbers of clerks trying to carry out this job.
I turn further to the cash flow. In the pipelines Act it says that £600 million would be made available to BNOC, and that on the Secretary of State's say so that limit could be raised to £900 million. But it also says that that was the limit of all borrowing. I have given the noble Lord notice of this point. The Bill does not say that this was the limit from the National Oil Fund. Is not getting a loan from a United States bank, Citibank, which heads up a consortium and borrows another 825 million dollars, a contrivance to get round the cash limits imposed by Parliament? If Parliament does not control through cash, it loses all control altogether.
I would ask the noble Lord, Lord Strabolgi, when he comes to reply, whether Parliamentary authority is going to be sought to expand BNOC borrowing powers. I imagine that this loan was taken partly to reduce the percentage rate it was paying on its borrowed money (and that was revealed in this report), but also to get round Parliamentary control. Noble Lords will know that the Comptroller and Auditor General has asked some very pertinent questions indeed about this device. It seems that Britoil is set up under some charity umbrella. This is a strange thing to learn of a nationalised oil company. It is a strange arrangement, and while I have had it reported on good authority, if I am wrong I am sure the noble Lord will put me right.
The annual report also takes credit for the fact that this huge loan was achieved without any Treasury guarantee. But that is a rather naive viewpoint. Would any Government—foreigners,who are providing much of the money, would know this—let a nationalised concern like BNOC go to the wall or go into liquidation? That could not possibly happen, so ipso facto there is an unwritten standby arrangement from the Government of the day.
Finally, I wish to touch on the pressures, either partially hidden or otherwise, which amount almost to blackmail. If an oil company criticises BNOC then, as we have heard so many times this afternoon, its president—in this case Bob McAllister—is sent to Canada or elsewhere on a smaller job.
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Several noble Lords: Oh?
Lord ORR-EWING: Yes, indeed, my Lords, he was president of Inter-Continental for the United Kingdom and Western Europe, and it is fair to say that he has been sent to a smaller job in Canada. BNOC have let it be know n that Bob McAllister's sacking should be taken as a warning to other oil companies. It is difficult to get chapter and verse on this, but I have that on good authority.
Perhaps I may give one more example to add to those which my noble friend gave. BNOC must give to the North Sea oil companies authority for the expenditure of AFEs—authority for expenditure—and I believe that unless these orders are placed where they are politically advantageous, the North Sea oil companies do not get a chance on future licences, or delays are imposed in giving them approval so that they cannot develop their existing fields on time. This blackmail may not sound serious, but the power to throttle can greatly affect the cash flow of any of the big majors; and of course cash flow is of vital importance when developing a commodity like oil.
I have sought in a short speech—shorter than the average in this debate—to draw attention to the need to know a little more about the capital programme of BNOC, to know something about its cash flow and to expose once again the fact the pressures—undue, incorrect and unfair pressures—are being brought on the private sector. I hope that when the noble Lord, Lord Strabolgi, replies he will try to set our anxieties at rest, because we all want to see this great oil industry go forward in a spirit of amicable cooperation and not in a mood of grave suspicion.
Lord TANLAW: My Lords, I should be grateful if the noble Lord, Lord Orr-Ewing, would clarify two points. There has been criticism from other speakers on the Conservative Benches about BNOC going ahead too slowly, and Mr. McAllister has been mentioned in this respect; but Lord Orr-Ewing referred to a sprint for growth. Would he clarify what he meant by that?
Lord ORR-EWING: Certainly, my Lords; I meant a sprint for their own growth and a brake on anyone else's

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growth by arguing about the form and conditions of the agreement, a point that was made very purposefully by other speakers. That is the difference.
6.44 p.m.
Lord VAIZEY: My Lords, I wish at the outset to join other noble Lords in congratulating the noble Lord, Lord Hatch of Lusby, on his interesting and important maiden speech which touched on a central issue, an issue to which I am sure the House will return many times in the future, when we shall expect Lord Hatch to lead us. I also wish to thank the noble Earl, Lord Gowrie, for tabling a Motion on this vital question, and in the course of my, I hope, brief remarks I shall try to touch in a non-partisan way on the questions he raised for our consideration.
I also wish to join the noble Lord, Lord Kaldor, and others in saying how much I regret the absence of the noble Lord, Lord Balogh, this afternoon; I have learned a great deal from him and the nation stands very much in his debt for his con struction of an oil policy. When I was at Harvard, Professor Seymour Harris, used to claim that his adoption of Keynesian ideas had saved the United States Government so many billions of dollars that the rate of return on his salary ran into billions of per cent.: I am tempted at times to think that the interventions of Lord Balogh into oil controversies in this country have saved this country a not inconsiderable sum.
I begin by touching rather generally on a central question which the noble Earl, Lord Gowrie, raised—namely, the relative merits of public and private corporations. I thought I detected in some of his remarks a feeling that on the whole the public corporations were less efficient and less popular than the private corporations. The last time I addressed your Lordships' House—the subject was the problems of management—I suggested that the problems were rather more complicated; that the problems of running large organisations were common to both private and State corporations and that, broadly speaking, small businesses—small affairs and those engaged in mending things and so on—were best left to small firms. That is the area where the major criticism of the nationalised industries
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came in; criticism of the gas board, the electricity board, the public transport system and so on. I do not believe that the criticisms are broadly directed towards bodies like the Central Electricity Generating Board, the Atomic Energy Authority or, I suggest, a body which operates so major an enterprise as the British National Oil Corporation.
Noble Lords have given some examples of what they have in mind and perhaps I may illustrate what I have been saying by a very homely example. Perhaps unpatriotically, I drive a Renault car. That car is made by a State enterprise and it seems to be an extremely good car. I try to have it serviced at a Renault garage, which presumably is also nationalised, but it is just as hopeless as the gas board. I believe therefore that the broad categorisation of public as bad and private as good is something we should avoid. I appreciate that Lord Gowrie has an infinitely more sophisticated view of the economy than that, but as the election comes near we might be tempted into that kind of fruitless debate. I suggest that we should take a pragmatic view of the failures and successes of our economy.
There are special problems in the oil industry. The oil companies are enormously powerful. They have in the past controlled Governments. As Lord Kaldor —who I regret to see has left the Chamber —said, they are enormously powerful, especially in the United States, and it is difficult to see whether they control the Government or the Government control the oil companies in that great country. It is because of the enormous power of the oil companies that, as noble Lords have said, so many oil producers like ourselves have set up their own State oil corporations.
I listened with great care to the arguments of the noble Lord, Lord Cockfield, and I thought his conclusions were very powerful, but I begged to differ and I thought that much of what Lord Kaldor said answered some of the crucial points which Lord Cockfield raised. I think there is no question—and I was glad to hear Lord Cowrie make a quite positive statement in this respect—but that, if there were a change of Government, the BNOC should survive—
The Earl of GOWRIE: My Lords—
Lord VAIZEY:—and that assurance was an important one for him to give, because, if a Conservative Government were returned, they should surely try to retain what is good out of the achievements of the present Government and do away with only things with which they seriously disagree. We have before us the supreme example of the catestrophic abolition of the Prices and Incomes Board by the Heath Government in 1971, which was a major cause of the difficulties which led to the fall of that Government in 1974. Does the noble Earl, Lord Gowrie, wish to intervene?
The Earl of GOWRIE: My Lords, I am not taking up a debating point with the noble Lord, Lord Vaizey, but a point on which I think he misheard me. I said the British National Oil Corporation as presently constituted would, in my opinion, almost certainly not survive a change of Government.
Lord VAIZEY: I was coming to that—but I thought that the noble Earl had carefully moderated his statement to say that it would in fact survive, at least in embryonic or skeletal form. But if in fact he went rather further than that, I think it is a more serious question. I had taken it to be the crucial issue which the noble Earl was raising this afternoon, and I thought that some of his arguments were very persuasive; indeed, he persuaded me. So I hope that he has not gone too far overboard in disagreeing in advance with what I say.
The question is, if the British National Oil Corporation survives (as I think it should), how far should it continue to have the privileged position which has been given to it by the legislation under which it operates? I have gone as carefully as I can into this question, and I have consulted all kinds of people and have followed the debates with great interest and care.
First, I think it important that the Government should have access to the specialised geological marketing and other expertise which is available to the international oil companies, but which, by its very nature, could be available only at second hand to the Civil Service. Therefore, I think it very important that the existence of a State-owned British National
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Oil Corporation gives the Government information of a direct character about the business operations of this crucial sector of the economy which could not be available to a regulatory agency. So the fact that this corporation is directly responsible to the Secretary of State for Energy is enormously important for the Government's regulatory work. I think that the noble Lord, Lord Tanlaw, made that point, and I hope that in the end it is non-controversial, because I think it is the central argument.
Secondly, there is the question of whether the corporation should continue to have the privileged option to take up 51 per cent. in the oil fields newly developed by its competitors. Comparing the speeches of the noble Lords, Lord Cockfield and Lord Kaldor, on this particular point, I thought that the noble Lord, Lord Kaldor, had it. On the whole the arguments against taxation, and the arguments for participation, seem to me to be broadly very convincing. It is a much more straightforward way of getting the money into the Treasury. It is more likely to be based upon realistic assessment of what the operating conditions are, and what the marketing conditions are. It is more likely that the decisions will be taken in the interests of the nation and of the firms in which the State has a participating share, because they are working in cooperation and partnership, than if it is a straight tax deal. The interests of the State as a tax collector are, for obvious reasons to some extent allied to those of private firms for making profits: the higher the profits, the higher the tax. They are also equally obviously diametrically opposed, because the higher the tax, the lower the profits, and the less likely, therefore, the firm is to be successful in its operation. So I should have thought that on the whole the partnership, if it works, is probably a good idea, rather than a bad idea.
Here, we come to the crucial question which has been raised several times this afternoon. The noble Lord, Lord Strabolgi, on the Front Bench, has intervened several times to point out that the British National Oil Corporation is not a regulatory agency. Perhaps I may put it this way: should the BNOC take part in the regulatory process? I think that the noble Lord on the Front Bench would not disagree if I said that

