Sitting of 4 June 1980

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

PRIVATE BUSINESS
BANGOR MARKETS BILL [Lords]
YORKSHIRE WOOLLEN DISTRICT TRANSPORT BILL
As amended, considered; to be read the Third time.

ORAL ANSWERS TO QUESTIONS
  ENVIRONMENT

    Development Commission
    Mr. Knoxasked the Secretary of State for the Environment when he expects to complete his consideration of the report of the review group on the Development Commission and its associated organisation, the Council for Small Industries in Rural Areas.
    The Secretary of State for the Environment (Mr. Michael Heseltine): I hope to complete my consideration very shortly.
    Mr. Knox: Is my right hon. Friend aware that the Development Commission and the Council for Small Industries in Rural Areas have done excellent work in my constituency, by supporting small businesses and private enterprise? Will he give an assurance that the activities of those bodies will not be curtailed when the review has been completed?
    Mr. Heseltine: I think that my hon. Friend will be as pleased as I am that I am able to confirm the statement made by my right hon. Friend the Minister for Local Government and Environmental Services. The purpose of such organisations is well understood and their continuation is assured. We are reviewing the way in which they function and the methods of their work. We hope to reach conclusions shortly.
    Mr. Beith: May we take it that the sensible appointment of my constituent, Mr. Nigel Vinson, as the new chairman of the Development Commission is a sign that the Government wish to remove the shadow of uncertainty that has hung over the commission while the review has been in progress? Is it a sign that the Government are prepared to commit themselves to continuing that excellent work?
    Mr. Heseltine: I am grateful to the hon. Gentleman and welcome his support. When Mr. Nigel Vinson—who is an admirable choice—was appointed to the task of chairing that organisation, the fact that he was a constiuent of the hon. Gentleman was not considered a qualification.

    Rating System
    Mr. Hicksasked the Secretary of State for the Environment what representations he has received advocating a reform of the domestic rating system; and if he will make a statement.
    Mr. Heseltine: I have received about 900 letters this year from individuals and local groups, plus a handful of letters from national organisations. We are reviewing all main options to domestic rates but, as we made clear in the manifesto, reduction of income tax must be a higher priority.
    Mr. Hicks: Will my right hon. Friend confirm that the Government intend to introduce legislation to reform the domestic rating system? Will not he agree that at a time of high inflation the iniquities of the present system—which is based on rateable values—are increasingly apparent, and particularly affect those on low or fixed incomes?
    Mr. Heseltine: I agree that the incidence of this form of taxation at a time of high inflation primarily harms those who pay domestic rates. I confirm that the long-term abolition of domestic rates remains a priority. However, we should have to substitute £2·7 billion of revenue a year. That could not be done without a thorough review of all the options, which we are now carrying out.
    Mr. Park: Does not the Secretary of State agree that it is easier to point to faults in the present rating system than to find a viable alternative?
    Mr. Heseltine: I agree that it is easy to point to the faults in the present system. It is difficult to make judgments about a viable alternative. That is one reason why those who have looked at this issue over the years have found it so difficult. We are having another look at all the options. I shall keep the House informed of any conclusions.
    Mr. Peter Mills: Will my right hon. Friend bear in mind that the higher the rates the greater the unfairness to many people? Is not the present system extremely unfair, particularly to those who live alone? Will he give us some comfort by saying that progress is being made towards finding an alternative means of raising finance?
    Mr. Heseltine: I sympathise with my hon. Friend's points. There are two sources of complaint. One is the level of inflation and the other is the unfairness of the system. The Government's top priority is the battle against the present level of inflation. When that proceeds and when we have achieved our priority of reducing income tax, we can reach conclusions on options to the rating system. No doubt my hon. Friend will understand that those who resent the present system would be just as concerned about any substitute system in many areas. No easy decision is available.
    Mr. Dempsey: Does the right hon. Gentleman recall that prior to the last general election the present Prime Minister paraded up and down the country giving an assurance that a Conservative Government would abolish the system of local rating because of its inequities and anomalies? Is he further aware that the right hon. Lady gave the impression that the matter was urgent? Surely, therefore, the Government should give us some idea of when they propose to abolish the system and what they intend to put in its place.
    Mr. Heseltine: I appreciate that the facts of history are not among the strongest pionts of the Labour Party and the hon. Member will appreciate that he referred to the wrong general election. My right hon. Friend made a specific pledge before the October 1974 general election, but after that we saw the significant increases in income tax that were the responsibility of the Labour Party.
    1398
    The reduction of those levels is the top priority of the Government.
    Mr. Bowden: Is my right hon. Friend aware that for the past 20 years the public have been fed up with hearing politicians talking about the unfairness of the system, yet doing nothing about it? We must do something, not only about the domestic rates, but about rates. I must tell my hon. Friend that if he does not take this matter on board, it will cost us a great deal—
    Mr. Speaker: Order. The hon. Gentleman should tell his right hon. Friend after Question Time.
    Mr. Heseltine: I accept my hon. Friend's view that there is a great deal of disgruntlement about the domestic rate system. Most of that disgruntlement centres on the levels of inflation. If inflation were proceeding at much lower levels a great deal of the agony about the domestic rating system would not be as evident. My hon. Friend will be as aware as I that any alternatives to domestic rates that suffered from the same levels of inflation as has the rating system would be subject to just as much criticism.
    Several Hon. Members——
    Mr. Speaker: Order. I appeal for shorter questions and answers.

    Mortgage-linked Annuities (Option Mortgage Facilities)
    Mr. Cadburyasked the Secretary of State for the Environment what is his policy regarding the provision of option mortgage facilities to retired non-taxpayers for the purchase of mortgage-linked annuities.
    The Minister for Housing and Construction (Mr. John Stanley): The proposal that my hon. Friend describes would require an increase in public expenditure for which no provision can be made at present. Moreover, within the housing public expenditure available we consider that priority should be given to those who need rented accommodation or who wish to buy for the first time.
    Mr. Cadbury: Does my hon. Friend agree that the scheme is an excellent way of giving elderly home owners an income while enabling them to remain in their homes? Can not the Government see

    1399
    their way to giving that group a concession equivalent to that enjoyed by better-off home owners who get tax relief on similar annuities?
    Mr. Stanley: I am obviously sympathetic to the general intention of my hon. Friend to try to make it easier for elderly, low-income owner-occupiers to remain in their own homes, but it is an inescapable fact that his proposal would require an increase in public expenditure and we are not able to contemplate that at the moment.
    Mr. Stephen Ross: Is the Minister aware that an increase in public expenditure will be needed anyway to house elderly people who own their properties, but can no longer afford to live in them? If he cannot introduce an option mortgage scheme, will he at least introduce a scheme allowing elderly people to sell the freehold of their properties and lease them back for the rest of their lifetimes? Such schemes are available, but they are limited and are operated only by merchant banks. Surely this is an area in which local authorities could play a useful role.
    Mr. Stanley: If it can be done without an increase in public expenditure, I shall be grateful if the hon. Member will provide me with details.

    Structure Plans
    Mr. Bob Dunnasked the Secretary of State for the Environment how many structure plans are still to be submitted to his Department.
    The Under-Secretary of State for the Environment (Mr. Marcus Fox): Six, Sir.
    Mr. Dunn: Will my hon. Friend take steps to ensure that the updating of structure plans is less wasteful and time consuming than their initial preparation?
    Mr. Fox: I can certainly give my hon. Friend that assurance. Our purpose in bringing forward as many plans as possible for approval is to have available for planning decisions something that we consider to be essential. In no sense do we believe that the preparation should be followed by changes such as my hon. Friend has mentioned.
    Mr. Chapman: Is my hon. Friend satisfied that the whole structure plan concept, which replaced the old development plans 12 years ago, is a sufficiently flexible instrument to deal with the rapidly changing demands and trends of local populations and land use? Will he look into the matter, because many believe that structure plans are far too bureaucratic an instrument nowadays?
    Mr. Fox: It is because we accept that weakness that our purpose is to get the structure plans accepted as quickly as possible. We shall then look carefully at the whole system. Where necessary, local plans will obviously fulfil an important need.
    Mr. Hill: Is my hon. Friend aware that the Southampton structure plan, which was commenced in the late 1960s, was out of date before the conclusions were made known to the public? Is that not a colossal waste of public money?
    Mr. Fox: This is a matter for local authorities, particularly county councils. I am sure that it is a source of distress to the whole House that plans have taken so long and involved so much expense. My hon. Friend is right to say that by the time many of them have been approved they are out of date.

    Amble North Pier
    Mr. Beithasked the Secretary of State for the Environment whether he has yet received proposals from Alnwick district council for the repair of the Amble north pier breakwater.
    Mr. Fox: No, Sir.
    Mr. Beith: Does the Minister realise the great difficulties from which the negotiations are suffering because of the huge cost increase that occurred when the Ministry of Defence pulled out of its project? Since everyone accepts that the breakwater will be repaired, will the hon. Gentleman withdraw the block that he is putting on investment by the Ministry of Agriculture in the rest of the harbour, which is desperately needed and which the Ministry of Agriculture would approve if the hon. Gentleman did not block it?
    Mr. Fox: Prudence dictates that the question of the breakwater should be

    1401
    settled first and any necessary improvements made. It is wrong to suggest that my Department has put a block on other improvements to the pier. The Ministry of Agriculture rightly decided that there was currently no way in which grant could be paid on that work since the work could be affected if the breakwater was not modernised or improved.

    Housing Associations
    Mr. Nicholas Bakerasked the Secretary of State for the Environment how many housing associations are currently being assisted by the Housing Corporation.
    Mr. Stanley: Seven hundred and sixty-nine housing associations are currently receiving development finance from the Housing Corporation.
    Mr. Baker: I am grateful for that answer. Does my hon. Friend share the impression that I gain from the case of the East Boro Housing Trust and another housing association in my constituency that the standard of services being provided by the Housing Corporation to housing associations is seriously deficient? If so, what action is he prepared to take?
    Mr. Stanley: I am not familiar with the instance to which my hon. Friend has referred, but if he will provide me with details I shall be glad to look into it. He may be referring to the general problem of the project control of housing association projects, on which we have been having extensive discussions in a working party with the Housing Corporation and the National Federation of Housing Associations. The issue of project control of housing association projects raises some profound issues of public accountability for substantial sums of taxpayers' money. We are hoping to reach conclusions on that matter as rapidly as we can, but in the meantime, if my hon. Friend will give me details of the scheme that he has in mind, I shall see whether I can help him.
    Mr. Alton: How many people from the North-West of England serve on the board of the Housing Corporation? Will the Minister tell us whether the percentage reduction in money made available by the Housing Corporation to housing associations in the North-West was the
    1402
    same as that in the South-East of England?
    Mr. Stanley: I cannot answer the hon. Gentleman's statistical question at the moment, but I shall be glad to write to him. I can say that, overall, the cash allocation to the Housing Corporation for the financial year 1980–81 is only about 10 per cent. below our estimated outturn in the previous financial year.
    Mr. Budgen: Has my hon. Friend any plans to introduce legislation to make the Housing Corporation either directly accountable to local authorities or more directly accountable to the Department of the Environment and, thus, ultimately to the House?
    Mr. Stanley: We have no plans to introduce legislation to make the Housing Corporation more directly accountable to local authorities and I do not think that it would be generally welcomed in the housing association movement for associations to become direct arms of local authority activity. However, we have made provision in the Housing Bill for the administration expenses of the Housing Corporation to be brought more directly under the influence of Ministers in the Department of the Environment through a system of grant-in-aid, which we hope to be able to introduce in the course of the current financial year.
    Mr. loan Evans: How many co-operative housing associations are being assisted by the Housing Corporation? Have housing associations been affected by the high minimum lending rate brought about by the Government? When do the Government intend to bring down the high minimum lending rate which is damaging owner-occupiers and dissuading people who might otherwise wish to buy their own house?
    Mr. Stanley: As the hon. Gentleman is aware, decisions on MLR are not for me but for my right hon. and learned Friend the Chancellor. I shall have to write to the hon. Gentleman about the number of co-operative association projects currently funded.

    House Improvement Grants
    Mr. Altonasked the Secretary of State for the Environment if he will raise the level of house improvement grants.
    The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg): My right hon. Friend will be making changes to the present eligible expense limits for improvement grants following the enactment of the Housing Bill.
    Mr. Alton: Is the Minister aware that, with raging inflation, it is becoming impossible for home owners to contemplate taking up improvement grants? Will the hon. Gentleman consider registering housing associations under the Local Authorities (Goods and Services) Act 1970 to enable housing associations to carry out improvement work and tender in competition with private enterprise?
    Mr. Finsberg: The answer to the hon. Gentleman's first question is " No." With regard to his second question, if he will write to me I shall look at the matter.
    Mr. Heddle: Can my hon. Friend assure the House that, where local authorities take up improvement grants, the work is carried out competitively, not necessarily by direct labour organisations, but by the private contracting industry? What checks can the Government provide to ensure that houses bought by local authities and subsequently sold are not sold at a loss.
    Mr. Finsberg: My hon. Friend asks that local authorities should be able to decide the better method of carrying out local authority housing work. If local authorities chose to carry out those works through their own direct labour organisations, we should expect the best of them to anticipate the provisions of the Bill now before the House. When the Bill receives the Royal Assent those local authority direct labour departments that are blatantly inefficient will no longer be able to operate in a way detrimental to their ratepayers.
    Mr. Frank Allaun: What is the good of raising improvement grants when the Government are busy slashing improvement and building expenditure? Is the hon. Gentleman aware that today the Environmental Health Officers' Association, formerly the Health Inspectors' Association, after replies from 300 councils, is bitterly protesting to the Secretary of State about the cutting by half of building and housing expenditure over
    1404
    the next three years? Is the hon. Gentleman further aware that 43 per cent. of councils have either ended or severely restricted improvement grants?
    Mr. Cryer: Hard-faced men of the Government.
    Mr. Finsberg: Is the hon. Gentleman surprised that an organisation that was once the sanitary inspector's organisation is unhappy at what some of its local authority members are doing? We have merely told local authorities to decide the order of priority within the amount that we give them.
    Mr. Nicholas Winterton: Does my hon. Friend agree that our existing stock of houses is a great asset to the country? Does he further agree that it is much cheaper to improve existing property than to build new property, and that the environment is protected by improving existing property? Will he therefore give a little more consideration, especially when the economic climate improves, to increasing improvement grants, which is an economically sound policy?
    Mr. Finsberg: I completely agree. That is why we went to the one-block system. Local authorities that blindly decide not to give improvement grants are acting against the interests of their residents.

    Private Rented Sector
    Mr. Beaumont-Darkasked the Secretary of State for the the Environment how many dwellings have been lost from the privately rented sector since the Rent Act 1974.
    Mr. Stanley: The precise information requested is not available, but between the 1971 census and the 1977 national dwelling and housing survey it is estimated that some 838,000 dwellings were lost from the private rented sector in England—an average rate of loss of 125,000 dwelllings a year.
    Mr. Beaumont-Dark: I thank my hon. Friend for his answer. Does he agree that the loss of that many dwellings affects the ability of people to move around the country when jobs necessitate such a move?
    Mr. William Hamilton: What jobs?
    Mr. Beaumont-Dark: Will my hon. Friend accept that shorthold tenancies are an important contribution to overcoming the problem of the shortage of houses for rent in the private sector? Does he further agree that, had the Socialist Party taken action years ago, we should not now have 800,000 fewer houses in the private rented sector?
    Mr. Stanley: I entirely agree. A basic objective behind our shorthold proposals is that of trying to meet the need for short-term rented accommodation in the private sector. Such accommodation is required particularly by people who need to go to a town for a year or two for a job or course. It is greatly regretted that the Labour Party has introduced a wrecking commitment to try to repeal shorthold.
    Mr. Tilley: How many houses were lost in the rented sector through demolition and how many through properties becoming owner-occupied? Will the hon. Gentleman accept that he is giving the impression that all the houses were lost because of the landlord's decision not to rent, but the figures disprove that? Are the Government planning further measures to stop the decline? At what rate do they claim that the Housing Bill will slow it down?
    Mr. Stanley: About one-third of the dwellings that I referred to were demolished. That is almost 300,000 dwellings, which is far too many.
    Mr. Viggers: Does the Minister agree that many individuals and families do not wish to buy houses or rent from the council? Will my hon. Friend accept that, if the Government are successful in bringing forward proposals to assist the private tenancy market, they will be widely supported?
    Mr. Stanley: I am grateful to my hon. Friend. In addition to shorthold, we are making it easier for owner-occupiers to sublet, giving council tenants the right to sublet and take in lodgers and we are introducing a system of assured tenancies for new build-for-rent dwellings outside the Rent Acts. We hope that the combination of those four important changes
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    in the Housing Bill will improve the availability of private rented accommodation.
    Mr. Kaufman: Since the Government have rejected the idea of a register of shorthold tenancies, how will the Government and the House know how many shorthold tenancies are created?
    Mr. Stanley: As the right hon. Gentleman knows, a requirement of shorthold is to have the fair rent registered. There will, therefore, be an application to the rent officer The more pressing need is to make dwellings available for those who want them, rather than closely to monitor the number of shortholds.

    New Towns (Dwellings)
    Mr. Durantasked the Secretary of State for the Environment how many new town houses and flats have been sold or are currently in the course of sale; and what percentage of total stock this represents.
    Mr. Heseltine: Since May last year 2,680 new town corporation dwellings have been sold. Negotiations are in hand on 5,270. These represent 9 per cent. of total new town tenancies. With permission, I will circulate the figures for individual towns in the Official Report.
    Mr. Durant: Does my right hon. Friend agree that that demonstrates the outstanding popularity of the Government's policy in selling public housing? Will he do everything in his power to ensure that those who wish to buy are not held up by bureaucracy and Socialist dogma?
    Mr. Heseltine: I agree that the fact that nearly 10 per cent. of all new town houses have been sold in a year proves beyond question the large demand that exists for ownership in those areas. Those living in parts of the country under Labour control will have to wait for the enactment of the legislation now before the House which will give other council tenants the right to buy. I assure my hon. Friend that there will be no bureaucratic delay in my Department in implementing the right-to-buy sales in new towns.
    Following is the information:

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    SALES OF NEW TOWN HOUSES: POSITION AT 31 MAY 1980

    Town

    Number of inquiries

    Number of inquiries resulting in firm negotiations

    Number of sales completed with effect from 18 May 1979

    Basildon

    6,030

    1,800

    1,252

    CLNT

    338

    75

    32

    Milton Keynes

    2,346

    250

    136

    Northampton

    1,086

    429

    231

    Peterborough

    2,013

    146

    498

    Redditch

    2,269

    301

    88

    Runcorn

    2,112

    413

    10

    Skelmersdale

    1,163

    344

    225

    Telford

    2,527

    1,218

    87

    Warrington

    1,305

    68

    44

    Washington

    1,240

    226

    77

    TOTAL

    22,429

    5,270

    2,680

    Proportion of tenancies where there have been

    Inquiries Per cent.

    Negotiations or sales Per cent.

    Basildon

    35

    18

    CLNT

    13

    5

    Milton Keynes

    22

    4

    Northampton

    19

    12

    Peterborough

    30

    10

    Redditch

    34

    6

    Runcorn

    22

    4

    Skelmersdale

    15

    7

    Telford

    26

    13

    Warrington

    46

    4

    Washington

    17

    4

    AVERAGE

    25

    9

    Regional Water Authorities (Manpower)
    Mr. Peter Lloydasked the Secretary of State for the Environment what are the latest quarterly staff figures for the regional water authorities; and how they compare with the previous year.
    The Minister for Local Government and Environmental Services (Mr. Tom King): On provisional information, at 31 March 1980 English water authorities employed an estimated 56,540 permanent employees calculated on a full-time equivalent basis. This is 400 fewer than on 31 March 1979.
    Mr. Lloyd: In the light of those figures, is my right hon. Friend now satisfied that the existing structure of the water authorities and the present arrangements for appointing their members ensure thorough and effective supervision of the way that they are run?
    Mr. King: As I advised the House on an earlier occasion, I have been having
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    meetings with the chairman and chief executives of all the water authorities. I am very concerned about some of the aspects of the ways in which the present water authority structure operates, and I am giving serious consideration to the implications of my discussions.
    Mr. Marlow: In view of the gross un fairness of water rates, will my right hon. Friend consider waiving domestic water rates altogether and imposing rates purely on commercial and industrial metered use—
    Mr. Speaker: Order. This question is about staffing. It is not about water rates.
    Mr. Marlow: Perhaps I may be allowed to continue, Mr. Speaker—
    Mr. Speaker: We are dealing with Question No. 11.
    Mr. Marlow:—by transferring the cost of domestic water rates on to 1 per cent. VAT—an equivalent amount of money—thereby cutting the number of expensive staff required to send out these hundreds of thousands of bills by which people are being abused to such a great extent at the moment?
    Mr. King: My hon. Friend has raised this matter with me before. It would involve the need to raise resources from elsewhere. But I understand the concern which is motivating hon. Members about the level of water rate increases this year. We are looking at the situation very seriously.
    Mr. Eastham: Although the Minister may be obsessed with the number of staff working for local water authorities, is his Department aware of the very serious problems in the North-West of England water authority's area due to underground dereliction, where it is recognised that a programme of £2,000 million is required to restore the necessary provisions for the people, which will need staff to bring about these changes?
    Mr. King: I can assure the hon. Gentleman that I am well aware of the condition of the sewers in the North-West because I have been in them. I am well aware of the very serious problems that we face in that respect. But I am not obsessed about manpower numbers, although I am obsessed about the need to ensure that in the water industry we get value for money for the consumer.

    First-time Buyers
    Mr. Murphyasked the Secretary of State for the Environment what plans he has to improve on existing legislation with a better grant scheme to assist first-time buyers of cheaper houses.
    Mr. Stanley: As my right hon. Friend said on 30 January—[Vol. 977, c. 1337]—in reply to my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle), any such scheme must await improvements in the overall economic climate.
    Mr. Murphy: I thank my hon. Friend for that reply. Will not he agree that a £1 grant for every £2 saved up to a given maximum would do a tremendous amount to promote home ownership and would also cost the taxpayer considerably less in continuing subsidies for further council housing?
    Mr. Stanley: It would also represent an increase in public expenditure. But I share my hon. Friend's concern that we must try to give all possible help to first-time buyers. I remind him that in the Housing Bill and other legislation we are introducing our new improvement for sale scheme, we are making very important extensions to the use of shared ownership, we are giving local authorities new powers to guarantee mortgages, and we have increased" the stamp duty threshold. I suggest that the right to buy is without doubt the most substantial and the most generous first-time buyer scheme ever introduced.
    Mr. Jay: Would not it also be a good idea to build some houses to rent?
    Mr. Stanley: Within the overall level of the finance that we can afford, we are giving local authorities the maximum freedom to use their capital investment in the best way that they can.
    Mr. Alton: Has the Minister considered giving special help to first-time buyers through the construction, for instance, of starter homes and more assistance for self-build schemes?
    Mr. Stanley: The hon. Gentleman will be aware that we have been urging local authorities to do precisely that. I refer him to my recent speech to the Institute of Housing. As for self-build, the hon. Gentleman may be aware that I have
    1410
    widened the priority categories for local authority mortgages to include those who are members of self-build groups.
    Mr. Durant: What has been the take-up on the Labour Government's scheme for first-time buyers? Has that scheme died the death?
    Mr. Stanley: I have not the figures for take-up before me, but undoubtedly they are very much less than when the home loan scheme was first introduced. The first benefits which are due to be payable under the scheme will be made in December, and we shall be fixing the house price limits related to that scheme by order in the autumn.

    Building Regulations
    Mr. Chapmanasked the Secretary of State for the Environment what progress he has made on simplification of the building regulations.
    Mr. Heseltine: I shall be publishing a consultative paper very shortly outlining proposals for changing and simplifying the building control system.
    Mr. Chapman: I welcome my right hon. Friend's reply. Does he agree that the voluminous four sets of building regulations which operate in different parts of the United Kingdom are unnecessarily complicated, comprehensive and confusing? Does my right hon. Friend agree, further, that they could be considerably simplified without compromising safety in any way?
    Mr. Heseltine: I recognise my hon. Friend's detailed personal knowledge and experience in these matters, and I shall be doing my best in my consultative paper to help him and the proposals which he is putting forward.
    Mr. Cryer: When the right hon. Gentleman consults local authorities about building regulations, will he consult them about the regulations for charging which the Department has issued under the building regulation procedure? Is not he now trying to blackmail local authorities into making charges, when the regulations are defective? If local authorities exercise their choice to make charges, under the new regulations they may have to make refunds. Is not the whole set-up a complete mess under his control?
    Mr. Heseltine: I am not aware that it is in anything like the state that the hon. Gentleman describes. But I say to him what I have already said publicly—that I am reviewing the system that we have introduced, and I shall take a view about the system when it has been in operation for six months to see whether changes are necessary.
    Mr. Alexander: Does my right hon. Friend agree that most Members of Parliament have had an enormous post-bag about these fees? If he agrees, will he also agree that he ought to see the Leader of the House to discover whether a debate can be arranged once his consultative paper has been issued?
    Mr. Heseltine: I am always pleased to see my right hon. Friend the Leader of the House. But it would remain essentially for him to decide whether there should be a debate. It is not a matter for me. I appreciate that there has been wide interest in this Government innovation. It is in response to that that I have offered to look again at the proposals which are currently operating when they have been tested after six months.

    Urban Areas (Aid)
    Mr. Steenasked the Secretary of State for the Environment what funds he is planning to make available in addition to the urban aid programme for urban areas under the Inner Urban Areas Act and for partnership and programme authorities for the current financial year; and if he will make a statement.
    Mr. Bevanasked the Secretary of State for the Environment, what funds, in addition to the urban aid programme, he will make available for urban renewal under the Inner Urban Areas Act and for partnership and programme authorities for the current financial year.
    Mr. King: Partnership authorities have been allocated £110·8 million and programme authorities £42 million in the current year. Other districts designated under the Inner Urban Areas Act have been allocated £5·6 million for work under the Act and similar purposes. There are no proposals for further allocations for urban renewal.
    Mr. Steen: Does the Minister agree that many of the problems of inner city areas have been created by too much
    1412
    Government intervention and by a lack of private investment? Will he take an early opportunity to lean heavily on the clearing banks and suggest to them that, to fulfil their social and financial obligations to the inner areas, they should invest some of their windfall profits in urban renewal?
    Mr. King: I very much agree with the idea that the amount of effort which can be expended dealing with the serious problems that we face in many inner urban areas should not be measured by the amount of public assistance and public funds which can be contributed towards them. There is a considerable contribution for the private sector to make as well. I am glad to say that there are encouraging signs that it is taking up this challenge, and we shall give further encouragement to that end.
    Mr. Bevan: Will my right hon. Friend confirm whether, in his new proposals, there will be an opportunity to cut back on the vast local authority bureaucracy which has diminshed funds in inner city areas and resulted in the prolongation of planning applications?
    Mr. King: The first impression that we had, especially of the partnership authorities when my right hon. and hon. Friends became concerned with them, was of the excessive amount of bureaucracy and paper work involved in getting action in these areas. We have concentrated on getting results with the minimum of bureaucracy and committee work.
    Mr. Tilley: Is the Minister concerned about the low level of ministerial involvement in committee meetings? May I draw attention to the fact that at a recent Lambeth partnership committee meeting, although seven Ministers are members of the committee, only two, including the Minister of State, turned up? Is that a matter of policy, or was there a major race meeting that day as well?
    Mr. King: Our concern is to get results. It is typical of what I call the " unessential" approach of many Opposition Members to be over-concerned about whether there were Ministers there, even if there were not subjects concerning them on the agenda. We are concerned to get results, both to cut down the paper work and to cut down the costs of the attendance of a lot of people who are not involved in a particular meeting.
    Mr. Marlow: With a view to cutting back on the need for vast amounts of urban aid in the future, may I ask what my right hon. Friend is doing to stop socialist local authorities from despoiling their areas and frightening employers away so that in future there will be no jobs and a great requirement for central Government money?
    Mr. King: I accept the point behind my hon. Friend's question. When we are seeking to stimulate economic revival in inner city areas, it is positively counterproductive if some local authorities raise their rates to levels which drive out small businesses from their areas. We can make our contribution, but it has to be a cooperative effort with the local authorities. I hope that my hon. Friend's message will be heard more widely.

    Local Authority Staff
    Mr. Rentonasked the Secretary of State for the Environment to what extent he is satisfied with the local authorities' response to his request for reductions in their staffing levels.
    Mr. Heseltine: On the basis of the available statistics, I am not at all satisfied. The Government's public expenditure plans require a much sharper reduction in manpower than is revealed in the December 1979 return of the Joint Manpower Watch.
    Mr. Renton: Will my right hon. Friend continue with his sterling work in publicising local authority staffing levels? Does he recollect that the decline of the Spanish Empire was attributed to the fact that one in four adult males was in the Holy Roman Church? Is it not possible that the same fraction of Britain's working population is employed in either local government or central Government and that this is also responsible for the decline of Britain?
    Mr. Heseltine: My hon. Friend refers to a period a bit before my time. I think a fair number of the people he mentions would have claimed divine inspiration. I do not think that applies to many people in local government today. There is plenty of room for reduction. It is necessary that, in the economies now before us, we should concentrate on reducing the levels of consumption rather than capital.
    Mr. Gwilym Roberts: Would not the right hon. Gentleman accept that these cuts in staffing levels also mean cuts in social services, education provision and in house improvement and building? The only thing to which they add is the dole queue.
    Mr. Heseltine: I am sure that the hon. Gentleman, who supported a reduction of 20,000 employees in 1976 compared with 5,000 last year, had those points much in mind. When structure plans are now largely complete, when far fewer public sector houses are being built, when the school population is falling and when fewer roads are being designed, it is humbug to talk about an inability to reduce local government manpower.
    Mr. Major: Will my right hon. Friend agree that far too many local authorities are still protecting staffing levels at the expense of services? Will he not further agree that this is a dereliction of their responsibilities to ratepayers?
    Mr. Heseltine: My hon. Friend makes the point most eloquently. The fact is that manpower could be reduced. This would make available more resources to provide better services and better value for money.
    Mr. Hattersley: The Secretary of State has persistently refused to give information about housing. Since he now says that fewer houses are being built this year, will he say how many fewer than last year?
    Mr. Heseltine: The right hon. Gentleman will be aware, as a supporter of the policy, that the number of public sector houses has been reduced every year for the last four years. Rather than trying to make irrelevant points about numbers in precise terms, the right hon. Gentleman would be better employed in remembering that only 12 months ago he was supporting the very policies about which we are now talking.
    Mr. Hattersley: The right hon. Gentleman has persistently refused to give information about housing. Will he say how many fewer houses will be built this year than last year?
    Mr. Heseltine: The right hon. Gentleman is fully aware that the Secretary of State in the previous Government constantly believed he could forecast the

    1415
    level of local authority building and failed to get the figures right.
    Mr. William Hamilton: Answer.
    Mr. Heseltine: I have learnt by that experience. I do not intend to make judgments when I do not have the information to support them.

    Structure Plans
    Mr. Michael McNair-Wilsonasked the Secretary of State for the Environment what degree of flexibility he allows in the implementation of structure plans.
    Mr. Fox: Once a structure plan is approved my right hon. Friend remains involved only where there is an appeal, or a departure from the development plan, or where he sees fit to call in a proposal or to issue a statutory direction.
    Mr. McNair-Wilson: Since the Secretary of State initiates regional strategy, his responsibility is total. If my hon. Friend has the doubts that he expressed to my hon. Friend the Member for Chipping Barnett (Mr. Chapman) about the efficacy of these structure plans, will he set up his inquiry rather than introduce the further six structure plans that he suggests? Does he agree that the gestation period for these structure plans is such that, with the shortage of resources that prevails today and with urban development a key policy, many of the plans are bureaucratic prophesies that have turned out completely wrong?
    Mr. Fox: My hon. Friend is right in that we considered carefully whether this exercise should continue. The years that had elapsed between made it imperative that we should get these plans approved as speedily as possible. The length of time in preparation obviously makes these plans less relevant. Flexibility becomes more important. In my hon. Friend's own area especially with housing proposals, a local plan has yet to be prepared that will be site-specific. At that level he will get what he wants.
    Mr. Gummer: Would my hon. Friend agree that the structure plan is used by local authorities as an excuse to be more inflexible than necessary? In my constituency, villages are dying because no development is allowed due to the structure plan that my right hon. Friend's
    1416
    predecessors accepted. There must be some kind of flexibility. This can come only from the top. Is he aware that local authorities use these plans as an excuse when making their decisions?
    Mr. Fox: The purpose of structure plans was to lay down broad policy and a general programme. As my hon. Friend suggests, there are considerable problems. We are tackling them. As a result of one or two circulars that are in preparation or have been sent out, complaints similar to those that my hon. Friend brings forward will become fewer. I am aware of the serious situation he has drawn to my attention.

    Ordnance Survey Maps
    Mr. Andrew F. Bennettasked the Secretary of State for the Environment if he will make a statement about the review of the future of Ordnance Survey maps.
    Mr. King: The Government are considering the report of the Ordnance Survey review committee in the light of comments received following its publication last October. I hope to make a full statement shortly on the Government's response.
    Mr. Bennett: Will the Minister reconsider his answer? The remit of the review committee was to produce a plan for the 1980s. The Government seem to be promising continually to make statements but never actually produce them. Does he realise that, if they are not careful, a large period of the remit for the review will be up before any opinion has been offered?
    Mr. King: I am not sure what the hon. Gentleman wants me to withdraw. Does he not wish me to make a full statement of the Government's views? This is an important report. The hon. Gentleman, I know, takes some interest in these matters. We have considered carefully the comments made to us and the consultations that have taken place since the publication of the report. We shall make a statement shortly.
    Mr. Costain: Is the Minister aware of the large increase in the cost of Ordnance Survey maps? Is he satisfied that they have not been raised to a price at which people will stop buying them?
    Mr. King: We are examining a whole range of aspects of the operation of the Ordnance Survey in connection with the review committee report. I would ask my hon. Friend to await the full statement that we shall make.
    Mr. Nicholas Baker: Will my right hon. Friend consider whether the staff of Ordnance Survey should be carrying out their duties preparing maps or whether they should continue to compete with private surveyors in offering surveying services?
    Mr. King: This is one of the matters included in the report. I would be grateful if my hon. Friend would await the full statement.

    Elderly and Disabled Persons (Housing)
    Mr. Stallardasked the Secretary of State for the Environment what assurances he has received from local authorities that the special housing needs of the elderly and disabled will be protected, in view of the reduction in the housing investment programme allocation 1980–81.
    Mr. Geoffrey Finsberg: It is for local authorities to decide how to spend their housing investment programme allocations which are now given as a single block. However, in announcing the allocations for 1980–81, my right hon. Friend the Secretary of State said that he believed the emphasis of public sector housing policy should now be on meeting particular needs such as those of the elderly and the handicapped.
    Mr. Stallard: Will the Minister accept that the stock reply to the effect that local authorities will work out their own priorities is becoming more meaningless in the face of massive reductions which have effectively robbed local authorities of any element of choice? Is he further aware that over half the occupants of property which lacks at least one basic amenity are either of pensionable age or are disabled? As with other legislation promoted by this Government, those who will be most hurt are the pensioners and the disabled. Will he have another look at the allocation to housing associations and local authorities?
    Mr. Finsberg: I must say to the hon. Gentleman that, in the 25 years he and I
    1418
    spent in local government, we would have given our eye teeth for the flexibility that our new system offers.
    Mr. Heddle: Will not my hon. Friend agree that the whole philosophy of selling council houses and thus remitting half the proceeds of the sales back to the HIP allocation will provide houses for those genuinely in need, particularly the elderly and the disabled?
    Mr. Finsberg: My hon. Friend is right. That would particularly apply to the London borough of Camden.
    Mr. Winnick: Is it not clear that the reduction in the housing investment programme in 1980–81 will cause immense and devastating hardship for people in housing need? Why do Ministers say that these matters are for local authorities when that is simply not true? Ministers are not telling the truth because local authorities, as a result of the reduction in the housing investment programme, do not have the money to carry out the sort of house building and modernisation programmes they would like.
    Mr. Finsberg: The hon. Gentleman seems totally incapable of assimilating the fact that the Government to which he gave nominal support while he was not a Member of Parliament were pursuing a policy of accepting that local authorities did not necessarily wish to go on building large new estates, but wanted freedom to decide within their allocation what to do.
    Mr. Hill: Is my hon. Friend aware that one of the most successful schemes ever produced for housing for the elderly is sheltered housing where the local authority's housing department and the DHSS combine and share the cost? Is he aware that this is the most imperative objective of housing for the elderly? I hope that in future we shall provide all the help that is possible for this scheme.
    Mr. Finsberg: My hon. Friend is right. That is a most important point. It is also right to remind the House that two specific steps have been taken which should be of immense help. The first is the revision of the housing cost yardstick allowances for old people's dwellings for single persons. The second is allowing the cost of providing lifts in two storey

    1419
    dwellings to qualify for subsidy. It is interesting that because those are useful points the Opposition choose to ignore them.
    Mr. Allen McKay: Is the Minister aware that the words " freedom " and " flexibility " fall strangely from his lips since the. Government have taken from local authorities the money that would give them that freedom and flexibility?
    Mr. Finsberg: While the alliteration of the "f's" is interesting, I could add a third which might not be in order.

    Property Services Agency (Staff)
    Mr. Garel-Jonesasked the Secretary of State for the Environment what is his latest estimate of manpower employed by the Property Services Agency.
    Mr. Heseltine: On 1 May 1980 there were 36,322 staff in post, a reduction of 8·9 per cent. on the numbers in May last year.
    Mr. Garel-Jones: What steps does my right hon. Friend plan to take to farm out work from the PSA to the private sector?
    Mr. Heseltine: I have made it clear that I intend that a continuing, increasing, proportion of work that can be put to the private sector should find its way there.

    Local Authorities (Private House Sales)
    Mr. Gwilym Robertsasked the Secretary of State for the Environment, pursuant to his answer to the hon. Member for Cannock,Official Report, 26 March, column 585, what are the reasons why he will not seek powers to enable local authorities to publish and advertise details of privately-owned houses for sale within their area.
    Mr. Stanley: Because ratepayers should not have to pay for unnecessary local authority expenditure.
    Mr. Roberts: Does the Minister accept that in this period of financial stringency it is important to remove from house purchasers and sellers the necessity to make payments to parasitic house agents? Does he accept that in this way the local authority could effectively compete with estate agents by providing the service at no cost?
    Mr. Stanley: I am glad to note the hon. Gentleman's enthusiasm for the involvement of local authorities in the sale of houses. However, I suggest that the priority for Labour councils such as Cannock is not getting into the business of selling houses they do not own, but getting on with selling the houses they do.

    Rural Areas (Aid)
    Mr. Gummerasked the Secretary of State for the Environment if he intends to take steps to redress the balance of central Government grants so that rural areas get a better proportion of funding.
    Mr. King: We acted in the 1980–81 rate support grant settlement to halt the drift of grant from the rural areas which had occurred under the previous Administration. The new grant arrangements now being developed should provide for a fairer distribution of resources in future.
    Mr. Gummer: I thank my right hon. Friend for what he has already done. Is he aware that Suffolk suffered so much cutback that its share fell from just under 1 per cent. of the rate support grant for the whole country to 0·7 per cent. in four years of Labour Government? We desperately need a fairer share of the money that is available. Does he realise that the country areas have their priorities as well, and there is rural poverty which is no more attractive because it happens to be thatched?
    Mr. King: I understand why my hon. Friend raises this point. In checking the figures I noted that during the period of the last Government Suffolk suffered a 24 per cent. drop in its share of the needs element, which obviously raised considerable hardships such as were faced by many other shire counties. We are anxious to achieve a fairer settlement. I am glad that we were able to make some small movement in that direction in this year's settlement. We have these issues very much in mind as we continue to prepare the new system of needs assessment.
    Mr. Nicholas Winterton: Does my right hon. Friend agree that towns exist within rural areas for rate support grant purposes? Such towns as Macclesfield which, like Manchester, were in the vanguard of the Industrial Revolution, require considerable funds to bring their infrastructure up to date. That applies particularly

    1421
    to drains and sewerage, which was referred to earlier today. Does this aspect feature in the Minister's consideration of allocation?
    Mr. King: Drains and sewers are a matter for the water authority. We are considering the position of the North-West in the allocation of capital expenditure graints for water authorities. I am well aware, as I previously stated, of the problems that exist. The issues that my hon. Friend raised are part of the difficulties that we are tackling to try to achieve a fairer method of distribution between the competing claims of different parts of the country.

    Planning Applications
    Mr. Heddleasked the Secretary of State for the Environment what is the average time taken for the determination of a planning application.
    Mr. Heseltine: In the period April-September 1979, 60 per cent. of planning applications were dealt with in the eight-week statutory period, and a further 26 per cent. were dealt with within 13 weeks. Statistics are not collected in such a way as to give an average.
    Mr. Heddle: Does my right hon. Friend acknowledge that the delays in processing planning applications mean increased interest payments which manifest themselves in increased prices for the houses that are eventually built? What steps does my right hon. Friend propose to reduce the delay in processing planning applications, and will he publish a list of those local authorities which delay in these processes?
    Mr. Heseltine: I am grateful to my hon. Friend because I strongly support what he said. I have made a number of proposals in the Local Government, Planning and Land (No. 2) Bill to eliminate duplication in the planning machinery between two tiers of authorities. I have agreed a 28-day time limit on consultations with local authorities and those—particularly statutory undertakers—that they have to consult. I am proposing increases in the levels of permitted development under the general development order, and I certainly intend—indeed, I have already started—to publish statistics showing the performance of my Department and local authorities in handling planning applications and appeals.
    1422
    The House will know that £8 billion of construction work goes through the planning machinery in a year, and any percentage decrease in the time taken to process that ought to flow straight through into the economy.
    Mr. Cryer: Does not the process of charging for planning applications mean that, under the weird system which is proposed in the order, that the Minister has put before the House, it will take longer to determine the fee to be charged? Is it not true that in certain circumstances the fee is miscalculated? Is not the only decent and proper course open to the Minister for him to withdraw the order, stop the smokescreen about reviewing the position in six months' time, admit that his officials have agreed that the order is defective and stop—if the report in The Guardian yesterday is right—blackmailing local authorities into making charges?
    Mr. Heseltine: The hon. Gentleman has made a number of interesting points. There is only one difficulty. We have put no such order about planning charges before the House.

    Option Mortgage Scheme
    Mr. Stephen Rossasked the Secretary of State for the Environment whether he will take steps to extend the advantages of the option mortgage scheme to elderly owner-occupiers who are not liable to income tax.
    Mr. Stanley: I refer the hon. Member to the answer I gave earlier today to my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury).
    Mr. Ross: Is the Minister aware that I thought at that time his answer was most disappointing and I am sorry that, 25 questions later, he has not managed to change it? Does the hon. Gentleman agree that it is essential to try to keep within the community elderly people who are facing problems in maintaining their homes so that they do not fall as a charge upon the State? If the hon. Gentleman cannot introduce the option mortgage scheme or some system whereby these people can be given capital to maintain their properties, will he look at the possibility of low-cost loans, from either the local authorities or the banks, to enable elderly people to maintain their houses,

    1423
    which must be in the interests of all concerned?
    Mr. Stanley: As I made clear to my hon. Friend the Member for Northfield, we are certainly sympathetic towards the objective of trying to help elderly owner-occupiers to remain in their homes. However, I am afraid that we are not able to contemplate the increase in public expenditure which the schemes to which the hon. Gentleman referred would be bound to involve.

    Housing Investment Programme (Transfer of Resources)
    Mr. Hooleyasked the Secretary of State for the Environment if he will make arrangements to transfer unused or under-used allocations within the housing investment programme from authorities which do not wish to spend to those which have pressing housing needs.
    Mr. Stanley: To date, I am not aware of authorities whose allocations are likely to be significantly under-used in the current financial year.
    Mr. Hooley: In the event of the diminishing number of Tory-controlled local authorities being unwilling, or unlikely, to spend the money that has been allocated, can the Minister assure the
    1424
    House that there will be a system for transferring surplus funds that might arise in that way to Labour-controlled authorities, such as Sheffield, which is willing and anxious to build up its public and private housing stock?
    Mr. Stanley: Just before the last election the Sheffield council wrote to the last Government to say that its HIP allocation was too high. If there is a repetition of that this financial year obviously we shall consider how to deploy the funds.
    Mr. Frank Allaun: Is the Minister aware that many cities with housing stress, such as Salford, used the whole of their allocations last year? Does the Minister accept my hon. Friend's proposal that authorities which make a further cut beyond that which the Government require should provide some of the extra money for housing stress areas? Is not that a sensible suggestion?
    Mr. Stanley: I must ask the hon. Gentleman to examine another alternative. He should take seriously the arrangements that we have made to enable local authorities to increase their HIP allocations if they realise housing capital receipts by the sale of council houses. It the hon. Gentleman supported that policy in Salford, its HIP allocation would go much further.

TENANT AND LEASEHOLD PROTECTION
3.32 pm
Mr. Peter Bottomley: I beg to move,
That leave be given to bring in a Bill to establish a pre-emptive option for tenants or leaseholders to purchase their residential property when offered for sale by the freeholders; and for connected purposes.
I have entitled the measure the Tenant and Leasehold Protection Bill in part to follow the example that you, Mr. Speaker, set some years ago. Freeholders often sell properties occupied by tenants or leaseholders and do not inform the tenants or leaseholders that the sale is about to take place. I do not understand why they do not tell them, because tenants and leaseholders are likely to offer as much as, if not more than, other potential purchasers of investment property.
The Bill requires a freeholder who intends to sell to inform the residents of the property, whether it is an individual house or flat, a block or a cottage estate, as in my constituency.
Secondly, the Bill provides for the tenant or leaseholder to take over, at the price agreed, the purchase of the property in which he is living. For example, if the owner of a property sells at a certain price during a specified time the tenant or leaseholder can pre-empt the sale and buy at the same price.
No extra Government expenditure is involved, and there will be no loss to the freeholder. The two provisions will help to extend freedom of choice by providing information and the opportunity for a pre-emptive option. The connected
purposes of the Bill cover more information that freeholders should make available to tenants and leaseholders about service charges, and so on. The two essential parts of the Bill provide for notice to be given to the tenants and leaseholders when a sale is about to take place and for the establishment of a preemptive option to take over a purchase.
3.34 pm
Mr. Andrew F. Bennett: I rise to oppose the Bill, for three reasons. I am not against the idea in principle, but it is undesirable that a motion such as this should be introduced so soon after the Housing Bill was presented. The provisions could have been included in that Bill and they would have had a chance of being accepted.
The Ten-Minute Bill procedure is useful, because hon. Members can raise an issue and the House can express an opinion. However, it often happens that an issue is raised, the House approves it unanimously, and the Whips quietly oppose it on a Friday. It is important that hon. Members should have an opportunity to express a view. One of my hon. Friends is prepared to act as a Teller so that we can discover how many hon. Members are in favour of the Bill. I hope that that will ensure that the Government take notice of it. My third reason for opposing the Bill is that on such a day as this it is useful to have a roll call of hon. Members.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House divided: Ayes 144, Noes 3.

Division No. 334]

AYES

[3.34 pm

Adley, Robert

Dalyeil, Tarn

Flannery, Martin

Allaun, Frank

Davies, Rt Hon Denzll (Llanelli)

Fookes, Miss Janet

Archer, Rt Hon Peter

Davis, Terry (B'rm'ham, Stechford)

Foot, Rt Hon Michael

Aspinwall, Jack

Dean, Joseph (Leeds West)

Forrester, John

Baker, Nicholas (North Dorset)

Dixon, Donald

Foster, Derek

Beith, A. J.

Dormand, Jack

Garel-Jones, Tristan

Benyon, Thomas (Abingdon)

Douglas-Mann, Bruce

Garrett, John (Norwich S)

Blackburn, John

Dubs, Alfred

Gower, Sir Raymond

Bottomley, Rt Hon Arthur (M'brough)

Dunn, James A. (Liverpool, Kirkdale)

Graham, Ted

Bray, Dr Jeremy

Dunn, Robert (Dartford)

Grant, George (Morpeth)

Buchan, Norman

Durant, Tony

Greenway, Harry

Butcher, John

Dykes, Hugh

Grimond, Rt Hon J.

Cadbury, Jocelyn

Eastham, Ken

Hamilton, James (Bothwell)

Callaghan, Jim (Middleton & P)

English, Michael

Hamilton, W. W. (Central Fife)

Campbell-Savours, Dale

Evans, loan (Aberdare)

Harrison, Rt Hon Walter

Canavan, Dennis

Evans, John (Newton)

Haynes, Frank

Carter-Jones, Lewis

Ewing, Harry

Heddle, John

Coleman, Donald

Faith, Mrs Shella

Hogg, Norman (E Dunbartonshire)

Costain, A. P.

Fell, Anthony

Hooley, Frank

Cunningham, George (Islington S)

Field, Frank

Horam, John

Howells, Geraint

Morgan, Geraint

Spriggs, Leslie

Hughes, Roy (Newport)

Morris, Rt Hon Charles (Openshaw)

Sproat, lain

Hunt, John (Ravensbourne)

Needham, Richard

Stallard, A. W.

Jay, Rt Hon Douglas

Newens, Stanley

Steel, Rt Hon David

John, Brynmor

Ogden, Eric

Steen, Anthony

Johnson, James (Hull West)

O'Neill, Martin

Strang, Gavin

Jones, Rt Hon Alec (Rhondda)

Palmer, Arthur

Straw, Jack

Jones, Barry (East Flint)

Patlen, Christopher (Bath)

Summerskill, Hon Dr Shirley

Jones, Dan (Burnley)

Pawsey, James

Temple-Morris, Peter

Kaufman, Rt Hon Gerald

Prescott, John

Thornton, Malcolm

Kerr, Russell

Price, Christopher (Lewisham West)

Tiiley, John

Lennox-Boyd, Hon Mark

Race, Reg

Varley, Rt Kon Eric G.

Lewis, Ron (Carlisle)

Renton, Tim

Wainwright, Edwin (Dearne Valley)

Litherland, Robert

Roberts, Gwilym (Cannock)

Watkins, David

Loveridge, John

Robertson, George

Welsh, Michael

McCrindle, Robert

Robinson, Geoffrey (Coventry NW)

White, Frank R. (Bury & Radcliffe)

McDonald, Dr Oonagh

Ross, Ernest (Dundee West)

Whitehead, Phillip

McKay, Allen (Penistone)

Ross, Stephen (Isle of Wight)

Wigley, Dafydd

McKelvey, William

St. John-Stevas, Rt Hon Norman

Willey, Rt Hon Frederick

McOuarrie, Albert

Sever, John

Williams, Rt Hon Alan (Swansea W)

Major, John

Eheorman, Barry

Wilson, William (Coventry SE)

Marlow, Tony

Shersby, Michael

Winnick, David

Marshall, David (Gl'sgow, Shettles'n)

Silverman, Julius

Winterton, Nicholas

Marshall, Dr Edmund (Goole)

Skeet, T. H. H

Woolmer, Kenneth

Mawhinney, Dr Brian

Skinner, Dennis

Young, David (Bolton East)

Maxweil-Hysiop, Robin

Smith, Rt Hon J. (North Lanarkshire)

Mitchell, R. C. (Soton, Itchen)

Soley, Clive

TELLERS FOR THE AYES:

Maynard, Miss Joan

Spearing, Nigel

Mr. Peter Bottomley and

Mills, lain (Meriden)

Speller, Tony

Sir Brandon Rhys Williams.

Molyneaux, James

NOES

Alexander, Richard

Brinton, Tim

Powell, Rt Hon J. Enoch (S Down)

TELLERS FOR THE NOES:

Mr. Bob Cryer and

Mr. Andrew F. Bennett.

Question accordingly agreed to.
Mr. Gerald Kaufman: On a point of order, Mr. Speaker. Now that the House has expressed its wish on this matter in so overwhelming a way, when will the Government provide time for the legislation?
Mr. Speaker: It is a very good question, but it cannot be answered now because it is not a point of order.
Bill ordered to be brought in by Mr. Peter Bottomley, Sir Brandon Rhys Williams, Mr. John Major, Mr. Tony
1428
Durant, Mr. John Heddle and Mr. Michael Shersby.

TENANT AND LEASEHOLD PROTECTION
  TENANT AND LEASEHOLD PROTECTION
  Mr. Peter Bottomley accordingly presented a Bill to establish a pre-emptive option for tenants or leaseholders to purchase their residential property when offered for sale by the freeholders; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 4 July and to be printed [Bill 215.]
ORDERS OF THE DAY

  FINANCE (No. 2) BILL
  (Clauses 10, 17, 18, 20, 23, S3, 68 and 91)
  Considered in Committee. [Progress 3 June.]
  [MR. BERNARD WEATHERILL in the Chair.]

  FINANCE (No. 2) BILL
    Clause 68

      ENTERPRISE ZONES
      3.45 pm
      Mr. Frank Hooley: I beg to move amendment No. 23, in page 47, line 41, leave out subsection (b).
      The Chairman: With this it will be convenient to take the following amendments: No. 19, in page 47, line 43, leave out
      ' or of a commercial building or structure '.
      No. 28, in page 48, line 1, after ' structure ', insert ' or '.
      No. 24, in page 48, line 1, leave out
      ' the qualifying hotel or the commercial building or structure '.
      No. 29, in page 48, line 1, leave out from ' hotel ' to ' is ' in line 2.
      No. 25, in page 48, line 12, leave out subsections (3) and (4).
      No. 30, in page 48, line 17, leave out subsection (4).
      No. 20, in page 48, line 20, leave out
      ' or, whether or not for such a purpose as an office or offices.'.
      Mr. Hooley: Amendments Nos. 24 and 25 are simply consequential on the main amendment, and therefore the same arguments will apply. In this matter the House is faced with something of a procedural nightmare. We are asked to debate in this clause tax allowances for a scheme that has never been debated by the House as a whole and a provision for allowances to be given to a body that has no legal existence. That body will never have legal existence unless legislation going through the House is eventually approved.
      The substance of the scheme that is the basis of the provisions in this clause—the 100 per cent. capital allowances—was contained in a new schedule tacked on to the Local Government, Planning and
      1430
      Land (No. 2) Bill. The matter was brought up in Committee and the House has not had the opportunity to debate it in detail. The provisions are extensive and complicated, and I suspect that they are unknown to the vast majority of right hon. and hon. Members.
      I believe that the schedule is now classified as schedule 25 to the Local Government Bill, as amended. In Committee the schedule ran to 15 pages, five parts and 34 paragraphs, and was virtually a Bill in itself. Yet the House is now required to debate taxation provisions on the basis of a scheme that we have never had the opportunity to examine in detail. The principle of the scheme was, I think, referred to only vaguely, if at all, during the Second Reading debate on the original Bill. Moreover, among the bodies that purport to take advantage of the capital allowances referred to in clause 68, the urban development corporations have no legal existence and, as I have said, may never legally exist unless the House eventually passes the local government Bill, as amended.
      We are dealing with a procedural arrangement that is grotesque in itself. Had some of my hon. Friends who are experts in " Erskine May " delved into the procedures and rules of the House they might have disqualified this procedure. It is thoroughly unsatisfactory, and puts hon. Members at a severe disadvantage when trying to discuss the true implications and merits of the provisions in the clause and the proposed amendments.
      The taxation implications of schedule 25 to the Local Government Bill are extremely formidable. If the enterprise zones are established, entrepreneurs, landlords, property speculators and others will be able, through the Treasury, to transfer to the general taxpayer their liability for paying rates. They will not pay any rates if they are in the enterprise zones. The Treasury will pay the rates to the appropriate authority, and the only way in which it can do that will be through general taxation. Therefore, the ordinary taxpayer, the old-age pensioner and the low-paid will be paying local taxation on behalf of those entrepreneurs and landowners who are shrewd enough to get in on the act in the enter prise zones.

      1431
      Not only will there be that transfer of taxation liability; there will be an exemption from development land tax, with all its consequences on the price of land and speculation in land in the enterprise zones. It is a massive invitation to speculations and to uncovenanted capital gains. In addition, there will be exemption from the industrial training levy and no requirement for industrial development certificates.
      In Committee the Minister used a curious phrase when discussing the enterprise zones. He said:
      " Customs relaxations will be covered by administrative action."—[Official Report, Standing Committee D, 15 May 1980, c. 1166–7.]
      It is not clear how the enterprise zones will attract relaxation of customs duty, unless helicopters with dutiable goods land in the middle of Attercliffe. At some stage the Government should give the House an explanation of that rather strange phrase used by the Minister. What customs regulations would be relaxed, why, and how? Will customs posts be established on the borders of the enterprise zones in the middle of Sheffield to judge what is exempt? It is a mysterious phrase. I shall be interested to know its implications for the excise duties that should accrue to the Revenue, and perhaps, to the Common Market also.
      The clause sets out explicitly the provision for 100 per cent. capital allowance. The scheme, which has never been debated by the House, has widespread and formidable implications for both local and national taxation and excise. I hope that we shall carefully probe into that aspect this afternoon, to see how the system is intended to work. We must fully understand its implications for taxation, planning, development, industry and jobs.
      I am slightly relieved to know that the scheme does not abrogate, right across the board, the health, safety and building regulations. That is some concession by the Government to decency and civilisation. I would like an assurance from the Minister that at some later stage of the game there will not be the abrogation of health, safety and building regulations also, like the wholesale demolition of taxation liabilities that are provided for under the scheme.
      1432
      It says something for the growing desperation of workers and trades unionists in Sheffield at the disastrous impact on industry and jobs being caused by the Government's policies that many of my worthy Socialist and trade union friends, whom I have known for the past 25 years, are grasping at this straw to help them in the increasing plight into which British industry is drifting. I think that they are mistaken to do so. There are many implications from such a scheme that they may not understand. I do not blame them for that. Most hon. Members have not had the opportunity to read the scheme, let alone trade unionists and shop stewards in Sheffield, but they feel that in terms of jobs the position is now so bad—and is becoming worse—that even this wretched proposition should be crabbed at, in the hope that it will produce 20, 30 or 100 jobs. No doubt other hon. Members will explore that proposition during the debate.
      No one on the Opposition Benches objects to the principle of special help to regional areas, or areas of cities. It is a long-established process, and one that the Labour Party has developed over the years—much more effectively and vigorously than the Conservative Party. There is already an urban programme, and I am puzzled to know why its provisions have not been used to deal specifically with the areas that will fall into the so-called enterprise zones. They will be mainly in the centres of our industrial cities. The urban programme is already established, and more money should be put into it, more vigorously and more energetically, to revive the economy of those areas where that is necessary, without the weird nonsense of establishing enterprise zones.
      In the past, we have had the regional employment premium, the temporary employment subsidy—which was de stroyed by a Common Market regulation —and the regional grants. It is rather extraordinary that the Government, who set out to dismantle a great deal of the apparatus of regional development and assistance, should produce this peculiar scheme, presumably with the ideological notion that somehow it will work miracles where more carefully controlled——
      Mr. D. N. Campbell-Savours: Much of the discontent felt on

      1433
      some Benches about enterprise zones could have been avoided if they had been called urban or inner city industrial development areas. That would have been far more acceptable, while the same powers were retained. It is the use of the term that some hon. Members find objectionable.
      4 pm
      Mr. Hooley: It is not only a question of nomenclature. My hon. Friend has hit on the substance of my amendment. As the clause stands, they are not industrial development zones at all. We could have any kind of cranky, potty, barmy scheme. Provided that it is in this zone, it attracts the tax relief and all the other exemptions set out in the schedule. Had they been properly considered and carefully organised schemes for industrial development, there might have been some case for them, and certainly there would have been no case for my amendment. But the amendment is necessary. What my hon. Friend rightly suggested as being a reasonable idea—one would have to spell it out carefully—might have been acceptable without the amendment, but that is not what is in the clause. My amendment is designed to remedy, at least in part, some of the deficiencies of the clause, as I shall spell out later.
      What we have in this scheme is not a carefully controlled public expenditure exercise, with defined aims and proper control by the Treasury and appropriate Government Departments regarding who gets what and under what conditions—which was the aim of regional expenditure under the Labour Government—but a proposition for totally uncontrolled tax handouts for all sorts of vaguely specified or, indeed, totally unspecified objectives, with no real economic benefit at all.
      Mr. Nick Budgen: Is it the hon. Gentleman's intention to try to limit the benefits of an enterprise zone to manufacturing industry, and to exclude other forms of what he would describe as less worthy activity?
      Mr. Hooley: Yes. I shall spell out that argument as I go along.
      Mr. A. E. P. Duffy: Does my hon. Friend realise that if that is his intention he will rule out those working men's clubs as well as
      1434
      pubs along Attercliffe Common, in the city of Sheffield, that have been abandoned both by de-industrialisation and by urban removal, and whose last hope of survival now is that they will benefit from rate relief under the enterprise zone proposals?
      Mr. Hooley: I have already expressed the profound difficulty of hon. Members in understanding and comprehending the small print of this scheme. I have spent a little time studying the text of the schedule and the eloquent remarks of my hon. Friend the Member for Newham, South (Mr. Spearing) in Committee upstairs. I have not had time to analyse the scheme thoroughly, but in the course of a casual reading of it I got the impression that public houses would not benefit from it. Indeed, I am dubious whether working men's clubs would benefit from it. Obviously, I take advice on that from the Financial Secretary. My hon. Friend ilustrates my point very well. As these zones are drawn, any kind of wide-ranging activity—[Interruption.] Yes, betting shops, for example, pubs and working men's clubs, which make no real contribution to the economy and create very little, if anything, by way of new jobs, will benefit.
      Mr. Duffy: They are indispensable to the social life of Attercliffe.
      Mr. Hooley: Working men's clubs exist in my constituency as well. I am happy that they should flourish. If people want working men's clubs or pubs, that is splendid. There are working men's clubs and pubs all over the place. But to get pubs and working men's clubs we do not need to create enterprise zones. That is the last thing in the world that we need.
      Mr. Duffy: When my hon. Friend looks at the text of his speech later he will see that on this point he was discussing my constituency, not his.
      Mr. Hooley: All that I am saying is that there is no necessity for a complicated schedule of 34 paragraphs to have pubs or working men's clubs in Attercliffe. I am sure that there are large numbers there already. There will no doubt be more in future if they flourish, and good will to them. However, we do not need rate relief, depriving the city of direct control over its finances, and we do

      1435
      not need handouts from the Treasury or a whole complicated list of tax exemptions to develop working men's clubs and pubs in enterprise zones. My hon. Friend is pursuing a red herring on that point.
      I come back to the main theme of my amendment. This scheme provides an indiscriminate, uncontrolled system of tax incentives within limited zones, however they are drawn, for people to do pretty well what they like.
      Perhaps I may give another example from Sheffield. The Sheffield city council is very properly concerned with the redevelopment of an important site in the city centre as part of a business and shopping complex. The site is well known to my hon. Friend. It is generally referred to as the H. L. Brown site. It is an important site in the middle of the city and it has caused considerable controversy. The development will undoubtedly be expensive and important in terms of shopping and office facilities. We do not yet know how it will work out.
      Let us suppose that the scheme is approved, that demolition takes place and new building commences, and that down the road we then get an enterprise zone. What will happen to the shops and offices if some bright speculator says "Why should I build on the H. L. Brown site? Why should I go to the expense of paying a lot of rates and claiming only perhaps 25 per cent. capital allowance "—I think that is the existing capital allowance—" when I can go down the road and build a whopping great supermarket or a thumping great office block without paying any rates for one year, two years, or heaven knows how long——"
      Mr. Nigel Spearing: Ten years.
      Mr. Hooley: "—without having to pay rates for 10 years," as my hon. Friend said, " with a 100 per cent. capital allowance and without having to bother about industrial training levies, and so on." This will make planning in Sheffield a nightmare. How can the city, as the planning authority, deal with a problem such as the H. L. Brown site—an important centre for the development of shops and offices that could have a valuable effect on the redevelopment of the centre of the city—when it may be undercut
      1436
      completely by the declaration of an enterprise zone down the road?
      If I read the schedule aright, the council would lose planning control. If someone said that he wanted to build a supermarket, a block of shops, another Centre Point, or something, as I understand the schedule, the council would be virtually unable to prevent his doing so. Instead of having a properly planned development in the city centre, providing valuable income to the city in the form of rates and valuable income to the Treasury in the form of taxation, we could have a fly-by-night scheme built somewhere else in the city, drawing trade away from the city centre and drawing away value from the properly planned layout of which Sheffield is rightly proud.
      Mr. Stan Crowther: Does my hon. Friend agree that a developer might ask whether he should build factories or offices in the Government's newly created development area in Rotherham and Mexborough that are perhaps even nearer than the centre of Sheffield?
      Mr. Hooley: I shall come to that point later, but it is a fair point to make.
      Mr. Duffy: I hope that my hon. Friend will make sure that he answers it.
      Mr. Hooley: I am happy to answer it. My hon. Friend should not get too peevish. We have time for a civilised exchange of views, as always, at least on this side of the Committee.
      Mr. Duffy: I assure my hon. Friend that there is no question of peevishness, but rather of trying to fix the responsibility of my hon. Friend in the city that he represents and in all the organs of the Labour movement in Sheffield that have discussed this proposal in recent weeks. Discussions may have taken place both outside and inside the House, but the proposal has not been fully discussed in Sheffield. I am anxious to know where my hon. Friend stands on this matter and how far he is prepared to reflect the wishes of the people that he represents.
      Mr. Hooley: Having known me for 20 years, my hon. Friend should be aware that measuring my judgment against the judgment of other people and other

      1437
      bodies has never seriously worried me. I may be wrong——
      Mr. Dennis Skinner: Does my hon. Friend recall that there have been many occasions when my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) has been in conflict with the general views and trends within the Sheffield Labour movement? Perhaps we can instance a few in recent times, namely, the Common Market, through all the machinations——
      The Chairman: Order. I think that perhaps we should not pursue that line.
      Mr. Hooley: I apologise, Mr. Weatherill, for being drawn into this excessively parochial debate. I am merely telling my hon. Friend that this is not the first time that my judgment does not square 100 per cent. with the judgment of the city council, and I do not think that it will be the last time. I must answer to my constituents and to the House for the views that I hold, and I am happy to do that.
      There was a famous occasion on which I criticised high-rise blocks. The local council thought that they were the greatest thing since sliced bread. Very few people think so these days. There may be differences of opinion, but hon. Members are here to express differences of opinion. I make no bones about the difference in opinion between myself, my colleagues in the trade union movement, and the local council. I suspect that in five or 10 years my judgment is more likely to be vindicated than theirs. I could be wrong, but that is my judgment of the scheme. I have probably spent a little more time studying the fine print of this schedule than those people who are anxious to rush along with the cranky notion that merely by giving tax concessions the disasters of the economic policy of this Government can be reversed.
      Mr. Spearing: Does my hon. Friend understand that it was made clear in Committee that local authorities and other bodies throughout the country have so far understood enterprise zones, what they are supposed to do, and how they are to operate purely through the information and circulars given to them by the Government. After nine hours of discussion on the small print of the schedule in Committee the enterprise zones appear
      1438
      in a different light. That should be taken into account by local authorities and other bodies when looking at this proposition, which may appear to be attractive on the surface but will pose many problems.
      Mr. Duffy Mr. Duffy rose——
      Mr. Hooley: I am sorry, but my hon. Friend cannot intervene in an intervention. I must reply to my hon. Friend the Member for Newham, South first.
      My hon. Friend the Member for New-ham, South is absolutely right. He spent many hours in Committee studying this schedule in considerable detail. I would prefer to listen to his opinion than off-the-cuff opinions from people who, with great respect, I suspect have not looked at the fine print of the schedule. I now give way to my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy).
      Mr. Duffy: What my hon. Friend said may be true of other authorities that are interested in an enterprise zone, but it is certainly not true of Sheffield. Sheffield's understanding of an enterprise zone and all that it may imply has been reinforced by a deputation on behalf of Sheffield to the Minister.
      Mr. Hooley: In that case, I hope that the Minister gave the deputation clearer and better information than he gave to the Committee. My impression from reading the Committee proceedings was that on a considerable number of points the Minister was vague about what the Government were doing.
      4.15 pm
      I return to the main theme of my argument. I have pointed out that the creation of these zones would have a damaging effect on development in other parts of a city. They could undermine planning procedures and sensible planned development, and they could cause serious difficulties, not only for the city council but for developers who are already committed to development in another part of or adjacent to the city.
      There is also the question of the kind of enterprise that will be set up in these areas. Will there be scrap dumps, dumps for used cars, and so on? Will they be a haven for that sort of business? How far will planning controls be relaxed for the purpose of these tax concessions? That is the central point of our argument today.