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in some sense the information which the BNOC provides to the Secretary of State for Energy is a rather important part of the information which is available for him when he is undertaking his regulatory duties.
Here, I believe it is perfectly clear that there is some degree of conflict of interest, and one which begins to sound a certain number of alarm bells in my own mind about the whole possibility of a conflict of interests. Again, I can see that the argument would be rather conclusive on the side of the Government Front Bench if the information itself was so crucial to the decisions which were taken. Those decisions could not be taken without the close and constant co-operation with the BNOC which I understood from my reading of the consultations was the central part of the argument for the way in which the present system was set up.
Therefore, by and large, I do not quite share the noble Earl's fears and worries, which were expressed with extreme eloquence and force, about the role of the British National Oil Corporation. I would be somewhat sad if a Conservative Government were returned heavily committed to savaging this new beast, which in its turn ravages the North Sea. This might be a commitment which was unwise, and which in the long run the Conservative Government (if one came in) might greatly regret.
I very much took the point made by the noble Lord, Lord Tanlaw, on the Liberal Front Bench, to the effect that the slowness in allocating licences, indeed the slowness in exploration, may very well be no bad thing. One listened with care to what the noble Lord, Lord Hatch, said, and to what the noble Lord, Lord Wynne-Jones, said in what I thought was a very telling intervention. The whole question of the rate of depletion is absolutely crucial. I should have thought that the balance of the evidence so far was in favour of slow take-up, rather than fast take-up. There has been a consistent ambivalence throughout the debate in that speakers have argued (sometimes within the same speech) that we should have a slow rate of depreciation and that we have been unnecessarily slow in our discovery and development of these fields. I can see that these are not necessarily contradictory positions, but I
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think that when one listens to them they almost inevitably seem to some extent to be contradictory positions.
Up to the point at which I rose to my own feet this has been a fascinating and important debate; one in which your Lordships' House has been behaving—as, in my view, it should—as a forum for the discussion of long-term questions, and not for the making of immediate points of Party advantage. On the whole, the question of the future of Britain's oil reserves and of the future of this very important corporation deserves a lengthy period of consideration outside this House, in the public Press, and perhaps a period of abstention from over-strong criticism until we are absolutely sure which way it is going to develop.
6.57 p.m.
Lord GISBOROUGH: My Lords, I should like first to congratulate the noble Lord, Lord Hatch of Lusby, on what can only be described as a model maiden speech. I want to add a few words to those said already by the noble Lord, Lord Orr-Ewing, and the noble Earl, Lord Limerick, on the small independent companies. It appears that the awards of licences will largely depend on the size of contributions to BNOC, as well as other factors, such as trade union representation, snd so on, and on the proviso that applicants should indicate how much over the 51 per cent. they are prepared to offer BNOC and that they will carry BNOC's share of exploration and appraisal costs. That seems to me to have all the features of a Dutch auction. Not only has the huge and risky cost of wildcat wells to be carried for the BNOC by the oil companies, but it has to be carried to the stage when the actual development programme is approved by the Department of Energy. This proposal would mean that many small British companies would be spending more than twice as much as the cost proportionate to their interest for wildcat wells, through the unsuccessful wells that would be drilled, and throughout the development phases.
In a speech which I thought was jolly good Election knockabout, the noble Lord, Lord Strabolgi, mentioned the ring fence. As I understand it, the point is that the major oil companies have ring fence income already, and therefore will be

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effectively able to pass 52 per cent. of the cost of carrying the BNOC back to the Government; but independent companies, without this advantage of standing income, may be unable to compete with the major multinationals. The effect will be seriously to harm smaller British companies, particularly those coming into the field, whose potential contribution to the British economy far outweighs the interest of multinationals, whose profits do not remain in this country any more than they can help.
Another criterion for obtaining a licence is the option of the BNOC to have the right either to buy or to sell its share of the oil or gas, so as to protect the BNOC from unattractive market situations. This could be a tremendous burden on the independent companies, many of which have no capacity as refiners to take the oil or to sell it. Furthermore, the six months' notice which the BNOC is to give the companies of its intention to sell or buy, is far too short in view of the long-term contracts which oil companies are used to making. These conditions have been described as very objectionable. The price at which the oil is to be bought or sold is described as "market price". There is no particular denition of "market price", and if the fact is that the price is to be dictated by an expert, then the question is: Who is the expert, and how could that be necessarily acceptable?
In the proposals, BNOC are effectively to dominate all operating committees, but the minority interest holders must go along with exploration and appraisal programmes provided by the majority on these committees. This is the first time that any participant in a licence has been denied the opportunity to step out of work obligations after statutory obligations have been met. BNOC dominance in this situation could make the position of smaller companies once again impossible. Most of the smaller British independent companies have been built round the North Sea exploration and development. They need a strong, sound and good future, not only to survive but also to expand. It is a vast capital-intensive industry, and obviously requires enormous resources. Unlike the major international companies, most British independents have very little overseas interests and must rely on work in the North Sea.
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Thus, it is only a few, and the majors at that—Chevron, Occidental, Shell and BP (and heads have rolled for it already, as has been mentioned)—that have had the courage to protest at the rôle of BNOC and the domination of the Government in the North Sea exploration.
The domination is increasingly severe each round, but the independent companies cannot afford to commit commercial suicide by expressing their concern at the rôle of BNOC and at the increasing domination of the Secretary of State and certain of his civil servants. These civil servants are acting at their own discretion within the sweeping powers given to the Secretary of State, and are acting in a political rôle, needless to say. They are justifying their actions as being, according to their view, in the national interest. Surely there is too much ministerial discretion in the Department of Energy, and there should be more control by statutory enactment.
Up to now, Britain has encouraged investment in North Sea oil and a large number of companies have therefore got into the act. There has been a great number of ideas, and the success is evident by the amount of oil that is coming out. But it is a vast investment. I have figures which disagree with those already produced, and I do not know which are correct, but it is reported that Shell now have a total investment of £1,000 million in the area, and that they will not get a positive cash flow from that sum until 1980. The costs are huge and the risks are enormous, particularly for the independents, without the vast resources. But the British independent companies have a great rôle to play and need every encouragement, with the ever-increasing high costs, the potential loss of buoyancy of the oil market and the fact that, as more and more areas get known, the areas left are less likely to have oil and to have been, in the words of one of the oil magazines, "well kicked over". The general thrust of the proposed terms will squeeze the independents and put the future of the North Sea development increasingly in the hands of the multinationals. As the BNOC rides entirely on the backs of major companies and independents, it is surely vital that BNOC should ensure the success, the wealth and the increase in numbers of all the companies, large and small on which