      1439
      In Committee, the Minister said repeatedly that this was an experiment. He said that the Government were not sure how it would work. Therefore, he could not answer many of the detailed questions from my hon. Friend the Member for Newham, South and others. The main purpose of my amendment is to limit this experiment with regard to capital allowances. I am aiming to confine the experiment—if it is to take place at all—to a more specific and precise area of development, so that if damage is done—I think that damage will be done—at least it will not be too far-reaching and drastic.
      I now wish to put to the Financial Secretary and the Committee one or two points about the way in which the scheme will work with regard to capital allowances. There is an astonishing provision in paragraph 22 of the new schedule to the Local Government Bill which was discussed in Committee. It states:
      " The scheme does not authorise the carrying out of operations after the termination date, even if they started to be carried out before that date in accordance with the scheme."
      Of course, it is difficult to understand the gobbledegook in which we write our legislation, but if I understand that paragraph correctly, it would mean that a person could start building a factory or an office and complete half the building, and then, if the Minister, for good reason or ill, decided to terminate the enterprise zone or change the boundaries of it, any capital allowances would disappear. What would happen to the wretched entrepreneur in those circumstances? If that phrase does not mean what it says, per-Paragraph 22(2) of the new schedule states:
      " even if they started to be carried out before that date in accordance with the scheme."
      So the entrepreneur will have to stop what he is doing, or, at best, carry on what he is doing but not receive all the tax refunds and tax rebates that he thought he would receive. I should be interested to know what construction the Government put on that paragraph.
      When do the capital allowances start? Do they start on the date on which the enterprise zone is designated? Do they apply to all work that is carried out after the date of designation?
      1440
      Let us take another situation. Let us suppose that a zone is designated that is mostly empty or derelict but has within it one factory or building—that is, the foundations are there and some of the first floor is built—and then the zone is designated. From the point of designation, does that building attract rate relief, capital allowances, and so on? Does the owner get that not for the first floor, but for the second, third and top floors? How exactly will these allowances be calculated?
      If the zone is designated and there is within it an existing factory, office block, or whatever, will they attract the allowances immediately the zone is designated? This is very important, because one will then have some jolly mavericking and political jiggery-pokery if the boundary of the zone runs fairly close to an existing factory or a factory being built just outside it. Some very heavy persuasion will be brought to bear on the Minister or the local authority, or others, by people saying " If you could just run the line up Howard Street, round the back and down Blake Street, my factory will come in, I shall not have to pay any rates and I shall get all the capital allowances." Perhaps the Minister will kindly explain how the designation of this scheme will apply to existing buildings, offices, and so on, once the zone is designated.
      When do the allowances finish? Let us suppose that the zone is terminated, or that the boundaries are changed. The schedule provides explicitly that the boundaries can be changed. If the zone is suddenly chopped in half, or whatever, do the rate relief and capital allowances abruptly stop on the date on which the zone is finished?
      What about a project that attracts allowances and is then abandoned uncompleted? Is there a provision that a project for offices or a factory must be carried right through to completion and actually put into use? This point is not as academic as all that, because we remember the scandalous case of Centre Point, which was not put to use for many years.
      If someone builds a factory or an office block simply as a speculation, purely in order to get the rate relief and the capital allowances—and the land, because there is exemption from development land tax—but then makes no attempt to put it

      1441
      into use, merely leaving it standing, taking a gamble—as the Centre Point chap took a gamble—that at a future date he may be able to sell it off at a very handsome capital profit, what safeguard is there against that sort of technique? In other words, how shall we guard against pure speculation for capital gain which has very little economic end to it in these zones?
      One of the golden opportunities of this scheme is the scrapping of development land tax. What will happen to the price of land within the enterprise zones with the knowledge that there is no DLT to pay? Will not this be opening the door to a splendid bout of new speculation in land values? What will be the eventual consequences of that for the sensible planning and the sensible development of our city centres if that occurs?
      Mr. Spearing: Is my hon. Friend aware that since the planning description for the whole zone will be a very general one, any land within the zone will be potentially available for any description of development that falls within that definition? Therefore, the potential or real value of the land in the zone, in speculation terms, is likely to be much increased, on the assumption that all sorts of buildings may be built anywhere on it. The value of the land is likely to be very much enhanced, and that may well detract from some of the objectives that the Government have in mind.
      Mr. Hooley: I am sure that my hon. Friend is right. I hope that the Financial Secretary will deal with that argument.
      Can the capital allowances that will accrue in respect of developments in the enterprise zones be offset against tax liabilities in other directions? I must admit that I am not sufficiently conversant with our tax system to know how these things operate, but I know that if one builds up, as it were, a tax credit in one direction—and there are substantial credits accruing from some of these schemes—one can, if necessary, apply it to one's liabilities somewhere else. It seems to me that there may well be a temptation for the owner of a business that has fairly substantial tax liabilities for some reason to look around for an enterprise zone, to start up a project there, and then to try to offset his liabilities
      1442
      in one direction against the allowances that can accrue in the enterprise zone.
      My hon. Friend the Member for Rotherham (Mr. Crowther), who is not present at the moment, asked about the effect on neighbouring areas of these enterprise zones. That is a very serious matter. There is no doubt that in certain circumstances these zones could attract some forms of development away from neighbouring areas with very high unemployment levels and into areas in which the unemployment levels were low, or by present-day standards, comparatively low. That would distort the whole planning system. My hon. Friend the Member for Rotherham made a very fair point. It would apply particularly in South Yorkshire, and it is a matter on which the Financial Secretary ought to be fairly explicit.
      Mr. Duffy: Although my hon. Friend is normally very well informed about South Yorkshire, and especially his own city of Sheffield, he does not seem to have a very clear picture of the relative rates of unemployment between his city and the adjacent areas, as I hope to show later. They are much closer than he and my hon. Friend the Member for Rotherham (Mr. Crowther) presume. What my hon. Friend also needs to bear in mind is that only a year ago, when we lost our assisted area status, we envied other areas, but wished them luck. We hope that they will adopt the same gracious attitude towards us now that there has been a reversal of the position.
      Mr. Hooley: My hon. Friend can spell that out in his own speech. He is well aware that for many years unemployment in the Dearne Valley area has been far higher than the unemployment rate in Sheffield, and still is.
      Mr. Duffy Mr. Duffy indicated dissent.
      Mr. Hooley: It still is. However, I do not want to make a major point. I am merely saying that my hon. Friend the Member for Rotherham was quite right to point out the damaging effect that this scheme could have on neighbouring areas if the enterprise zones were not dealt with very carefully.
      I believe that the whole scheme is a charter for the tax lawyers, the tax accountants, the tax evasion industry,

      1443
      and the land and property speculators. It could be argued—the Government may argue—that there is a very strong need to try to influence small firms, perhaps, and certainly some more industries, to come into certain central city areas, and that the scheme is designed to do that. If the Government are arguing along those lines they must support my amendment, because it makes it quite clear that although the clause as thus amended would disqualify commercial and hotel building, and non-industrial activity of one sort or another, it would not disqualify industrial development.
      I am prepared to give the Government a little bit of licence. If they push on with this scheme anyway—I am not enamoured of it—at least it should be carefully confined to promoting, if it can promote, some development of manufacturing industry. My hon. Friend the Member for Workington (Mr. Campbell-Savours) very fairly and properly pointed out earlier that if it were possible to promote a limited amount of industrial develepment by this scheme, creating new jobs, perhaps there would, as a limited, carefully controlled experiment, be a little to be said for it. The Labour Party instrument of the National Enterprise Board was an infinitely more sensible instrument.
      4.30 pm
      Mr. Martin J. O'Neill: The example of the development agencies of Scotland and Wales is perhaps even more pertinent. The agencies' small business assistance departments can go in and clear out areas of industrial despoliation and supply equity capital to set up partnership projects that can fulfil all the functions of free enterprise.
      Mr. Hooley: My hon. Friend is right. I should have included the Scottish and Welsh Development Agencies along with the NEB. These are infinitely more valuable and important instruments of industrial development than the cranky enterprise zone system.
      My amendment would make it possible for the scheme to go ahead and to attract 100 per cent. capital allowances for industrial purposes. It would rule out office blocks, hotels and that type of development.
      Mr. J. Grimond: Will the hon. Gentleman explain what " commercial " covers? I understand what is meant by office blocks and hotels, but what does " commercial " mean?
      Mr. Hooley: I am not a drafting lawyer and I am in difficulty in replying to the question of the right hon. Member for Orkney and Shetland (Mr. Grimond). I have assumed that there are, broadly, three categories of development. There is industrial development, which is basically manufacturing or processing. There is domestic development, which is property in which people reside. I assume—I admit that it is a rather vague assumption—that " commercial " development means, for example, finance, banking, property and land agents.
      Mr. John Townend: Does the hon. Gentleman agree that included in " commercial " would be warehousing and other service industries?
      Mr. Hooley: Warehousing might be regarded as commercial. That depends on what is to be put in the warehouse, and the nature of the operation. I must admit to the right hon. Member for Orkney and Shetland that I am not sufficiently conversant with parliamentary jargon to be able to define " commercial " while on my feet. He must put the question to the Financial Secretary.
      I have no doubt that the Financial Secretary will explain that if the amendment is carried, which I hope it is, there will be certain consequences—namely, the exclusion of certain activities and the inclusion of others. The amendment is designed to ensure that if the scheme goes ahead it will be intended to promote or encourage the creation of real wealth through manufacturing industry and not a spivery of profiteering or speculation.
      There is the element of a confidence trick in the scheme. We are told by the Minister that the rates forgone by the local authorities will be paid by the Treasury. In other words, if Sheffield can prove that it has lost £4 million in rates because of its enterprise zone, it can ask the Treasury for the £4 million. As I understand it, under the scheme the Treasury is bound to pay back the loss. Is it credible that the Treasury, with all its characteristic attitudes, will pay out, year after year, £4 million to

      1445
      Sheffield, £5 million to Bradford, £6 million to Glasgow and £7 million to Manchester? I think that that is unlikely.
      I suspect that the Treasury will rapidly say " Enough is enough. The scheme has cost us £10 million this year. It will cost £20 million next year and £50 million the year after. We will not have an open-ended account of this sort. It must be stopped."
      One way of stopping it would be to knock it off the rate support grant. A promise has been given that that will not be done, but one never knows. The other way of stopping it would be to call a halt or to modify the scheme. That reinforces my argument for going slow with the scheme, for accepting my amendment, and for limiting the effect of it to a more precise and specific type of development, namely, the development of industry, especially manufacturing industry.
      Finally, in a spirit of good humour more than anything else, I refer to the wise words of my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant). In Committee my hon. Friend said:
      " If he thinks that the Government with this little bit of the Bill with these few enterprise zones, will be able to challenge the massive social inertia of institutions, particularly local authorities, and create a situation in which we have some sort of Hong Kong on our doorstep, he does not know the institutions. If the Minister were to say that Stoke-on-Trent was to have such a zone, all the defensive mechanisms of the institutions would move into action. All the vested interests would take up position. What he imagines will take place is too far fetched."—[Official Report, Standing Committee D., 21 May 1980, c. 1344.]
      There is much substance in that view. I am worried that the Government are in the process of creating the sort of dog's breakfast that the previous Conservative Government created with local government reorganisation and the reorganisation of the Health Service. There was a ghastly bungle and muddle when those reorganisations took place. I fear that that will be recreated, and that jobs will be lost.
      My honest Socialist friends in Sheffield believe that there will be jobs for skilled engineers and skilled workers in the steel and engineering industries, but I fear that there will not. However, there will be jobs for property sharks, real estate men, lawyers, accountants
      1446
      and tax fiddlers. This scheme is a charter for tax evasion, and it should be considered in that light.
      The Chairman: It may be for the convenience of the Committee if I allow a general debate on the principle of clause 68 with this group of amendments. I propose to do that.
      Mr Fred Silvester: For those of us who missed the Derby, I think that the Sheffield chase has provided an entertaining afternoon. In a way Sheffield has been divided by those who should speak with one voice.
      It appears from the speech of the hon. Member for Sheffield, Heeley (Mr. Hooley) that a great difficulty is arising for Labour Members. Those of us who are associated with areas of deep unemployment and substantial industrial problems will look favourably at any scheme which is likely to help to alleviate those difficulties and problems. On the other hand, the fact that we are talking about enterprise, with all the implications of the effect that free enterprise will have on the production of jobs, seems to bring out the worst in some Members. Apparently, it is all right to call them inner city industrial development areas but it is not all right to associate them with free enterprise. The hon. Gentleman's view is absurd. Enterprise zones stand or fall in their own right.
      Those to whom I have spoken about private enterprise zones wish them well. That does not mean that they foolishly believe that there will not be any trouble or difficulty around the periphery. There may even be—as the hon. Gentleman mentioned—some examples of spivery. Many difficulties may arise. However, those people also believe that to do nothing would be a greater danger.
      The hon. Gentleman's speech was remarkable because it was completely negative. He quoted an example of people being driven to set up enterprises in order to benefit from some of the dreadful tax advantages that he envisages. Those enterprises may benefit the area. Perhaps enterprise zones are not completely virtuous. However, some of us believe that virtuous poverty has been endured for too long. We should therefore look to the engines that work in free enterprise if we wish the system to succeed.
      Mr. Hooley: It was unfair of the hon. Gentleman to say that my speech was negative. I pointed out that the urban programme, the Scottish Development Agency, the Welsh Development Agency and the NEB were in existence. I said that those were available without any need for further legislation. There is nothing negative about that.
      Mr. Silvester: Nevertheless, problems have not gone away despite the existence of those agencies. For many years we have struggled and have tried different devices. We now wish to experiment and to try a different tack. We wish to create private rejuvenation where public rejuvenation has failed. The hon. Member for Heeley has over-egged the pudding as regards the difficulties. I should like to quote from a document that was sent to local authorities. It states that the plan for the enterprise zone would be prepared and approved by the Secretary of State. It continues:
      " The plan would show which classes of development were permitted in each part of the Enterprise Zone; it would set out any conditions governing development eg those needed for health or safety or for the control of pollution; and it would specify any ' reserved matters '."
      It is not true that enterprise zones will become scrap yards. It is possible for the local authority or Secretary of State to impose some restrictions on planning applications for enterprise zones. I hope that they will not make too many restrictions.
      There is a danger in the way in which we are going about the proposal. I hope that the Financial Secretary will give some estimates of the costs involved. We have promised one enterprise zone to Scotland, one to Wales and one to Northern Ireland. Six areas in England have been listed. Only three or four will be allowed. I should like to be satisfied that the cost of going ahead with six enterprise zones is prohibitive. The publication of the paper has stimulated great interest and effort. There has been great excitement, and a willingness to succeed.
      Mr. Tam Dalyell: It has raised expectations.
      Mr. Silvester: I can see no reason why we should not instil a competitive spirit between the areas in order to see how
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      keen they are. However, the keenness of the six English regions has been demonstrated. If the Government say that they are sorry but that there will be only three enterprise zones, the three areas that do not receive zones will be worse off than if we had not made the proposal in the first place.
      I realise that I am pressing a regional issue. It does not take great wit to see that two of the suggested zones are in the North-West. People in the Northwest feel that if the pruning knife has to come out it might be thought more sensible to allow one enterprise zone in the North-West. A choice would then have to be made between Liverpool and Manchester. That would be an ill-advised choice. I advise the Financial Secretary against it.
      Mr. Bill Homewood: There is no unanimity of opinion on this issue among Members of the Opposition or, as the hon. Gentleman has shown, among Conservative Members. However, if enterprise zones are a good idea, why should they be restricted or reduced? We have been told that they are a good idea. Let us expand the programme. Let us have 10, 15 or 20 enterprise zones.
      4.45 pm
      Mr. Silvester: The hon. Gentleman is deliberately trying to send up the argument. We may learn from enterprise zones things that have universal application. Those who believe in a free enterprise economy believe that enterprise zones will demonstrate certain qualities that will lead the Government to undertake policies of more general application. But I am not concerned about extending the list. The list has been published. Those who live in the areas affected have been involved. There has been a lot of discussion and activity. Many hopes have been raised in those areas. That is different from wishing to increase the number of enterprise zones beyond six. I do not wish to do that. It would be foolish to do so.
      Turning to the amendment, it would be a great mistake to limit the area of operation within enterprise zones. Not only can jobs be created by the type of commercial development that the hon. Member for Heeley dislikes; the types of jobs created would be of particular value in those areas. We should do ourselves

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      a great disservice if we did not allow enterprise zones to develop naturally under their own steam. They should cover activities that include manufacturing, commerce and the hotel trade. I hope that the Financial Secretary will say that the scheme will go ahead in its full glory.
      Mr. Denzil Davies: You have indicated, Mr. Weatherill, that several amendments can be debated with amendment No. 23. The two main Opposition amendments are amendments Nos. 19 and 20. They do not differ in substance from the amendment moved by my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley), or from the points that he raised concerning the split between industrial and commercial developments. Amendment No. 19 seeks to leave out commercial buildings. We should like to know what " commercial building " means. Perhaps the Financial Secretary will tell us what type of development he has in mind. Does " commercial " include warehousing and other activities? We need some explanation.
      Amendment No. 20 concerns offices. There is a curious provision in the clause. It states that an office—even if a " trade, profession or vocation " is not carried on in it—can still get capital allowances. I hope that the Financial Secretary will explain that. I cannot envisage an office that does not carry on a " trade, profession or vocation." I should have thought that the activities of that office would have been taxed under case 1 or case 2 of schedule D.
      We need clarification. That is one reason why we tabled our amendments. There will be further opportunities to debate the matter and a chance in Committee upstairs to discuss the development land tax aspect. When we have brought all the strands together, we can come back to the subject on Report. It is a new venture and we need to understand fully what the Government are about.
      You have indicated, Mr. Weatherill, that you are happy that there should be a general debate on this subject and the discussion has proceeded along those lines. It is clear that, despite a few disputes within the city of Sheffield, the Opposition remain deeply sceptical about the venture, which seems to be a pathetic attempt to remedy some of the damage
      1450
      that the Government's other economic policies are doing to this country.
      We are sceptical for a number of reasons. First, the venture is being introduced against a background of depression, no growth for the next few years, high inflation, high unemployment and the virtual destruction of manufacturing industry in many parts of the country. We read today that 3,000 jobs are to be lost in the Lucas works in the West Midlands. I do not know whether there is to be an enterprise zone in that area, but how can paltry enterprise zones make up for even a small fraction of the loss of jobs that has taken place over the past year and the loss that will, on the Government's own admission, take place over the next two or three years?
      We are being offered a few miserable acres to help to arrest the continuing decline and the rising tide of unemployment. Many parts of industrial Britain are being starved to death by the Government's policies. It seems that all that the Government can do is to throw it a few stale crumbs and crusts, as they are trying to do with the enterprise zones.
      Mr. Budgen: They are fresh.
      Mr. Davies: They are not all that fresh, as I shall show shortly.
      We are sceptical because of the Chancellor of the Exchequer's attitude and the reasons that he gave in a speech to the Bow Group at a public house on the Isle of Dogs in June 1978. We are sceptical of the reasons for introducing the zones. The philosophy behind them is rather disturbing. The Chancellor told the Bow Group:
      " Almost ten years ago I was walking with a Labour councillor, whom I knew well, down a road in Poplar, only a short distance away from here.
      As we passed beside a terrace of decaying houses, two up and two down and about a hundred years old, he observed ' Are those not a dreadful monument to private landlordism? '
      ' Absolutely not ' I replied. ' The fact that they are here in such numbers is remarkable tribute to the speed with which nineteenth century private enterprise housed the newly urbanised working people of our country, to standards much higher than they had previously enjoyed '."
      We reject the philosophy behind the enterprise zones and the idea that private enterprise can produce makeshift schemes to provide a few miserable jobs in areas

      1451
      where standards will be less than adequate in many cases.
      Take the case of South Wales, Mr. Wealherill. We are being offered a miserable 200 acres on the edge of an area which is to lose 6,000 jobs in one steelworks and 6,000 in another, with all the consequences of that action. How can those miserable 200 acres do anything to alleviate the misery and suffering that will be caused?
      In South Wales, and no doubt other areas, there are already factories on enterprise zone sites. I understand that they will receive the new capital allowances. We are not talking about new businesses coming in. In many cases, existing institutions will get support, even though they are already in those areas. I hope that the Financial Secretary to the Treasury will confirm that existing operations will receive those benefits.
      We are also sceptical because the Government have taken away development area status from many parts of the country. Many parts of Wales, Scotland, and the North have lost that status as the result of a positive decision by the Secretary of State for Industry to deny help to the regions, because he and the Government believe that that is not the way to develop the economy. Having taken away development area status, the Government are proposing to restore these miserable provisions in small parts of many of the regions that have ceased to be development areas.
      The clause is concerned with capital allowances, which are all very well if a firm is making a profit, because they can be set against taxable profits, but in many cases firms in the enterprise zones will not make profits. We have seen the prognostication of the effect of Government policies on the profit potential of British industry over the next few years. There will be a substantial decline. We shall find that tax allowances cannot be taken up.
      Firms starting up, especially small firms, do not need capital allowances, because they cannot use them until they are generating profits. If the Government wanted to help such firms, they should have provided specific grants, because they would enable organisations to get started. Capital allowances come years
      1452
      afterwards when firms generate profits, if they are able to do so in the present economic climate. If the Government were concerned about helping those firms to build factories, they should have gone back to the old investment grant system, which specifically helped small firms to put up factories. The Government scheme is clearly ill thought out.
      Another problem is that areas will be competing against each other. We do not have economic growth. There are no more jobs being created and there is no more investment coming. Areas will be competing for the same investment and the same lack of growth. Areas that get the assistance will take jobs from other areas.
      The economic cake is getting smaller. There will be no growth next year or in the following year. We have a shrinking pool of investment, labour and job opportunities. Areas will be bidding against each other. If we had growth, there might be something to be said for the venture, but we have no growth and one It is an ill-thought-out scheme, which the area will be fighting against another. Chancellor has introduced as a result of an idea that he had while walking down a road in Poplar. It is another example of the Tory Party's wishful thinking about the economy. It is a nineteenth century attitude towards the problems of a modern, complex, industrial society. The idea is that if we cut taxes and give people a few reliefs there will, as in the nineteenth century, be great growth. But the world and the British economy have changed, and that is no way to regenerate the economy.
      The last Budget was supposed to produce a crop of entrepreneurs as a result of the tax cuts. Nothing has happened. There will be nil growth next year or the following year, and little growth throughout the Government's tenure of office. The proposed system is based on a wrong-headed attitude to the problems of industry and the economy in the middle of the twentieth century. It is the laissez-faire attitude of the nineteenth century put into operation at a time when circumstances are completely different.
      Mr. Hooley: There is also a basic dishonesty in the concept. The Government say that they will cut public expenditure

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      by not giving grants, but they are prepared to forgo income through tax relief. The end result is the same.
      Mr. Davies: I do not know whether the Financial Secretary can tell us how much this clause will cost, but perhaps he can indicate the total cost of the Chancellor's idea.
      5 pm
      Mr. Spearing: In Committee the Minister of State, Department of the Environment mentioned the figure of £50 million a year. That is additional expenditure by the Exchequer, possibly including forgone income. That is a scandal. Those in need and those not in need, the just and unjust, will all be affected within these zones.
      Mr. Davies: The Minister may be able to give us the figure, which is possibly more than £50 million. That money will have to come from somewhere. I do not know how much the Government will save by changing development area status.
      Returning to that famous speech by the Chancellor, it was headed in the handout from Conservative Party Central Office " Enterprise zones for all systems go ". I understand that that is a space metaphor. In terms of the problems of urban blight and decay and unemployment, the scheme can be compared with using a Tiger Moth to try to reach the moon. That is basically why we remain deeply sceptical of such schemes. We shall go into detail in Committee upstairs. I hope that on Report we shall have further information on which to form a final judgment.
      Mr. Esmond Bulmer: I hope that the Committee will resist attempts to restrict operation of the scheme. My right hon. and learned Friend the Chancellor emphasised that it was an experiment designed to help those areas that most needed help.
      The Treasury team will doubtless monitor the success of the zones and apply some of the lessons learnt more generally. When my hon. Friend does so, I hope that he will bear in mind the problems of the one-industry town. Kidderminster has for many years depended on the carpet industry. In the past 10 years that industry has employed, directly or indirectly, at
      1454
      least one-third of the people in the town. Since 1974 the number of people directly employed has fallen from 11,500 to about 7,000. The indications are that the number will further reduce.
      The reasons for the reduction are not difficult to diagnose. The industry expanded during 1973–74. It was then hit by the huge increase in oil prices, as was our whole economy, and found that it had a great deal of surplus capacity. It began to sell at the margin, and had less money to invest. It faced higher wages and costs, particularly fuel costs. It found itself in a vicious spiral.
      A number of us in management, unions and local government met together at regular intervals over the past five years to see what might be done to attract new industry, and the proposals in the enterprise zone scheme are extremely attractive. We first tried to see where sites might be provided for new industry. The largest potential site was unavailable because of the complexities of development land tax. Some of the smaller sites involved county and district planning, which caused problems. I pay tribute to the district planning officer for the way in which, over a long time, he has looked at each site to see what could be done to bring it forward. However, when it comes to looking for sites, particularly for carpet factories that have gone out of business, and seeing how such sites can be relet, difficult planning problems can arise. Any measures that the Government may introduce to simplify such procedures can only be helpful.
      The sum of the past five years is that we have lost jobs in thousands and have reinstated jobs only in hundreds. Large companies will not employ more people. New jobs must come from new and smaller companies.
      Three factors are overwhelmingly important in seeking to encourage industry. First, those who take investment decisions must have confidence that the basis on which they are taken will not be torpedoed. Over the past five years my company has lost hundreds of jobs through a single tax change introduced by the previous Government. Secondly, industrial relations are crucial. My company is fortunate in having a background of good industrial relations. Thirdly, interest rates are at present the great dampener. For people to see that interest rates are coming down is as important as,

      1455
      and some would say more important than, the absolute level.
      Mr. Campbell-Savours: When?
      Mr. Bulmer: The Prime Minister gave an indication yesterday that it would not be too long before the0y came down. It is essential that those in industry should be confident that when interest rates start to come down they will continue to decrease and not rise again.
      The right hon. Member for Llanelli (Mr. Davies) poured scorn on the enterprise zone offer for his constituency. If 200 acres in my consituency were available under the scheme, we would grab it. It would be poetic justice if the old Ministry of Defence site at Hartlebury, which employed over 2,000 people and which was closed by the previous Government, were offered. It would be a good site for new industry. The Property Services Agency is offering it next month. If it had the attractions that go with enterprise zones added to it, it would rapidly generate new jobs.
      I hope that the scheme will be successful, that my hon. Friend will learn lessons from it and that some of the measures will have wider application. When my hon. Friend seeks to extend the measures, will he consider particularly those towns that have been over-dependent on one industry?
      Mr. Grimond: I hope that the Financial Secretary will discharge the duty imposed on him by the hon. Member for Sheffield, Heeley (Mr. Hooley) to define the word " commercial ". The hon. Gentleman prudently refused to define it, but it is of importance.
      I have some sympathy with the amendment. I believe that primarily the provisions in the clause should be for manufacturing industry. There is a danger that there will be land speculation in those areas that people believe may be designated under the Bill. I hear, however, that " commercial " includes such concerns as repair shops, apart from warehousing and other activities that one could not rule out as being illegitimate activities for these zones. I hope that the hon. Member will clear up that matter.
      I agree with the hon. Member for Heeley about the curious way in which
      1456
      the matter has been handled. As the hon. Gentleman said, what amounted to a Second Reading debate took place in a Committee of the House on an enormous new schedule to the Local Government, Planning and Land (No. 2) Bill. So far, that is the main fount of information upon which we have to go, and whether it is to continue as a matter for the planning authorities or for the Treasury appears somewhat doubtful. I hope that at some stage, somewhere, the two will brought together.
      Many interesting features arose in that debate. I found myself, not unexpectedly since unity is the hall-mark of the Liberal Party, largely in agreement with my hon. Friend the Member for Isle of Wight (Mr. Ross). We approve of this move with considerable reservations and questions.
      When the Chancellor of the Exchequer first made this suggestion, I welcomed it for two reasons. First, any sign of new thought in a Chancellor of the Exchequer is to be welcomed, otherwise we plough on with 50 per cent. on whisky, 10 per cent. on cigarettes and the argument that the duty on this or that commodity has not been increased in 10 years and it is time that it was. This is supposed to save the country. But it has not saved it over the past 30 years, and it will not save it in the next 30 years. Something must be done to improve the state of industry and to increase production. Therefore, any new thought on the part of a Chancellor of the Exchequer is in principle to be welcomed.
      Secondly, it shows that for once a Government are not content to erect obstacles to common sense, production and so forth, and then erect machinery for getting over them. This is our normal way of proceeding. As I understand it, here we have an attempt to remove the obstacles, and I welcome that. It seems economical and sensible and the kind of move that one seldom hears proposed in the House of Commons.
      Having read the Government's explanations of this, one is bound to ask what is the object of it all. Frankly, I found it much easier to commend before I heard Ministers speak about it. With the short, throwaway remarks of the Chancellor of the Exchequer I find considerable agreement, but the more I read

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      the speeches in Committee, the more confused I become.
      I thought that the Chancellor of the Exchequer was putting forward this proposal as a method of helping the derelict inner city areas.
      The Financial Secretary to the Treasury (Mr. Nigel Lawson)The Financial Secretary to the Treasury (Mr. Nigel Lawson) indicated assent.
      Mr. Grimond: If that is so, why has every planning authority been asked whether it wants to participate?
      The new towns are mentioned specifically in the schedule as possible beneficiaries. Whatever else one may think of the new towns, it must be agreed that they are totally different from the derelict inner city areas, So who is it meant to help? Every local authority which has any planning powers is being told that it may take part in this experiment, if it is lucky. It is a great national lottery in which someone will draw a prize. We do not know who. But it is open to everyone.
      Although the Financial Secretary indicates his agreement when I suggest that this proposal is designed to help the inner city areas, that is contradicted by the schedules to the Local Government, Planning and Land (No. 2) Bill.
      It may be said that, anyway, it is meant to help small businesses. But there is no reason to believe that that will happen. As the hon. Member for Heeley and others have pointed out, it is all too likely that very large and speculative businesses may be in a better position to cash in on this than are small ones. At any rate, I should like to know from the Treasury whether helping small businesses is part of the object. I hope very much that it is, because they have a part to play in this. But, if it is, they will need some protection against being outbid by big businesses for premises and so on in these zones, and they may need other help if they are to take part.
      The third possible reason for this is that it is an experiment. Indeed, this was said by a Minister in Committee. However, before reading what he said, perhaps I might digress for a moment, because I notice that his comments were made in the course of the forty-first sitting of the Committee. This is the state that we have reached under a Conservative Government. I used to complain about the
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      number of hours spent in this place under a Labour Government. But those seem happy far gone days. Now we have a second, perhaps a third, planning Bill running to innumerable pages and 41 days in Committee. However, that is by the way. I return to my main theme.
      5.15 pm
      During the forty-first sitting, the Minister said:
      " As the Member for Greenwich pointed out, it is extremely expensive"——
      that refers to this proposal——
      " even in the limited fashion in which we propose to conduct it. It cannot be widely extended; it is an experiment."—[Official Report, Standing Committee D, 20 May 1980, c. 1256.]
      But what is the point of an experiment which cannot be extended? It could be argued that if it is relevant to certain places, that is all right, but that is not an experiment. If it is an experiment, why cannot it be extended?
      I refer now to the matters dealt with in the Government's handout. There is no reason why some of them should not be extended, and extended now if the Government thought it appropriate. For example, reference is made to the simplification of planning procedures. I can tell the Government, without having all this palaver, that this would be welcomed everywhere in the country, from Shetland down to Land's End. The Government do not need to bring in this Bill to establish that. They could do it now, and it would be welcomed unanimously.
      There is a reference to exemption from the requirements of industrial training boards. It has been pointed out by me that in my constituency industrial training boards are of no use. My constituency is separated from the boards by the sea, and small businesses do not find these boards of any great use. So in many parts of the country the exemption has been established already.
      Mr. John Townend Mr. John Townend indicated assent.
      Mr. Grimond: I am glad to see agreement coming from an hon. Member who runs a small business. In respect of many parts of the country, industrial training boards can be written off now, though I do not suggest that that is true of all parts of the country.
      There is also reference to a reduction to the bare minimum of Government requests for statistical information. Surely

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      we do not need an experiment to establish that. I cannot believe that a Conservative Government need an experiment to do so. I have often heard the Financial Secretary inveighing against the practice, although I notice that he has that pained expression worn by Ministers when they are reminded of what they have said in the past. However, I cannot help it. It has been one of the themes of the hon. Gentleman's writing and talking. He does not need this experiment before deciding to reduce the Government's requests for statistical information.
      It may be true, of course, that the tax exemptions will be shown not to be worth while. Presumably that is what the Government have in mind by experiment. If we read the speeches of the Minister in the Committee which considered the Local Government, Planning and Land (No. 2) Bill, we see that these tax exemptions represent a considerable sum.
      What evidence have the Government that derating in Scotland, which already exists, has been effective? We have this experiment already. Scottish industry is derated. Has this led to the expected result of drawing industry into Scotland?
      In my constituency it has had a curious and anomalous result, in that the largest oil terminal in Europe, which has come to Shetland not because of derating, not because of the splendour of Shetland, and not because of a love of the Shetlanders but because it happens to be nearest to the North Sea oil fields, may be derated. The one in the Orkneys has been derated already. But it was not derating which drew it there. That is a wholly unforeseen result.
      As the Government are experimenting, and as they are keen to monitor the effect of the experiment, have they been monitoring the effect of derating in Scotland? If so, what conclusions have they drawn?
      There is a great deal of evidence both here and in the United States that it is extremely difficult to get industry to go back into the inner cities. It was mistakes of planning and ludicrous Government policies which drove industry out of the inner cities. Now we have other Government policies to drive it back again. This may go on indefinitely, and, if it returns
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      to too great an extent, we shall have set up a new bureau of office dislocation. The Location of Offices Bureau was set up to drive offices out of London. Suddenly, London's Underground was covered with notices saying that the bureau was now driving people back into London.
      Have the Government any real evidence that all this will end up in a satisfactory balance in the inner cities? I do not complain about discrimination; it is dog-in-the-manger to complain that someone else's constituency is getting what one does not get in one's own constituency, anyway. What is more, I do not complain about a few spivs, so long as they are kept within reasonable bounds. I do not think that we can draft legislation to exclude spivs completely in any country, especially in this. Nevertheless, discrimination inevitably brings more discrimination, and I hope that the results of this are being noted.
      If we are to have an experiment, and if this is an experiment, it should not be carried out solely in one type of community. There is a lot of evidence to suppose that in smaller towns such as Gloucester small industry has better prospects than it does in the derelict inner city areas. If there are to be four or five experiments in England, they should not be set up in the same type of place. Some should be located in inner cities, some in medium-sized towns and some in towns with a particular problem, such as Corby.
      There have been references in the debate to one-industry towns. I have no constituency interest in Corby. My interest arises as chairman of an organisation that is trying to persuade people in Corby to put their money into co-operatives. Corby would seem to be a suitable place for an experiment. If it were freed of taxation and new industry were located there, some of the people being laid off by the steel industry, in painful circumstances—they are taking it extremely well—might be willing to engage in new forms of enterprise, such as a co-operative.
      What is the relationship with the urban programme? This is skated over. Will areas already covered by the urban programme be considered? Some information should be given. How is the scheme to be administered? I understand that the free enterprise zone will be administered by the relevant local authority. I hope that that is correct. Parts of the schedule give

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      the impression that the zone might be administered by new town corporations. Is it conceivable that a new quango will be set up to administer them?
      Mr. Hooley: Part of the answer appears in the schedule. The Government's new quangos, called urban development corporations, will have the power to run those zones. That is set out specifically in the schedule.
      Mr. Grimond: This is what alarms me. I hope that the Government will throw some more light on their intentions.
      Another question that has rightly been raised concerns the Government's intentions about infrastructure. Part of the trouble of the derelict areas of inner cities is that the infrastructure has disintegrated. Transport and all sorts of amenities have vanished. The middle of Liverpool is becoming a desert. It is no good simply proclaiming that people in the area will get tax exemption. More is needed. Do the Government intend drastically to alter the planning procedures? What are their plans for these areas that have been virtually abandoned not only by industry but by the population?
      One of the great mistakes of the planning Acts was zoning. It was a mistake entirely to separate industry from living conditions. It will be extremely difficult to repopulate inner parts of cities. If it is to be achieved, one needs a mixture of people living there and working there, together with small businesses, trading, and all sorts of retail activity. That will mean a drastic alteration of the planning law. Zoning still continues. It is disastrous.
      I hope that the Government will not only answer the main point of the amendment, which has much validity, in trying to tie this experiment mainly to manufacturing, but will inform the Committee in far more detail how their proposals will work and whether they are prepared to take the measures outside the Finance Bill that will be necessary if the scheme is to be successful.
      Mr. Graham Bright: The Government's plan to create enterprise zones in inner city areas suffering from economic decay and social decline is one of the most imaginative proposals in the Bill. The severe problems that communities
      1462
      dependent on one major industry have to face when that industry enters a long-term decline have been recognised by hon. Members on both sides. A whole range of measures has been tried in the past to deal with this problem—regional subsidies and allowances, physical control, adjustments and the rate support grant. Unfortunately, efforts to revive areas such as the docklands of inner London or the shipbuilding areas of Tyne and Wear have not been as successful as was hoped.
      Part of the reason is that artificial respiration is no substitute for natural breathing. Our aim must be to create jobs with a secure future based on self-sustaining economic activity. That is a task for private enterprise, especially small businesses. Such businesses offer the best opportunities for generating new products and new services. They offer opportunities for skilled workers and executives to set up and innovate on their own.
      The enterprise zones will provide the right conditions in which the process of economic revival can begin. I welcome and support the Government's proposals strongly. It is vital to get the right balance between industrial and commercial development in the zones.
      I am surprised that Opposition Members should have put down amendments to clause 68 to exclude commercial buildings and offices from the proposed capital allowances. This would prevent a wide range of commercial and service undertakings from setting up in the enterprise zones. It is a mistake to assume that industrial development alone creates a large number of new jobs. In the United States and West Germany small businesses create the bulk of new jobs, mostly in the commercial and services sector. In that sector I include banks, computer services, warehousing, packaging, and repair and maintenance services.
      Mr. Hooley: The hon. Gentleman is right in saying that commercial operations create jobs. But he has overlooked the fact that the massive loss of jobs, the haemorrhage of jobs, at the moment is occurring in manufacturing industry. It is no use offering jobs as computer operators to skilled engineers who have been displaced from the engineering and steel industries.
      Mr. Bright: I appreciate that. We must examine what is happening, as living standards increase, in other parts of the world. I have mentioned West Germany and the United States, where a more significant part is played in the economy by service industries.
      Mr. O'Neill: Supporters of the amendment are trying to make the point that they would like to see a Silicon Valley in many of these areas. We do not want a Las Vegas.
      Mr. Bright: I have already stated that the right approach is to try to achieve a balance. The capital allowances for industrial and commercial development are the key to balanced growth in enterprise zones. This would not be possible if development land tax was applied. Exemption from its provisions is a positive step forward. It is right that the Government should be seeking the agreement of local authorities in whose areas the enterprise zones may be sited on the planning criteria to be employed. Speeding up the planning procedures is an essential step in encouraging businesses to come in.
      As a small business man, I know from personal experience how time-consuming these procedures can be. I appreciate the burden of rates not only on the domestic ratepayers but on commercial premises. They take no account of the profitability of the business, the number of people employed or the nature of the work done. My right hon. and learned Friend the Chancellor of the Exchequer has decided rightly that premises in enterprise zones shall be exempt from general rates. If the experiment is successful, I hope that my right hon. and learned Friend will see the advantages of extending his proposal to the rest of the country. There is no harm in hoping.
      The measures accompanying the provision of capital allowances, exemption from the requirements of the industrial training boards—I also hope that these can be severely cut back elsewhere—the abolition of the remaining industrial development certificates, the reduction of the amount of statistical information demanded and the speeding up of Customs procedures are all welcome. They will certainly make the enterprise zones more attractive, but they do not necessarily complete the range of measures that we should be considering.
      1464
      My hon. Friends who are members of the small business committee are keen on the idea of exempting employers in the enterprise zones from paying national insurance surcharge for their full-time employees. I am sure that Ministers know how much that would do to encourage small employers in these zones to take on more workers, and I hope that they will respond positively.
      5.30 pm
      The limited experiment that we are now beginning is of great importance to the depressed areas. I am convinced that the creation of positive incentives and relaxation of the suffocating web of fiscal and planning controls is the right way to solve their problems. But we should not be afraid to expand the number of enterprise zones and to apply the principles upon which they are to operate to other areas where industries are declining and unemployment is high and rising.
      Small businesses will certainly seize the opportunity that the creation of enterprise zones and the provision of the industrial buildings allowance will give them. When there is a loan guarantee system for small businesses, our range of measures will be nearer completion. I urge my right hon. and hon. Friends on the Front Bench to go forward with this scheme and to follow it up by widening its scope and application in the years to come.
      Mr. Spearing: The speech of the hon. Member for Luton, East (Mr. Bright) illustrates our great difficulty. He was in favour of the principle of enterprise zones, but at the moment we are debating an amendment to restrict capital allowances to industrial activities in enterprise zones, should they be introduced. The hon. Gentleman is a first-rate example of those who have taken the Government's proposal for these zones hook, line and sinker. That is illustrated by his hope that such experiments will be applied generally over the whole nation——
      The Chairman: Order. I do not think that the hon. Member for Luton, East (Mr. Bright) needs my protection, but if the hon. Member for Newham, South (Mr. Spearing) had been here earlier he would have heard me say that I was prepared to allow a general debate on clause 68 with these amendments. The

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      hon. Member for Luton, East was therefore in order.
      Mr. Spearing: I was not suggesting that the hon. Gentleman was out of order, Mr. Weatherill. I noted what you said and that is why I hope that what I am now saying is equally in order. But the hon. Gentleman has accepted the Government's propaganda hook, line and sinker. I was criticising only the content and logic of the hon. Gentleman's speech. He hopes that the scheme will be extended, but, as the right hon. Member for Orkney and Shetland (Mr. Grimond) pointed out, this is not that sort of experiment. Indeed, can it be an experiment if it is not applicable in the wider conditions—as it is not, as the Minister of State told us in Committee? He said that the Government are to spend £50 million on rate relief and other reliefs and that they could not possibly do more because it would cost too much. I think that my hon. Friend the Member for Greenwich (Mr. Barnett) worked out that rate relief would amount to about £10,000 an acre in the designated enterprise zones if they were to cover about 500 acres each.
      Mr. Bright: Does not the hon. Member agree that if the experiment is a complete success and it generates new businesses and provides an impetus for growth in the economy the Government obviously would have to consider extending it?
      Mr. Spearing: The hon. Gentleman assumes that the new jobs and enterprises that are thereby generated will be a net gain to the country and will not be drawn into one part of the country from another. That is a big assumption. Secondly, in advocating wholesale largesse from the Treasury to particular areas, irrespective of who is already in those areas and what is happening there, organisations which do not need assistance will benefit from central Government funds just as much as those who do need it. For a party which publicly proclaims that centralised interference with local activities and centralised support of free enterprise is anathema to propose such indiscriminate largesse represents a surprising philosophical move.
      Mr. Homewood: If it is surprising should it therefore not be welcome?
      Mr. Spearing: It may not be quite as welcome as it looks. There is an old saying that when Greeks bear gifts one has to beware. If the Government turn almost the whole of their philosophy back to front, as they are doing in respect of enterprise zones—I see the Financial Secretary shaking his head, but the proposal is for centralised and indiscriminate intervention in local and industrial affairs. It is intervention in normal, local planning democracy. It is a taking away of local democracy and local choice of the sort that is advocated throughout the Local Government, Planning and Land (No. 2) Bill. All this is done in a manner which gives the Secretary of State for the Environment enormous powers, which will sometimes bypass this House. That, again, is contrary to almost everything that was said by Conservative candidates at the general election. The nature of this centralised power can be gauged from the new schedule 25 of the Bill. I therefore say to my hon. Friend the Member for Kettering (Mr. Home-wood) that although this may appear to certain councillors all over the country to be a welcome move, they should beware of it. This apparently good bargain contains long-term disadvantages, not just for their areas but for the nation as a whole.
      The Local Government, Planning and Land (No. 2) Bill appeared in reprinted form yesterday. It contains over 13 pages of the schedule on enterprise zones. The price which local authorities are being asked to pay has hardly yet been mentioned. They will be asked by the Secretary of State for the Environment, both in informal conversations which have already begun and in the terms of the schedule, to give up detailed planning control. The right hon. Member for Orkney and Shetland may think that that is a good thing, but exchanges involving the Labour Benches so far have shown that planning control has become a firm element in post-war government. In many places those who invest—this includes pension funds representing large sections of the population—require the protection that planning control gives. It is a question not of bureaucracy but of wise decisions about what sort of development should go where and how much of it there should be. We all know such centres. Some of them are not far from this

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      House, particularly town centres such as Croydon, where office developing has taken place specifically as planned in a structure plan.
      The surprising thing about the Bill is that it says that, where there is an enterprise zone, the structure plan should be changed willy-nilly. If that is not retrospective legislation it is getting very near to it. It is important that the principle of generalised structure plans as to where retail development, office development and new road building should take place is, in broad terms, not questioned across party lines. I do not think that even the right hon. Member for Orkney and Shetland would question the broad structure of planning. He does not face the problems in Orkney and Shetland that we encounter here, but I do not believe that he would question strategic planning.
      This scheme says that we shall do away with planning applications within enterprise zones provided that the use falls within the generalised definition of the zone as a whole or within its compartments. That is the new feature in enterprise zones, other than the financial largesse which the Treasury is, uncharacteristically, pouring into the zones. I suggest to Conservative Members that that is a dangerous precedent, because what the Government will say to local authorities is that there will be no general process of planning applications for any activity within the zones as long as that activity conforms to the generalised perimeter definition.
      It may be that some activity will not affect the rights of people already there but it might well do so, and there will be no question of a planning appeal. There will be no question of going along to one's local councillor to say that the local planning committee should throw out a particular planning application. If such an application is within the generalised criteria which have been agreed with the Secretary of State for the Environment before the area was designated the complainant will be told that the authority is sorry, but all has been agreed and the application comes within the generalised definition. The authority will say that matters have been agreed with the Secretary of State and that nothing can be done about it.
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      The aggrieved householder or local ratepayer—it might even be a business man—might then go to his Member of Parliament and say: " Look, I have no powers here. What are you going to do about it? " The Member of Parliament will go to the Secretary of State for the Environment to ask why he is allowing a certain thing to happen. The Secretary of State will say " It is not me. The local authority produced the scheme. I have designated the area and that is that."
      One of the greatest dangers of this scheme is that we shall give away some of the protective mechanisms covering individuals or bodies who are either inside an enterprise zone or adjacent to it for the payment of money which does not go to them but which goes in rate relief and capital allowance taxation for the enterprises within the zone. That mechanism is open to considerable criticism.
      The second point touched upon in the debate is that the scheme will engender great speculation. There are to be only six zones at the start. There will probably not be more than six, for reasons that we understand. Yet great interest has been shown. We know that the Secretary of State for the Environment has sent his officials to talk to people in many areas. Much speculation will take place about where the zones might be established. In those areas where zones are established land values will obviously go up because land which is rate-free, and free from other financial encumbrances, must increase in value. There is no getting away from that.
      As I pointed out in an earlier intervention, if the generalised planning permission is for offices up to four or five storeys, for example, the value of the land will leap immediately. Therefore, the money which the Treasury will pay out under these provisions—particularly in rate relief, which will constitute the largest amount—will, I suggest, go either straight into the hands of the people who own the land already, who are the fortunate recipients of the windfall where areas are designated, or into the pockets of speculators who may be speculating on where the zones may be.
      Hence, the technical press is full of stories about Wandsworth hoping for a zone, Tower Hamlets putting in for a zone and Manchester asking for one as well. Liverpool may ask " What about

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      us? " Those stories are appearing and the greater the speculation the greater the degree of speculation investment. In the end it is the firms who go there who will pay because unless they own the freehold rights already they will have to pay higher rents for the value of the land.
      5.45 pm
      What of the activities that will take place in the enterprise zones? I address my remarks in particular to my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) because these are some of the factors that must be borne in mind. Where will the activities come from in any industrial area to comprise the enterprise zone? I suggest that the first people to move in will be those already running foot-loose industries within a reasonably short distance of the area. Such businesses can move into the zone with their employees.
      In other words, many of the people who will move in fairly soon are already operating not far away, and there will not be much net gain. I suggest also that those who move in will be people who do not have a great deal of heavy capital plant or equipment. Once capital plant and equipment for manufacture has been set down it is very expensive to move it again. The kind of people who will move into the enterprise zones quickly are those who have equipment which is easily moved. Those businesses will, perhaps, be particularly associated with transport, the container trade, packaging, transport depots, vehicle repairs and so on.
      What will be the position of those businesses when an enterprise zone is finished? The Government say that the zones will exist for 10 years but, presumably, a subsequent Government could review the position. After a time the rate relief will be a diminishing return because at any time it could disappear. I cannot see the Treasury advocating the proliferation or continuation of the zones for that length of time.
      I suggest that in the matter of long-term income the business men who go to the enterprise zones will have little security over five or six years. What kind of people will go to the zones in the face of that relatively short-term benefit?
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      My own borough is interested in this issue and I say to my hon. Friends that there are some disadvantages to the scheme. Those disadvantages will appear as time goes on. They are particularly noticeable from a perusal of schedule 25 to the Local Government, Planning and Land (No. 2) Bill. In the end it will be the Secretary of State who invites local authorities to put up a scheme. All the consulation that is going on is entirely unofficial. The legislation has not yet gone through the House and it is quite clear that the Secretary of State for the Environment is seeing how much de-planning local authorities can achieve. Those authorities which provide the Secretary of State with a de-planning package suitable to his requirements are probably the ones that will be designated in the end.
      If there is to be an experiment it could be that, in a very specious way, the Secretary of State for the Environment—particularly the present one—will say " Look how this industry is flourishing now that we have removed planning controls ". The real reason, of course, why industry might flourish would be because of massive handouts of millions of pounds by the Treasury. It will be as a result of money received from the Treasury, not because of de-planning, because such de-planning will be to the disadvantage of somebody else.
      That point brings me to the amendment in the names of my hon. Friend for Sheffield, Heeley (Mr. Hooley) and myself, in which we seek to delete subsection 1 (b) of clause 68. That provision allows hotel and commercial buildings or structures to be given capital allowance relief under this scheme. The amendment represents a relatively small cut in the financial largesse which is to be showered. The rate relief will provide the lion's share of the finance. Capital allowance might be significant for certain forms of activity.
      I deplore de-planning. It is a cosmetic to the process of regeneration of British industry. I do not believe that it will do what the Government wish it to do. If there is to be such a form of de-planning, we should not shower money on commercial and hotel developments in this way. That is why I support the amendment. I hope that my hon. Friends will heed the arguments.
      Mr. Budgen: I wish to take up the general spirit of what the hon. Member for Newham, South (Mr. Spearing), said. It is plain and understandable that he and many of his hon. Friends deeply dislike the whole idea of enterprise zones. We understand why. The enterprise zone springs from the Tory Party's belief in profit and the desire of people to improve their lot and the lot of their families. The idea is wholly opposed to the bureaucratic ideal of planning and regulated commercial and industrial activity.
      It is plain from even a cursory perusal of schedule 25 of the Local Government, Planning and Land (No. 2) Bill that the co-operation of a local authority is a condition for the designation of an enterprise zone. The Labour Party wishes to pour scorn on the enterprise zone concept but has neither the muscle nor the courage to vote against it au fond. It wishes to nit-pick and to make it plain that it does not like the idea. However, some local authorities are more self-confident in their Socialism. They will say " We prefer planning to the profit motive. We prefer the wisdom of the bureaucrat and the concept of regulation and heavy taxation to anything that the Tories may propose for an enterprise zone."
      If a local authority does not wish to co-operate in an application for an enterprise zone, I hope that the Minister who has to decide whether to designate a zone will make clear publicly that he has not designated a particular area because the local authority does not wish it to be so designated. That is an important point and it could apply to my local authority. Some of the Socialist councillors in Wolverhampton have indicated that they do not wish the local authority to make such an application.
      If the suitable 500-acre site at Bilston, which could transform a large part of the Midlands, is not designated, because of opposition by the ruling Socialist group in Wolverhampton, that should be made known, and the voters in Wolverhampton should be able to express a view at the next election.
      My second point demonstrates my distrust not only of local authorities, but of central Government. I asked my hon. Friend the Member for Bristol, West (Mr. Waldegrave) how the six areas were to be designated. He told me with jovial but not entirely serious cynicism that they
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      will be designated according to the pork barrel. I hope that that is not so.
      I have often listened to the Financial Secretary with interest and admiration. I am sure that he will agree that one of the most disagreeable features of the last decade has been the extension of the pork-barrel principle in our politics. I believe that reliefs or benefits should be general and that there should be no showering of benefits on particular areas or individuals as a consequence of the pork-barrel lack of principle in politics.
      The two great parties have been guilty of pork-barrel politics in the last decade. It was used after the discretionary powers were conferred on Governments under the Industry Act 1972. The power was used to help the motor cycle manufacturers at Meriden, which is in a marginal constituency. Until 1974, that area was represented by the Tory Party. It was used again in the most disgraceful way in respect of the vast discretionary investment in South Wales as a result of the last Prime Minister's desire to try to buy employment near to his constituency.
      I want no more of pork-barrel politics. A value judgment must be made by the Government in the designation of enterprise zones.
      Mr. Spearing: The Minister of State became vague when he was pressed in Committee to give the criteria on which he would judge the zones that he would be most likely to designate. Is the hon. Gentleman aware that the Opposition moved an amendment to allow any local authority to make statutory application to the Secretary of State rather than leave the Secretary of State to give a statutory invitation and that the Minister resisted it?
      Mr. Budgen: I am grateful to the hon. Gentleman.
      I hope that the Government will publish the criteria on which they will choose the six areas. That is the best way to avoid the charge of pork-barrel politics. If the enterprise zones are to be useful, considerable benefits will be conferred upon people who own land in an enterprise zone and on the local authorities in designated areas. It follows that the local authorities which apply and are turned down will be disappointed. That is an inevitable consequence of any selective discretionary arrangement.

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      I am prepared to go along with the idea of a discretionary enterprise zone because it is an experiment which will be useful and which will have general application, particularly to the planning system. I understand why the Labour Party, pledged as it is to support centralised planning systems, dislikes the enterprise zone concept.
      The Financial Secretary must make it plain that clear and specific criteria will be used and published so that there can be no allegation about pork-barrel politics. I shall be deeply ashamed if a particular area is made an enterprise zone in order to influence a Tory marginal seat. I shall be equally disgusted if Wolverhampton, which has a relatively stable parliamentary pattern, is denied an enterprise zone simply because it is more convenient to benefit other constituencies. I hope that my hon. Friend, when he reflects on some of his past speeches about the rule of law and the dangers of discretionary powers given to Governments, and all the comments that be no allegation about pork-barrel polisition, will give a clear undertaking that such criteria will be published.
      6 pm
      I hope that there will be no playing around with the amendment that has been proposed by the hon. Member for Sheffield, Heeley (Mr. Hooley). It is quite plain that the concept of the enterprise zone represents a return to free market liberalism, which is a strand within the present Conservative Party. I understand that the Labour Party, with its great links with the trade union movement, has an instinctive tendancy to prefer manufacturing activity to all other forms of activity. Let us have none of that.
      Let us have none of the rather aristocratic paternalism which came so strangely from the mouth of the right hon. Member for Orkney and Shetland (Mr. Grimond) when he said, in a very grand way, that he did not mind a few spivs, as long as there were not too many. I must remind him that in the days when the Liberal banner was being carried by Cobden and Bright the great landowners regarded the manufacturers from Lancashire as the spivs of their day. The market not only created great prosperity for the new spivs who eventually became established families, such as the Peels and the Gladstones; it provided great
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      wealth and prosperity for Britain. Let us have no strange Labour Party prejudices or new style paternalistic Liberal Party prejudices about the matter. Let the market decide who will prosper in the enterprise zones.
      Mr. Duffy: In a curious speech my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) subjected the concept of an enterprise zone to prolonged ridicule and deprecation, yet he concluded by commending it to the Committee, if on a limited basis. He said that he preferred that we should move slowly on the matter. The hon. Member for Wolverhampton, South-West (Mr Budgen) pointed out that it is a condition of determination of enterprise zone location by the Minister that there be an acceptable degree of enthusiasm, and a willingness to work with the Minister, on the part of a local authority.
      I say with the utmost sincerity that my hon. Friend the Member for Heeley has more virtues than most. No one could represent his constituency more conscientiously and effectively—as I, his neighbour, know well. If we appear to be taking issue on this occasion, no one should make too much of that, as did the hon. Member for Manchester, Withington (Mr. Silvester). No doubt the press, tomorrow, will do likewise. However, we have not disagreed before, and we disagree this afternoon only because I feel that the hon. Member did not make a case for our city that would commend it as an applicant for an enterprise zone. Whatever reservations we have—and I shall spell out mine—we need to show a great deal more enthusiasm than that mustered by my hon. Friend. Moreover, in presenting the case on behalf of Sheffield we must necessarily talk in a little more informed way about the nominated location, which happens to be in my constituency.
      I intervened rather frequently in my hon. Friend's speech, and he gave way because he is a generous person. I now invite him, as I make my case for Sheffield, to feel free to reciprocate. If he thinks that I am not presenting the case properly, I hope that he will intervene. I shall prefer to give way to my hon. Friend rather than to other hon. Members who may wish to intervene.
      Mr. Spearing Mr. Spearing rose——
      Mr. Duffy: This is what I was afraid of. It was my hon. Friend the Member for Newham, South (Mr. Spearing) whom I had in mind when I made that cautionary remark.
      Mr. Spearing: I am grateful to my hon. Friend. I understand that he is representing the interests of his constituency, as did my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley). In the course of my remarks I said that my area was also interested in the enterprise zones—but I did not make a case for Newham, which I could have done very easily. Does my hon. Friend agree that the debate is about the general issues of enterprise zones as applied to the national need, and especially about the amendment before us? Does he not think that it may be better to stick to those general points, rather than make a case which the local authority is, no doubt, making adequately elsewhere?
      Mr. Duffy: I am sure that my hon. Friend is not serious in making those remarks. He heard the Chairman describe the debate as a general debate. There can be no question whether I am in order in speaking on behalf of my constituency. Indeed, I am expected to do so by interested bodies in Sheffield.
      I take issue with my hon. Friend the Member for Heeley for another reason. Because of his acquaintance with Sheffield, his concern for the area, and the frequency with which he speaks in the House, no one was better placed than he to tell the House how industrial activity in Sheffield, especially in its east end, is in a state of crisis. No one was better placed than he, in opening the debate, to say that because of inflation, the soaring pound and record interest rates, local industry faces a collapse in profits. He knows that all the signs in our city point to a local industry in the grip of recession. He knows also that those developments point to something even more disturbing. Sheffield's east end, especially Attercliffe, symbolises Britain's industrial heartland as much as, if not more than, any other part of Britain. The threat facing Attercliffe is not only the decline of its staple industry—steel—but a threat that is compounded of persistent dereliction and desolation, which has lasted for 20 years, and of crumbling factories and industrial
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      wastelands, from which there seems to be no relief. While Attercliffe, where successful industries once thrived, remains a blight and an eyesore on the industrial landscape, it is not only Sheffield but Britain as a whole which faces the relentless decline and fall of those manufacturing industries which were once our greatest strength.
      I believe that the position is a good deal more urgent than my hon. Friend had in mind when he recommended the acceptance of the enterprise zones on a " go-slow " basis. Given the awareness of the acute problem of deindustrialisation in the east end of Sheffield, it is not surprising that the Sheffield city council demonstrated an immediate interest in the enterprise zone concept.
      We lost assisted area status only a year ago, thanks to the changes in regional policy by the Financial Secretary's right hon. Friend the Secretary of State for Industry. Since then there has been a continued shake-out of jobs in steel alongside the failure, over many years, to redevelop Attercliffe. Therefore, it is not surprising that not only the city council, but nearly every other organised body in Sheffield, and not only on the Labour side, demonstrated interest in the enterprise zone proposal.
      Discussion and consultation have taken place. If we have not entered into such discussions here—I read the Committee proceedings with the greatest interest— at least discussions have gone on for weeks in Sheffield between bodies at various levels. It is only right to put on record that they reflect all the doubts, scepticism and opposition that have been heard in this debate and will no doubt be heard again before it concludes. Nevertheless, the consensus is that Sheffield should make a bid for an enterprise zone.
      No one is in any doubt about the possible snags or even the eventual possibility of downright frustration and disappointment. No one in Sheffield is dreaming of a Hong Kong on its doorstep or of a great programme of job creation. Sheffield's hopes as yet do not even run beyond job retention. The position in the east end of Sheffield is so desperate that we just want to hang on to what we have. That is why, for Sheffield's trade union leaders, an enterprise zone is a lifeline. For the working men's clubs and pubs, at which some of

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      my hon. Friends, who are not now present, were prepared to scoff about an hour ago, an enterprise zone might yet mean a new lease of life. These valuable social institutions have been left high and dry as a result of deindustrialisation, which has removed plants and jobs as the city has followed the programme of housing clearance which has gone in every great city.
      For the River Don steelworks, without which we could not have won two world wars, it could yet mean survival. For a firm such as Hadfield's, which was in the news recently—I mention it as one, but I could mention others—which is locked into a price structure not of its own making but through the BSC, and is now desperate for cash flow, rate relief could amount to more than £1 million. For a city which forfeited more than £15 million in spending power earlier in the year as a result of the disastrous steel strike, the notion of an enterprise zone is bound to have a compelling attraction. At the same time, it poses the same dilemma for the ruling group on the city council as it does for my right hon. and hon. Friends. It is only right to say that the city council faced that dilemma. I am not saying that no one else has done so or may yet do so, but Sheffield has done so with its eyes open.
      My hon. Friend the Member for New-ham, South said that we ought to be aware of the possible consequences, and he mentioned me and my constituency. We are aware of those possible consequences.
      I accompanied a deputation from the Sheffield city council a month ago to see the Secretary of State for the Environment to explore the implications of this concept. I am proud to say that Sheffield was the first such local authority to see the Secretary of State. Indeed, it may be the only local authority to have seen the right hon. Gentleman. Certainly we were at the head of the pack. We spent more than an hour with the right hon. Gentleman. Ministers in both this Administration and the previous Labour Administration are always busy, but it was the people from Sheffield who got up first to leave.
      We had a helpful discussion. All the questions that were exercising our minds were raised. We did not get all the
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      answers. Again, it is only right to say that we came away with the impression that the Government had not at that stage thought their way through this matter, and I can understand why. But the parties on both sides of the table were agreed that this was to be an experiment. The purpose of the zones will be to test, on a few sites, how far industrial regeneration can be achieved by a new mix of incentives and commercial stimuli. Nevertheless, the depuation felt obliged to express deep concern to the Secretary of State about the implications of all the measures which have so far been spelt out—for example, development land tax, industrial training boards and planning procedures, notably in respect of health, safety and pollution. Doubt was also expressed about how many and what types of jobs the enterprise zones will succeed in attracting and for how long and at what cost to their neighbours.
      In deciding subsequently to apply for an enterprise zone, the Sheffield city council was prompted by certain considerations. The first was that the current increase in the loss of jobs in steel and associated industries requires special efforts to accelerate the regeneration of the Attercliffe area of the city.
      Mr. Hooley: If I interpret my hon. Friend correctly, the drift of his argument hitherto is entirely in support of the amendment. Though I have grave reservations about the whole thing, I want it concentrated on manufacturing industries. That is the purpose of the amendment. That is the burden of my hon. Friend's speech. Therefore, I suggest that it would be sensible to support the amendment on those grounds.
      Mr. Duffy: In my references to my hon. Friend's speech I thought that I entered two caveats. One was that he did not present the case for Sheffield with enough enthusiasm and that he did not present the case for Attercliffe—my constituency—with a clear enough appreciation of contemporary facts. I shall come to that aspect later, when I come to the different unemployment levels in the east end of Sheffield and other areas across the M1.
      6.15 pm
      The other caveat was that in view of what was happening in the east end of Sheffield—no one who has just heard

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      me can doubt it—we need to proceed with greater urgency, not on a go-slow basis.
      I was informing the Committee that the Sheffield city council was prompted to make an application for an enterprise zone, first, because the position in Attercliffe—a position that has persisted for over 20 years with little, if any, sign of relief of regeneration—now calls for special measures, and, secondly, because much of existing industry in Attercliffe needs to adjust to new market conditions, to restructure with a view to improved competitiveness, for example, or to rationalise and diversify. An enterprise zone may provide us with the mechanism to accelerate the process of change that will take place anyway. In other words, it may shorten the agony.
      Thirdly, this regeneration of the Attercliffe area could be accelerated by a relaxation and streamlining of planning procedures and practices and still leave an obligation on the developer to ensure that intended development accorded in every way with an approved planning scheme for the zone and the council's long-term plans for the area.
      Mr. Spearing: I appreciate the point being made by my hon. Friend, but the Secretary of State may not agree with that concept.
      Mr. Duffy: Indeed, he may not. However, I understand that there is to be consultation between the Department and local authorities. It has already started with Sheffield, as I shall explain. Indeed, Sheffield has informed the Minister not merely of its reservations, but of its sticking points. My hon. Friend may be right, but at least the Minister knows, as the Committee has now been informed, where we stand in Sheffield. I hope that there will be a process of give and take. I do not see how an enterprise zone can work if there is no such process.
      Sheffield council applied to be nominated as an enterprise zone on the basis of a belief that an enterprise zone need not portend a free-for-all. The council's objectives for securing a good standard of environment for the principal road corridor along the banks of the canal and river in my constituency should be retained, and there should be some limitation on shopping development.
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      It may be useful for the purposes of the debate if I give a case history—if that is an appropriate description—of Sheffield's proposal. We proposed a zone with a total of 518 acres, of which 309 are vacant at present or could become available for redevelopment in the next few years. Those 309 acres have been vacant for years, with no possibility of their being used. Three-fifths of the land in the area will, therefore, be available for early development, and, as such, the area offers tremendous potential over the next 10 years for new industry and commerce.
      I am not saying that we believe that Sheffield should be nominated as an enterprise zone only on that basis. Neither am I saying that we believe that Sheffield will be rejuvenated on any other basis. I am saying that so far we have not been rejuvenated on any basis. The city council has already attracted central Government and EEC regional development fund aid for infrastructure works in the area, and the Yorkshire water authority is receiving similar aid and loans for the Don Valley intercepting sewer, which will serve the whole of the possible enterprise zone area.
      The council also proposes to divide the zone to ensure that the land fronting the main route from the motorway is not an eyesore. Those hon. Members who have left the motorway at the Tinsley viaduct and have driven into Sheffield city centre—some hon. Members did so recently when the semi-final was played at Hillsborough—will have driven through my constituency. The city is anxious that that land fronting the route will not become an eyesore to people visiting Sheffield. I am sure that the Minister will recognise that concern by the Sheffield city council.
      Outline planning permission would be automatic, for schemes in zone A, because it is recognised that the scheme is in accordance with the planning scheme for the area. Any development is required to meet the standards set by the statutory authorities on health and safety regulations, noise, smoke, dust emissions, effluent control, fire regulations, building and advertisement control regulations. I do not worry about scrap-yards, which my hon. Friend the Member for Heeley mentioned.

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      In zone B, developers would not have to apply for outline or detailed planning permission if their schemes accorded with the plan for the area, and I do not see how they could not do so. But they would have to meet the standards required by the statutory authorities that I have spelt out for zone A. The major reservation of the council about the enterprise zone concerns the threat of a hypermarket. We believe that this could pose a threat, to commerce in the centre of Sheffield, Barnsley, Doncaster, Rotherham and Chesterfield. I am sorry that my hon. Friend the Member for Bolsover (Mr. Skinner) is not present. I wanted to tell him that we are also concerned that a hypermarket in any economic zone near Attercliffe should not threaten the shops in his constituency.
      There can be no question of Sheffield consciously lending itself to bad neighbour policies in the pursuit of enterprise zone status. On the contrary, I believe that Sheffield's neighbours stand to benefit, although I well understand a residual nervousness on their part about its impact on their local economies. My right hon. Friend the Member for Llanelli (Mr. Davies) did not take that view. He did not allow for the possibility that such an impact might be the reverse, and that it might be beneficial. I ask him to consider that hypothesis. I am sorry that my hon. Friend the Member for Rotherham (Mr. Crowther) is not present. I told him last night that I would be addressing several of my remarks to him, but he explained that although he would have liked to be present, he had another engagement.
      I was present in the Chamber on 24 July 1979, when we debated changes in regional policy following the announcement by the Secretary of State for Industry that Sheffield was to lose its assisted area status and that our neighbours in Rotherham, Rother Valley and Dearne Valley were to receive improved assisted area status. My right hon. Friend the Member for Sheffield, Park (Mr. Mulley) spoke in the "same debate. Naturally, we expressed envy of our friends and neighbours, but at the same time we wished them luck. I wish they would show similar gracious-ness now that it appears that Sheffield is to receive some degree of restoration of the position that it enjoyed only a year ago.
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      I also appreciate any disappointment felt by Rotherham and Rother Valley about the preference of Sheffield as a posible location for an enterprise zone, in view of the relative disparities in unemployment levels. They may feel that they are more deserving. I should like to comment on the impact of such a zone on them, and on any possible belief on their part that they are more deserving.
      The economic importance of Sheffield in relation to the rest of South Yorkshire, and in particular to the need to develop the Don Valley and exploit its full potential in terms of job creation, was well documented in terms of the structure plan. This area, with its continuous belt of manufacturing firms, spans the Sheffield and Rotherham travel-to-work areas. There is an economic linkage that runs right along the Don Valley. The Don Valley has given rise to continuous industry—and the same sort of industry. The announced removal of assisted area status from Sheffield last year fractured this unity and created a potential anomaly, notably in respect of the BSC complex, which spans these travel-to-work areas. Enterprise zone status for Attercliffe would restore this economic entity—this natural economic linkage—and, with the multiplier-effect secondary consequences, it would confer beneficial consequences on the county as a whole. I am simply saying that that is possible. I am all too aware of the disappointments that are likely to be our lot. I hope that my right hon. Friend the Member for Llanelli will agree that there is a good case for Sheffield being nominated as an enterprise zone, and I believe that there is more than a theoretical case.
      Sheffield is a major industrial centre, serving a much wider area than that within its own boundary. In 1971 there was a net inflow of 26,000 persons coming to the city to work every day. Accordingly, the structure plan recognised Sheffield as the area of greatest potential for job growth, to the benefit of the whole county of South Yorkshire. At present, half of South Yorkshire's jobs are in Sheffield. So, incidentally, is half of the county's unemployment.
      6.30 pm
      That brings me to my second point. It is certain that unemployment will continue to increase locally. Despite great efforts to diversify its industrial base,

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      Sheffield remains largely dependent upon one industry—steel. But, as we all know, job losses in metal manufacturing have been and are expected to be considerable. They have proceeded even faster in Attercliffe than the national average suggests. The structure plan in 1976 estimated a loss of 11,000 jobs between then and 1986, but the situation has deteriorated markedly since then. Osborne Hadfield's and Ashlow's are just two firms that have closed down in my constituency in recent weeks, and the number of redundancies is expected to reach 5,000 by the end of June. This figure exceeds that for the whole of last year.
      That is why there is a feeling of desperation on the part of some of us about this deterioration at the east end of Sheffield, especially among the trade union leaders. That, also, is why the overall unemployment rate for the city of Sheffield is so misleading. It conceals a number of specific local problems. Sheffield's pockets of unemployment, such as those that exist in the east end, are averaged out of perspective if not out of existence; yet they were clearly brought out in the structure plan evidence and the inner city submission and were recognised in the granting of inner area programme status.
      The latest figures available from the national dwelling and housing survey published in 1979 showed a 6·6 per cent. unemployment rate for the inner city, when Sheffield's overall rate was 4·6 per cent.—in other words, half as much again in the east end. It will certainly be higher now.
      Six yards within the inner area, with a population roughly equivalent to that of Dearne Valley—about 100,000—showed a rate of 8·9 per cent., when Mex-borough's rate was 9·7 per cent. A wider area, covering 10 wards, showed 7·9 per cent. At the time the rate at Rotherham was about 7·8 per cent.
      Therefore, contrary to what has been said in this debate, it is most likely that parts of Sheffield, from which assisted area status was removed last year, will have unemployment rates comparable to those of adjacent areas which were given full development area status last year. Indeed, about a quarter of the employed men in some of those adjacent
      1484
      areas which are assisted come to Sheffield daily to work, most of them coming into my constituency. Yet when those people commuting from those adjacent areas outside Sheffield's travel-to-work area lose their jobs in my constituency they are not included in Sheffield's unemployment figures, never mind in those for my constituency. That is another reason why the relative unemployment levels can be somewhat deceptive.
      Much more revealing is the rate calculated for unfilled vacancies. This shows Sheffield's 0·27 per cent., similar to Barnsley's at 0·28 per cent. and less than Doncaster's 0·46 per cent. Undoubtedly, the unemployment position has deteriorated nationally. I am not saying that we have problems that other areas do not have. What I am saying is that the level of unfilled vacancies relative to the number of persons employed in Sheffield is now very low. It is lower than the national average. It is very worrying. It is the same as Barnsley's figure, which has intermediate status. It is approaching that of Rotherham, which is 0·23 per cent., and that of Dearne, at 0·22 per cent., both of which have full assisted area status.
      As well as unemployment, there are other grounds on which I know the Minister will ponder when he considers Sheffield's application for consideration as an economic zone location. The derelict land problem in Sheffield has been recognised for a considerable time. The area was designated as a derelict land clearance area prior to being granted intermediate area status. Despite receiving aid approaching £500,000, there is still a considerable problem, much of which is in the Don Valley.
      Therefore, what I am really arguing throughout is that Attercliffe is ripe for redevelopment. There is considerable infrastructure, social as well as economic. It has an unrivalled position, lying between the city centre and the motorway. It straddles the river Don and embodies the canal basin for the South Yorkshire navigation, which is in the process of being widened and modernised.
      Sheffield is also well aware of the large element of risk for all concerned in such a concept as that before us. At the end of the day there may well be a greater

      1485
      preponderance of warehousing/commercial concerns as against manufacturing concerns, as my hon. Friend the Member for Newham, South warns. This may or may not generate more or fewer jobs. On the other hand, given modern technology, there is no guarantee that more jobs would be forthcoming if we continued with present policies within an economic zone.
      Sheffield is taking a practical view. It is willing to go a long way to meet the Minister's wishes. I hope that the Minister will be equally practical and will recognise that it is similarly incumbent on him to go some way to meet the wishes and to allay the fears of the hard-pressed people of Sheffield. It is in the Minister's interests, after all, as well as those of Sheffield, that the undertakings should be harmonious and the outcome successful. But that is likely to be secured only on a basis of give and take. Sheffield hopes, therefore, that the Minister will be seized of the same outlook and a corresponding readiness to enter into partnership.
      The economic zone concept cannot be realised on the basis of a lopsided philosophical or historically out-of-date approach, which seemed to permeate the remarks of the hon. Member for Wolverhampton, South-West.
      Sheffield is painfully conscious that it would lose some control over the type of development in Attercliffe. For his part, the Minister must recognise that market forces can no longer be given their head in Britain. There is no possibility of the restoration of Victorian laissez-faire. The problem for the Government in trying to establish these economic zones is essentially one of trying to find a new equilibrium—a new and appropriate point of balance between the claims of the entrepreneur and the needs of the host community. It can be done with good will and co-operation on both sides.
      As with the assisted area next door, industrial and commercial promotion in Attercliffe will be subject to incentives and stimuli. The range and the mix in economic zones will be different, and, of course, there will be a much less positive input. But where public incentives and public money are disbursed, public accountability is never very far behind, and always lurking in the background is the instrument of public intervention.
      Mr. John Loveridge: I listened with amazed admiration to the loquacious tenacity of the hon. Member for Sheffield, Heeley (Mr. Hooley), and added to that a sense of admiration for his temerity in bringing forward an amendment the effect of which must surely be to damage the interests of his own city.
      Mr. Hooley Mr. Hooley indicated dissent.
      Mr. Loveridge: In bringing forward the amendment, the hon. Gentleman seems not to have noticed what was said by his hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) or the words in the article in The Times of 28 April, which said that in the Sheffield case
      " prosperity … has been in decline since the mid-forties. The fortunes of the steel industry have plunged and the pressing need for improved living standards and environmental improvements have swept away factories and sub-standard housing so that Attercliffe is once again ripe for development"
      It is a pity that the amendment of the hon. Member for Heeley should knock a Government measure that is designed to bring new vigour and life to just such an area, particularly if that area of Sheffield is selected as an enterprise zone in due course. The amendment would take away not only from hotels but from commercial buildings and commercial structures the benefits accorded to enterprise zones. If the amendment were to have the effect of taking such benefits from commercial structures, the hon. Member would be taking away what he would like to see—namely, greater industrial development. That is because most of such development takes place within a structure.
      If we are to have enterprise zones—and I welcome the Government's initiative—surely we should allow the enterprises in them to do what they wish. That is the very function of the experiment. We do not need " carefully controlled " ideology. The experiment will not work on that basis. It will work only if we draw into these derelict areas new life and vigour from those who themselves have the initiative and the will to make them work.
      Mr. Guy Barnett: I do not think that any of my hon. Friends doubt the value of commercial premises and commercial operations in areas of

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      the sort that we are debating. The question is whether, for example, 100 per cent. rate relief is needed by the undertakings that will operate in the enterprise zones.
      Mr. Loveridge: The hon. Member knows that in Sheffield, Attercliffe there has been great depression for a long time. Some new inspiration and some new drawing of life into the neighbourhood is required. If we do not allow experiments to take place, we shall never see it and other neighbourhoods grow and develop.
      People have moved out of inner London. Young people have moved out to live in the commuter belts. They have made their homes in those areas, but they have continued to commute into the city to work. They commute into the city, but not to the areas in which they used to live, and those areas now have a population imbalance that is dominated by the elderly. They do not have enough young people of working age. So we have been left with derelict areas. Surely it is better to provide an incentive and try to develop these areas and give hope for the future than to leave them alone.
      To achieve that aim the Government have brought forward a number of proposals, including first-year capital allowances of 100 per cent. for all commercial and industrial building. I hope, incidentally, that the Government will allow the maximum flexibility to the firms concerned when they take up these allowances if they cannot take them all up in the first year.
      Secondly, the Government have given complete relief from development land tax, that minefield of confusion and anomaly that has deterred so many entrepreneurs. They have given complete derating and provided for compensation for local authorities. They have ended industrial development certificates and have promised fast planning procedures. They are cutting out industrial training requirements, and they have made special provisions for warehouses. These measures, when taken together, form a substantial inducement to firms to move into the enterprise zones, and that is welcome. The scheme will
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      especially help to bring small businesses into these zones.
      6.45 pm
      Does the scheme go far enough? I hope that the Government will consider the provisions that are included in the amendments and new clauses that have been tabled by my hon. Friends who are officers of the smaller businesses committee. The provisions should be accepted and introduced for the enterprise zones at least, even if not more generally.
      The more that we can do to make the zones true magnets for endeavour, the better it will be. They are experimental, and we must try to make the experiment work from the first. No unnecessary limitation must be placed on the inducement. We must offer every attraction possible.
      It will be beneficial if employers who are located in enterprise zones are not liable for the national insurance surcharge in respect of persons employed full-time within the zone. The surcharge is, in effect, a payroll tax. Relief from the surcharge would draw in firms that employ a high ratio of labour to capital and thus help to reduce unemployment.
      That relief would apply to full-time workers, so as to prevent tax avoidance. The removal of that aspect of taxation would have a strong psychological effect. It is a tax that has caused much irritation in the small business sector. Payroll taxes have never been popular in Britain. Some hon. Members may remember that it was a payroll tax that led to Wat Tyler's rebellion in 1381. Exemption from the payroll tax for firms in enterprise zones would show the Government's clear purpose to make the zones work, in addition to providing the capital and other concessions that are welcome and encouraging.
      There was a spectacular growth of the Irish economy following the tax concessions given to businesses. The zone at Shannon was especially successful. It was founded in 1959. As I understand it, profits and losses are disregarded there. That is an even greater inducement to bring trade to that zone than is offered within the enterprise zones that the Government plan. It is my belief, and the belief of my colleagues in the smaller businesses committee, that the zones, if they are to work well, should be given the

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      fullest concessions, so that they can act as a magnet. If they prove themselves especially successful, there is no reason why similar provisions should not be applied to make the whole of Britain an enterprise zone and allow us all to enjoy the fruits of success and thus benefit in the future.
      Mr. Donald Anderson: And no taxes.
      Mr. Loveridge: Taxes could be raised, but not necessarily in a way that depresses output. We want to get the country on its feet again. When we have done that, we can tax the product on output and sales. At present we have taxes that inhibit output and sales, and there is not a sufficient base to enable the Government to obtain the money to allow them comfortably to pay their way without having a large public borrowing requirement.
      Another helpful measure would be to give firms in the enterprise zones greater flexibility in stock relief. That would also have a magnetic effect. An additional aspect that the Government may care to consider is setting up special banking arrangements so that enterprises and fast expanding businesses that have only slender capital resources and little security to offer banks can obtain bank loans with a form of Government-backed guarantee. The Government are doing that in an experiment in Wales, through the Welsh Development Agency. What is good enough for Wales should be good enough for the enterprise zones.
      The real need of smaller businesses is the freedom to retain earnings for reinvestment. That is a real need, in addition to inducements to make them work harder to produce more and to sell more for the kingdom generally. The firms that will go to the enterprise zones will not wish to borrow any more than is necessary. The best inducement that the Government can give is to encourage the firms to reinvest their own earnings. The capital allowances provision will go a long way towards that within the enterprise zones. That is why I welcome the Government's initiative, and why I oppose the amendment.
      Mr. Homewood: The hon. Member for Upminster (Mr. Loveridge) has opposed the amendment. I shall also oppose it, but for different reasons. I should be hypocritical if I were to support
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      it. The day after the Budget speech I wrote to the Treasury and suggested that Corby should become an enterprise zone. I did not stipulate that assistance should be confined to manufacturing. However, it is with regret that I oppose the amendment.
      I have as many reservations about enterprise zones as have other Opposition Members. I had thought that the hon. Member for Wolverhampton, South-West (Mr. Budgen) had left the Chamber, but I am pleased to see that he is here. I do not believe that he meant that he supported the results of the situation that existed many years ago. To some extent that situation can be paralleled to enterprise zones. I do not believe that the hon. Member is in favour of producing such environments again.
      Some Opposition Members seem to believe that if we reject enterprise zones the Government will do what we wish and start to pour money into the NEB. They believe that the Government will intervene more actively in society and reinstate some of the things that they have removed from manufacturing industry. By putting forward amendments to the scheme they believe that we shall induce the Government to do that, but that is impossible.
      The town of Corby is in my constituency. By the end of the year unemployment will probably not be below 25 or 27 per cent. About 5,500 people are being discharged from the iron and steel works, and that figure will be augmented by another 1,000 from the tube works in the town. Out of a population of 55.000, 23,000 work. Within three or four years there will be an unemployment rate of 25 or 27 per cent. I recognise the dangers inherent in enterprise zones. However, the people of Corby must be grateful, as my right hon. Friend the Member for Llanelli (Mr. Davies) said, for crumbs and scraps from tables. We need every crumb and scrap that we can get.
      There is no possibility of Corby becoming substantially depopulated. People will not move to other areas. Of the population in Corby, 72 per cent. live in public housing. It will not be easy for them to go to other areas to find work. I wish to make a special plea. I hope that the Financial Secretary will confirm that enterprise zones will be set up in those

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      areas in which they are most needed. We shall have to withstand the resulting despoliation and unplanned environment if we wish to meet the problem of unemployment.
      Mr. Dalyell: All hon. Members will understand the special problems facing my hon. Friend the Member for Kettering (Mr. Homewood), who has Corby—or Little Scotland—in his constituency. I listened to the speech of my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy). It is possible that a bad thought will have crossed one's mind. What would happen if a bad fairy from the Department of the Environment—we all know that there are bad fairies in that Department—decided against Sheffield and in favour of Hull, with its fishing problems, or Bradford, or Barnsley, and so on? A large number of areas have special needs. If there are to be only three enterprise zones, some areas will lose. Will Sheffield, Merseyside, or Manchester lose?
      One must look at the scheme as a whole and not argue in favour of special cases. I do not wish to argue a special case. However, I have some experience of the matter as I represent half the new town of Livingston. Let us be candid. Several local authorities, including some major Labour-controlled authorities, are tumbling over their proverbial selves to get an enterprise zone. I have no doubt that the Sheffield Labour movement is committed to an enterprise zone. The position is such that any straw that can be grasped is more than welcome. That is understandable.
      The burden of proof lies with the Chief Secretary and the Financial Secretary to prove that the scheme is more than a gimmick. Let us suppose that the scheme had been introduced under the Government of my right hon. Friend the Member for Huyton (Sir H. Wilson). What would the Chief Secretary have said? He would have written in The Economist about " another Wilson gimmick." Formidable and eloquent articles would have been written in the Spectator by its former editor to the effect that this was just another Wilson gimmick.
      Mr. John Garrett: It would not have been well written.
      Mr. Dalyell: Some of us believe that this gimmick was thought up in order to give a silver lining to a very black cloud when the Budget was presented. Enterprise zones had more to do with the Chancellor of the Exchequer's problems in presenting the Budget than with any economic rationality.
      It is true that, as one trade union official in the West of Scotland put it to me, " Nobody quite knows what it is, but everybody wants an enterprise zone ". We have an obligation to try to find out precisely what is in the Government's mind, because the suspicion is that once again the Government have spoken first, come up with a superficially bright and attractive idea and later taken the time to think. I prefer Governments to think first and then to speak.
      7 pm
      My right hon. Friend the Member for Llanelli (Mr. Davies) asked a question that I hope will be answered. Where is the extra growth to come in this scheme? Will not those who are lucky enough to get enterprise zones be competing for any growth that may take place? Will we not be robbing Peter to pay Paul? Will the Financial Secretary deploy the argument that enterprise zones will create more growth than would otherwise have taken place? If so, I shall listen to him with great care.
      Mr. Loveridge: The question of robbing Peter to pay Paul is important. It is possible that that will happen and that there will not be the desired growth. If so, the experiment will not have succeeded. However, is it not much more likely that as we get the magnet effect of growth in the zones, with new trade and new life there, all the other trades around the zone will have a demand made upon them from the area of growth so that they also benefit? I believe that that will be the case, though there may inevitably be a little robbing of Peter to pay Paul.
      Mr. Dalyell: In the light of the nature of that intervention, I do not wish to respond by trying to be too clever by half or by giving a slick response to the hon. Gentleman, who has asked a fair question. However, to use his own analogy, is it not in the nature of magnets that they attract objects from other places rather than create objects?

      1493
      Let me give the hon. Gentleman a less glib answer. I listened to his speech with care and interest. He used the analogy of Ireland. Some hon. Members will know that Livingston new town is in competition with Eire for a major Japanese-owned electronics project. It strikes some of us who have gone into the matter that the Irish economy will, as some Irishmen admit, soon reap a whirlwind by having been over-generous in terms of external investment.
      At one level, I concede that if one has an enterprise zone that is a whole State it may or may not work, but small enterprise zones in part of a unitary State raise different problems, and I have yet to be convinced that the total sum of trade will be any greater as a result of this scheme.
      What will happen if a company moves into an enterprise zone and produces goods that are already being produced by another company in the area? Let me give a precise example. Let us suppose that on Clydebank, where the enterprise zone is proposed to cover the Singer factory area, a company moves in and makes some of the same products as those being produced by the John Brown engineering firm, which will not be in the enterprise zone. I am not just bringing up ghosts. The scheme could involve serious consequences for industries that have survived.
      My hon. Friends the Members for Greenwich (Mr. Barnett) and for New-ham, South (Mr. Spearing) know that an enterprise zone in the East End of London could make things much worse for firms outside the zone which are having great problems at present. Inside the zone, products would be heavily subsidised. The Financial Secretary must deal with that matter.
      I understand why my hon. Friend the Member for Attercliffe says that local industry is in the grip of a decline. However, it is not apparent that the scheme, on the present basis, will not hasten the decline of local industry outside the enterprise zones. Uncertainty about the operation of the scheme must be a deterrent to investment in buildings. The delay and uncertainty involved will be a deterrent in a situation which is difficult enough at present. The Government
      1494
      must get down to the nuts and bolts of any proposals.
      My hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) asked about the Customs situation. I had envisaged that that would not arise, but there will be endless bureaucracy to determine who is working in an enterprise zone and who is not. The question of distinguishing, for tax and other purposes, which companies are operating inside a zone and which are operating outside must be a complex matter.
      Since no area has yet been designated as an enterprise zone, the importance of what we are discussing is difficult to estimate, but the names of posssible sites have been outlined and uncertainty must be a deterrent to investment in buildings in those locations, since by deferring investment a higher rate of allowance may be obtained on industrial buildings, and non-industrial buildings may qualify for relief. Is it suggested that the Government will consider extending the relief to any expenditure incurred after 26 March 1980 in areas subsequently designated as enterprise zones, so that investors are not penalised for acting now?
      Another problem is the question of travel to work. As we know from our constituency experiences, there is no doubt that the costs of travelling to work are increasing out of all proportion, even to inflation. Is it desirable that in Clydebank, for example, one should concentrate a travel-to-work area in an enterprise zone when we know that it may mean longer and more expensive travel for many of those whom we are trying to help?
      There is a related question: what is the estimated loss to the Exchequer involved in enterprise zones? How much will all this cost? What will be the cost in revenue that would have been collected but for the proposals before us?
      The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to obstacles for developers. What are the obstacles that will be removed? My hon. Friend the Member for Greenwich knows more about the matter than I do. He was the efficient and helpful Minister in charge of such matters during the Labour Government. I suspect that the talk of removing obstacles disguises measures to

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      undermine planning procedures. We may from time to time find planning procedures irksome, but almost every planning procedure has a reason behind it. If we do not have planning procedures, how can we hope to maintain a meaningful and rational urban programme?
      Not every arm of the Labour movement is enamoured of the proposal. I agree with the Scottish TUC that the policy is based on the false assumption that planning regulations are a major factor in inhibiting industrial development. The major factors inhibiting development are the lack of demand in the market, superimposed on decades of unsatisfactory investment, which has left whole sectors of industry hopelessly uncompetitive. The other provisions in the Budget make those problems much worse. The enterprise zones are offered as a palliative. They were spatchcocked in at the end of the Budget.
      I listened carefully to what the Chancellor said in putting forward the proposal, and I have checked in Hansard what I heard. He talked of
      " a drastically simplified planning scheme ".
      Will the right hon. and learned Gentleman let us into the secret of how drastically to simplify planning schemes? Every hon. Member would like to see drastically simplified planning schemes for his constituency. However, a drastically simplified procedure often means riding rough-shod over such measures as the Health and Safety at Work etc. Act. I suspect that it means cutting corners in relation to such organisations as river purification boards. I go to Clydebank from time to time. I was recently at a Labour Party meeting there when several views were expressed. It is madness to ride rough-shod over such organisations as purification boards. The Government should spell out the whys and wherefores.
      The right hon. and learned Gentleman also talked of
      " accelerated handling of applications for warehousing free of Customs duty ".
      What does that mean in terms of extra personnel for Customs and Excise? There are problems if the Customs and Excise operates in one part of the United Kingdom and not in another. I do not wish to take the Committee through the devolution debates. The Financial Secretary
      1496
      shakes his head. Perhaps he will explain. What checks will there be against abuse? What are the police duties?
      7.15 pm
      The Chancellor referred to:
      " Minimal requests … for statistical information ".
      What statistical information can we do without? I presume that the Chancellor knew what he was referring to. I should like to know what statistical information is unnecessary and gratuitous. In, say, six enterprise zones, the attempt at economic management will be far more difficult if one washes one's hands of the need for statistical information.
      The right hon. and learned Gentleman went on to say that
      " red tape all too often stands between a young school leaver and the prospect of a job."—[Official Report, 26 March 1980; Vol. 981, c. 1488–9.]
      That is emotional talk. It is all too easy to work up steam against red tape. We are all against red tape, as we are all against sin. What is the red tape that stands between a school leaver and the prospect of a job? The remark appears to suggest the need to override regulations that the House in the past has thought necessary.
      Mr. Tom Benyon: I have just played a modest part in attempting to gain planning permission for a substantial company moving to my constituency. I assure the House that there are considerable problems and delays, which can be speeded up with good will, which we managed to achieve. Having been once round the circuit, I assure the hon. Gentleman that the process can be simplified in many areas without cutting corners. Gaining permission from the district, the county, the Department of the Environment and the Department of Trade can be run in parallel instead of series. Perhaps the hon. Gentleman will put forward positive proposals for developing areas of total neglect.
      Mr. Dalyell: That is a temptation to speak for an hour and a half, and my colleagues will be grateful that I do not succumb.
      The hon. Gentleman is right, but what can be done by laws and what can be done by good will? In my experience there is comparatively little difficulty

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      and delay when there is good will. However, all the laws in the world will not overcome messing around, ill will and bloody mindedness. The human factor is important.
      I have ideas about urban development, but I am not an inner city Member. I do not believe that the Committee would thank me for discoursing on the subject at present.
      What is the good of experiments if, by their nature, those experiments cannot be extended? It is not sour grapes. Although I am an East of Scotland Member, if I thought that the scheme would benefit West Scotland I should admit that West Scotland had priority. However, singling out Clydebank is less than satisfactory.
      Mr. Budgen: An experiment may bring out lessons that can be generally applied.
      Mr. Dalyell: We have been over this road before. I can look into the glass.
      I represent half of a new town. There is no doubt that the advantages of a new town are very fine for the new town area, but they create endless problems for industry in the area round the new town. If that is on a small scale, it could be extended to the rather larger scale which the hon. Member for Wolverhampton, South-West (Mr. Budgen) has in mind.
      In all this talk of free and cheaper markets, again one sees it from one's own constituency experience. Many of my constituents go off on Sunday mornings to buy a great many goods at the Ingliston market, which in a sense is a free market just outside Edinburgh. That is all very well, and no doubt it is to their short-term advantage. But whether it is to the long-term advantage of the area is a different proposition when one sees once prosperous businesses becoming less prosperous and employing fewer people than they used to do.
      Having experience of free markets and of new towns, I am very sceptical about the proposal.
      I come to one or two technical points. Schedule 13 provides that
      " a company may by notice in writing given to the inspector not later than two years after the end of the chargeable period for which the allowance falls to be made disclaim the initial allowance or require it to be reduced to a specified amount."
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      Cannot a great deal happen in two years? I think that it can. It seems to me that we are getting into an enormously complicated area of bureaucracy, especially with this kind of time lag.
      The schedule also provides:
      " In section 2(3) of the said Act of 1968 for the reference in one twentyfifth of the expenditure there shall be substituted references to one quarter of the expenditure."
      With all the talk of reducing manpower in the Civil Service, what will be the manpower costs of operating an enterprise zone system?
      All these questions are perfectly legitimate in Committee, and I feel that seriatim they deserve an answer. If people put forward schemes such as this which look attractive, it is part of the purpose of the House of Commons to examine what may be a gimmick. It is able to be examined in no other form. We had better look before we leap.
      Mr. Guy Barnett: My hon. Friend the Member for West Lothian (Mr. Dalyell) raised a number of issues which it had been my intention to raise. However, I do not wish to delay the Committee more than I can help, and therefore I shall not cover ground which my hon. Friend covered very ably. He showed that there were many unanswered questions, and we hope that the Financial Secretary will deal with the matters that have been put to him.
      Sometimes when Governments come forward with proposals which they describe as experiments, I am afraid that they are putting forward propositions which they simply have not thought out. Unless we receive satisfactory answers from the Financial Secretary to some of our questions, we shall be driven to the conclusion that all that we have is a proposal which the Chancellor of the Exchequer thought up at a drinking party on the Isle of Dogs and which he discussed with a Labour councillor in the streets of Poplar. Any experiment which this House is proposing to approve ought to have a little more background work done on it than that.
      The experiment which the Labour Administration put forward to deal with the problem of our inner cities was very well thought out. It was based on a good deal of practical experience through

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      the urban programme and other programmes that had been carried through. But here we have an experiment which appears to be based on very little experience and hardly any research.
      It is even odder to describe this as an experiment when, at the same time as they propose to set up enterprise zones as an experiment, the Government say that as part of the experiment they will reduce to a bare minimum their requests for statistical information. I thought that the purpose of an experiment was to learn from it. Apparently that is not the Government's purpose since, at the very moment that they set up the experiment, it is clear that they do not intend to monitor it. Earlier today a Government supporter made a justified plea for a proper monitoring of the experiment to see how it worked. Apparently, we are not to get that.
      My hon. Friend the Member for West Lothian pointed out that in addition to being an ill-thought-out experiment it was a very expensive one. In Committee we managed to glean from the Minister for Local Government and Environmental Services certain vague answers. He coud not give a clear estimate. We should like a clear estimate from the Financial Secretary of how much the House is voting, because he is responsible for doling out the money.
      On 15 May the Minister for Local Government and Environmental Services said:
      " The nearest estimate of the cost that I can give at the moment is £5 million to £10 million."
      He went on:
      " We do not know to how much it will ultimately give rise, because that depends on how successful the enterprise zone concept is. If it attracts a lot of industrial and commercial development, the cost may increase significantly, possibly up to £50 million a year."—[Official Report, Standing Committee D, 15 May 1980, c. 1171.]
      The Committee should take note of what we are doing in the Bill. We are allowing the Government to enter into an open-ended commitment to spend a sum, the total of which they do not know.
      What about the matter that we are immediately debating, that of capital allowances? We were told by the Minister that the cost in a full year might be
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      between £10 million and £20 million. He could give no estimate of the cost on the Exchequer as a result of the exclusion from development land tax. We have no estimate of the cost of exclusion from the industrial training levy.
      Mr. Lawson: I apologise for intervening at this stage, but it may expedite the proceedings on this series of amendments if I do so now.
      Is the hon. Member suggesting, for example, that because we do not know the amount of sickness in any given year there should be no such thing as sickness benefit?
      Mr. Barnett: I am making no such sugestion. I am drawing attention to the fact that we are allowing the Treasury to enter into a wide and open-ended commitment, and we want clearer explanations from the Financial Secretary than we have had so far from the Minister for Local Government and Environmental Services.
      Several hon. Members have pointed out very properly that it is no use setting up an enterprise zone unless the proper infrastructure is provided. That infrastructure will not involve merely the 500 or so acres that we are discussing. It may involve industrial feeder roads. If the zone is to be a success, it may even involve the development of other transport facilities. My hon. Friend the Member for West Lothian spoke about people travelling great distances to work. That may place a burden on rail and road services in the area. There is also the problem, which pertains in docklands especially, of land that requires proper drainage and a proper water supply before it is possible for industry to operate successfully there.
      7.30 pm
      In Committee it seemed right for us to pursue the issue with the Minister, and the right hon. Gentleman gave extremely vague replies about the cost. It was clear to me that the Government had not thought out the issue. The right hon. Gentleman said:
      " The answer is that the matter of resources for enterprise zones, particularly in regard to infrastructure, is one that we shall consider, but of course we cannot consider it until we know which will be the enterprise zones and whether they will or will not have infrastructure implications. But we shall be anxious to consider that and see whether help is

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      needed."—[Official Report, Standing Committee D. 20 May 1980, c. 1265.]
      That is a pretty open commitment. When the Labour Government put forward their proposals for inner cities, some limit was at least set on the sums of money that we proposed to devote to dealing with the problems of the inner cities. The proposal under discussion seems to involve a variety of open-ended commitments to which the attention of hon. Members should be drawn.
      A good deal of attention has been paid to the competing claims of local authorities. That does not surprise me. If I lived in Sheffield I should be keen to have an enterprise zone there, because of the heavy subsidy that an enterprise zone involves from Government to local authorities.
      The Minister for Local Government and Environmenal Services has described the scheme as expensive. Since it involves the Government acting as ratepayer, to the extent of 100 per cent., for all commercial and industrial property within a zone, in addition to all the other reliefs that are provided, it is an immediate and considerable benefit to any local authority that succeeds in obtaining a zone. Hon. Members listened with sympathy and respect to my hon. Friend the Member for Kettering (Mr. Home-wood) talking about the problems of Corby. I know them well, and I can understand why my hon. Friend and his constituents would be only too keen to receive a subsidy of the kind implied in an enterprise zone.
      I wish to underline the point made by the hon. Member for Wolverhampton, South-West (Mr. Budgen), who pointed to the need for proper criteria to be established. If six enterprise zones are to be set up throughout the British Isles, and if considerable benefits are to be unloaded on little pockets of 500 acres in various parts of the country, there must be published criteria that will be used to decide why one area rather than another qualifies for the benefits that the Government propose to dispense. I recognise the difficulties. It will be difficult to pick out six zones of 500 acres and declare that their need is pre-eminent. I can inform the Minister of the difficulties experienced by the previous Government in designating 47 areas as well as programme
      1502
      authorities. It was a real problem to meet the competing claims of different local authorities.
      I ask the Minister to try to give a clearer indication of the criteria that the Government will apply. A clearer identification of the criteria than that given by the Minister for Local Government and Environmental Services is needed.
      I have discussed with a number of small business men whether the proposals for the enterprise zone that I explained to them were relevant to their needs. Their answer was most definitely " No ". The small business men to whom I spoke are looking for decent estate management more than anything else. They want one authority to which they can go for answers to specific questions. They do not want a diminution of controls. Many recognise the need for control over pollution, safety, health at work and such issues. What really upsets and annoys small business men is that there are so many authorities to which they must go—one for health, another for pollution and still more for safety at work, planning permission and building control. A small business man with a small administrative staff finds it difficult to secure perhaps one small change, because so many different authorities have to be consulted. The enterprise zone is no solution. According to the Government, many of the controls will remain.
      The solution is proper estate management, where the estate manager takes responsibility for a large number of the issues that are involved in developments that take place on a particular estate. The experience of new towns indicates that where there is good estate management by a development corporation, rather than a situation in which they are flogged off to pension funds or anyone else who cares to buy them, the business man can get on with his job. If he has a question to ask or wishes to seek permission for a particular development, he can get an answer quickly and efficiently from someone whose job is to find out what regulations apply and those who need to be approached for an answer. That is the problem, and I do not think that it will be answered by the enterprise zone idea. I understand that there will be no estate management in the proper sense of the word. The Government have admitted that most of the controls

      1503
      that exist, with the exception of a degree of diminution of planning control, will continue.
      For those reasons, I find the whole proposal highly suspect. The Committee will want some explanations from the Minister to many of the questions that have been raised, especially those that I have tried to put and also the points that were ably put by my hon. Friend the Member for West Lothian.
      Mr. Anderson: I share the scepticism of those of my hon. Friends who have participated in the debate. I participate for two reasons. The first is that the lower Swansea Valley, in my constituency, is the site favoured by the Welsh Office for the enterprise zone to be located in Wales. There has, presumably, to be a statutory Welsh zone in this context. The second reason is my experience as a councillor in a deprived inner city part of London for five years.
      The Chancellor of the Exchequer, in his Budget speech, introduced the concept of the enterprise zone in a curious way. He began by saying:
      " Finally, I come to an idea."—[Official Report, 26 March 1980; Vol. 980 c. 1487.]
      It was an utterance on the lines of a Conservative Prince Monolulu saying " I have a horse ". It was an idea which, clearly, came to the Chancellor on the Isle of Dogs and became refined as it was processed through Treasury channels and emerged, still an idea, on Budget day.
      One can understand why the Chancellor, seeing the Isle of Dogs and the problems of inner city areas, concluded, like so many others, that something different had to be attempted. All the traditional means had failed. Manufacturing industry has fled from much of our inner cities. It is almost impossible to find apprenticeships for young people. Small workshops and other small enterprises that could form the basis of a local economy are not attracted by current methods. One decides, perhaps in desperation, to try a new idea.
      Mr. Dalyell: Will my hon. Friend accept that both he and I, representing the areas that we do, will be faced by employers complaining bitterly about the poaching of skilled people whom they had trained, who would be taken away
      1504
      by firms under no such obligation? I know that he has this matter in mind, from questions on the subject that he has put in the House and elsewhere.
      Mr. Anderson: That is one of the areas that form the basis of my scepticism. Where skilled workers are needed in the enterprise zones, they can be provided only by firms outside the zones which have trained them. There is bound to be poaching. That element may be inherent in the concept, but it is a negative aspect of it. The aim of bringing life back to these inner city areas is admirable. Perhaps the concept is more apposite to inner city areas than to declining industrial areas such as one finds in Wales, Scotland and the older industrial parts of England.
      The concept is based, first, on a distaste for planning. It is clearly a direct attack on the benefits of planning, and we can think, in passing, what many of our areas would be like these days were it not for the development of our planning system, not to mention the local democratic input referred to by my hon. Friend the Member for Newham, South (Mr. Spearing). If planning procedures can be simplified in these enterprise zones, why cannot they be simplified elsewhere in the country? Far more relevant to the inner city areas than lifting the burden of planning restrictions is greater public investment. That, however, will clearly not come from this Government. Like my hon. Friends, I am philosophically reluctant to accept the concept of removing controls to see what enterprise may flourish. One may find all sorts of unwelcome enterprises developing.
      The Government's basic distaste for planning is coupled with the belief that there are people who are likely and ready to respond to the new incentives that are to be provided. That statement in the Budget speech is contradicted by the whole series of other policies in the Budget—the general deflationary policies, with the current high level of interest rates—and one wonders where the growth that will form the basis of these new zones is to come from if it is to be additional to enterprises that would exist anyway. Where will the new orders come from, particularly since so many of the smaller enterprises which the Government have in mind are likely to be dependent on the public sector for their orders? As

      1505
      the public sector is in a period of retrenchment as a result of other Government decisions, clearly that stimulus to smaller businesses will be missing.
      All the areas that are currently being considered are desperate for jobs, and naturally all local authorities which have been mentioned will be falling over themselves in seeking to convince the Government that their areas are the appropriate ones for the new zones. The Welsh favoured area in the lower Swansea Valley is suffering grievously from the current recession, even before the impact of the Port Talbot steel closure is felt. It is hardly surprising that, in common with other areas, the local authority is desperately keen to attract this new concept. However, there are dangers within the enterprise zones because, as the local authorities compete with one another in a Dutch auction to win the favour of the Government, they may well seek more and more to do without controls, to make the area look more attractive by having less stringent controls than those imposed by a competing authority.
      7.45 pm
      If the Government seek to establish a system of sub-zoning by which one part of the zone is for warehouse development, another for manufacturing units and another for other servicing units, the more controls there are the more the whole concept will be undermined and the more the whole raison d'etre of the enterprise zones will be put in question. There is therefore a real danger, with such a Dutch auction, of doing away with controls which most of us think are necessary for the establishment of such zones. For example, if the only bidders for enterprise zones were scrap yards—and we all, presumably, have in our areas the problem of where scrap yards are to be situated—would there be any control to stop them from coming in if the quota for them in a zone was already full? If there is to be no attempt to link the establishment of enterprise in a zone with the number of jobs that that enterprise will bring, are we not in danger of establishing a series of warehouses—what some of us regard as jobs on wheels? Clearly, the number of jobs generated by warehousing may be minimal, and therefore the job creation element, the real reason for this proposal, may be minimal, too.
      1506
      There is the problem of hedge-hopping. Because the Government are proposing to create a zone of privilege, what will happen to the non-privileged areas outside it? [Interruption.] I believe that my right hon. Friend the Member for Llanelli (Mr. Davies) is suggesting that his constituency, which adjoins mine, is such an area. What will happen where a small enterprise from Llanelli decides to leave that area to come to mine?
      Mr. Denzil Davies: Never.
      Mr. Anderson: That may be so. However, if it decided to hop over the hedge into my constituency there would be no net increase in employment in the overall travel-to-work area, and therefore no benefit. Even so, a firm would have an enormous incentive to do just that. Have the Government any proposals to combat the real danger of hedge-hopping?
      There is the real danger, therefore, of a lack of control over the type of enterprise that will be attracted to these zones and of the effects that they will have on areas adjacent to them. They are defined by the Government as being of no more than 500 acres. That suggested for my constituency would be about 200 acres—a relatively small area. The relevant area in employment terms—the travel-to-work area—is much larger, and it is in that much larger area that the adverse effects could be felt.
      We were told from the Conservative Back Bench that if the concept of enterprise zones were a success it could be extended. That begs many questions, but there must be some way of measuring any success. Because of the vested interests that will develop during the 10 years, it is unlikely that any of the sites that are chosen will lose that status. Is the measure of success to be the number of jobs created within the area of privilege, or the effect on the total relevant area? They could be very different. The Government could find, on the principle of robbing Peter to pay Paul, that the total effect in the travel-to-work area was adverse.
      Mr. Spearing: On the important question of time, is my hon. Friend aware that in the schedule the designation order gives the period for which the order shall be effective? All that we have heard is that the Government have mentioned 10

      1507
      years. There is no obligation on the House to renew that period. It would be a matter for the House after 10 years if the Government wished to renew it.
      Mr. Anderson: What the House has made it can unmake, and anybody who goes into an enterprise zone must be well aware of that, but the assumption would be that if these areas were successful according to the narrow definition of creating jobs within their own area, such vested interests would be created that no Government—of whatever complexion—would dare to destroy or take away privileges once they had been granted.
      There are a number of question marks over the provisions. There is, for example, the question of what is meant by being free from Customs and Excise dudes, and also what statutory information will no longer be required. It is certain that in any of the currently favoured sites, whatever our overall scepticism, we shall each fight to ensure that the enterprise zones come to our own area.
      We are aware of the danger that the Government will use the creation of enterprise zones as a substitute for a real regional policy or an inner cities policy in those areas which desperately need such policies. What is needed in my area and that of my right hon. Friend the Member for Llanelli is not an enterprise zone—though that might make a contribution to our desperate jobs situation—but a regrading of our regional development status. Whatever is done on enterprise zones should not be a diversion from looking at regional policies.
      Mr. Lawson: The debate on this series of amendments, and on the clause, has been going on now for over four hours. It is perhaps appropriate, therefore, if I intervene at this point. It is quite possible that in your wisdom, Mr. Craw-shaw, you will decide that the debate should continue for a further four hours. Nevertheless, I believe that it is appropriate that I should reply at this stage to the great number of points that have been made.
      I do not think that it is possible—nor do I think that the Committee would think it reasonable—for me to reply to all the points, partly because there have been so many and partly because—though
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      your predecessor in the Chair, Mr. Crawshaw, suggested that the debate could be on the whole clause—the debate has gone wider than that. A great deal of the debate has, effectively, been on new schedule 25 of the Local Government, Planning and Land (No. 2) Bill.
      I am sure that the Committee will understand if I do not deal with all the points in that 13½-page schedule. I shall confine myself largely, though not entirely, to those points which relate to the Bill we are now debating.
      Mr. Bob Cryer: The clause that we are discussing says in subsection (2) that
      " ' enterprise zone ' means an area designated as such by an order made by the Secretary of State under powers in that behalf conferred by any Act ".
      The Act that will confer those powers is the Local Government, Planning and Land (No. 2) Bill. The Government, not hon. Members, have framed the legislation in this way. The Financial Secretary has a duty to answer the points that have been raised on this clause, dealing with subsection (2), on the other powers that will designate the zones.
      Mr. Lawson: The hon. Member for Keighley (Mr. Cryer) has just come into the Chamber. I shall make my own speech and, as I have said, I shall answer a great number of the points that have been made and many of the questions that have been asked during the course of this lengthy debate.
      The clause and the whole concept of enterprise zones have been largely welcomed by those of my hon. Friends who have contributed to this discussion. I see that my hon. Friend the Member for Manchester, Withington (Mr. Silvester) is in his place. He asked whether we might have six enterprise zones in England rather than the three that have been suggested. At this stage the scheme is an experiment and it will be difficult to meet my hon. Friend on the matter of six zones, though his remarks will, of course, be given full consideration. It is possible that four zones will be created. I think that my hon. Friend's request for six at this stage is a little difficult to meet, but I am grateful to him for the support that he gave to the concept.
      Support was also given by my hon. Friends the Members for Kidderminster

      1509
      (Mr. Bulmer), for Luton, East (Mr. Bright) and for Upminster (Mr. Loveridge). The last two of my hon. Friends wanted the proposal to be extended considerably. That really cannot be acceded to, although I understand what they are asking for.
      The enterprise zone concept goes a long way. Let us see how it works out in practice. My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) also intervened, characteristically, in the debate. He wanted two things in particular. I am glad to see that he was wholly and robustly opposed, as I am, to the amendments before us. My hon. Friend wanted the Government to make it quite clear that a particular area had not been designated as an enterprise zone because the local authority did not wish it to be so. My right hon. Friend the Secretary of State for the Environment will, at the end of the day, decide on the particular areas and his decisions will be made known to the House before it rises for the Summer Recess. I think it likely that it will become apparent where local authorities have said that they do not want enterprise zones within their areas.
      Let me make it clear from the start that no area will be made an enterprise zone against the will of the democratically elected local authority that is responsible for that area. There is no question of foisting an enterprise zone upon an area where it is rejected by the local authority concerned. I think that that answers the question about local democracy raised by the hon. Member for Newham, South (Mr. Spearing).
      Mr. Spearing: The hon. Gentleman misunderstood the point that I was making. I was not referring to the response to the invitation. I was concerned that planning control—and one man's bureaucracy could be another man's protection—should be taken out of the hands of locally elected councillors in respect of planning applications. If the scheme goes through, the Minister will know that there is no planning application in the normal way in an enterprise zone.
      Mr. Lawson: The planning regime—and there will be a planning regime even though it is different from the one which applies to the rest of the country—will
      1510
      have to be agreed with the local authority concerned in discussions that will take place, in broad terms before the designation and in detail after the designation.
      Mr. J. Enoch Powell: As the Financial Secretary is a United Kingdom Minister will he confirm that what he said about the local authority having the veto will apply to the Belfast area equally with the others?
      Mr. Lawson: The position, obviously, is different in Northern Ireland, for reasons that the right hon. Member for Down, South (Mr. Powell) knows full well. I am sure that if he asks the Northern Ireland Ministers about this they will be able to enlighten him, though I do not make light of the issue.
      Mr. Hooley: If the Government are genuinely concerned about democratic accountability why do they give power to the urban development corporations to operate the zones? The corporations are not democratically elected. They can be imposed upon an area by the Secretary of State.
      Mr. Lawson: That is so. I was not aware that the Labour Party was opposed to the urban development corporations.
      My hon. Friend the Member for Wolverhampton, South-West wanted an assurance that there would be no pork-barrel politics. He thought that that could be avoided only by clear and specific criteria being announced in advance. That is unrealistic. Any Government must decide, for example, which road schemes should go ahead. A Minister cannot publish clear and specific criteria in advance so that people know which road schemes will be authorised and which will not. An element of judgment is involved.
      8 pm
      Broad criteria are being used. We have sought a reasonable geographical spread between the regions. Within each area we have examined economic problems, decay and physical dereliction. We have looked for sites which have a need and potential for development. We have tried to pick sites which have a variety of different problems in order to test the enterprise zone concept in different circumstances. I think that that answers

      1511
      the right hon. Member for Orkney and Shetland (Mr. Grimond).
      The enthusiastic co-operation of the local authority is a pre-condition. The anxiety of my hon. Friend the Member for Wolverhampton, South-West about pork-barrel politics will be assuaged after the event. After the sites are chosen my hon. Friend, with his perspicuity, will be able to judge whether there is any evidence of pork-barrel politics. Most of the authorities that have been approached so far are solidly Labour-controlled. There is no evidence that we are looking to Conservative-controlled areas and overlooking Labour-controlled areas. I think that my hon. Friend was afraid of that. The press would be quick to investigate and we should be happy to submit ourselves to that test.
      Mr. Anderson: Local authorities will be compensated by the Government for the loss of rate revenue. Will they also be compensated for any additional expenditure on infrastructure necessitated by the creation of enterprise zones?
      Mr. Lawson: That is a matter for my right hon. Friend the Secretary of State for the Environment.
      The debate was opened by the hon. Member for Sheffield, Heeley (Mr. Hooley). There was an instructive division of view between the hon. Member for Heeley, who was much opposed to the concept but who backed down later, and the hon. Member for Sheffield, Attercliffe (Mr. Duffy"), who was anxious that Sheffield should have an enterprise zone. The hon. Member for Attercliffe had the courtesy to explain why he is not in his place now. He has a naval dinner to attend. [Interruption.] I am horrified that the hon. Member for Keighley should laugh in derision because the hon. Member for Attercliffe, who is a former Navy Minister, has to attend a naval dinner. That is an honourable reason for not being present to hear the reply to the debate.
      The hon. Member for Heeley spoke for 50 minutes. I shall try not to beat that record. His argument was echoed by the right hon. Member for Llanelli (Mr. Davies). They drew back from attacking the concept of enterprise zones. They wanted to ensure that the 100 per cent. allowances went only to manufacturing
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      industry. The amendment is not drawn as narrowly as that but it comes to the same thing. But I do not wish to make anything of that point. I shall explain why I reject their approach.
      The hon. Member for Heeley asked a number of specific questions. I shall try to answer some of them. He and other hon. Members were worried that taxpayers should shell out to pay for the concessions in the enterprise zones. Many Opposition Members talked in terms of robbing Peter to pay Paul. Of course there is an element of that. There must be. I ask Opposition Members to agree that those areas which receive favourable treatment, whether through increased Government expenditure or through tax and rate remissions, must be paid for by the generality of ratepayers and taxpayers. Hon. Members must either accept that or say that there should be no special aid for any region. They cannot have it both ways. They cannot say that they are in favour of regional policies and policies to help the inner cities and at the same time be against taxpayers being asked to pay.
      Mr. Guy Barnett: We have asked that where there is discrimination of the kind provided by an enterprise zone clearly stated criteria must be published. We must be clear why one area is treated more favourably than others.
      Mr. Lawson: I shall have to disappoint the hon. Gentleman. I do not have all the time in the world and I cannot devote more time to the question of criteria. There will be ample time to discuss it further. I had hoped that the Committee would be satisfied with what I had already said.
      The hon. Member for West Lothian (Mr. Dalyell) mentioned Customs regulations. That was based on a misreading of what my right hon. and learned Friend the Chancellor of the Exchequer said in his Budget Statement. He said that there will be:
      " accelerated handling of applications of warehousing free of Customs duty ".—[Official Report, 26 March 1980; Vol. 980, c. 1488.]
      He was saying not that there should be freedom from Customs duty in those areas but that in cases where handling free of Customs duty applied under the law of the land the procedure would be accelerated in the enterprise zones. Customs facilities throughout the country are

      1513
      available to firms to deal with goods that can be processed free of Customs duty. It is an administrative assistance—a cutting of red tape. The procedures will be expedited in the enterprise zones. The criteria applied to decisions on Customs warehousing in enterprise zones will be more relaxed than the criteria elsewhere in Britain. There will be no remission of Customs duty in those areas. I hope that that point is clear.
      Mr. Dalyell: Why can the procedure be expedited in the enterprise zones? Why cannot it be expedited in all other areas?
      Mr. Lawson: I hope that that will be possible at some stage. The hon. Gentleman and a number of his hon. Friends seem to be in favour of a curiously un-empirical approach. The approach that is embodied in the clause is that of " suck it and see ". It is not, as such, a doctrine of the Government. It is what lies behind the concept of an experiment, and the enterprise zones are an experimental concept. It make more sense to see how practice and changes in practice work in tiie light of real-life experience than to apply them by some abstract principle or dogma.
      The hon. Member for Heeley was concerned about projects that had already started in areas subsequently designated as enterprise zones. It is clear from the Bill that relief applies only to expenditure incurred after an enterprise zone is designated. If a building is erected wholly and completely before the designation of the zone, there will be no 100 per cent. capital allowance relief. However, there will be rate relief after the zone has been designated. The clause makes it perfectly clear that a contract entered into during the 10-year period enables relief to be claimed under the 100 per cent. capital allowance.
      The hon. Gentleman entered into some altercation with his hon. Friend the Member for Attercliffe about whether pubs would qualify for capital allowances. He said that it was a matter on which I should arbitrate, and I do so gladly. Pubs in enterprise zones will be eligible for the 100 per cent. capital allowances.
      The hon. Gentleman was concerned with reviving manufacturing industry. These proposals are concerned with reviving the areas where there has
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      been—as the hon. Member for Attercliffe said—dereliction and decay for 20 years. How are those areas to be revived? The idea that if a job disappears in a certain industry it must be recreated by Government action is the most arrant nonsense, and a clear road to disaster. The amendment sneers at the non-manufacturing sector because we are giving it 100 per cent. capital allowances too. That is where the majority of working people in Britain are employed.
      8.15 pm
      The right hon. Member for Llanelli said that he was unfamiliar with the idea of extending relief to commercial buildings. He asked the meaning of the word " commercial ". He said that he was puzzled. I am surprised that he was puzzled. Not only do the commercial and other non-industrial employers employ more than half of the working population—there is nothing here of the fringe nature suggested by the hon. Member for Heeley—but the right hon. Member has himself spoken about commercial buildings on many occasions in the past. Far from attacking the fact that in the enterprise zones we wish to give the same allowances to commercial buildings as to other buildings, he has conceded the point in the past. In Committee on the Finance Bill in 1977, only three years ago, he said:
      " There is no case in equity for treating commercial buildings differently from industrial buildings."—[Official Report, Standing Committee D, 22 June 1977; c. 1135.]
      I see that the right hon. Gentleman is nodding in agreement. Yet he has the gall to say to the Committee that it is absolutely monstrous to give commercial buildings the same allowance as industrial buildings.
      Mr. Denzil Davies: I did not say that. I simply asked what was meant by the word " commercial ". Secondly, I was dealing with capital allowances in general and not with the position in enterprise zones.
      Mr. Lawson: That is a riddle. The right hon. Gentleman knows perfectly well that the reason why he made that statement in 1977, and did not accede to the demands of the CBI and many others, was that he could not afford it. Because enterprise zones are very limited, the cost is much cheaper and, therefore, they can be afforded. If he does not know the

      1515
      meaning of the word " commercial ", how could he make that statement in 1977? Commercial buildings are those such as retail or wholesale warehouses, shops, offices, garages, cinemas, banks, launderettes, and a whole range that do not qualify as industrial buildings. For the benefit of the right hon. Member for Orkney and Shetland, let me say that industrial buildings are confined, broadly speaking, to the manufacturing and processing industries. Everything that is neither manufacturing nor residential comes, in general terms, under the heading of commercial, including the office buildings that are given relief under the clause.
      The right hon. Member for Llanelli also asked about cost.
      Mr. Denzil Davies: I asked what is an office? What sort of office would exist where there was no trade or professional vocation being carried out?
      Mr. Lawson: I will give an example. If the Labour Party wished to set up its office in an enterprise zone, we would, out of the goodness of our hearts, grant it the 100 per cent. allowance, despite the fact that it is not a trade, profession or vocation, although Labour Members may feel in their hearts that it is a trade, profession or vocation. The right hon. Gentleman asked for an example. That is the example that I give him. [Interruption.] I think that, as my right hon. Friend said, it is an industry now, but that concept is not yet known to the statute book.
      The cost of the rate relief, as the hon. Member for Greenwich (Mr. Barnett) rightly quoted from my right hon. Friend the Minister for Local Government and Environmental Services, is estimated to be between £5 million and £10 million a year. The cost of the capital allowances we reckon to be about £20 million. It has to be a broad estimate. We cannot be precise. That means that the total cost of those two items comes out at between £25 million and £30 million.
      The right hon. Member for Orkney and Shetland asked a number of questions, some of which I have tried to answer in my earlier remarks. He asked two particular questions. One was whether this was specifically designated for small businesses. The answer is that it is not.
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      I hope that small businesses will be attracted to the enterprise zones, but there is nothing specifically geared to small businesses in the clause. There are many other matters in the Bill which will be of considerable benefit to small businesses. We have debated one of those matters and we shall be debating others later.
      The right hon. Gentleman also asked about the relationship with the urban programme. I assure him that the two will continue side by side. I do not know what areas my right hon. Friend the Secretary of State will designate, but if an area is part of both schemes it will presumably get the benefits available under both.
      The hon. Member for Newham, South was concerned about local democracy, on which I have already touched. He was also concerned about the increase in land values that might arise. I think that is unrealistic, and I see no signs of it. Many areas—most of them Labour-controlled—have applied to be enterprise zones. The knowledge that they have applied has not increased land values. Once an area has been designated an enterprise zone, it is likely that land values will rise. But that is not the end of the world. That is no terrible thing. It is an extraordinary suggestion that we should not rescue these areas from dereliction because land values might rise. It is almost inconceivable that they will not rise if these areas are to be rescued from dereliction.
      Mr. Spearing: My horror was not for that reason. The point that I was making related to the £30 million of which the hon. Gentleman spoke. Does he not agree that, because land values will rise and rents will rise with them, the effective benefit will go to the holders of the land and not necessarily to the industry? Therefore, the money voted by the House for this scheme will benefit not necessarily the areas, but the people who, by chance, already hold the land or speculate on its value.
      Mr. Lawson: I am astonished at the hon. Gentleman. Whenever planning permission is granted, the benefit goes to the owner of the land. If he thinks that is repugnant, the whole planning permission system should disappear.
      Mr. Denzil Davies: If that happens under planning permission, development land tax is paid. Under the Bill there will be an exemption from development land tax. Indeed, there will be no tax at all on the increase value.
      Mr. Lawson: That is one of the ways of encouraging development in these areas. This is the purpose of the clause.
      With the exception of the speeches by the hon. Members for Attercliffe and Kettering (Mr. Homewood), we have had a mixture of nit-picking and ideology.
      Mr. Dalyell: No.
      Mr. Lawson: The hon. Member for West Lothian says " No " to ideaology That is right. There was no ideology in his speech. He was a nit-picker. The ideology which came from the right hon. Member for Llanelli and the hon. Member for Heeley was that civilisation was to be equated with Government regulation. Apparently the more Government regulation there was, the higher the gedree of civilisation. The suggestion was that to remove any regulations—to de-plan, as the hon. Member for Newham, South said—was to destroy civilisation. I use the word " civilisation " because it came from the lips of the hon. Member for Heeley when he introduced this concept, and his hon. Friends agreed with him.
      Mr. Hooley: I used the word " civilisation " in the context of those important laws passed by the House over the years to control pollution, filth in water and air, which damages people's health, to control safety and to try generally to exercise some benificent effect on the environment. Is the hon. Gentleman repudiating all that legislation?
      Mr. Lawson: No. If the hon. Gentleman was talking only about that aspect, his speech was wholly irrelevant to the clause. Nothing in the clause alters health and safety at work provisions or the pollution regulations. I do not know what the hon. Gentleman was worrying about. Indeed, I do not know why he made his contribution, if that was his concern, because there is nothing in the legislation which alters those matters.
      The hon. Member for West Lothian asked, as he often does, a number of pertinent questions. He was concerned particularly about administrative difficulties
      1518
      over a wide area. One was the administrative problem of the tax relief when there is a wide travel-to-work area.
      Mr. Dalyell: Rubbish.
      Mr. Lawson: If the hon. Gentleman looks carefully at the legislation, which is partly in the Local Government, Planning and Land (No. 2) Bill and partly in the Finance (No. 2) Bill, he will see a consistent pattern. We have tied the tax relief to buildings—whether it be development land tax, capital allowances or rates—rather than to employees. That is for the reason that he suggested—namely, that it is easier administratively to identify where a building is located.
      The hon. Gentleman asked whether there would be back-dating of the relief to the date of the Budget. There will not. That is not the intention. Therefore, to say that there would be a great amount of investment in those areas which will have been penalised because it had taken place prior to the designation is a little over-optimistic. One of the problems of those areas is that there is very little investment in them at present. But the relief will start from the date on which the designation takes place.
      8.30 pm
      The hon. Member for West Lothian also said—this point has been touched on by a number of hon. Members—that planning delays were not a problem for business and industry. He said that the problems of business and industry were caused by a lack of demand. I venture to disagree with him very strongly. If he talks to business men he will find that planning delays and red tape are also real impediments. A number of studies have been made of the time taken to get planning permission for commercial and business enterprises in this country as compared with other countries. A study that was made comparing this country with Canada shows that in a particularly striking way.
      This illuminates a major difference between the two sides of the Committee. We do not believe that economic growth is a function of government, and that it is simply a matter of how much monetary demand the Government pump into the economy that will determine the rate of economic growth. We believe that individuals are responsible for economic growth. The main

      1519
      factors that hamper individuals are impediments of one sort or another on the planning side. Planning delays are one factor. Others include restrictive practices—some of which are enforced by trade unions and some by other bodies—and disincentive levels of taxation. Those are the factors which are responsible for the lack of economic growth. If the hon. Gentleman thinks that planning delays are not impediments he is very much mistaken.
      The hon. Member for Swansea, East (Mr. Anderson) did not make any new points, although he made many of the points rather better than some of his hon. Friends. I am not being patronising, because he is an eloquent speaker. The phrase:
      " What oft was thought, but ne'er so well expressed."
      might well apply to him.
      I have tried as briefly as possible to cover a large number of the questions that were put to me. I hope that the Committee will be satisfied that this is one of the most imaginative concepts to have come from any Chancellor of the Exchequer within living memory. We put forward the concept of enterprise zones as an experiment. We shall learn from that experiment, both from the problems of the derelict areas and from the lessons which will be of general interest and general validity for the economy and for the country as a whole. Above all—it is long overdue—I believe that the Opposition will learn some lessons too.
      Mr. Dalyell: The Financial Secretary said that I was a nit-picker. I propose to pick some substantial nits that have not been answered.
      The first is on the question of red tape. The Chancellor of the Exchequer said that red tape all too often stands between young school leavers and the prospect of a job. I should like him to spell out precisely what this red tape is. Often there is a reason for the red tape. It is true that there are delays in planning procedure, but they often occur as a result of the lack of good will and human bloody-mindedness. Is there any undertaking that human bloody-mindedness and lack of good will will be absent or will be cut with regard to enterprise zones.
      1520
      Another nit that was not answered was the question of exemption from the scope of industrial training boards, and the question whether poaching would be allowed. Poaching would certainly occur if this system came into operation.
      The Chancellor referred to " drasticaly simplified planning schemes." If there is a possibility of drastically simplified planning schemes, why, in heaven's name, can they not be introduced in other places and at other times? I do not think that the world is quite as simple as that.
      Again, the question of what would happen to industry in the neighbourhoods was not answered. That question was put by my hon. Friend the Member for Greenwich (Mr. Barnett), who had ministerial responsibility for these matters, and by my hon. Friends the Members for Sheffield, Heeley (Mr. Hooley) and for Newham, South (Mr. Spearing). The question was, what would happen to industry that had survived on the edges of one of these enterprise zones? [Interruption.] The Assistant Patronage Secretary, the hon. Member for Monmouth (Mr. Stradling Thomas), has not been here for this memorable debate. It will be remembered as the " suck it and see " debate. The hon. Gentleman missed it. When he writes his memoirs, he will regret that he was out of his place for the " suck it and see " debate.
      Then we did not come to the fundamental nit of all—what extra growth will be provided? We come back to where we started. We are competing for such growth as exists. There was no indication in the Financial Secretary's speech that somehow or other, by some alchemy, extra growth would be presented by all this. So the original charge of robbing Peter to pay Paul stands.
      Again—a very substantial nit indeed—what about the whole travel-to-work problem? If this is to be a centre of industry, what about the infrastructure? I suggest that an answer should have been given to my hon. Friend the Member for Greenwich, who had to deal with the local authorities. A question which has not been answered is what the local authorities will have to pay for all this in terms of infrastructure. Suppose that in East London—we shall leave Clydebank out of it—an enterprise zone is set up. What will the neighbouring local

      1521
      authorities have to pay out, particularly in relation to transport? It is no good saying to local authorities at the end of the day " Suck it and see ". They will certainly not thank the Treasury for that.
      Again, the question of delay was not answered.
      There is a purely factual question about minimal requests for statistical information. How does one set about any kind of economic management if one has major enterprise zones, for which one does not require the statistical information which is required for the rest of the country? When the Treasury statisticians ask for it, what will they be told?—" Suck it and see."
      Once again, the whole thing has been exposed. The Assistant Patronage Secretary knows very well those many occasions when he was sitting where my hon. Friend the Member for Birmingham, Stechford (Mr. Davis) is sitting now when the House of Commons, doing its job, has exposed a nonsense. I fear that this is yet more ill-thought-out nonsense.
      I do not know whether the Financial Secretary will reply again.
      Mr. Lawson: All right; I shall intervene. I made the point—I am glad to have this opportunity of repeating it—that it was unworthy of the hon. Gentleman to suggest that this was a gimmick, because he knows that my right hon. and learned Friend the Chancellor of the Exchequer put this idea forward two years ago in a speech and has been working on it since then. As soon as we got into office, a great deal of work was done on the detail of this proposal, and it has, therefore, come to fruition and to a vote in the 1980 Budget. Therefore, this is no instant gimmick. It has been developed ever since that speech in 1978.
      Mr. Dalyell: That makes it worse and not better. If the Government have been thinking about this for two years, we should go over the whole list of questions again. However, I do not want to annoy my colleagues. That is the only reason for not doing so. The questions about travel to work are unanswered.
      If the Financial Secretary wants to bring this debate to a speedy end, will he answer a key question? It has been asked
      1522
      by a number of my hon. Friends, and for Greenwich. How much are the local authorities in the area to pay out for the enterprise zones contiguous to their areas? If the hon. Gentleman will answer that question, I shall make a bargain with him—I shall be quiet and we shall leave it. Will he answer that question? It was asked by my hon. Friend the Member for Greenwich, a former Under-Secretary of State for the Environment. No such luck: the hon. Gentleman is not prepared to do so. I suppose that the answer is " Suck it and see ".
      Mr. Spearing: Is my hon. Friend aware that, in spite of two years of preparation, schedule 25, which has been referred to in the debate, was not part of the original Bill? It was inserted after the Bill began to be considered in Committee. Paragraphs 9 to 14 of the schedule—paragraph 13 gives the Minister power by direction wholly to replace the scheme—were inserted on 15 May, two days before the Committee debated it, without the local authorities being notified.
      Mr. Dalyell: We have been down this road before. Does not the Assistant Patronage Secretary know what happened in the previous Parliament and what happens to Governments when they put in additional schedules at a late stage? Be warned. Take the Bill back to the Whips' Office and tell it what happens when ill-thought-out legislation is produced and an attempt is made to put it right. The result is that Governments spatchcock new ill-thought-out schedules. On these occasions one sinks deeper and deeper into the mire as one sucks. This will be known as the " suck, suck and suck again" debate.
      Mr. Hooley: We now know what the Tory answer is to the dole queue. Those in the queue will be told " We are sorry, but we have no way of providing you with a job, but at least you can have a rate-free pub in which to spend your time." I was astonished to learn that capital allowances will be available to the brewing industry. If any industry does not need tax relief and tax allowances, it is the brewing industry.
      Mr. Spearing: That applies to the banks, too.
      Mr. Hooley: Indeed. The banks have enjoyed massive windfall profits in a very high-interest-rate regime. If anything is needed to confirm me in my view that my amendment is sound, that is it.
      The Financial Secretary echoed what his Treasury colleague kept saying in the Standing Committee, namely, that it is an experiment. Admittedly, his colleague used somewhat more elegant language. The Financial Secretary repeated that it was an experiement and that the Government wanted to try it. We are supposed to be in an age of science and technology, notwithstanding some of the nineteenth century notions of Conservative Members. The essence of an experiment in this age that it is controlled.
      My amendment is deliberately conceived and presented. It is not a vague notion. Many of us believe that the enterprise zone is a cranky idea. It will not work. It does not stand much chance of working. However, if the Government must have it, and if they insist on having it, let us have it in a properly defined area and in the area in which the country is facing the most serious difficulty, namely, run-down manufacturing industry.
      Sheffield and other major cities require especially the replacement of manufacturing industry. The men who are being thrown out of work are engineers, steel workers and industrial workers. It is
      the men who are losing their jobs. By and large, the position of women is being maintained. In so far as there is a change in the composition of the work force, the change is in favour of service and commercial activity and against manufacturing and industrial activity.
      Treasury Ministers say that they want to embark on the experiment. If that is so, let us have a controlled experiment in a defined area. That is broadly the substance of the amendment. Despite all the doubts and severe criticisms that have been expressed by my hon. Friends, let us have a controlled, sensible and confined experiment. Let us look at its development. I do not think that it stands much chance. However, that is a matter of judgment.
      8.45 pm
      When over 2 million people are unemployed, and when interest rates have risen to 21 per cent., we may get a U-turn, or something like it. We have a gimmick. Let us confine it to something that is manageable and fairly precise. That is the substance of my amendment. I still think that it is perfectly rational, and I hope that the Government will see it in that light.
      Question put, that the amendment be made:—
      The Committee divided: Ayes 26, Noes 160.

      Division No. 335]

      AYES

      8.45 p.m.

      Allaun, Frank

      Evans, John (Newton)

      Stoddart, David

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

      Lewis, Ron (Carlisle)

      Straw, Jack

      Bennett, Andrew (Stockport N)

      Litherland, Robert

      Walker, Rt Hon Harold (Doncaster)

      Buchan, Norman

      Marshall, David (Gl'sgow, Shettles'n)

      Weetch, Ken

      Callaghan, Jim (Middleton & P)

      Maxton, John

      Winnick, David

      Campbell-Savours, Dale

      Maynard, Miss Joan

      Young, David (Bolton East)

      Canavan, Dennis

      Roberts, Ernest (Hackney North)

      Carter-Jones, Lewis

      Skinner, Dennis

      TELLERS FOR THE AYES

      Crowther, J. S.

      Spearing, Nigel

      Mr. Frank Hooley and

      Dalyell, Tarn

      Springs, Leslie

      Mr. Bob Cryer.

      NOES

      Alexander, Richard

      Brinton, Tim

      Cope, John

      Ancram, Michael

      Brittan, Leon

      Corrie, John

      Arnold, Tom

      Brooke, Hon Peter

      Cranborne, Viscount

      Aspinwall, Jack

      Brown, Michael (Brigg & Sc'thorpe)

      Dickens, Geoffrey

      Atkins, Rt Hon H. (Spelthorne)

      Bruce-Gardyne, John

      Dover, Denshore

      Baker, Nicholas (North Dorset)

      Budgen, Nick

      Dunn, Robert (Dartford)

      Beith, A. J.

      Bulmer, Esmond

      Durant, Tony

      Benyon, Thomas (Abingdon)

      Burden, F. A.

      Eden, Rt Hon Sir John

      Berry, Hon Anthony

      Butcher, John

      Elliott, Sir William

      Best, Keith

      Cadbury, Jocelyn

      Eyre, Reginald

      Bevan, David Gllroy

      Carlisle, John (Luton West)

      Fairgrieve, Russell

      Bitten, Rt Hon John

      Carlisle, Kenneth (Lincoln)

      Faith, Mrs Sheila

      Biggs-Davi8on, John

      Carlisle, Rt Hon Mark (Runcorn)

      Fenner, Mrs Peggy

      Blackburn, John

      Chapman, Sydney

      Fisher, Sir Nigel

      Bonsor, Sir Nicholas

      Clark, Hon Alan (Plymouth, Sutton)

      Fletcher-Cooke, Charles

      Boscawen, Hon Robert

      Clarke, Kenneth (Rushcllffe)

      Garel-Jones, Tristan

      Bright, Graham

      Cockeram, Eric

      Glyn, Dr Alan

      Goodlad, Alastalr

      Mather, Carol

      Sainsbury, Hon Timothy

      Gow, Ian

      Maude, Rt Hon Angus

      Scott, Nicholas

      Griffiths, Eldon (Bury St Edmunds)

      Mawhinney, Dr Brian

      Shepherd, Colin (Hereford)

      Griffiths, Peter (Portsmouth N)

      Maxwell-Hyslop, Robin

      Skeet, T. H. H

      Grimond, Rf Hon J.

      Mellor, David

      Smith, Cyril (Rochdale)

      Grist, Ian

      Meyer, Sir Anthony

      Speller, Tony

      Gummer, John Selwyn

      Mills, lain (Mariden)

      Spence, John

      Hamilton, Hon Archie (Eps'm&Ew'll)

      Mills, Peter (West Devon)

      Spicer, Michael (S Worcestershire)

      Hamilton, Michael (Salisbury)

      Miscampbell, Norman

      Stanbrook, Ivor

      Hannam, John

      Mitchell, David (Basingstoke)

      Stanley, John

      Hawksley, Warren

      Moate, Roger

      Steel, Rt Hon David

      Heddle, John

      Molyneaux, James

      Stevens, Martin

      Henderson, Barry

      Morgan, Geraint

      Stradling, Thomas, J.

      Hicks, Robert

      Morris, Michael (Northampton, Sth)

      Thatcher, Rt Hon Mrs Margaret

      Hill, James

      Morrison, Hon Charles (Devizes)

      Thomas, Rt Hon Peter (Hendon S)

      Hogg, Hon Douglas (Grantham)

      Morrison, Hon Peter (City of Chester)

      Thompson, Donald

      Holland, Philip (Carlton)

      Mudd, David

      Thorne, Nell (Word South)

      Howell, Ralph (North Norfolk)

      Murphy, Christopher

      Thornton, Malcolm

      Howells, Geraint

      Needham, Richard

      Townend, John (Bridlington)

      Hunt, John (Ravensbourne)

      Nelson, Anthony

      Townsend, Cyril D. (Bexleyheath)

      Hurd, Hon Douglas

      Normanton, Tom

      Trlppler, David

      Johnston, Russell (Inverness)

      Page, Rt Hon Sir R. Graham

      Vlggers, Peter

      Jopling, Rt Hon Michael

      Parkinson, Cecil

      Waddington, David

      Knox, David

      Parris, Matthew

      Wakeham, John

      Lawrence, Ivan

      Patten, John (Oxford)

      Waldegrave, Hon William

      Lawson, Nigel

      Penhallgon, David

      Walker, Bill (Perth & E Perthshire)

      Lee, John

      Pollock, Alexander

      Waller, Gary

      Le Marchant, Spencer

      Powell, Rt Hon J. Enoch (S Down)

      Watson, John

      Lester, Jim (Beeston)

      Price, David (Eastleigh)

      Wells, John (Maidstone)

      Lloyd, Peter (Fareham)

      Proctor, K. Harvey

      Wells, Bowen (Hert'rd & Stev'nage)

      Loveridge, John

      Rathbone, Tim

      Wheeler, John

      Lyell, Nicholas

      Rees, Peter (Dover and Deal)

      Whitney, Raymond

      Macfarlane, Neil

      Renton, Tim

      Wilson, Gordon (Dundee East)

      MacKay, John (Argyll)

      Rippon, Rt Hon Geoffrey

      Wolfson, Mark

      McNair-Wilson, Michael (Newbury)

      Ross, Stephen (Isle of Wight)

      McOuarrie, Albert

      Ross, Wm. (Londonderry)

      TELLERS FOR THE NOES:

      Marlow, Tony

      Rossi, Hugh

      Mr. John MacGregor and

      Mates, Michael

      Mr. Tony Newton.

      Question accordingly negatived.
      Clause 68 ordered to stand part of the Bill.

    Clause 91

      INCREASE OF PETROLEUM REVENUE TAX
      Mr. T. H. H. Skeet: I beg to move amendment No. 26, in page 66, line 16, leave out '70' and insert '65'.
      I had an occasion to read the Official Report of 3 June, when the Financial Secretary said:
      " To introduce a discriminatory tax on the profits legitimately earned of one particular sector of the economy requires a very strong case to be made. In my judgment, that case has not been made in tie instance of the banks this year."—[Official Report, 3 June 1980; Vol. 985, c. 1286.]
      My hon. Friend went on to say that the clearing banks had used their profits to strengthen their reserves, to enable them to support domestic business, to invest in future technology and to cope with increasing risks. Exactly the same argument could be made for the oil companies, large and small, which are making a great contribution to the energy situation in the United Kingdom. The Government may therefore be encouraged
      1526
      to reduce the petroleum revenue tax from 70 to 65 per cent. Seventy per cent. would yield £2·5 billion, and 65 per cent. £2·3 billion, so the loss would not be that great.
      With three major tax changes within the compass of one year, the Government are making effective use of Socialist legislation—the Oil Taxation Act 1975. [Interruption.] The record is instructive, and the hon. Member for Bolsover (Mr. Skinner) may like to listen to the record. In June 1979, under part III of the Finance (No. 2) Act, PRT was advanced from 45 to 60 per cent., coupled with substantial alterations in the allowances. The Petroleum Revenue Tax Act 1980, drafted in December 1979, provided for accelerated payments of PRT, and this clause, drafted in March 1980, advances the rate from 60 to 70 per cent. retroactive to 1 January 1980. Clause 92 provides for further acceleration of PRT payments. The advanced payments under the clause may be increased by statutory instrument.
      9 pm
      After such an annual performance in 1979–80, what is to be expected in 1980–81? Surely there must be a crossover point when the burdens placed on

      1527
      a single industry in the economy will become too great. After all, of their marginal earnings the companies will retain only about 12p in the pound.
      I remind the Minister of State that in 1975 certain assurances were given. I recollect that on 25 February 1975 Mr. Dell said that the incidence of PRT could be changed in the event of a sustained and significant change in the price of oil in real terms.
      The real price of North Sea oil in sterling in February 1979 was only 46·8 per cent. above that on 25 November 1975, when PRT was introduced. This increase was adequately covered by the 1979 PRT increase from 45 to 60 per cent. On the basis of Mr. Dell's assurance, a further increase in PRT is not now warranted.
      The Select Committee dealing with the Treasury and the Civil Service has looked into this. Mr. Pollard, the under-secretary of the policy division of the Inland Revenue, indicated that he did not accept the concept of 46·8 per cent. based on the wholesale price index as the deflator. The deflator which he intended to use, purely for his own purposes, was the GDP. He worked out the figure at 65 per cent. Therefore there is an anxiety between UKOOA, which has put forward its own arguments in this case, and the Treasury, which is looking for more revenue or, for its own purposes, to raise additional revenue.
      What concerns me is that in 1975 there were reasons why the PRT should be increased. The talk at that stage was for a stable tax. Three major changes in the course of one year is not an indication of the stability of tax.
      There have crept in various criteria which are now used for altering the rate of PRT. I have cited the first, which is a sustained and significant change in the price of oil in real terms. That has already been breached. The second is the reassessment of the internal rate of return of the companies operating in the North Sea, an argument advanced by Mr. Pollard before the Select Committee on 16 April 1980.
      Apparently the argument runs " We accept the concept to a broad extent." Apparently what the Revenue does is,
      1528
      to take 34 or 35 fields, both producing and under development, and some hypothetical fields for the future. Then it makes various assumptions about the price of oil, the rate of inflation, the pound-dollar exchange rate and production profiles. Then, by looking at these variables and working on further assumptions, it works out the internal rate of return of the company. There was the further argument that the Inland Revenue's workings could not be disclosed because they might reveal highly confidential information.
      I conclude that PRT is thus assessed by the Inland Revenue on assumed company internal rates of return worked out by a complex formula derived from confidential information assembled in relation to about 35 fields either in production or under development. The relevant elements are not published and can have little real connection with the individual company's estimates of its own rate of return from a given field. The weight attributed to specific elements, such as the movement of future oil prices, the inflation rate and production profiles, is not given and may be subject to a broad range of error.
      The formula is therefore designed to load the dice firmly against the companies and in favour of the Revenue, extracting from the wretched taxpayer 87·4 per cent. at the marginal rate. I should have thought that we must come to the conclusion that the Treasury is not concerned about the real price of oil, but is concerned only about extracting as much as possible from the companies, when they do not have enough left to carry out necessary work in the North Sea to ascertain new reserves for future years.
      Although Mr. Dell assured the industry that PRT was intended to be a stable tax and not to be used as a short-term regulator, the Bill provides that the 15 per cent. advance payment may be altered by statutory instrument. It is difficult to argue that this is not making use of the tax, in part, as a short-term regulator. An acceleration in payment increases the rate of PRT. The pure Revenue requirement to reduce the PSBR has been outlined by the Chancellor.
      It is further argued that increased prices yield the companies better returns than formerly. This is a misconception.

      1529
      The Wood Mackenzie North Sea report of 27 March 1980 states:
      " It will be seen that the effect of oil price increases is counter-balanced by delays, increased costs and so on. Even before tax increases, a field of 150 million barrels with a peak rate of 50,000 barrels a day is barely more profitable than envisaged five years ago, and a 450 million-barrel field with a peak rate of 180,000 barrels a day is significantly worse off. Thus it would appear difficult to argue that the tax increases are justified on the grounds of better returns compared with the position in 1975."
      Mr. Dick Douglas: Oh, come on !
      Mr. Skeet: The hon. Gentleman may scoff, if the companies have 12p in the pound left on a marginal rate with which to do their exploration and development work, they are driven down to a pretty low figure.
      Mr. Douglas: The hon. Gentleman is presenting an absurd case. He is knowledgeable in these matters. He knows that the expense, including an additional uplift in capital expenditure, is set against profits before companies start paying PRT. I do not want to make a speech, because I hope to speak on the motion, That the clause stand part of the Bill, but the hon. Gentleman really is over-egging the pudding. None of these fields of 150 million to 450 million barrels is unlikely to be developed at present rates of PRT or present prices.
      Mr. Skeet: I am surprised that the hon. Gentleman puts forward that argument. I am aware of front-end loading. This was conceded in the 1975 Act, but the companies are faced with new work in the North Sea. The ring fence applies. The revenue cannot be utilised in work elsewhere, or the oil has to be thrown into the pool available for distribution. The hon. Gentleman is aware of the facts.
      I agree that the price of oil has been going up. On the other hand, one has to consider the expenses. The cost of inflation in the North Sea is higher than one would normally expect. There are the costs of developing fields in deeper water, using new technology, greater attention to small accumulations, abortive drillings and the phenomenal rise in interest rates. Surely the hon. Member realises that about a year ago, when the uplift was reduced from 175 to 135 per cent., interest rates were unstable. They
      1530
      have since soared to almost record levels.
      Mr. Cryer: The hon. Gentleman seems to be arguing with passion the case for the oil companies. He does not often argue in that way on behalf of the poor and the needy. To judge from what the hon. Gentleman has been saying, the oil companies would want to get out of the oilfields, but they are desperately queuing up for new concessions. His passionate conviction in support of the oil companies leads me to conclude that he must have some sort of financial support from them. He is incredibly zealous in his arguments in support of a nonsensical case.
      Mr. Skeet: That is the sort of comment that I expect from the hon. Gentleman. If he wants to learn of my interests he can look at the book, which is available to the public, and, can examine any financial implications. When he considers all the matters involved he will realise that my argument is backed by a great deal of common sense. I am concerned about self-sufficiency in oil, not merely now but in the 1990s.
      The fields now under development will reach their peak in the 1980s, after which they will gradually decline over a number of years. It is necessary for the United Kingdom to be self-sufficient in the 1990s which means that a lot more oil must be found in the years ahead. The lead time for the development of an oilfield, from discovery to the time when it reaches its peak, is from 7 to 10 years. We know perfectly well that at this stage any surpluses that we may have in the 1980s are equivalent to only one year's United Kingdom consumption. With high marginal rates, less funds are available for future investment.
      Let us consider the scale of the work that is involved. Drilling reached the peak of its success in 1975, when 79 wells were drilled in the North Sea. They produced 3,175 million barrels. In the last year under the Labour Government, 33 wells were drilled and they produced only 250 million barrels. It is apparent from that that if we do not discover a great deal more oil there will be a deficiency in the 1990s, and that will mean importing more. That is when the man in the street will feel the effects most severely.

      1531
      In order to secure self-sufficieny it is necessary, according to UKOOA, for between 65 and 90 exploration wells to be drilled a year. At present only 50 per cent. of that number are being drilled. Whereas before 1975 one well in eight was successful—that is, produced oil in commercial quantities—since that year the figure has been only one in 51. Therefore, more money is required to be invested.
      Perhaps Mr. Christopher Laidlaw, managing director of BP, was correct when he said that the Government should create a climate in which the companies could operate and pay more attention to the way in which profits are used than to how they should be taken away. There is one interesting point about BP, and it was mentioned by the chairman in his speech. This year, for every £50 of Government spending, £1 has come from BP taxes.
      Mr. John Garrett: That is all right.
      9.15 pm
      Mr. Skeet: The hon. Gentleman says that that is all right, but he is leaning on one industry and making it pay heavily for the rest of the nation, even though I have pointed out that the time may come when instead of being self-sufficient we shall face the situation, in the 1990s, in which wells are not being drilled because not enough contractors are coming on to the continental shelf. I agree that others are flocking into the United Kingdom now, but last year only 33 wells were drilled, and only 250 million barrels were recovered under the hon. Gentleman's Government. The Labour Government could not move. On that basis we shall run out of oil in the early 1990s.
      It may be greedy of Governments in the United Kingdom and in Western Europe to demand such high marginal rates, but let us look at what the other democratic countries are taking. The situation in the United States is more advantageous, because incentives are provided. In Alberta, in Canada, the highest rate does not exceed 60 per cent. On the Canadian continental shelf the federal Government take between 45 and 63 per cent. In Australia the Government take 51 per cent.
      1532
      If the hon. Gentleman has any doubts, let him look at the analysis prepared by Doctor Alexander Kepp, senior lecturer in economics at Aberdeen university, and Mr. David Curry. There are other democracies that take smaller amounts. The hon. Member for Dunfermline (Mr. Douglas) says that Norway takes a higher figure and there is every reason why Norway should do that. There is less urgency for the Norwegians to raise the oil from the sea bed. They wish to keep the oil there, and they wish to have less production. The Norwegians do not wish to export more oil, because they are not part of the Common Market. We have certain obligations to our neighbours in Europe, and we certainly have an obligation to the people of the United Kingdom. We have an obligation to the motorists and all those who depend on fuel.
      Mr. David Penhaligon: Will the hon. Gentleman say whether it is preferable that this country should be three quarters self-sufficient in oil for 40 years, or totally self-sufficient for 30 years?
      Mr. Skeet: If the hon. Member had listened to my observations he would have realised that if we take the likely available surplus in the 1980s it will provide only one further year of United Kingdom consumption. Therefore, all the surplus that we have above our requirement will carry us for only one additional year.
      Even if we had a full depletion policy, it would not help a great deal. Everybody says that we must not waste our natural gas and oil. It is said that we must bring them forward at a planned rate. That is being done under the various Acts of Parliament, and I do not quarrel with that. I am simply saying that we must be circumspect, to ensure that we have financial resources so that we may uncover at the appropriate rime the necessary amount of reserves that are yet to be discovered.
      Let me mention one aspect of the Government's use of revenues. There is no doubt that the petroleum revenue tax and corporation tax payable by five companies in 1979–80 will yield about £2·2 billion. The figure for the current year, 1980–81, will be £4·1 billion. That is a lot of money going into the economy.