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it relies to be carried. If ever a rider starves his horse, the horse will either disappear or no longer be able to carry the rider.
7.4 p.m.
Lord STRABOLGI: My Lords, I think we have had a most interesting debate, and I should like to join with other noble Lords in saying how indebted we are to the noble Earl, Lord Gowrie, for initiating it. Before replying in detail to points raised by noble Lords, I should like to join in the congratulations to my noble friend Lord Hatch for a most notable and thoughtful maiden speech, if I may say so. I hope it will not be long before my noble friend addresses your Lordships again. He stressed in his speech, by implication, the great importance of a proper depletion policy, and how we shall have an oil crisis one day through the wasteful use of this resource. I am also grateful to my noble friend Lord Kaldor, who played such a distinguished role in the question of North Sea oil for his support., I think we were all interested in his account of the early arrangements; and, of course, he also reminded us of the strong criticism contained in the 1974 White Paper about the loss to the Exchequer of taxation through the previous Government's policy. This was supported, too, by my noble friend Lord Wynne-Jones in a very vigorous and emphatic speech. I am grateful to the noble Lord, Lord Tanlaw, for his support of our policy. He asked me to whom BNOC is financially accountable. The answer is that the Corporation is accountable to the Secretary of State for Energy. The Secretary of State is of course accountable to Parliament.
The noble Earl, Lord Lauderdale, who apologised for not being able to stay, asked how the proposed arrangements for awarding exploration contracts first would help the small companies, as I alluded to that in my speech. It has previously been the practice when considering the technical competence of applicants to look to see whether the nominated operator is capable, not only of exploration but also of development; but the massive demands of the North Sea in terms of skills and manpower mean that only the largest companies have access to the resources to meet those demands. So our proposal that operators
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will initially be approved only for the exploration means that the applicants will have to satisfy a less rigorous standard of examination, and that must assist the smaller companies. But it is not true that the smaller companies have been unable to compete in the North Sea. Indeed, several were successful in the fifth round.
The noble Lord, Lord Cockfield, also asked whether an operator who had been successful in an exploration contract would be awarded the development contract. Licences are granted for exploration, and, if anything is discovered, for development and production of the resources in the discovery. Under the licence, the operator, who is usually a licensee and a partner in the consortium holding the licence—because most of this work is done by consortia, as the noble Lord, Lord Orr-Ewing, knows well —can function as such only with the approval of the Secretary of State. Under earlier licences, approval has been for the whole licence activity—exploration plus development if it occurred. The intention now is to introduce a natural break at the end of the exploration phase. The Secretary of State's approval will be given for the exploration phase only in the first instance. Resources generally for the development of the discovery are relatively scarce because they are on a much greater scale than those required for exploration. To regulate the pressure on those scarce resources, the prospective development operators, who are very probably also members of the licensee consortium—indeed it could be an exploration operator —will have to have their operatorship endorsed by the Secretary of State before functioning as such.
The noble Earl, Lord Lauderdale, also made a reference to the Eighth Report of the Public Accounts Committee. We do not consider it appropriate that orders should be made under Section 41 of the Petroleum and Submarine Pipelines Act 1975 in respect of any of the participation agreements we have so far signed. The Act confers power on the Secretary of State to make provision by order for the making of payments by BNOC to licensees who are parties to participation agreements. When the draft legislation was before Parliament, it was envisaged that participation in existing licences would

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occur through acquisition by BNOC of a 51 per cent. beneficial interest. Ministers made it clear that the licensees would be compensated in respect of that acquisition. In practice, none of the agreements so far concluded provides for State participation in this way. The noble Earl, Lord Limerick, made the suggestion that there should be a court of appeal for—I take it— the unsuccessful applicants. The law authorises the Secretary of State to exercise discretion in awarding licences. There is no evidence of disquiet about fairness of allocations. Indeed, there have been no complaints from any quarter; but I will inform my right honourable friend the Secretary of State about the noble Earl's suggestion.
The Earl of LIMERICK: My Lords, I am grateful to the noble Lord for giving way. I must have expressed myself badly. I was not referring to allocation of licences but to cases of negotiation in which it was felt by the party other than BNOC that they had been leaned on in a rather heavy manner along the lines of the examples that I cited. Those are the cases that I had in mind, where I thought there should be some reference to an Ombudsman —I used that parallel—in cases which may approach maladministration.
Lord STRABOLGI: My Lords, I take the point the noble Earl has made, but this is so always. If there is any complaint about this so-called "arm twisting" that the Opposition are always talking about, they can let my right honourable friend have the information. I should like now to deal with the carried interest which was also mentioned by the noble Earl, Lord Limerick, and the noble Lord, Lord Cockfield. The carried interest for BNOC is a reflection of our policy to obtain the fullest national benefit from our offshore oil resources. The Opposition claim that to carry BNOC would place a heavy burden on the companies.
Let me put the matter in perspective. The position is that it will be open to the applicants to offer to meet some or all of BNOC's share of exploration and appraisal costs. There is no compulsion on them to make such an offer or to pitch the offer at any particular level. Where such offers are made, the companies no
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doubt will have satisfied themselves that the offer makes commercial sense in their interests. I cannot predict what the cost of carrying BNOC would be as this will chiefly depend on the offers applicants choose to make. I should like to repeat what was said by my noble friend Lord Kaldor; that is, that BNOC will, as in fifth round licences, pay its share of development costs as these are incurred.
The noble Earls, Lord Gowrie, Lord Lauderdale and Lord Limerick and the noble Lord, Lord Gisborough, all spoke about the lack of opportunities for the smaller firms. The noble Earl, Lord Limerick, implied, I thought, that the Government had some prejudice against small companies. I should like to deny that. The Government have followed the line of their predecessors in having no special attitude towards any particular category of company. It has been the policy of all Administrations that there should be no discrimination between applicants on grounds of nationality. All applicants are considered against a common set of published criteria. It is by reference to how well a company meets these criteria and not whether it is large, small or independent, that discretion is exercised in the grant of licences. I am sure that that is the proper policy. Any other policy surely would be inconsistent with our international obligations. That said, small British companies have, as one would expect, continued to put up a good performance in the rounds of licensing. In the fifth round, several such companies were successful, despite very strong competition from the blocks. I understand that the Association of British Independent Exploration Companies were very pleased with their success, and so, of course, were the Government. Twenty-four British companies were successful in the fifth round of which 16 came within the category of "small". I can publish a list of these in the Official Report if required.
I should like also to say a word now about our licensing policy. It is useful, I think, to make a few comparisons between our policy and that of the previous Administration. As was said in this debate, in their four years in office, the Conservatives had one huge round of licensing in which they allocated nearly 300 blocks. That resulted in a serious overdemand which our offshore industry