      1533
      According to the Chancellor of the Exchequer, those revenues may play a crucial part in reducing the PSBR, and to that there must be added transfers from the national oil account. I do not wish to cover the figures twice, because while those sums are paid into the national oil account, which in turn is paid into the Consolidated Fund, a part of this will be new money. Transfers were made by the Secretary of State for Energy on 31 March 1980, 23 March 1979 and 30 October 1979. They totalled £1·2 billion. I should have thought that we could rely to a certain extent on a particular industry, because it must play its part.
      Let us examine what the industry is paying in revenue to the Government. I have given the figures for North Sea oil revenues. Vehicle excise duty amounts to £1·1 billion. Hydrocarbon oil duties amount to £2·9 billion, and VAT on all carbon oil amounts to £450 million. These are large sums for one industry. Together they total £6·7 billion. That is the amount contributed to the Government by one industry.
      I agree that the public sector borrowing requirement should be reduced. However, one industry is making an enormous contribution at the expense of its future. The advance sale of oil was to bring in between £400 million and £500 million, the sale of BP shares brought in £275 million, and fixed down payments on the seventh round will net another £1,000 million.
      The Opposition will say how right it is that all that money should fall into the Government's coffers, and how unfair it is that the private sector should behave as it does. There is no avoiding the conclusion that both this Government and the previous one have exploited one industry. Perhaps that is reminiscent of the Emperor Constantine exploiting agriculture in Byzantine times.
      It is normal for politicians to talk about the private sector exploiting the public sector, and the modern State is responsible for doing just that. That can be illustrated by reference to the Government take on a typical barrel of OPEC oil. In 1978 the cost was $33·80 a barrel. The host Government in the Middle East received $13 and consumer Governments in the United Kingdom and elsewhere received $13·40. Refining and marketing costs were only $5·35. The freight to
      1534
      Rotterdam was only $1 and production costs amounted to only 50 cents. Of the $33·80 sale price, about 80 per cent. went to Governments. Where is the greed? Is it in companies or in Governments?
      Let us examine the industry's margin. The margin is 55 cents. What about the public? Where do they come into the picture? I have examined the price of a litre of Dutch petrol in 1979. The host Government in the Middle East received 25 per cent. The Dutch Government taxed at a rate of 55 per cent., refining and marketing took 17 per cent., and the industry's margin was 3 per cent.
      A company paying the full rate of PRT, corporation tax and royalties will be left with 12·6p in every pound of net revenue, against 16·8p at present and 23p when the tax was initiated. From that 12·6p, it is expected to put aside enough to enable it to recover the essential oil for self-sufficiency in the 1990s and beyond—to meet all Britain's requirements—and to provide enough for our exports to Europe and elsewhere. Is it possible to do that, or will we force the oil companies on to the market and make them borrow?
      It might be useful to say to the oil companies " Much money will be earned, but provided that it is spent on energy requirements and purposes to provide more fuel for the Unitd Kingdom and for essential exports, it should be scheduled for that requirement and should not fall into the Consolidated Fund ". That seems reasonable. I am concerned with the future not of the oil companies but the United Kingdom. I wish to ensure that we have sufficient for our requirements.
      I think that raising the rates for the third time from 45 to 70 per cent. is too much. The figure should be set at a lower rate. The Government would not net quite as much, but perhaps they could call on other industries to make contributions, as this industry is making its contribution.
      Mr. John Garrett: What about the banks?
      Mr. Skeet: It is a great confession by Opposition Members, after many years of Labour Government, to say that there is no profit in any industry other than banking. They have reduced industry in the United Kingdom to what it is today. They are responsible for de-industrialising the United Kingdom. They picked on one

      1535
      industry and exploited it to the maximum. The Government should not make the same error. They must realise that there is a point of no return. At present people are prepared to come to the North Sea because oil is more important than price, but the time will come when price will count, and less development will be undertaken.
      I emphasise once again that 1975 was the peak year, and one which we have not been able to rival since. Many wells were drilled in the North Sea. Now, well under half of that number are being drilled. We must return to a higher figure. While it is right to have a balance by taxing the companies for the benefit of the nation, the nation is also assisted if it allows the compames to have a little revenue that can be applied to the recovery of new oil.
      Mr. John Garrett: I oppose the amendment to reduce the rates of petroleum revenue tax. The amendment gives us an opportunity to press our case that the level of petroleum revenue tax, and, indeed, other taxation on oil companies, is too low. [Interruption.] I hope that I shall be allowed to develop the argument in my own way. If I manage to catch your eye, Mr. Godman Irvine, on the clause stand part debate I shall make a few remarks about the uses to which the revenue may be put.
      We last debated the form and incidence of petroleum revenue tax in December 1979, on the occasion of the Petroleum Revenue Tax Bill. That was a measure designed to advance the payment of tax by two months and thereby to improve the Government's cash flow. In that debate, I pointed out that the five-year history of petroleum revenue tax has been one of Government continually trying to catch up with the profits of companies operating in the North Sea, and usually lagging well behind.
      The central question has always been whether there are adequate arrangements for securing for the Exchequer and for the economy a fair share of the results of the exploitation of North Sea oil and gas. The proposal in the Bill to raise the rate of tax falls far short of what is necessary. The amendment is wholly misguided. From listening to its proposer, we would never know that it
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      is a profits tax, levied not only after all the capital expenditure associated with development has been met but with an uplift on capital expenditure to 35 per cent.
      In 1974, the Conservative Opposition attacked the concept of petroleum revenue tax and accused the Labour Government, in introducing it, of badly shaking the confidence of the oil industry. They accused us of trying to drive the oil companies away from the continental shelf and on virtually every occasion they defended the interests of the oil companies.
      9.30 pm
      In the debate last December I asked whether the oil companies were still getting over the garden wall with their windfall of golden apples because the petroleum revenue tax was insufficiently effective. We urged a windfall profits tax on the companies because of their enormous, fortuitous gains from the rise in oil prices. The Minister of State, Treasury, who is to reply to this debate, blandly turned down this call for economic justice, saying that these industries were light of foot and might flit off to Mexico.
      At the time of that debate, North Sea oil was priced at $23 to $26 a barrel. Today it is $34.20 a barrel, after three price increases so far this year. The result of this rise in the price of oil has been a phenomenal increase in the profits of the oil companies. Most of the international groups are turning in profits of 70 to 100 per cent. higher than a year ago. Last year, BP's after-tax profits reached £1·6 billion—nearly four times the figure for the previous year. Shell's profits increased by 180 per cent., Texaco's by 111 per cent., Exxon's by 55 per cent., and Mobil's by 77 per cent. But, interestingly, Esso UK showed a tenfold increase in profits for the year. The reaction of BP to this windfall was to call for tax cuts and to plan to spend £6 million on an advertising campaign:
      " to show the friendly face of an oil giant to the man in the street."
      The agency chosen to handle this £6 million account was the one with the highest reputation for concealing ugly truths—one might say the one with the reputation for gilding the cabbage—Saatchi and Saatchi.
      Mr. Tim Eggar: Since the hon. Gentleman has obviously studied BP's annual reports so carefully, and as BP is a majority State-owned corporation, would he comment on how much investment BP has in the North Sea at present?
      Mr. Garrett: No. I am talking not about investment by BP in the North Sea but about the profits made by BP. This is a tax on profits. We say that these windfall profits deserve to be further taxed.
      Mr. Eggar: Is the hon. Gentleman saying——
      Mr. Garrett: I am not giving way. I am coming to the question of investment. I am about to come to one aspect of BP's investment. The oil companies always maintain that they need these levels of profit to fund the exploration for and development of new oil. Who are we to doubt them? But if that proposition is true, why is BP spending many millions of pounds on coal in South Africa and on coal, copper, gold and uranium in Australia? BP plans to spend £600 million in the next decade on a copper, uranium and gold deposit in South Australia, thougr apparently the Labour Government in that State has a ban on uranium mining.
      BP is not the only oil company using its windfall profits to diversify out of oil production. Shell is investing £500 million in coal production in the next 10 years, having invested unsuccessfully in nuclear power generation. Exxon is trying to invest in electronics—a move which I understand is the subject of an anti-trust investigation in the United States—and in word processing, all on oil profits. Mobil is trying to get into department stores, and Gulf into property. It seems to me that they have more funds than they know what to do with. Some of these funds—the greater share—must belong to the British people since they arise from the exploitation of a community resource—namely, North Sea oil.
      Mr. Skeet: The hon. Gentleman must know that the National Coal Board will be mining at German Creek in Queensland, Australia, even though it is in a dreadful situation in the United Kingdom.
      Mr. Garrett: The Electricity Council has an investment in uranium in Canada. What is it doing with that?
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      I should like the Minister to answer one simple question. During his administration, after the peak year of 1975 why did the number of wells drilled in the North Sea go down and down, and the amount of oil that was discovered fall away? In 1975, 3,175 million barrels were discovered; in 1977 725 million barrels were discovered; and last year only 250 million barrels were discovered. Why?
      Mr. Eggar Mr. Eggar rose——
      Mr. Garrett: No, I shall not give way.
      Presumably it was not a case of the level of the oil taxation regime, because oil exploration is now improving in the light of an even richer oil tax regime, in the sense of raising petroleum revenue tax, that this Government are introducing. As for diversification, clearly it may be in the interests of the National Coal Board to exploit coal elsewhere in the world, but BP and the other oil companies are diversifying right outside their line of business, using profits made from the exceptionally profitable regime for them of the North Sea oil.
      Mr. Eggar Mr. Eggar rose——
      Mr. Garrett: No, I shall not give way at the moment.
      The chairman of Tricentrol, reportedly a tax exile in Geneva and who has not been enticed back to Britain by the Chancellor's last incentive Budget, did not think this change at all bad. Most oil companies clearly expected worse, such as the reduction of the generous allowance against tax. The Economist of 29 March called this increase in tax " loose change ".
      It said:
      " How could the Chancellor let the oil companies escape so cheaply? Scream as they will, their profits are barely scraped by the PRT rise. It is not enough of a change to worry the oil companies."
      The Wood Mackenzie report on the tax changes commented that they were more restrained than had been feared. It included a table on the impact of the PRT increase on rates of return for different fields. Clearly, from examination of that table, the impact is negligible. The rate of return on the Argyll field is reduced from 41·2 per cent. to 41·1 per cent., on the Auk field from 42·7 per cent. to 42·6 pere cent. on the Forties field from 37·5 per cent. to 34·2 per cent. and on the

      1539
      United Kingdom part of the Statfjord field from 26·5 per cent. to 26·2 per cent. No wonder there were no screams from the oil companies.
      The oil companies make an exceptionally high return in Britain, and we already provide a uniquely favourable climate for them.
      Other countries have a more robust attitude to the oil companies. The United States Congress hit them with a massive windfall tax. The Norwegians——
      Mr. Eggar Mr. Eggar rose——
      Mr. Garrett: I shall give way in a moment. I shall choose when to give way.
      The Norwegians, whose oil tax regime is more comparable with ours, have intensified their drive to " Norwegianise " the oil industry by requiring a 50 per cent. stake for Statoil, the State oil company, in new licence allocations and by introducing an excess profits tax which raises its take from 77 per cent. to 85 per cent. The oil policy White Paper produced by the Norwegian Government proposes increasingly to relegate the oil companies to paid consultants, with little or no influence over how new fields should be exploited. When the Norwegians are increasing their national stake in oil, we are reducing ours. If plucky little Norway can say " boo " to the oil companies, why cannot we?
      Norway takes a much firmer line towards the oil companies than we do, as can be seen from a lecture in Edinburgh last month by Dr. Jans Evensen, former chairman of the Norwegian Petroleum Council. He said:
      " The oil business is becoming too important to leave it in the hands of the oil companies&the traditional way of granting offshore concessions to private companies should give way, at least in part, to a system in which the government retains ownership of both the seabed and the oil flowing from it&The self-evident starting point of Norwegian oil policy was that the oil on the Continental Shelf belonged to society as a whole. No tax or licence fee, for example, could cope with the enormous windfall profits that were being earned as a result of the recent oil crisis."
      In his view, therefore, it was time that the Norwegian Government considered introducing service contracts for offshore oil production as other oil producing countries had done.
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      This is a question that we must ask ourselves. Can any form of taxation adequately secure the community interest, and should we not simply move to a situation in which the companies simply receive a fee for producing oil?
      In the next round of licensing the companies will apparently be required to make a down payment of £4 million for 20 or so of the blocks on offer. By contrast, the recent auction of exploration tracts in Alaska produced $1 billion for the Government of Alaska, with some companies offering the State up to 90 per cent. of the profits in order to get the blocks.
      The Bow Group produced a pamphlet on the issue which called our system a " give-away " and showed that the Government could collect up to £3 billion from an auction. I quote the Bow Group, a body with which I have absolutely no connection:
      " Even if the Government fears that an oil licence auction might give an advantage to foreign multinationals, it might at least consider a far higher charge for blocks since this again is common practice overseas."
      Mr. Eggar: Will the hon. Gentleman confirm that it is Labour Party policy that a Labour Government would auction blocks in the North Sea? That is the implication of what he has been saying Will he consider going even further than that and stating categorically that if they are auctioned no discretion will be retained by a future Labour Government as to which oil companies would be given the blocks if they bid the highest amount?
      Mr. Garrett: That is rather a stupid question. As the hon. Member knows, Labour Party policy on these and other issues is made by the party conference.
      Mr. Eggar: Oh, no !
      Mr. Skeet: Not the Front Bench?
      Mr. Michael Brown: We need not take any notice of the Opposition Front Bench now.
      Mr. Eggar: Sorry chaps, you can all go home.
      Mr. Garrett: Our policy is not made by spokesmen speaking in debates on individual questions of taxation when asked silly questions by Conservative Back Benchers in a boisterous mood.

      1541
      Then we come to the mystery of the missing billions. The Government are exceptionally coy on what the Government revenue from North Sea oil is likely to be over the next few years. The Chancellor did not feel able to supply details of the revenue to the Select Committee on the Treasury and Civil Service, although that Committee observed that the tone of Treasury evidence on the question confirmed the widely held opinion that the revenue from North Sea oil was considerably understated in the Financial Statement. I see from today's newspapers that the chairman of the Select Committee, the right hon. Member for Taunton (Mr. du Cann), intends to press the Treasury Ministers in future cross-examinations to make them come clean on a whole variety of information, including, no doubt, information on this matter.
      The Treasury assumptions were that North Sea oil would yield £2¾ billion in 1980–81, rising to £4¾ billion in 1983–84. Wood Mackenzie estimates that the revenue would be £3 billion in 1980–81, rising to £15 billion in 1985. We should like to know the Government's view on this matter. It should be a matter of common concern to us all.
      It is likely that revenues could be considerably greater than even this, given the tendency of oil prices to rise faster than world prices generally and the continuing discovery of new fields. We are already a bigger producer than Kuwait, and all the evidence is that there is much more oil to be found under the North Sea.
      The upshot is that we consider that the Government, true to the tradition of the Tory Party of fawning on oil companies, are letting the oil industry get away too lightly, that the oil companies are making more profit than they know what to do with, and that, because of the inadequate State presence in the North Sea, Britain is not securing a fair and proper share of the wealth from the North Sea. If that is not so, we expect the Minister to refute it. We shall certainly oppose any attempts on the Conservative Benches to reduce the proposed level of PRT and, therefore, the just share of the British people in the resources of the North Sea.
      Mr. Michael Brown: As I hope is my custom, I shall be very brief.
      1542
      To a considerable extent, I support the remarks of my hon. Friend the Member for Bedford (Mr. Skeet). I represent a constituency that has growing oil interests. We have a number of oil refineries in the Killingholme area of the Brigg and Scunthorpe constituency which provide a considerable number of jobs. Labour Members are rather unfair when they pick on an industry which is expanding, which needs to be encouraged and which provides a considerable number of jobs.
      9.45 pm
      I ask my hon. and learned Friend the Minister of State to consider the arguments behind the amendment. I recognise that it may not be possible now for the Government to accommodate the amendment. However, it should be useful for the Government to consider the arguments that have been advanced by my hon. Friend the Member for Bedford.
      There is no doubt that we shall have to encourage the oil companies in future. There may come a time when they will be discouraged if we have the system of petroleum revenue tax as at present constituted. I ask my hon. and learned Friend to bear in mind that the time will come shortly when we shall have to give some encouragement to the golden goose. It is laying eggs now, but it will not do so indefinitely. As my hon. Friend the Member for Bedford said, we have not reached the peak of oil exploration since 1975 and further exploration will be required. That will have to be encouraged.
      I take up the general argument advanced from the Opposition Benches. We have heard it on other occasions. Their approach seems to be a desire to bash the oil industry. It is our one boom industry, and surely we want to encourage it.
      Mr. Skeet: They do not like success.
      Mr. Brown: Exactly. We happen to have a successful industry, which is pro viding taxation revenue. The hon. Member for Norwich, South (Mr. Garrett) referred to BP. Has he forgotten that earlier this year BP made over to the British Government——
      Mr. John Garrett: What is the surcharge on gas prices introduced by the Government if it is not bashing a successful industry?
      Mr. Brown: We are discussing PRT. I shall be happy to debate the gas industry on a future occasion. Time is pressing and I must be brief.
      We have a boom industry that needs encouraging. However, it is the victim of bashing, which is encouraged by the emotions of Labour Members. There are jobs in the industry that need to be preserved, encouraged and expanded. Some of the jobs happen to be in my constituency, where all too many jobs are being lost through declining industry. We need to consider everything that we can to encourage the oil industry instead of discouraging it, as some Labour Members seem to wish to do.
      Mr. Donglas Mr. Donglas rose——
      Mr. Brown: I wish to resume my seat.
      Mr. Douglas Mr. Douglas rose——
      The First Deputy Chairman (Mr Bryant Godman Irvine): Order. The hon. Member for Brigg and Scunthorpe (Mr. Brown) has resumed his seat.
      The Minister of State, Treasury (Mr. Peter Rees): I am sure that the Committee is indebted to my hon. Friend the Member for Bedford (Mr. Skeet) for having provided the opportunity for a brisk and highly charged even though perhaps rather circumscribed debate. My hon. Friend has a long and consistent record of pressing the Government, and perhaps even the Labour Administration, on the need for treating those involved in the extraction of oil from the North Sea rather more gently than either Administration has been disposed to do.
      On the other hand, we have had a powerful case deployed by the hon. Member for Norwich, South (Mr. Garrett) for a rather tougher regime. The Administration have been accused of fawning over the oil companies. I am not certain how to circumnavigate the Scylla of my hon. Friend the Member for Bedford and the Charybdis of the hon. Member for Norwich, South. However, I shall do my best.
      Mr. Gordon Wilson: Go through the middle.
      Mr. Rees: As always, the hon. Member for West Lothian (Mr. Dalyell) has words of comfort and advice.
      Mr. Dalyell: That is the first time that the words of the hon. Member for Dundee, East (Mr. Wilson) have been attributed to me, and vice versa.
      Mr. Rees: I beg the hon. Gentleman's pardon. I had assumed that it was the hon. Member for West Lothian, not the hon. Member for Dundee, East (Mr. Wilson).
      Leaving aside the attributions that I have rightly or wrongly made, I should like to turn to the central issue. The increase in world oil prices since the introduction of petroleum revenue tax poses a problem for this Government, as it would for any Government. In August 1978, the then Chief Secretary announced the increases that he would have proposed in the next Finance Bill. At that time the price of North Sea oil stood at $13·70 a barrel. When we debated the last Finance Bill, which proposed an increase, the price stood at $20·70 a barrel. In March 1980, at the time of the Budget of my right hon. and learned Friend, that oil cost $33·75 a barrel. Since then, the world price of oil has drifted upwards slightly as a result of events in Saudi Arabia.
      Could any Government have stood back and said that the rates introduced last June were the final word? I hope that the Labour Government would have faced this problem in the same responsible way as we have. However, having listened to the hon. Member for Norwich, South, I doubt it. A balance must be struck between the interest of the Exchequer—and of the country as a whole—and the interest of the oil companies that extract the oil.
      I think that the hon. Member for Norwich, South has misquoted me slightly. I did not say that oil companies were light-footed. I said that their capital and expertise could be deployed in other parts of the world. If I did say "light-footed ", so be it. Their capital and expertise are necessary to us, just as our oil reserves are necessary to them. If we strike the wrong balance, they will be tempted—I do not know whether they have been tempted—to defer further investment in the North Sea or to invest at a slower rate. A balance must be struck.
      We concluded that it was fair to increase the rate this year from 60 per cent. to 70 per cent. At the same time,

      1545
      we felt it right to ask oil companies to accelerate their payments by a payment on account.
      It has not been sufficiently stressed that the Finance Bill contains some small measures of relief. It may have been overlooked that clause 93 permits the un-absorbed expenditure in a particular field to be transferred when the interest in that field is transferred to another company. That is known as stranded reliefs. We felt that the oil companies had a legitimate case. The case has been pressed on the Government before, and it may have been pressed on the Labour Administration. One may think that that is something that the oil companies have been offered.
      Clause 95 offers some relief on gas banking schemes. Again, we felt that that was a legitimate case and that it was right to concede it. We shall debate that issue in Committee upstairs. Clause 96 offers some relief fractionation. That is a complex operation and I do not propose to weary the Committee with it now. We shall have plenty of opportunities to debate that subject in Committee.
      Mr. Skeet: I appreciate that several anomalies have been removed. That is excellent. However, if companies have 12·6p in the pound left for all their future exploration, will they not be in some difficulty? During the period of the Labour Government the amount of drilling fell continually. To what extent will the Government make further impositions and changes? Will my hon. and learned Friend say something about giving companies the taxation stability which was promised in 1975?
      Mr. Rees: Against such an uncertain prospect, no Minister could possibly give a total assurance that there will be no further changes in PRT. Does my hon. Friend really expect me to say that no matter what increases may take place in the real price of oil in the next year and the years to come, no changes can be contemplated? I am sure that he realises that that would be an irresponsible statement.
      I remind the Committee that when Mr. Edmund Dell gave his assurances, which were warmly supported and confirmed by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin), he said that the position was
      1546
      subject to alteration in the event of increases in the real price of oil. That is precisely the situation that we faced last year and are facing this year.
      Endeavouring to strike a fair balance and disregarding the cheap gibes that we were fawning over the oil companies, we felt it right to raise the rate of PRT. My hon. Friend the Member for Bedford will recall that reliefs are built in which should cover the exploration costs. We are told by the Opposition that the reliefs are too generous. The hon. Member for Norwich, South was right to remind the Committee, against the background of his assertion that the rates were too generous, that we cut the uplift last year and cut the amount of free oil because we felt, on reflection, that we could moderate them a little. It is a matter of fine political and economic judgment where the balance should be struck.
      Mr. Skeet: If I accept the view indicated by Mr. Dell that if there is a significant change in the real price of oil the rate of tax may be altered, I understand that there must be an accretion of the tax. But the Treasury seems to be moving along different lines. It is establishing the tax on the basis of the internal rates of return of the companies concerned, working it out for all the fields in the way that I explained.
      Surely the Government are altering their position. That was fully explained to the Select Committee. What does my hon. and learned Friend say to that? Are we to have PRT assessed in future on the basis of the internal rates of return of the companies?
      Mr. Rees: This is not tailored to the internal rate of return of individual companies in individual fields. If it were, the provision would be regarded as hybrid. In fact, it is a general tax devised for a general situation. That is the basis on which it was commended to the House in 1974 and the subsequent amendments—we would say improvements—are also commended on that basis.
      Of course my hon. Friend is right in saying that the marginal rate paid by the companies will be increased, if the proposals are accepted, from 83·2 per cent to 87·4 per cent. His mathematics are correct when he deducts that figure from 100 per cent. and tells us what would be

      1547
      left in the companies' hands. But the hon. Member for Norwich, South is right in saying that that is the marginal rate on profits. We have scaled down the reliefs, but they are designed to enable the companies fully to absorb their costs. In addition, the uplift is designed to compensate them because they do not get any relief for interest. We hope that we have struck a fair balance.
      I appreciate that my hon. Friend the Member for Bedford is sceptical, but so far the response to the seventh round does not seem to indicate that we have cooled the ardour of the oil companies.
      Mr. Eggar: Will my hon. and learned Friend confirm the evidence given by Mr. Pollard to the Treasury Sub-Committee that the average take on a marginal North Sea oilfield will have increased from 70 per cent., where it stood when the Government took office, to 80 per cent. if this measure becomes law?
      Mr. Rees: As I said, the marginal tax take has risen to 87·4 per cent. Is that what my hon. Friend is talking about, or is he asking about the marginal take of the companies?
      Mr. Eggar: My question related to the average take of the companies in the field——
      It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
      Committee report Progress.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, the Motion relating to Customs and Excise may be proceeded with, though opposed, until half-past Eleven o'clock or for one and a half hours after it has been entered upon, whichever is the later.—[Mr. Le Marchant.]

BUSINESS OF THE HOUSE

  FINANCE (No. 2) BILL
  (Clauses 10, 17,18, 20, 23, 53, 68 and 91)
  Again considered in Committee.
  Question again proposed, That the amendment be made.
  Mr. Rees: We know that bets are off since the Wembley conference and Labour Party policy is being rethought, but the
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  hon. Member for Norwich, South appeared to advocate that the entire North Sea should be exploited by the oil companies purely on a service fee basis. That is a novel proposition and one to which the Labour Administration did not subscribe.
  We have debated these matters three times in the past 13 months. The hon. Gentleman appears to be enamoured of Norwegian precedents. I am not prepared now to embark on a comparative discussion of our system of PRT and that of the Norwegians. I am advised that they are broadly comparable. These are evolving fields. The idea that oil companies should operate on a service fee basis is not consistent with our policies. If the hon. Gentleman feels that oil companies can be attracted on that basis, it will be interesting to see what he can glean from them. However, the point hardly arises on this amendment or this raft of provisions. We are merely improving on—smoothing—the petroleum revenue tax regime that we inherited from the previous Administration. We believe that it is right to increase the rates against the increase in the real price of oil that has undeniably taken place over the past five or six years.
  I can argue in a friendly fashion with my hon. Friend whether the real increase has been two-thirds or one-third. It is common ground that there has been a significant increase in the real price of oil. On that basis, it is right for the Government to propose an increase in the rate, which is precisely what we have done. We have done no more and no less.
  This is not an area in which it is possible to be dogmatic. It is necessary to strike a balance between the legitimate expectations of the Government of the day and the legitimate expectations of the oil companies for the risks that they have to run. I remind the Committee that since we last debated these matters in December of last year and January of this year there has been the tragic accident to a platform in the North Sea. That emphasised that this is not a risk-free business. The oil does not gush automatically out of the North Sea. It is not quite a windfall profit in the sense that Opposition Members describe it. It demands the committal of capital and expertise, and risks have to be run.

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  Against the rather uncertain oil supply position, I hope that clause 91 and those with which it is associated strike a fair balance between the two interests. I hope, too, that my hon. Friend will not feel obliged to press his amendment to a Division. Although he has pursued an honourable and consistent course, I am sure that he will recognise that at the end of the day a fair balance has been struck and that the Government have taken full account of the factors to which he has drawn attention. If the picture were quite as black as he has painted, perhaps there would have been a slightly less favourable response to the seventh round.
  On that basis, I hope that my hon. Friend will withdraw his amendment. However, the Committee is indebted to him for having provided the pretext for a brief but stimulating debate.
  Mr. Skeet: I am a little disappointed, since a number of hon. Members wished to contribute to the debate and they
  1550
  cannot do so now. I know that one hon. Member on the Opposition Benches and one of my hon. Friends wanted to contribute, but perhaps they will have an opportunity in due course.
  I am grateful to my hon. and learned Friend for his observations. This is a question of balance. It has to be established somewhere. I must look to the future. I emphasised that if only 12·6p in the pound is left to the companies to do the necessary exploration and development work in the future, that is not enough. But if my hon. and learned Friend is prepared to look at it again on some future occasion, and, providing that he does not have three major changes in the next year, I may be satisfied.
  In view of the opportunity that I have had to put forward the arguments which I felt should be placed before the Committee, I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Question proposed, That the clause stand part of the Bill.
  Mr. John Garrett: It would be wrong to let this clause go without at least briefly considering the future uses of North Sea oil revenue and getting an idea from the Minister of State about how he sees future policy developing, because I know that he takes a deep and close interest in this issue.
  One of the most crucial problems facing any British Government in the 1980s is the use that is to be made of the flood of North Sea oil revenues into the Exchequer. It is clear that it suits the Treasury to understate the value of these revenues, as the Select Committee on the Treasury pointed out.
  It appears that these revenues are to be the source and fount of the quaintly named fiscal adjustments or tax giveaways of the 1983–84 forecast in the Financial Statement. As we know, this flow of revenues represents a huge opportunity and a huge risk for our economy. Within five years we can expect a revenue flow of between £10 billion and £15 billion a year into the Exchequer. That excludes the obvious scope for increasing the tax rate or reducing the very generous reliefs against tax; it excludes a higher charge for licensing whether by auction or levy; and it does not take account of the new discoveries which are being reported or the improvements in prospects for formerly marginal fields. There will be a net current trading account contribution of between £7 billion and £8 billion a year, and a contribution to the GNP of between 4 and 5 per cent.
  The Treasury has always played down the size of the benefit from North Sea oil because, in the words of The Observer of 24 February,
  " it fears that the success of the North Sea will encourage the slothful ways of the British public and its tendency towards easy consumption."
  The Treasury also has a horror of earmarking revenues for specific purposes. Therefore it has always opposed the institution of a special North Sea fund. But it seems thoroughly mistaken or unwise to let North Sea revenues sink into the general fund of Government revenue. Surely we should consciously, as a nation, deploy our greatest national asset—oil money—to solve our greatest national
  1552
  problem, de-industrialisation and unemployment. We should like an indication of Government thinking. They have not given any such indication since coming to power.
  Much has been made of the risks inherent in North Sea oil money, particularly the risk that it will be squandered on a level of public expenditure unsustainable when the oil has gone. This scenario is known as the Dutch disease, on the analogy of what is said to have happened in Holland with natural gas revenues. I am told by people who live in Holland that the Dutch disease is discernible only to British commentators. It is a matter of surprise to the Dutch themselves.
  Holland is a successful and economically stable country due, to a large extent, to the rapid expansion of natural gas production, 50 per cent. of which has been exported. This wealth has enabled the Dutch virtually to eliminate poverty and to ensure a reasonable standard of living for all its citizens, including those made redundant by structural decline in the economy, to rehabilitate their inner cities, to build cultural, social and sporting facilities on a scale unimaginable in this country, to build an excellent public transport system and an infrastructure in public works, to provide a sound basis for economic development and to provide jobs in industries most susceptible to competition from low-cost labour.
  If that is the Dutch disease, the quicker we catch it the better. Dutch public sector uses of the revenue of natural gas have put that country in an excellent position to face the future. Would that we had the sense to use oil revenues to meet our country's deficiencies in transport, education, housing, public works and jobs.
  Four broad areas of possible use of revenues from North Sea oil were set out in "The Challenge of North Sea Oil", published by the Labour Government in March 1978. That was a discussion document. It opened the whole question to public discussion. It is time that the present Government produced a comparable discussion document. At least the Minister gave some indication of his thinking tonight. The Labour Government's document said that the four broad areas into

  1553
  which our oil resources might be channelled were investing in industry—I shall not go through all the ways in which that might be carried out—improving industrial performance, investing in energy and increasing essential services. That document enabled a genuine public debate to take place on the use to be made of the flow of oil revenues.
  In those days the Government were talking of an annual oil public revenue for the State of perhaps £2 billion or £3 billion a year. We shall be talking, in a few years, of £15 billion. It is therefore all the more important to have some discussion of the Government's views. Conservative philosophy, I understand, is to hand out tax reliefs all round that will lead to massive investment abroad and not to investment in British jobs. It will lead to a consumer boom fed by imports and to overheated property and share speculation of a kind that is so often a feature of Conservative Governments. In the year 2000 people will look back and say " Why were they so foolish?" At the same time, the high value of an oil-backed pound will cripple our exports.
  One alternative apparently canvassed in Tory circles—I was interested to read this in The Times of 19 March—is that the revenue should be wholly used to run down the Government's borrowing requirement to a point where a surplus could be created on the Government account. According to The Times, this would force British investors either into industrial shares or, more probably, into the acquisition of overseas assets. We would thus end the oil years with more foreign assets but far less investment in British industry.
  We now face an unemployment rate of well over 2 million. Any solution other than channelling oil funds into jobs, preferably in manufacturing industry, would be a criminal waste. In April this year, Mr. Geoffrey Chandler, director general of the National Economic Development Office, made an authoritative and important contribution to the debate. He proposed a positive industrial policy, a means by which oil revenues can help to build the productive potential of this country and not just feed its propensity to consume, which also means, effectively, its propensity to import.
  Mr. Chandler pointed out that our
  1554
  industrial competitors, from far stronger economic foundations, have no hesitation in using a constructive linkage to public and private endeavour and a selective array of assistance and intervention to create the basis for successful competition.
  Mr. Chandler was reported in The Times as saying of oil revenues:
  " ' It is the only buttress that this country has to cushion its poor industrial performance. It will not last for ever and we have to use the time during which it is available to recreate an industrial potential against the day of its decline.
  If oil revenues are not to come and go unnoticed, if they are to be identified as a specific resource for production rather than consumption, then something needs to be done to undermine their crucial role and their ephemeral nature.'
  A debate on the national policy towards depletion of North Sea oil was overdue and might well be too late."
  10.15 pm
  A week ago Mr. Peter Balfour, chairman of the Scottish Council for Development and Industry deplored
  " the continued disappearance of revenues from the North Sea into the ' cavernous maw ' of the Treasury.
  ' Not to reinvest oil revenues to create new industries, new technologies, new skills, not to improve our productive capacity and international competitiveness, is tantamount to asset stripping of a most blatant kind.'"
  Perhaps the Minister of State will give us a brief view of whether that opinion of someone who is well familiar with the need to regenerate industry in one of the most rundown parts of the country is sound.
  The Government are not only purposely understating North Sea oil revenues but are purposely having nothing to say about their proper use. They are keeping quiet because they do not want our rising oil revenues to be used by our EEC partners as a reason for refusing a further cut in our contribution to the EEC budget. They are keeping quiet because they want to create the impression of an overwhelming need to cut public expenditure, which is not genuine. They are keeping quiet because they want to produce tax cuts out of a hat in time for the next general election. This crucial public debate is being stifled and avoided. It must take place. Revenues from the North Sea offer us our last chance of modernising industry and of creating many thousands of new jobs through a rational and planned approach to industrial reconstruction through the creation of new industries

  1555
  and new technologies. All we want to know is the Government's thinking on this subject.
  Mr. Eggar: It has always surprised me how little comment there has been in the Committee and in the House about the PRT regime. The reason, I suppose, is that it is a specialist tax affecting a small number of companies—companies that are not exactly popular either with the electorate or with the Government. However, the North Sea and revenues from it are increasingly coming to dominate our economic debates and it is time we looked carefully at the arguments about oil taxation.
  I do not seek tonight to be an apologist for the oil companies; they can get on extremely well without me. However, it is worth drawing attention to the evidence given by UKOOA to the Treasury and Civil Service Select Committee. It made three main points in its representations. The first was the lack of stability in the tax regime. Oil taxation has become the new economic regulator. I am not surprised that we had our last regulator debate two days ago.
  If there is to be expenditure on future exploration in the North Sea, there must be certainty about the tax rates. Without it the risk assessment of the oil companies will go up and they will not explore in areas where otherwise they would have done so.
  Mr. Anthony Nelson: I agree with a great deal of my hon. Friend's argument. It is fair to say that oil companies are entitled to make their capital investment projections and feasibility studies on the basis of a fixed or reasonably assessed rate of PRT. However, they also clearly take into account the basis of the return on the price that they will get for their oil. When PRT was introduced even the most optimistic oil companies could not possibly have guessed what the price of oil now prevailing would be. While the whole debate has been on the basis that the real price of oil may continue to rise, we have to face the reality that in a recession and a glut of oil the real price may decrease. In those circumstances, regrettable as it is that this tax has become in a sense a regulator, that is perhaps inevitable with a commodity whose price is extremely volatile.
  Mr. Eggar: I do not differ from my hon. Friend the Member for Chichester (Mr. Nelson) in a word that he said. I shall refer later to the general theme that he has developed. However, I think that it is necessary that the oil companies know the basis of oil taxation and are certain as to the percentage of their profit that the Government will be looking to take from them.
  The second point that the oil companies made concerned the way in which the percentage tax take—and this refers to the point made by my hon. Friend—relates to the real price of oil and in turn to their internal rate return. I was amazed that the Inland Revenue official, in evidence to the Committee, stated quite blandly that every single PRT change introduced by the Government had been justified by the Inland Revenue's analysis of the internal rate of return to companies. All I can say is that I am surprised that the OPEC countries were so keen to bear in mind the Government's internal economic necessities when they raised the price of their oil.
  The most serious point that the oil companies made in their representations concerned the lack of consultation between the oil companies and the Government—both with the Department of Energy and the Treasury. Of course, the oil companies will complain whenever there is a rise in taxation; that is a natural reaction. What I find of deep concern is that one of the grounds for that complaint was the lack of consultation. It was not that the representations of the oil companies had been heard and rejected—the Government would have been entitled to do that—but that their representations had never been asked for and that any efforts they had made to explain their situation to the Government had not been met with a welcoming hand.
  None of my right hon. and hon. Friends—or, I am sure, the oil companies, in their heart of hearts—believes that PRT is unchangeable. Of course it is not. Ideally PRT should be structured to take account of the rises not only in the real price of oil but in the real price of exploration, development and production. It is almost beyond the wit of man, however, to devise a tax which meets all those criteria for all the various situations faced by the oil companies both as

  1557
  to their own tax positions and to the development profits they have in their own operations.
  At a time when the Department of Energy is considering its depletion policy, the Government should also be considering whether it would be appropriate to enunciate a set of principles that would govern future changes in PRT. I believe that that would give the oil companies the guidelines and, to a certain extent, the certainty that they require while not requiring the Government and the oil companies to reintroduce amendments to the present oil taxation scheme.
  If those proposals were put forward by the Government, of course the oil companies might not be happy about the guidelines laid down. But at least they would be certain of the basis on which the Government would set their future tax policy in relation to oil.
  Mr. K. J. Woolmer: I echo the sentiments expressed by my hon. Friend the Member for Norwich, South (Mr. Garrett). I hope that the Minister of State will be able to explain the Government's thinking on the use of North Sea oil revenues. That was a glaring omission from the Budget. The Minister of State must acknowledge that comments are being made about that omission.
  The sums of money involved are large. The revenues are emerging quickly and will last for a comparatively short time. It is important to know how the Government intend to use the resources to the benefit of the nation. I hope that the Minister of State will shed light on the Government's policy or at least express a willingness to initiate a public debate to ensure that the Government are aware of the various opinions.
  I appreciate that PRT is only part of an oil and gas policy. I appreciate that pricing, depletion and exploration policies are extremely important. I do not wish to engage in the trade union lobbying that has taken place on both sides of the argument about how much can or cannot be obtained by tax revenues from the oil industry.
  The evidence is that the oil companies are still making substantial profits. The Economist article, to which my hon. Friend the Member for Norwich, South, referred, said that the increase in PRT will take less than £3½ billion extra from
  1558
  the oil companies in the next three years whereas gas and oil revenues are increasing by about £10½ billion. Most people will agree that that represents a generous treatment of the oil companies.
  It is difficult to argue that the tax increases seriously threaten exploration. Two of the largest clearing banks are seeking to join consortia to take part in further exploration. I cannot believe that major banks would do that if the tax increase seriously threatened the profitability and viability of exploration, let alone the existing oil fields.
  The Minister of State will appreciate that I am new to the House of Commons and I suspect that the answer to my next question will be " No." Is it the practice to make available the profit before and after tax made by each company operating in the British gas and oilfields? The facts are of public interest. The public have a right to know. When statements are made about oil companies being squeezed unreasonably, people could judge if they knew what profits were being made by each company. Companies cannot plead confidentiality in this matter; it is of national interest. Government Members make sweeping statements about exploration being threatened. If they knew the profits made by companies, the public would be better able to judge. If we were fully and better informed, we should at least be able to assess the arguments.
  The hon. Member for Bedford (Mr. Skeet) argued that we should reduce the PRT. If the evidence supports his case, I am sure that he would be willing to see such evidence made public
  10.30 p.m.
  I turn to the question of impending gas tax, which is not included in the Bill, It is an important fiscal measure". Will the Minister remind the Committee of the proposals, say when they are expected to be brought before the House, and estimate how much will be raised for the Exchequer this year?
  I welcome indications that the Government are moving towards a type of depletion policy relating to self-sufficiency. When will we be given a statement on depletion policy? I appreciate that it is a matter about which the Minister of State, Department of Energy will make a statement. Will that statement be accompanied by the Chancellor of the

  1559
  Exchequer' s assessment or any changed level of Government revenues that are expected up to 1983–84? There will be important fiscal budgetary consequences. In the Treasury and Civil Service Select Committee, and in the House on occasions, it has been hinted that it is a possible reason why revenues may be lower than expected. We have a right to expect a statement of a financial nature from the Chancellor and the Minister. Will the Minister indicate when there will be a statement about the consequences for Government revenues?
  Were any new assurances given to the EEC about British oil production and net exports as part of the recent budget negotiations? Does the previous commitment for a net export of 5 million tonnes of oil in 1985 remain a precise commitment? Have there been any changes in the commitment as a result of the budget negotiations? Clearly they are part and parcel of the overall financial consequences for Britain.
  As my hon. Friend the Member for Norwich, South asked, is the Minister able to throw more light on the reasons for the understatement of the oil and gas revenues as set out by the Government? They appear to be substantially underestimated. It is an opportunity for the Government to explain both to the public and to the Committee, what the revenues are expected to be and why there is a substantial difference between the Government's estimates and the published figures.
  Because oil prices have risen significantly since the Red Book estimate of oil revenues, what, in current prices, are the revenues from North Sea oil and gas now expected to be? It is an opportunity for the Committee to be given updated information so that it can judge the present consequences of the significant increases in prices. The figures were also somewhat vague on the question of expected revenues from gas. Will the Minister say whether these revenues are included in the Government's figures? If not, what are they expected to be?
  Mr. Nelson: I intervene briefly to support the inclusion of the clause in the Bill. These debates on petroleum revenue tax are amongst the most important and
  1560
  financially significant that we have in the Chamber. As one who has contributed to such debates in the past, I think that it is sad that not more hon. Members take an interest in this important aspect of national income.
  My opinion has shifted slightly from being in favour of PRT at a lower rate and opposing the initial proposals of the Labour Government, who were in favour of a much higher rate of petroleum revenue tax, to a move in that direction. The movement in the international oil price means that we are entitled to ensure that our Revenue and people obtain a greater and more adequate share of the benefit of this great national resource. At a time when the price of oil is so high, and appears to be still rising, and when the BNOC has recently increased the price of its oil, it is right that the PRT rate should be increased as proposed in the Bill.
  However, I have some misgivings. Chichester, together with other areas on the South Coast, is an area of seismic exploration by a number of consortia. While the capital cost of exploring for and obtaining oil on land is much less than that in the North Sea, I am concerned that too high a rate of PRT may inhibit many of the smaller companies which are engaged in this form of on-land exploration. I recognise that PRT is only one element of a tripartite tax system of royalties and corporation tax that falls on such companies, but in striking the right balance, about which the Minister spoke with such eloquence and care, I should like an assurance that the effect of the clause will not inhibit seismic and productive exploration of oil on land along the South Coast.
  I should like to refer to some of the arguments that have been put forward by Opposition Members, notably the hon. Member for Norwich, South (Mr. Garrett), about the application of PRT revenues nationally. We ought to be able to agree on some degree of bipartisan approach to the PRT element, because both major parties are in favour of a high majority percentage rate of petroleum revenue tax accruing to the Treasury. How we apply that money—whether by giving it to the National Enterprise Board or by using it to reduce the public sector borrowing requirement—is a matter for partisan debate, ideological difference, and perhaps the subject of a

  1561
  major debate on another occasion. But on this occasion, when we are talking about PRT as a source of national revenue, the message should go out, and it should be clear, that we are united that a high rate of PRT is necessary in present circumstances.
  Mr. Eggar: I, too, would wish for a bipartisan policy, but we have had the extraordinary proposition put forward from the Opposition Front Bench that there is no place for profit-making oil companies in the North Sea and that they should be run on a licence basis. How does that fit into the scenario?
  Mr. Nelson: It is no part of my remit to speak on behalf of Her Majesty's Opposition. However, in the situation hinted at by the hon. Member for Norwich, South—namely, the oil companies acting as sub-contractors—there would be no profit for them. There would be no petroleum revenue to be taxed in that way. They would undertake work for a negotiated price with an agreed or negotiated profit margin which would accrue to them, and they would pay corporation tax just like everybody else.
  Mr. John Garrett: I cannot see why this proposal should cause such waves of shock and horror on the Government Benches. It is a customary and common arrangement for a relationship between Governments of oil-producing countries and oil companies. It is not unusual.
  Mr. Nelson: It is not all that usual. In many instances the principal oil companies are State oil companies. Such is the position in the Gulf region.
  When a national oil company or a variety of individual independent oil companies sub-contract the work of exploration and production of oil from an area such as the North Sea, it is done on the basis of a negotiated price, and all the profits will accrue to the Government. The hon. Gentleman said that he did not understand the objection to that But where will the capital investment come from in the beginning?
  In the past, the trade-off has been that the private or independent oil companies had to raise the capital to invest, lose, and profit from in the North Sea. In the situation that the hon. Gentleman describes, it will be considerably more difficult for
  1562
  major oil companies to go to international markets to raise finance to sink into capital programmes in the North Sea. Those programmes may prove to be highly non-productive, but in the few cases which are productive they will make money. There has to be a trade-off between the rate of return and the amount of capital invested. In the situation described by the hon. Member for Norwich, South, the Government of the day or the oil agency of the Government will have to raise the capital moneys to do that. We may be able to afford that now, but that was certainly not the case when oil exploration in the North Sea started.
  I suggested that the price of oil may decline. I have no divine way of foreseeing the future, but there is a tendency in investment, capital markets, and politics and amongst commentators to assume that when the price for a commodity, whether oil, property or something else, has risen considerably over a short time and is continuing to rise, that is an inevitable picture of the future. Such is not the case—as we discovered in the past with property—and there is no reason why oil should be any exception. To look at the refinery capacity in Rotterdam is false. If we look at the prospects for the major industrial economies in Europe, our economy and that of the United States, we are now seeing, and we shall certainly continue to see over the next year, a dramatic decline in industrial demand, particularly in producer demand. Consumer demand has fallen, and producer demand will fall rapidly thereafter.
  Tied to a surplus of oil production, that will inevitably mean that the real price of oil will not be allowed to rise as much in the future. The cartel which the oil-producing countries have been able to impose in a way that no other major commodity set of nations has been able to exert will not survive the combined effects of a recession and a surplus production of oil.
  In the future, we may have to consider reducing the rate of petroleum revenue tax if the real price of oil decreases. The exchange rate between sterling and the dollar has risen considerably, from a low of just over $1·5 to $2·32 today. If that were translated into terms of the effective price that we would have to pay in our petrol stations for oil if the rate of sterling was as low as it was previously,

  1563
  there would be a much higher price for oil. Exchange movements would also have a direct impact on future Government policy towards setting the rate of PRT.
  I reiterate that this is an important debate, involving countless billions of pounds. Bearing in mind the application of these moneys in the future, at a time when we will not only have to repay a considerable amount of the national debt, which has grown and grown, but when we will have to deal with some of the severe structural industrial problems in the next decade, it is right that every hon. Member should be allowed to speak his mind on this most important matter.
  10.45 pm
  Mr. Douglas: It is not my intention to canvass and review some of the arguments of the hon. Member for Chichester (Mr. Nelson). He speculated widely about the future price of oil and the impending demise of the OPEC cartel. I do not believe that that demise will take place. If the OPEC nations, which have, collectively, the substantial proportion of the free world's oil reserves, find that there is likely to be a glut of oil, it is within their hands and their competence to cut back. Indeed, speculation currently in the press is that Saudi Arabia in particular will try to reorganise the cartel by taking certain steps to raise the price per barrel by $2 and reducing its rate of production from about 9·5 million barrels a day to something substantially below that. Therefore, there are other factors to be taken into consideration other than what might be thought to be the decline of the international economy.
  But we are in a nation which, for ill, has a petrocurrency. When talking about revenues raised from PRT, the Government must take cognisance of what that petrocurrency means to United Kingdom industry. Day in and day out, I meet industrialists. Coming to London this week, I met several Scottish industrialists who have substantial overseas business. They have to give fixed long-term quotations in dollars. They complained vociferously to me about the consequences of an " unnatural " high exchange rate. That is one difficulty.
  The second deficiency is that we have high rates of inflation. We also have high unemployment and low growth. Most of
  1564
  these matters are the ill effects of having a petrocurrency. What we are looking for—my hon. Friend the Member for Norwich, South (Mr. Garrett) tried to raise this matter—are some of the beneficial effects that ought to accrue to the United Kingdom economy from the use of these resources.
  This is the only Western industrialised nation which can say that it is self-sufficient in total energy resources, and we have an economy that is going into decline, with industry after industry showing redundancies. That ought not to be so. The Government have the main responsibility for reversing this process.
  My hon. Friends have raised questions about the extent of the PRT in terms of total revenue to the Exchequer. We ought to have clear answers on this matter. But, looking to the future, this depends primarily on the Government's own view of a depiction policy and an overall licensing policy. If we are to talk about bipartisanship across the Floor of the Chamber—I get into enough trouble speaking for myself, and I do not speak for the Labour Party on this issue—I would welcome a long-term understanding of what the licensing policy would be on the rate of blocks per annum or every two years, or whatever it may be, and a long-term understanding about depletion policy.
  If we talk in technical terms—and this relates to the long-term viability of the PRT—depletion policy should not only be related to what we loosely call good oilfield practice, as under the Petroleum and Submarine Pipe-lines Act, but also to whether we impose upon the companies the responsibility of having enhanced recovery techniques related to every field.
  I know that these are technical matters and that time does not permit me to develop them. However, the rising price of oil forces the companies to consider getting a higher yield from each field in terms of recoverable reserves. The Forties field, for example, will have recoverable reserves well in excess of 40 per cent. That is because BP technicians and engineers decided from the beginning that it would have secondary if not enhanced reserve techniques. We are afraid that the pressures on the companies to seek a quick rate of return may result in the companies employing techniques that do not include the most modern and

  1565
  sophisticated methods of enhanced recovery. The techniques are costly, but it is the Government's responsibility to examine them. Enhanced recovery techniques may be as valuable as discoveries.
  I shall not deal with the remarks of the hon. Member for Bedford (Mr. Skeet) about marginal fields and more sophisticated types of production techniques in future. I question the Government on a vital aspect of PRT, namely, revenue-raising technique. The key to PRT is the price that we charge for North Sea oil. The Government's vehicle is the British National Oil Corporation. We are getting much disquieting news about the BNOC in the press. Much ill will is engendered by bad manners, as The Times stated recently. I have in mind the handling of the appointment of the chairman and the resignation of Mr. Mortin. There was also the resignation in April of Mr. Ford.
  The chairman was appointed not by the previous Labour Government but by the current Secretary of State for Energy. I quote from the annual report of the BNOC in the context of the changes that have been imposed by the Government on the corporation. The chairman said:
  " Although important, they do not affect substantially the operations of the Corporation in exploration and development on the United Kingdom Continental Shelf, nor do they change the role of the Corporation as the major trader in UKCS oil . The general tenor of these changes was to put the Corporation for the future more nearly on a similar footing to other oil companies in regard to tax and access to new licences. The abolition of the statutory role as advisor to Government will, I believe, result in the Government being less well informed, but from the narrow standpoint of the Corporation it removes a work load for which it was not remunerated. Most importantly, it was deceided not to sell off individual assets of the Corporation, which had been unanimously opposed by the Members, because it would have destroyed the operating capability "
  If we are to talk of bipartisanship, the Government should give us an undertaking that they will refrain from their doctrinaire approach to the privatisation of the BNOC, which is unnecessary, unjustified and unwanted by the oil companies. The hon. Member for Enfield, North (Mr. Eggar) shakes his head. Let him name one oil company that wants it. If he can name one, I shall give way. If he cannot
  1566
  do that, I shall not give way. I give way in expectation.
  Mr. Eggar: I put the question in reverse. Can the hon. Gentleman name one company that has said publicly that the 3NOC should keep the powers that it inherited in May 1979?
  Mr. Douglas: I used to think that I knew something about the oil industry. After 15 years of further study I realise how little I know. However, I know that if the oil companies had a gripe about the future role of the corporation they would have made their views well known. It would be appropriate for the Minister to indicate whether an oil company de sires the privatisation of BNOC. Is that desired by BP or Shell? Let the Minister name a company that wants that to happen.
  The Government's approach is doctrinaire. It is destructive of the Government's useful instrument to get the maximum information about United Kingdom reserves and the maximum yield for our economy.
  This has been a wide-ranging debate. All hon. Members want an assurance that we shall have, as far as possible, a technique of licence and taxation policy that will ensure access to the maximum quantity of North Sea oil and gas for as long as possible. As the Minister said, a balance must be struck. There is no evidence that the rate of taxation frightens oil companies. Applications for the seventh round indicate that oil companies are queuing up. Highly speculative banking groups are being formed. Small oil companies are also trying to get in on the act. The North Sea is for the big boys. However, the Government may wish to encourage smaller British companies.
  If one wishes to examine the operations of oil companies, one should examine what they are paying for drilling rigs. They are a major item of expenditure. The market rate for drilling rigs can rise dramatically. It will probably rise from the current figure of £20,000. Shell will find that it has to pay £70,000. There is great interest in the North Sea. The North Sea accounts for half the world's offshore oil activities. It is the most valuable settled province available. If oil companies were put at arm's length, they would still get their " screw," or

  1567
  profit. They have the necessary expertise. I take no pleasure in making that statement. Oil companies can use their expertise to do other things in addition to exploring for oil.
  The Government have probably got the right balance. We are concerned about whether the policy is right in toto. We must ensure that we get the maximum amount of oil recoverable together with a balanced accretion and licence policy.
  Mr. Penhaligon: The hon. Member for Dunfermline (Mr. Douglas) made an interesting speech and raised several important points. He said that we needed an accretion policy that would not lead to panic exploitation of the resources and assets by oil companies. A public statement to the effect that the Labour Party would not nationalise oil companies if it won the next election would do more to stop them panicking and exploiting the facilities than any action taken by the Minister or any other hon. Member.
  The Labour Party conference is now apparently the source of its policies. At the recent Labour Party conference it was said that the assets of our public sector industries—sold off to the Tories—would be taken back into public ownership without compensation. Anyone who acquires an asset will have to think how he can get a return on his investment within four years. The Labour Party is exacerbating the problem to which the hon. Member for Dunfermline fairly referred. Indeed, it can be said that his party, and not the oil industry, has caused the problem.
  11 pm
  The hon. Member for Norwich, South (Mr. Garrett) extended the debate in an interesting way. We ought to spend more time discussing what we are to do with the money coming from North Sea oil. It will not last forever. The guesses vary from 10 years to even 20 years, depending on which document one reads. We ought to be thinking what we wish to change that great, God-given asset into. Do we want a short-term bonanza and to spend it on better pensions and hospitals? Do we wish to invest it all abroad? Do we wish to invest it in British industry? The answer must be the latter.
  It is always worth reiterating that we need to import half our food to live. That means that we must export something.
  1568
  We have few raw materials to export, My constituency probably does better than almost any other with the exports from its china clay industry. The rest do not keep up to the mark. We have only our skill, industry and enterprise to export.
  As a trained engineer, I can see that the costs involved in rejuvenating our industry and getting on the stocks and into production products that are internationally competitive are horrifying. I congratulate the public relations department of British Leyland on the ECV2, which the company claims to have developed for £100,000, but if that is all that the company has spent it has done nothing more than build a cardboard model. With modern technological requirements, one cannot make any technical progress or investment for production on such figures. They are small change.
  What are we to do with the money from North Sea oil? Is it to be tipped in to reduce the upper rates of tax? Is it to be used to reduce the public sector borrowing requirement? What do the Government wish to see it changed into? If the Minister says that he wishes to increase investment in British industry, I do not know how he can equate that with 20 per cent. interest rates. Even if a company has a good idea for products, it will probably be the best part of a decade before any can be sold. That is an enormous investment, but the Government's policy requires that the money must be borrowed at 20 per cent. accumulative interest over the years.
  I support the hon. Member for Norwich, South in stressing that the House of Commons and the country ought to spend far more time discussing this matter. We must realise that North Sea oil is only a short-term asset. We must think about what we want to invest it in and change it into and how we mean to do that. It is a vital subject.
  Mr. Gordon Wilson: I am not convinced that the rate of PRT is at a sufficiently high level. All that the Government have done, in effect, is to increase the rate of tax, which was historically too low, in order to account for the increase in the price of oil in recent years. The Government will have to come back to the matter to determine a proper rate of tax and allowances. If the oil industry

  1569
  thinks that the House of Commons has left the matter in a state of stability, it is mistaken.
  When talking about oil taxation, I criticise the Government particularly for the failure to deal, by taxation if by no other means, with the huge profits that the oil companies have been making out of inventory stocks. Every time that the price of oil goes up in the Middle East, the oil companies rush through almost immediately increases in the price of petrol. They explain that they have to buy in further stocks, but it has seemed to me for some time that that is not a particularly convincing argument.
  It is a great pity that the Government refused to tax these huge profits. The best solution may have been for the Government to have taken action to prevent those unacceptable increases in the first instance, which merely drive up the rate of inflation for the benefit of the major oil companies. Insufficient action has been taken over the level of taxation. As a result, income has been lost.
  The hon. Member for Dunfermline (Mr. Douglas) referred to the role of the BNOC. One criticism is that, due to the delay in increasing the price of oil through BNOC, a considerable amount of Government revenue has been lost. Perhaps the Minister of State could ask his Department to investigate that.
  The hon. Member for Norwich, South (Mr. Garrett) mentioned use of oil revenues. It shows a complete absence of any policy to use that money, which was an exceptional request, to reduce the PSBR. There is no strategy for deploying those funds to modernise industry and combat unemployment in areas where it is already far too high. As a result of Government policies and their failure to take action, unemployment in my constituency and in other areas is rising fast. Almost every day the local newspaper has stories of factories closing and substantial redundancies occurring. That is set against the large volume of money going to the Government. They are making no effort to deploy that money where it is badly needed.
  Can the hon. and learned Gentleman justify the Government taking no action in areas such as my constituency, with male unemployment over 10 per cent. by way of additional industrial finance being made available to reduce unemployment?
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  People will be put on the industrial scrap-heap without hope of industrial growth over the next three or four years. Even if the Government are correct in saying that the rate of inflation will come down in the next three or four years, with resulting growth in the economy, areas with maximum unemployment will benefit last. Those who are suffering now will suffer longest. Will the Minister therefore ask the Cabinet sub-committee to reconsider the whole question of investment of North Sea oil revenues?
  The Labour Party is not blameless. During the Labour Administration we debated what should happen to oil revenues and whether there should be a separate account where the oil revenues would be hypothecated and made available for industrial purposes. The Treasury argument that these funds should go to basic accounts prevailed then.
  Mr. John Garrett: Quite right, too.
  Mr. Wilson: Those policies mean that my part of the country and Northern Ireland, among others, will not benefit.
  When the new Labour manifesto was produced at the Wembley conference on Saturday, a proposal was made for an industrial investment fund. I congratulate the Labour Party on that small step. However, when I looked at that document it grieved me to find virtually no reference to Scotland and no definition of the ways in which the industrial investment fund would be used to combat unemployment. We in Scotland will have to press for a Scottish oil fund. Without it, we shall undoubtedly end up as one of the few areas in the world in which oil has been discovered but which have gained very little benefit from the resource.
  Mr. Dalyell: I shall not yield to the temptation to follow the hon. Member for Dundee, East (Mr. Wilson) on the subject of Wembley and other assorted matters.
  I wish to make one observation, and then ask a question. I do not believe anyone who says that the oil companies are unwilling, on price grounds, to restrain themselves from exploration in the North Sea. Those of us who went to the BP briefing today know that BP, for example, is taking on the hazardous and enormously expensive development of the Magnus field. This is the most northerly of all fields. Anyone who takes on a

  1571
  proposition such as Magnus in the relatively far North will not be deterred by fluctuations of price, so let us put that argument out of the way.
  I am sure that the Minister of State will say that I ought to be barking up other trees, but I want to make one rather peevish reference to Seaforth Maritime Limited. We discover this week that this firm has placed an order for two specialised ships in Singapore.
  In a question to the Department of Industry, I asked how much Government money had gone to Seaforth Maritime Limited of Aberdeen under the Industry Act in any convenient period. I was informed by the Under-Secretary of State, the hon. Member for Basingstoke (Mr. Mitchell), that in 1976 a loan of £950,000 was granted——
  The First Deputy Chairman: I am sure that the hon. Gentleman will relate this immediately to the clause which we are discussing.
  Mr. Dalyell: The point is that the firm had Government money in one form or another, and the only way that I could table the question was under the Industry Act. The firm has benefited enormously from British public money.
  This Government, like the last one, are putting a good deal of money—some would say not enough—into the ship building industry, only to find that, having been given this money, off goes the firm and, on some kind of accounting operation, places orders——
  The First Deputy Chairman: Order. The matter which we are debating is related to the amount of tax which is paid.
  Mr. Dalyell: It is all a question of public money. However, I think that I have made the point, and I shall not pursue it any further.
  Mr. Peter Rees: We have had an interesting and far-ranging debate. I have had to remind myself from time to time that the purpose of this modest clause is to raise the rate of petroleum revenue tax from 60 per cent. to 70 per cent. But it is always profitable to hear the views of such well informed hon. Members as the Member for Norwich, South (Mr. Garrett), although he went a little far when he said that the debate on how the
  1572
  oil revenue should be used had been stifled and avoided.
  I remind the Committee that this is the first Administration to have published a medium-term financial strategy—a modest and tentative forecast for five years—in the Red Book demonstrating that there would, optimistically, be implied fiscal adjustments in 1982–83 and 1983–84. This brings out into the open the possibility that there will be something to decide and therefore something to debate.
  To say that the matter has been stifled and avoided indicates either that the hon. Member for Norwich, South has not done his homework on the Red Book or that he has quite misunderstood the point of table 9 in it.
  Mr. John Garrett: The Government have stifled debate on the uses of public revenues from North Sea oil, given the alternatives that have been canvassed on both sides of the Committee. Hon. Members have said that they want a wider debate on the uses of public revenue from North Sea oil, particularly given the decline in our manufacturing industry. That is a perfectly reasonable request to make. There has been no discussion of it since the Government took office.
  Mr. Rees: To say that debate has been stifled and avoided is a travesty of the truth. It is always open to the Opposition to use their Supply days to raise precisely this point if they are so minded. I shall certainly convey to my right hon. Friend the Leader of the House the intense anxiety of Opposition Members to use their Supply days for this subject. My right hon. Friend will no doubt take note of their request.
  I hope that I do not sound disrespectful to the Chair, but I doubt whether clause 91 is the right vehicle for this far-reaching debate. I feel that I should be trespassing on your indulgence, Mr. Godman Irvine, if I were to explore at this hour all the possible uses. This will be a legitimate matter for debate over the years to come. There is an old adage about not counting one's chickens before they are hatched. We can have a useful and tentative debate, but I shall not embark on it tonight.
  I say only that I was a little surprised when the hon. Member for Norwich,

  1573
  South sketched out a Dutch scenario with a Norwegian tax system. I am full of admiration for our friends in those two great countries. I hope that we in this country, with our own distinctive contribution to the world and to Western civilisation, will work out our own way of developing.
  11.15 pm
  Mr. John Garrett: Will the hon. and learned Gentleman give way?
  Mr. Rees: I am not giving way to the hon Gentleman again.
  Mr. Garrett: What the lion, and learned Gentleman says is a travesty.
  Mr. Rees: Hon. Members and people outside will be able to judge when they read Hansard whether my remarks are a travesty of the arguments deployed by the hon. Gentleman. I thought that his argument bore little relationship to the rate of petroleum revenue tax. That must rest between the hon. Gentleman and the Chair.
  The convention, I would say to my hon. Friend the Member for Enfield, North (Mr. Eggar), is that one does not deploy in advance before interested parties the precise fiscal measures that one has in mind. My hon. Friend, I am sure, will appreciate the sensitivities that are involved. I had discussions with UKOOA and the other organisation in advance—I am surprised that my hon. Friend was not aware of them—about how they saw the oil scene in the light of the price increases. That was the furthest that it was proper for me to go. I hope that they appreciated the candid and far-reaching discussions that took place. There can' not be complaint that the Government have not gone as far as they legitimately were able to canvass these matters.
  I turn to the remarks of the hon. Member for Batley and Morley (Mr. Woolmer). I hope that I do not sound " peevish "—the word was used about 45 minutes ago—in responding to him. His intervention at that time sounded more a preview of the questions that he intends to put to the next witnesses called before his great Select Committee. Whether that is debate or catechisation I do not know. I shall do my best to answer the questions.
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  It would not be proper to make available information about the profits of individual companies. I am not entitled to ask for the tax files of individual companies, just as I am not entitled to ask for the hon. Gentleman's tax files. If he raises questions about his tax affairs, I am entitled to look at the matter and deal with the point raised. I am not, however, entitled to call for the information that he mentioned. I am certainly not entitled to debate it here.
  The hon. Gentleman asked about the gas tax. That will be a matter for my right hon. Friend the Secretary of State for Energy. No doubt in due course all will be revealed to the House and there will be ample opportunity to debate the matter. The form and details have not yet been decided.
  Depletion policy, again, is a matter for my right hon. Friend the Secretary of State for Energy. In due course, when all the decisions have been taken, I am sure that he will wish to confide in the House and there will be ample opportunity to consider what he announces. I can assure the hon. Member that there have been no changes in our commitment to the EEC in this area as a result of recent negotiations in Brussels.
  I hope that that deals with all the points raised by the hon. Member. If not, he will have ample opportunity to pursue these matters when his own great Select Committee resumes its consideration of this point.
  My hon. Friend the Member for Chichester (Mr. Nelson) approached the problem from a different angle, expressing his misgivings that the rate might be too high and might discourage further exploration off his constituency. We are, of course, sensitive to the rates of PRT. That was the purpose of the debate initiated by my hon. Friend the Member for Bedford (Mr. Skeet. However, there is a considerable element of front-end loading which enables companies engaged in exploitation in difficult areas to recoup that cost before they pay any tax.
  During our debates last summer, when we increased the rate of PRT, I announced that there was to be a marginal fields review. It was to make certain that the structure and rate of the tax were not damaging exploitation in the

  1575
  way that my hon. Friend feared. The review is almost complete. We shall draw from it whatever lessons need to be drawn. We are very sensitive to that issue.
  The hon. Member for Dunfermline (Mr. Douglas) gave his usual balanced contribution. We take note of the points that he raised, particularly about enhanced recovery techniques. These technical matters are not the primary concern of the Treasury, although the structure of the tax must take account of these matters and, of course, it will.
  I take issue with the hon. Gentleman on one point. He said that on price the BNOC is the Government's vehicle. It is not. In one sense it is, in that it has oil to purchase and to sell. But the Government believe that these matters must be dictated by market forces, and we are not yet a major oil-producing country. We are therefore unable to determine the price of oil, although we can have an effect, even of the specialised oil produced in the North Sea.
  The privatisation of the BNOC does not arise on this clause, and it is more a matter for my right hon. Friend the Secretary of State for Energy than me.
  The hon. Member for Truro (Mr. Penhaligon), speaking from the Liberal Bench, developed in a Liberal way the general theme of the hon. Member for Norwich, South. There will be time enough to debate the implied fiscal adjustment. I hope that the hon. Member will be able to contain his impatience for a year or so yet.
  The hon. Member for Dundee, East (Mr. Wilson) complained that the rate of PRT was not high enough. This matter was thoroughly ventilated in the debate on the last amendment. I hope that the hon. Gentleman will forgive me if I do not go over the ground again. I appreciate that the issue is difficult. One cannot be dogmatic about precisely where the balance should be struck. It is a matter of reconciling the not entirely divergent interests
  1576
  of the Exchequer and the oil companies.
  I would not be so arrogant as to say that we have the balance right. I hope that we have. Judging from the conflicting contributions from both sides of the Committee, I think that we might have skated down the middle and got it right. Our minds are not closed.
  I was encouraged by one of my hon. Friends to give an assurance that if the real price of oil were to fall we would bring down the rate of PRT. I cannot give a categorical assurance, but we should certainly have to take such an event into account because PRT is an annual tax and we shall continue to review it. If the real price of oil were to go up again, we should have to take that into account.
  We are not slow to protect the national interest. The marginal take is now 87·4 per cent. It is a progressive tax and I hope that the Committee will feel that the country has its due proportion of oil revenue.
  I turn to the notable and idiosyncratic contribution by the hon. Member for West Lothian (Mr. Dalyell). I hope that he will forgive me if I do not deal with the affairs of the company that he mentioned because I am unaware of them. I might be called to order if I were to do so.
  We have had a general and interesting debate. I hope that the Committee recognises that there will be other opportunities to debate the implied fiscal adjustment. I hope that we shall have other opportunities to determine whether we need a Dutch or Norwegian scenario rather than the British scenario for which I hope. The rate is just about right. There will be further opportunities to debate the details of improvements and amendments to PRT proposed in the Bill.
  Question put and agreed to.
  Clause 91 ordered to stand part of the Bill.
  Bill (Clauses 10, 17, 18, 20, 23, 53, 68 and 91) reported, without amendment; to lie upon the Table.

IRAN (SANCTIONS)
11.28 pm
The Minister for Trade (Mr. Cecil Parkinson): I beg to move,
That the Iran (Trading Sanctions) Order 1980, a copy of which was laid before this House on 29 May, be approved.
I remind the House why we are seeking approval for the two orders to implement sanctions against Iran. At Luxembourg on 22 April Community Foreign Ministers agreed to proceed with economic sanctions in conformity with the draft United Nations Security Council resolution which was vetoed by the USSR on 13 January.
They agreed that if there was no decisive progress on the release of the hostages by 17 May they would meet again and decide what action to take towards enforcing that Security Council resolution. They decided in the meantime to take a number of political steps. In accordance with the commitment made by the Foreign Secretary, the Government secured the passage of the Iran (Temporary Powers) Act 1980 and at Naples on 18 May the Foreign Ministers of the Nine decided to make the necessary orders to implement the sanctions.
I need not remind the House of the reactions that it expressed to the Naples decision. The House decided, very firmly, against any retrospection on contracts signed before the date of the orders. The Government recognised these very strong views and, as my right hon. Friend the Lord Privy Seal announced on 20 May, decided to make sure that the orders would not apply to the export of goods under arrangements made before the date of the orders. He also explained that it was our intention to act broadly in line with our Community partners. Our partners in the Community all took action on 22 May by means of decrees or other regulations in acordance with their own legislative procedures. Japan and some other countries have also taken action. I shall have something to say later on how those measures compare with those implemented in the United Kingdom.
We were unable to take action on the same date as our partners and we decided to implement our sanctions on 29 May, with effect from 30 May—the earliest practicable date under our parliamentary and statutory procedures. We have now come, as early as possible after that date,
1578
to seek the approval of the House for these orders. Tonight we are asking the House to approve the two orders. In this debate we are considering the Iran (Trading Sanctions) Order 1980, which is an Order in Council made on 29 May under section 1 of the Iran (Temporary Powers) Act 1980, which prohibits the making or performance of contracts for the sale, supply or transport of embargoed goods to Iran. Under section 1(6) of the 1980 Act this order will lapse after 28 days unless it is approved by resolution in each House of Parliament.
The House has debated before the question why orders need to be made under both the 1980 and 1939 Acts. The 1939 Act gives powers to control the exports of goods, the main sanction called for under the United Nations resolution vetoed on 13 January. The 1980 Act enables us to take additional measures in accordance with that resolution. Let me give the House an example. The order under the 1980 Act, as I shall explain, applies to contracts for the supply of goods to persons in Iran, but it would not prevent a person buying goods in the United Kingdom and subsequently exporting them to Iran for his own use. Nor could it do so, because the 1980 Act provides powers only in relation to contracts related to or connected with Iran, and not to sales to persons in this country. Under the 1939 Act we can prevent goods sold in this way from going to Iran.
The Iran (Trading Sanctions) Order 1980 is made under section 1 of the Iran (Temporary Powers) Act 1980. This section gives powers to make such provision in relation to contracts for the sale, supply or transport of goods to Iran as appear to be necessary or expedient in consequence of breaches of international law by Iran in connection with or arising out of the detention of members of the United States embassy. The order extends, by virtue of article 1 (2), to the United Kingdom, the Channel Islands, the Isle of Man and the dependent territories listed in schedule 2 to that order.
If I may say so, the length of the list is to an extent a tribute to the assiduous work of the hon. Member for West Lothian (Mr. Dalyell), who pointed out in the course of various debates in Committee various dependent territories which might be used. I have to tell him that the only reason why the New Hebrides

1579
is not included m the list is that it is governed under condominium powers by ourselves and France. However, the authorities have been asked by both Governments to take note of these orders. I might tell the House that we have not yet had a reply from Mr. Jimmy Stevens.
Mr. Tam Dalyell: Nor has Diego Garcia replied.
Mr. Parkinson: Article 2 (1) contains a number of definitions, of which two are particularly important. The first is the definition of embargoed goods. All goods are to be embargoed except the foodstuffs and medical products specified in part 1 of schedule 1 to the order, and the other products specified in part II of that schedule if, and only if, sold or supplied for medical or surgical purposes.
The other important definition is that of a
" contract made before the date on which this Order comes into operation."
in article 2 (2). It is provided in article 3(2), following section 1(2)(a) of the 1980 Act, that sanctions are not to apply to contracts for the sale or supply of goods entered into before the order comes into effect.
Article 2(2) defines what is a
" contract made before the date on which this Order comes into operation."
for the purposes of this exemption. First, a contract made before the date of the order continues to be exempt if it is modified, amended or extended after that date. The reason for this is that, quite frequently, both parties to a contract agree to minor changes to the terms of a contract—for example, to delivery dates or perhaps prices. We would not wish an otherwise exempt contract to be frustrated by sanctions because of the sort of everyday changes that business men make. However, modifications must not be so substantial that a contract becomes, in effect, a new contract. If that happens, it cannot escape sanctions on the ground that the contract has only been modified.
Article 2(2) also provides that the exemption for goods sold or supplied under existing contracts shall apply to sales under new contracts made in continuation of an established course of business dealing. To qualify under this exemption, new contracts will have to be made between the same parties. They must relate
1580
to goods of the same or similar class, and be in continuation of a course of business dealing which existed immediately before the date on which the order came into operation—30 May 1980.
Some exports to Iran are made under commercial arrangements which, although they may not amount to legally enforceable contracts, reflect long-standing and regular business commitments. It would be inequitable, in our opinion, to draw a distinction between this sort of longstanding arrangement and formal long-term supply contracts, and we have therefore excluded such arrangements from the effect of sanctions.
Mr. Eldon Griffiths: My hon. Friend has been dealing with article 2(2) in a fairly clear manner, but has he read the report of the Joint Committee on Statutory Instruments, and will he deal with it at this stage of his speech in respect of article 2(2) in particular?
Mr. Parkinson: My hon. Friend has anticipated my next remarks. We have read very carefully the comments of the Joint Committee on Statutory Instruments, and I propose to deal now with its comment on this matter.
The Committee has given as its view that
" Although the meaning of this expression will be critical for deciding in many cases whether conduct is in breach of the order, and therefore criminal, it seems to the Committee that there will be many kinds of cases as to which it will not be possible to say with confidence whether they fall within it."
There are clear criteria spelt out in article 2(2) that will enable exporters to judge where they stand. For exports under new contracts to be exempt they must involve established trade links, the same parties and the same or a similar class of goods. These criteria will, I suggest, be sufficiently clear for most exporters to be sure, perhaps with legal advice, when they will be acting within the law.
I expect that there will still be some cases in which exporters will find themselves in doubt. The only sure way of avoiding that would have been to introduce a system of export licences. The Government rejected that as an unjustifiable interruption of trade under existing commitments which are not to be prevented by the sanctions. In other words,

1581
we believe that the introduction of a wholesale system of licensing—which would probably have been the only way—would have been a mistake, would have been cumbersome, would have been expensive and would not, in the circumstances have been justified.
I remind the House that the moment the hostages are released, we hope that the order will lapse. I do not think that the creation of a large bureaucratic machinery is justified in those circumstances.
Mr. Eldon Griffiths: I am grateful to my hon. Friend for his explanation of that point. The last thing that I wish to do is to make a difficult task any more difficult. With respect, my hon. Friend should have continued the quotation from the Joint Committee on Statutory Instruments. In contrast to what he said, it goes on to say:
" In oral evidence to the Committee the representatives of the Department of Trade and the Foreign and Commonwealth Office acknowledged that that was the case."
In short, the officials said that there was a problem in establishing the sort of cases that do, or do not, fall within the order. My hon. Friend made a perfectly fair point when he said that he did not want an elaborate structure. I agree with that. But it is not satisfactory to leave the business man and the exporter in as confused a position as that in which the officials and the Joint Committee on Statutory Instruments found themselves.
Mr. Parkinson: I note my hon. Friend's remarks. I think that I have given him the answer, which is that the alternative procedure that we would have had to implement to do what he wants would have been a system of export licences, which would have been difficult to administer and expensive. I wonder whether, in practice, it will be as difficult as he suggests. In theory in may be so, but in practice people will know.
I shall give an illustration of the sort of arrangement that we have in mind. There are a number of joint ventures where a United Kingdom company is dealing with an Iranian company in which it may have an interest but where there is no formal agreement between them because it is not necessary. We believe that the absence of a formal agreement should not result in that trade being stopped when somebody who had signed a contract
1582
on 29 May for a first-ever dealing with Iran would be allowed to go through with that transaction. I accept that it is a difficult order. I hope that my hon. Friend accepts that it is a matter to which we have given a great deal of thought.
Mr. Robert Adley: Does my hon. Friend think that what we are doing in the House tonight will help to release the hostages?
Mr. Parkinson: Yes.
The remainder of article 2 provides for the interpretaion of a number of largely technical terms contained in the order, and for the interpretations of the tariff headings given in the schedule.
Article 3 is the main operative provision of the order. It prohibits the making and performance of contracts for sale of embargoed goods to Iran from the United Kingdom or any dependent territory. As I have explained, article 3(2) exempts sales under existing contracts. Article 3(4) provides that nothing in the article overrides any other restrictions that may exist on the sale or supply of goods to Iran. For instance, computers will continue to require an export licence. The only other part of article 3 to which I wish to refer is article 3(5), the purpose of which is to give the Customs the power to enforce this order.
Article 4 prohibits contracts for the transport of enbargoed goods to Iran from anywhere in the United Kingdom or from any of the dependent territories. The prohibition covers carriage by ships and aircraft registered in the United Kingdom, and all land carriage. Scheduled passenger services by air or sea are unaffected because the prohibition covers only goods and not people. There are two exceptions to the prohibition. The first is contracts made before the order came into effect. This mirrors the position with contracts for the supply of goods, and means that carriers may honour all their existing contracts.
Secondly, the personal effects and professional equipment of passengers are also exempt. Clearly, if people are to be free to travel between the United Kingdom and Iran, provision has to be made for their personal effects.
Article 5 provides penalties for offences under the order. Article 5(1) restricts the institution of proceedings. Article 5(3) enables proceedings to be brought

1583
before the appropriate court having jurisdiction in the place where the defendant is at the time.
By virtue of article 5(2), where a contract for the transport of goods to Iran is prohibited by article 4, the owner or master of a ship registered in the United Kingdom or in any territory to which the order extends the operator or commander of an aircraft so registered who makes or performs such a contract, is guilty of an offence. As a result, a contract for the carriage of goods from the United Kingdom to Iran, for example, does not escape sanctions by being made outside the United Kingdom.
Mr. Bowen Wells: Will my hon. Friend explain how this will affect trading through third countries? Will this in any way be caught under these orders?
Mr. Parkinson: No.
Article 6 applies various Customs powers, including the right to demand evidence of the declared destination of exports and powers of search, to the enforcement of article 3(5). As I said, article 3(5) prohibits the exportation of goods in performance of a prohibited contract.
The final article of the order relates to licences. The Secretary of State or the governor of a scheduled territory, as appropriate, has powers to license exceptions to the prohibition on new contracts for the supply of goods to Iran and new contracts for their carriage to Iran. These powers are intended for use only in exceptional cases, and the purpose of article 7 is to make it clear that licences are not irrevocable, but that the Secretary of State or a governor has power to vary or revoke any licence which may be granted.
We do not expect the frequent issue of licences, and we have certainly no intention of setting up any form of licensing system. A general licence has, however, been granted permitting the export of various means of payment.
Hon. Members may ask, why have the power at all? Perhaps I could give an example of a case in which we might wish to issue licences. My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), during the debate on the Iran (Temporary Powers) Bill, asked the Government
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to give an undertaking that goods could continue to be exported to Iran for humanitarian reasons. Relief supplies, after an earthquake, for instance, is one possibility. We might need to grant licences to ensure that such humanitarian supplies could be contracted for and delivered to Iran.
The Joint Committee correctly pointed out that unfettered power is given to modify or revoke licences and that there is no right of appeal. We realise that this is a broad power, but we believe that it is necessary. For instance, it might be desirable that licences obtained by fraud should be revoked. I remind my hon. Friend and others that the Secretary of State would be answerable to the House in such cases.
Mr. Eldon Griffiths: Is my hon. Friend saying that in the case of fraud, where he wished to prevent a transaction taking place, that should not be justifiable in the courts but should be blotted out by the Secretary of State without any appeal to a court of law?
Mr. Parkinson: I am simply saying that one of the occasions that we had in mind when we took this power was that if we discovered that a licence had been obtained by fraud we might wish to have the power to revoke that licence. As I said, the Secretary of State would have to answer to the House of Commons were he to use that power.
Mr. Bob Cryer: Putting aside the example of fraud, if, for example, the Secretary of State were to modify or revoke a licence from a trader who was operating in good faith, for whatever reasons, that trader would have no recourse to the courts. Is that not a serious limitation on the rights of the individual concerned?
Mr. Parkinson: I accept that this is a serious matter, and the hon. Gentleman has raised an important point. I repeat that the Act under which this order is made is designed to have a very limited life. It may be necessary, should we discover that fraud has been used for obtaining a licence, to act quickly. Therefore, the Secretary of State has taken this power, and the House would have the right to call him to account.
We believe that United Kingdom sanctions are likely to be broadly similar in