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was unable to meet. This is the offshore industry which gives the back-up to the oil development and which I think has not been mentioned so far in this debate. The lesson that we learned from that was to introduce a more orderly approach to licensing, offering smaller amounts of the territory at more frequent intervals. I was glad to note that this had the approval of the noble Earl, Lord Lauderdale.
Despite the increasing evidence of oil potential in the North Sea, the previous Administration issued licences the terms or which showed little change from licences issued five years earlier. I was interested in what my noble friend Lord Kaldor, with his intimate knowledge, said about this. The licences made no provision for the nation to obtain royalty oil; they included inadequate controls over development and had no controls at all over the rate of depletion or the flaring of gas. This is something, I think, which the noble Earl, Lord Gowrie, with this enthusiasm for laissez-faire should study, if I may suggest it, because this question of gas flaring has not been mentioned today. They included no provision to require exploration after the initial years of the licence; nor were the controls over the transfer of licence interests adequate.
The Earl of GOWRIE: My Lords, I am grateful to the noble Lord for giving way. I was at pains to try to distinguish between Conservative intervention traditions and Liberal laissez-faire. I am one of the least laissez-faire Members of your Lordships' House.
Lord STRABOLGI: My Lords, I was really remembering the speech the noble Earl made on 8th February when he seemed to think that the best way of controlling the North Sea was through taxation. In fact, his honourable friend in another place, the official spokesman for Energy, giving his reaction to the Press about the Consultative Document, said—and I have the Press cuttings—that the best way to control the North Sea was through taxation.
The Earl of GOWRIE: My Lords, what has that to do with laissez-faire?
The Earl of HALSBURY: My Lords, if the noble Lord will allow me to interrupt, I appear to be unfortunate because the noble Earl left the Chamber when I
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started to speak and the noble Lord must have been asleep; because I made a speech about nothing but gas.
Lord STRABOLGI: My Lords, I do not think I have yet referred to what the noble Earl, Lord Halsbury, has said.
The Earl of HALSBURY: My Lords, the noble Lord said that nobody had made a speech about gas.
Lord STRABOLGI: My Lords. I am glad that the noble Earl, Lord Halsbury, has intervened. I was talking about gas flaring which, as the noble Earl with his great technical knowledge will know, is a subject on its own. I am going to come to the points that were made by the noble Earl, Lord Halsbury, about British Gas later on in my speech.
Several noble Lords spoke about and complained about the sole licences for BNOC. The Government's policy on the issue of sole licences to State corporations is not a new development. The intention that BNOC should be able to acquire its own licences has been made clear on a number of occasions. My noble friend Lord Balogh, whose absence oil duty abroad we all greatly regret, referred to the prospect when the Petroleum and Submarine Pipelines Act was before this House.
The Government first used the power when we had sole licences, when two blocks were awarded to British Gas in 1976, and we recently decided that the time was right for this policy to be developed. Doing so will extend the expertise and experience of BNOC and British Gas, as the corporations will themselves be block operators. Apart from this, sole licensing provides a flexible and therefore most valuable tool for depletion, because the corporations each in their way have a ready identity of view with the Government on what is appropriate solely in the national interest. Thus BNOC could sit on the discovery until such time as it was in the national interest to develop it, even though this might be for several years. This would not be suitable with a commercial operator.
The noble Earl, Lord Limerick, spoke about "farm-ins" and "farm-outs". The new policy, as noble Lords will know,

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is that when a licensee wishes to give up some of its licence interest, it will be expected first to provide the corporation and British Gas with an opportunity to negotiate to acquire that equity interest. Let me emphasise to the noble Earl that these agreements will be freely negotiated. If the corporation does not wish to acquire the interest, or if genuine attempts at negotiation are unsuccessful, then the licensee will be at liberty to assign his interest to a third party. Naturally, as in the past, the terms of any assignment will be subject to the approval of the Secretary of State. This policy was introduced because the Government consider that the present State corporation's holdings in earlier licensing rounds—which is only about 12 per cent—is inadequate. It is much too modest a share. Even with the new policy, the private sector will still hold the major part of equity interests in these licences.
Various points have been made and there were complaints that British Gas and BNOC have been treated preferentially. Those were well answered by my noble friend Lord Kaldor. The noble Lord, Lord Orr-Ewing, said that there had been some delay in the award of fifth round licences and that BNOC was responsible for this delay. The continuing repetition of these allegations shows, if I may say so, some prejudice. The Government recognise that settlement of the joint operating agreements takes time and indeed has taken more time than we earlier thought it might. But there has been no undue delay. These are very important matters and contracts to be decided and some of them may of course last for a period of nearly 40 years. I do not want to go into the question of Mr. MacAlister, except that I thought that the noble Lord, Lord Orr-Ewing, implied somehow that he had been dismissed and sent back to Canada by BNOC. But of course he was sent back by his chairman, Mr. Armand Hammer, who strongly disassociated himself from Mr. MacAlister's remarks. Indeed, I have a cutting from the Guardian which is headed "Public rap for MacAlister".
The noble Earl, Lord Gowrie, complained that, in allocating fifth round blocks, the Secretary of State was disregarding the claims of United Kingdom companies. That again is not true.
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There were 40 blocks awarded to the private sector and United Kingdom companies had an interest in no less than 27 of these. I should like to say a few brief words about BNOC. I do not want to say—for I think the third time this afternoon—that BNOC is not a regulatory agency. One of the reasons for establishing the corporation was that it could provide a source of informed comment on which Government policy could be formulated.
The noble Lord, Lord Orr-Ewing, also spoke about links. BNOC have acquired information from its involvement in licences and by normal commercial processes. It is quite wrong to suggest that it has acquired the information improperly. There have been a number of allegations that BNOC has indulged in arm twisting. Let me make the point that licensing is entirely a matter for the Secretary of State. Of course where BNOC is in commercial negotiations it will take a robust and vigorous approach with those with whom it has negotiations. That is entirely appropriate, both as a commercial approach which any company would employ, and in the national interest. The noble Lord, Lord Orr-Ewing, also mentioned the question of training. Of course we are now arranging that there will be training by the commercial companies so that BNOC can build up its expert staff. I am sorry that he complained about the salaries; I thought they were fully competitive—in fact rather less than those paid in the private sector.
I must now deal briefly with Britoil because this was raised by the noble Earl, Lord Gowrie, and the noble Lord, Lord Orr-Ewing. I was asked a number of questions. Last year, with the approval of the Government, BNOC raised some 825 million dollars on the United States market by means of a forward sale of oil. The financing was structured as a forward sale in order to secure the most advantageous terms in the American market. It was a notable achievement on the part of BNOC to raise money at very low rates of interest without mortgaging any of its assets and without a Treasury guarantee. The particular way that the deal was structured has meant money so raised does not count against the corporation's statutory £600 million borrowing limit, since the transaction is not in the legal sense a borrowing by BNOC. However,

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the deal was in no sense designed with this view. The proceeds of the forward sale were used to repay BNOC's NLF loans. The only borrowings that the corporation has at the present time, which are counted against the borrowing limits, are those to a maximum of £15 million under an overdraft facility. It will be appreciated that, even if the forward sale proceeds had counted against the borrowing limit, BNOC would still have been well within its £600 million ceiling.
The noble Lord, Lord Chalfont, who apologised that he has not been able to stay to listen to my speech, rather widened the terms of the debate by extending it into the field of defence. Of course he is an acknowledged defence expert. He raised the very important question of the defence of our oil wells against terrorist attack. He asked whether the Government were satisfied with the arrangements. This is a matter that comes within the province of the Secretary of State for Defence. I will certainly bring what the noble Lord has said to the notice of my right honourable friend. North Sea oil is controlled by ourselves and the Norwegians, and we are both members of NATO. In the event of war, special arrangements will be made. That is as far as the House would expect me to go on that matter. The noble Lord, Lord Chalfont, also asked whether we were going to take the lead on a common European energy policy. As my right honourable friend the Secretary of State has made clear on a number of occasions, a positive European energy policy should be based on a proper recognition of each individual State's needs.
Lastly, the noble Earl, Lord Halsbury, gave as always a most notable speech, and he made the suggestion that the sixth round should be used as a lever for enforcing renegotiation of the contracts between British Gas and the companies supplying gas from the Southern basin. The renegotiation of contracts freely entered into is not a matter for the sixth round of licensing, but the noble Earl has made a number of interesting points, of which we will certainly take note. I hope that has answered all the various points raised by noble Lords. I can assure your Lordships that everything which has been said in this debate today will be noted carefully
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by my right honourable friend the Secretary of State.
7.31 p.m.
The Earl of GOWRIE: My Lords, I am happy to say that our debate did from time to time get controversial—I do not think that we should be afraid of controversy in this House—and as controvery raged I thought of sending over a note to the noble Baroness the Chief Whip to demand equal time with the noble Lord, Lord Strabolgi. But I think I have certainly been given a good run. I am very pleased with the way the debate has gone; I think we have learnt a lot from it, and so I have resisted that particular temptation.
I would just like to say to the noble Earl, Lord Halsbury, that I am acutely conscious that I did leave during his speech, which was rather shorter than I expected. This raises a difficulty in which the Opposition sometimes finds itself, because Government Ministers are able to send their private secretaries to Hansard to read their speeches but we have to do it ourselves. At some point or another one has to go and do that.
I should like to add my thanks and gratitude to the noble Lord, Lord Hatch of Lusby, for very properly widening the debate in his maiden speech, and for bringing us back to the humane values involved in this subject. We have debated them before and I do not apologise for not bringing them in this time; but he was quite right, particularly in a maiden speech, to refer to them.
I would add only one short point of my own to close the debate. I do not think that anything which the noble Lord, Lord Strabolgi, with his courtesy and friendliness, has said has really allayed my suspicions about BNOC. Indeed, I rather fear they have been strengthened a little bit. I will take the advice of the noble Lord, Lord Vaizey, and look very carefully at what the noble Lord the Minister has said, to see whether we can find more and greater areas of agreement between us. I am a little sceptical that we shall, but I agree with all noble Lords that it is desirable that we should. With those sentiments, I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

REFUGEES: STATUS IN THE UNITED KINGDOM
7.33 p.m.
Lord AVEBURY Lord AVEBURY rose to ask Her Majesty's Government what consideration they have given to the Note on the application of the 1951 Convention and the 1967 Protocol relating to the status of refugees in the United Kingdom submitted by the representative in the United Kingdom of the United Nations High Commission Representation (UNHCR), and whether they will make a Statement. The Noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. The fact that the representative has submitted this memorandum to Her Majesty's Government indicates that the arrangements we have made for the reception and classification of refugees are not entirely satisfactory. But before going on to the criticisms, may I say that, as I think everybody would agree, (including the UNHCR) this country has a long and honourable tradition of granting asylum to refugees and of extending to them warm and generous hospitality once they have reached our shores. In the 19th century we received the heroes of the struggle for liberty in Europe such as Garibaldi and Kossuth; at the beginning of the 20th century, we took in the Jews escaping from the vicious anti-semitism of Czarist Russia, and in the 1930s we gave shelter to the thousands who fled from Nazi persecution in Germany.
As the noble Lord, Lord Ashby, reminded us in a radio talk last July, our generosity to these people has been more than repaid during the course of the years. He pointed out that no fewer than 53 Fellows of the Royal Society have been refugees or the children of refugees, while 15 have won Nobel Prizes. He reminded us, indeed, that Einstein himself was a refugee. I believe that we can expect a similar enrichment of our national life from those refugees who have come to us more recently from Hungary, Czechoslovakia, Uganda, Cyprus, Chile, Argentina, Uruguay, South Africa and Ethiopia.
The UNHCR representative paid tribute to the part Britain has played in the international community's efforts on behalf of refugees, and he said that our record of treatment of people granted the
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status of refugees has been "quite outstanding". However, he also says that this fine record has been spoiled by the existence of legal and administrative obstacles facing a person claiming the status of a refugee, which he says are incompatible with our obligations under the 1951 Convention and the 1967 Protocol.
The memorandum is concerned mainly with the problems faced by people who have been granted admission to the United Kingdom under some other provisions of the immigration rules. For example, they may be visitors or students and then apply to be recognised, once they are here, as refugees. However, before coming to those problems I must refer to some difficulties which arise overseas, at the application stage. A person who wants to come here from his country of origin is not, of course, a refugee within the meaning of the Convention, however severe the persecution he may have sustained or may reasonably fear that he is likely to sustain. Thus, someone for example, who is imprisoned without trial and may be brutally tortured, cannot normally expect to gain admission to the United Kingdom even if his own country is prepared to let him go. That is particularly important in the case of some South American countries, notably Argentina, where a discretion on the right of option exists, under which a person who is convicted of a political offence may be allowed to go into exile as an alternative to serving the whole of his prison sentence.
Hitherto we have been extremely reluctant to grant entry to any of these South American refugees who have applied to come to us directly from their countries of origin, although in one or two cases recently we have done so. I should like to ask the Government whether there is going to be any general change in their policy in that respect. But if the victim of persecution does succeed in crossing the frontier to a neighbouring State and makes a formal application there to come to Britain as a refugee, he has to pass what is called a test of personal acceptability which, in my view, is unsatisfactory because it takes a long time to apply, it is lacking in any sense of objectivity and is subject to no proper appeal procedures. Delays in processing applications from Argentina have caused

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particular concern, because from time to time the refugees from neighbouring States living there have been murdered, or abducted and taken illegally over the frontiers back to their own countries, where they may be severely ill-treated or even murdered. That happens during the time they are awaiting visas—a process which can last for several months.
Also, perhaps I might mention that in Lesotho, Swaziland and Botswana there are many thousands of refugees from South Africa, who constitute a severe burden on those small countries which have to maintain them while they are seeking asylum in a third country. I believe that, in collaboration with the Governments of those countries, we could seek means of speeding up the resettlement of those refugees who cannot remain in their own territories, in places such as the United Kingdom or elsewhere where they may be seeking to continue their education.
Appeals from overseas against refusal to admit someone as a refugee are bound to fail, as the honourable lady, Dr. Shirley Summerskill, admitted to me in a letter dated 3rd November last year. She pointed out that the immigration rules apply only to a person who presents himself at the port of entry; thus, if an application from overseas is refused, then the adjudicator or the appeals tribunal would have no grounds for reversing the decision. But, as I said, the main points of criticism in the UNHCR's Note concern the arrangements for designating a person as a refugee, once he has arrived within the boundaries of the United Kingdom, when he may have every right to that status.
It is not our normal practice in this country to incorporate instruments, such as the Convention, into our domestic law, as other countries often do. All we have instead is a provision of last resort in the rules for control after entry, and in the rules for control on entry, to the effect that a person who does not qualify to remain here, or to enter, under any other heading may claim that if returned to his country of origin he would face persecution by reason of his race, religion, nationality, membership of a social group or political opinion.
The UNHCR's Note makes the very important point that, since refugees are
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treated as just another kind of immigrant, that is how they are seen both by officials and by the public at large. Over the last 10 years, while there has been a very marked tightening up of the controls over immigration in general, there has been no change in the legal status of the refugee. That has meant that an increasing number of cases are coming to the attention of the UNHCR, and the voluntary agencies, of people being denied the rights supposed to be conferred on them by the Convention and the protocol, while, at the same time, those people have no remedies before the immigration appellate authorities or before the courts.
I wrote to the noble Lord, Lord Harris, on 18th July last, drawing his attention to the fact that in 146 appeals which had been determined since the beginning of 1974, from persons claiming to be refugees, only one was successful and that concerned a person who did not in fact come within the terms of the Convention. At about the same time, I asked a Question to establish the number of persons seeking to enter or remain in the United Kingdom as refugees. The noble Lord, Lord Harris, said that he was attracted by the idea of identifying refugees as a separate category in the immigration figures, but that it could not be done without great expense. He defended the last resort character of the rules, which I mentioned, on the grounds that if somebody had a good case for entering the United Kingdom, or remaining, under some other heading, then the need for a claim to asylum did not arise. He also did not think that it would be desirable to create a separate category of "Convention refugees", because he said that this would act against the interests of people who do not strictly qualify under the Convention, but who may be quite generously treated as the rules at present stand.
I think that this argument can be refuted fairly simply, because what we could do is to leave alone the existing permissive rules on political asylum—for example, paragraph 30 of the rules on control after entry for Commonwealth citizens—and then add in a new paragraph which states that where a person establishes that he comes within the provisions of Article 1 of the Convention, he shall be permitted to remain indefinitely and without conditions. I think that this

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would have the consequence—as some people might see it, the undesirable consequence—that the adjudicators and tribunals, who are at present dealing with illegal immigration and overstaying, would have the job of deciding who is a refugee; a job for which some people might say they were not particularly well equipped. But the UNHCR representative shows in his Note that in some European countries the representative himself is involved in the process.
One answer here might be to ask him to sit on any tribunal which considered refugee cases, either in person or through a panel of experts which he would appoint. I submit that that solution might be implemented as an interim measure while further consideration was given to the main proposal in the memorandum that totally separate machinery should be established for determining who is entitled to the status of refugee. I think that in the longer term we ought, surely, to think about harmonisation of the law on refugees throughout the Community, because Annex III of the Note shows that the procedures vary widely, though in all four of the countries which were examined there are formal steps which an individual can take to secure recognition.
Some of those who are treated generously in this country are admitted outside the rules, by the discretion of the Home Secretary. In this category, of course, were the stateless people from Uganda, as well as all those Africans who have, more recently fled from the tyranny of Amin. Those people are certainly Convention refugees but like most, if not all, Commonwealth citizens, they have been denied that status, and, by consistently refusing to treat anybody from a Commonwealth country as a refugee, we are, according to the memorandum in breach of Article 3 of the Convention, which requires that it be applied without discrimination as to country of origin. I should like to know whether the noble Lord can explain why this practice has grown up of refusing to classify as a refugee anybody from a Commonwealth country.
The other category of persons who are denied their rights under the Convention are those admitted, or allowed to remain,
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under some other heading of the rules, as I mentioned at the beginning. Once somebody arrives as a student or dependant, for example, it is practically impossible for his status ever to be changed. If he is both a student and a refugee then, invariably, he is admitted as the former, and this can be an extremely important distinction—which the noble Lord, Lord Harris, did not quite seem to appreciate when he wrote to me about it—because many and may be all universities charge recognised refugees the domestic rate for fees, which is of course much lower than the rate for overseas students.
However, as he points out, the most vital reason for a person wishing to be classified as a refugee is the strength of protection which it gives to the individual concerned against the risk of expulsion. That must obviously mean a great deal to any person who has had to leave his own country, and whose immediate and uppermost need is to have a feeling of security. As the memorandum states, this risk of being kicked out is not a remote or a theoretical one. Some examples are given, with one of which I was personally concerned, w here certain people were under threat of being expelled, and I am sure that many other examples on lines very similar to those set out in the memorandum could have been produced.
Another very significant advantage of being classified as a refugee is that it entitles a person, as is pointed out, to the possession of a Convention travel document, which makes international travel very much easier than the certificate of identity which is issued to stateless persons who are not refugees. I shall not go into the whole catalogue of advantages, but it is far better for a person who is a refugee to have that status, then to have, for example, the status of dependant or student.
The UNHCR has as its governing body a committee of 31 members, which includes the United Kingdom, and in 1977 this executive committee unanimously urged Governments to establish formal procedures for the determination of refugee status. We have taken no steps that I know of to comply with this resolution, although the noble Lord, Lord Harris, said to me in a letter which he wrote on 2nd September last, that the Home Office