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effect to those adopted by other Community countries and Japan. They have, by decree or other regulation, introduced systems of licensing for exports to Iran. Naturally, the procedures adopted in each country vary.
The Community countries have announced that exports under contracts signed since 4 November 1979 will not be licensed. The pattern of trade between some of our major Community partners, as well as Japan and Iran, is, in some respects, different from ours. They are carrying out some large projects in Iran under contracts signed before 4 November. United Kingdom contractors are not currently carrying out any major projects in Iran. Thus, it is not possible to generalise about the likely effects of sanctions simply by comparing the regulations that each country has made. Community countries will be keeping in close touch with each other about the application of the measures. A technical committee of experts has been set up in Brussels which will monitor both the imposition and the effects of sanctions.
I ask the House to approve the order.
Mr. Deputy Speaker (Mr. Richard Crawshaw): I remind the House that we are taking the two orders separately.
11.53 pm
Mr. Edward Rowlands: Yet again we have heard an unhappy and unconvincing presentation of Government policy by the Minister of State. These two orders are, alas, the remnants of a policy which is now in tatters, and the Government have no one else but themselves to blame for the position that they are in.
The original policies were brought forward and promoted in the House without any real conviction or commitment by the Ministers concerned, who were then under pressure from both sides of the House. Nods and winks were given about the exemptions of existing contracts, and then the Foreign Secretary made a foolish commitment in Naples that would have made sanctions retrospective. Within hours of announcing that commitment to the House, the Government were forced to make the most speedy U-turn in recent political history. The luckless Lord Privy Seal had to announce yet another change of policy.
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In making these orders, the Government have gone even further in extending the exemptions which we debated during the Committee stage of the Iran (Temporary Powers) Bill. Under this order not only the contracts made before the date of the order will be exempt, but any extension, modification or amplification of an existing contract will also be exempt. We shall certainly seek further clarification as to the meaning of those words.
The sum total of these twists and turns of policy is that the policy is in tatters, and it lacks any form of conviction. The credibility of Ministers on this matter is nil. Does anyone now believe that our American allies and friends feel that we have stood stoutly by them by introducing this sanctions orders? Does anyone believe that the Iranian authorities and so-called students will be moved one inch by these sanctions?
I suspect, frankly, that our American friends will feel more than a little peeved by what may be cynically seen as mere cosmetic and gesture politics. The Iranians will be stiffened in their obstinacy, and irritated rather than brought under any serious economic presure. The idea that this order and the subsequent order will have anything but the most marginal effect on the efforts that are being made to obtain the release of the hostages is frankly laughable.
When we debated the Bill, we found it full of ambiguities and confusions. Some of that confusion and ambiguity has now been carried forward into the orders. I specifically refer to article 2(2), which is repeated in the second order and was quoted by the Minister. It says:
" references to a contract made before the date on which this Order comes into operation include a reference to such contracts the terms of which have been modified, amplified or extended after the date on which this Order comes into operation, and also include a reference to a contract made in continuation of an established course of buisiness dealing ",
and so on.
The whole of that paragraph is clouded in uncertainty and ambiguity, as the hon. Member for Bury St. Edmunds (Mr. Griffiths) mentioned. We are the only people who feel confused. The Joint Committee on Statutory Instruments was similarly confused. The relevant paragraph of the Committee's report has been

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quoted. It said that there would be many cases
" as to which it will not be possible to say with confidence whether or not they fall within it."
The other point—perhaps the point not made by the hon. Member for Bury St. Edmunds in his intervention—is that, as I understand it, the Joint Committee on Statutory Instruments was very concerned that criminal proceedings could flow from the article—as the Committee said,
" whether conduct is in breach of the Order, and therefore criminal ".
We need much greater clarification of the relevance, significance and meaning of this paragraph, especially in view of the fact that if it were breached it would be not some minor civil offence but a criminal offence, which would be considered and treated as such. That was one of the additional points that the Joint Committee on Statutory Instruments made about the ambiguity and confusion over the meaning of this paragraph.
Let us try to test this paragraph by a specific example. Reading the press reports on the day after these orders were made, I noted that Department of Trade officials were quoted in a variety of anonymous ways. I quote one press report. A Department of Trade official is reputed to have explained this paragraph in the following way:
" A company with a contract to sell, for example, fridges, would be able to sign a new contract for, say, washing machines, but not for new cars."
Let us take that as the best illustration. We all know how the departmental press briefings occur. On the whole they are accurate. I should be grateful if the Minister would tell us whether that is a reasonably accurate description and practical illustration of what this paragraph means—that is, if a company has been selling fridges to Iran and then finds a demand for washing machines, within the terms of this paragraph it could sell washing machines.
As the Member of Parliament representing the largest washing machines factory in Europe, I have a rather particular interest in the proposition. [Interruption.] I shall ignore that gibe from the Minister. Is that not a good illustration or example, and will he confirm, as it was obviously from a Department of Trade briefing,
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that that is the meaning of article 2(2)?
When the Minister was defending the Iran (Temporary Powers) Bill he explained lucidly the difference between the use of powers under the 1939 Act, which will feature in the second order tonight, and the order promulgated under the new Act. He explained why we had to have new legislation and why we had to sit up for 16 hours to enact it. He said:
" there are gaps in the provisions of that Act "—
that is, the 1939 Act—
" which the Bill seeks to fill. For instance, that Act does not deal with future service contracts ".—[Official Report, Monday 12 May 1980; Vol. 984, c. 1004.]
Where in the order is there a reference to future service contracts? Service contracts were one of the main features of the Government's case.
Mr. Parkinson: When the House passed the Bill, it was giving the Government the power to implement the United Nations resolution which was vetoed by the USSR. It was an enabling measure. Throughout the debates we said that we would not move further than our partners. We said that we would move in concert with them. Our partners are not introducing sanctions on future service contracts. Let the hon. Gentleman come clean. Is he complaining because we are not doing more than our partners, or is he complaining because the Government are honouring their undertaking that they would not?
Mr. Rowlands: I am trying to ascertain exactly what the Government are doing. One of their major arguments for forcing the House to enact the Bill in a short time was the major gap in the 1939 Act for future service contracts. However, I am thankful to say that such contracts do not appear in the order. That is because our European partners have not included them in their measures. It is possible that the House will be presented with a further order to cover service contracts. I am not urging the Minister to go any further. I am merely trying to ascertain how far the Government have gone and why they have gone so far.
It is not only the issue of service contracts which aroused the interest of the Joint Committee on Statutory Instruments and which should arouse the interest of the House. The hon. Gentleman

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skirted penalties. I ask him to comment on the Committee's reference to the penalty provisions in the order. It was not exactly complimentary. The second paragraph of the Committee's report states:
" The effect of the Order in this respect is that the Order will be varied as to the penalty for summary conviction by the operation of Orders made under another Act ".
That is not the Iran (Temporary Powers) Act, and not the order, but the Criminal Law Act 1977. The relevant provisions of that measure do not apply to orders made under subsequent Acts. The Committee continues:
" This appears to the Committee to be an unexpected use of the powers of the Iran Act, especially bearing in mind that Orders under the Criminal Law Act are subject only to negative resolution proceduring ".
We debated the need for the House to scrutinise these measures and the comment of the committee is significant.
The Minister could have done the House of Commons the courtesy of addressing himself to that issue. He could have said that the Government do not agree for certain reasons. He should have tackled head-on the valid point made by the Committee.
The Minister did not mention another comment that appears in the same report. He was challenged about the power to modify or revoke a licence. That challenge was right. The hon. Member for Bury St. Edmunds also challenged the Minister on that point. The Committee's words were not exactly complimentary. It refers to an "unfettered power" to modify or revoke a licence granted under the order. It states:
" Neither Order contains any provision for an appeal against any such modification or revocation, and the effect of conferring an unfettered discretion to modify or revoke is that except in rare circumstances, there would be no right of appeal to the Courts."
" Unfettered power" is a strong term. The House deserves a better explanation than the Minister gave in his opening statement.
Several hon. Members wish to speak in the debate. We shall have an opportunity to raise other questions when we discuss the other order. The time scale is important. What impact does the Minister think these orders will have on the tragic situation of the hostages? Does he believe that the orders will make one
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jot of difference to whether the hostages are released?
The Minister defended some of the arbitrary and capricious aspects of this order. He said that he did not expect the orders to remain in force for long. However, we do not know whether he was referring to weeks or months. He said that we did not want a licence system and that we must accept the arbitrary powers of the Secretary of State. The Government say that they hope the order's use will prove marginal. They expect the orders to become irrelevant shortly, when the hostages have been released. What is the time scale?
Perhaps the order will remain in force for a long time. Sadly there is not much evidence that either the threat of sanctions or their implementation are having much effect on the obstinate Iranian authorities and the so-called students. The American hostages seem no nearer to release.
Perhaps the Minister will say whether this is the only order that he intends to make under the Iran (Temporary Powers) Act 1980. Are there more to come that will cover future service contracts? Are these two orders the sum total of the sanctions that we are expected to implement to assist in the release of the hostages? I fear that in a few months, the order having been implemented, the hostages will not have been released. Our American friends may then ask us to impose greater sanctions, or to put forward alternative policies. What will our response be?
Mr. Dalyell: Is it not relevant that some hon. Members are very bothered, to put it no higher, about the 14,000 American military personnel who are apparently being sent to Diego Garcia, together with seven pre-positioning ships and tanks? Why put tanks on an Indian Ocean atoll? That question must be asked.
Mr. Rowlands: While that serious issue is not irrelevant in the general context of the policy, I fear that I should be swiftly ruled out of order if I were to take up my hon. Friend's remarks.
How does the Minister see the order working? I want a simple answer to the following question: is this the last order that the House is to be called upon to agree to under the sanctions legislation?
12.10 am
Mr. Eldon Griffiths: Like most of my hon. Friends, I found myself in a dilemma in approaching the orders, as I did in approaching the legislation. I want to support the United States and to demonstrate our total abhorrence of the actions of the Iranians in holding the American diplomats, and apparently the only method by which the House and the people of this country are able to do that is to approve the sanction order.
Yet it is the most laughable order. It is full of holes, it makes no sense, it cannot work and, in my view, it is not intended to work. However, I shall vote for it, though in the knowledge that I am taking part in gesture politics, simply in order to demonstrate to the President of the United States, who may not be President a year from now, that at a time of his difficulties and high emotions among the American people the British Government and Parliament will not overtly pick a quarrel. That is the only reason why I shall, with the greatest reluctance, support the Government.
I do not envy my hon. Friends, the Minister for Trade and the Minister for State, Foreign and Commonwealth Office the task to which they have been required to put their hand. I admire my hon. Friend's gallantry in stoutly defending an order which I suspect he knows is indefensible. I hope that he will not construe my remarks as being directed at him. He is an admirable Minister for Trade.
I wish to deal specifically with article 2(2)—the dog's dinner of what contracts can be extended, modified or amplified—and article 3(2) on the sale or supply of goods. The hon. Member for Merthyr Tydfil (Mr. Rowlands) said that refrigerators can continue to be sold and that washing machines could be added to the extent that they extended, modified or amplified fridges, but that the principle would not extend as far as motor cars.
In my constituency, the sugar beet industry has had a variety of contracts with Iran to give technical advice on the propagation of sugar beet seed. That has been useful to the Iranians in the Caspian area. There are matters that I should like the Minister to deal with on behalf of my constituents.
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If sugar beet know-how is to continue to be supplied to Iran, can the provision be extended to carrots and turnips, on the ground that they, too, are roots? Can it be extended to the construction of sugar refineries and packaging businesses, which run into hundreds of millions of pounds? I am hopeful that we shall get such an order. It may not be too well accepted in the United States if we extend sugar beet seed technology on the basis of this order to the provision of a £500,000 complex for sugar refining and manufacture. What does the order mean? Could it be extended to cover the provision of chocolate, mintoes and, dare I say, humbugs, on the ground that sugar is an in-dispendable contributor to those comestibles? It is not good enough to say that most people will know what it means, and in any case they can go to the courts. My hon. Friend rather shrugged the matter aside by saying that, in any event, if the Secretary of State suspected irregularity or fraud he could wash out the courts and make an order regardless, with no appeal or other justiciable procedure. Our business men are entitled to have clearer instructions.
I return to my simple question: does the provision of sugar beet seed technology and know-how to Iran lend itself under this order to extension to the provision of carrots, turnips and other roots crops, the building of refineries and sugar packaging plants and chocolate and sweets?
Mr. Dalyell: Does the hon. Gentleman realise that he is standing in the very place where, in 1962–63, with devastating effect, the late Sir Gerald Nabarro argued about anomalies in purchase tax? Are we not back in that fantastic situation, which was brilliantly exposed by Sir Gerald Nabarro?
Mr. Griffiths: I recall the argument about whether gramophone records were graphite and therefore under one quota, or whether they were musical instruments and under a different one. Such problems could also arise with this order.
At one stage I was a director of Crane-Fruehauf. We had extensive and successful business in Iran. We shipped large numbers of components for trailers and other types of heavy lorry to Iran for assembly. Suppose that that business were

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continuing. It is to some extent under British control, although no longer under complete control. Would article 2(2) permit the Crane-Freuhauf business in East Anglia to extend the supply of trailer parts to Iran to the assembly of total trailer units, which would be a natural extension under the terms of this section?
Would it be permissible, under the modification aspect of the article, to add refrigeration units, which are part of the normal business of trailers, dumper trucks, container wagons and the tractors that pull them? I presume that it would. It is a natural extension of the business, and is precisely what Crane-Fruehauf has been hoping to achieve in Iran.
Let us go on. There is extension, modification and amplification. Does it follow, perhaps to push the argument a little far, that in the provision of trailer units and refrigeration vehicles to the transport system of Iran it would be reasonable to provide road-building equipment so that the vehicles might have roads on which to travel? I do not know, I do not believe that Crane-Fruehauf knows, and I suspect that the Minister does not know.
I believe that it is the Government's duty to ensure that our business men—our exporters, whom we are always urging to do better—have a measure of clarity, which they are not receiving from the House.
Mr. Rowlands: Especially as they will be subject to criminal proceedings if they get it wrong.
Mr. Griffiths: I was about to make that point.
I draw attention to article 5(2):
" Where a contract prohibited by Article 4 is made or performed by a person who is at that time the owner or master of a ship, or … the operator or commander of an aircraft ".
In answer to an intervention, my hon. Friend said that it did not apply to business arising from third countries, and I was grateful to hear that. It is entirely consistent with what he said throughout Second Reading and in Committee.
I presume that the position will now be that if some goods that the Iranians wanted arose in the United Kingdom but found their way, in one way or another, to Ireland, it would be perfectly lawful
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for the commander of a British aircraft or ship to pick them up from Shannon or from Cork and to transport them to the Gulf or Iran, but unlawful if he picked up the same goods from Liverpool or from Bristol.
It may be that my hon. Friend will say that it would be a question of the intention of the manufacturer and the maker of the contract at the point where he let the goods leave the plant or port in the United Kingdom. I agree with my hon. Friend when he says that he does not want to set up an elaborate system of licences and does not want the bureaucracy and red tape that goes with that. If he does not have that, however, how can he establish that goods made in Bury St. Edmunds or Birmingham and sent off to Ireland or some other third country, possibly Turkey, and then picked up by British vessels, are lawful? In my view, this part of the order is a dog's dinner.
I conclude with a double-barrelled appeal to my hon. Friend. After the very great difficulties that the Government had in the House during those prolonged debates it was singularly unfortunate and most embarrassing internationally for the Foreign Secretary at the Naples conferences to get it wrong. He may have been inadequately advised by those who sat in the Box throughout our late night discussion. It was their duty to nudge his elbow in Naples and tell him that what he was agreeing to was not what the House had said. It is a matter which needs further investigation: why was not the Foreign Secretary properly advised at Naples about precisely what the House had agreed?
That being the case, it was all the more important that my right hon. Friend's advisers should not pile one confusion on another. That is why I read with some astonishment the comments of the Joint Committee on Statutory Instruments on the orders. If ever there was a case, where officials of the Department should not have allowed their Ministers to get into yet another imbroglio with the House, it is this one. There was enough trouble in the debates that the hon. Member for West Lothian (Mr. Dalycll) initiated. To pile Pelion on Ossa in this case by having yet another problem with the Joint Committee on Statutory Instruments seems to be lamentable internal

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management in both the Foreign Office and the Department of Trade.
Mr. Dalyell: Does not the doctrine of ministerial responsibility apply to these matters? It is a bit off to start automatically blaming officials when it was the duty of Foreign Office Ministers to get in touch with the Secretary of State.
Mr. Griffiths: The hon. Gentleman states accurately the constitutional position. I am certain that Ministers in this Government at least will always accept the responsibility. I am, however, making my own speech. It is lamentable that the Foreign Secretary should have gone to Naples and not had his elbow jogged when he came to agree to something that the House had not authorised. He then had to disagree.
That is past. What matters is the new situation. Having made one unfortunate misjudgment of what the House of Commons had agreed, we find ourselves presented with yet another set of semi-constitutional objections from the Joint Committee on Statutory Instruments, a senior Committee of the House for which all hon. Members have the greatest respect. I say that in the presence of my right hon. Friend the Member for Crosby (Sir G. Page), who, perhaps more than anyone else, over the years has devoted a great deal of time and skill to that Committee. It is exceedingly embarrassing and quite wrong that the Committee should have to come to the House with this powerful argument that in a number of other ways the Government or the Department have got it wrong.
It should not be the case that the Committee has had to advise the House that the form of both orders requires elucidation. It is the job of those who draft legislation to do their elucidation in advance. All hon. Members know that these things can go badly wrong, but it is lamentable that more confusion should have been created. Will the Minister, within the limits that Departments always face when matters can go to court, try to give business men and exporters clear guidance on what is or what is not likely to be permissible, and what is or what is not likely to be pursued against them by the Government in the courts?
I appreciate the difficulties of giving that sort of interpretation. I believe, however,
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that it is a practical necessity that the Government should carry out.
The central issue is whether the passage of the order will lend comfort to the hostages who languish, still imprisoned, in Iran. Will the order bring nearer the day of their release? I do not know the answer. It will certainly give a measure of comfort to the relatives of the hostages to know that, in this matter, at least, the British, when asked, gave some help to the United States. Whether it will speed up the release of the hostages is a matter of speculation. If it has any effect at all in Iran—I doubt that it will be much—it will be counter-productive. The reaction of the Iranians to what they will construe, rightly or wrongly, as international bullying could be adverse to the purpose that we seek.
Nevertheless, for the reasons that I have given, I shall support the order. I shall do so in the spirit of the Chief Whip of the day when I first came to this place in 1964, following a by-election, in the latter weeks of the then Conservative Government, before they were heavily defeated at the polls. I had the temerity, within six weeks of arriving here, to vote against my Government. The Chief Whip said to me " When you have been here longer, you will understand that there are times when loyalty requires that you support your friends, even when you know they are wrong." My loyalty extends that far.
12.30 am
Mr. J. Enoch Powell: Having argued and voted against the Bill under which the order is made, I shall naturally oppose this and the second order. I agree with the epithet which the hon. Member for Bury St. Edmunds (Mr. Griffiths) attached to it—laughable. It was more laughable when he reached the end of his speech than it had been at the beginning. However, the hon. Member will vote for it, though he has charged a high and, possibly, an excessive price not merely to the Government but to other hon. Members for his vote tonight.
I intend to refer to an aspect to which attention was drawn by the Joint Committee—the matter of penalties. During the Committee stage, as the Minister may recall, I complained that penalties had not been dealt with as they should have

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been in the parent Act Now we see some of the consequences. One of them is the impropriety, to put it mildly, to which the Joint Committee refers, namely, that the actual penalty at some future time, perhaps a time more distant than that at which the Minister expects the Act to be operative, will be determined not by an order made under this Act but by an order made under the Criminal Law Act 1977.
Another aspect closely linked with that which the Joint Committee did not specifically mention, is perhaps worth a moment's attention by the House. The order lays down as a penalty on summary conviction a fine not exceeding the statutory maximum. The statutory maximum is defined in article 5(5) of the order. The 1977 Act gave the Secretary of State power to increase the figures if he thought that they had been rendered out of date by inflation. He has not so thought, curiously enough, in the three years since 1977.
The part of the 1977 Act which is being used in this way by this order does not apply to Northern Ireland. Northern Ireland, in the Government's wisdom, is still in many respects legislated for separately and not, as should be, as a part of the United Kingdom by Act of this Parliament. Consequently, of course, the orders altering the penalties specified in the 1977 Act do not apply to Northern Ireland. But the Government wanted the order to apply to Northern Ireland, as this is a United Kingdom order and a United Kingdom policy.
I do not know whether the Minister realised what he was doing or why he was doing it, but he had for the first time to make the 1977 Act, which does not apply to Northern Ireland, apply to Northern Ireland in order that the Home Secretary's order—under that Act—increasing the penalities might be operative for the purposes of this order. That is an illustration not only of the difficulties that one encounters when one makes an absurd order for absurd purposes—that is the general situation with the order—but of the special difficulties that arise when one insists on legislating for one part of the United Kingdom differently from the rest of the United Kingdom, and not, as one should, by a United Kingdom Act.
That is not the first time that I have brought that lesson to the attention of
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the House, and not the first time that I have done so at a fairly late hour. I keep on hoping that it will be the last, but at any rate I shall persevere.
12.35 a.m.
Mr. Mark Lennox-Boyd: On some occasions Back Benchers have the edge on Ministers, because sometimes Ministers are inhibited by having to defend a position or diplomatic nicety and are prevented from saying what they think. I shall speak in full and frank support of the order from an uncharacteristic position but one that I adopted on Second Reading of the parent Act.
The orders contain two main characteristics. First, the financial difficulties which they may impose upon the Iranian people will not be noticed by them. Secondly, the financial burdens which the orders might have imposed on our exporters will be little felt. From what my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) said, the orders are also difficult to interpret.
It is interesting that both in conception and application the orders are thoroughly oriental in character. That is a humorous observation, but it is important to take it into account. We are not seeking to persuade ourselves that the detention of the American hostages is violently wrong. We are seeking to persuade the people who live in Iran that it is wrong. I am not saying that we shall have a great measure of success in imposing the sanctions, but it must be right to address our minds to the audience that we are trying to persuade.
During the Second Reading debate I said that the orders were oriental in character because at that stage it seemed that the orders were likely to harm British interests. I said that in the Middle East and in Iran in particular a large number of people were prepared to bite off their noses to spite their faces. However, we are not spiting our faces. The orders do not seem to hurt our exporters, but we are having our cake and eating it—another Middle East characteristic. We are none the worse for that.
Accusations will be made by friends across the Atlantic that the orders are not as effective as they should be, and that because they are ineffective they should not be imposed. It is neither wise

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nor feasible to imagine that we can bring down the Iranian Government by sanctions. It would not be wise to try to bring down the Iranian Government because we might find something even worse in their place. It would not be feasible, as everybody who has had experience of sanctions will agree. It is essential to recognise that we are seeking to make a stand for a friend in need in a way which evidence suggests will be understood by some elements in the Middle East.
In case hon. Members think that I am being too theoretical, I shall describe something that actually took place. I have just returned from Jordan. When President Sadat agreed the Camp David accords with the Israeli Government in America, the Jordanian Government decided that the position was too intolerable for them to bear, with the result that they broke off diplomatic relations with the Egyptian Government. Before that event, there were two flights a day from Amman to Cairo. There are now eight. The reason why there are eight flights a day between two countries which have no diplomatic relations is that there are 200,000 Egyptian citizens living and working happily and peaceably in Jordan. The fact is that in the Middle East there are people who find it necessary, in the interests of something that they believe in, to take a stand, to make a gesture and to make their position felt even when, to us Anglo-Saxons and other wiser people in the sophisticated West, it seems a waste of time.
We have these references and explanations from hon. Members, be it about sugar beet, turnips or selling washing machines and similar absurdities. I suggest that those references are irrelevant. They will certainly not be understood by the Iranians. It matters not a jot to the Iranian people whether there are some holes in these sanctions, or whether some washing machines or turnips or carrots will be exported to Iran. The important thing is that we have made our stand. What we are doing, in a highly oriental way, is saying " We don't like your behaviour and we are demonstrating it by a form of conduct which costs us nothing."
I take it that my hon. Friend the Minister for Trade will be replying to the
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debate. He has been awarded the citation of gallantry and other such epithets by hon. Members. I remind him, when he attempts to answer all the difficult questions that have been put to him tonight, of that wise and important Oriental proverb:
" It is a good thing to know the truth and to answer it; but it is often a better thing to know the truth and in answer to speak of palm trees."
12.42 am
Mr. David Winnick: A tribute should be paid to the House itself for the extent to which the orders are not as strong as they might be. There are those who suggest that this Chamber is not effective and that our work can be done better in various Committees. What happened on 19 May showed clearly how effective the Chamber can be. The extent to which the orders are weak and full of loopholes is a tribute to the Chamber as a parliamentary instrument and also to my hon. Friend the Member for West Lothian (Mr. Dalyell).
The orders clearly show that the Government, like the rest of us, do not have any faith in sanctions. Their heart is not in the job. In replying to one of his hon. Friends, the Minister said that he believed that the hostages would be helped as a result of the imposition of sanctions. I find it difficult to believe that he or any other member of the Government really believes that to be the case. What the House is being asked to approve is a futile and silly gesture, which is why the orders should not be approved.
I ask the obvious question: will those holding the hostages say " Look at the tremendous damage that will be done to us by the United Kingdom. Let us release the hostages as quickly as possible "? There are those in Iran, especially the more fanatical elements, who would welcome an effective sanctions policy against their country. They take the view that it would make Iran more self-reliant and less concerned with the West. Today, in the Evening Standard, the religious leader of Iran is quoted as telling Iranians at the conference being attended by a number of foreign observers that they should be prepared to let foreigners build a wall around Iran and imprison them and to use donkeys for transport in their current confrontation with the United States. There is not much evidence there that the

1601
most influential person in Iran is likely to be influenced by what is being done by sanctions, be it by the United Kingdom or by any other country in the EEC. We know that sanctions were never meant to be effective and that this is being done only to please the United States.
It is argued by some—the hon. Member for Bury St. Edmunds (Mr. Griffiths) said, in effect, if I understood him—that it will not do any good, but we should vote for the orders to show our solidarity with the United States. If we want to show solidarity and if we want to show friendship to the United States, should we not be good friends and give good advice? If we do not believe this to be of any use—if it is futile, if there is hardly anyone in the House who believes that it will help the hostages—why vote for it? Why mislead the United States? If it will not have much effect on Iran, it is hardly likely to have much effect on the United States from the point of view of saying that Britain is developing a policy that is helping, because to a large extent, I suppose, the attitude of the United States will be that we are not being good, reliable allies. So in effect we are pleasing no one.
There has been one major political development since we debated the Bill a few weeks ago. I refer to the documents that have been released in Iran, which seem to show that the United States was making plans to seize power there, using the Iranian armed forces. As far as I know—I am willing to be corrected—there has been no denial of that by the United States' authorities. This means that the United States was willing to intervene in the internal affairs of Iran last year following the end of the Shah's rule, in the same way as it acted in 1953.
I am the last person to condone or justify the holding of the hostages. It is totally unlawful, and we all condemn it, but at the same time we have a duty to condemn the manner in which the United States has intervened, time and again, in the internal affairs of Iran. We know what happened in 1953. We know what happened afterwards. The documents that were released yesterday show that NATO, General Haig and another American general were directly involved in plots and plans to try to bring about a coup, following the end of the Shah's rule. If I condemn the holding of hostages. I certainly
1602
condemn what the United States was planning to do.
I have received a letter from an engineering firm in my constituency in which it expresses concern about the effect that sanctions could have on its business. I have written to the Secretary of State for Foreign and Commonwealth Affairs and sent a copy to the Secretary of State for Trade.
Hon. Members have rightly brought out some of the difficulties and snags arising from the report of the Joint Committee on Statutory Instruments. I am particularly concerned about two matters, which I shall mention quickly. The first is that there is no appeal system. That information is to be found at the end of page 2 of the document. There is an unfettered power, as my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) said, to modify or revoke a licence granted under the order, with no right of appeal at all. The question of which contracts can be extended is very much open to question. It is ambiguous, and there does not seem to be the guidance that should be provided. I think that those two matters are sufficient to give rise to a great deal of concern.
It may be said that if these orders are weak, if they will not do too much damage, we should not bother to vote against them. I believe that we should refuse to approve the orders, because they serve no purpose whatsoever. They are a futile gesture. It is wrong to apply orders in which we do not believe, which will have no real effect, and which will not do anything for the respect for this House. Those who share the feeling of myself and my hon. Friends that the orders do not serve any purpose should go into the Lobby and vote against them accordingly.
12.50 am
Mr. Parkinson: It is true that the House has shown that the Government are in some difficulty, but I suggest that the House is also in a certain amount of difficulty. After the Naples meeting, a great deal of indignation was expressed because the House never expected the Bill to apply to existing contracts. Many hon. Members made impassioned statements on that day. Yet tonight the House says that it is an outrage, and that they are weak orders because they do not apply

1603
to existing contracts. The Bill is not retrospective. The Government have responded to the wishes of the House and removed the retrospective element.
The House—the hon. Member for Walsall, North (Mr. Winnick) put his finger on the point—is deploring the orders. Those who voted for the Bill—it had a substantial majority, and the Opposition voted for it—are saying that the orders are weak because they do not do the things that the House said it never expected them to do, and are not worth the time of the House in discussion. Yet those who said that are those same hon. Members who voted for the Bill. On Second Reading the Opposition Front Bench warned us that if we attempted to introduce orders that were any stronger than these they would resist that attempt fiercely.
The orders are difficult to defend, and I can see some of their weaknesses. It is because the House insisted that the orders should not be comprehensive. It would have been simple to have a clearcut, understandable order that terminated all existing contracts immediately and said that no further goods would go to Iran. That would have been clear, and easy to enforce, and the House would have understood it perfectly. The House said that it did not want that sort of order. It wanted existing contracts to continue.
During previous debates the hon. Member for Nuneaton (Mr. Huckfield) made some excellent speeches, pointing out the importance of existing contracts being allowed to continue. The hon. Gentleman has criticised what he calls the vague wording of clause 2(2). One reason for that wording is that British Leyland does not have anything that could be called a written agreement. British Leyland has something that could be described as a continuing course of business. Therefore, we are trying to do exactly what the House demanded that the Government should do, namely, not disrupt existing business.
The right hon. Member for Down, South (Mr. Powell) spoke convincingly on a number of occasions during the passage of the Bill, and he made a strong point tonight. I accept his criticism. He has been consistent. But I do not think that the House can have it both ways.
1604
It cannot vote for a Bill, order the Government not to have any retrospective element in any of the orders, and then criticise the Government because they do just that.
The political initiatives that have been taken since we debated the Bill have failed. Various people have been to Iran, but there is no movement on that front. I remind the House that our American allies asked us to help. They proposed the way in which we could help. They suggested that we should impose sanctions. The House agreed, by its vote, that the Government should be given the extra powers needed, which they did not have under the 1939 Act, to enable them—if a decision was taken by the Council of Ministers—to comply with the United Nations sanctions resolution.
To meet the demands of the House, the retrospective element to which hon. Members objected has been removed. The order will prevent our exporters from obtaining the new business that they might otherwise have obtained. Many firms had begun to expect valuable new business from Iran. They will be sorry not to be able to sign contracts and to export the goods that would have arisen from those orders.
Mr. Tony Marlow: Will my hon. Friend give way?
Mr. Parkison: No, there is not time. There will be another debate, when my hon. Friend can put his question.
A number of companies have already been in touch with my Department to explain their concern and feelings about the fact that they will lose business that they felt they might otherwise have obtained. I have no doubt that as the order takes effect hon. Gentlemen will be writing to us on behalf of their constituents—and I suspect that a number of those who made rather clever speeches tonight and were dismissive of the order will be among them—complaining that jobs are being affected because orders that were on the point of being concluded cannot be signed.
Mr. Marlow: Will my hon. Friend give way?
Mr. Parkinson: I will not give way. My hon. Friend can speak later.
Our trade with Iran is running at about 50 per cent. of its 1978 level. Those

1605
figures are in cash terms. In real terms, our trade is much lower. Our trade will, to a considerable extent, be pegged by the order at the current level of 50 per cent., in cash terms, of the 1978 level.
I have no doubt that there will be a price to pay and that hon Members will be contacting the Department on behalf of companies in their constituencies urging us to do things to help those companies because orders can no longer be signed. But this price must be paid if the United Kingdom is to play its part in the decision of the Community and of a number of other OECD countries to go ahead with sanctions.
My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) asked me about problems that he was expecting
with sugar beet and carrots. I have news for him. Neither food nor know-how is affected by the order. Therefore, the carrot growers and the beet producers and those with know-how can sleep easy in their beds tonight.
A number of other questions were asked, to which I shall not have time to reply because we are just about to run out of time. But we shall have another debate and I shall take the opportunity in that debate to deal with any points that I have not dealt with in this debate—
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 129, Noes 18.

Division No. 336]

AYES

[12.58 am

Alexander, Richard

Gorst, John

Nelson, Anthony

Ancram, Michael

Gow, Ian

Newton, Tony

Arnold, Tom

Griffiths, Eldon (Bury St Edmunds)

Normanton, Tom

Aaplnwall, Jack

Griffiths, Peter (Portsmouth N)

Page, Rt Hon Sir R. Graham

Atkins, Rt Hon H. (Spelthorne)

Grist, Ian

Parkinson, Cecil

Baker, Nicholas (North Dorset)

Gummer, John Selwyn

Parrls, Matthew

Beith, A. J.

Hamilton, Hon Archie (Eps'm&Ew'll)

Patten, John (Oxford)

Benyon, Thomas (Abingdon)

Hamilton, Michael (Salisbury)

Penhaligon, David

Berry, Hon Anthony

Hawksley, Warren

Pollock, Alexander

Best, Keith

Heddle, John

Price, David (Eastleigh)

Bevan, David Gilroy

Henderson, Barry

Rathbone, Tim

Biften, Rt Hon John

Hill, James

Renton, Tim

Biggs-Davlson, John

Hogg, Hon Douglas (Grantham)

Ross, Stephen (Isle of Wight)

Blackburn, John

Howell, Rt Hon David (Guildford)

Sainsbury, Hon Timothy

Braine, Sir Bernard

Howell, Ralph (North Norfolk)

St. John-Stevas, Rt Hon Norman

Brinton, Tim

Hunt, John (Ravensbourne)

Scott, Nicholas

Brittan, Leon

Hurd, Hon Douglas

Shepherd, Colin (Hereford)

Brooke, Hon Peter

Jopling, Rt Hon Michael

Skeet, T. H. H

Brown, Michael (Brlgg & Sc'thorpe)

Lamont, Norman

Smith, Cyril (Rochdale)

Budgen, Nick

Lawrence, Ivan

Speller, Tony

Bulmer, Esmond

Lee, John

Squire, Robin

Butcher, John

Le Marchant, Spencer

Stanbrook, Ivor

Carlisle, John (Luton West)

Lennox-Boyd, Hon Mark

Steel, Rt Hon David

Carlisle, Kenneth (Lincoln)

Lester, Jim (Beeston)

Stevens, Martin

Carlisle, Rt Hon Mark (Runcorn)

Lloyd, Peter (Fareham)

Stradling, Thomas, J.

Chapman, Sydney

Lyell, Nicholas

Taylor, Teddy (Southend East)

Clark, Hon Alan (Plymouth, Sutton)

Macfarlane, Neil

Thomas, Rt Hon Peter (Hendon S)

Clarke, Kenneth (Rushclllte)

MacGregor, John

Thompson, Donald

Cope, John

MacKay, John (Argyll)

Thorne, Neil (Ilford South)

Cranborne, Viscount

Mates, Michael

Townsend, Cyril D. (Bexleyheath)

Douglas-Hamilton, Lord James

Maxwell-Hyslop, Robin

Viggers, Peter

Dover, Denshore

Mellor, David

Waddington, David

Dunn, Robert (Dartford)

Mills, lain (Meriden)

Wakeham, John

Durant, Tony

Mills, Peter (West Devon)

Waldegrave, Hon William

Eden, Rt Hon Sir John

Miscampbell, Norman

Waller, Gary

Elliott, Sir William

Mitchell, David (Basingstoke)

Watson, John

Falrgrleve, Russell

Moate, Roger

Wells, Bowen (Harl'rd & Stev'nage)

Faith, Mrs Sheila

Morgan, Geraint

Wheeler, John

Farr, John

Morris, Michael (Northampton, Sth)

Winterton, Nicholas

Fenner, Mrs Peggy

Morrison, Hon Charles (Devizes)

Wolfson, Mark

Fisher, Sir Nigel

Morrison, Hon Peter (City of Chester)

Fletcher-Cooke, Charles

Mudd, David

TELLERS FOR THE AYES:

Forman, Nigel

Murphy, Christopher

Mr. Carol Mather and

Freud, Clement

Needham, Richard

Mr. Robert Boscawen.

Garel-Jones, Tristan

NOES

Bennett, Andrew (Stockport N)

Cryer, Bob

Huckfield, Les

Campbell-Savours, Dale

Dalyell, Tarn

Kilfedder, James A.

Canavan, Dennis

Davis, Terry (B'rm'ham, Stechford)

McKay, Allen (Penistone)

Crowther, J. S.

Evans, John (Newton)

Marlow, Tony

Powell, Rt Hon J. Enoch (S Down)

Soley, Clive

TELLERS FOR THE NOES:

Ross, Wm. (Londonderry)

Stoddart, David

Mr. David Winnick and

Skinner, Dennis

Welsh, Michael

Mr. Nigel Spearing.

Question accordingly agreed to.
Resolved,
That the Iran (Trading Sanctions) Order 1980, a copy of which was laid before this House on 29 May, be approved.

IRAN (EXPORTS)
1.10 am
The Minister for Trade (Mr. Cecil Parkinson): I beg to move,
That this House approves the Export of Goods (Control) (Iran Sanctions) Order 1980 (S.I., 1980, No. 735).
The order was laid by my right hon. Friend the Secretary of State for Trade on 29 May under section 1 of the 1939 Act, which prohibits the export of embargoed goods to Iran.
On Second Reading and in Committee my hon. Friend the Minister of State, Foreign and Commonwealth Office and I gave assurances that the order would be brought before the House in the same way as the preceding order, although the formal approval of Parliament is not a requirement of the 1939 Act. The order will be revoked if it is not approved by Parliament. We have promised that the House will be given an equal opportunity to debate the order. The motion seeks specific approval of the order.
I hope that the House will agree that I need not go through the provisions of the order in detail as they follow the definitions and exceptions in the preceding order. However, I shall mention two features. Article 2 prohibits the export of embargoed goods from the United Kingdom to Iran. The House will notice that, unlike the previous order, the prohibition does not extend to the Channel Islands, the Isle of Man or the dependent territories. Parallel action in those other territories is being taken by the authorities or the governors in each case.
Secondly, the prohibition on exports is not limited to goods supplied in performance of a contract, as is the case under article 3 of the previous order. As a result the embargo extends, for example, to goods exported to Iran by a person who is already their owner. The order does not apply to exports pursuant to existing contracts. In that it resembles the previous order.
1608
My right hon. Friend the Lord Privy Seal said in the House on 20 May, in response to clearly expressed wishes, that sanctions would not bite on the performance of existing arrangements.
Mr. Tam Dalyell: In a written answer the Minister of State, Foreign and Commonwealth Office stated:
" The Export of Goods (Control) (Iran Sanctions) Order 1980 applies to the United Kingdom only, but parallel action is being taken in Hong Kong, and the other dependent territories, and the Channel Islands have also been asked to take such action."
The Minister has again used the phrase " parallel action ". How will parallel action be effective? What measures will be taken? Anyone who knows the setup in Hong Kong will know that parallel action is quite a formidable operation.
Mr. Parkinson: By a strange coincidence, I happen to have the answer to the hon. Gentleman's question. The Executive Committee in Hong Kong has approved an order requiring licences for all goods exported from Hong Kong and transhipped through Hong Kong for Iran. In issuing licences the Hong Kong authorities will follow the same policies as those that appear in the United Kingdom regulations concerning exemptions from sanctions. That, together with the previous order, which applies to Hong Kong, will ensure that the same sanctions apply there as in the United Kingdom.
The Government do not intend to into-duce a licensing system. Companies will have to make a declaration that the goods that they are sending are not embargoed. The Customs authorities will from time to time test-check the arrangements and will call upon companies to justify the declaration. Any companies that are found to be breaking the orders will incur penalties.
Mr. Tony Marlow Mr. Tony Marlow (Northampton, North) rose—
Mr. Parkinson: I thought that the House would like to know how the orders will be administered.
Mr. Marlow Mr. Marlow rose——
Mr. Parkinson: I shall sit down and let my hon. Friend the Member for

1609
Northampton, North (Mr. Marlow) make his speech. I shall be happy to reply to it at the end of the debate. During the last debate I was accused of speaking for too long. I do not wish to make the same mistake.
1.15 am
Mr. Edward Rowlands: When the Minister replied to the previous debate, many hon. Members found themselves fed up at the way in which he attempted to deal with the argument that the House had put. The House did not complain that the Government had changed their mind or retreated. We did not complain that they had ruled out the possibility of the order affecting existing contracts or the contracts described in the two orders. Hon. Members pointed out that the wording of the order was unclear. It is confusing. It does not make clear what type of contract an exporter may make.
It was the wish of the House that the Government should retreat from their earlier position. Indeed, the hon. Gentleman accepted that point at the beginning of his remarks during the previous debate. Both orders refer to modification, amplification and extension of contracts. However, the wording is unclear. Exporters and those wishing to sign contracts do not know whether they could be caught out by the provisions.
When I quoted the example of a firm selling fridges, I did not do so frivolously. The firm might believe that it could also sell washing machines, because it would be a modification or amplification of an existing arrangement. I did not use a hypothetical example. I was quoting from a press report concerning a spokesman for the Department of Trade. Will the Minister say whether that illustration was accurate? It is important.
I understand the significance of the fact that the order has been made under the 1939 Act. The Hansard record of the Committee stage will reveal that we understood the question well. If the wording were stripped down, it might show that the order bans not new exports from existing exporters but new exporters. I have read the order thoroughly. All hon. Members will have read the paragraph referring to modification and amplification of existing contracts.
1610
The press has made a reasonable interpretation of the provision. If an exporter has been selling fridges but has an offer to sell washing machines, will that change constitute modification or amplification? If an existing exporter sells something that is not wildly different from goods that he exported earlier, will he be prosecuted? There was a sceptical comment among last week's press cuttings. I shall not rest my case on those comments. However, we are entitled to ask whether they are right. It was said that anyone selling coaches to Iran would also be able to drive horses through. That is true, because there is an exemption for live animals, including donkeys, which were mentioned earlier.
We want to know the meaning of the key paragraph to which hon. Members have returned time and again tonight. How far do modification, amplification and extension allow an existing exporter to add to the goods that he sells within what is called a similar class? I return to the question that I asked earlier: are washing machines in a similar class to fridges?
Department of Trade spokesmen were widely quoted last week and we are entitled to ask whether their comments were official or unofficial. The Times reported on 30 May that Britain's trade could increase in spite of sanctions. The report said that it was reckoned that sanctions ought at least to " check the growth" of our export trade. Will the Minister for Trade confirm that that is the expected result of the policy? He said that he thinks that we shall hold about the same level of exports.
The Minister of State, Foreign and Commonwealth Office has sat through our debates and it is a pity that we have not had a contribution from him. I am sure that the Minister for Trade agrees with me; I appreciate his wish to divert the fire and share the gallantry involved in presenting the Government's policy.
The orders must be seen in the broader context of the Government's whole policy. In our debates on Second Reading and in Committee, hon. Members argued strongly that if there was a justification for economic pressure, including some form of sanctions, it had to be part of a total political and diplomatic effort to obtain the release of the hostages.

1611
All sorts of things may be going on, but I am not clear in what political and diplomatic context we are expected to approve the order. We have heard nothing since our original debates about the Government's view on how they should approach political and diplomatic action or whether there is scope for international effort or United Nations' action, though we know of the rebuff of the Secretary-General's representatives in Tehran. Where do we go from here in political and diplomatic terms?
Unless we have the total picture, we cannot fully assess the value and relevance of the order. If I were asked what contribution I expected the orders to make to the release of the hostages, I should be tempted to reply in the vernacular, but I would confine myself to saying that we expect them to make little contribution.
Mr. Mark Lennox-Boyd: There is confusion in the hon. Gentleman's stance. In the first part of his speech he indicated that the gravamen of his case against the orders was a defect in their material detail. He amplified that clearly. He is now moving to arguments that are inconsistent with supporting the parent legislation that the Labour Party supported on Second Reading. The right hon. Member for Stepney and Poplar (Mr. Shore) gave full support to the forceful diplomatic initiative that he hoped would accompany these sanctions. Will the hon. Gentleman make the position clear?
Mr. Rowlands: The hon. Gentleman should be the last person to accuse me of lack of clarity. He made a marvellous and intriguing Oxford debating speech, which was redolent with oriental confusion. If the hon. Gentleman reads the speech of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) on Second Reading and the amendments that we moved in Committee, he will see that, although there might be a case for the principle of economic pressure, international diplomatic action was the most important form of pressure and persuasion. My argument is consistent with our attitude throughout the debates. We want to know what the position is now. In co-operation with our partners and American allies, what is the present state
1612
of diplomatic action? We need to know what political and diplomatic action is proposed.
Until we know what action the Government intend to pursue with our partners, we must continue to ask whether the order alone can help to release the hostages. Most hon. Members have grave doubts and feel that the credibility of the policies outlined are laughable. I shall share that view until we can see the order in a broader political and diplomatic context.
1.28 am
Mr. James Kilfedder: I voted against the trading sanctions order and I intend to vote against this order. Even had I doubted what to do, the speech of the hon. Member for Bury St. Edmunds (Mr. Griffiths) would have convinced me. He described the order as laughable and went on to ridicule the order and the speech made by the Minister. The speech of the hon. Member for Morecambe and Lonsdale (Mr. Lennox-Boyd) also ridiculed the order. The hon. Gentlemen tried courteously to criticise the order, but then voted for it.
Although the hon. Member for Bury St. Edmunds was against the order and exposed its weaknesses, he based his reason for voting for it on the argument that we had to maintain the American alliance. I should have thought that we would have done America a greater service by guiding her away from military and economic pressures, knowing full well that the United States Government have already made one drastic mistake in trying to release the hostages by military action. By adopting sanctions the American Government might well not pursue a course which would lead to the early release of the hostages.
We have the greatest sympathy for the hostages held in Iran, but, as far as I know, there is no hon. Member of this House who believes that sanctions will lead to the freeing of the hostages. If that is the case, we ought to be dwelling on ways of securing their release other than by adopting sanctions. These orders will only strengthen the Iranians in their determination to show the Western world that they can stand alone, free of the West.
The hon. Member for Walsall, North (Mr. Winnick) quoted from the speech

1613
made by Ayatollah Khomeini at the conference which is taking place at the moment, in which he shouted his defiance of the West. We have the ridiculous state of affairs at present in which a former distinguished Attorney-General of the United States, Mr. Ramsey Clark, is in Iran taking part in a conference, and he has stated that the Shah should be put on trial. Whether that is right or wrong, there we have a leading American politician and lawyer declaring that America has been wrong in the past and implying clearly that America is wrong in pursuing a sanctions policy.
United States foreign policy, especially towards Russia, vacillates in a manner which alarms friends and foes alike. But, strangely, the United States Government always seem consistent in their attitude towards the United Kingdom, especially with regard to Northern Ireland. I mention that because the right hon. Member for Down, South (Mr. Powell) pointed out that the law had to be twisted to bring Northern Ireland within these sanctions. Northern Ireland business men, as well as those of England, Scotland and Wales, will encounter all sorts of difficulties and legal expense to find out whether they are within the law or outside it if they contract to supply goods or services to Iran.
We are imposing these sanctions to maintain the alliance. We are doing it for the sake of the grand alliance with the United States. But what do the United States Government do when the 1Ý million people of Ulster are hostages to the Provisional IRA? There, the United States Government take a different view. They impose a sanction on the British people and refuse the export of 3,000 Luger pistols to the RUC, whose members are fighting the evil men of the Provisional IRA who are murdering innocent British citizens, members of the UDR and the police and British soldiers. Yet the United States Government ask us to take these measures against the people of Iran when we know—and they know—that they will in no way secure the freedom of the 50 hostages in Iran and when more than 50 Ulster people have been murdered by American bullets and guns bought with American money contributed to the Provisional IRA.
The House should reject the order. I hope that hon. Members, bearing in mind
1614
the speech of the hon. Member for Bury St. Edmunds, will decide to show common sense. Even though the United States has betrayed us and is prepared, for the sake of votes, to support the IRA, I believe that we would do the hostages most good and most help the people of the United States by rejecting the order. Sanctions will do nothing to further good relations between Iran and the United States.
1.36 am
Mr. Bob Cryer: I am grateful for the chance to make a few brief comments. I am sorry that I cannot refer to the previous order, but my concern relates mainly to the comments of the Joint Committee on Statutory Instruments. I shall, however, also have some individual comments to make that will be distinct and separate from those of the Committee.
The Committee is established by Parliament to scrutinise legislation. It is important that all legislation, irrespective of the merits, should be fair. The Committee is not concerned with the merits of legislation, tempting though it is sometimes to enter that area. It is concerned only with the form of the legislation. It draws to the attention of the House any duties of the Government that are not being adhered to.
If the Government wish to secure adherence to their view, they will not achieve that purpose if people are being dealt with unfairly. If people feel, for whatever purpose, that they are being discriminated against or that their rights are being eroded, the Government will hardly gain their support.
The Minister claimed, I thought unfairly, that the House wanted weak, wide orders. But the House never expressed a wish for orders that were potentially unfair or for powers that were unusual and excluded citizens from certain rights in the courts. The House, by setting up the Committee, has, in effect, said that it wishes all statutory instruments to be examined to make sure that excesses are drawn to the attention of hon. Members. The Minister was not fair in saying that this complicated and important matter took precedence even when people's rights were limited. Legislation must be applied fairly.
Article 1 (3) says that the order also includes a contract

1615
" made in continuation of an established course of business dealing between the same parties relating to goods of the same or a similar class."
The report of the Joint Committee makes clear that the evidence—there has not been time for it to be published—shows that it would be difficult to establish the criteria and that it would not be possible to say with confidence whether many cases fell within them. That seems to me to be highly unsatisfactory and something that the Government should take careful note of.
The second point that I raise is common to both orders. It is most important and is one of the items which the Joint Committee has a duty to draw specifically to the attention of the House. It is the exclusion of the rights of appeal in a court under article 5 by virtue of the absolute powers granted to the Secretary of State.
In this order article 3 further provides that the Secretary of State shall in effect require that
" all conditions attaching to the said licence are complied with."
He has not only the right to revoke or modify an order but the quasi-judicial job of scrutinising the fulfilment of conditions which he attaches to the order. There is no appeal against that, because the legislation gives him that absolute power. That is greatly disturbing.
The Minister has repeatedly said tonight that the Government have rejected a licensing system. Perhaps the Government want only to produce a cosmetic but whatever they are producing in subordinate legislation has to conform to certain criteria. Basically, that includes fairness in its application to citizens. In producing this sort of legislation in conformity with other EEC members, the Government should have paid much closer attention to the possibility of a licensing system. It may be cumbersome, but those who are faced with it, if they have an appeals system such as is excluded by this order, may feel that in the long run it is fairer if they have some means of making representations.
The Minister says that he is responsible to the House, but that does not mean a great deal. By the time his decision has been made, the constituent contacts his Member of Parliament, and the Member secures an Adjournment debate or
1616
tables questions, the run of the order may be finished. The decision will have been made and in practice it is most unlikely that a Minister will revoke it. That would tend to make him appear weak. So, although it is fine-sounding to say that the Minister is accountable to this House, in practice, with the application of routine licensing, it does not mean much.
There are one or two points that are not connected with the legislative character of the instruments. Other EEC countries have adopted a licensing system because, although they may be concerned simply with producing an EEC-wide cosmetic, they have felt that their way is fairer than giving the Minister absolute powers.
We all want to see the hostages released and we have to judge whether these orders will have the slightest effect in that direction. As my hon. Friend the Member for West Lothian (Mr. Dalyell) said, these orders are simply gesture politics. We should not be involving ourselves in this sort of gesture with this detailed application of a meaningless cosmetic in order to demonstrate our support for American foreign policy.
There have been many examples where, if friends have wanted to influence one another, they have adopted not a " me too " approach but a constructively critical approach. They say " You are going down the wrong path ". That can result in a stronger bond of friendship if those friends know that they are speaking honestly and squarely to one another. If we speak honestly and squarely to the Americans, we must say that the scheme will not work and that it is a waste of time. The only way that the hostages will be released is by negotiations, no matter how long they take. This is a weak and futile gesture, which will not help to release the hostages one day sooner.
1.45 am
Mr. Tony Marlow: My hon. Friend the Minister said that there would be an opportunity for me to speak and that he would be happy to answer any questions which I asked. I shall begin by asking a couple of questions.
The stated reason for the order is to secure, as soon as possible, the release of the unfortunate American hostages. Will

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the Minister undertake that the day that the hostages are released and leave Iranian soil sanctions will be withdrawn? I shall describe a more tragic possibility. Let us suppose that some of the hostages are found guilty under Iranian law and that the death penalty is imposed. If several hostages are shot and the others released, will the Government withdraw sanctions? There would be no point in continuing them.
In the previous debate the Minister spoke of people who were about to settle contracts in Iran knocking on his door and saying that they would lose business. I am sure that the Government have gone into the proposals with their eyes wide open. I am sure that they have made an estimate of the loss of business to the United Kingdom as a result of the orders. What is the estimate of the value of business that the United Kingdom will lose as a result of sanctions?
What will happen if a third country which has no sanctions against Iran sets up as a trading principal and seeks goods from the United Kingdom and sells them to Iran? That could be done without the knowledge of the British Government or the manufacturer. Alternatively, a company could say that that is what it proposes to do. How will the order affect such an arrangement?
The orders flow from an Act to impose sanctions against Iran. I have scanned the history books and examined the recent past. I have tried to find circumstances in which sanctions have had a positive effect on the country against which they were imposed. I shall be happy to give way to the Minister if he can give an example of any country which has been positively affected by sanctions. We could rest more easily if he produced such evidence. If the Minister wants to intervene, I shall be happy to sit down. Perhaps we can return to that later.
Mr. Nigel Spearing: Will not the hon. Gentleman agree that, even if the Minister does find such a historic example of sanctions having some effect, the chances of these sanctions having some economic bite and influencing the Iranian people in the aftermath of an economic and social and political revolution are slight? Is it not likely that further hardships, if there are any, will make the Iranians more determined to achieve their objectives?
Mr. Marlow: I accept the hon. Gentleman's first point. I should be surprised if my hon. Friend could bring forward a convincing example of sanctions having an effect. I shall deal with the hon. Gentleman's other point in the course of my speech.
I have asked, along with others, in what way sanctions will bring about the release of the hostages. Again, I and other right hon. and hon. Members have not had a satisfactory answer. What effects will sanctions have? Iran is in a state of revolution, with various factions competing with one another—perhaps three, perhaps four—to take over the reins of power. Mainly they are concerned with internal events. One faction is probably more favourably disposed towards Western interests than another.
Alexander Pope said that the best thing to do when there are troubles at home is to soothe worries by inventing foreign troubles. If there is a faction that is more anti-West than another it will seize upon these sanctions as a way of unifying its people. It will not only strengthen its campaign and make it more likely to be successful but, having been successful, will make such people more strongly inclined against Western interests than ever.
The final reason given for continuing with the order is the necessity to stand by our allies, the Americans, who have stood by us. If one's friends have embarked on a sensible course of action, by all means stand by them, work with them, do what one can to help. But if they are about to do a nose-dive into foul ground, one should do everything one can to restrain them.
Mr. Martin Stevens: Was it not Lord Brougham who was told that loyalty is supporting one's friends when one thinks that they are wrong?
Mr. Marlow: I agree that there is a lot to be said for supporting one's friends when they are wrong. But supporting them does not necessarily mean encouraging them to continue with a course of action which will be damaging to their interests and to one's own interests if it is possible to convince them to take a different course of action.
The hostages are currently in the hands of so-called students. I believe that they

1619
are militants who are largely members of the Tudeh Party—the Communist Party—which is largely controlled from Moscow. They have been very successful so far in carrying out Moscow's orders. First, they have diverted attention from Afghanistan to Iran. Secondly, they have persuaded the American Government to take a course of action in trying to rescue the hostages which has been most counter-productive to the perception of American policy within the Middle East and which has been most unhelpful to Western interests in that area.
Now, by their continuing action in holding the hostages, the militants are forcing European countries to embroil themselves in a policy of sanctions which will damage our interests and the esteem in which we are held in that part of the world, not just by the Iranians but by many of the important Arab countries. By pursuing these orders, we are acting against our national interests and the interests of the West in the Middle East.
I concur with the point made by the hon. Member for Down, North (Mr. Kilfedder). The United States is now faced with the problem of terrorism and is coming to us for assistance. We very much wish to give what assistance we can to our allies. For years our people have not just been held hostages; they have been murdered, maimed, tortured and terrorised in Northern Ireland. We have asked for a perfectly simple thing —for weapons to help against the campaign of murderous terrorism. The request has been turned down. Until we get those weapons, I feel most disinclined——
Mr. Dalyell Mr. Dalyell rose——
Mr. Marlow: I am just about to finish. The hon. Member is always getting up and intervening in other people's speeches. Perhaps he will hear me out. Unless and until the Americans are sympathetic to helping us with our problems, I am much disinclined to help them with theirs.
1.55 am
Mr. David Stoddart: I very much regret having had to sit here and listen to one of the nicest Ministers being attacked by his hon. Friends, one after another. It seems to me that the hon. Gentleman does not have a friend left
1620
in the House tonight. Bearing in mind the charming manner in which he used to deal with me when we served on the Finance Bill Committee, I feel very sorry for him. I wish that there was some way in which he could get out of the tangle and mess into which he has got himself. But there we are: the hon. Gentleman has taken on this great role of Parliamentary Secretary—[HON. MEMBERS: " No ".]—Minister for Trade, and it is his task tonight to defend an untenable position. It is a position which the Government have brought upon themselves.
Despite the fact that the previous order went through with a large majority, we have heard one Conservative Member after another attack the use of sanctions—and indeed the very idea of sanctions—as a policy. As the hon. Member for Bury St. Edmunds (Mr. Griffiths) said, Conservative Members voted for the previous order not out of conviction, not because they think that this policy will do any good at all, but out of sheer loyalty to their comrades and friends in the Government.
Mr. Eldon Griffiths: And in the United States.
Mr. Stoddart: Well, perhaps in the United States. They went into the Lobby and voted for the order. They have ignored the interests of this country and of their constituents to follow blindly a policy in which the Government do not really believe. I think that this is a matter of great regret, and I do not think that tonight the House has done itself very much good.
I believe that the holding of the American hostages is a disgraceful act of terrorism, which all will condemn. I have condemned it all the way along. Indeed, when a consular official came to the House to explain his country's policy to a group from the Parliamentary Labour Party I took the opportunity to tell him what I thought of him, of his Government and of those who were holding the hostages. It is a disgraceful act of terrorism, which we must all condemn.
Having said that, we must surely recognise that the objective of everyone in the House—indeed of everyone in this country—is to secure the release of the hostages, alive and well. That is the major objective. Will these sanctions achieve

1621
that? Will they go any way towards achieving that? I do not believe that they will. I do not believe that anybody in this House except perhaps the Minister—and even he is a little diffident about this—believes that these orders will do anything to secure the release of the hostages, safe and well.
Mr. Spearing: Is it not a little unfair to berate the Minister for Trade? The technical orders are perhaps the responsibility of his Department, but is it not the responsibility of the Foreign and Commonwealth Office and its Ministers to demonstrate the impact that these sanctions will have on the economy of Iran—such of it as is within the money sector—and, further, how that impact will influence political thought in Iran? I do not believe that any Minister of the Foreign Office demonstrated or sought to demonstrate that impact.
Mr. Stoddart: They certainly have not sought to demonstrate that impact tonight. The Minister is having a bad night tonight. I even demoted him, for which I apologise. The Foreign Office stuck him up as a stooge. It should not have done that. It has a duty, because it has the prime responsibility, to explain to the House exactly how this policy would further the objectives of the Government in relation not only to the hostages, not only to Iran, but to our relationships with the United States and other countries. That has not been done.
As I have said already, no one believes that the sanctions will do anything towards obtaining the release of the hostages alive and well. They certainly will not have any effect on the fanatical ayatollah. After all, his policy is to convert Iran into a full Islamic State. He does not believe in the Western ethic or the Western way of life. The sanction orders will help him to achieve his objectives. They will not assist in bringing about the release of the hostages. They will do nothing to convince the Ayatollah Khomeini and his henchmen—whether they be students, other ayatollahs or other people in political power—that they should release the hostages.
Mr. Lennox-Boyd: The hon. Gentleman is considering the whole matter from a Western point of view. Would he
1622
address his mind to a suggestion? What would the ayatollah and other prominent Iranian citizens make of the strength of the Western alliance if we did not support our allies? Would they draw the conclusion that we did not care about the detention of the American hostages? Would they draw the conclusion that we were not interested in helping a friend, however imperfect be the weapon that we were using? Would they draw the conclusion that there was not the conviction of which the hon. Gentleman spoke that it was an intolerable and unacceptable act?
Mr. Stoddart: We are once again trying to impose the Western mind upon the Eastern mind. We cannot do that. The conclusion that the ayatollah and his henchmen will draw from the orders tonight is that Britain, along with the rest of the Western nations, intends to put pressure, if necessary even military pressure, on the authorities in Iran to reestablish themselves in control of that country.
Mr. Clive Soley: Is it not right that it has nothing to do with the Eastern or Western mind? If there is one thing that history has shown us, from Vietnam to Dunkirk, it is that if one besieges a country in this way it reinforces resistance, regardless of whether it is Eastern, Western or anything else.
Mr. Stoddart: I think that that is true. If Parliament were faced with a threat of sanctions, if we were told that if we did not do something another country would impose sanctions against us, I think that that would stiffen our resistance. It would not make us concede. That again shows that the sanctions orders could be counter-productive.
It is certain that sanctions against the present regime in Iran will not achieve the desired objective. We shall be cutting off our noses to spite our faces. The people who will suffer from these sanctions will be our business men and workers in the factories who are already being made redundant by the thousand every day.
Mr. Dalyell: Has my hon. Friend seen the interesting work that has been

1623
done by the Catholic Institute for International Relations? That says:
" An entire nation, in a spontaneous uprising, refused to be cast in an alien mould imposed by superpower economic and military imperatives. The Iranian revolution, whatever its outcome, thus calls into question the whole western approach to trade with and development in Third World countries."
The Catholic Institute for International Relations has done some serious research into the situation and that research supports the argument being deployed by my hon. Friend.
Mr. Stoddart: The Catholic Institute for International Relations is an organisation that we must all respect. I think that it has hit the nail right on the head. As I said, these sanctions will do more damage to us than to the Iranians, and that is not the objective that we seek.
If the British Government had been acting in the interests of Britain and looking after the British attitude to foreign affairs, I wonder whether they would have come to the same conclusion over sanctions. We have agreed to impose these sanctions in concert with the nations of the EEC. They do not necessarily have the same experience and expertise as we have in dealings with the rest of the world. They have a different ethos from ourselves.
I wonder whether these sanctions are being imposed at the behest of the United States not only because we think that we are friends but because we feel that in some way we ought to be doing the same as our EEC partners. If so, I am not sure that that does any good for British foreign policy, and it certainly does not enhance the reputation of the British Government.
I fear that after tonight's debate these orders will be seen as a joke——
Mr. D. N. Campbell-Savours: They are a joke.
Mr. Stoddart: We know that they are a joke. The important thing is that they will be seen by the rest of the country, the United States and the rest of the world as a joke, and that will do more damage to our relations with the United States than anything else could. If they are to have action, they want to see action which has the whole country and Parliament behind it. These sanctions do not provide that kind of action. We have
1624
introduced these sanctions with no conviction at all. There has been no conviction on either side of the House. All we shall do is to reduce our stature in the councils of the world.
I believe very strongly that the British have a good deal to contribute in world affairs. We have experience which is vital to the world, particularly at this time. I regret anything that diminishes our stature in the world, and the whole House should regret it.
Mr. John Loveridge: Is not this order the only realistic way of bringing home to those in authority in Iran that the seizing of hostages is wicked and evil in the context of the Muslim religion or any other religion? It is the only way in which we can be seen to oppose this wrong, and to support decency and our allies in the United States, whatever reservations we may have about certain aspects of their policy.
Mr. Stoddart: We must try to look at the matter from the point of view of Iran as well as from the point of view of the United States and ourselves. We must understand that in Iran there has been a long history of Governments being imposed on that country by Western nations—first by the British, and then, in 1953, by the United States. We are unlikely to convince the Iranians that our intentions, and particularly the intentions of the United States, are honest and in the best interests of Iran.
Mr. Dalyell: Following the interesting intervention by the hon. Member for Upminster (Mr. Loveridge), does my hon. Friend understand that in the Shi'ite religion this is highly relevant? Martyrdom holds a high place, and in those circumstances the argument that he puts forward is valid.
Mr. Stoddart: My hon. Friend is, of course, an expert in these religions, and I am grateful for his instruction. It has been amply shown that people of Iranian stock are prepared to undertake martyrdom on behalf of their religion or on behalf of any deeply-felt conviction.
I believe that if we are to secure the release of the hostages and to rebuild the bridges that we and the rest of the Western world have had with Iran, and which we should seek for the future, we shall not do it by issuing threats and

1625
by imposing sanctions. We shall achieve it only by patient diplomacy over a long period. That is the only answer, and the only action which has any prospect of success. I sincerely believe that the only way in which we can achieve our objective is through quiet and patient diplomacy. Because I believe that, I shall vote against this order, as I voted against the previous order.
2.13 am
Mr. Clive Soley: I think we are into martyrdom with a vengeance. I shall not go over all the points that have been raised. I wish to direct my comments to article 4 of the order, but first I should like to underline some of the points that were made earlier.
These debates have confirmed my view that we were right to oppose these orders and sanctions from beginning to end. I do not accept the argument about loyalty. This is the most misguided form of loyalty I have ever seen. To my mind, loyalty comes from wise counsel. It does not come from saying " We will back you up whatever you do." That leads to a blind loyalty that ultimately leads to dictatorship, and in extreme conditions to the concentration camp. That is blind loyalty. That is not what we are after.
What we are after is to put pressure on a country which is holding hostages totally irrationally and unreasonably but with a history behind it of problems with the United States which in the minds of the Iranians makes that action perfectly rational and reasonable. We might disagree with that, but that is it from their point of view. Our job is to help the Iranians to come to a different conclusion and to help the United States to act in a more thoughtful and wise manner, and to recognise that elections for presidential posts should not be fought in this manner. That is what it is about.
I think I am right in saying that it was the former Prime Minister, the right hon. Member for Sidcup (Mr. Heath), who pointed out that the Soviet Union is concerned about the stability of the American governmental system. That is a wise comment, because we often assume that dictatorships are unstable and democracies are stable. That is not necessarily so.
1626
It ought to be significant to us in this country that we are having this debate on the anniversary of the Dunkirk evacuation. We know what Dunkirk did to this country. It stiffened the resistance—exactly as the bombing of North Vietnam stiffened the resistance of the North Vietnamese. As a number of my hon. Friends and some Conservative Members have indicated, the actions that we are taking against Iran, if they are noticed—I doubt that they will be even noticed—will be used by the Ayatollah Khomeini to organise his resistance in the way that has been described. [Interruption.] I have not voted for anything on this matter, and I have no intention of doing so.
As I said in an earlier debate on this matter, my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) made an excellent speech and a first-class analysis of the problem but, unfortunately, he came to the wrong conclusion. It is as simple as that. [Interruption.] I find my position and that of my right hon. Friend much better than the sort of position that is being argued by Conservative Members, where there is a recognition that this is nonsense and that it has no effective force, and yet they still troop through the Lobby in order to support it, on the blind loyalty principle. That is what is happening. That makes a mockery of this country and does nothing to help a delicate international situation.
I turn to article 4—enforcement. Being relatively new to this House, even after a year here, I am not fully aware of what this can mean, but, as I understand it, relating, as it does, to the Export of Goods (Control) Order 1978, presumably it gets the powers of enforcement from that order, which is re-enacted in this order. Will this order really be enforced in the way that is spelt out? We are told that the 1978 order concerns Customs powers for demanding evidence of destination, offences in connection with applications for licences and, very interestingly, powers of search.
In my constituency of Hammersmith, North there are many small businesses which have sprung up very largely from the Asian community, in which goods are transported via Iran. What is to happen in that situation? After the order has been brought in tonight, shall I be faced with a situation in which, suddenly, the Customs and Excise people descend on

1627
some part of North Hammersmith and raid one of the Asian shops in the area, with the idea of finding goods that are now in one of the small supermarkets?
This is not a minor point. I do not invent it at this time of the night for fun. It suddenly struck me as an important point. The order provides for powers of search.
Will the Government try to enforce these measures? They have two options. They can decide not to bother and to turn a blind eye to everything that happens. There are one or two hon. Members who say that that is what will happen. That is the cynical view. If the Government are to enforce these measures, observance and enforcement will become as crucial as the question of penalties. Enforcement must be carried out either by getting information about the destination of goods or by finding the goods in Britain. That involves Customs and Excise officers searching premises. Does the Minister intend Customs and Excise officers to check on the industries to which I have referred, which are holding a variety of goods that have come from Iran? I would welcome an answer from the hon. Gentleman.
2.21 am
Mr. Andrew F. Bennett: I have two questions for the Minister. First, how will he monitor the way in which the regulations work? There seem to be two strands running through hon. Members' feelings on this issue. There are those who feel that sanctions will not work but that possibly some of their constituents will lose out in their export businesses as a result of sanctions.
Everybody will be interested to know how effectively the sanctions are working and how much trade is being lost. The Department will be monitoring carefully to ascertain whether there is sanctions-breaking. I hope that it will monitor what other countries are doing, apart from what Britain is doing. There is the suspicion that, although some countries' legislatures were more enthusiastic about sanctions than we were, they might be looking for ways round their legislation pretty quickly. I hope that we shall be told the extent to which sanctions are being effective, the effect that they are having on our exports and on the exports of
1628
other countries and how far others are finding ways to get round them.
I hope that the Minister will tell us how the monitoring will be done and whether he will be prepared to bring the information before the House at regular intervals. Obviously it is a short period since the order came into effect. However, I ask the Ministers what orders have been stopped as a consequence. He should be able to tell us within a month the extent to which the orders have worked and the impact that they have had on trade with Britain and on the trade of other member States of the EEC that have participated in sanctions.
My second question concerns licences. We still do not have a clear indication whether there will be any way in which an individual firm will be able to appeal if its licence is revoked. It is an extremely important issue. Is it one that can be raised only in the House? It seems grossly unfair that, in the absence of any appeal procedure, a firm may have its licence revoked.
I hope that the Minister will answer my questions on monitoring, reporting to the House, and licensing.
2.23 am
Mr. Parkinson: I shall try to deal with a number of the issues that have been raised in the debate.
The hon. Member for Merthyr Tydfil (Mr. Rowlands) asked me whether there was a continuing diplomatic effort or whether the Community's efforts were merely going into imposing sanctions. There is a continuing diplomatic effort. EEC ambassadors in Tehran are seeking continually to find ways of bringing to the attention of the Iranian Government the need to obtain the release of the hostages. There have been various visitors to Tehran recently, including Mr. Daoudi of the United Nations commission of inquiry and the Chancellor of Austria, Mr. Kreisky. Two other leading Socialists were there last week. Their efforts, on their own initiative, were welcomed and supported in every way by Western Governments, but none of them made the slightest difference. Representations were made by a wide variety of bodies, but there is no sign that they have made any impression on the Government.
Mr. David Winnick Mr. David Winnick (Walsall, North) rose——
Mr. Parkinson: I hope that the hon. Gentleman will not mind if I do not give way.
This is not an "either/or" situation. Diplomatic initiatives will continue. We shall seek to get over our point of view and to persuade the Iranians. We have not succeeded, and that is why the Community it taking a second step.
When Community Ministers met on 22 April, they outlined a programme of political action. They took that action. They delayed any further discussion of economic sanctions in the hope that their political initiatives would work. However, they did not. Reluctantly, member States of the Nine and of the other OECD countries concluded that sanctions would have to be imposed.
The hon. Member for Merthyr Tydfil referred again to the clarity of the orders. The hon. Member for Keighley (Mr. Cryer) made the same point. If the Government had difficulty in drafting the orders, it was because they tried to do so in the spirit that the House made clear that it anticipated. We should have had no difficulty and would have obtained absolute clarity if we had drafted an order to the effect that nothing would leave this country for Iran from this day henceforth. That would have been straightforward.
The hon. Member for Merthyr Tydfil spoke about the way in which we sought to preserve the rights of those who have continued to trade with Iran. He mentioned the different categories of activity. I accept that there is some imprecision. The Government do not welcome that, but it stems from our wish to meet the needs and demands of the House.
The hon. Member for Keighley spoke of the difficulties of licensing. He said that he would prefer a system of licensing because it would give some certainty. There would be another certainty about licensing. It would have broken the existing flow of contracts. We would have had to suspend business until we had set up a licensing procedure. The hon. Gentleman should realise that there would have been a flood of applications for licences. Those licences would have to be processed. The Government would also be breaking the undertaking that
1630
they gave the House not to interfere with existing contracts.
We have considered the issues carefully. We take the work of the Joint Committee on Statutory Instruments extremely seriously. We congratulate the Committee. It has come forward with its comments at short notice, having been given only a little time to consider the orders. I am sure that the hon. Member for Merthyr Tydfil realises why so little time was available. We wished to give the House an opportunity to comment on the orders as soon as possible once they had been laid. When he spoke about fairness he automatically assumed that the Government would seek to administer the orders unfairly. He had no ground for making that assertion. The Department, my right hon. Friend the Secretary of State and our officials will seek to administer the orders as fairly as possible. I have explained that the power to revoke licences is residuary. We do not expect to use it frequently. It would be used in exceptional circumstances if, for instance, we discovered that licences had been obtained by fraud.
My hon. Friend the Member for Northampton, North (Mr. Marlow) asked four questions. Some of them were more perceptive than others. He asked a number of hypothetical questions about such matters as what would happen if all the hostages were killed. I should prefer those questions to remain hypothetical and I do not propose to answer them.
Let me tell my hon. Friend how the orders may be revoked. The order under discussion is made under the 1939 Act and it can be revoked by another order of the Secretary of State made under the 1939 Act. It would not be subject to parliamentary procedure and would be brought into force the day after it was made. The Iran (Trading Sanctions) Order would be ended by means of an Order in Council under section 2(3) of the 1980 Act. The order would automatically cease to have effect, since its enabling powers would have disappeared. Such an Order in Council would not be subject to parliamentary approval and would come into effect straight away. The Government have built into the orders the ability to revoke them with all speed once the emergency that they are designed to meet has ended.