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would have a look at the rules. He said:
"I do not think there is any question of their preventing us complying with our obligation under the … Convention, and I should have expected the UNHCR to agree with that as a general proposition."
We see from this Note that the UNHCR would not agree with that as a general proposition; or, at any rate, they would say that, while the rules do not prevent us from complying with our obligations, they certainly do not place any requirement on us that we should properly satisfy them as is suggested. It is now clear to me that we have been urging others to do the things that we have failed to carry out ourselves.
I suggested to the Home Secretary, in a letter of 13th October last, that he should take the initiative in promoting a discussion on the way in which the rules apply, and on the changes needed in this system for determining who is, and who is not, a refugee. I proposed that a small working party should be established consisting of Home Office officials and of representatives of the agencies concerned with refugees, and I offered to give any assistance in this process that was within my power. This has now become a matter of great urgency, since we voted for a resolution in the General Assembly while we were in breach of many of its provisions. I think that it should be a matter of honour that we put ourselves in compliance with that Resolution as quickly as we can.
I am sure that the noble Lord will realise that if an anodyne reply is given to my Unstarred Question this evening, it will certainly not be the end of the matter. The Parliamentary Human Rights group is interested and is hoping that the UNHCR's representative will come to address it at its next meeting on the subject. Arising from that, questions on Government policy will no doubt be asked in another place. The High Commissioner himself is expected to pay a visit to this country in a week's time, and I imagine that he will be very interested to see what the noble Lord has to say at the conclusion of this debate. I have every confidence that the arguments put forward in this powerful memorandum will already have convinced the Government and that it will now only be necessary for them to work out the details of its implementation.
7.51 p.m.
Lord SANDYS: My Lords, your Lordships will be grateful to the noble Lord, Lord Avebury, for having introduced this very interesting Unstarred Question on a subject which so clearly needs the attention of your Lordships and in particular the Government to resolve. I take as my starting point the situation with regard to the 1951 Convention. I believe that a study of this document is fundamental to the note which we have received, so helpfully circulated by Mr. Heidler and of which the Government have their own copy. Even to look at Article 1 of the Convention, which gives the definition of a refugee, is illuminating, if one has not previously realised the very considerable complications which arise from terms of definition. However, the 1951 Convention was not the end of it. This country was also a signatory to the 1954 Convention relating to the Status of Stateless Persons, to the 1957 Refugee Seamen's Agreement, to the 1959 European Agreement on the Abolition of Visas for Refugees and to the 1967 Potocol which has the effect of extending the 1951 Convention.
Taking together those five instruments, may I go back in particular to the 25th July 1951, when the birth pangs of the 1951 Convention were taking place. I should like to draw your Lordships' attention to one very significant recommendation which was made by Mr. Hoare, the delegate of the United Kingdom at the conference. Mr. Hall submitted a resolution to the Convention, and if I may burden your Lordships with its annotation, it is A/Conf/2/107. It asks the signatories to the Convention to apply it in a manner which errs on the side of generosity. I think that possibly it would be beneficial if I read this resolution so that it is placed on the record, for it was the contribution of the United Kingdom to the Final Act.
If I may quote the exact words, the United Kingdom:
"…expresses the hope that this Convention will have value as an example exceeding its contractual scope and that all nations will be guided by it in granting, so far as possible, to persons present in their territory as refugees and who would not be covered by the terms of Paragraph A of Article 1 the treatment for which this Convention provides".
Therefore, in that Final Act the United Kingdom said to its would be co-signatories, "Let us interpret this Convention,

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which we have had great difficulty in drawing up, in a generous and liberal manner". That resolution was passed, and I think that the Government should take note of it, because that was our view in 1951. This Convention is one of many international treaties and conventions entered into by this country. I deem it, as I am sure that the noble Lord, Lord Avebury, deems it, to be a matter of national honour that we should give currency to it.
The right of asylum was dwelt upon by the noble Lord. I should like to make a short comment upon it at this point, because I believe that asylum is a matter which is sometimes misunderstood. The United Nations' High Commissioner's representative mentioned this morning that the right of asylum is the right by a sovereign State to grant asylum and not the right on the part of a refugee to receive it. In other words, it is the act of a sovereign State which can be either given or withheld.
Asylum itself is a matter of definition, and the definition of "asylum" which is given by the Oxford English Dictionary is that it is:
"a sanctuary or inviolable place of refuge".
The granting of asylum, therefore, is a matter of discretion. Very often it occurs that a person is granted permission—this was the case mentioned by the noble Lord, Lord Avebury—to enter another country and that subsequently he applies for asylum. In all probability this will he denied to him; the grant of asylum fails because the application to enter this country was made on other grounds. In the case, which very frequently occurs, of refugee students seeking to enter a country for the purpose of, perhaps, a 12 months' visit, the application for asylum will almost certainly fail on these grounds. It is very important to recognise what a sacrosanct right this is and also, as again the noble Lord, Lord Avebury, mentioned, how important is the need for co-ordination of the European signatories to the Convention.
I was very interested to read Annexe V to the note which has been circulated, for it deals with the figures of those entering this country. The figures for the past three years have been given in depth, but in order to be brief I shall quote only
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those for last year. If the figures can be relied upon, it is interesting to note that Commonwealth immigrants amounted to 37,396, and foreign nationals to 31,917, making a total of 69,313 persons who were admitted to this country, of whom only 1,300 were believed to be refugees. In the present circumstances, the Home Office say that from their statistics they are unable to identify separately the refugees. Nevertheless, this figure of 1,300 is only approximate and has been arrived at with very great difficulty. However, it represents a minute proportion—that is, 1·9 per cent. of the total of those persons entering this country.
I believe that a very important comparison and differentiation has to be made between the status of an immigrant and the status of a refugee. In our earlier debate I believe that it was the noble Earl, Lord Lauderdale, who said that the British never draw a line without blurring it. That is particularly true of the situation of immigrants and refugees. Immigrants have one supreme advantage. In coming to this country—or, indeed, to another country from their own home territory—immigrants have the advantage of being able to return to it. In the case of a refugee, no such facility is afforded to him. Therefore, some very specific advantages are guaranteed under the Convention and I hope that it will not weary your Lordships I if state the four particular articles and the four particular advantages which differentiate it. These are not all, but they are four very significant ones and they are as follows: Article 27 deals with identity papers, Article 28 with the highly important travel documents for international travel and Articles 32 and 33 are perhaps the most significant. Article 32 deals with expulsion and Article 33 with the prohibition from expulsion. That is the Article which is known as the "Non refoulement" Article.
I think it can be said that there is the strongest possible case for asking the Government to look again at the categories which are afforded for separating refugees from immigrants. I believe that the fact that the United Kingdom has apparently taken no special steps to safeguard the particular category of refugees needs urgent amendment. I should like to say here that of course this country has a particularly fine record and I echo every word spoken by the noble Lord, Lord