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My hon. Friend asked what estimates had been made of the likely loss of business. It is not possible to provide an exact figure, because we are dealing with a fluid position. My hon. Friend also asked whether I knew of any instance in which sanctions had worked. Since taking part in recent debates in the House, I have visited Zimbabwe and talked to people who were subject to sanctions. I can tell my hon. Friends that there is immense relief that sanctions have been lifted. There is no doubt that they were a problem for Zimbabwe. They cost the country a lot of foreign exchange and everybody I met was delighted that they had been lifted. That suggests that they were having an unpleasant effect. My hon. Friend asked me for one example. I hope that I have given it to him.
The hon. Member for Swindon (Mr. Stoddart) made some kind remarks based on our days together as opposing Whips on Finance Bill Committees. Tonight's proceedings and the hour at which they are taking place have brought back memories of those days. I congratulate the hon. Gentleman on doing something that has not been done as often as it ought to have been done today, namely, deploring the position that the hostages find themselves in. The hon. Gentleman made the point effectively and strongly and described their position as an outrage. He is right, and I thank him for making the point.
The hon. Gentleman and I differ because he believes that the order will not help. I do not agree with him. I agree with my hon. Friend the Member for Morecambe and Lonsdale (Mr. Lennox-Boyd). What conclusions would the Iranians draw from the fact that, although they had broken a convention that is the basis of world diplomacy, it was " business as usual " and that the British and all the other OECD countries would continue to supply them with anything that they wanted to buy? Would they draw the conclusion that they were doing something that was to be deplored? I suggest that the answer is " No ".
The OECD countries have decided simultaneously to impose sanctions that are designed not to bring Iran to its knees but to bring home to the Iranians that their behaviour is intolerable. That is worth doing, and I believe that it will be understood far better than the nonsensical
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" When you tell your friends that you will not co-operate with them, you are really proving to them that you are their friend " attitude that we have heard tonight.
I thank the hon. Member for Swindon for highlighting the cause of the problem. It is a simple one. The Iranian regime has broken a convention which is the basis of our diplomatic system. It is to be deplored. The treatment of the hostages is to be deplored. The orders are not a strong way for Britain to demonstrate its feelings, but they are a way. If they are not as strong as they could be, that is because the House did not want them to be. I believe that even in their present state, coupled with the action that our friends in the OECD are taking, they will be a sign to the Iranians that they had better mend their ways.
The hon. Member for Stockport, North (Mr. Bennett) asked how the sanctions would operate. I touched on that in my opening remarks. I said that we had considered carefully whether we should institute a system of licences. It would have been cumbersome, it would have involved a substantial increase in bureaucracy and it would have created a machine that might have been redundant before it was finished. We came to the conclusion that that would not be sensible. We decided instead that sanctions should be operated on the basis of declarations by exporters that the goods involved were not prohibited exports under either of the orders. Firms will be required to enter details of their exports with Customs, together with a declaration before any goods are shipped. They will then be able to export their goods. However, Customs has the power to go to their offices and investigate their documents to find out whether the basis of the declaration is truthful. It will be using that power. That is a better solution. Customs will check goods as they leave, check the declarations and search the evidence. It will be up to the exporter to demonstrate that the declaration is based on a set of circumstances that justified making it. That is the way in which we shall administer the orders.
In the earlier debate it was suggested that we were mugs to take a tough line when no one else was doing so. That suggestion has rather disappeared during our debate. The Community has set up a group of technical experts to survey the

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orders and regulations made by member States. As I explained earlier, individual member States have their own way of legislating and making regulations. The technical committee will consider the regulations and ensure that, as far as possible, they conform. It will also monitor the way in which the regulations are operated by member States. There will be an opportunity for us to make sure that countries are moving forward in concert.
Contracts for future services are no longer included, which is an example of how we are determined to work in concert with our allies. We took the view that, since a substantial number of our allies were not taking sanctions against contracts for future services, we should not do so. It was the examination of other people's regulations that enabled us to come to that conclusion.
Mr. Andrew F. Bennett Mr. Andrew F. Bennett rose——
Mr. Dennis Canavan: Give way.
Mr. Parkinson: If the hon. Member for West Stirlingshire (Mr. Canavan) returns to where he usually discusses such matters with his hon. Friends, perhaps we shall be able to proceed with a serious debate.
There are measures in hand to enforce these regulations.
Mr. Dalyell: On a point of order, Mr. Deputy Speaker. Three hours ago, the hon. Member—
The Parliamentary Secretary to the Treasury (Mr. Michael Jopling)The Parliamentary Secretary to the Treasury (Mr. Michael Jopling) rose in his place and claimed to move, That the Question be now put.
Question put, That the Question be now put:—
The House divided: Ayes 127, Noes 15.

Division No. 337]

AYES

2.39 am

Alexander, Richard

Gow, Ian

Murphy, Christopher

Ancram, Michael

Griffiths, Eldon (Bury St Edmunds)

Needham, Richard

Arnold, Tom

Griffiths, Peter (Portsmouth N)

Nelson, Anthony

Aspinwall, Jack

Grist, Ian

Newton, Tony

Atkins, Rt Hon H. (Spelthorne)

Gummer, John Selwyn

Normanton, Tom

Baker, Nicholas (North Dorset)

Hamilton, Hon Archie (Eps'm&Ew'll)

Page, Rt Hon Sir R. Graham

Benyon, Thomas (Abingdon)

Hamilton, Michael (Salisbury)

Parkinson, Cecil

Best, Keith

Hawksley, Warren

Parris, Matthew

Bevan, David Gilroy

Heddle, John

Patten, John (Oxford)

Biffen, Rt Hon John

Henderson, Barry

Penhaligon, David

Biggs-Davison, John

Hill, James

Pollock, Alexander

Blackburn, John

Hogg, Hon Douglas (Grantham)

Price, David (Eastleigh)

Boscawen, Hon Robert

Howell, Ralph (North Norfolk)

Rathbone, Tim

Braine, Sir Bernard

Hunt, John (Ravensbourne)

Renton, Tim

Brinton, Tim

Hurd, Hon Douglas

Sainsbury, Hon Timothy

Brittan, Leon

Jopling, Rt Hon Michael

Scott, Nicholas

Brooke, Hon Peter

Lamont, Norman

Shepherd, Colin (Hereford)

Brown, Michael (Brigg & Sc'thorpe)

Lawrence, Ivan

Skeet, T. H. H

Budgen, Nick

Lee, John

Speller, Tony

Bulmer, Esmond

Lennox-Boyd, Hon Mark

Spicer, Michael (S Worcestershire)

Butcher, John

Lester, Jim (Beeston)

Squire, Robin

Carlisle, John (Luton West)

Lloyd, Peter (Fareham)

Stanbrook, Ivor

Carlisle, Kenneth (Lincoln)

Loveridge, John

Stevens, Martin

Carlisle, Rt Hon Mark (Runcorn)

Lyell, Nicholas

Stradling, Thomas, J.

Chapman, Sydney

Macfarlane, Neil

Thomas, Rt Hon Peter (Hendon S)

Clark, Hon Alan (Plymouth, Sutton)

MacGregor, John

Thompson, Donald

Clarke, Kenneth (Rushcliffe)

MacKay, John (Argyll)

Thorne, Nell (Ilford South)

Cope, John

Marlow, Tony

Townsend, Cyril D. (Bexleyheath)

Cranborne, Viscount

Mates, Michael

Viggers, Peter

Douglas-Hamilton, Lord James

Mather, Carol

Waddington, David

Dover, Denshore

Maxwell-Hyslop, Robin

Wakeham, John

Dunn, Robert (Dartlord)

Mellor, David

Waldegrave, Hon William

Durant, Tony

Meyer, Sir Anthony

Walker, Bill (Perth & E Perthshire)

Eden, Rt Hon Sir John

Mills, lain (Mariden)

Waller, Gary

Elliott, Sir William

Mills, Peter (West Devon)

Watson, John

Falrgrieve, Russell

Miscampbell, Norman

Wells, Bowen (Hert'rd & Slev'nage)

Faith, Mrs Sheila

Mitchell, David (Basingstoke)

Wheeler, John

Farr, John

Moate, Roger

Winterton, Nicholas

Fenner, Mrs Peggy

Monro, Hector

Wolfson, Mark

Fisher, Sir Nigel

Morgan, Geraint

Fletcher-Cooke, Charles

Morris, Michael (Northampton, Sth)

TELLERS FOR THE AYES:

Forman, Nigel

Morrison, Hon Charles (Devizes)

Mr. Spencer Le Marchant and

Garel-Jones, Tristan

Morrison, Hon Peter (City of Chester)

Mr. Anthony Berry

Gorst, John

Mudd, David

NOES

Bennett, Andrew (Stockport N)

Cryer, Bob

Evans, John (Newton)

Campbell-Savours, Dale

Dalyell, Tarn

McDonald, Dr Oonagh

Canavan, Dennis

Davis, Terry (B'rm'ham, Stechford)

Kilfedder, James A.

McKay, Allen (Penistone)

Soley, Clive

ELLERS FOR THE NOES

Powell, Rt Hon J. Enoch (S Down)

Stoddart, David

Mr. David Winnick and

Ross, Win. (Londonderry)

Welsh, Michael

Mr. Nigel Spearing.

Question accordingly agreed to.

Question put accordingly:—

The House divided: Ayes 124, Noes 15.

Division No. 338]

AYES

2.50 am

Alexander, Richard

Gorst, John

Murphy, Christopher

Ancram, Michael

Gow, Ian

Needham, Richard

Arnold, Tom

Griffiths, Eldon (Bury St Edmunds)

Nelson, Anthony

Aeplnwall, Jack

Griffiths, Peter (Portsmouth N)

Newton, Tony

Atkins, Rt Hon H. (Spelthorne)

Grist, Ian

Normanton, Tom

Baker, Nicholas (North Dorset)

Gummer, John Selwyn

Page, Rt Hon Sir R. Graham

Benyon, Thomas (Abingdon)

Hamilton, Hon Archie (Eps'm&Ew'll)

Parkinson, Cecil

Best, Keith

Hamilton, Michael (Salisbury)

Farns, Matthew

Bevan, David Gllroy

Hawksley, Warren

Patten, John (Oxford)

Biffen, Rt Hon John

Heddle, John

Penhallgon, David

Biggs-Davison, John

Henderson, Barry

Pollock, Alexander

Blackburn, John

Hill, James

Price, David (Eastleigh)

Boscawen, Hon Robert

Hogg, Hon Douglas (Grantham)

Rathbone, Tim

Braine, Sir Bernard

Howell, Ralph (North Norfolk)

Renton, Tim

Brinton, Tim

Hunt, John (Ravensbourne)

Sainsbury, Hon Timothy

Brlttan, Leon

Hurd, Hon Douglas

Scott, Nicholas

Brooke, Hon Peter

Jopling, Rt Hon Michael

Shepherd, Colin (Hereford)

Brown, Michael (Brlgg & Sc'thorpe)

Lamont, Norman

Skeet, T. H. H

Budgen, Nick

Lawrence, Ivan

Speller, Tony

Bulmer, Esmond

Lee, John

Squire, Robin

Butcher, John

Lennox-Boyd, Hon Mark

Stanbrook, Ivor

Carlisle, John (Luton West)

Lester, Jim (Beeston)

Stevens, Martin

Carlisle, Kenneth (Lincoln)

Lloyd, Peter (Fareham)

Stradling, Thomas, J.

Carlisle, Rt Hon Mark (Runcorn)

Loveridge, John

Thomas, Rt Hon Peter (Hendon S)

Chapman, Sydney

Lyell, Nicholas

Thompson, Donald

Clark, Hon Alan (Plymouth, Sutton)

Macfarlane, Nell

Thorne, Nell (Ilford South)

Clarke, Kenneth (Rushcllfle)

MacGregor, John

Townsend, Cyril D. (Beileyheath)

Cope, John

MacKay, John (Argyll)

Viggers, Peter

Cranborne, Viscount

Mates, Michael

Waddington, David

Douglas-Hamilton, Lord James

Mather, Carol

Wakeham, John

Dover, Denshore

Maxwell-Hyslop, Robin

Waldegrave, Hon William

Dunn, Robert (Dartford)

Mellor, David

Walker, Bill (Perth & E Perthshire)

Durant, Tony

Meyer, Sir Anthony

Waller, Gary

Eden, Rt Hon Sir John

Mills, lain (Merlden)

Watson, John

Elliott, Sir William

Mills, Peter (West Devon)

Wells, Bowen (Hert'rd & Stev'nage)

Fairgrieve, Russell

Miscampbell, Norman

Wheeler, John

Faith, Mrs Sheila

Mitchell, Davld (Basingstoke)

Winterton, Nicholas

Farr, John

Moate, Roger

Wolfson, Mark

Fenner, Mrs Peggy

Morgan, Geraint

Fisher, Sir Nigel

Morris, Michael (Northampton, Sth)

TELLERS FOR THF AYES:

Fletcher-Cooke, Charles

Morrison, Hon Charles (Devizes)

Mr. Spencer le Marchant and

Forman, Nigel

Morrison, Hon Peter (City of Chester)

Mr. Anthony Berry.

Garel-Jones, Tristan

Mudd, David

NOES

Bennett, Andrew (Stockport N)

Klifedder, James A.

Stoddart, David

Campbell-Savours, Dale

McKay, Allen (Penistone)

Welsh, Michael

Canavan, Dennis

Marlow, Tony

Cryer, Bob

Powell, Rt Hon J. Enoch (S Down)

TELLERS FOR THE NOES:

Dalyell, Tarn

Ross, Wm. (Londonderry)

Mr. David Winnick and

Davis, Terry (B'rm'ham, Stechford)

Soley, Clive

Mr. Nigel Spearing.

Evans, John (Newton)

Question accordingly agreed to.

Resolved,

That this House approves the Export of Goods (Control) (Iran Sanctions) Order 1980 (S.I., 1980, No. 735).

PETITION

  High Court Attendances (Officers of the House)
  3 am
  Dr. Oonagh McDonald: I beg leave to present a petition, Mr. Deputy Speaker, and ask that you direct the Clerk at the Table to read it.
  The Clerk Assistant The Clerk Assistant read the petition, which was as follows:
  To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
  The Humble Petition of David Frederick Charlton sheweth:—
  (1) that the Petitioner is the solicitor representing Edward Milne, a former Member of your Honourable House;
  (2) that an appeal has been brought in the Court of Appeal against a judgment of the High Court of Justice Chancery Division in an action brought by the Distributive and Allied Workers;
  (3) that in the said appeal an issue arises as to the relationship between Members of Parliament who are sponsored by Trade Unions and their sponsoring unions;
  (4) that on 14 October 1975 the House ordered to be printed a Second Report from the Committee of Privileges on a complaint concerning a Resolution of the Yorkshire Area Council of the National Union of Mineworkers;
  (5) that the above Report printed as aforesaid related directly to the issue referred to in paragraph (3) hereof and reference is desired to be made by your Petitioner in the appeal referred to in paragraph (2) hereof to the Report.
  Wherefore your Petitioner prays that reference may be made in the appeal presently proceeding in the Court of Appeal referred to herein to the said Report and that leave be given to the proper Officers of the House formally to prove the same according to their competence.
  And your Petitioner, as in duty bound, will ever pray, etc.
  David F. Charlton
  1 Euston Road
  London N.W.1
  Ordered,
  That leave be given for reference to be made to the said report and for the proper Officers of this House to attend the said proceedings and formally to produce and to prove the same according to their competence.—[Dr. McDonald.]

SPORT IN SOUTH AFRICA
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]
3.2 am
Mr. John Carlisle: The significance of the timing of this debate is obvious to all, coming as it does when a British Isles rugby team is touring South Africa and small pockets of political unrest are being reported there by the world press. That those events have occurred in and around where the Lions are playing is not without coincidence, as the All Blacks rugby team found in 1976. By the very nature of the unrest, it is obvious that South Africa's political opponents are taking every opportunity of causing trouble in that part of the world while world attention is focused upon them. All is not well. Even South African politicians admit that. However, the very nature of the disturbances indicates a minority view that is obtaining majority publicity.
The Sports Council visit, led in January by its chairman, Dickie Jeeps, a distinguished former rugby international, has produced a very fair and balanced report. Nowhere does it make a definite recommendation. Its attitude is vague as to its intention. Its message is clear—that in the opinion of the delegation dramatic progress has been made towards a total multi-racial sports society and that this Government should consider renewing their sporting links immediately.
The report is extremely long and comprehensive. The programme was decided by the council and every attempt was made to see as broad a section of South African sports as possible. Some may argue that too much time was given to the views of the South African Council on Sport—SACOS—which refused fuir co-operation with the delegation, withheld information and attempted to deceive the council in its intent. This body represents a minority of coloured black sportsmen in South Africa—probably a maximum of about 400,000 in a population of about 25 million.
SACOS receives funds from outside South Africa, possibly from Eastern Europe, and yet maintains some respectability with Western Governments. The

1639
delegation found its members difficult to contact, biased in their views and deceitful in their information. Some organisations which it claimed to represent did not even exist, and its slogan
" No normal sport in an abnormal society"
precludes any chance that its organisation will be of any value to a mixed racial society.
The delegation also found disturbing evidence that there were allegations that SACOS was operating a system of intimidation and that victimisation took place. Complaints had been made that one SACOS spokesman's daughter had been hit on her tennis arm with the sharp edge of a ruler because she had shown interest in participating in a tennis programme run by the provincial association, a non-SACOS body, Also reported was the case of a young table tennis player, a Miss Wisneth, who did not compete in the 1979 open championships because of
" certain pressures from outside sources."
If one adds to that the posturings of Mr. Paul Stephenson, the coloured member of our Sports Council, and his inflammatory remarks aimed at setting white against black, one realises the antagonism that the delegation faced in its attempts to produce a fair and balanced verdict.
Mr. Tony Marlow: SACOS has a "child ", I understand, which runs around this country in nappies, known as SANROC. Why is it that whenever the BBC wants to interview anybody from South Africa with regard to sport in that country it always turns up with SANROC, which is utterly unrepresentative of sporting interests in South Africa?
Mr. Carlisle: I am glad that my hon. Friend made that point. I shall say something about SANROC later in my speech.
The majority view, however, was reported as held by those sporting bodies that are prepared to work within the system to achieve change. The delegation received deputations from many sporting fields and formed the immediate impression that any young South African, whatever the colour of his skin, could achieve that accolade of sport—the Springbok blazer.
1640
Nor was there any evidence to suggest that segregation existed in crowds. Indeed, some blacks are now complaining that they cannot obtain tickets for matches, because they used to have a stand of their own and that facility is no longer available. Certainly some extra facilities are needed, such as encouragement of coaching, a new soccer stadium, more encouragement at school level and a major capital investment on facilities in the black townships.
There is no doubt that the Jeeps report found South Africa in a period of transition. Prime Minister Botha is committed to irreversible change—not always popular with his own party—and the heartening feature of those taking part in the field of sport is that they are becoming the pace-setters to achieve integration. One can well imagine their extreme frustration and despair at the negative response they receive from Britain, where the Minister has made little comment on the report, or, indeed, on the recommendation that other countries should also send delegations. Recently nine French Members of Parliament reported back favourably to their Government. We still await the International Cricket Council's report, which is rumoured to be favourable, and, of course, the International Tennis Federation reported in a favourable way.
To stand at each end of a field and fire shots at each other is no way to achieve any sort of harmony. South Africa has made several concessions that would have been unheard of a decade ago. The Jeeps report confirms this, and it must be right that the British Government should in their turn recognise that change and seek to encourage it. Active discouragement will only encourage the ultra-Right, which is only too ready to return to the old ways. My hon. Friend must realise this danger and the fact that his constant refusal of recognition is prejudicing the sporting opportunities of thousands of blacks.
One very telling and revealing sector of the report is to be found in the question and answer paragraphs, prepared for the council by the South African Olympic and National Games Association. This sector pulls no punches. I shall not detain the House for too long on its findings, but confine my remarks to one or two points.

1641
The answers confirm that sporting participants of all colours can share facilities, such as hotel accommodation, dressing rooms, refreshments arrangements, toilets, receptions, use of liquor and travel, all on an equal basis. It is admitted that in the election of officers for clubs, club membership and club rules, South African sports clubs still follow the custom enjoyed by many British clubs, in that they can accept what members they like. Many will not question a club's right to discriminate in the composition of its membership.
To the allegation that whites are enjoying financial favour in terms of services, facilities and planning for sport, the report points out that in 1978 and 1979 about 2½ million rand was spent on sport for whites, and nearly 10½ million rand on sport for other participants. The association admits that more money for black sportsmen is required. Much of the shortfall that needs to be made up is caused by the recent active interest being shown by non-whites in sporting activities. That is bound to take time to correct. It is admitted that much remains to be done, especially with the liquor laws. But they were never intended to apply to sport, and the sports bodies will continue to press for their sports to be exempted from them.
Perhaps the most interesting evidence comes from the IOC fact-finding committee of 1967, headed by Lord Killanin—one who has not endeared himself to the Government by his stubborn determination to stage the Olympic Games in Moscow. The report found that
" SANROC, the South African Non-Racial Open Committee, now operating from London, is supported only in spirit by the majority of non-whites in Africa but its methods are a cause of embarrassment to the majority in South Africa for whom it claims to speak."
It is not without significance that, following the report, South Africa was invited to the Mexico Games, but political pressure eventually caused the invitation to be withdrawn. If the IOC thought South Africa a fit member in 1968, how can it exclude it after 12 years of change and progress?
Reaction in South Africa to the Jeeps report has been favourable. Mr. David Dalling, an Opposition MP, said:
" If changes in sport were encouraged in South Africa by not cutting off relations, or,
1642
for a trial period reopening relations there would be a massive reaction to change in South Africa."
He went on to say that if separation continued on the lines recommended by the former British Minister with responsibility for sport, the right hon. Member for Birmingham Small Heath (Mr. Howell), there would be a slow backlash that would retard change.
Mr. Abe William, a senior coloured rugby official, said about the Lions' tour to South Africa, according to an article by Franks Keating in The Guardian of 27 May:
" Afrikaners, you change their rugby, you change their life, man. P. M. Botha is our hope for the future. If he goes, we are back to square one … Once they were dark days, now at least we have some hope.' "
I wish to mention but one sport, football, which is the favourite pastime of blacks in South Africa. The Jeeps report stated that football has achieved full integration and that there is nothing more their administrators can do to achieve more integration. It is indeed a disgrace that the world is now discriminating against every black man in South Africa, even though South Africa has complied with every aspect of what it has been asked to do.
Inevitably, I must conclude with the Gleneagles agreement, a decision thrust upon this Parliament without its ever having a chance to approve it; nor, of course, was there any consultation with the Sports Council or sportsmen throughout this country. For a Conservative Government to be hogtied to such an agreement, made by a Labour Administration, is an extraordinary situation.
Mr. Edward Rowlands: I do not know whether the hon. Gentleman was present at Prime Minister's Question Time on Tuesday when she——
Mr. Nicholas Winterton: My hon. Friend the Member for Luton, West (Mr. Carlisle) asked the question.
Mr. Rowlands:—reaffirmed her support for the Gleneagles agreement, and made it clear that in her opinion, and in the assessment of the Government, the changes have not been sufficient to justify the abrogation of the Gleneagles agreement.
Mr. Carlisle: I note the hon. Gentleman's remarks, but, as my hon. Friend the Member for Macclesfield (Mr. Winterton) said, I asked the question. In an answer to a question of mine on 18 April, my right hon. Friend the Prime Minister stated that progress
" is not yet sufficient to discuss with Commonwealth colleagues the possibility of modifying the Gleneagles agreement."—[Official Report, 18 April 1980; Vol. 982, c. 729.]
Because of those answers and because of the reaction of the House, the South African Government are now at a loss to know what they are expected to do. No hint of correction has come from my right hon. Friend's office and there has been no indication of the further steps that are considered to be necessary.
The Jeeps report was a fact-finding mission funded by Government money. Surely it is not too much too ask that Parliament be informed whether the Government feel that that money was well spent and whether they intend to act on its conclusions.
I urge my hon. Friend to indicate what he now expects of the South African sports authorities, whether he will encourage our Commonwealth colleagues to accept the report and whether he will commence, however slowly, the process of restoring South Africa to full international sporting participation.
3.15 am
Mr. Nicholas Winterton: I shall be brief, because I know that my hon. Friend the Under-Secretary of State wishes to make the Government's position clear.
I speak as someone who is very interested in sport and who has been privileged to visit South Africa on two occasions, meeting representatives of black, white, and coloured South Africa and of the Indian community. I have visited virtually every part of South Africa, including many of the townships, coloured, black and Indian, where the South African Government are endeavouring to provide sporting facilities and to bring about a gradual integration in sport.
For that reason, I am glad that my hon. Friend the Member for Luton, West (Mr. Carlisle) raised this matter on the Adjournment. I hope that this debate will bring pressure on the Government to provide time to debate the Jeeps report in this place.
1644
I was very sad when my right hon. Friend the Prime Minister answered my hon. Friend in the way that she did on Tuesday during Prime Minister's Question Time. It indicated to me either that she had been badly briefed or that she had not read the Jeeps report. To say that there has not been a massive move towards integration in sport in South Africa—the Jeeps report confirms that that has taken place—is to deny the facts of what has happened. I have been to South Africa, seen what is happening there, and been impressed by the speed with which integration, in a very difficult situation, is being achieved.
I am surprised that a Conservative Government, who are setting about reforming many of the mistakes of the Labour Administration, are prepared to remain on this ridiculous hook of the Gleneagles agreement. I should like to draw my hon. Friend's attention to some of the words in the Commonwealth statement on apartheid in sport, which forms the basis of the Gleneagles agreement. It refers, first, to the members of the Commonwealth who attended and states:
" They were conscious that sport is an important means of developing and fostering understanding between the people, and especially between the young people, of all countries."
But I agree that the statement then goes on to say:
" But they were also aware that, quite apart from other factors, sporting contacts between their nationals and the nationals of countries practising apartheid in sport tend to encourage the belief (however unwarranted) that they are prepared to condone this abhorrent policy or are less than totally committed to the principles embodied in their Singapore Declaration "—
a declaration of many years previously.
I suggest that it is absolutely ridiculous that a Tory Government should be hung on this hook of an agreement made by a Socialist Administration when that agreement was not put before the House and, as my hon. Friend rightly pointed out, no consultation was carried out by the then Minister for Sport with the Sports Council or any other sporting body in this country. Therefore, I believe that the move suggested by my hon. Friend—that the Government should look at and provide time to debate the Jeeps report—is relevant.

1645
I should like to quote briefly from the Jeeps report. Mr. Leslie Sehume, formerly secretary-general of the Committee for Fairness in Sport, who is known to my hon. Friend, asked
" why should they not be internationally recognised. The primary interest of SACOS was to bring the Government down. Mr. Sehume suggested that the opportunity to play sport should take priority over such considerations. What was needed was to point out ignorance and to make clear the changes that had taken place."
Dr. Koornhof is now the Minister for Co-operation and Development, but he was previously the Minister of Sport and a man who had led much of the progress, as I am sure even the Opposition will admit, that has occurred in South Africa. Referring to SACOS, he said that,
" in his experience, they were not interested in sport per se as would be a normal sportsman: they were using sport for political reasons and that was why it was not possible to get them to co-operate. The Minister reiterated a comment he had made in the past to the effect that he would put up a monument to one who could persuade Mr Hassan Howa to co-operate with anyone."
The motion that has been proposed is important. Let us get off the stupid hook that this House played no part in getting us on. Let us operate the Tory policy sensibly, and let us negotiate again with our friends.
3.20 am
The Under-Secretary of State for the Environment (Mr. Hector Monro): I am glad that my hon. Friend the Member for Luton, West (Mr. Carlisle) raised this subject tonight. He was assisted by my hon. Friend the Member for Macclesfield (Mr. Winterton), whose criticism of my right hon. Friend the Prime Minister on this subject I cannot accept. The motion gives me a chance to clarify certain aspects and to set the record straight.
The mission was devised entirely by the Sports Council as a result of a resolution proposed by a member at its meeting last October and prompted by the controversy surrounding the tour here of the South African Barbarians rugby club. The council approved the resolution and proceeded with the fact-finding mission. At no stage had it anything whatever to do with Ministers.
The Sports Council is the major body representing sports interests in this country
1646
and when it was established in 1972 the Royal Charter gave it an international role. It is also independent of the Government but adviser to them. It is not an outpost of my Department. It is only right, therefore, that it should have acquainted itself of as many relevant facts as possible about sport and South Africa. At the same time, however, the Sports Council recognises that this matter is for political judgment also, and that this is the province of the Government.
The report is clearly the result of hard and diligent work and the enthusiasm of members of the mission. It was produced quickly. I have read it carefully. All hon. Members will agree that it will take time to distil all the information. Instant reactions are not possible. However, many readers of the report would have liked more cross-examination of the evidence. That would have strengthened the report.
As my hon. Friend said, the report draws no conclusions and makes no recommendations but as a whole confirms the Government's assessment that there is progress towards integration. Here I disagree with my hon. Friend the Member for Macclesfield and his comments about my right hon. Friend the Prime Minister. She was not making an off-the cuff comment. She knew exactly what she was saying and has said it constantly over the past six months.
The process of integration varies from sport to sport, from area to area and from club to club. It is generally greater on the field than off the field. Wider problems remain and laws have to be varied to allow for social mixing. Education is still racial, and schooling is very import ant relative to future attitudes. As the report suggests, rugby may be one of the less well integrated sports, and some confusion abounds between non-racial sport and matches between different races.
It is important to note that the Sports Council, in its resolution passed on the report on 12 May, did not call on the Government to take action. It urged the IOC and the international sports bodies to review the state of South African sport. It simply asked the Government to note the action that the council had taken, and, as I have indicated, I am happy to do that.
The report does not affect the Government's position. We have made clear that

1647
this rests on the Commonwealth statement of 1977. The Foreign Secretary confirmed our acceptance of it in Parliament last June. It is worth recalling that that statement was an attempt to harmonise relationships within the Commonwealth. My hon. Friends and other hon. Members will recall that it was discussed, considered and accepted after the difficulties of the Olympics of 1976, subsequent to the New Zealand tour of South Africa, when there was great disharmony in the Commonwealth about the attitude within the Commonwealth to sport with South Africa. A serious situation was then developing over sports contacts with South Africa, and that is why the agreement was devised and accepted by the then Government.
But, of course, it was to that the IOC and the international sports federations had already isolated South Africa from international sport. Sport has been seized upon, as my hon. Friends have said, by anti-apartheid elements as a means of attacking the system in South Africa. The Commonwealth needed to devise a formula that was acceptable to all members of the Commonwealth, and that is presumably why the wording of the Commonwealth agreement is rather ambiguous and open to some doubt, as my hon. Friends indicated. But we shall continue to abide by it to the best of our ability within the context of our laws and tradition, as is allowed for in the statement itself.
As the House knows, we have thought it right to look towards the future possibility of seeking modification of the statement with our Commonwealth colleagues if and when we judge that sufficient progress has been made towards integration in South Africa. We made this clear as long ago as last September, in a press release. An important element in this is the attitude of international sports bodies, such as the IOC. It led the isolation of South Africa from world sport long before the Commonwealth statement.
Mr. Nicholas Winterton: Yet it is going to Moscow.
Mr. Monro: If it believes that sufficient progress towards non-racialism has been made in sport there, it must help to create the right atmosphere to pave the way for possible renegotiation. I am pleased that the Sports Council resolution
1648
was directed to it so that it can consider this very point. If South African sport can demonstrate to the IOC and the ISFs that it should be readmitted, Her Majesty's Government and others will take these views into account.
The Commonwealth is not alone in taking this attitude. Sports Ministers of the 23 Council of Europe members in 1978 unanimously adopted a resolution on sport in society far more stringent than the Gleneagles agreement. Britain cannot act in isolation over this matter. The next possible opportunity of discussing the Commonwealth statement is at the Heads of Government meeting next year. As I said, our view is that progress has been made but has been patchy from one sport to another. The end of isolation is not yet in sight, but it is right that international sport should keep the position under review.
Isolation has accelerated change. As the Sports Council report recognises, there is need for the carrot, or at least the promise of one. It is a difficult balance. To do too much slows down change. To do too little may dishearten both the white and black alike. Certainly the tour of the South Africa Barbarians club heightened the possibility of Britain finding herself increasingly isolated in international sport, as indeed by the Lions' tour today. There have been definite signs that the Commonwealth countries may seek to exclude Britain from the Commonwealth Games. Originally it was the Olympics, but that has been overtaken by Afghanistan and the Russian invasion and atrocities happening there.
Mr. Nicholas Winterton: They are all going.
Mr. Monro: The loss of the Commonwealth Games, or a British entry, would be serious indeed, and I hope that those involved will take into account the interests and concerns of fellow sportsmen even if they are unwilling to accept advice from the Government.
The situation is not helped by the absolutely rigid attitude of various anti-apartheid elements. They are reluctant to-understand or appreciate the basic freedoms traditional in our laws and customs. The Commonwealth statement
" Fully acknowledged that it was for each government to determine in accordance with its laws the methods by which it might best discharge its commitments."

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A refusal to see the other point of view is unhelpful. That is particularly manifest in the draft convention against apartheid in sport that is being drawn up in the United Nations.
The way forward is not easy. A renegotiation of the Gleneagles agreement is essential before normal sporting contacts can be resumed. My right hon. Friend the Prime Minister and I have made it clear that when sufficient progress has been made in the present arrangements in South Africa for integrated sport we shall consider revising the
1650
agreement. That moment has not yet arrived.
If and when the moment arrives will depend on many factors—for example, the attitudes of the ISFs, timing, the feeling within the Commonwealth and diplomacy of a high order. I hope that one day this can be achieved to the benefit of world sport. In the meantime, the Government will keep a close eye on developments.
Question put and agreed to.
Adjourned accordingly at half-past Three o'clock am.

SOCIAL SERVICES
  Hospital Policy
  Hospital Policy
  Hygiene
  Hygiene
  Ronald Sailes
  Ronald Sailes
INDUSTRY
  Small Businesses
  Small Businesses
  Departmental Staff
  Departmental Staff
  Essential Minerals
  Essential Minerals
  Leicester
  Leicester
  Derelict Land
  Derelict Land
  Business Premises (Insulation)
  Business Premises (Insulation)
  Consulting Engineers (Exhibition)
  Consulting Engineers (Exhibition)
EMPLOYMENT
  Apprenticeships
  Apprenticeships
  Departmental Programme
  Departmental Programme
  Ethnic Minorities
  Ethnic Minorities
  Unemployed Persons
  Unemployed Persons
  Women Workers
  Women Workers
  Departmental Staff
  Departmental Staff
  Family Expenditure
  Family Expenditure
CIVIL SERVICE
  Departmental Staff
  Departmental Staff
  Civil Servants (Transport)
  Civil Servants (Transport)
TRADE
  Mr. Ray Smith (Speech)
  Mr. Ray Smith (Speech)
  British Sugar Corporation (Takeover)
  British Sugar Corporation (Takeover)
  Exporters
  Exporters
  Domestic Gas Appliances
  Domestic Gas Appliances
  Cream
  Cream
  European Community (Commercial Agents)
  European Community (Commercial Agents)
  South Africa
  South Africa
  Textile Industry
  Textile Industry
  NURSES (PAY)
  NURSES (PAY)
SCOTLAND
  Forestry Commission
  Forestry Commission
  Trees
  Trees
  National Parks
  National Parks
  Electricity Showrooms
  Electricity Showrooms
  Blind Persons
  Blind Persons
EDUCATION AND SCIENCE
  Higher Education Centres (Full-time Students)
  Higher Education Centres (Full-time Students)
  Cranfield Institute of Technology
  Cranfield Institute of Technology
  School Leavers
  School Leavers
  School Premises (Non-alcoholic Liquid Refreshments)
  School Premises (Non-alcoholic Liquid Refreshments)
  Glue Sniffing
  Glue Sniffing
  Islamic Studies
  Islamic Studies
  Overseas Students
  Overseas Students
  Initial Teaching Alphabet
  Initial Teaching Alphabet
HOME DEPARTMENT
  Fourth Television Channel (Welsh Language Programmes)
  Fourth Television Channel (Welsh Language Programmes)
  Identity Laws
  Identity Laws
  Southall (Disturbance)
  Southall (Disturbance)
  Robberies (Use of Shotguns)
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  Prisoners (Repatriation)
  Prisoners (Repatriation)
  Iranian Nationals
  Iranian Nationals
FOREIGN AND COMMONWEALTH AFFAIRS
  Iran (Sanctions)
  Iran (Sanctions)
  Middle East
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EUROPEAN COMMUNITY
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  Greece (Membership)
WALES
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  Public Bodies (Current Cost Accounting)
  Slaughterhouses
  Slaughterhouses
NATIONAL FINANCE
  Medical Insurance Schemes
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  Invalidity Pensioners
  Invalidity Pensioners
  Industrial Disputes (Tax Rebates)
  Industrial Disputes (Tax Rebates)
  Personal and Family Allowances (Budget Strategy)
  Personal and Family Allowances (Budget Strategy)
  Charities (Tax Relief)
  Charities (Tax Relief)
  Recovery of Tax
  Recovery of Tax
  Multiple Taxation
  Multiple Taxation
  Retail Price Index
  Retail Price Index
  Investment Income Surcharge
  Investment Income Surcharge
  Child Allowance
  Child Allowance
  Personal Taxation
  Personal Taxation
  Civil Servants (Transport)
  Civil Servants (Transport)
  Value Added Tax
  Value Added Tax
DEFENCE
  Health Physicists
  Health Physicists
  Departmental Staff
  Departmental Staff
  Staff Vacancies
  Staff Vacancies
  Widow's Pensions
  Widow's Pensions
ENERGY
  Coal Imports
  Coal Imports
  Electricity Showrooms and Sales Offices
  Electricity Showrooms and Sales Offices
  Gas Showrooms and Sales Offices
  Gas Showrooms and Sales Offices
NORTHERN IRELAND
  Rates
  Rates
  Primary Schools
  Primary Schools
TRANSPORT
  M25 (Completion)
  M25 (Completion)
  Tyres (Regulations)
  Tyres (Regulations)
  Goole Inner Bypass
  Goole Inner Bypass
  Motorways and Trunk Roads
  Motorways and Trunk Roads
  Motorway Construction
  Motorway Construction
ENVIRONMENT
  Local Authority Staff
  Local Authority Staff
  Housing Starts
  Housing Starts
  Empty Dwellings
  Empty Dwellings
  Sea Birds (Pollution Deaths)
  Sea Birds (Pollution Deaths)
  Elderly and Disabled Persons (Housing Needs)
  Elderly and Disabled Persons (Housing Needs)
  Departmental Staff
  Departmental Staff
  Olympic Games
  Olympic Games
  Planning Applications
  Planning Applications
  Co-ownership Schemes
  Co-ownership Schemes
  Enterprise Zones
  Enterprise Zones
  Common Land
  Common Land
  Water Meters (Domestic Properties)
  Water Meters (Domestic Properties)
  Water Authorities (Performance)
  Water Authorities (Performance)
  Council Rents
  Council Rents
  Housing Investment Programme
  Housing Investment Programme
  Urban Aid Programme
  Urban Aid Programme
  New Towns (Transfer of Assets)
  New Towns (Transfer of Assets)
  Rates
  Rates
  Council House Repairs
  Council House Repairs
  Countryside Commission
  Countryside Commission
  House Building
  House Building
  Structure Plans
  Structure Plans
  Dwellings (Statistics)
  Dwellings (Statistics)
  Insulation Grants
  Insulation Grants
  " The Strategy for Corby "
  " The Strategy for Corby "
  Rent Acts
  Rent Acts
  Damp Damage (Assistance to Householders)
  Damp Damage (Assistance to Householders)
  Building (Prescribed Fees) Regulations
  Building (Prescribed Fees) Regulations
  Directorate-General of Design Services
  Directorate-General of Design Services
  Effluent Lagoons
  Effluent Lagoons
  Ancient Monuments and Archaeological Areas Act
  Ancient Monuments and Archaeological Areas Act
  Property Services Agency
  Property Services Agency
  Lupin Close, West Drayton
  Lupin Close, West Drayton
  House Building
  House Building
  Urban Aid Programme
  Urban Aid Programme
  Derelict Land Clearance Areas
  Derelict Land Clearance Areas
SOCIAL SERVICES
  Supplementary Benefits
  Supplementary Benefits
  Rent and Rate Rebates
  Rent and Rate Rebates
  Unemployment Benefit (Merseyside)
  Unemployment Benefit (Merseyside)
  Mental Hospitals
  Mental Hospitals
  Didcot Office
  Didcot Office
  Invalid Vehicles
  Invalid Vehicles
  Disabled Persons
  Disabled Persons
  Westminster Hospital
  Westminster Hospital
  Invalid Care Allowance
  Invalid Care Allowance
  Prescription Charges
  Prescription Charges
  Mobility Allowance
  Mobility Allowance
  Attendance Allowance
  Attendance Allowance

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

COMPANY LAW: ECC REPORT
Lord PLOWDEN: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they agree with the conclusions of the Report of the European Communities Committee on Company Law: Scissions (43rd Report, H.L. 206) that there is inadequate justification for the draft directive on scissions, that the Council of Ministers should consult both the European Parliament and the Economic and Social Committee before proceeding on the matter, and that the Government should press within the Council for amendment.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard): My Lords, Her Majesty's Government welcome the committee's conclusions on the European Communities draft directive on divisions of public limited liability companies, and agree that the need for Community action on this subject has not been satisfactorily established. Her Majesty's Government would have seen advantage in an up-to-date opinion on this matter from the European Parliament and the Economic and Social Committee. Her Majesty's Government will continue to present these views within the Council. We have taken careful note of the options which the Select Committee on European Communities suggested were open to the Government, and we envisage putting forward an amendment on the lines which the committee proposed.
Lord PLOWDEN: My Lords, while thanking the noble Viscount for that reply, may I ask whether he can say whether the Government are satisfied with the
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apparently haphazard way in which the different proposals in the Community's company law programme are brought forward, and, if not, what action he proposes they should take?
Viscount TRENCHARD: My Lords, my right honourable friend the Secretary of State for Trade is in correspondence with the commissioners concerned on whether a better degree of priorities and order and method can be drawn up in relation to dealing with harmonisation of company law questions. At this stage, since those discussions are continuing, I prefer not to elaborate further.
Lord DERWENT: My Lords, may I apologise for my ignorance, but can my noble friend tell me what "scissions" are?
Viscount TRENCHARD: My Lords, I can assure my noble friend that, in spite of having been in industry for a long time, I had no idea either. In fact, a scission is the ceasing to exist of a limited liability company; instead of the original company, which ceases to exist, one, two or more new companies spring up and the liabilities and assets of the original company are split between these companies. The original company goes out of existence without going into liquidation. I have tried to get my staff to trace an instance of this process having occurred in the United Kingdom, and I have been unable to unearth a scission.
Lord DERWENT: My Lords, may I thank the noble Viscount, and I shall read that answer with the greatest care.
Lord ROBERTHALL: My Lords, in view of the tremendous amount of time and effort involved, not only of the Members of your Lordships' House but of civil servants and all the bodies which give evidence to us, may I ask whether the Government think that that time and effort which is being put in on the whole company law programme is justified?
Viscount TRENCHARD: My Lords, I think the Government have been in support of important measures on company law and on company law harmonisation where these affect the objects of the EEC. But, as I have already indicated, we are critical, as indeed the European Communities

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Committee over which the noble Lord, Lord Plowden, presides have been, of the apparently somewhat indiscriminate way in which some proposals for harmonisation of law are followed apparently for the sake of harmonisation itself. One has to add that we have to make sure that we have understood the views of other members of the Community to whom these things may be more important than they are to us; and in regard to a proposal such as this, which may not affect us to any great degree, we must not put ourselves in the position of stopping harmonisation which may help other states.
Lord HARMAR-NICHOLLS: My Lords, is my noble friend aware that his Answer to this Question provides one of the rare occasions on which the Government have said that they would welcome the help of the European Parliament in trying to arrive at some answer to this question? Is there any channel from the Government to their representatives in the European Parliament to let them know officially that that is the home Government's wish, in order to arrive at proper harmonisation on matters such as this?
Viscount TRENCHARD: My Lords, I think my noble friend spends a lot of his time ensuring that such channels are kept perpetually open.
Lord BRUCE of DONINGTON: My Lords, is the noble Viscount aware that we on this side of the House would very much endorse the observations that fell from the lips of the noble Lord, Lord Harmar-Nicholls, on this matter. We, in particular, welcome the noble Viscount's reference to the need for consulting the Economic and Social Committee. Will the noble Viscount agree that this particular body is all too frequently ignored by the Council of Ministers, and, I am bound to add, also by the Commission? This is a typical matter which would merit their detailed attention.
Viscount TRENCHARD: My Lords, I think I must quickly explain that both these bodies, the European Parliament and the Economic and Social Committee, were consulted when a proposal on scissions was included in the third directive. There is an argument thus to
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say that they have already been consulted. It is the Government's view that consultation on this now expanded and separate draft directive should go back to those two bodies.
Lord ELWYN-JONES: My Lords, would the Minister say what consultations take place with British lawyers in the formulation of these ideas, many of which are good, but many deplorable?
Viscount TRENCHARD: My Lords, I shall write to the noble and learned Lord on the specific question of the channels of communication. However, I am sure that they are well and truly open and that we do consult the legal profession in all periods leading up to consultation with the EEC on these matters.
Lord BROWNLOW: My Lords, much as I have appreciated everything that the noble Viscount has so far said on behalf of the Government, I should like him to say a little more, not on the subject of this directive on scissions, but on the subject of the procedure followed in this case, and its implications for scrutiny both within the European Community and Westminster. I should like to ask the noble Viscount whether he is content with advice which says that, when a phrase—a clause—is taken out of a draft directive and then expanded into a separate directive, there really is no need to consult the European Parliament and the Economic and Social Committee or to publish the expanded text in the Official Journal, thus by-passing the usual procedures for scrutiny in Westminster? If, as I imagine, the Government do not approve of this, will they take steps to prevent its recurrence in future? Was it inadvertence or through failure to accept the procedures that this strange procedure was followed?
Viscount TRENCHARD: My Lords, I have already covered the question of whether the procedure has been correctly followed and I think that it is a mute point under the instruments of the EEC. We are pressing the point that, as it is a mute point, renewed consultations should take place. I shall be delighted to answer the noble Lord's detailed questions by letter or in another way.
The LORD PRESIDENT of the COUNCIL (Lord Soames): My Lords,

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in view of the fact that we have for some time been discussing something which, according to my noble friend Lord Trenchard, does not in fact exist, perhaps it would be better if we moved on.

THE GENOCIDE CONVENTION AND THE PLO
2.46 p.m.
Lord JANNER: 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 steps have been taken by the United Nations and the Lebanese Government to observe the Genocide Convention (which was ratified by Lebanon without reservation) to prevent the PLO, which is committed to the destruction of Israel by violence and whose headquarters are in Beirut, from carrying on its operations from South Lebanon against inhabitants of Israel.
The SECRETARY of STATE for FOREIGN and COMMONWEALTH AFFAIRS (Lord Carrington): My Lords, the Government deplore all acts of terrorism but the Genocide Convention does not cover terrorist attacks against Israel such as those to which the noble Lord refers.
Lord JANNER: My Lords, surely the noble Lord has not studied or appreciated the effect of the legislation which has been carried out by the Lebanese Government who, since 1969, have entered into agreements allowing the PLO and its murderous assassinating companions to act freely in South Lebanon? Lebanon agreed to refrain from appointing a police force in that area to prevent those with the definite object of destroying a state, which is absolutely contrary to the Genocide Convention.
Lord CARRINGTON: My Lords, the convention on the crime of genocide was adopted by the General Assembly on 9th December 1948. It was aimed not at individual acts of terrorism but to cope with the question of genocide in the aftermath of the Second World War.
Lord JANNER: My Lords, with the greatest respect, is the noble Lord suggesting that the groups to which the Genocide Convention refers—a convention which we have ratified and which Lebanon ratified without a single dissenting voice—do not include the elimination of a group like a state? Surely that is nonsense, is it not?
Lord CARRINGTON: My Lords, I do not think that the Genocide Convention applies to the acts of terrorism to which the noble Lord draws attention.
Lord BALLANTRAE: My Lords, would it be relevant or irrelevant for the noble Lord, Lord Janner—whose Questions along these lines are now very familiar to us all—to address a Question to the Government Front Bench asking what steps should be taken by the United Nations to deter the assassination of Arab mayors on the West Bank?
Lord CARRINGTON: My Lords, if that Question was addressed to me, perhaps I might answer it by saying that in the original Answer to the Question I said that the Government deplored all acts of terrorism.

GREEK STUDENTS: HIGHER EDUCATION FEES
2.48 p.m.
Lord STEWART of FULHAM: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether Greek students entering higher education in Great Britain this autumn will be required to pay full overseas students' fees or will be treated as EEC students.
The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Baroness Young): My Lords, Greek students beginning courses on or after 1st September this year will be liable to pay full cost fees. The intention is that these students should be treated as EEC students and thus qualify for the home rates of tuition fee with effect from 1st September 1981.
Lord STEWART of FULHAM: My Lords, as Greece adheres to the Community on 1st January 1981, ought not these students to be entitled to pay EEC rates at least for two terms out of three in the coming academic year?
Baroness YOUNG: My Lords, tuition fees are fixed for a full academic year and it is not regarded as appropriate to make this distinction in the first year. They will be on home fees as from September 1981.
Baroness DAVID: My Lords, I should like to ask the Minister whether the fees are collected for the whole year in one sweep. Surely they are paid termly, in which case it would be perfectly easy to make a different arrangement?
Baroness YOUNG: My Lords, it is a Government decision that the home fee will be charged after the accession of Greece to the EEC, which takes place in January 1981. From September, for the next academic year, they will be treated as home fee payers, but for this year it has been decided that they must pay the full overseas fee.
Lord NUGENT of GUILDFORD: My Lords, can my noble friend tell the House whether, in the event, the sharp raising of fees to overseas students has seriously decreased the number entering? Is it not a fact that the number of applicants has not fallen all that far below what it was before? Perhaps it is a reflection on the value of what they get here?
Baroness YOUNG: My Lords, the latest retuns from UCCA show that there has been a drop of 12 per cent. compared with the number of applications for March 1979, but the drop is only one of 6 per cent. compared with the number of applications in 1978. I think that it reflects the statement of the noble Lord, that university education in this country is of excellent value.
Lord CHALFONT: My Lords, at the risk of seeming to be simple-minded, may I ask why, if the fees are fixed from the beginning of the academic year, they cannot be fixed on the basis that on 1st January 1981 Greece will be a member of the Common Market?
Baroness YOUNG: My Lords, the fact is that the cost of a concession to Greek students in 1980–81 would be £1–5 million, and this is a matter which we have decided we cannot accept this coming year.
Lord KALDOR: My Lords, as Greece will become a member of the EEC in the middle of an academic year, cannot the Government split the difference and charge a proportion of the EEC fees and the other fees?
Baroness YOUNG: My Lords, I have noted what the noble Lord has said. It is, of course, true that all other EEC students will pay the home fees as from this September, but we have taken a decision on the Greek students.
Lord STEWART of FULHAM: My Lords, when the noble Baroness says that it will not be appropriate to deal with the fees on a yearly basis, by that does she mean anything more than it has not been done before and that she lacks the imagination and generosity needed to deal with this problem?
Baroness YOUNG: My Lords, I think that we shall deal with the problem better by not using exaggerated adjectives in connection with it. The fact is that tuition fees are fixed from the beginning of the academic year.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, in view of the feeling all round the House on this subject, can we ask the noble Baroness to use her very great persuasive powers with her colleagues to change the zenophobic approach which has been taken on this subject, including our own Commonwealth?
Baroness YOUNG: My Lords, I am very well aware of the strong feelings of this House on the whole subject of overseas students. We had a major debate on this matter before Christmas in which the Government's policy was set out. As I have already indicated, we have gone into this matter very thoroughly. We have come to a decision that we can offer the home fees to Greek students once Greece is a member of the EEC, which will be in January 1981. We have looked at the financing of this and have come to

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our conclusion on the basis of the costs that would be saved. We believe that we have made the right decision. As always, we shall note what the House of Lords says.
Baroness DAVID: My Lords, will not the Government take a fresh look at this whole subject in the light of the Third Report from the Foreign Affairs Select Committee, which has just reported and which is highly critical of the present policy?
Baroness YOUNG: My Lords, I think that the most encouraging sign about our present policy is the number of applications that we still receive from overseas students. Perhaps I might remind the noble Baroness that if the numbers of overseas students dropped considerably more than they have done, they would only then reach the number of overseas students that the former Administration expected to have in our universities next year.
Lord GLADWYN: My Lords, is not the estimate of the number of applications purely provisional? Surely there is no reason to attach undue importance to it, as it may be one way or the other in a month or two's time.
Baroness YOUNG: My Lords, I can answer questions only on the basis of the facts as we know them, but we have no reason for thinking that the position this year is other than as I have described it.

THE CIVIL SERVICE: WEALTH-CREATION SECTORS
2.54 p.m.
Lord SANDFORD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether in seeking greater efficiency and further economy in the Civil Service they will regard as a special category those parts of the service directly involved in encouraging wealth creation, particularly in supporting small businesses.
Lord SOAMES: My Lords, in seeking greater efficiency and further economy in the Civil Service, Ministers will be looking across all the activities of their departments. Their detailed plans will take into account both the need for those activities and the scope for making them both simpler and more efficient.
Lord SANDFORD: My Lords, I am most grateful to my noble friend for that reply. Will he also agree that, in a number of services which contribute directly to the efficiency of wealth-creating organisations in this country, it is also a question of choosing the pace at which reductions, if they are to be made, are in fact made? My noble friend will perhaps recall the Agricultural Development Advisory Service, over which he once presided, as being a service which cannot easily be removed at a stroke.
Lord SOAMES: My Lords, of course my noble friend will appreciate that this is very much a matter for the individual Ministers concerned. It is not for the judgment of the Minister responsible for the day-to-day happenings in the Civil Service Department as to what should be cut or run down in which department. However, I know that my right honourable friend the Secretary of State will, of course, take note of what my noble friend has said.
Lord PEART: My Lords, will the noble Lord remember that he still has a major responsibility, as I had when holding his present office? The noble Lord, Lord Sandford, has mentioned agriculture. We are worried about it, because in one period at a stroke the Conservative Government destroyed the morale of the advisory service by restrictions. I know that the noble Lord agrees with me.
Lord SOAMES: My Lords, what the noble Lord is talking about happened such a long time ago that I do not remember it, so I do not agree with him.
Lord SHINWELL: My Lords, can the noble Lord explain why the Government have decided to dispense with the services of a body of civil servants, and that we now discover that there is a section responsible for wealth creation? What is

1423
this wealth creation about? Can he explain the matter to me?
Lord SOAMES: My Lords, the noble Lord, Lord Shinwell, will understand that it was not I who tabled the Question. My noble friend Lord Sandford refers particularly to supporting small businesses, which are certainly very wealth-creative.
Lord WHADDON: My Lords, will the noble Lord not agree that the Council for Small Industries in Rural Areas, COSIRA, has shown outstanding returns in terms of value for money? Will he take a firm stand against any intention from his friends to cut down on COSIRA? Indeed, does he not feel that we should be justified in setting up an urban version of COSIRA to help small firms in the towns?
Lord SOAMES: My Lords, I know that the noble Lord will understand me when I say that my noble friend the Minister of State for Industry will, I am sure, take note of what he says. Of course, he will. However, it is not for me to say whether or not a certain priority will be given within a department to one aspect or another of its work.

BUSINESS: TRANSPORT BILL REPORT STAGE
Lord DENHAM: My Lords, it may be for the convenience of your Lordships if I announce that it will now be necessary for the House to sit on Friday, 6th June, at 11 a.m., to conclude the Report stage of the Transport Bill.

INDUSTRIAL PRODUCTIVITY
2.58 p.m.
Lord SCHON: My Lords, I rise to call the attention of your Lordships:
"to the urgent need for industry to increase productivity substantially in the interest of the country as a whole; and to move for Papers ".
We see regularly in the newspapers, and particularly on Sundays, gloomy assessments of our economic situation. I am now retired from day-to-day business management, but the news I hear from
1424
friends who are actively engaged in industry is not encouraging. I do not want to repeat examples of what I am told, but in the general atmosphere of worldwide economic and political problems one is naturally inclined to be worried.
During my recent travels on the Continent I have also heard of the problems in other industrial countries. I would say that the two most important issues which are raised—and I speak here about industrial countries like Germany—are problems connected with the availability of energy, and the social problems arising from the introduction of the micro-processor. The introduction of the micro-processor is in many ways comparable to the effects years ago of the introduction of the electric motor which, looking at it now from a distance in time, was relatively painless and advantageous—possibly because in those days they did not have so many sociologists, economists and philosophers to comment about the problem. However, what is important is that I cannot get away from the fact that our competitors are introducing micro-processors and we will have to do likewise to remain in the game.
We are in a much better position than other industrial countries with regard to sources of energy. We have reason to believe that we have enough oil to cover the bulk of our requirements up to the end of the century, and we may even have a surplus for export in the next few years. We also have large reserves of coal. Still, during the first quarter of this year we were running at an annual balance of payments deficit of £2 billion. I am frightened to think what this balance of payments deficit would have been if we had had to import all our oil. That is one of the reasons why I have put down this Motion. To emphasise the point even more strongly, the fact that we have the oil conceals the seriousness of the situation.
There is a psychological factor which increases my apprehension. I was the co-founder of a chemical company in Cumberland, where I lived for 27 years during and after the war. In the mid-fifties I was chairman and chief executive of this company, which employed well over 2,000 people. On one occasion when we were faced with the improving performance of our foreign competitors I complained about the lethargy of the

1425
people I worked with. I had the honour and privilege to have the late Sir Henry Tizard as a non-executive member of my board, and while I was complaining he said to me, and I quote verbatim, "Schon, remember, the British are unique in one respect: they get worried only when the water is over their head; all other people get worried when the water gets up to their chin". Much later I was told another way of putting it: "The British sec the writing on the wall only when they have their backs to it".
If we accept that we are facing a difficult economic position, and if industry as the main creator of wealth has to improve its performance, we have to get moving now. In industry it takes a long time to get from the planning stage to the point where you can show profitable industrial achievement. We are in the unique position among industrial countries of being self-sufficient in oil and may possibly have a surplus in the 'eighties, but according to some of the present forecasts, we may become net importers of oil again in the 'nineties. The decade we have just entered therefore gives us our last chance to put our house in order.
Another reason why I have put this Motion forward is that, in my years in industry, I have seen that when the British are properly motivated and properly led they can hold their own with any foreign competitors, and the others can choose the weapons. I am anxious to approach this subject not on a party political basis but genuinely from the Cross-Benches and, above all, from the point of view of the country as a whole. I hasten to add that if my remarks appear too excessively patriotic, they should not be misinterpreted. What I am trying to say is motivated by self-interest. My family and my substance are here in this country and, as I have said on previous occasions, I owe a debt to this country which gave me hospitality at a time when I needed it. Moreover, I still believe that this country can play a major role in world affairs, but only if we are economically strong.
There are so many things to be done to improve our position. In the first instance, we have to increase exports and reduce imports. In this country the salesman does not really have the social standing he ought to have. We will have
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to promote our salesmen to the senior service. This, inter alia, should express itself in the importance which is attached to the feedback from the market place to the production manager in regard to the design and quality features required.
When I first entered business I learned that the customer is the boss, and that the experienced buyer looks for quality, price and service. I have been in direct contact with industry in this country for 41 years. I joined the National Research Development Corporation as a board member in 1967 and retired in 1979 after serving 10 years as its chairman, so I had a front seat, giving me the opportunity to assess the capabilities available in Britain to be innovative and to produce goods of the right design and quality.
With regard to price, which is based on cost, here we have problems. We are notoriously low in productivity. The strength of the pound is often used as an excuse for our lack of competitiveness, particularly in exports. When it comes to service, Britain has lost its reputation for reliability of delivery. Our record of industrial unrest is well known. This leads the buyer to doubt whether we can give service, because service depends inter alia on uninterrupted deliveries. It is reported that, in the first quarter of this year, days lost through strikes were up by 40 per cent. to 9–2 million working days, but to add insult to injury the publication of the figures in the Department of Employment Gazette was delayed by industrial dispute.
Despite all this, I am confident we can provide the right quality, price and service if only we would co-operate with each other. We have to bury the distrust and look at each other as human beings and partners. For too long management and unions have referred to each other as "we" and "they". What we have to learn is that "we" means all of us and "they" means our competitors, especially those abroad. This is the philosophy which our most successful foreign competitors adopt. I am certain on this point because I have heard about the relationship between unions and management in countries such as Germany and Austria. I am not arguing about the fact that every human being should have the right to withdraw his labour, but we have to realise that you cannot get rich

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by stopping work. I recently heard an eminent trade union leader on the Continent explaining in depth that to ask for more pay without more production is inflationary, and inflation is a forerunner of unemployment. He emphasised that if production had been increased it was his task to see to it that the men he represented would get a fair share of the additional wealth created.
We have also to bear in mind that the more sophisticated our industrial machinery gets, and the more capital-intensive industry becomes, the more important it is that plant should be fully used and not allowed to stand idle. Some plants deteriorate when they are not working; but all plants are a cost item in the price make-up of the end product, whether they are in use or not.
I am not claiming that my pronoucements are new, but what J am asking is whether we can put the message over that the time has come for everyone to realise that continuity of production is essential if we want to get more business. Let us work together in industry to match our competitors' efforts, which is, after all, in our own interest. Let us put the message over that we destroy our credibility whenever we talk about strikes, whenever we appear to be in conflict and when we fight among ourselves. Let us not forget that by 1979 the United Kingdom share of world trade had shrunk to almost one-third of what it was in the early 'fifties.
Many of our problems are due to the fact that, ever since the war, jealousy and envy have become prime motivating forces. I accept that jealousy and envy are strong motivators, but I am equally sure that they are never constructive. For the majority of human beings the two constructive motivators are, putting it crudely, the carrot and the stick. The high taxation that we have experienced since the war has reduced the carrot to insignificance, and unconditional social security has removed the stick. If management performance has been poor—and it has often been very poor indeed—the removal of the carrot has been partly responsible.
Obviously I am in favour of social welfare and therefore I wish for support and social security to be extended to
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those who are in need. I cannot overlook the fact that some of us are marginally cleverer than others. Some of us are willing to work harder than others. We can, as individuals, develop policies democratically together, but in industry, certainly, execution has to be on the basis of line responsibility. Able people—and we have got them—will perform best within the framework of a genuine meritocracy.
I know from my own experience in industry that we often accuse workers of being lazy and having no consideration for the importance of increasing productivity. I have found that much of the underlying opposition to increased productivity is due to a subconscious effort by the employees not to work themselves or their mates out of a job. I appreciate this point. The question therefore is, how can we increase productivity without reducing jobs? The only answer is to increase the volume of sales.
In order to increase productivity you also have to have a high and continuous rate of investment. And in order to increase investment you have to have profitability, which some of our foreign competitors have certainly achieved. We in this country must take responsibility for having created a low productivity, low wage, low profit, high cost economy. I have to admit that I do not know how, or where, to break the vicious circle. I am in favour of high wages, provided they are directly related to output. High output and high wages have some synergy, because if people are earning more, they can buy more, and that helps to provide the absorption basis for high productivity.
I appreciate that it is difficult to reduce all the points I have made to a common denominator. The problem becomes even more difficult when one bears in mind that unemployment is rising, and in this environment it is difficult to improve industrial relations. I have implied that wage restraint is essential if we are to achieve a reduction in inflation, which will in turn reduce the risk of unemployment. The question is: how do we convince each other that it is in our interest to co-operate and to make every possible effort to create an environment where we produce more, and, above all, where we sell more?
I am fully aware that I have been able

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to make only a few suggestions on what we should do to overcome our present difficulties, but I am sure that the wise counsel which those noble Lords who are to follow me will put forward will provide the basis for further thought and action, and that is why I have put down this Motion. My Lords, I beg to move for Papers.
3.13 p.m.
Lord BRUCE of DONINGTON: My Lords, your Lordships will be grateful to the noble Lord, Lord Schon, for having moved this Motion this afternoon, because it affords us an opportunity to consider in depth one of the greatest problems which confronts the United Kingdom at the present time. There is a tendency for productivity and the necessity for increased productivity to be discussed within a broad general political context. Everyone agrees that it is necessary to work harder. Much emphasis is laid on the need for incentives. Much importance is attached to the retarding effect of restrictive practices and to the general undesirability of any kind of bad industrial relationships.
I venture to suggest that in discussing the problem within that broad ambit, we are probably unlikely to arrive at any constructive solutions to it, and, with your Lordships' indulgence, I shall seek to narrow the points at issue, and to look at them rather more closely, so that we know the real areas in which some action needs to be taken.
Although in British industry we tend to be a little hypochondriac, we have to face the position where a very large number of our companies are functioning at profitability—I use the word "profitability"—and therefore productivity levels that quite easily match those of our leading competitors. If when your Lordships have time you refer to the Sixth Report on Competition Policy issued by the European Economic Commission, you will find that there are there listed the names of the 50 most profitable companies in Europe.
I say "profitable" because, in arriving at the order of profitability, regard has been taken not only of the total net profits earned, but also of the net profit/sales ratio, the net profit/own capital
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employed ratio, the cash flow/sales ratio, and the cash flow/own capital ratio. Of the 50 companies listed, no less than 25 were British companies, earning £1,270 million net profit in the year to which the report refers—
Viscount TRENCHARD: My Lords, will the noble Lord allow me to ask him how many of those British companies are multinationals, and can he say whether or not he is speaking of their worldwide profits?
Lord BRUCE of DONINGTON: No, my Lords; one is speaking solely of profits within the United Kingdom. The industries covered in this connection are electrical machinery, domestic appliances, electronics, pharmaceuticals, cosmetics, alcoholic and non-alcoholic beverages, building materials, paper, packaging, textiles, motor vehicles, accessories, rubber, tyres, plastics, aircraft, mining, oil, food products, construction, energy and power utilities, glass, pottery, china, and mechanical engineering. That covers a very wide spectrum of industrial activity in this country—
Lord HARMAR-NICHOLLS: My Lords, I am sorry to interrupt the noble Lord, but I think that this point is very important because it completely alters one's own thinking. Is the noble Lord saying that the 20 or so firms that he has quoted as being in the top 50 have had their earnings in this country separated from their multinational earnings, and that it is the United Kingdom earnings that put them in that top bracket?—because that is not the information that has been given to some of us from other sources.
Lord BRUCE of DONINGTON: My Lords, I am not in a position to particularise on that point because it is not disclosed in the European Economic Commission's Report. However, what I am satisfied on is that those companies are essentially under British management. They are British companies, and even if one made allowance for a certain degree of multinational income within them, nevertheless that does nothing to detract from the fact that these are British companies and that they in fact compete successfully with our leading competitors

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in Europe and indeed in the United States.
Incidentally, I am fortified in that by an observation which fell from the lips of the Secretary of State himself, Sir Keith Joseph, speaking in sunny California last week, as reported in the Daily Telegraph (which, as the House knows, is the house journal of the Conservative Party), on 30th May last. It said:
"Sir Keith also said strikes and bad industrial relations were almost unknown in modern British industries like electronics ".
Then he said:
"Combine British lower wage rates with American high-productivity standards and labour costs become very competitive indeed ".
He also went on to say:
"In Britain you will find plenty of skilled and adaptable labour".
I think it has to be faced—not only faced, but accepted with admiration and gratitude—that there are quite a large number of companies in the United Kingdom, employing British managements, British directors and British operatives, which are in fact functioning fully up to competitive standards. I do not think any noble Lord would deny that. Also, in the field of farming, of course, there is once again a fairly high degree of productivity, which, as the noble Viscount, Lord Eccles, explained, quite correctly, in the debate in this House on 3rd July 1978, arises largely from the comparatively personal circumstances in which farmers and farm workers operate under conditions of innovation and under conditions of a reasonably assured market.
The question one has to ask here is this. Are the workers in the profitable industries any different in physique, in temperament, in character, in dexterity, in ability or in endurance from those who work in the unprofitable industries? What different, unique characteristics do those who work in the unprofitable and less productive industries have which are not present in those who work in the productive industries? Even the trade union structure is common to them all. In those areas which are covered by the profitable industries to which I have referred there are the same unions represented as in the less productive industries—the Transport and General Workers,
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the Municipal Workers, the Electrical Trades Union, the Amalgamated Engineering Society and so on. They are all represented right across the spectrum, and they are all spread right across the country geographically.
What, therefore, marks the difference between those industries which are so fortunately productive and competitive and those which are not? I would venture to suggest that one of the factors which we have now to take seriously into account is the quality of management. The production of goods is very often highlighted by reference to only the point of production at which the operative actually produces the particular article or the particular service; and the inference which is very often drawn from that is that if by some means you can get the worker at the point of production, actually engaged in the operation, to put greater energy and drive into it, then somehow productivity is going to increase.
Nobody will deny that greater effort at the point of production would have that result, but what that tends to obscure is the whole process of production, which encompasses very much more than the labour which is expended at the point of operation. Indeed, Lord Schon in his speech laid very great emphasis—and I think the House would agree with him—on the necessity to up-grade salesmen. Because, of course, there can be no smooth production, and therefore no sustained productivity, unless the flow of orders into a particular firm or into a particular company is sustained, and, if possible, increased. I very often think that Her Majesty's Government might bear that point in mind in their public expenditure cuts, which consist very largely of material and service purchases from outside firms and companies.
The whole production process not only involves working at the points at which the various operations are accomplished; it involves research, including market research, and it involves design. Let us take design as an example. What holdups can ensue, what unnecessary production effort can be expended and therefore what increased unit costs there can be, if there is a faulty design of the article, or series of articles or objects, to be produced—articles which, had they been properly designed, would have required

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far Jess operation and far fewer machine changes. In other words, an article has to be designed not only for the sake of appearance but also for ease of production.
Lord Schon mentioned investment, and I will not touch on that, except to say that many of us who have some memory of Lord Ryder's report on British Leyland will recall with some melancholy that, out of the £74 million profits earned within a period of five years, no less than £70 million was distributed by way of dividend and £4 million only devoted to investment, with the consequent obsolescence of the plant and the machinery which lies at the very root of many of British Leyland's problems today. There is also the question of finance; and there is the question of production planning and progress. Unless production planning and progress is carried out satisfactorily, no amount of extra effort at the point of production is going to result in increased productivity. This has to be done properly. Plant layouts have to be satisfactory; otherwise, there is unnecessary movement.
One of the aspects involved in any large process of production is materials-handling, and it is my own experience, as one who has been accustomed to applying work studies to various sections of British industry, that the materials-handling situation in very large sections of British industry as such is so disgraceful as to enhance the unit costs of the articles which are subsequently produced. Then, also, there is the other point of inspection. This is important, too, because unless inspection is carried out properly then delays can occur at a later stage about which the ordinary operative can do nothing at all if a faulty article arrives for him to perform the next function upon.
In short, those who talk about the necessity to increase productivity, rather than tending (and I put it no higher than that) to blame the whole thing on to the operative, would do far better to examine the whole structure, which, of course, is what the directors or the leaders of the various firms are there to do. There are three types of industrialist, and they are all self-styled. There are, at the top of the list, captains of industry; there are then what are euphemistically described as leading industrialists; and the third grade
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is the mere industrialist. Some of these gentlemen—not those, like the noble Lord, Lord Schon, and many others, who are engaged in successful industries—might do well, before they call themselves industrialists on the basis of a membership of the Institute of Directors, to acquaint themselves in greater detail with what actually happens on the factory floor before they begin wholesale denunciations of the workers themselves and the trade unions which represent them.
As any student of factory procedure knows, and as anybody who has indulged in the practice of work study should know, all the functions within a factory are categorised under five heads: the operation itself, the time spent in inspection or verification, time spent in moving, time for delay, which sometimes occurs through no fault of the operative himself, and time that the object itself is held in store, whether a sub-assembly store, a buffer stock or whatever. The whole production process, even in an office, can be categorised in varying degrees and in varying numbers over those five categories of activity.
Where excess costs arise they arise from the time spent in collecting materials, in cleaning, in lost time because of no materials being available or because of faulty materials or because of subassemblies not arriving on time, machine breakdown, power failure or unclear instructions on the original operating instructions and, sometimes, because of interrupted priorities. In small or medium-sized firms, very often a director will interrupt the complete production process in order to establish a new priority to please somebody he has met over lunch or somebody who phoned and pressed their claims on him. That results in a loss of productive time.
Then there is the question of the unbalanced team: the working up to manufacturing the products that have finally to be assembled can be done only on the basis of having balanced teams of carefully-selected individuals who can perform their work in reasonable time, so that there is smooth production all the way through the line and all the way through the further processes. Finally, there is the time lost through maintenance.

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All these matters are under the control of management. In the 25 companies to which I have referred, and in many others, companies which function quite well and which must be above average in the whole of British industry, these are matters that receive careful attention by all enlightened managements. One of the greatest services that the Government could perform for industry where industry needs to be informed—and, in a very large number of fields, clearly it does—is to draw to their more specific attention the magnificent work of the British Institute of Management and the British Productivity Council.
I have in front of me a work which was prepared under those auspices as long ago as 1954 in collaboration with one of Britain's most successful companies, Imperial Chemical Industries. If the industrialists read this, read the documents that have succeeded it and assimilated them and if members of the Government attended a seminar to be arranged on their behalf by the British Institute of Management and the British Productivity Council, they would begin to have a rather greater insight into how productivity can be increased than is evident from the very broad, sometimes spiteful, political utterances that they may make. For their part, they should accomplish everything they can to ensure that these two bodies receive the prestige to which their efforts in the last 30 or 40 years have entitled them.
I return briefly to the question of restrictive practices. I would not wish to avoid it. Restrictive practices arise essentially from two main sources. The first is fear and uncertainty—something that is comparatively unknown to those of your Lordships and many outside who are accustomed to more secure and comfortable circumstances. Secondly, restrictive practices and bad industrial relationships are due to a degree of cussedness and resentment which operatives very often feel and which have three basic causes. I make the point seriously. First, they arise in many cases from a contempt for the more obvious incompetence of some managements with whom they are in contact and, secondly, the cussedness and bad feeling can arise from a sense of frustration about unremedied deficiencies in organisation and procedures
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to which management's attention has been repeatedly drawn without any result. Thirdly, they can arise from anger at the social arrogance of some of these managements who presume to lecture them on the virtues that they themselves do not obviously possess, bearing in mind some of them—and where the cap fits it can be worn—have very little direct knowledge of what goes on on the factory floor. These are all matters which cause resentment and cause fear.
The reason I have addressed your Lordships in these terms this afternoon is because I fear—to use the words of those who are responsible for the introduction of the new Employment Bill, in order, as they say, to redress the balance—that the balance of denunciation of the ordinary working man in this country has gone too far and that it needs to be balanced by a proper regard to even more crucial deficiencies among some—and I repeat: if the cap fits it can be worn—managements.
To this situation, regrettably, the Govenrnment are contributing very little. The Government's present policies are harassing all businesses, whether they be small or large, successful or unsuccessful. There is no doubt that the high-interest policy to which they have persistently and dogmatically kept is, as we are talking now, having a disastrous effect on productivity in the United Kingdom. In support, I would quote the warning repeated in the Financial Times by the chief of Vickers. Sir Peter Matthews says:
"Industry is not infinitely elastic. As a business shrinks it reaches a point from which recovery is either not possible or extremely slow. Many companies are forced to devote all their attention to the immediate impact of today's orders, cash flow and profits."
As I hope, the noble Lord, Lord Schon, would endorse, the concentration on those more immediate objectives to the point of grave apprehension does not produce a factory atmosphere in which productivity can continue to grow confidently or in which increases in productivity can occur at all. I hope therefore that the noble Viscount will not take it amiss when I say to him that many of his fellow industrialists in the outside world, whether or not members of the CBI, and many supporters of his in this House and in the other place, are becoming increasingly apprehensive that the whole

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social climate within which, ultimately, production must take place in this country is becoming steadily poisoned by the dogmas to which the Government are so tenaciously holding. May I express the hope that even at this late hour the Government will be able to pursue and announce policies that are constructive in their purpose, that are non-diversive and encourage all the people of our country, whether engaged in management or on the shop floor, in a common productive purpose for the future prosperity of our country?
3.40 p.m.
Lord ROCHESTER: My Lords, from these Benches I should like first to join in thanking and indeed congratulating the noble Lord, Lord Schon, on having selected as the subject for this debate the need in the national interest to increase our productivity substantially. He could not in my view have chosen a matter more vital for our future. I particularly liked the way in which he treated this concept of "us" and "them". How right he was to suggest that we have somehow to get into the way of thinking of all of" us "as being together and of" them "as being our international competitors.
It is significant, too, that the noble Lord, Lord Sieff of Brimpton, should have decided to make his maiden speech today on this subject. This is surely an indication of the importance that he and his great company attach to the problem. I understand that there is one day in the week when, if one tries to enter one of his stores at nine o'clock in the morning, one cannot get in. The reason is that for the first half hour on that morning managers and supervisors consult and communicate with their staff. On the face of it, the time so spent must seem to be entirely unproductive; but I dare say that in fact in the long run the half hour or so spent contributes more to increased productivity than any other half hour in the week. However that may be, it is better that the noble Lord himself should add anything further that he may wish to say on that subject. We on these Benches—and I am sure that I speak for noble Lords throughout the House—look forward to his speech. I am only sorry that I shall not be in a position to congratulate him upon it after he has made it.
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Regarding the remarks of the noble Lord, Lord Bruce of Donington, as someone who, until not so long ago, was a manager, I do not think that I am in the best position to counter what it was that he had to say. But if he will allow me to say so, I think that the line he was taking regarding management really does not contribute very much to the elimination of this problem of "us" and "them", to which the noble Lord, Lord Schon, was referring.
As regards his comments on profitability and productivity, aside from the questions that were asked of him by the noble Viscount, Lord Trenchard, and the noble Lord, Lord Harmar-Nicholls, it by no means follows that, because so many of our leading companies are as profitable as are many of the major European companies, their productivity is as good. Many of our companies remain profitable relative to our international competitors despite relatively low levels of productivity rather than because we are, in that particular regard, on terms with our competitors.
It is nearly two years since the noble Viscount, Lord Amory, introduced a debate in the House on much the same subject. In doing so, he said that he believed the level of our productivity was the most serious of our economic problems because it lay at the root of most of the others, and it was likely to prove in his view the most intractable of them all. It was in keeping with the wisdom and experience that we have come to expect of the noble Viscount that, in framing his Motion on that occasion, he related productivity to employment in such a way as to indicate his belief that new job opportunities could not precede but only follow improved productivity.
Just how serious and intractable the problem remains can be judged from the fact that many people still do not understand even the difference in meaning between productivity—whether that is measured as sales per employee, as I think the noble Lord, Lord Schon, would measure it, or as value added per employee—on the one hand, and production on the other. For example, from people who should know better we still hear calls for more investment of capital or for the employment of more people, without any apparent recognition that because we

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are a nation that is dependent on foreign trade, the investment of that capital and the employment of those people can be justified only if they provide a return that keeps us internationally competitive.
In my view, our productivity will increase substantially only through a change in attitude of ordinary working people which derives from a clearer understanding of economic realities such as those. On the need for this understanding and the means by which this can be achieved, I think I have said enough in our discussions on the Industry Bill. The noble Viscount, Lord Trenchard, may feel that I have said too much; but at least he and I are agreed on the importance of the subject, and that whatever part Government legislation and encouragement should play in that process, it is primarily one in which management should take the lead within industry. There have recently been some welcome signs, I suggest, in British Leyland, in the British Steel Corporation and, if I may dare to say so at this time, on the part of the Central Electricity Generating Board in the Isle of Grain, of that lead being given and being followed.
I will now add only one point arising from my earlier experience as a manager in a large company in trying to overcome resistance to improved productivity on the part of employees. It is that this resistance often proves in practice to be due to factors such as fear—and on that point I very much agree with what the noble Lord, Lord Bruce, had to say—habit; failure of communication; poor relationships and lack of trust. If such obstacles are to be overcome, this can only be done through frank discussion between management and employees or their representatives, starting from the perceptions not of those who are seeking to effect the change but of those who are to be affected by it.
If low productivity is indeed the most intractable of our industrial problems, then I suggest that continuing wage/cost inflation contributes very greatly to it. The main weapon which the Government are using to conquer inflation is the control of the money supply. On this matter, Professor Sir Henry Phelps Brown, whom I greatly admire as the author of the pamphlet Where Do Rises
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in Pay Come From?, recently made a number of most discerning points in a letter to The Times. I am indebted to him for a good deal of what I next want to say, although it will not take very long.
What cannot be foretold is how, over the next few years, people are actually going to respond to monetary restraint. The Government appear to think that the contraction of demand, increased unemployment and bankruptcies of firms which look like being the effects, if not the purpose, of their policies will bring about a lasting change of attitude. But is that what will really happen? Suppose that the coming recession, deepened by Government action, succeeds in reducing the level of pay increases and that after two or three years the vigorous revival of industry that is envisaged occurs: what reason is there to believe that pent-up pay claims will not then be let loose again in just the same way as has happened, it must be acknowledged, in the past following incomes policies which have, after all, been only makeshift affairs?
Moreover, in the meantime monetarism will not work constructively for, if restraint is not to be enforced indefinitely by unemployment, it must come to be accepted voluntarily through understanding; and a weighty argument in favour of a renewed attempt to develop an incomes policy is that it is educative and not divisive and that through tripartite, if your Lordships will forgive the word, meetings at the highest level and the development of procedures for working through the problem, incomes policy rests on an appeal to reason and the spread of information. Monetarism, by contrast, relies on impersonal market forces in a field of human relations and it deals with fellow countrymen at arms' length. In the view of Sir Henry Phelps Brown, neither monetarism nor incomes policy offers the immediate prospect of instituting a lasting order. An incomes policy works towards a change in attitude without which, in the long run, order cannot be kept.
For my part, I believe that in order to increase the nation's productivity what we now need to do in this field is, through consultation between representatives of the Government, of employers, trade unions and possibly others, to get as near

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as possible to agreement on two points: first, on long-term procedures for pay determination. For example, as the late Sir John Methven argued, the annual pay round should be conducted over a period much shorter than at present, and negotiations in the public sector should come at the end so that they follow those in the private sector where market considerations have to apply.
The second point on which I suggest there is need to seek agreement is broadly what, having regard to our productivity—or lack of productivity—the country can afford by way of overall pay increases. Here an essential element in the process is that discussion should be so conducted as to enable the public at large to gain a clearer understanding of what is at stake before a decision is taken by the Government. It is not necessary, nor, it seems to me, desirable, that a bargain should be struck. What is necessary is consultation. I accept that in formulating an incomes policy the last stage would be the most difficult on how to gain sufficient acceptance not of course of some rigid norm but on general guidelines, so that in a field where until now there has been no restraint on short-term interest these guidelines can if necessary be enforced with all the authority that Parliament can bring to bear.
So as not to beg the most awkward question of all, in the last resort, what sanctions should the Government use to ensure that their counter-inflation guidelines are not breached? Should the instruments to be used be taxation, the removal of immunity from legal suit of those taking industrial action to breach the guidelines, or what? I shall not attempt to answer those questions now but, just because they are extremely difficult ones, that does not seem to me to be a sufficient reason for not beginning to face up to them now in case before long they do have to be answered. Surely this Government, more than any, would be wise at least to prepare for themselves a fallback position more accommodating to improvements in productivity than the ice-hard rigidity of the total pay freeze that they may otherwise have to introduce before long. If their monetary measures fail over the next few years the only alternative to incomes policy that I can see is the imposition of widespread
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import controls. Those, in my view, would certainly not help to increase our productivity.
I am sorry to have introduced in turn what may seem to be a somewhat controversial note into this debate. I have done so only because in my view the need to increase productivity is not separable in the long run for the questions of pay, prices and employment; and sooner or later I believe we shall all have to come to that realisation.
3.57 p.m.
Lord SIEFF of BR1MPTON: My Lords, I should like to thank the noble Lord, Lord Rochester, for his generous remarks. As I rise for the first time, I am deeply conscious that my father made his maiden speech on productivity 14 years ago in your Lordships' House. I am sure your Lordships will show me the same indulgence as you extended to him. I beg your Lordships' forbearance for quoting what he then said, which was as follows:
"Lying at the core of our economic problem is the need for a special attitude of mind on the part of those engaged in industry and commerce, and an understanding of sensible co-operation. To break down the element of fear, suspicion and insecurity is a very difficult thing to do when dealing with human relations, but it has to be done if industry is to reach the high degree of efficiency which we all desire. "(Official Report, 26/4/66; col. 71).
Looking back over these last 14 years, I see only very modest progress. Our present standard of living is due in no small measure to our oil and gas production, and not, I regret, to a generally good economic performance. The noble Lord, Lord Schon, has done a public service to call attention once again to the urgent need to increase productivity. I believe your Lordships welcome contributions to your debates based on personal experience. What I have to say is largely based on my experience with one firm, in which I have worked for nearly 50 years; but such progess as we have made would not have been possible without close co-operation with many companies in the field of manufacture, agriculture, building, transport and with many scientific and technological institutions. But, above all else, our progress and high level of productivity are due to the co-operation which has been built up

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between management and all other employees.
What have I learned in these nearly 50 years? The creation of wealth for all to share demands a high working performance of everyone and needs cooperation, not confrontation, between managers and other employees. Conflict solves nothing and benefits nobody except those who want to change our economic and social system in favour of some other system of a totalitarian nature, whether of the Left or the Right, and under such régimes living standards are low generally and progress and productivity poor. The great majority of people in the United Kingdom are moderate, law abiding and ready to work together, but most want to be treated as responsible individuals who merit respect. Many feel that they have a constructive contribution to make, and most of them have.
The kind of industrial leadership indispensable to a modern democratic society can only exist if top management is seen by its deeds to be committed to implementing in practice a policy of good human relationships with all employees. I use the term "good human relations" rather than the more commonly used term "industrial relations" because we are human beings at work; we are not industrial beings. Human relations in industry should, for example, cover the problem of the individual at work, his or her health wellbeing and progress, the working environment, profit sharing, It implies—and this is very important—good communications both up and down. These areas, additional to wage bargaining, are often inadequately covered by today's industrial relations procedures. It is my experience that all senior management, be it Government, trade union, private enterprise or nationalised industry, sincerely believe in the importance of good human relations. But, in fact, some top management merely pays lip service to it and does nothing about it; others believe in it, but do not know how to implement it. But those who understand and implement such a policy invariably create an environment where people work hard, work well and work together, where productivity is high, and the organisations concerned are progressive and profitable. They are creators of wealth in which everyone shares.
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So management must recognise and implement its social responsibilities. But, if they do so, equally union leaders and employees have to recognise their responsibilities and obligations as well as accepting the benefits such a policy brings. I am glad to say that many do so. But unless the leaders of industry and trade unions pursue tenaciously but with patience a policy of good human relations and cooperation, we must not be surprised if our national productivity, our competitiveness, our standard of living and the quality of life fail to improve.
There is another problem which both sides of industry must tackle together; that is, the high and growing level of unemployment. During the last three months I have visited 14 major factories employing many thousands. They are concerned mainly with clothing production and food processing. They are modern and all have high productivity. All have one thing in common; investments in recent years of tens of millions of pounds into the most modern methods of production, computers, mechanisation and automation. Without this investment these plants would not have achieved their high level of productivity and profitability. They would not have been able to compete in either home or export markets. But there is a necessary corollary. This increased efficiency and high productivity almost invariably means that more is produced to a higher standard of quality with fewer people, so unemployment increases at least temporarily. If, however, the businesses concerned do not improve their efficiency and productivity, eventually they will lose their markets, cease to be viable, close down and everyone becomes unemployed. We have seen many examples of this in the past 20 years.
It is natural in such circumstances that some employees and some union leaders resist the introduction of modern methods and cling to outdated systems, which for a short time maintain unemployment, but in the end lead to greater unemployment as firms shut down. We must face up to this fact. How do we tackle the twin problems of increased productivity and unemployment? I cannot offer a solution, but I have one suggestion which could increase employment and alleviate the problem: that is, the development of entirely new industries based on modern

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technology for which there is, and will be, a growing market.
I should like to refer to the report of the Joint Working Party on Biotechnology, published by the Government in March this year. With your Lordships' permission, I will quote from the summary of conclusions and recommendations of these distinguished scientists and industrialists:
"We envisage biotechnology—the application of biological organisms, systems or processes to manufacturing and service industries—as creating wholly novel industries with low fossil energy demands which will be of key importance to the world economy in the next century. Over the next two decades biotechnology will affect a wide range of activities such as food and animal feed production, provision of chemical feedstocks, alternative energy sources, waste recycling, pollution control and medical and veterinary care. For the United Kingdom, biotechnology is an area of high technology with large potential growth offering opportunities for the renewal of various existing industries and the creation of new ones. It can be used by both "large and small businesses",
The summary continues:
"British industry must respond faster to the challenge presented and grasp these opportunities to develop new products and processes and supply equipment and reagents in both home and overseas markets. Regrettably, by comparison with our competitors. West Germany, Japan, the United States, investment is low and opportunities have been missed".
That is part of the summary of the report. I do not think that this report has received the publicity or the attention which it deserves. Biotechnology, which includes such developments as genetic engineering, could well be in the 80s and 90s what electronics have been in the 60s and 70s. For example, just as penicillin was the result of the application of biotechnology in its early stages, the production of interferon—about which so much has been written in recent months—on a commercial scale, with its huge potential demand, may well result from the application of modern biotechnology.
The working party, under the chairmanship of Dr. Spinks, made a considerable number of recommendations which, if implemented, would result in a well-organised and co-ordinated effort, not just by the research councils but including the universities, the Government, the CBI, many industries and trade associations specified in the report. I am told that the amount of money involved to give this impetus to the new high technological development is initially extremely modest
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and that later finance should be self-generating.
I believe that it is along these lines of identifying and opening up new opportunities for far-reaching innovations that one answer will be found to improve production, to develop the economic growth that the country needs, and to provide employment. But a high level of productivity in long-established industries which are now very sophisticated, or in the new industries of the near future, demands co-operation between all concerned, and this in no small measure depends upon management's attitude to human relations in industry. There is much that we can do to help ourselves.
4.11 p.m.
The Earl of SHANNON: My Lords, I regard myself as most particularly fortunate, in that it has fallen to my lot to be the first speaker to have a chance to congratulate the noble Lord, Lord Sieff of Brimpton, on his excellent maiden speech. He brings to your Lordships' House his great wealth of commercial and industrial experience, which is typified in the internationally famous company which he chairs with, I understand, great personal involvement, in that he arrives in his office before 8 o'clock in the morning every day.
That company's success is largely due not only to this exemplary management and the personnel relations, which he has described to your Lordships, but also to their enlightened system of strict quality control which they exercise over the products they sell, and the advice and guidance which they give to the manufacturers who supply them. It is this outlook which is an example so badly needed in many spheres of British industry and which qualifies him, as I know your Lordships will agree, as a major contributor in this afternoon's debate. I am sure I speak for all your Lordships when I say that I hope he will not confine himself to this debate alone, and that we shall often on future occasions have the benefit of his wise advice.
Like others, 1, too, should like to express my thanks to the noble Lord, Lord Schon, for introducing this debate this afternoon. We all ought to thank the noble Lord for keeping us talking about productivity. Too many of us say,

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"Of course, productivity is one of the main answers to our troubles. But there's nothing new or wonderful about that—nothing startling. We all know that. Let's talk about something else". It is most important that the noble Lord, Lord Schon, is wanting to keep us talking about productivity until somebody does something about it, and we should not start talking about something else.
There are many aspects of productivity, as previous speakers have already reminded us, and we all know that it is one of our major factors in defeating inflation. Much of our inflation is due to the fact that we have become accustomed to paying ourselves what we want; not what we are worth. I am afraid that there have been decades of weak government which have allowed this to happen, and we are now paying for it with inflation.
Whether the present Government's action is appropriate, I should like to leave the major political parties to argue among themselves. Personally, I believe that their actions are undoubtedly right. But as to whether the treatment is too right, too late, I suppose we shall have to wait and see whether the patient dies before it is cured. However emotionally upsetting it must be to those who spent at least a generation in satisfying social consciences out of the public purse, I think that the Government are right in avoiding, so far as possible, cutting assistance to the wealth-producing areas. If those wealth-producing areas collapse, then there will be nothing at all left for the socially satisfying, wealth-consuming areas.
As an indication of the international state of inflation, it might be interesting to look for a moment at the rates of improvement in productivity and pay for the fourth quarters of 1976 and 1979 respectively, those being the latest figures that I have been able to obtain. The United States improved productivity on a basis of output per person per hour by 2–2 per cent., yet they paid themselves 8 per cent. more for doing it. Japan improved productivity by 5–2 per cent. and paid themselves 5–3 per cent. more—nicely balanced. France improved productivity by 5–5 per cent. and paid themselves 13–1 per cent. for doing it. Germany
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improved by 3–6 per cent. and paid themselves 5–9 per cent. for doing it. Italy improved by 3–1 per cent. and paid themselves 17–9 per cent. for doing it—nearly 5¾ times as much as the improvement. The United Kingdom improved by 1.1 per cent. and we paid ourselves 14–4 per cent. more for doing it. We were, therefore, paying ourselves 13 times as much as we were really worth in improvement. Compare that, my Lords, with Italy's 5¾ times.
All this makes it obvious why we have inflation. So what are we to do about it? The solution is obviously not simple. There is no one universal panacea, and we have heard many good suggestions from previous speakers. We have touched on the subjects of labour relations, management, investment, rates of interest and bureaucracy crushing struggling small firms, but because of my own particular interest I should like to concentrate on the subject of innovation and the adoption of new technology.
I must emphasise that, in itself, it cannot be a sole, or even necessarily a major, answer, as any investment in new technology is immediately handicapped, unless steps are taken to use new equipment to the full and not leave it gathering dust and overhead charges for whatever product it produces, until the single shift condescends to come back and start work again. As a country, we are good at producing new technology. We are bad at adopting it in our industry, and we are equally bad at using it to its full potential, when, and if, we do adopt it.
I suspect that to-day in British industry there is far too much, of an attitude of saying "Well, let's shorten sail, batten down the hatches and wait till the storm blows over". I suggest that, even with this shortening of sail and battening down of hatches, industry will not survive this storm. It will steadily go down, unless it actively takes steps to get out of the storm and does not just wait for it to blow over. As the noble Lord, Lord Schon, has told us, this time it is for real. This is our last chance. This is not one of those periodic crises which we have had in recent years, which appeared to come and go—yet did not really go—and which mainly seemed to provide a stage for the major political parties to shout at each other. Each said the other was worse than itself and that the fault was really

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that of those who supported the other party. However much fun this has given to professional politicians, it does not help industry at all.
I suppose it must be a sign of advancing years, but I must observe that over the last few decades the captains and kings have departed, leaving the children to lead us. Oh, for real national leaders! Still, we must make the best of what we have got and try to instil some sense of national purpose throughout much of our industry unless we are prepared to abandon our present standard of living, to opt out and to become a nation of tourist guides, showing rich Chinese, Mongolians, Formosans and everyone else over England's green, pleasant and once great land as our only means of support, perhaps assisted by selling the remains of our North Sea oil to nations better able to use it than ourselves.
Nobody likes change. The adoption of new technology is bound to mean change and is bound to cause resistance. It is perhaps an unfortunate fact of life for some, that if there is to be unemployment through the use of new technology it is better by far to adopt the new technology and to be able to pay for the resulting unemployment than the alternative of not adopting the new technology and being unable to pay for the unemployment caused by being internationally uncompetitive in our industry. In fact, we have no choice.
However, not all new technology causes unemployment, but where it does we must have the wherewithal, through the wealth created by being internationally competitive, to absorb the unemployment either in new industry, as the noble Lord, Lord Sieff, has just told us, or in new or existing service industries. If I may quote the last director of the National Computing Centre, he said:
"If at the turn of the century we had decided against using the internal combustion engine on our roads on the basis of the number of ostlers it would put out of business, we would never have had a motor industry, or its ancillary service employment, or a competitive system of getting goods around the country ".
In direct terms of new technology giving rise to new employment, may I ask your Lordships to consider this one small example? Development over the last 30 years has produced the small bore tubing and glandless pumps which have
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enabled central heating to be afforded by the average householder. This has created some 80,000 jobs in this new industry, jobs which did not exist 30 years ago. And the manufacture of ancillary control systems accounts for a turnover of another £100 million a year, with the creation of some 5,000 new jobs that certainly did not exist before 1950. That is only one example.
I should like to conclude by asking Her Majesty's Government one question. I suspect, I am afraid, that I know the answer and that it is going to be, "Nobody; we just muddle through as we always have". But in asking the question may I leave the thought with Her Majesty's Government that they might like to put in train the necessary actions that in future might provide a different answer to the same question.
As we spend very large sums of public money on research in universities, for a long time there has been agitation that their research should be industrially orientated. The Science Research Council responded with various schemes. Various universities, with varying degrees of success, have assisted industry, sometimes very successfully, with their facilities. I am not asking that any of this should be abandoned; I am not asking that the universities should be told what to do. What I am asking is this: is there anyone to whom the Minister can point his finger and say, "That is the person who has the responsibility for looking at the great wealth of results of university research, assessing their potential value to industry and taking steps to get them implemented?".
I know that the National Research Development Corporation has done much work in this field; so have research associations; so have private consultants; so have the requirements boards of the Department of Industry; and so have the universities themselves. However, the question is not, who has been doing it? but, who has the direct responsibility for seeing that this great national asset, in a field in which I would suggest that we are really rather good, is put to the best national advantage? The Department of Education and Science do not have this direct responsibility and I do not think that there is anybody who does. So my question could be an invitation to the

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noble Viscount who will be speaking on behalf of Her Majesty's Government in this debate to answer, "There is nobody, but I will accept it on behalf of the Department of Industry". For, in my opinion, that is where this responsibility should rightly and most profitably lie.
I hope that I shall be able to stay until the end of the debate. However, I have another long-standing engagement. If, therefore, I have to leave before the debate finishes, I trust that your Lordships will forgive me.
4.27 p.m.
Lord BOWDEN: My Lords, may I add my voice to those who have thanked the noble Lord who initiated this debate, thus allowing us to discuss this important subject this afternoon. There can be few, if any, men in the world more fitted to introduce a debate such as this. He came to this country impoverished, with nothing but his genius. He created industries and made districts of England, which might otherwise have been impoverished at this moment, relatively well off. I think that the country as a whole is greatly indebted to the noble Lord for the work he has done, just as this House is indebted to him for allowing us to debate the subject this afternoon.
I am also very grateful for the opportunity to congratulate the noble Lord, Lord Sieff of Brimpton, on a perfectly magnificent maiden speech. His firm is one of the most extraordinary achievements of this or any other country. I remember thinking to myself when I was last in Moscow, that were they to open up there they would do more to introduce true democracy into a communist country than anything else that could possibly be imagined under any circumstances. The noble Lord's speech was interesting, informative, and, so far as I was concerned, very precious. Therefore, I hope that we shall have many opportunities to hear him speak again.
Whenever I have the opportunity to discuss these matters with your Lordships, I like to try to concentrate on a particular and perhaps rather fundamental but most material subject. Therefore, I should like to discuss briefly some of the implications of the Government's policy as we have
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observed it in action so far, the most important one being the imposition of spending cuts. What have these done for industry? I should like to revert once again to the question of what they have done for the preservation of the infrastructure of the community upon which industry depends. On the last occasion upon which I addressed your Lordships I referred to an enormous hole, the size of a double-decker bus, which had appeared in Oxford Road, Manchester, on account of the collapse of one of the main sewers. Your Lordships will be glad to know, I am sure, that in the months that have elapsed since then the hole has been mended; but, unfortunately, another hole almost exactly as big has arrived in the middle of Market Street, Manchester, very near to one of the main department stores well-known to the noble Lord, Lord Sieff.
These catastrophes, for they are little less, are due to a wilful neglect on the part of many Governments of what in my day used to be called preventive maintenance. It is not enough to wait till the roof falls in before you mend the tiles; it is not enough to wait until successive large streets in Manchester fall in before you mend the sewers. Governments have in effect saved money by wilfully reducing the limited funds which are available to the community at large for the preservation of the main items of the infrastructure upon which civilised life depends.
I was talking the other day to one of the men responsible for the maintenance of the roads in a southern county of this country, which perhaps ought to be nameless. He told me that on present plans he hopes to be able to resurface the subordinate roads once every 325 years. I know from my classical readings that when the Roman Empire started to collapse the first sign of neglect was in the decay of the ordinary small roads along which ordinary commerce moved, while they kept the main roads along which the legions could march in proper working order. We are following this remarkable historical precedent 2,000 years later.
I think it deplorable that any Government—and I am not criticising this one more than any other—should have been so neglectful over a period of many years of what one can best call preventive maintenance of the infrastructure on which

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the whole community, including industry, depends. I have said in this House before, and I repeat it, that I believe in fact that the total cost of neglect can be great and catastrophic, but the total net cost of doing the work is very much less than people usually think, because of the fact that the men who are now unemployed could put their lives to good use. Furthermore, the machinery which is now rusting away could be brought out and properly used. I believe the net cost of doing some of the work so urgently needed would be relatively small.
It is a curious thing to say, but it may well turn out that the best buy open to the Government today might be, let us say, to mend the sewers in Wigan. I do not know. But the Government must take this sort of possibility seriously and contemplate the thought that by saving small sums of money in this way they are laying up not treasure in heaven but catastrophe on earth in the very near future. No great community can survive unless the infrastructure of roads, of drains, of water, electricity and gas are all kept in some reasonable state of repair. The Government are going to allow these things to decay at their peril. It is this sort of thing more than anything else, in my experience of Manchester and its environment, which discourages ordinary working people. They think to themselves "What is the use?". That is point number one.
The next point I should like to take up is the point made by the noble Lord, Lord Bruce of Donington. He spoke of the great profitability of English firms. The question of the profitability of English firms is at the moment a matter for vigorous, violent and passionate dispute among the accountants responsible for computing it. I would mention just one or two cases; for example, the case of TCI. I was lunching with the chairman and the finance directors a few months ago and they told me that if they calculated their profits in the usual way which the Government requires, namely the historic costs, they made 19½ per cent. on invested capital. But they also said that if they did the sums in such a way that they allowed appropriately for inflation, they made 5 per cent. of their capital. I want to know, if it is at all possible, from the noble Viscount who is winding up, on what basis the Government are going to
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tax these firms in future. And in particular I should like to ask the noble Lord, Lord Bruce, to let me know, perhaps in writing, whether 1CI was in the category of profitable firms, and, if so, on what basis was it calculated.
Another very large textile firm, well-known to your Lordships, made a profit of £16½ million, according to one basis of calculation. According to the other basis it lost £44 million. I have to say to you, my Lords, because I think it is desperately important, that we have in effect been taxing companies, and we have been encouraging them to pay out dividends, on profits they have not actually earned. The reason has been that we have obsessively insisted on the use of historic cost accounting long after the fact that it was misleading and dangerous had become apparent. J hope that, now that the accountants have at last come to some decision, the noble Viscount who winds up will be able to tell us on what basis taxes will be levied next year. It makes all the difference if you are taxed as if you have made £16½ million profit when in fact you have lost £4½ million instead.
I discussed this problem with the noble Lord, Lord Stokes, when he was chairman of British Leyland. He told me, and I am sure he was right, that in the last year before they were finally taken over the company made a loss of £45 million, but it was taxed as if it had made a profit of £50 million. I cannot elaborate on the details but Mr. Healey had not then introduced his allowance on stock appreciation.
Lord BRUCE of DONINGTON: My Lords, if the noble Lord will forgive me for intervening, will he tell the House whether he is aware of the provisions of Schedule 5 to the Finance Act 1976 and whether he has taken that into account?
Lord BOWDEN: My Lords, I am afraid I could not understand it, and I would be awfully grateful if the noble Viscount who is to wind up would say quite simply "We are to tax on historic costs" or "We are to tax on inflation accounting profits". It is a simple question and a simple answer. I may mention too that the EEC has published a complicated document on the nature of

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company accounts, from which I cannot discover what they really recommend.
The main point I want to make is that we are, perhaps not unreasonably, almost to the exclusion of all other matters, obsessed by inflation. There is no doubt that inflation is extraordinarily important and dangerous, but J regard it as being less important and less dangerous than the increase in unemployment which I see around me in the part of the country from which I come. Once a man has lost his job, once he has failed in fact even to do a day's work, the opportunity has gone forever. But inflation seems to me very often to be an abstract thing, and it seems often to be associated with the kind of individual who boasted, at a time when he was the blue-eyed boy of the party opposite, that he did not expect to make things, he made money instead.
We must never forget that the real things which matter are nearly all physical, material things, and that inflation does not of itself reduce the amount of coal in the ground or the skill of the workers. It may, if it is allowed to do so, destroy the companies for which they work, and it does so not because it is of itself dangerous but because combined with a system of accounting which never allowed for it it has produced a capital levy which has taken the capital of British industry ever since the end of the war.
When I was briefly a member of the Government in 1965 I was given a sight of a Treasury paper on the total amount of capital invested at that time in British Industry. They had compared the total amount of capital invested in British industry in 1952 and the amount invested in 1962. There had been an intensive investment programme throughout the whole of that decade, but the amount of money taken out of British industry because of taxes based on profits which did not really exist, was greater than the total investment which had been made during that time. In other words, there had been a capital levy even in the days when inflation was running at about 3 or 4 per cent., which was of itself enough to take out all the capital which was then being put in. Now that inflation has mounted, as it has done, goodness only knows what will happen to the capital in British industry.
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We were told when I last looked at the figures that the nominal profits that British industry was making had risen to about 16 per cent. and the real profits were down to about 1.5 per cent. That was the situation last year, but I have not seen the figures for this year. It was upon that large, inflated, misleading and unreal profit that British industry was taxed and it was for that reason that it lost its capital to the Chancellor of the Exchequer. Moreover, that is why we have had a capital levy of enormous size wholly unknown to the people responsible for levying it and totally destructive to British industry in the meanwhile.
I hope that the Government will be able to take some positive steps to persuade people that it is worth while working, that there can still be opportunities for people, that companies can still be profitable in a real sense, and that the infrastructure upon which all these vast enterprises depend will be retained so that people can have some pride in the cities in which they live.
Sometimes I think that we speak almost as theologians. I listened to yesterday's debate which I found fascinating intellectually and in every other way, but in my view it was devoid of content in the sense that it did not impinge on any world that I knew or understood. The right reverend prelate who has just come in to the Chamber will doubtless remind us of the days when considering the nature of the Holy Trinity, someone declared the Father incomprehensible, the Son incomprehensible and the Holy Ghost incomprehensible; and yet there are not three incomprehensibles, but one incomprehensible! I cannot help thinking that people listening to some of the debates that we have had on the nature of the relationships between management and their employees will take the view that those debates have been as obscure in their conclusions as anything ever enunciated by the mediaeval schoolmen.
We are discussing a desperately urgent problem. I know of young men who cannot get jobs. They are competent, hardworking and ambitious people, but they are being destroyed by this situation. One of the reasons for it is that the Government have decided to save money by cutting back on their capital invest-

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ment programme. They have not supported industry, for example, in some of the contracts for the defence programme.
We speak of our failure to seize opportunities. I am sure that your Lordships must know the terrible story of what is probably the greatest invention that British industry has had to boast of for many years. The inventor was awarded the Nobel Prize for his invention, which was a new mechanism for X-ray scanning the body which produced a much more detailed analysis than could be had in the ordinary way. The company which supported him did extremely well and sold the machines in the United States, until President Nixon cut back on hospital spending. What happened, my Lords? We closed the business down and sold it off to the States. Could there ever be a greater opportunity which was more totally muffed by British industry? It was compelled to cope with taxation based on a system which I have said is meaningless. The Governor of the Bank of England said about a month ago that most profits these days are non-existent and illusory. But, let us think of it: a great inventor wins the Nobel Prize; he thinks that an industry will be based upon the work which he has done, but he finds that it is sold to the United States.
We cannot go on like this. We are failing—we are talking about abstractions. I try to bring our debates back to concrete matters like drains upon which, in the end, the whole of our society depends. We neglect them at our peril and we do so, I believe, in the totally illusory belief that if we could once conquer inflation everything else will be all right. I fear that by the time we have conquered it there will be nothing left!
4.45 p.m.
Viscount AMORY: My Lords, I always enjoy the opportunity of listening to the noble Lord, Lord Bowden. I remember very well when he wrung our withers with the sad story of the sewer in Manchester. When I realised that I was to follow him on the list of speakers this afternoon I rushed to the Library to read up about sewers but, of course, the noble Lord, Lord Bowden, has talked about something else. However, he told us a great many things that it is right we should
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listen to with respect. I disagreed with him when he described inflation as "an abstract thing". I think, in general terms, that it is very far from that.
I have no general quarrel with the remarks of the noble Lord, Lord Bruce of Donington. I thought that he deployed his considerable knowledge and experience of industry with skill until he came to his peroration, and there I must disagree with him sharply. But, we are all allowed a little licence with our perorations and they do not really matter because your Lordships, in my experience, never listen to them! However, I think that the noble Lord, Lord Bruce, was perfectly right to stress the importance of salesmanship, which I believe is not one of our strongest national points.
It was a real privilege to listen to my noble friend Lord Sieff of Brimpton, who is one of the ablest commercial managers in the country, and to find him in such magnificent form. How much we all look forward to hearing him on many occasions in the future. I have one sad matter to report to your Lordships—namely, that a year or two ago, I think as the noble Lord knows, my girth was found to be two inches in excess of the maximum circumference which the noble Lord's great company's research department had told him was reasonable for a civilised adult of my age, with the result that I had to go to another emporium to obtain the garments which I shall proudly, but with some regret, display to your Lordships if your Lordships would like me to do so!
I am sure that we shall all want to express our real gratitude to the noble Lord, Lord Schon, for introducing this vitally important matter to us this afternoon and for speaking with his great knowledge and authority. It was a pleasure to listen to a master entrepreneur, if I may so describe him, because that is a quality which we so much need in this country.
The noble Lord, Lord Rochester, was good enough to refer to a debate we held in this House nearly two years ago, and was kind enough to mention that I had expressed an opinion on that occasion that our level of productivity in relation to our international competitors was likely to prove the most intractable of our economic problems. Since then I am

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afraid that any progress that has been made has been minimal and hard to identify.
Whether our productivity is measured per person employed or per unit of new invested capital, our performance is relatively bad. Until we can get our productivity up, it is useless to talk about higher standards of living. In fact, there is no escape from a fall in our national standard of living. Let us hope it will prove only temporary. Not even the bonanza of North Sea oil can prevent it happening.
Twenty or 30 years ago our productivity was rising, though even then—now that we can look back on all the statistics—it was not rising so fast as that of some of our competitors. Unfortunately, as the noble Lord, Lord Schon, said, it is much easier to secure increases in productivity when business is expanding—and today it is contracting. Why is production contracting? In our case I think the main reason must be cost inflation, with its accompanying price increases. I say "cost inflation" because this time it cannot be what we used to call "demand inflation" 20 or 25 years ago, or more.
Of course other reasons play a part—world recession, the strength of sterling, import penetration; but in my opinion these are subsidiary to the main problem. We are suffering really from three diseases: inflation, low productivity and unemployment. When a patient suffers from more than one complaint simultaneously a good doctor sees whether one is symptomatic of or consequential on one of the others, and he treats the one which he believes is the fundamental cause. It is clear that on that analogy inflation is the cause and unemployment the serious symptom. If the cause can be eliminated the symptom will become less grievous. I believe the present Government have got their main priorities right. The prerequisite for bringing down unemployment must be the breaking of the vicious circle of inflation, to which the noble Lord, Lord Schon, referred. Without that, attempts to promote more employment will be frustrated.
Part of the cure is within our national control; part, such as the increases in oil prices, is not. But what are the main
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factors involved in combating our own internal cost inflation? Surely two stand out: one, a strict control of the money supply, which is not so easy as it sounds. To control the volume in its varied forms today is hard enough, but to measure the velocity of circulation must be still harder. In my opinion, strict control of the money supply by itself is not enough. If that were the only instrument applied to remedy inflation, by the time it had worked sufficiently, as is often said, the patient might be dead. One must be very careful in applying a tourniquet.
The other factor, surely, is the rate at which money incomes increase regardless of productivity. I believe that we as a nation now accept in theory that the standard of living we can expect will be what we can earn by our own efforts; but we still seem to expect that as inflation brings with it price increases we can fairly expect our own individual incomes to rise, at least by the same amount as the cost of living rises, and so insulate ourselves from the effects of inflation. That is a most dangerous delusion. Sadly, in our present circumstances, increases in wages and salaries equal to the rise in the cost of living index without corresponding increases in productivity is a sure recipe for continuing or even aggravating inflation. So temporarily our national standard of living has to come down. Indeed, it is coming down and it must do so—we will hope only temporarily.
Now I come to a factor which I want to deal with fairly and carefully—the attitude of our trade unions. I do not enjoy, and never have enjoyed, what is sometimes called "union bashing". When I was in industry I always, I hope, gave ready recognition to trade unions within our plants. I recognised their traditional role to work for their members' benefit. But, like others of us, they are by nature very conservative. With respect, they tend to pursue their members' short-term interests at the expense of their long-term interests. This often leads them to fight for levels of manning which are excessive and unrealistic in terms of what modern technology requires and other nations employ. So their traditional efforts are out of line with their members' real interests, and often result in their members being priced out of the market, thus resulting in additional unemployment.

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What I am asking them to do is something which I realise will be very hard for them in view of their long traditions. It is no less than to accept a new role; to set out positively to help promote an increase in the efficiency of industry and thereby the security of their members' employment and real wages. That is the only way in which their members' real earnings can be got on to an upward path. Today, sadly, the policies of unions are often working in the opposite direction.
But, my Lords, you will ask, am I making this demand for a drastic change of attitude on the part of the trade unions alone? No, I am not. I suppose I have been something of a consensus man all my life. It is almost a dirty word, according to some of the fashions of today, but my experience in life has led me to believe that if one wants the people one is working with to pay attention to one's views, one must be sure that they are given an equally full opportunity to express their own views and, as far as is feasible, to participate in whatever cooperative effort may be needed in the common interest. So, there is a very real responsibility falling on management to manage efficiently, as the noble Lord, Lord Sieff of Brimpton, so well brought out in his speech, and the noble Lord, Lord Bruce of Donington, referred to, and I do not deny that in any way whatever. The responsibility of management is to secure that everyone employed takes as full a part as can be devised in the fortunes of the company, in the interests of all.
When human relations—and I agree with the noble Lord, Lord Sieff, that that is a better phrase than "industrial relations"—are really good, such an attitude comes almost naturally. Many companies are working really hard to bring about such relations. As the noble Lord, Lord Bruce, acknowledged, many are highly efficient but some still cannot believe that these human relations objectives are attainable. It is as usual a problem of mutual respect and of bringing the performance of the average nearer to the level of the best.
Finally, what of the Government's role? It goes without saying that with their responsibility for the supervision
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of the economy as a whole their task is clearly to try, within their proper responsibilities, to create the economic conditions most favourable to industrial and commercial expansion without inflation. It is a strategic role and the less they get involved themselves in the details of industrial administration, the better.
I see my noble friend Lord Harmar-Nicholls, in his place. I have mentioned before in this House something he said in an earlier debate which made a deep impression on me, when he reminded us that we have 800,000 small businesses in the country. If we can create conditions in which each of those businesses can feel a legitimate confidence in the future, sufficient to enable each to take on one more employee, it would make an enormous impression on the sad volume of our employment today. These are the conditions which alone will lead to the upsurge of new investment in British industry, which we all yearn to see.
One thing which it is very important to get understood is that higher productivity does not usually mean harder or more laborious work or longer hours, but more effective work. In the businesses that I knew best I had no complaint to make about idleness or laziness on the part of operatives on the shop floor. It was quite the contrary. Occasionally I perhaps felt grieved about their loyalties to out-of-date methods of which I, myself, may sometimes have been guilty.
No one can pretend that we are yet combining our national strengths or all pulling in the same direction. On the contrary, we are dividing and exhausting our strength by sectional conflict and meaningless disputes. Our friends overseas, who respect our character and believe in our potentialities, are amazed and concerned at our suicidal antics. The time has come for us to take a grip on ourselves, and, by a national effort and a combined national resolution, to correct our failings—a task which I believe is well within our powers—and show the world again that example in industry and commerce which it used to be our proud boast to display.
5.2 p.m.
Lord SPENS: My Lords, I want to add my congratulations to those already

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given to the noble Lord, Lord Sieff of Brimpton, on his maiden speech. It was a marvellous speech to listen to and it made a deep impression on me on two counts. First, he suggested that we use the phrase "human relations" rather than the phrase "industrial relations". Briefly, I should like to tell of an example of the human relations which emanated from the noble Lord's firm. A cousin of mine worked in that firm for many years; he then became ill and the firm looked after him; when he died the firm took care of his widow. We could not expect greater human relations than that. The noble Lord's other suggestion was that new industries based on the new technological progress that is taking place must be encouraged. I am quite certain that that is something which we must all watch and help.
I should also like to congratulate my noble friend Lord Schon on introducing this debate. I think that it was inspired by the closing words of the maiden speech of the noble Lord, Lord Scanlon, which was made on 27th February. At column 1365, he said:
"In my view we have but a short five or 10 years in which to re-establish ourselves as a leading industrial nation".
Those words hit the headlines in the press and certainly made a profound impression on all who heard them, because, as we all know, the noble Lord, Lord Scanlon, is a very great expert in his own field of engineering and the engineering trade unions.
I come to productivity. It is very easy to think of productivity as just a question of getting the workers to work harder. I agree with the remarks made by the noble Lord, Lord Bruce of Donington, that it is not only the workers who have to work harder. They do; they work very hard. Of course, they must ensure that the quality of their work is maintained. But in order to have increased productivity, everyone must work harder; not only the workers, but management, the unions and the Government.
I should like to suggest how I think we can achieve that from those other three sources. First and foremost is management. Management must have the overall responsibility for obtaining higher productivity from its workers. I believe that at
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present management is failing to communicate sufficiently with the shop floor. That comes out more particularly when one considers that nearly all strikes happen in the largest industries, where the distance between the top level of management and the shop floor is very great, or in the public services, where again the distance between the top floor and the shop floor is very great. There is very seldom a strike in a small industrial firm where management knows its workers, knows all about them and is continually watching how they behave and how their families behave, and looking after them in the way that the firm of the noble Lord, Lord Sieff, always does for its employees.
Therefore, I believe that management must take a great responsibility for increases of productivity. It was very pleasing when I was at a meeting of our Select Committee which was trying to find remedies for long-term unemployment, for me to hear Sir John Greenborough and his fellow officers from the CBI give evidence before us. We spoke about this problem of communication in management, and Sir John Greenborough told us that it was a subject which the CBI was taking very seriously indeed. They consider that it is now almost the most important subject with which they have to deal—to try to get management more professional than it has been in the past. So management must take a very great responsibility for obtaining greater productivity.
I then come to the unions. They also have to do their share. What comes to mind immediately is the problem of their restrictive attitudes. In a way, the noble Lord, Lord Bruce of Donington, dealt with those points, but he did not convince me that that was all that mattered. There is still a much too restrictive, even almost a Luddite, attitude in some unions about the introduction of new technology, and an example of that was brought to my attention only to-day, although I would have known about it had I read the relevant law report in The Times on 4th March.
The matter was brought to my attention by somebody who knew I would be taking part in this debate. It is the case of a company called Health Computing Limited, which failed to get an interim injunction

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against NALGO when they were trying to introduce computing services into the National Health Service and would, if they had been able to do so, have saved the NHS millions of pounds. But NALGO refused to work with them and instructed its members not to give any orders to that firm and not to act with any products which the firm received. That application for an interim injunction failed because of the huge immunity of the unions in civil law, a subject which we are discussing on the new Employment Bill. The result of that failure to get an interim injunction has been that that firm has now gone to America, so we shall not get the benefits which it could have given to us if the union had not been so utterly restrictive in its attitude. I feel that the unions must change their minds over restrictive attitudes.
The unions are also letting down their members by trying to keep people on in unproductive jobs. As we have heard from earlier speakers, including the noble Lord, Lord Sieff of Brimpton, that in the end leads only to the failure of the firm concerned. Instead, they should be helping those of their members who must become redundant to find new jobs, and what worries me about the whole nature of trade unionism to-day is that it is far too paternalistic. You join a union and the union looks after you so long as you are in employment and a member of that union. You do not have to bother to think for yourself. But now, when huge redundancies are occuring and employees are receiving quite large sums in redundancy payments, they do not know what to do; there is nobody there to help them either to set up for themselves or find other jobs. They wait for somebody to come along and offer them another job rather than going out to look for one. That, I believe, is because the unions have been looking after them too carefully, so not enabling them to take decisions of their own. Therefore the unions should be responsible in a great way for helping to increase productivity.
When we come to the role of the Government, even the present Government, with their almost laissez faire attitude concerning industry, have several responsibilities. First, they must give leadership, not only at the very top but far lower down the line, and I should like to think that part of that leadership will enable the Government
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to encourage the suggestion made by the noble Lord, Lord Sieff, that new industries based on the new technology will be developed. Leadership is necessary there, and of course I am thinking in particular of the problem of the microcomputer manufacturing corporation Inmos, which is still awaiting a decision from Government about its future. That is not leadership. We need leadership quickly.
The Government should also be ready to help some of our industries which are quite flourishing but suddenly find themselves seriously affected by imports from other countries, and I am thinking in particular of the fishing industry and our apple growers, troubled by the French. When the French people were troubled by our lamb they took action straight away. What are we doing for our apple growers and the fishing industry? Nothing at all. The Government might consider introducing some form of emergency procedure—which the Americans have and which they are quite prepared to use temporarily—to prohibit imports for a short time, put an extra tariff on imports or in some way stop the large flow of imports of a particular character for a temporary period. The old Defence of the Realm Act might even be the base on which such an idea could be founded.
I have already spoken for too long. I had intended to talk about one area in which I think industry could help itself—that is, by making use of the rail freight system—but I do not have time to develop that now, so I will leave it to a later debate.
5.18 p.m.
Lord RHODES: My Lords, we are grateful to the noble Lord, Lord Schon, for raising this subject. It is nearly 30 years since he came to the Board of Trade when I was the Minister there pleading for assistance from the Government to start that wonderful enterprise that bears part of his name. In those days he did not have quite as big an expanse of shirt and I do not think he knew anything about Marks & Spencer. Suffice it to say that what was agreed between Government and the Schons has reflected not only great credit on the Schon family but also on the then Government who made it possible.
The noble Lord, Lord Sieff of Brimpton, is one of the latest candidates for us to take notice of in this House, and may I say how

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much we all enjoyed listening to him, because behind his speech were years and years of practical experience of a family whose name is renowned throughout the world. I echo what the noble Viscount, Lord Amory, said: that it would be marvellous if the noble Lord came to this House and spoke often on a subject that he knows so well.
A few years ago I attended the 100th anniversary celebrations of the Co-op Bank at the Mansion House and after the reception on the first floor I gravitated in order to see if I could find anybody to talk to. There I met a man who had created an empire in the mail order field. I knew him when he was in Manchester, and I asked, "How's the manufacturing part of your concern going on?" He replied, "It isn't. Only a fool manufactures today". I have never forgotten that; it hurt me. I have been working in manufactures now for 73 years, because I started when I was 12, and during the whole of that time I have never seen a situation as serious or as severe as that which arises today and that will have its effect on the people of this country for years ahead. It is now that industry wants some backing, support, leadership, understanding, and some statements that will help it.
The noble Lord, Lord Sieff, said that he had visited 14 factories during the past few months. Well, in my humble way I have visited three factories during the last 10 days. I started off at a factory that normally exports 80 per cent. of its products. As I went through the works I could see various things which could have been improved from the productivity point of view. But the stark fact was, and is, that that firm has no more than three weeks' orders. It is not so much productivity they want at the moment; it is orders.
We have heard about this question of productivity time and time again for years. We are reciting the same kind of points that we have recited for years. Perhaps the odd new point comes out, such as the suggestion of the noble Lord, Lord Sieff, about what should happen to the findings of the Spinks Committee—matters of that kind. But what we have never really got down to is understanding, and being able to cope with, the results
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of productivity; because every productivity deal really means that there is someone along the line who cannot accept its provisions because they will put him out of work. The noble Lord, Lord Sieff, was right; this is part of human nature. It is very difficult to get people to agree to their own redundancy.
I visited firm No. 2 on Monday of this week. I went through the factory. I know the type of product that they make—and have done ever since I was a lad. One could not improve the productivity of that factory wherever one went in the world. It is superb. They asked me to go there. I did not know why they had asked me to go, but I soon found out. They had foremen, managers, directors and customers to meet me. That firm is producing primarily for the home market. Now because of monetary policy, on the one hand, and free collective bargaining, on the other, the home section has not suffered as much as the exports section. Why do I say that?—because the figures show it.
Do your Lordships realise that two months ago this country was for the first time a net importer of manufactured goods? In 1965 we exported three times as much as we imported, and gradually throughout the years the figure has come down until two months ago, when we were importing more than we were exporting. This is an absolute scandal for a country that is supposed to be a manufacturing country. It is shameful for everybody. We should bear the responsibility.
The firm's home trade order books are not as short as their export order books. But what is happening? The noble Lord, Lord Sieff, knows this better than anybody. The manufacturers' customers are being forced out of business for a variety of reasons, whether they be high interest rates or the inability to export because of the value of the pound. Everybody connected with the second firm that I visited had grave apprehensions as to what is to happen because in the last three months two or three of their important customers have gone out of business.
My third visit was to a large company with millions to spend on research, backing it up with money where their

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mouth is. They are ordering new machinery at colossal expense, but they have grave doubts about whether it will be profitable due to reasons outside the ability of people in this country to correct. This situation arises because if the firm
"had been operating on Canadian costs our fuel bill would be approximately £4–9 million against an actual cost of £11–9 million, based on United Kingdom prices.
"The prices noted in the document are those which were operative on 1st April 1980, both in Canada and the United Kingdom and are converted at the current rate of exchange, which is approximately Canadian dollars 2–60 to the pound sterling".
These figures demonstrate the facts, and I have every reason to believe that they are true. That is because of the group pricing system which is permitted in the United States of America. Any amount of productivity will not bridge this gap, and this must be thoroughly understood. The gap is too big for productivity at the present moment to do anything about, and my plea this afternoon is that we should be as energetic and as determined in keeping our industries here alive, ticking and growing as the countries on the Continent, such as Germany and France, and Japan, have been in the last 20 years.
I do not want to speak for long, but I come now to another point. A friend of mine was declared bankrupt a week or two ago. He was an entrepreneur, a manufacturer. Over the years he had gradually built up first-class productivity. He had invested all his money in a plant, but, then, interest rates were at 8 per cent. He went out of business a fortnight ago because interest rates were at 18 per cent., or whatever they are. His bank manager had said, "Yes, you are an ideal person to lend money to". The same bank manager has seen him out.
Now I come to a point about which I want to make a plea, but before I do that I want to say this: growth is difficult to generate. All the time you are bedevilled by inflation. What can we do about it? I am going to make a suggestion. If you look back at the history of this problem over the last 20 years, you will see that we have had periods of free collective bargaining lasting about 18 months before an incomes policy has had to be introduced. It has happened with every Government, and it is going to happen with this one.
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There will be a partial U-turn before the end of the Summer Recess. Then you go on for about two or three years—look it up in your Parliamentary history—when you will again have free collective bargaining after the incomes policy has been thrown out. These have been abrupt changes, and they have been matched by abrupt changes in attitude to Government intervention, too—witness the Edward Heath scrapping of the Prices Board and the Industrial Reorganisation Corporation. Then after the familiar 18 months the Edward Heath Government brought in the Industry Act, when free enterprise policies did not work. Then, when we came into office in 1975, we set up the National Enterprise Board and introduced planning agreements—and here we are, back at the old game again.
Today, industry makes a despairing appeal for a political consensus. It stands well away from this ridiculous idea that "the other Government were wrong, before we came in". You cannot possibly have growth of the kind that we need unless there is a political consensus about some of the basic principles that we need to operate. You only need to look at the competing countries in Europe to see that what I am saying is true. Countries like France, Germany and Japan have established a political thrust behind their industrial policies which survive all Government changes, and until we can get into that kind of scene we can whistle—and it has got to be done. What has been done for France, for Germany and for Japan, surely it is not beyond the wit of man to do here. We live in desperate times. We need pluck, determination and skill; we need human understanding—all those things that go to make relationships stick. We have not got them yet. It is up to everybody to pursue such a course of conduct in what they do as to attain such an end.
5.36 p.m.
Lord NELSON of STAFFORD: My Lords, may I add my thanks to the noble Lord, Lord Schon, for introducing this debate this afternoon. I think it is a most valuable debate at just the right time on a desperately important issue and that has been emphasised in his usual vigorous way by the noble Lord, Lord Rhodes. Let us hope that this debate will help us all to understand this problem a little

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more thoroughly and the need for all to work together for its solution. These islands will support our population only if we are able to be successful in world trade and all noble Lords, most of whom are involved one way or another in world trade, know that this means competitiveness in price, in delivery and in design.
We had a very interesting debate a few weeks ago on the Finniston Report on the matter of the quality, supply and training of engineers. During this debate noble Lords will remember much was said about the importance of design, and I think it is very appropriate that so shortly after that we are today debating that other important issue—productivity. The noble Lord Lord Rhodes, has just emphasised the importance of this problem to manufacturing industry and I agree with him wholeheartedly.
May I remind noble Lords, to add one or two figures to those already mentioned this afternoon, that earnings in the United Kingdom increased by 14 per cent. in 1977–78, by 16 per cent. in 1978–79 and currently they look like increasing at 20 per cent. Without increased productivity, this must mean inflation. I think lack of productivity leads to inflation rather than the other way round, and in the end these increases in earnings do not mean real wages increases at all but an erosion of savings and an erosion of confidence.
These conditions are also coupled with an appreciating exchange rate with all the problems that that brings with it, including a deteriorating competitive position. I read some startling figures only two days ago which estimated that our competitiveness had decreased by 20 per cent. since 1979 and by 35 per cent. since 1976—frightening figures by any standards, my Lords, which illustrate the size and desperateness of this problem. There are many factors involved in this situation, but I believe that increased productivity is a very important one. I do not believe we can look to reaching a solution of increased competiveness by basing it on low wages policy. This must be completely unacceptable, emphasising once again that increased productivity is the only way of approaching it and all should recognise this. I am glad that an earlier speaker, the noble Lord, Lord Spens,
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referred to the importance of productivity in all activities. The terms of this debate relate specifically to productive industry; but the problem is not only in the productive industries but also in the non-productive activities as these are the overheads of the productive industries and therefore the principle applies throughout. I shall direct my contribution wholly within the context of productive industry.
Here may I agree with the noble Lord, Lord Bruce of Donington, in his opening statement. He referred to industrialists or industrial leaders or captains of industry. I suppose that I myself come into one of those categories—I am not sure which; but clearly one of the categories to which he referred, as being one of those who knows what it means to work on the shop floor and knows what the shop floor thinks about it. I agree with him in saying that the problem is primarily one for management. It is management's job to put this right. But having said that, may I add that it is management in co-operation with all others involved whether it be Government, trade unions or top management—and I say, "top management", because when I say it is a management problem, I mean at plant level, at business level, at factory level. I say that particularly because they are the people who know what is going on and they are people who can have the understanding of the problem of all workers involved and so obtain their co-operation. It is in fact the accumulative achievement of individual managements at that level having success in tackling their problems which creates high productivity for the nation as a whole.
Having said that what does it add up to? Looking at it from the plant level, it adds up to two things: Have you got the right plant and are you using it properly? These two are intimately tied together. If you are not using it properly, you cannot afford to buy the plant and, vice versa, you must use it properly if you are to be able to justify the investment in the new plant and maintain it and replace it. These are the factors which must be studied and looked at jointly at the workshop and plant level.
Looking first at the problem of utilisation of plant, what does this mean? You cannot afford new and modern plant unless you get maximum output from it. There are high capital charges, high

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standing charges associated with the plant. If you cannot maintain an adequate cash flow, you cannot maintain that plant and keep it up-to-date, nor replace it—so you must use it properly. You must get the maximum amount of hours from it with the minimum of manning levels and get the highest quality of production with minimum wastage. These are things which must be worked out together by management with the people involved at the shop floor level. My experience is that if this is done in this way it is surprising what can be achieved. You can get good plant manning and flexible working if people understand what it is about. It cannot be done from on high but by the people who know what the problem is and what is involved. There is also the question of keeping the plant running—this can be vitally important particularly on continuous process plant. This means the highest possible collaboration between the productive operators and the supporting services, whoever they may be, maintenance staff and others. Here I think there is a lot more still to be done. We must sec much closer working between those who are the so-called productive workers and those who are the support workers. They are all the same. What is the difference? In order to keep the plant going, let the productive workers and the maintenance workers work together. If there is a breakdown, everybody should work together to get it going as quickly as possible and not say or ask whose job it is. This is where I think, looking at continental experience, some of the biggest advances can be made without any serious loss of jobs or anything else, thus ensuring better utilisation of the plant that we have.
I should now like to touch on the question of plant investment. Modern plant is sophisticated—that has already been mentioned—and costs a lot of money. I am glad that reference was made earlier—I think by the noble Lord, Lord Bowden, who is no longer in his place—to the question of depreciation of plant and to the tax treatment. You cannot afford plant unless you make money, and for this you must have profit; you must have real profits which are profits after allowance for inflation. If there are no real profits, there is no cash flow, and if there is no cash flow there is no investment. This is a very important matter. I hope
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that the Government will be looking at this problem. It will be particularly important now that we all have to produce shortly current cost accounting figures. These will be particularly interesting from this point of view, as it will show who is making a real profit and a positive cash flow into the business. This is what will determine whether we can afford to continue the investments which are required. I think this is tremendously important.
We have a situation where higher productivity needs greater plant utilisation and greater investment, equally. You do not get this unless you get a cash flow and higher productivity. There is the vicious circle. How are we to break that vicious circle? I do not know. A number of speakers have touched on that this afternoon. This is the biggest problem of all. I would make this contribution. One hears it said that British industry is short of modern plant and investment. Up to a point, it is; but, on the other hand, it has a lot of modern plant and very good plant, so that I think the first thing is to see whether we are using properly the plant that we have. I think the answer to that is important. In the first place, the answer must be, No. Surely, therefore, the thing that we must do right now is to see if we cannot obtain greater productivity from the plant that we have. This will lead to greater competitiveness and greater cash flow, and therefore work and cash for more plant in the future.
Another problem already mentioned, if we are going to obtain the co-operation on the shop floor, is what happens to the people who are thrown out of work as a result of increased productivity. This is a real dilemma, in my opinion, and one of the major problems. When you talk about productivity there is a lot of uncertainty, there is a lot of lack of confidence, there is a lot of fear that what you mean really is redundancy and loss of jobs. In certain cases that may be the case. I think that those cases are where management has not done its job over the years—unfortunately. Where management is doing its job, where it is looking ahead and studying the problems as they arise, these things can be adjusted without the trauma of lack of confidence or future difficulties which arise. There is wastage going on all the time. There are people

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who want to change their jobs, there are new job opportunities coming up, there are some people who would not mind retiring earlier if given the opportunity. All these are steps that management can take whereby these matters can be moderated so that they do not blow up into a serious and intractable situation leading to the conditions touched upon by the noble Lord, Lord Bruce of Donington, in his opening speech of lack of confidence and—to put it crudely—bloody-mindedness which can come out of these things.
So it comes right back to where I started: on the shop floor, with management doing its job with the co-operation and support of all those with whom they are working. If this is done, I think that we can achieve higher productivity. I think that we must do so and only in this way, to my mind, shall we get inflation under control and get real wages maintaining their purchasing power or even increasing it. Only in this way shall we get the greater job stability that we all want to see or a reduction of unemployment through increasing competitiveness. Therefore, I support others who appeal today for everybody to pull together and realise that we are all in this problem together and that we must all seek to find its solution, because it can be found if we tackle it together.
My Lords, I must conclude by adding an apology to that of a previous speaker: I also have an engagement this evening and the time is advancing. I hope that I may be able to stay to the end of this debate, but if I do not I hope that your Lordships will excuse my absence.
Baroness GAITSKELL: My Lords, before the noble Lord sits down, may I ask him a short question? I have listened to his speech with great interest. It was fascinating. I thought that at the end he slid over the problem of unemployment rather too easily. What made him do that? There are bound to be millions of men out of work; we cannot take it quite so easily, can we?
Lord NELSON of STAFFORD: My Lords, I agree that I did slide over that because it is a very sensitive and difficult question. I think the situation can be mitigated and if people understand the
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problem then they will realise that higher productivity will lead in the end to a rise in employment and greater stability of employment. In the end it is the only way which will lead to the solution of the unemployment problem, but there is a difficult interim period which can only be surmounted by people understanding what it is all about.
5.53 p.m.
Lord HANKEY: My Lords, how valuable it is that we have people like my noble friend Lord Schon and the noble Lord who has just sat down, who can give their vast experience in industry to Parliament and, in particular, to your Lordships' House. We are most indebted to my noble friend and I must apologise to him that, owing to my train being late, I missed his opening words.
One answer to the interesting point raised by the noble Baroness, Lady Gaitskell, is to be found in Sweden where there is a good state of co-operation between the trade unions. When there is an industry which is declining, such as textiles, the unions co-operate in switching workers out of the declining industries as quickly as they can be trained to go into other industries which are expanding. The result of that is that the workers in the declining industries are not so numerous and can be paid more, with any luck, and the workers who are redundant are sure to find employment in other industries.
Unfortunately, we do not always seem to have that state of affairs here. I should like to think that we could move towards a state of greater co-operation between industries, between trade unions and between all sections of the community—in particular to greater co-operation between management and unions. Personally, I share the view which has been expressed by so many people in this debate that if we have an atmosphere of confrontation throughout industry we are never going to get a rise of productivity. I entirely agree with the noble Lord, Lord Rhodes, whose speeches are always so very stimulating, that we should try to get a better state of co-operation between the political parties.
There ought to be certain issues on which all parties are agreed. After all, for the most part, we agree about the main

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lines of foreign policy. We agree about many defence questions. There is a lot of agreement regarding the work of the Home Office. I should have thought that in this matter of restoring the earning capacity of the United Kingdom there must be vast areas where our common interest ought to come out and bring us together.
An enormous amount of work has been done by OECD and, before that, by OEEC, on measuring productivity in precise ways and in bringing together all the scientific elements of a study of productivity. I should like to quote the latest figures for the decade 1969 to 1979 because they really are alarming—and I mean really alarming. The productivity of Japan has increased by an average annual rate of change over that whole decade of 5–2 per cent., France by 3–5 per cent., Germany by 3–6 per cent., Italy by 2–6 per cent., and the United Kingdom comes nearly last with 1–5 per cent.
I want to add a point that I made in a previous speech though not with this particular statistic. The United States is behind the United Kingdom with an average rate of increase of productivity over the decade of only 0–7 per cent. If this continues, the United States will suffer the same fate as the United Kingdom. This would be really disastrous for the world in which we live.
So, my Lords, what is going to be done about this trend? One has to look around. One lesson that comes out from the fascinating debate to which we have listened today is that this is a very wide problem. I should like to widen it a little further if I may do so without being boring. A great many of our Ministers have not been very interested in production. They are interested in the financial and social aspects. I am not speaking about a particular political party; this goes for all parties. Many of them regard economics as rather a bore. If we could persuade Ministers to be more interested in production, that would really be very helpful. I do not think that it is sufficient just to get the financial aspects right. If one gets the financial aspects wrong—which we have done in an alarming degree over the past 10 years—everything goes to pot. But is one gets the financial aspects right—and I hope that the present
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Government are going to do this, and they have my warmest good wishes—it does not follow that everything else is going to be right unless one knocks away the props that stop the ship moving on the slipway—and there are an awful lot of them.
Businessmen with whom I have been in considerable touch are extremely worried about the instability of public policy. This is partly a reflection of the confrontation policies to which my noble friend Lord Rhodes drew attention. They never know which way things are going. Taxes change in an alarming way and they are always in trouble with planning delays. Any ecology group which can object to anything seems to be able to hold things up and even disrupt the public inquiries before a factory can be built. It is very alarming to the businessman; he does not know whether he is coming or going. This has a great effect on the low level of investment which is now typical of our country.
I should like to come back to the Government for a moment. The Government are going to have to reconcile themselves to giving leadership. A number of our colleagues in this House have said this today. I give an example. Take the fast breeder reactor, which went critical 22 years ago, to my certain knowledge—22 years ago. The prototype reactor for commercial production has been producing power for the grid for about 12 years but nothing has been done about it. Why did not the Secretary of State for Energy—it was Mr. Wedgwood Benn, I think—get on with it and get that moving? Had we had the cheap electricity which the north of Scotland has enjoyed owing to this—it is the only part of the United Kingdom where the price of electricity did not go up because it comes from the fast breeder reactor—it would have been a great help to productivity in our industry. But, no, the Ministers were worried—perhaps they were worried about the miners. I do not know what Mr. Benn's reasons were, but I protest, without being personal in any way, that the Government really should have given a lead in this matter. They have failed in their responsibilities, and I hope that the present Government will not fail to meet this challenge soon.

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I will come back to the Government's having a policy, but I want to come now to the trade unions. I do not know whether your Lordships saw the television broadcast about 18 months ago when a senior delegation of Soviet trade union leaders came over to this country and were received by the TUC. I have always been very interested in Russian trade unions. The TUC representatives began by welcoming their guests and saying, "Perhaps you would like to tell us what is the main function of the Russian trade unions?" The Soviet leader said: "Well, of course, it is to increase productivity". The expression of sheer amazement on the faces of our countrymen was very amusing to behold. They said to the Soviet delegation: "Surely, are you not interested in increasing the well-being of your members?" The reply was: "Oh, yes, of course we are; but how can we do that unless productivity rises?"
My Lords, when you have nationalised your production the Government want higher productivity—in fact they jolly well have to have it; otherwise everything goes down—and the trades unions have to have that too. I hope we are not going to reach the state of nationalisation like that, in spite of some ideas which are cooking in certain sections of the Labour Party, but I think there is a lesson to be learned there: that behind the Curtain they are really trying to mobilise the trade unions, and are succeeding, to increase productivity. Their productivity generally—because I am interested in Soviet industry—is amazingly low. Ours is much higher, but the fact remains that they have got a systematic approach by the trade unions to productivity, which is very helpful.
I warmly agree with everything the noble Lord, Lord Nelson, said in his very interesting speech about the importance of personal relations on the shop floor and letting the chaps get on with it with goodwill. I do not know why we cannot do more of this in our country. The list of disasters is so appalling. There was that magnificent textile factory at Skelmersdale with the most up-to-date machinery, which failed because apparently the workers in the Liverpool area would not work it properly. There is another similar factory which is also run by
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Courtaulds in another part of the country, which is very productive and makes a handsome profit; but in the Liverpool area it could not be done. There is the sad story of the Speke factory which closed: these are all in areas fairly close to the heart of the noble Lord, Lord Rhodes. I was very sorry when that closed, but that was also due to extremely low productivity.
I will just mention other disasters we have had. We have spent an enormous amount of money on the Llanwern Steel-works; for 18 months they could not be opened. There was the long delay over the Glasgow rail terminal some years ago—a disaster. There was delay over the Tilbury container docks. We invest money but we do not get the co-operation of the workers in getting these things going, and I believe it is necessary that somebody should try to bring the common interest we all have in this matter to focus on these problems in a productive and forward-looking way.
Turning back now to the Government, I want to say that in times of inflation it is no good thinking in terms of having a nice bank account, because it is losing its value all the time. The most valuable thing we have in a country like ours is the tremendous manufacturing capacity and skill that we possess. If you do not allow it to operate efficiently and if you allow it to be undermined slowly by one factory after another going out of action and by the new processes—my noble friend Lord Spens mentioned a very disastrous case—just going abroad to other people who develop our inventions, obviously this country is going down. It is going down: we have a growth rate of 1–1 per cent. at the moment and almost everybody else has got a higher growth rate. We are being overtaken by almost everybody and we have to do something. So I come back to what was said earlier: the Government, I think, really have to give a lead. I believe they should do even more than they are doing—and they are doing a great deal—to see what can be done to help industry.
Very encouraging developments are going on, and I want to see more of them. I would be really sorry if the Government, for what I regard as ideological reasons, abolishes the National Enterprise Board. I am not in favour of nationalisation. I think it has failed in our country, except in certain industries where it is necessary;

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but I am quite certain of one thing, which is that the Government must have a tool which can be used in order to spur industry on. I think that the National Enterprise Board is such a tool and if it is abolished the Government will probably have to end by creating another. Let the tool be used to increase productivity.
Finally, I want to say that I share the view which one speaker has expressed: that the Government will almost certainly have to reconcile themselves to having some sort of policy for incomes. It was no good the last Government having an incomes policy limit of 5 per cent. I have an indexed pension and in the winter, when everybody was being told they could have only 5 per cent., my pension was indexed at a considerably higher figure. I thought that really knocked the logic out of the Government's policy, although I did not advertise it at the time. We have to be sensible about these matters: we really do.
The most important thing to be sensible about is this. The man on the shop floor has not got so much water under the keel as the director in the boardroom and when prices go up at the rate they are going up now, he is worried about the future. He does not quite know whether he will be able to pay for his motor-car, or his mortgage or other things. We have to face the fact that he is going to require an increase in wages during the year which will be somewhere approaching the increase in the retail price index. It is no good trying to avoid the question: he has to have it. At present we have a system and we say: "We don't admit that you have to have this ". All right: he goes on strike. Productivity goes to hell, we lose our markets and we fail to fulfil our delivery dates—and, having had a great deal to do with export industries, I am very conscious of this aspect. I promise your Lordships that the delay in fulfilling our export dates is one of the most telling considerations in our loss of markets.
If you run your wages system in such a way that you force this lack of productivity on industry, of course you get into trouble. And so when the Government are going to face the approaching necessity of having an incomes policy of some sort I want to make the following highly controversial suggestion. I know it is
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highly controversial, but I shall make it all the same. The idea should be that wages will be enabled to rise and everybody will be expected to increase wages to something like 75 per cent. of the retail price index every year. The remaining 25 per cent. will be fought for, but the fight should be made to depend on the increase of productivity in the preceding year—I repeat, the preceding year.
Only too often people have paid lip-service to productivity agreements and they have said "Oh well, we'll pay an extra 10 per cent. and that will be made up for by productivity". They do not get the productivity. It is no good making an agreement like that. The thing turns out to be inflationary. You have got to do better. You have got to base it on the increase in productivity in the preceding year. I know this can be attacked logically, but on all practical grounds I believe it would be more likely to yield results.
I know exactly what the noble Lord who is going to reply to this debate is going to say about this. He is going to say that this is a form of indexation, it is abominable, it is a sin, the Treasury will not have it and so on. But I conclude with the words of, I think, Oliver Cromwell:
"I beseech you in the bones of Christ, ye may yet think whether you are not mistaken ".
6.12 p.m.
Lord SANDFORD: I start by thanking the noble Lord, Lord Schon, for introducing this Motion; congratulating the noble Lord, Lord Sieff, on his maiden speech; and paying tribute to both of them and to other noble Lords who have taken part so far, for furnishing the debate with so much of their own valuable first-hand experience. I am not any sort of industrialist of any rank or level, and I have little or no insight into the inner workings of commerce or industry. But I take productivity to mean broadly making the most of what you've got, and to be capable of a wider interpretation than the factors of production in the actual industrial process itself.
I want to talk about making the most of the physical resources of the environment in which industry operates, making the most of human resources coming out of the schools and the colleges on which

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it has to draw, and making the most of the resources of the communities in which industry and commerce are set. At this time in this small island, it seems to me we cannot afford to be profligate of any aspects of our environment, particularly our land. We cannot afford to leave idle precious urban waste land which is fully serviced with roads, sewers, power supplies, even if holes develop in some of them in Manchester from time to time!
It is true that because we were first in the industrial revolution a lot of our industrial infrastructure is elderly. We cannot afford for it to be wasted. We certainly cannot afford to sterilise any more of our agricultural land for industrial development. So productivity, it seems to me, involves not just efficient use of the factors directly involved in production, but efficient use and conservation of the surrounding physical environment too, and in a way that can be sustained throughout succeeding generations.
It is for that reason that I particularly welcome the proposals recently announced by the Government for enterprise zones in which industry is going to be encouraged to make greater use of some of our inner urban areas. There are a number of measures proposed to encourage industry to go back. I should like to say, in the context of encouraging industry to make better use of our precious urban land that is lying waste at the moment, that Her Majesty's Government should also consider removing VAT from the repair and conservation of industrial and other buildings in the areas that are selected as enterprise zones. But before leaving enterprise zones I want to make the point that, of course, it is not enough merely to remove the constraining hands of bureaucracy in the enterprise zones—this is the main effect of what the Government propose. It is also necessary to inspire enterprises to go back and to make good use of them. I will return to that point.
The second resource which I am sure we must make full and better use of if we are to get a general rise in productivity are our human resources, and we must learn to develop their talents and harness them better. Others in industry and commerce are far better qualified than I am to talk about the professional craft
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and other skills that commerce and industry need and require from the schools and from the colleges.
I want to comment on my experience now going back three or four years in helping to deal with the problems of unemployment as they affect those young boys and girls immediately they come out of school and college, because there are a tragic number of those, who are unemployed from the very moment they leave school. Some of those, many of those, leaving school and college are undoubtedly well trained and have already the skills and crafts which industry needs. But the sad fact of the matter is that the operation with which I have been concerned—namely, the implementing of the special programme of the Manpower Service Commission for the young unemployed—revealed that a horrific number of children leave home after 16 years and leave school after 10 years not really able to write properly, not really able to read properly, not really able to count, not very willing to work, many of them hardly able to converse, and a lot of them unable to keep clear of the law. This is a sad state of affairs and it is hard to see how industry can possibly be as productive as it should be if so much of the material available to them is of this character.
But the tragedy is compounded by the fact of our experience which is that a year of proper management under one of the MSC's special programmes, undergoing training and doing work properly geared to the personal needs of these young people, is in many cases enough to make good these defects with which we find we have to deal some of these boys and girls as their come out of school. If that can be done within a year after they leave school, it does make one wonder what on earth must be going on in some of the homes, in some of the schools and at such great cost. It does seem to me to call into question the preparation of so many of our young people—not, of course, the huge majority; only a minority. It must fall considerably short of what industry and commerce require.
I turn thirdly to the resources available in the local community for the support and encouragement of enterprise in commerce and in industry. Last September, I was invited to speak at the annual dinner of the Swansea Chamber of Commerce.