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Avebury, in regard to our historic refuge afforded to those persons fleeing from foreign territories under persecution. I believe that this fine record can be both enhanced and improved if the measures which have been suggested are put in hand.
There is one further important matter to be considered; namely, the arbitration procedure. I believe that the Home Office should consider the membership of the arbitration tribunals; I believe that they should consider the possibility of entering into discussion with the representative of the United Nations High Commissioner in the United Kingdom to see whether his representation on the body would not be beneficial. It is most interesting, in making a comparison with other countries in Europe, to see how they have treated it. In the case of Belgium, the whole task of managing the question of arbitration is handled by the United Nations High Commissioner, on licence, as it were. This has recently been reviewed. In the case of Italy, it is a 50 per cent. representation by the United Nations High Commissioner's representatives and the Government concerned. In Western Germany, the situation is somewhat different: it is wholly in the hands of the Federal Republic.
Here, once again, is a case where those European signatories to the convention might indeed look again in greater detail to see how best they may co-ordinate their views. Under the European Communities Act of 1972 there were special arrangements under which the European laws were co-ordinated; that is, under Section 2 of that Act, which of course reflects Article 177 of the Treaty of Rome. We are under a dual obligation here, and I believe it calls for the Government to examine the situation most carefully.
8.4 p.m.
Baroness ELLIOT of HARWOOD: My Lords, I shall be brief, but I am anxious to support the noble Lord, Lord Avebury, in his Question, and also my noble friend Lord Sandys in his remarks. Both of them are great experts; both have studied these matters in great detail, and I was enormously impressed by the amount of information which they were able to put forward for the Government to consider. My interest in refugees harks back a while. After I had been a delegate to the United Nations for some years, in
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1959–60 I was invited to head the committee in this country which ran the United Kingdom Committee for World Refugee Year. I suddenly found myself absolutely involved in this and deeply interested and concerned about it. What was so amazing in that one World Refugee Year was the astonishing response which came throughout the whole United Kingdom to that appeal. I think I am right in saying that there was only one other country in Europe—and I think that was Holland—which raised more money for refugees per head of the population than we did. In one year this tiny country with only 50 million people raised £10½ million for refugees.

The great appeal at that time was to clear the camps in Europe, to help those countries particularly which had taken great numbers of refugees—we were still in the aftermath of the war disturbances. We distributed the money, with the advice of course of the United Nations' High Commissioner, to the European countries, to Israel with thousands of refugees and to UNRWA which was also engaged with refugees.
When I look back on that I realise what a great moment that was in our history that the British public should respond in that way. I am afraid I passed on to others the continuing interest and the committees arising out of the World Refugee Year; I am now only an observer rather than an active participant. I should like to pay a tribute to the Standing Conference on Refugees who are the continuing body arising from the World Refugee Year Committee, who have carried on and who have continued to meet—because alas! these things go on all the time—the challenges of the last 10 or 15 years.
The tragedy about the refugee situation is that, while one hopes and thinks that one great campaign or great movement will solve this terrible problem, year after year something else happens and there are more refugees. So, far from being something which ends, I fear it is something which continues all the time. That is what makes it so necessary for us to continue to take a keen interest in your Lordships' House, and tonight we have heard a great deal from the two experts on the present situation.
I have also read the memorandum which has been circulated to us and I was

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very much impressed by all that is in it. I was impressed by the account of the different ways in which countries treat this problem. I had intended to mention the four nations which are quoted—Germany, France, Belgium and Italy—but my noble friend Lord Sandys has already told your Lordships how they deal with their problems. I think we could learn something from that, but I do not want the noble Lord, Lord Wells-Pestell, to think that I am highly critical of what the Home Office and other Departments do now. I am not critical at all. I am sure that they have a great problem and they try to solve it in the best way they can. But I think we could learn from other countries, and as a result of our participation in the debates in the United Nations I think we might go a step further than we have gone so far. On the resolution passed in November, 1977, which we supported, we appear not to have taken very much action since then. In a way, what seems to be our weakness is that there is the Home Office, which is the Government Department responsible, and then come into the picture a great many other agencies and Government Departments. In the European position, as I understand it. there is more concentration in one group, whether it is a group, as in Belgium, which works with the United Nations High Commission and the Ministry of Justice, or as in Germany, where it is more or less an independent group, a high administrative body with a top official who is responsible to the Minister of the Interior and who controls the administrative courts. There are different ways involved, but the system seems to be concentrated more in one group. I think it would be a good idea if, to some extent, we could copy that idea, to see whether it is possible to set up an independent body to review the cases on the lines of other nations with the help of the UNHCR representative, who would be able to concentrate on getting these cases dealt with more swiftly. What I think is wanted is one Department, and a group in that Department, who have authority rather than involving widespread interest, which at the present moment is the way in which our refugee problems are dealt with.
I do not think this would necessarily lead to an increase in refugees. In fact
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the High Commission does not know of refugees who have been refused admission or expelled under the present Convention rules. But it would speed up the processes. It would save the Home Office immigration and nationality department much time and trouble; and, of course, it would save a lot of money because time is money, and naturally one is anxious not to spend more money than necessary. I understand from my study of these documents that if anybody who was considered to be unsuitable or to be a risk, was trying to get into this country the authority would be there, in this committee or council or whatever it is called, which would prevent them being allowed in. If we could adopt a more simple system we would save money and save time, and also much unhappiness.
In the modern world—and I am not talking of the World Refugee Year as I knew it nearly 20 years ago—one reads of the awful cases of people who are persecuted and detained without fair trial, and of other things. Indeed, only yesterday and the day before the appalling experiences in Zaire and other parts of Africa created at once a further number of refugees. This is a tragic problem. I think that we in Britain can feel that we really have made a great contribution towards alleviating suffering in this way, and we want to go on making a great contribution. I am sure we should ask the Home Office to see whether or not we cannot improve our contribution, and whether or not some more simplified scheme can be evolved. I am sure the noble Lord who is to reply will be very sympathetic. I hope very much that the Home Office will consider some reorganisation or some new schemes which would simplify our methods and make them more effective concerning the refugee problem.
8.14 p.m.
Lord WELLS-PESTELL: My Lords, in many respects this is rather a timely debate, and I am glad to be able to answer on behalf of the Government the matter referred to in the Question put by the noble Lord, Lord Avebury. I think it is fair to say that the debate has ranged a wee bit wider than that. I would not pretend that I could deal with every point raised tonight, but I shall certainly do my best to do so.

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My Lords, on 15th March last the United Kingdom representative of the United Nations High Commissioner for Refugees forwarded to my right honourable friend the Home Secretary a paper that he had promised to let him have when they met in January last. Copies were sent at the same time to the Parliamentary Under-Secretary of State at the Foreign and Commonwealth Office and to the Solicitor-General. Since then a further memorandum has been prepared by the legal adviser to the United Kingdom representative. I think perhaps I ought to say, as I am going to use the term "United Kingdom representative", that the United Kingdom representative is not a citizen of the United Kingdom but a representative appointed by the United Nations High Commissioner. I mention this for no other reason than to clearly indicate that this is not just a matter between a United Kingdom individual and the Government. It is something much more important, much wider; it is a matter between the Government and a representative of the United Nations, and therefore sets the whole thing on a much more important and, if I may say so, higher plane.
At the January meeting and in his memorandum the United Kingdom representative pays tribute to the United Kingdom record in the refugee field, and I am grateful to noble Lords who have taken part for subscribing to that. Looking at our record of admissions, and bearing in mind our economic, demographic and social constraints, the United Kingdom representative says that the United Kingdom is indeed playing its part in the international community's effort on behalf of refugees, and that the situation of the refugee once he has been granted asylum compares favourably with that in any other refugee receiving country.
Perhaps I may mention here that in their recent report the Select Committee on Race Relations and Immigration in another place said that they regarded the maintenance of the United Kingdom's historically long and proved record of generosity as one of the greatest importance and value. They pointed out that many people are admitted who do not come within the definition of a refugee in the 1951 United Nations Convention on the Status of Refugees. They recommended that the Government should make
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it clear that in the foreseeable future there would be no further major primary immigration—and I understand that this relates to such people as heads of households, as distinct from those who come as dependents of people already settled here. The Committee recommend that if events compelled an exception to be made on the grounds of political asylum, this should be done by the United Kingdom discharging its responsibilities within agreed international arrangements.
Clearly, when considering the memorandum received by the United Nations representative in the United Kingdom, we shall have to take the Select Committee's recommendations and views into account; but I think it right to make it clear that the United Kingdom can justly be proud of its record in the refugee field. The Government are engaged in amicable discussion with the office of the United Nations High Commissioner for Refugees about our practice and procedure for recognising as Convention refugees those who fall within the terms of the 1951 Convention. There is a fund of goodwill and a wide measure of common ground between us which bodes well, I think, for the final outcome.
The noble Lord, Lord Avebury, made reference to Southern America. He will know that we took part, I think on a fairly substantial scale, so far as the Chileans were concerned. I agree and accept that it was a special exercise brought about at the request of the United Nations High Commissioner. I may be able to say something more about other South American countries before the end of my reply.
It is worth bearing in mind that we do accept as de facto refugees people who would not normally qualify as Convention refugees. Perhaps it is an impertinence on my part to interpret what I mean by "Convention refugees". They are people who have a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group, or political opinion. We accept de facto refugees—that is, people from some of the Eastern European countries and others, for example—who have overstayed their period in this country and who have satisfied us that they would suffer very severe penalties if they were sent back. So, we meet the

815
Convention refugee and we acknowledge a large number of others as de facto refugees.
May I come to the memorandum which I myself read in detail. The memorandum was submitted by the representative in the United Kingdom of the United Nations High Commission Representation. It discusses at some length the background of the Convention, its implementation in a number of other countries and the weaknesses, as he sees them, in the United Kingdom procedures for recognising people as Convention refugees. We find it an interesting document which we are considering in detail and with care. The memorandum has been in our hands for only two months and we have already had two exploratory meetings on it and a third meeting has been arranged. That is not too had, bearing in mind that we have had it for only two months. I do not think that I have ever known a Government Department to move so quickly.
Lord AVEBURY: My Lords, would the noble Lord not agree that, in accordance with the policy of open government which is adopted by so many other Departments, the Home Office might care to involve some of the voluntary agencies and some Members of your Lordships' House who have taken an interest in the refugee problem? I asked the Home Secretary whether there was any assistance that I could give him in consideration of these matters, and so far I have received no reply.
Lord WELLS-PESTELL: My Lords, I am grateful to the noble Lord and I give him an undertaking that I shall draw his remarks to the attention of my noble friend. I do not feel that I can say more than that, and I do not think that he would expect me to do so.
The recommendations fall into two parts. The first is that legislation should be passed incorporating into United Kingdom law
"all those provisions of the 1951 Convention and the 1967 Protocol which are not provided for in the existing law".
The Convention and the Protocol cover a wide range of subjects and I must say that the language of international agreements, which is designed to cover countries with widely differing legal and administra-
816
tive systems, is rarely suitable for direct incorporation into United Kingdom law, even when a decision has been taken that some legal provision is necessary to enable us to comply with obligations which we have undertaken. Work at official level has, however begun in this connection, but, because of the complexity of the matter, I think it would be unrealistic of me to suggest that there will be a very early outcome.
The second part of the memorandum is the establishment of a formal procedure for the determination of refugee status by an independent body in accordance with recommendations made by the executive committee of the High Commissioner's programme of which the United Kingdom is a member. These, in brief, are that border officials should have clear instructions and should refer cases to higher authority; applicants should receive guidance as to procedure; there should be an identified authority to take the first decision; and applicant should have the necessary facilities for submitting his case; a successful applicant should be informed and issued with a document; an unsuccessful applicant should be able to appeal to another judicial or administrative authority as appropriate, and the applicant should he able to remain, pending determination of his case, unless his request was clearly abusive. The recommendations made by the executive committee are broadly in line, we think, with our own practice at present. Whether or not they are, we are most anxious not to be seen in default of our obligations under the Convention.
The first task here will be to identify whether, and if so, what changes are necessary in our recognition procedures. In this we have already made a useful start and have taken on board for consideration certain related points; but I think two general observations are relevant. First, in his memorandum the United Kingdom representative expresses the view that the adoption of the changes he proposes would not be likely to lead to any change in the number of refugees received in the United Kingdom, but rather to speed up the process of recognition. Secondly, my right honourable friend has made it clear that his concern is that cases should be considered on their merits and not hampered by inflexible procedures. The crucial importance of the second point

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is that in practice we allow many people to stay on here who may regard themselves as refugees, although they do not fall within the definition of a refugee for the purposes of the 1951 Convention.
We are approaching our discussions on the memorandum in a positive and constructive spirit. As I have said, there have already been two extended meetings at official level with the United Kingdom representative's legal adviser and more are planned. The issues are being examined in detail and we are most grateful for the helpful attitude that has been brought to these talks. When the process is complete, my right honourable friend will be able to decide on any changes that he considers should be made and how those changes should be made. This will not necessarily be a single operation. Some matters will, we think, be able to be treated separately, and in those cases we may well be able to initiate changes quite early. I think that we must face the fact that, while some of the changes may be possible without legislation, some might require legislation.
The short answer—because it has been a short answer—to the noble Lord's Question, is that we have received the Memorandum and we have only had it, as I have said, for two months. We have received a further paper from the office of the United Kingdom Representative, since then, and we are engaged in detailed discussions with his legal adviser over the points raised. There are many points to be dealt with and they are not easy ones, but largely thanks to the good feeling on both sides we think that not only has a satisfactory start been made, but it should prove to be quite fruitful.
The noble Lord, Lord Avebury, asked me a number of questions, one in relation to Commonwealth citizens. We are now considering whether to make it a general rule to regard Commonwealth citizens as not own nationals so as to bring them within the Convention. However, as they are British subjects we shall clearly have to have regard to international as well as domestic implications. We have granted a number of—
Lord AVEBURY: My Lords, will the noble Lord allow me to intervene? In many cases they are British subjects under our law but not under their own
818
law. For example, an Australian citizen is not a British subject under Australian law.
Lord WELLS-PESTELL: I will bear in mind what the noble Lord has said but, as he probably knows, we have granted a number of Convention travel documents to Commonwealth citizens. With regard to change of status, I understand that there is no difficulty about a person who has come to this country changing his status to that of a refugee. He merely has to state his case and this will not in any way be prejudiced by his existing status. He can then apply for a Convention travel document and get it.
I think the noble Lord referred to applications from the Argentine. As I said, in response to an appeal by the High Commissioner, we did something about people from Chile, and in response to another appeal we have admitted a number of people said by the United Nations High Commission Office in the Argentine to be in special danger. The Home Secretary is reviewing his South American policy at the moment. As I said, we have admitted a number from the Argentine because we were given to understand that they had been in special danger.
Regarding the noble Lord's points about statistics they are at present under discussion and they are in the memorandum that we have been waiting for. The actual figures, and the conclusions that are suggested by them, are at present under discussion. I think it would be premature for the Government to accept all the claims and statements made by the United Kingdom representative while we are having preliminary discussions with his office. The Home Secretary's concern is to let in people who should come and not be caught in a straitjacket of formal procedure.
I think the EEC was referred to. It is not necessarily a matter of EEC harmonisation. We are taking part in Council of Europe discussions about refugee conventions and in separate and continuing United Nations discussions. Harmonisation of actual procedures between the Nine would be very difficult, and one has to face the fact that the practice varies considerably.

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I think the only other thing which I have to deal with is the special category. The United Nations' representative particularly praised the position of people accepted as refugees, both Convention and de facto. This is because anyone once admitted on a permanent basis is treated as though he were native born. The issue of identity cards for refugees might be regarded as offensive and I think many people would take that view. But we are considering the issue of a document saying that we recognise a person as a Convention refugee. I do not think I can take it any further than that, except to say that the Government welcome the comments and observations that have been made which will obviously be useful in view of the discussions which have only recently started through the office and with the representative in the United Kingdom.

DOMESTIC PROCEEDINGS AND MAGISTRATES' COURTS BILL [H.L.]
Returned from the Commons agreed to with Amendments; the said Amendments to be printed.
INDEPENDENT BROADCASTING AUTHORITY BILL
Brought from the Commons; read 1a, and to be printed.
  JEWEL TOWER, WESTMINSTER: POOL MAINTENANCE
  JEWEL TOWER, WESTMINSTER: POOL MAINTENANCE
  PSA EXHIBITION: BANQUETING HALL, WHITEHALL
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