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Heaven knows why, but I was. That chamber was established among the earliest ones in 1846 and its purpose then, as it has always been there and everywhere, was the preservation of free competitive enterprise—very much the thing we are talking about this afternoon. Indeed, that purpose it certainly fulfilled in 1846. Swansea was then the metallurgical centre for the whole world and it flourished exceedingly in that capacity for many years with many different industries contributing to its prosperity, and thanks very much to the enterprise of the famous firms established in that famous valley. Of course, there were mistakes and the derelict and polluted state of the Lower Swansea Valley today has borne testimony to some of them. But at least in that city in that century, as in so many other cities in that century in this country, the firms of Swansea were masters of their own fate. Now some things, many things, are, of course, better than they were then. But the firms in Swansea like the firms in Liverpool, Newcastle and many others of our great but depressed cities in the assisted areas, are no longer the masters of their own fate, responsible for their own destiny and success, and standing or falling on their own decisions. Much of the local employment in such places now is public service, not creating wealth at all but absorbing and consuming it, and much of the wealth-creating activity that is in those places is not indigenous. It has been imported from elsewhere and is made up of branches of larger companies whose policies are dictated from elsewhere, sometimes even from outside this country.
Of course, this kind of employment is better than no employment at all. The conditions of work are better than they were 100 years ago. But I should like to suggest to your Lordships that a whole dimension of local enterprise has been lost over the years. That is one of the factors which is leading to the problems which so many noble Lords have analysed and identified during this debate. It seems to me that before Britain can once more produce her best again, that dimension of local enterprise must be recovered and rekindled, as my noble friend Lord Amory has said.
It is for this reason that the local enterprise trust movement needs to be welcomed and encouraged. It does not
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matter very much whether it is stimulated, as it has been, by large firms such as Marks and Spencer, or by chambers of commerce, central Government, local government, groups of small firms or even by individual initiative. I am glad to be associated in a small way with this movement, particularly in the business of preparing young people temperamentally to appreciate its importance and to participate in its development. In fact, I look forward to joining the noble Lord, Lord Schon, in getting something more going along these lines in Cumbria before long, in the county to which he has already made such a big personal contribution.
My noble friend Lord Trenchard will know that part of the package of measures agreed in Brussels last week includes proposals to make an increase of expenditure in this country from the regional fund. He will also know of the proposals made late last year by the Commission, for the first use of the non-quota part of that fund in areas of this country which are affected by the decline of shipbuilding and steelmaking, in particular. I have given notice to my noble friend of this question, but I apologise for originally giving him the wrong reference; it was 9808/79 of last year.
It seems to me that these proposals have special and topical merit in the context of what we are talking about this evening, in that they were not designed to offer grants towards particular industrial or commercial investment projects—the normal way in which regional policies operate—but rather to be in support of strategic and comprehensive programmes of industrial revival and of regeneration of local enterprise over whole areas of actual and impending unemployment. As the noble Lord, Lord Sieff, and the noble Lord, Lord Nelson, pointed out, something of that kind—the regeneration and revival of fresh new enterprises—has to be in hand or in prospect, if the fears of those adversely affected by measured productivity are to be allayed.
Therefore, it will be interesting to hear from my noble friend, when he replies to this debate, of the extent to which Her Majesty's Government now intend to take full advantage of this proposal and others like it, and of the way in which Her Majesty's Government intend this Commission proposal to be adapted to our

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current national need—the need to return to much higher levels of industrial enterprise and productivity.
6.25 p.m.
Lord HOUGHTON of SOWERBY: My Lords, I must first apologise for having had to leave the Chamber for one hour earlier in the debate, but I had to keep an appointment with a Minister. Of course, I heard the admirable opening speech of the noble Lord, Lord Schon, and also the most impressive maiden speech by the noble Lord, Lord Sieff. The noble Lord, Lord Schon, entertained us for a few minutes with a couple of jokes about the characteristics of the British. Your Lordships will remember that one was that the British never see the writing on the wall, until they have got their backs to it. I brought something back from America, which I visited recently, and I will present it to the noble Lord, Lord Schon. They were saying that the future is not what it used to be. The more we ponder over that, the greater the truth we may discover in it.
We have had to use the much overworked words in the vocabulary of industry, human relations and so on. I wish that we could get rid of the term "industrial relations", and I was very grateful to the noble Lord, Lord Sieff, for proposing that. We have several days to go considering the Employment Bill. If we could make a vow to use the term "human relations", instead of "industrial relations", we might get on a little better, because that is really what it is all about.
Incidentally, I once compiled a small dictionary of the jargon of discontent, which I got from the opening words of resolutions passed by trade union conferences—This conference is alarmed, disappointed, discontented, disgusted, and so we went through the whole range of expressions of discontent. Some of it, I thought, was almost congenital or, at least, inseparable from the kind of gatherings from which it came. "Productivity" is such a pedestrian, worn part of our jargon in these matters.
We have had several suggestions made. The noble Lord, Lord Sieff, spoke of "high working performance". That is three words instead of one. As a means
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of alternating from one word to another, "output" is probably not a bad word to use. But, of course, "productivity" does not really define what we are talking about. In some contexts, we are talking about efficiency. In other contexts, we are talking about equipment and what people are using. What is "productivity", if all you give to a road-mender is a pickaxe? What is his productivity? He wants technology. What about the man on the pedal-cycle? What is his productivity? Are you asking him to pedal faster? He will say "Give me a motor-bike", and then he will say, "I want more pay and shorter hours". The more we talk about these simple words, the wider the range in which we have to put our thoughts.
Another word is "co-operation". It is like saying, "All we want is love", and then giving the wife a new electric sweeper to do more housework in a shorter time. We do not get these things merely by saying that they are needed or that we want them. I was very glad that the noble Lord, Lord Sieff, addressed himself very substantially to management. There is an old saying, in which there is a good deal of truth, that there are no bad soldiers, only bad generals. Certainly, management has its full share of responsibility for whatever happens in industry.
Just recently, I was asked to take the chair at a conference on the electronic office. I sat through it for the whole of the day, having made at the beginning what was described as a keynote speech. I discovered that we were talking about a neglected field of concern to us all—the offices of the land. Of those in gainful occupations, 37 per cent. are white-collar workers. We tend to think of productivity as something which is confined to the shopfloor, to the worker who is turning a machine or who is doing a manual operation of some kind. But there are aspects of productivity and efficiency in the office.
The late Lord Stamp, the father of the present noble Lord, Lord Stamp, when he was chairman of the London, Midland and Scottish Railways, said at a conference of the Royal Institute of Public Administration:
"No organisation of diversified activities can move faster than its forms will allow ".
After long experience in the Inland Revenue, I can tell your Lordships that

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that is as true today as it was when he said it 45 years ago. May I remind your Lordships that the coding notices in the Inland Revenue, which many of your Lordships now receive, are written by hand, on the same sort of form as when they first began to be issued in 1943? The only new technology in use in connection with Pay As You Earn is at East Kilbride in Scotland, and it has never got any further. Why? Because of the point raised by my noble friend Lord Rhodes and the noble Lord, Lord Hankey, only a few moments ago: the instability of public policy. The computerisation of Pay As You Earn was first mooted 21 years ago and it is no nearer completion today than it was then, except for the pilot scheme in East Kilbride, Scotland.
What about productivity? There are 30,000 jobs at stake, and in a moment I shall come to what may happen to them if Pay As You Earn is computerised. Let us take the Department of Health and Social Security. There have been 17 years of shilly-shallying and chopping and changing about the kind of state superannuation scheme we should have. Noble Lords should consider that over that period the Ministers concerned were the noble Lord, Lord Boyd-Carpenter, myself, Dick Crossman, Sir Keith Joseph, Barbara Castle; and I think that my noble friend Lord Gordon-Walker and my noble friend Lord Stewart of Fulham came somewhere in between. What could be expected to come out of that assortment of Ministers, with little direction as to where their Governments wanted to go on this enormously important question? So the whole of the insurance world, pension schemes, occupational interests of all sorts and kinds were held up until eventually a compromise scheme was reached. And we have now got it, 17 years afterwards. An enormous waste of money is involved.
Lord INGLEWOOD: My Lords, the noble Lord referred to Ministers who did not know where they were going. During that period, Parliamentary Secretaries, I would submit, did know where they were going. It is a pity that Ministers did not listen to them.
Lord HOUGHTON of SOWERBY: But, my Lords, they were not there long enough to get anywhere. That is the
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problem. I think Dick Crossman knew where he wanted to go but he did not arrive. The then Prime Minister decided to dissolve Parliament while the Crossman scheme was in full spate in the House of Commons. As the former chairman of the Public Accounts Committee, I will tell your Lordships this: it is Governments who waste money, and occasionally civil servants save it. That is something to bear in mind when we are talking about productivity in the public sector.
May I return to the electronic office, the paperless office, the fascinating prospect of just watching things happen without doing anything yourself and without seeing a single bit of paper in the waste-paper basket. But where will all the clerks have gone when this has been accomplished? There is no more cooperative section of the working community than office staffs. They give less trouble than any other section of workers, barring perhaps the clergy. We must show some concern about what is going to happen to people who are displaced by the new technology. That is why I think it is desirable for us to have some public understanding of how the country is going to get through this transitional period. We cannot criticise those who say, "I prefer to go on doing the job as I am doing it now, because if you bring in anything else I shall probably lose it". The noble Lord, Lord Sieff, said that if you cling to your old methods you will be out of work anyway. But their reply is: "If I adopt the new ones I shall still be out of work. So what?"
We have got to find the answer because the white collar unions are busy now. They have prepared interesting booklets about office technology and they have given some very good advice to their members about how they are to meet the new situation. They are told that this is the model agreement. First, so far as the ongoing requirements as to monitoring the introduction of the new technology are concerned, that is all right. Secondly, they say that they want a model agreement on employment. One of the important things about that requirement is that there will be no job loss as a result of the introduction of the system. Then they go on to say that in the light of the increased productivity anticipated, the company should agree to negotiate on a reduction of the working week towards the

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goal of a 30-hour week of four days without loss of pay, improvements in holidays and a lowering of the retirement age on full pension. That is the prescription for the introduction of the new technology into office life.
What are the consequences? They are not so out of this world as they might sound. If clerks are going out of big offices by the dozen or by the hundred, or even, as in the case of the Inland Revenue, by the thousand, what have we to say to those who adopt the new technology when they say, "Well, something must be conceded to those of us who embrace the new world". They want training. Well, that is understood. They want health and safety safeguards. That is understood as well. They also want machinery for dealing with grievances. And naturally they want to know why the new technology is being brought in. Improved services, new services or products, more competitive prices—there can be half a dozen reasons why the new technology would be economic and could be fully justified on the ground of profitability. But these people are not machines. They are human beings, with all the conservative reactions to change that that implies.
One thing to bear in mind in this field, and in many others, is that man is not a rational being. He is an emotional animal. His brain gives him a lot of bother and he prefers not to use it. That is why so many people believe so much nonsense; they cannot be bothered to think it out for themselves. I am beginning to think that it is not economists we want. It is anthropologists; it is socio-biologists. I am finding much more interest at the moment in reading Edward O. Wilson's On Human Nature than any I would get in reading what has been written by my noble friends on economics.
Seriously, though, how are the interests of workers to be reconciled with the need for change? Is it unemployment? Is the policy of the Government full unemployment? Is that what it is? The new leisured classes—is that what it is? If so, what are to be the conditions for the new leisured classes, those who are out of jobs because they have been replaced by new technology and who have to get through life, like the rest of us, as best they can? These are quite serious and great
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problems, and I do not think we are addressing ourselves sufficiently closely to them. I know that at the end of the day we are all yearning for entry into the kingdom of heaven but the probability is that when we get there the future will not be as it used to be!
6.44 p.m.
Viscount TRENCHARD: My Lords, may I add my thanks and the thanks of the Government to the noble Lord, Lord Schon, for introducing this, the latest in a long series of debates, both on productivity and on economic affairs, of which a major content has usually been discussions on productivity. In my opinion it has certainly lived up to its predecessors in the quality of the contributions that it has drawn, and I am quite sure that it will repay reading by all concerned who have listened to it and by many others who have not. That is up to this point, when, as usual, I try to sum up from notes made, rather than from a brief, and from hereon it may not be worth reading to the same extent.
The majority of comments made by all speakers—and the noble Lord, Lord Schon, was no exception, although he told us that we must get moving now—were of a longish-term nature. What is causing the problem? Why have we not put it right? What can we do to put it right? Thus I can assure the noble Lord, Lord Rhodes, that I shall come to the short-term extremely tough time which industry is undergoing, but I will come to it later. If I may, I will start by trying to reply to the debate in relation to the analysis of the British problem in a slightly longer-term way.
I agreed so much with the noble Lord, Lord Schon, when he said that we have not applied the carrot or the stick. I shall return to human nature a little later, against the background of the remarks made by the noble Lord, Lord Houghton of Sowerby, and the possibilities of changing it, but I have said on previous occasions—and I will say it again now—that I am convinced that if we had had the same degree of incentive to work, to work hard, to work rather than not to work, to take responsibility, to take risks, as the Japanese have had for 30 years, we might well be talking about the British work ethic to-day.

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Let me join those who have congratulated my noble friend Lord Sieff. I told him when I saw him at lunch that this was perhaps a unique occasion in that for once I was able to have the last word. Actually that is quite an unfair allegation because as a very junior manager in industry, when I wanted to challenge the policy of the noble Lord, Lord Sieff, he gave me something like three hours and a whole morning with his staff present in order to do it, and I think on that occasion he allowed me the last word. I think perhaps that sums up the unique person that he is, and I just want to add my view that his contribution to this House, which he started this afternoon, can be of immense value. I hope that somehow he will find time from all his great responsibilities to come and make a contribution on future occasions.
My Lords, perhaps in order to have the last word the only thing I found myself thinking as the noble Lord spoke—and spoke about his proved management methods in his company—was that, no matter how we try or how any other country tries, we shall not have all our companies run by Marcus Sieffs and we have to have systems which will accommodate the average and the great spread of management which one will find—and does find—in industry in every country.
In this series of debates which this House has had there has never been any difficulty in the last two years, or possibly three—before that there was some disagreement—in agreeing that the record of this country in productivity was lamentable and was very much worse than everybody else's. So I am not going to produce the new or old statistics which have been produced before, and indeed various contributors to this debate have already underlined our bad record. At the end I will make the odd point about evidence of improvement, of which I believe there is now some sign.
While there has been agreement in all these debates that our record is very much worse than that of our main industrial competitors, there has been a variety of emphases on the reasons for the poor British performance; and as the debate wore on I noted sales, marketing, design, implementation of development, but the engineers did not receive quite so much
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time today as usual. Normally the Members of this House who are extremely well qualified in the engineering profession add their view that this is a major cause of our lack of productivity. Then of course there are the more general ones: lack of investment has been mentioned again to-day; the standard of management, the trade unions, our human relations system. The lack of enterprise culture is very often raised and the anti-industry cult of this country has been raised in previous debates. It is the first time that I have heard the suggestion that it is due to a lack of socio-biologists, but that adds yet another possible aspect.
My noble friend Lord Amory tried to separate causes and symptoms, if I understood him correctly. He did it mainly in relation to the economy rather than the non-productive state of industry, but the two overlap. Therefore I will rest on what he said—and I believe him to be much better qualified to judge than I, with all his long experience. He said that we must keep inflation as enemy number one; that we must pull inflation up, and that, if we do not do so, unemployment will rise to a very much greater level (if I understood him correctly), and furthermore that the tough time that industry is indeed having at present is an inevitable consequence of getting the overall economic priorities right in relation to inflation.
In trying to use the medical analogy of causes and symptoms I noted down, "Let us look first at the condition of the patient"—the patient being British industry; and let us from that try to speculate on causes, on the one hand, and on symptoms, on the other hand. Before I start on this analysis, I think the American saying that anybody not confused by the issue may not have understood the situation is probably true. I believe the condition of British industry at the moment is one of very little money—for shorthand I have written "no money"—and little or no time.
Let me explain what I mean under both those headings. In describing the little or no money I find myself dealing with the point raised by the noble Lord, Lord Bruce, in relation to profitability. I will look up the EEC document that he quoted and I will communicate with him on that document. The work that my Department regards as most authoritative in com-

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parisons of profitability between different countries is that of Professor Hill; this is on an inflation-proof basis and refers to manufacturing industry. The last year in which this was done—because it is a scholarly work—was in fact 1975, and, although there was a small improvement in this country after that, and probably in other countries, it is generally agreed by economists that we are back to roughly the same position in 1980. The United Kingdom return on capital on an inflation-proof basis was 2–8 per cent. in that year; in the United States it was 18–6 per cent.; in Japan 13–9 per cent. and in West Germany 11 per cent.
Of course I agree with Lord Bruce that there are good companies which have maintained profitable records right up to the present time, and there are some sectors—the oil sector perhaps clearly leading at the moment—which are much stronger than others, but those are the overall figures given by what we believe is the best assessor. I believe they show very clearly that for quite a time now British manufacturing industry has been starved of profits and thus has undoubtedly been short of capital. I do not believe that this decline has been going on for a very long time as some commentators often suggest. It is true, of course, that if you measure performance by shares of market, we went down from 40 per cent. in 1880 to 29 percent. in 1913; in 1938 we had 22 per cent. of world markets; in 1955 we were still at 19 per cent.; then over the last two decades came the real slide, and we ended up with 8–8 per cent. in 1974.
Let me explain very quickly what I mean by "no time". I believe that in this country we have so complicated our management task with a mass of intervention, with a mass of legislation and in recent decades with a degree of necessity for constant trade union negotiation not found to nearly the same extent elsewhere in Europe that managers, who actually have a pretty full-time job in running a factory—and I have done that—have in fact been extremely short of time, as well as money, to attend to the longer-term matters, and even to the necessary degree of explanation and communication which has been mentioned today. This has been particularly true in our very big factories, which are a much more time-consuming job to run.
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They have more problems of communication, and it makes it much more difficult to reach the ideal which the noble Lord, Lord Sieff, mentioned of communicating with every employee.
If, therefore, I can suggest to your Lordships that the condition of the patient has been that he has had little or no money and less time, certainly, than his competitors overseas, let us go back to the list of possible scapegoats which have been mentioned in this debate and in others and try to separate causes from symptoms. I suggest that the symptoms of the original list clearly include the marketing and sales, the design questions and the implementation of development. The lack of investment clearly stems to a degree from the "no money" situation, although, of course, almost miraculously British industry has kept up a rate of investment not so far removed in relation to GDP from its competitor countries. So in the main the problem is the utilisation of investment. I suggest that all of those are almost certainly symptoms of the "little time" and "little money" situations. And I suggest that those have been caused by the clobbering of British industry over the last two decades with controls, price controls, income policy (to which I shall return in view of the comments made in this debate) and by the erosion of incentive and the burden of taxes.
I think a contributory cause has to be our unique trade union position which we have taken steps, debated in the House this week and again next week, to try to improve. I would not for one moment contradict the views of all those who have said that the co-operation of all employees depends upon the quality and the activity of management as well. The question of the enterprise culture and education has been well debated in the Finniston debate and I shall not go back over it today. I think that the management position does have to be dealt with to a degree. It is not true that other countries do hot have a variation of standard of management. Everything in my personal experience, and in the time I have had to supplement that in my present position, indicates that there is a big variation of management in all industrial countries.
Of course the manager is responsible for performance and there can be no

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gainsaying it, and thus the adage mentioned today, that there are only bad officers and no bad soldiers, is eternally correct. But you can have a situation where the officers have been discouraged, where the time available to them to improve things in the longer term has been diminished; consider the amount of consultation they have to do in order to take a single management decision. The differences here have been shown by published studies on multinational companies and the amounts of time necessary to be taken in negotiation in factories making the same product and staffed to the same management standards.
These things can make performance, particularly in our larger factories—which are the majority and do affect the overall productivity figures more than anything—else extremely difficult for average and variable management. As I said in the Finniston debate, we have undoubtedly got a shortage of technical management. I would willingly suggest that we swop some accountants, who are doing very well overseas in many areas running many companies, for some engineers, now that our tax rates are sufficiently low to be able to do it, which we could not do a few years ago; bring in engineers to fill the short-term gap while the longer-term measures are taking effect.
It has been suggested in this debate and many times before that the Government's policy is a single strand, one of controlling the money supply only. I have talked about the carrot situation and the tax incentives which we have brought back. The Employment Bill is proceeding through the House at present. Money supply is not alone in our admittedly non-interventionist policy, because we really believe that the variety of situations in industry is not assessable centrally, or to any great extent improvable centrally, except by providing the right conditions.
One other matter which is working steadily towards improvement—and I shall come to any signs of improvement in a moment—is that there really is a spreading realism throughout industry, management and on the shop floors. My noble friend Lord Amory said that our standard of living must fall. I believe that in many parts of industry which are not competitive that is a correct statement and
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that we do depend upon the spread of realism for that most unpalatable fact to become accepted. That contrasts slightly with the noble Lords, Lord Rochester, Lord Rhodes and Lord Hankey, who supported the incomes policy concept.
The noble Lord, Lord Rochester, described the incomes policies that have been tried in this country as makeshift affairs. I do not think that those who brought them in would be very pleased with that description. Indeed, if the noble Lord, Lord Harris of High Cross, were here I think that he would give your Lordships 2,000 years of economic history to show that no incomes policy has ever stuck for long, even when in medieval years they tourtured people in order to try to enforce them.
In contrast to the noble Lord, Lord Rhodes, I believe that it is a question not of saying that the other Government got it wrong, but that the weight of economic history is against the incomes policy route in this and in every other country. The noble Lord, Lord Rhodes, brought in other countries to support his argument, but in my view he changed the argument. Other successful countries such as Germany and Japan—and the United States has stayed with it for a second—have not had incomes policies. I have some sympathy with his thought that certainly past Governments may not have worked so closely with British industry in a national way as have those of some competitor countries. I hope, having spent 30 years in industry, that I can make a small contribution to try to improve the situation. I do not believe, and nor do the Government, that flexible incomes policies and guiding lights can solve the problem, and nor are they practical in the myriad of industrial situations in a big industrial economy such as ours.
Let me turn for a few moments to the problem of improving productivity when volume is static or even when it is being reduced. This relates very closely to the question of new technology causing job loss. From all the longer-term surveys it is perfectly clear that individual firms and parts of industry that have invested in new technology and have kept up to date are those which are employing more and not fewer people. The problem comes when both through world economic stagnation, and more particularly loss of British share

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of market, companies that have not invested in new technology start losing their share of market heavily. Overall in this country we have a backlog where undoubtedly in order to catch up it is not possible to adopt the suggestion of the noble Lord, Lord Schon, and say: "Increase volume and then we can increase productivity". Overall we must carry out a major de-manning in order to become competitive. It is not true of every industry or of every company. I admit that this is, indeed, the hardest human problem and the hardest thing for people to accept.
On other occasions we have discussed the various measures that we take where obvious major de-manning becomes necessary and we shall no doubt discuss them again. We have kept policies and developed some to encourage new growth, new training and retraining and to foster an increase of small businesses to try to relieve the problem and provide new employment when we pass through the short, tough time. The noble Lord, Lord Bowden, is not present, but I point out that tax next year will be on an historical basis with stock allowances still allowable, and I shall follow that matter up in writing.
Let me turn quickly to the understandable worries of the noble Lord, Lord Rhodes, about the short-term situation caused by the strong pound and the interest rates. I think that in his Budget speech my right honourable friend the Chancellor of the Exchequer showed very clearly that he understood those fully and he has given priority so that the interest rate is likely to be able to be reduced at the earliest possible date compatible with pulling up inflation. It was made clear in the last few days that the interest rate has a relationship to the strength of the pound. The strength of the pound, of course, is extremely valuable in helping to get inflation permanently, not temporarily, under control.
I turn briefly to the important point made by the noble Lord, Lord Sieff of Brimpton—these are all technological points—on biotechnology. We are spending money; we are examining the report of ACARD and of others; and we plan to come to decisions as to how much more
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support should be given to that area during the summer. There is no question of its importance not being recognised by the Government and I think that we shall see that develop. I am very interested in the noble Lord's remarks and view on the very pervasive effects of that new technology.
I have spoken about Inmos before, and we shall hold that decision up for only long enough to carry out responsibly, or allow others to carry out, negotiations which we would have been irresponsible not to allow. The fast reactor is receiving a great deal of research and development. Our research and development expenditure in the energy area is high. Yes, we are still strong in inventions. In the analysis of my department the trouble concerns our application post-development. That matter, rather comes back to the point—" no money ", no "time".
There are improving signs and perhaps I may quickly mention them. First, in 1979—and I have said that we cannot be held responsible for much in 1979 while noble Lords opposite have said that we should be held responsible for everything in 1979, so I think that we should split it 50–50—there was a 2 per cent. improvement in manufacturing output per employee over 1978. The Financial Times survey shows for the first time that industry is expecting to de-man to a greater extent than its volume problems would apparently require and that has been shown by the last two surveys. There are many individual examples—which time prevents me from giving, but which are known to my department—of quite substantial improvements in productivity, both in better use of existing investment and in the introduction of new technology. With the widening spread of realism, I believe that this process will continue.
I believe that we must give time for the Government's policies to encourage industry to take major steps forward to match European productivity levels. If we do that on a total scale, on my calculations we could carry the present pound exchange rate and interest rates. I believe that we must speed up this process by every means known to us. Time prevents me telling your Lordships more of the possible ways in which the Government hope to encourage that trend.
Lord SCHON: My Lords, I promise to be brief. We have had a very interesting debate. I should like to thank all noble Lords for having participated, and in particular I should like to mention my old friend the noble Lord, Lord Sieff of Brimpton. Like others who have preceded me, I should like to say that I hope that we shall hear his wise counsel often in your Lordships' House.
I have tried, in the national interest, to convey that we should produce more—and I was speaking about higher productivity—on the basis of selling more in exports, and of a reduction of imports—all that on the basis of quality, price and service. That is all I wish to say in summing up. In conclusion, once again I should like to thank all noble Lords for participating in this very important debate in this time of economic difficulties. My Lords, I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

STREET OFFENCES (AMENDMENT) BILL [H.L.]
7.12 p.m.
Lord AVEBURY: My Lords, it is about three and a half years since we last debated the proposal which is embodied in the Bill now before your Lordships' House, a proposal which I was prompted to reintroduce when I read the reports of the speech of the Home Secretary of 21st March, when he said that measures had to be taken as a matter of urgency to prevent the prison population from growing any further than it already has. He remarked in that speech that five years ago his predecessor, Mr. Roy Jenkins, had said that a prison population of 42,000 would be intolerable, and yet it had already reached a figure of 44,800. He went on:
"We shall need, and in this the courts have their part to play, to see that prisons are not allowed to remain cluttered up with trivial and inadequate offenders who are no real threat, to anyone, except possibly themselves, but whose presence helps to create the extremely acute pressures which afflict our prisons today and all who work in them ".
I could not agree more with the remarks of the Home Secretary.
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However, I think that if Parliament enacts laws which provide that terms of imprisonment can be imposed for any particular offence, we are obliged to set aside resources adequate to accommodate the resulting prison population. If, on the other hand, Parliament would like the courts to impose lesser sentences for a particular offence, or none at all, it is up to us to say so clearly.
Therefore, this Bill would have the effect of abolishing imprisonment for soliciting and would thus relieve the women's prisons of some 300 women a year who are either sent there directly on conviction of an offence under Section 1 of the Street Offences Act, or are sent there in default of payment of a fine for the same offence.
According to the figures for 1978 published in the Criminal Statistics for England and Wales, 245 women were sent to prison directly on conviction of the offence, and the noble Lord, Lord Belstead, was good enough to give me figures in answer to a Question the other day showing that an additional 90 women were taken to prison during that year in default of a payment of a fine for the same offence. According to another Answer given to me by the noble Lord on 16th May, there were 411 women in Holloway prison on 31st March this year, occupying accommodation intended for 245 persons; and in Risley the position was, he said, even worse: 175 women in accommodation that was mant for 85.
I shall not pretend that the passage of this Bill would eliminate this horrific degree of overcrowding, which is far worse than the average for the men's prisons. But I suggest that it would make a contribution towards alleviating the pressure. On other occasions no doubt there will be plenty of suggestions of further categories of women who ought not to be in prison. If one talks to anyone in the women's prison service, one will find that they have no difficulty in producing many suggestions as to how the women who are now accommodated in those prisons could be better dealt with elsewhere. However, I think that this is one component—by no means negligible—of the overall solution.
What does Section 1 of the Street Offences do? It makes it an offence for a common prostitute to loiter or solicit in a

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street or public place for the purpose of prostitution. For the purposes of this section, a common prostitute is a woman who has been cautioned twice before by a police officer when seen loitering or soliciting, or who has a previous conviction under the section. This provision was considered by the Working Party on Vagrancy and Street Offences which was appointed by the then Home Secretary, Mr. Reginald Maudling, as long ago as 1971. In 1974 the working party issued a working paper, and in 1976 they finally made a report, saying that:
"the most effective way to maintain the status quo on the streets (if that is what is wanted) is to retain the present Section 1 offence and the cautioning system".
The purpose of the Wolfenden Committee's recommendations, which have been embodied in the Street Offences Act, was not, of course, to eliminate prostitution, which, as everybody recognised, would have been impossible, but to deal with the nuisance that was caused prior to that Act by large numbers of prostitutes persistently and tenaciously soliciting, particularly in certain areas of London where they annoyed the local residents and made it difficult for any woman to walk through those areas without being importuned.
Some people are afraid that without the sanction of imprisonment, the prostitutes would emerge from the brothels and bedsits where they have been lurking for the last 20 years to become again a plague on respectable citizens and tourists. Here I think that we are in the region of pure opinion, as no one can be absolutely certain what would happen. What can be said without fear of contradiction is that some prostitutes continue to solicit on the streets and are not deterred by the penalties, including the threat of imprisonment; while others, who turned to a variety of different methods of attracting clients, would be unlikely to go back to the relatively uncomfortable and inefficient business of street walking. What they have done is to arrange their affairs so that the clients come to them through massage parlours, saunas, escort agencies, postcards in the windows of newsagents and private parties, such as the one held recently by the unfortunate Mrs. Payne. It is worth noting that the ladies who offered their services at her establishment
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ran no risk of prosecution, and by all accounts they seem to have been able to rely on a higher class of customer than would be expected from casual encounters on the street.
One major social change in the last 20 years, which I think is frequently overlooked in these discussions, is the dramatic increase in offences of violence. The prostitute who relies on picking up men off the streets is, of course, taking a very considerable risk. That must be at least as great a disincentive to soliciting as a method of attracting clients as a threat of a prison sentence. My own conclusion would be that decriminalisation might have a small effect on the prevalence of soliciting, but that any nuisance caused thereby would be vastly outweighed by the beneficial effects of keeping some 300 to 400 women a year out of prison. It is worth pointing out, too, that there are on the statute book other methods of dealing with soliciting of an aggressive or violent nature. Section 64 of the Metropolitan Police Act 1839 has been mentioned to me; I do not know whether this is used any longer, but it allows any constable belonging to the Metropolitan Police
"… to take into custody, without a warrant, all loose, idle and disorderly persons whom he shall find disturbing the public peace, or whom he shall have good cause to suspect of having committed or being about to commit any felony, misdemeanour or breach of the peace, and all persons whom he shall find between sunset and the hour of eight in the morning lying or loitering in any highway, yard or other place and not giving a satisfactory account of themselves ".
Then there is Section 5 of the Public Order Act 1936, which provides:
"Any person who in any public place uses threatening, abusive or insulting words or behaviour with intent to provoke a breach of the peace, or whereby a breach of the peace is likely to be occasioned, shall be guilty of an offence ".
The police in certain parts of the country are perfectly ready to use Section 5 of the Public Order Act 1936 on a fairly extensive scale. I think that if prostitutes were to commit acts of aggression against ordinary passers-by and citizens, there is a whole armoury of weapons on the statute book which the police could use to deal with them.
I asked the Minister recently whether the review of the Public Order Act now being undertaken would include consideration of the use of Section 5 to deal with both

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soliciting by women and importuning by men, and the noble Lord replied on 14th March that the law on sexual offences was entirely a matter for the Criminal Law Revision Committee. Perhaps he could say this evening whether that committee would be able to examine the possible use of Section 5 and what, if any, is the extent of liaison between the Criminal Law Revision Committee and the body which is now examining the Public Order Act.
A questionnaire which the Criminal Law Revision Committee issued last June did not refer to the matter, and in the 18 questions on various aspects of the law on prostitution which they put to the recipients of that questionnaire the only one to which they attached a comment suggesting the answer they appeared to want was the one about soliciting. They asked:
"Should the existing provisions about soliciting by prostitutes in streets and public places be retained?"
And they went on:
"It should be borne in mind that past experience has shown that men solicited by prostitutes are usually unwilling to give evidence and accordingly the Working Party on Vagrancy and Street Offences (Report, para. 87) and the Wolfenden Committee (Report, paras. 251–256) did not favour any form of provision requiring proof of annoyance ".
It seemed to me that the committee had approached at any rate this part of its task with its mind partly made up. It would be helpful if the Minister, when he replies, could give some indication of when the Criminal Law Revision Committee is expected to report. I think the par for the course would be about two years; the questionnaire having gone out in June 1979, the replies would be received in June 1980, with publication towards the end of 1980, allowing adequate time for consultations on the report of the committee, it is unlikely that legislation would come before the House before the Session 1982–83. I suggest that some way has to be found to speed up this process if the criminal law is to be kept properly up to date, not only in this area but as a whole.
I turn to the negative side of the provisions which the Bill seeks to amend. The working party said in their report that the principal criticisms of Clause 1 were:
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"(a)that its use of the phrase ' common prostitute ' is at best derogatory and at worst prejudiced;

(b) that it is differently drafted from comparable legislation controlling male importuners (and at present there is no offence of a man importuning a woman) and thereby discriminates against women; and

(c) that without a requirement to prove annoyance or nuisance there is insufficient concern for the liberty of the individual".

To those should be added the statement of the Home Office Research Unit Bulletin on Women Offenders of July 1974, which said:
"It is quite widely acknowledged that prison is inappropriate to prostitutes. The women involved tend to regard it as a calculated risk of their profession. It can have slight rehabilitative value, even if it affords temporary respite from an exacting life".
If prison, then, has no effect on the prostitutes themselves, their presence there may presumably influence the other women whom they meet. Dr. Megan Bull, the Governor of Holloway Prison, said in evidence before the Select Committee on Expenditure in another place that young girls may be recruited into the profession as a result of the contacts they make with prostitutes in prison.
There are two other points I wish to emphasise. First, sending a prostitute to prison makes it even more necessary for her to continue soliciting and to intensify her activities if she has no other means of attracting clients. She comes out of prison often heavily in debt and, incidentally, if prison sentences are to be retained at all, it seems to be generally agreed that much shorter sentences can be just as unpleasant subjectively, if that is the idea, as the longer ones which are normally imposed; a couple of weeks does the same as a three months' sentence, which appears to be standard for most magistrates' courts. She needs to go back on the streets immediately to make up for lost time and to stave off the most pressing of her creditors. I thought that was well exemplified by the evidence given by Susan to the Expenditure Sub-Committee when she said, and I quote from Paper HC 61, xiv:
"After I got out (three months imprisonment for soliciting and loitering) I was two months behind with my bills. I had £80 of debts to come out to. That was money owing on my furniture, TV, insurance and clubs (hire purchase) besides the £8 to £10 a week I give to my mum for my keep. In the end I had to solicit to get the

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money. I was doing it again within two weeks of coming home. After a while I got an assembly job but I only cleared £30 a week after stoppages. It just wasn't enough for my commitments so I went back on ' the game ' again ".
This of course is not a problem peculiar to prostitutes, but I suggest it affects them disproportionately because they are less likely than most other women who go to prison to have the support of their families, and it is getting worse because women may be given one or more three-month suspended sentences and then, on the second or third occasion, they may come up against a tough bench who will put another three months on top of the previous one or two, so that the woman will spend six or nine months in prison at a stretch.
I spoke to a woman, Jean, this morning in Birmingham, who was sentenced on 2nd May 1979 to three months plus a three months' suspended sentence, so she did six months altogether in Risley Prison, Birmingham. She has two children aged seven and eight, but she was lucky enough that they were able to live with her sister while she was in prison, but of course many women are not fortunate enough to have relatives who will do that. She said to me that in the area of Birmingham where she operates the police know who to pick on and that very frequently they arrest women who are passing through a red light area and who they know, from their recognition of them, have previously been prostitutes, and so they may get three or six months for doing nothing whatever.
The second point I wish to make before concluding is that several of the witnesses who appeared before the Select Committee mentioned the fact that prostitutes tend to have dependent children, so that imprisonment frequently means the children having to be received into care. That, of course, is an extra punishment not only for the prostitute but for the innocent child as well, and the long-term psychological damage it does to the child may be quite severe, apart from the cost to the taxpayer.
Apparently—and I should like the views of the noble Lord on this—no records are kept of the number of children received into care as a result of their mothers receiving custodial sentences, nor has any research been done on the effects of prison
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life on pre-school children who spend time in mother-and-baby units. I wonder whether the Home Office might not start to keep statistics on children received into care from now onwards. Perhaps the noble Lord will consider that point. I also wonder whether he can tell the House what has been the result of the Home Office consideration of the usefulness of commissioning research into the effects of pre-school children being taken into prison with their mothers, which was mentioned in the former Home Secretary's Answer of 17th April 1978.
Lord DAVIES of LEEK: My Lords, what age group was the noble Lord thinking of?
Lord AVEBURY: My Lords, the Answer that was given by the former Home Secretary related to the pre-school children, but in answer to the noble Lord, Lord Davies of Leek, I am informed that although in theory any child of pre-school age may be received into, for example, Holloway Prison with his mother, in practice the accommodation is very limited and the prison takes only children up to the age of three. Other provisions have to be made where a child is aged over three, and these are the occasions on which the child has to be received into care.
Lord DAVIES of LEEK: I thank the noble Lord.
Lord AVEBURY: My Lords, on this point I obtained some figures from an inner city probation department in Sheffield today. The department told me that in the 18-month period between January 1979 and May 1980 17 women were given sentences for soliciting by the magistrates' courts in Sheffield, and among those 17 women, six had either a child or groups of children who were received into care as a consequence of their mother's sentence. I do not know whether those figures are typical; perhaps the noble Lord can enlighten us on this. If that experience was paralleled throughout the country, then it would seem that we are taking a very large number of children into care purely as a result of the convictions for soliciting.
The other fact I was given—and it is very interesting—relating to the experience

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of the inner city probation office in Sheffield is that of 21 statutory clients referred to them by the court, no fewer than 17 were single parents and this tallies with the estimate that was given to me by PROS, the Programme for Reform of the Law on Soliciting, who said that in their judgment as many as 75 per cent. of prostitutes may be single parents.
The next question that I should like to ask the noble Lord about is that of community service orders as an alternative to prison. The board of visitors of Hollo-way Prison said in their evidence to the Select Committee that community service orders may not be appropriate for single parent families—and I have just mentioned the high proportion of single parents who are found among soliciting prostitutes—and they suggested that some form of service which single mothers could carry out in their own homes while looking after their children be devised. I wonder whether the noble Lord can tell us whether the Home Office has looked at that suggestion and, if so, with what result. To what extent are community service orders already being used by the courts for women convicted of soliciting?
I spoke today to another girl, Sandra, who is carrying out a community service order at the moment, and she said to me:
"As an alternative to prison it's better, but why should we go to court at all? I'm doing meals-on-wheels. It's very awkward because I've got a little boy aged seven and you have got to go when they say they want you.
"When I was in prison about five years ago he had to go into care. I was lucky—the lady he went to was very good".
But if we must have a penalty at all, then clearly these community service orders are very much better than sending women to prison.
I mentioned earlier that many other categories of person other than prostitutes find themselves in prison because of the bankruptcy of ideas in our society about how to deal with the whole spectrum of what we would call deviant behaviour. But these categories tend to overlap. Evidence also given to the Select Committee showed that a quarter of the prostitutes imprisoned are alcoholics, a quarter are drug addicts, a quarter have attempted suicide at some time or another, a quarter have a variety of physical disorders, and one in six has a history of mental illness. The Police Federation describes them as
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"inadequate by virtue of a variety of health, mental or other reasons … and are in need of medical help, which the prison sentences do not give".
The behaviour of, tragically, large numbers of persons who are social casualties may be strange and frightening to the normal person, and even normal people may become a nuisance to others when, for instance, they swarm into a city for a football match, drive noisy motorcycles, or park in front of somebody else's house. But we do not imprison people for their behaviour when their actions in other respects are perfectly lawful.
Prostitution itself is not an offence, and while it is certainly not to be encouraged, neither is it right in my view for an act preparatory to prostitution to be treated with such great severity under the law. The offence of soliciting is itself unique in that the accused is treated as guilty before any decision has been reached by the court, by reason of the two cautions which are read out by a police officer, labelling the accused as a "common prostitute". The offence is also exceptional in requiring police evidence only, and not that of the person who in theory has been annoyed.
It is hard to believe that this provision was not the work of Victorian hypocrites, but that it was promoted and supported by many who are still here today. The remedy was indeed far worse than the disease, and now with the enlightened policy announced by the Home Secretary, there is reason to hope that the Government will be sympathetic to this Bill. My Lords, I beg to move.
Moved, That the Bill be now read 2".—(Lord Avebury.)
7.36 p.m.
Lord HARRIS of GREENWICH: My Lords, I hope to speak fairly briefly this evening. However, before doing so, perhaps I should say that I have not hitherto regarded it as proper to intervene in debates on penal policy in the last 15 months, given the fact that as chairman of the Parole Board I should have regarded that as inappropriate. However, I speak tonight for two reasons. The first is that I was involved in a debate in this House, with the noble Lord, Lord Avebury, into the possibility of abolishing penalties of imprisonment for certain offences; that

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was when I was a Minister in the Home Office. The second reason is that in any event the cases of women sentenced to imprisonment for soliciting do not come before the Parole Board, nor indeed local review committees. The sentences are in fact too short to come before those bodies.
As the House will be aware, and as indeed the noble Lord, Lord Avebury, has already reminded us, at the moment the entire prison system is suffering the most grievous overcrowding. The position in local prisons where people are serving shorter sentences of imprisonment is particularly serious, and this being so, it is appropriate for us to discuss any proposal which would lessen the pressures on the system.
A few weeks ago the right honourable gentleman the Home Secretary announced his plans for dealing with this problem. I very much agreed with the approach which he indicated in that statement. He certainly pointed out—and I think it was right that he should do so—that there are no simple solutions to this problem. Sometimes it is argued that there is some magical way in which the pressures on the prison population can be relieved. I am bound to say that I do not believe that such options exist. But certainly we must look at any proposal which has the effect of reducing the numbers.
Some of the critics of the Home Secretary's statement have advanced proposals which I believe would paradoxically have the effect not of reducing the prison population, but arguably in some cases even increasing it, though of course that is not the intention of those who put forward these proposals. Having said that, there is one particular area in which Parliament itself has a responsibility; and it is a very important one indeed. That is when it considers, as it has to when considering proposals for legislative change, the scale of sentences; and, as a result of this Bill, introduced by the noble Lord, Lord Avebury, we are given the opportunity to examine the penalties this evening.
I would say this at the outset. I have come to the conclusion—and tonight, of course, I speak entirely for myself—that in some respects the present law is unsatisfactory. First, I am impressed by the doubts
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which have been expressed by a wide variety of organisations about sentencing prostitutes to terms of imprisonment. The Home Office Working Party on Vagrancy, to which the noble Lord, Lord Avebury, has already referred, has reported that the Prison Service did not see itself as having any useful rehabilitative role in the case of prostitutes, and I think it is self-evident why that is so. And, as the very helpful document which has been provided by NACRO reminded us, this view has been more than confirmed by policy statements made by organisations ranging from the Prison Officers' Association to the prison and borstal governors' branch of the Society of Civil and Public Servants.
Secondly, I am struck, too, by the dismissive attitude of a great deal of informed public opinion about the whole concept of imprisoning these women. They just do not think it is necessary. More than that, many people are I believe increasingly uneasy about a law which can imprison women for the offence of soliciting but which leaves untouched the men who drive slowly through some of our streets trying to pick up these girls. I am well aware that the men who do this, either in cars or on foot, can in certain circumstances themselves be guilty of an offence, but that offence is exceptionally difficult to prove; and, in any event, I think the House must accept that chief officers of police have heavy demands on their resources, and there has to be some limit to the number of men they can make available for this purpose.
I recognise at once that there is a dilemma facing those who take the view which I am expressing this evening. Do we argue that the present law is so unsatisfactory that it should be scrapped altogether, or do we say that what concerns us primarily is the question of imprisonment? I concede at once that there is a need for a law which deals with the nuisance that can be caused by soliciting, by men or by women. I think we would be quite wrong to suggest that soliciting is not a matter which can create an exceptionally disagreeable situation for many of our fellow citizens. It is folly, I think, to pretend that there are not some areas of our great cities in which a man's wife, girlfriend or daughter cannot approach her own front door without being

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approached by men. Furthermore, I think that in a situation of that kind people are perfectly entitled to be quite indignant that that should be so, and, indeed, to demand some protection from the law.
NACRO have argued, in the evidence which they have put forward to the Criminal Law Revision Committee—and, indeed, the noble Lord, Lord Avebury, touched on this particular point a few moments ago—that one way of dealing with this problem is by simply relying on Section 5 of the Public Order Act. It is argued that this in itself would be an adequate answer to the problem. Under that section of the Public Order Act it is an offence to use threatening, abusive or insulting words or behaviour whereby a breach of the peace is likely to be occasioned. I suspect that if I were to ask the Parliamentary Under-Secretary what were his views on that, he would perfectly reasonably, if I may say so, say that this matter has been put to the Criminal Law Revision Committee and, that being so, we should wait to hear their views. That would be the answer which I would give if I were in his position, so I will not ask the question. But, having said that, I should like to echo the question put by the noble Lord, Lord Avebury: When are we likely to get a report from the Criminal Law Revision Committee on this matter?
I now turn, if I may, to the question which is before us this evening; namely, whether the courts, having convicted a woman of the offence of soliciting, should any longer be empowered to sentence her to a period of imprisonment. I concede that if the offence remains—and it will clearly do so in any event until the Criminal Law Revision Committee reports; I think that is inescapable—some women who have merely been fined will in fact end up in prison anyway. We have all spent a great deal of time discussing whether there is an alternative to the imprisonment of people who do not pay fines, but it is an exceptionally difficult problem to find a satisfactory answer to this. Therefore, I would accept, on the basis of the argument which I am deploying this evening, that even if the offence itself was no longer imprisonable some people would still go to prison.
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But, having said that, I very much hope that the noble Lord the Parliamentary Under-Secretary will be able to indicate that the Government are at least prepared to consider abolishing the right of courts to order a term of imprisonment. The overcrowding situation in women's prisons is certainly just as serious, if not in some respects more serious, than the situation in male establishments. Holloway is still only partially rebuilt, and it will be some years before it is wholly in operation. While I was a Minister I had the extremely painful duty of deciding that a new remand centre which was going to be opened at Cookham Wood in Kent, designed to take young men from the extremely overcrowded conditions in the local prison at Canterbury, would in fact have to become a women's prison. It had just been built, and the staff had pretty well been engaged. Then, at the last moment, we had to switch it round and make it a women's prison. In doing so, I incurred severe criticism from the right reverend Prelate the Bishop of Rochester and Chatham, because he said—and I believe he was absolutely right in saying so—that what I was doing was preserving wholly unacceptable conditions at the local prison in Canterbury. Indeed I was, but, unfortunately, I had no choice because the pressure on the women's prisons was so serious that in fact we simply had to make more accommodation available.
It therefore seems to me in the situation I have described that it would be right to treat soliciting in exactly the same way as the Criminal Law Act 1977 dealt with the offence of being drunk and disorderly; namely, by preserving a substantial financial penalty but abolishing the right of the courts to order a term of imprisonment. I do not believe—I must say this in conclusion—that such a change in the law would in any way run counter to the views of many informed members of the public, and I think that it would make a useful contribution to lessening the very heavy burdens which, as I have indicated, are now facing our entire prison system.
7.48 p.m.
Baroness VICKERS: My Lords, I should like to thank the noble Lord, Lord Avebury, for proposing this small amendment to the Street Offences Act,

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and for his speech today, which was most informative. I was very interested in what the noble Lord, Lord Harris, said, because I remember what he said in a previous debate when I spoke and he was in the ministerial position. But I am also rather astonished that he should, apparently, if I have not misunderstood him, think that overcrowding of prisons is one of the main reasons for not sending prostitutes to prison. They are not doing anything illegal; they are not criminals; and I should have thought that this was a very poor reason for suggesting why they should not go to prison. There are plenty of other reasons.
I am sorry that this debate has taken place rather late at night, and I hope that noble Lords not here will read in Hansard tomorrow what is said; because we had hoped, I think, to get the views of this House on what has happened since the passing of the Street Offences Act 1959, and I think it is extremely important. But, as I said in 1977, I still hold the view that consideration should be given to the total abolition of all laws concerning prostitution—and, I should like to add, especially the Street Offences Act 1959.
Since the date in 1977, I have consulted (as has the noble Lord) a number of organisations. I have given talks to interested societies, attended press organisations, met the press from the Continent and attended the weekend conference of the Cropwood Round Table in Cambridge in December of last year. I have received the report from NACRO, also that of the Women's National Commission and that of a number of solicitors and lawyers. Many people agree, it seems, that the 1959 Act is not compatible—and I do not think that this has been mentioned—with the Sex Discrimination Act. In fact, it is totally contrary to what that Act has laid down. The basic fact in dealing with prostitution is that it has always existed, continues to exist and will continue to exist in some form because there has always been and always will be a demand for the prostitutes' services. We all know that prostitutes go on the streets not for other prostitutes but for getting their clients, who are men. However many Acts of Parliament are passed, I suggest that this will continue.
May I suggest that prostitution has
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little to do with what is known as the permissive society. It seems logical that in a permissive society there should be less need for prostitution than there was, for example, in the Victorian era. But the Home Office working party in their Green Paper said:
"The way of life of the prostitute is so remarkable a rejection of the normal ways of society as to bear comparison with the drug addict ".
That, to my mind, is one of the most unthinking and undesirable remarks in this Green Paper. It is a fascinating statement to be made (and put into a document) by people who are supposed to be responsible. Therefore, I have little faith in that working party.
The National Women's Commission considered a lot of these points and said in regard to imprisonment that it may have a certain deterrent value but that they do not see it as a particularly effective form of punishment. Although I do not agree with all the suggestions in their paper, I do agree with what they went on to say:
"The law should be changed to apply equally to men and women. In deciding whether to prosecute, allowance should be made for the fact that in some cases a prostitute's husband or cohabitee, who may be technically ' living on the earnings of prostitution ' is in fact playing a supportive and protective role in accordance with women's own wishes".
This does not happen only in Britain but in several countries in Europe. As the noble Lord has said, the number of prostitutes sent to prison does not reveal a satisfactory state of affairs. In 1978, there were 308 prostitutes in prison and, in 1972, 265. Nothing has happened since the Street Offences Act was promulgated to keep women out of prison. The National Women's Commission went on to talk of other unpleasant things: the poncing by landlords for higher rents, hotel staff who have to be tipped or the prostitutes may be evicted.
At the time of the Wolfenden Report, on which the Street Offences Act was based, I understand that no women would give evidence. I am pleased to say that I was able to arrange in Central Hall, Westminster, to have a meeting at which over 200 women turned up. Also attending were members of voluntary organisations, probation officers and clergy. One of my difficulties was to see that the police did not arrest anybody they knew when they came out of the building. But

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they understood what was happening.
Also, I gave evidence to the Education, Arts and Home Office Sub-committee of the House of Commons Select Committee on Expenditure and I was allowed to take there a deputation of all types of prostitutes who were very eloquent in the views they gave. The noble Lord said that he had read some of this evidence. This is one of the best ways of getting to understand the problem. In order that women should not be sent to prison after being arrested for persistently accosting persons, it should be necessary that the person being accosted should either say that he or she was not worried or should go to the court to give evidence if the prostitute pleaded not guilty. I am sure that it is against British law that a person should go to court and have only, say, the police officer's word against hers. It is essential that evidence should be given.
I should like to do away with the phrase "common prostitute". No person should be so labelled for life. I think it is most unfair. Supposing that a woman, no longer a prostitute, commits a trivial offence and goes to court. The magistrate asks for her past record and is told, "She is a common prostitute". She may by then be happily married. Perhaps she had been apprehended for accosting only twice before being labelled a common prostitute. That should be abolished.
One of the difficulties at the present time is the number of foreigners in this country. I know, and others may know, that foreigners expect to obtain the services of prostitutes. I was told only this morning that the foreign guests of a certain hotel had asked for some women to be supplied to them. This is a great temptation for the people who are asked to provide women, and sometimes names are given by officials at the hotels concerned.
I should like to ask the noble Lord who is to wind up a specific question about the shortage of staff in Holloway. I was told only yesterday that women are often locked up from 2 p.m. until 8 p.m. Can the noble Lord say whether this is correct?
I should like to suggest that Section 54(1) of the Metropolitan Police Act 1939, under which annoyance has to be proved, is quite enough—and in those days the fine was £2. Things have changed. Surely that is enough. We do not need the Street
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Offences Act. I should like to see the Street Offences Act repealed and then, if necessary, to use the other Act. Other action can be dealt with by the Public Order Act 1936 or by the by-laws which most local authorities have.
May I conclude by reading what was said in 1957 by the organisation known at one time as the Josephine Butler Society:
"It is a matter for profound regret that the Wolfenden Committee has, in contrast to its work on the problem of homosexuality,"—
and the Wolfenden Report started what are now called the "gay men"—
"placed so narrow an interpretation on its terms of reference in regard to prostitution.
"The great fundamental, that good law educates, and unjust law prostitutes the moral standards of society has been ignored. Equitable and just law is the first requirement for fostering a sense of equal responsibility in both men and women. Concentration upon the prostitute in the streets as a nuisance, rather than part of a complex moral and social problem, leads to complacent disregard of the moral effect upon the public mind of the legislation proposed ".
My Lords, that still holds good.
7.59 p.m.
Baroness HORNSBY-SMITH: My Lords, when the 1959 Bill came in I was then, I think, the bê te noir of the noble Lord, Lord Avebury, when we both sat in another place. Indeed, I had to take the Bill through its Committee stage at that time. That Bill was not introduced without an enormous wealth of evidence from all sources and authorities who had to deal with the great metropolitan cities; and some of the strongest representations were made by the then Tourist Board because of the enormous number of complaints they had from highly reputable visitors who found the manner of behaviour, the soliciting, the threatening and sometimes the sheer blackmail, was a real menace on our streets. I have a very open mind about whether gaol is of any value, so it is not on that point that I am mainly disagreeing with the noble Lord and my noble friend Lady Vickers.
I should like to say to my noble friend the Minister that, as I understand it, prostitutes are not lightly sent to prison unless there is a long record of persistent soliciting—and sometimes in rather unpalatable circumstances. Secondly, a very substantial number of young girls come to

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the great City and do not have financial means. They do not find themselves in Soho, but probably get a lift on a lorry and finish up in the East End, round about Stepney, in some of the clubs there. By the "network" they may find themselves in a situation where someone says: "I know where you can find somewhere for the night". They perhaps start off being given a job in one of the cafes.
During my investigations at the time I toured some of the cafes in Soho. Some months later I was to recognise in the police courts some of the girls whose debts had suddenly run up from their benefactors and they were told how they could make more money. They were thereupon set up in the West End.
I agree with what I know is the view of my noble friend Lady Vickers, that many of the prostitutes who (shall we say?) straightforwardly offer their services are prepared to accept: "No, thank you. Not interested ". But they are not all archangels, and a minority can be extremely vicious and use blackmail. It is here that I would quarrel with the noble Lord's amendment, and that is on the limitation of £50. That is peanuts to the highly paid professional in London—absolute peanuts. If she goes to prison she is losing a week, a fortnight, or possibly—in a severe case—a month.
If the noble Lord inquires of some of the hotels, he will find that one of the problems of their security officers is to see that some of these astute ladies do not bribe a casual member of the staff to let them into some wealthy visitor's room. When he finds a prostitute in his room he feels his reputation is at stake. She tells him quite bluntly that she will swear that she was invited there and he can pay up or otherwise. Anybody who believes that this type of situation does not happen is living in Cloud Cuckoo-land. While I would not go all out in maintaining that there should be a prison sentence, I think that there should be a latitude for the court to decide whether a higher amount should be imposed where there is evidence of someone trying to blackmail.
Lord DONALDSON of KINGS-BRIDGE: My Lords, I am puzzled by what the noble Baroness is saying. This can only be based on the belief that
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prostitution is an offence. The noble Baroness knows as well as I do that in this country prostitution is not an offence. Blackmail of course is. What we are discussing is not whether prostitution is an offence or whether some prostitutes make a great deal of money and may be very disreputable people. This is part of our background, and there is no offence of prostitution in this country. What we are discussing today—and I do not think the remarks of the noble Baroness are relevant to it—is whether soliciting by a prostitute in public is an offence.
Baroness HORNSBY-SMITH: My Lords, I accept what the noble Lord says. I hope he will forgive me if I feel that the background on which the present Bill was passed—then, many of the offences occurred in the streets, and the legislation was passed to stop the nuisance and soliciting in the street—has been transferred to what I would call public places; I refer to where somebody trespasses into somebody else's room in a hotel. That is the basis of my reservation.
There may be times when a £20 fine is enough, but I think that the £50 limitation and maximum is too small. I should like to ask my noble friend the Minister whether, when young girls are involved, it will still be possible, if they are under age, to take them into care, even if this amendment were passed? Girls—and we have had examples of girls aged 13, 14 and 15—who are under age should not be covered by this amendment. That is all I want to say, my Lords. I did not think I would be here in time to speak. I feel that we cannot treat too lightly something which can be a great embarrassment and quite a menace in our capital cities.
8.7 p.m.
Baroness BIRK: My Lords, the noble Baroness who has just spoken at least broke the chain of attitude as far as Lord Avebury's Bill is concerned, because there seemed to be almost complete agreement—certainly up to a certain point—about it. She asked the Minister how often people should be sent to prison for prostitution. My noble friend Lord Donaldson explained that prostitution is not an offence. I can tell the noble Baroness (and save the noble Lord, Lord Belstead, from doing so) that loitering and soliciting are the offences and there is a maximum penalty of £50

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fine for the first offence, £200 for the second and £200 and/or three months' imprisonment for the third or a subsequent offence. It depends entirely upon the court. I am a justice of the peace. We have cases which come before us and, on the whole, we try to avoid sending women to prison. But the way is open for other courts to operate the law as it is.
The first time I spoke in this House in connection with this subject was in making the second speech I ever made in the House, in 1968 when the late Lord Chorley brought forward the Street Offences Bill. The purpose of that was to remove discrimination from the law on prostitution and soliciting and to redefine it to include loitering for immoral purposes. It is very interesting that at the time the late Lord Stonham, who was the Minister of State on the Government Benches, said, when I put very much the case that my noble friends have been putting tonight, that the Criminal Law Revision Committee was looking at it and would be reporting very shortly. I said (at column 1330 of Hansard for 8th February 1968):
"The question of referring the whole thing to the Criminal Law Revision Committee and waiting for their report seems to me to be wrong for two reasons. I mean no disrespect or disbelief of what my noble friend Lord Stonham has said, that they are ' very ' shortly going to examine this area, but that means rather longer for those of us who have been impatient for many years".
My Lords, they still have not reported. I then went on to say:
"I still disagree with my noble friend, because I think the advice we should be giving is not technical advice "—
from the Criminal Law Revision Committee—
"but advice on policy, advice on the relationship between men and women, equity of punishment, sex discrimination. This is not a job for the Criminal Law Revision Committee but a job for Parliament. That is my view about this. "
I still take the same view.
The problem with the original Bill—and we are now going back over 12 years—was that the law on loitering for immoral purposes was going to be a rather wide and a rather insubstantial thing to establish. Therefore, it rather fell down on that, together with the fact that there was then—I am not sure about this—a stronger degree of male chauvinism in your Lordships' House than there is now, and certainly there was a packing of the men together to support each other so that they
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did not come within the purview of any Act. Then, in the following year, in 1969, Lord Chorley brought forward another Street Offences Bill. In connexion with that, he said it was based on it being an offence for any person in a street or public place
"… persistently to accost any person or persons with a view to offering or obtaining sexual services for payment or reward ".
That Bill got its Second Reading although the first Bill did not, but it was lost because of wrecking amendments. There the matter stood. There have been various attempts by noble Lords, including the noble Lord, Lord Avebury, who has brought forward this Bill tonight, to try to get the law altered.
I think the question of whether or not the fine is £50 is quite irrelevant. The noble Lord is trying to do what I think is absolutely right. He is putting down a marker and from then on, as the noble Lord, Lord Harris, said—I will not repeat it all—suggests dealing with this particular offence in the context of not sending women to prison. It is really what we are talking about and moving towards, I hope; in other words, that the offence itself should go as other speakers have said, and that it should be dealt with by the law as it stands on the basis of nuisance.
If two people want to get together through being solicited or accosted and it does not displease either of them, there is no nuisance created. They are both adults, and therefore the law has nothing to do with it. I think the trouble is that unfortunately there has always been an incestuous relationship between law and morality in this area. There has also been, and is still, a great deal of hypocrisy about this, and I should not be surprised if the all-party penal reform group which is to report fairly soon on a vast number of offences which they feel should not result in imprisonment does not follow the line which I am following tonight.
The only point at which I would part company with the noble Lord, Lord Avebury, is that he was asking how much was being done in the way of research and monitoring the effect on children when their mothers go to prison. I really do not think one needs to spend a great deal of money and research on

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that. We know it must have a very bad effect on the children when their mothers go to prison. I would much rather not send the mothers to prison and spend the money on the research on the children. If you do this by "nuisance", the Minister is probably going to say, first, that we should perhaps go back to the situation as it was before the 1969 Act. The noble Lord, Lord Avebury, dealt with that, but I think the whole sexual climate has changed considerably in this country—that is a "guesstimate" just as much as any other, if the noble Lord does say that this is going to happen again. What we have to do is to behave in a civilised and humane way, do away with the offence and then see what happens.
The other point then probably arises: What then do you do if you have people who are found guilty of creating a nuisance—let us get away from the words "loitering" and "soliciting"—and then they do not pay their fines? I would say that one should work along the lines of proposals for other fines, for example, as regards the non-payment of maintenance and debt. If it is proved that there has been a deliberate or wilful refusal to pay, then in those cases one considers that as the offence in itself, for which the ultimate sanction would be prison.
I think the noble Lord, when replying is also going to refer to the fact that the Home Office working party finally came out in favour of leaving the law as it is at the moment. That is not surprising when one looks at the composition of that working party; seven Home Office officials; four senior police officers, one DHSS official and one official from the DPP. None of the voluntary organisation dealing with prostitution was represented on the working party—or, for that matter, vagrants—so I would not put my faith in that particular report.
Lord AVEBURY: My Lords, if I may intervene, the noble Baroness might also have reminded the House that out of all those people she has mentioned on that committee there was only one woman.
Baroness BIRK: My Lords, the noble Lord has made the point for me. It is a fair point, but I do not like the idea of the "statutory woman". Let me say there
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were not even two women on the committee. There is also the point that if you set up a committee like that you probably ought to have somebody who is in the trade on it, and thus have a prostitute on that committee. Be that as it may, I would support my noble friend Lord Harris in that something really needs to be done in the interim, not only on the basis of keeping more people out of prison—which is absolutely essential, as I think we would all agree; at least I hope we would—but in order to deal in an interim manner with this proposition. However, I think that the noble Lord, Lord Avebury, knows very well there is not very much chance of this Bill emerging as an Act of Parliament as it stands. I should have thought that very strong guidance could have been given to magistrates and courts along the lines that imprisonments should not be one of the penalties used in cases like this until the law is changed, unless there are very special circumstances. In other words, the emphasis should be so strongly against imprisonment that it really becomes almost disused.
Finally, I would say that it is perfectly true, as the noble Baroness said, that prostitution will go on as long as there is a demand. If there is a demand there will be a supply to meet it. I was at one time a prison visitor at Holloway Prison and I remember, many years ago, there was a young girl there, who was only 20. The chaplain asked me whether I would take her on because all the other visitors had "had a go" and had not got very far with her. I must say I did not either, except that I think I learned much more from her than she learned from me—I mean about her attitudes. When I asked her why she did it, she said: "Tell me of any other job where you can get up late in the morning and earn the sort of money that I am earning".
The effect of rehabilitation or doing anything for her meant nothing at all, and the fact that she had been to prison once then took away that deterrent. I know the difficulty the noble Lord will find himself in when he replies, but I would hope he will be able to say that the Government are thinking along these lines and that the whole attitude to this offence has got to be changed. We really have to grow up as a society when we are dealing with adults. In the meantime, any

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interim measure that can be taken will be taken, and either the Criminal Law Revision Committee will be reporting almost immediately or he will say: "The whole thing has got moribund and we will just forget about it all together and get on and take action ".
8.19 p.m.
The PARLIAMENTARY UNDERSECRETARY of STATE, HOME OFFICE (Lord Belstead): My Lords, I think it is fair to say that the principal issue which is before us this evening—and I am grateful to the noble Lord, Lord Avebury, for raising this matter in the form of his Private Member's Bill—is whether or not a prostitute who solicits in the street or in a public place should be liable to be imprisoned. That is really what we are talking about. It is an issue which, as your Lordships are aware, has been considered by two substantial bodies in the last 20 years or so, the Wolfenden Committee in 1957; and then the Working Party on Vagrancy and Street Offences in 1976.
The first thing thing I should like to say is that neither the Wolfenden Committee nor the Working Party which reported 19 years later can exactly be accused of advocating a system of criminal sanctions leading to a large-scale imprisonment of prostitutes; rather the reverse. I listened with great interest to the speech which the noble Lord, Lord Avebury, made, and I think that the debate which his Bill has given rise to has been of importance this evening. But, if I may say so to him, the point which he did not address his speech to was the broad effect which the 1959 Act has had. That Act reduced substantially the number of women found guilty of soliciting, and this may be said to have justified in some considerable measure the recommendations of the first body and the endorsement of those recommendations by the second.
However, the Government's attitude to the noble Lord's Bill this evening will be based on a rehearsal of the arguments put forward by either of those two bodies; not indeed on those raised during the passage of the Criminal Law Bill of 1977 when the noble Lord sought the same objective as he is seeking now. On that occasion, of course, it was the noble Lord, Lord Harris, who spoke for the Government of that time. But the Government
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today cannot support this Bill as it stands, and the most compelling reason is that the law on prostitution is being reviewed as part of a comprehensive exercise on the law on sexual offences by the Criminal Law Revision Committee, which is being assisted by the Policy Advisory Committee on Sexual Offences. It would be inappropriate, in the Government's submission, to consider making this one aspect of the law on prostitution revert to the position that obtained before the 1959 Act in advance of the findings of those committees, which will enable this aspect to be viewed in a more general perspective.
Because the noble Baroness, Lady Birk, did so, I shall not rehearse the structure of the penalties of the 1959 Act. The simple fact is that the Act provided for enhanced financial penalties, with finally—on being convicted for a third time—a prostitute who solicits being liable to a maximum term of imprisonment of three months imposable instead of or in addition to a fine.
Lord AVEBURY: My Lords, will the noble Lord remind us whether, in 1959, the courts had power to award suspended sentences, or has that been introduced since then? Is not the effect of that that many prostitutes serve as much as six or nine months in prison instead of the three months originally contemplated by Parliament?
Lord BELSTEAD: My Lords, that is rather a fast ball. As far as I remember, the suspended sentence most certainly came after that particular date. On the other hand, I do not draw the same conclusion that the noble Lord draws from the question he has asked.
If I may go on for a moment on the tack that I am on, the committee recommended that a short term of imprisonment—and I am referring to the Wolfenden Committee—would be available on third or subsequent conviction because it considered that there was some danger that persistent offenders would simply pass on the fines to their customers, or that they would seek more customers. Within the committee's reasoning was also the hope that the threat of possible imprisonment might make prostitutes more willing to accept the imposition of a probation order.

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The noble Lord in his speech spoke of children being received into care because their mothers are in custody. I agree with the noble Lord that each situation of that kind is potentially tragic. But I would remind the noble Lord that without a sentence of imprisonment as a possibility there undoubtedly are people—among them prostitutes who solicit—who will not agree to a probation order. The Wolfenden Committee had some very firm remarks to make on this particular subject, and when the noble Lord also spoke, as he did, of the merits of community service for these offences I would just say that the 2 per cent. of women found guilty in 1978 of soliciting who were made subject to community service orders were of course given those orders as an alternative to imprisonment.
If I may just turn to the question of imprisonment, because this is what is uppermost in our minds, I remind the House for a moment that the Working Party on Vagrancy and Street Offences endorsed both the graduated penalty system and the availability of imprisonment as a final sanction. But, if one looks at that report, what is absolutely clear is that the 1976 working party took the view that prison was a deterrent against soliciting. Indeed, they went so far as to say, if I remember rightly, that they thought it would not greatly increase the prison population. I would put it to the House that the evidence would appear to justify that view. It would also justify the view which I sought to put forward at the beginning of my speech, that the effect of the 1959 Act had been to reduce the prevalence of soliciting in the streets. In 1959 over 12,000 women were found guilty of soliciting. A year later, by which time the Act had begun to have effect, that number had dropped to less than 3,000.
I was not sure from the speech which the noble Baroness, Lady Birk, made, but it seemed to me from her remarks that she felt that soliciting was not really a public nuisance. Let me just finish, because I am going to say something nice. It may be that the noble Baroness is too young to remember the days before the 1959 Act, but at my age I can certainly remember when, before the 1959 Act, in all seriousness parts of the streets of the
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capital were a public nuisance. I do put it to your Lordships that in this respect the 1959 Act has had an effect.
Baroness BIRK: My Lords, I thank the noble Lord very much for what he has said. I had heard about it; somebody did tell me what went on! I must put it to him that this again is going backwards and just making a guess at what is going to happen. Once you have done that and emptied the streets, it is very unlikely that the same thing will happen again. It is proved by what the noble Lord has said, and the figures we have from the Home Office, that the numbers of people who have been in prison are really very, very small, otherwise there would be more people being imprisoned. The courts are not imprisoning people, but prostitution is still going on, though it is going on in a different way. It is going on, if you like, in a more comfortable way, off the streets through call girls and in all sorts of ways. That is the pattern today.
Lord BELSTEAD: My Lords, I am interested that the noble Baroness thinks that if the final sanction of imprisonment were to be done away with one would not revert to the sort of figures for soliciting that were found before the 1959 Act. I am not saying that in any way to cross swords with the noble Baroness. I am genuinely trying to listen to what has been said in this debate, because it is an important debate this evening. In this connection may I say that I discerned a difference between the speeches and the objectives of the noble Lord, Lord Avebury, and the noble Lord, Lord Harris. The Bill of the noble Lord, Lord Avebury, and the speech which he made on it, would not only remove custody as a final sanction for soliciting but also reduces the maximum financial penalties which there would be for someone who is soliciting. As I understood the speech of the noble Lord, Lord Harris, he spoke of the desirability of removing the final sanction of imprisonment, but also spoke of the necessity of substantial financial penalties. This evening, all I can say is that we shall have to see what the Criminal Law Revision Committee has to say about this aspect of the matter. But certainly there is an important distinction here between those attitudes of the two noble Lords who spoke.

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Before I finish, I just want to make one or two quick points. First it is important that I should just give the statistics of the prison numbers. On 30th June 1978, which, I am afraid, is the latest date for which I have figures, there were just 37 women convicted of offences relating to prostitution who were in prison. That figure represented about 0–1 per cent. of the sentenced prison population. None the less, the noble Lord, Lord Avebury, was quite right to quote my right honourable friend the Home Secretary. He had every justification for doing so.
Any contribution, however minimal, to a reduction of the pressures on our prisons is generally to be welcomed. Let us make that absolutely clear. But I do not think it can be properly brought about by simply abolishing imprisonment for certain offences, without full consideration of the implications for other related areas of the criminal law and, more important, without a careful assessment of the social consequences. Indeed, in his speech the noble Lord, Lord Harris, gave a word of warning about measures which are very often, with the best will in the world, designed to reduce the prison population, and may be found, in the final event, to be counter-productive.
Incidentally, the noble Lord, Lord Avebury, asked me whether the Criminal Law Revision Committee would be dealing with Section 5 of the Public Order Act in its deliberations. My answer to that question is that the CLRC will deal with all aspects of the law on prostitution, including the possibility of using provisions in other legislation, such as Section 5 of the Public Order Act.
Both the noble Lord, Lord Avebury, and the noble Lord, Lord Harris, asked me when the Criminal Law Revision Committee would report. We may have to wait until next year for their working paper, and perhaps a year or two after that for their final report, covering the whole range of sexual offences, to be published. But I suggest that it is worth waiting until the full examination, which the previous Government asked these committees to undertake, is completed.
Finally, there were two questions which my noble friends Lady Vickers and Lady Hornsby-Smith asked me, and I am sorry that I cannot give fuller replies. My
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noble friend Lady Vickers asked me about the present conditions at Holloway. I have not visited Holloway for exactly a year and I am therefore speaking on advice, which is that at the moment the real problem in the prison is with remand prisoners. On rare occasions it has been found necessary to keep sentenced prisoners locked up for prolonged periods during the day, but they are almost always allowed association on most days, and would it were even better than that.
But it is the case that the particular difficulty arises with remand prisoners. Those who elect to work are naturally out of their cells while working, but for those who elect not to work it is sometimes difficult to allow association periods, because of staff shortages. May I just add that we are pressing ahead as fast as possible with the building project at Holloway, about which the noble Lord, Lord Harris, spoke. One of the things that I am glad to be able to say to your Lordships this evening is that at least during the last year one of the silver linings to the many clouds in the prison service is that recruitment to the prison service has enormously improved. I hope that this, in its turn, will have its effect not only on men's, but also on women's prisons.
I am afraid that I am answering my noble friend Lady Hornsby-Smith off the cuff, when I say that, as I understand it, the noble Lord's Bill would not have any effect on the provisions of the Children and Young Persons Act, with regard to taking young people into care. I must finish, and I merely express a hope, which is that the noble Lord, Lord Avebury, may feel it right, in the light of this debate, not to proceed with this Bill, in the knowledge that he will none the less be able to return to it in due course, because of the reports to which I have referred this evening.
8.35 p.m.
Lord AVEBURY: My Lords, I should have been very satisfied with the debate which has just taken place, if I had listened only to the weighty and significant speech of the noble Lord, Lord Harris, since he was the Minister who was sitting on the other side of the House on the Criminal Law Bill of 1977. His views have shifted significantly since then, in that he now does

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not see prison as an appropriate penalty for this offence.
If I may say so to the Minister, it is no good him trying to drive a wedge between the noble Lord, Lord Harris, and myself on this issue, because in drafting this Bill I was not particularly concerned with the amount of the fine, but was simply enabling the House to discuss the general principle of whether or not imprisonment is an appropriate penalty for this offence. If we could get that out of the way, the noble Lord, Lord Harris, and I would have no difficulty whatsoever in agreeing on what kind of levels the fines should be.
I was also very grateful to the noble Baroness, Lady Vickers, with her immense knowledge and experience, for having taking part in this debate and for having emphasised, as she did, that the provisions of Section 1 of the Street Offences Act arc incompatible with, at any rate, the spirit of the Sex Discrimination Act and should be looked at in that light.
I am grateful, too, to the noble Baroness, Lady Hornsby-Smith, although I did not entirely agree with her. I thought that she enabled some points, which could have got in the way of the consideration of this Bill as red herrings, to be clearly dealt with by the Minister. The noble Baroness, Lady Birk, rightly pointed out to your Lordships that this is a job for Parliament and not for any number of committees, however weighty and important they may be.
I really think, in view of the timescale that the noble Lord, Lord Belstead, has given to us, that the Criminal Law Revision Committee will not report before next summer and then it will be in the form of a working paper which will lead to a final report, perhaps two years later, that I was far too optimistic in the timescale that I mentioned at the beginning of this debate, when I said that it might be possible to have legislation on the Street Offences Act, in general, in the Session 1982–83. What the noble Lord, Lord Belstead, has just said means that we could not expect anything to happen before 1984–85, at the earliest.
While, as the noble Lord indicated, it is not appropriate for us to proceed with this Bill at such a late stage in the Session, when it would be impossible, even with
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the full backing of the Government, to get it on to the statute book, I am quite certain that, in the light of the timetable which the noble Lord has mentioned, we shall not have heard the end of it, but that others, apart from myself, will wish to introduce legislation with a better chance of success, at the beginning of the next Session.
We have, as the noble Baroness, Lady Birk, said, to deal with this matter in an interim manner. Even if we cannot change the law, there is the valuable suggestion which she made that guidance should be given to the courts, so that they would use this penalty only as a last resort. The noble Lord, Lord Belstead, did not touch on this point and perhaps it needs a little more consideration.
There were two questions which I also put to him, concerning the number of children taken into care after sentencing where a woman had previously been given a suspended sentence of three months, which was added on to a further sentence imposed by the magistrates, so that she did six or nine months in total. There was a further question which I asked, and which the noble Lord may be able to answer in writing. But as I have said, I think it would be inappropriate for us to deal with the Bill at this late stage in the Session. However, I take this opportunity of giving the noble Lord, Lord Belstead, and the Government notice that, if nobody else brings in a more comprehensive Bill this autumn, early in the Session when it has a chance of success, I shall be doing so myself. With that, I beg leave to withdraw the Bill.
Motion, by leave, withdrawn.
Bill, by leave, withdrawn.

LICENSED PREMISES (EXCLUSION OF CERTAIN PERSONS) BILL
Lord INGLEWOOD: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the Order of Commitment be discharged.
Moved, That the Order of Commitment be discharged.—(Lord Inglewood.)
On Question, Motion agreed to.

THE ARTS: CAREER TRAINING
8.41 p.m.
Lord VAIZEY Lord VAIZEY rose to ask Her Majesty's Government whether they are aware of the difficulties facing young people who are training for careers in the arts. The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. First, may I thank all noble Lords in the Chamber who are going to take part in the debate for their great concern about this important issue. A number of other Peers wanted to take part, but they cannot, unfortunately, be present, notably the noble Lord, Lord Balfour of Burleigh, the noble Lord, Lord Miles, and the noble Lord, Lord Vernon, who is unfortunately ill. I hope very much that he will soon be better. I am sure, though, that despite their absence it will be an interesting and valuable debate. Not least, may I in anticipation thank my noble friend for his reply and say how much we are looking forward to the maiden speech of the noble Viscount, Lord Chandos, who has come here tonight specially for this important debate.
I had the privilege of being the chairman of two committees of inquiry into training for the arts which were established by the Gulbenkian Foundation. One was into drama and the other was into music. There were two further reports: one on dance, chaired by Mr. Peter Brinson; and another on the visual arts, chaired by Dr. Richard Hoggart, will soon follow. The three reports on the performing arts—I know that my noble friend Lord Gosford will be speaking particularly about the visual arts—make many similar points, and I wish to draw your Lordships' attention to them tonight.
Achievement in the arts is of course a matter of talent and genius, but the high levels of achievement are dependent upon high levels of training. You get good dancers, good orchestras, good actors, out of a well tilled and well fertilised seedbed in which individual plants of genius and talent are nurtured. The rise in the standards of British dance, drama and music in this century, and especially in the past 30 years, is principally due to the excellence of the training which is provided here in Britain. All the reports provide chapter and verse for that. There is no
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doubt at all that training leads to excellence, and we have excellence in this country probably without parallel in the Western World.
The next point I want to make is that we are dealing with very small numbers of people. All children of course have artistic gifts of one kind or another but the number who are gifted, in the sense that they have the potential to go on to become professional performers or to play in one of the great symphony orchestras, is exceptionally small. In the report on music, we estimated that out of the 10 million children in our schools, something like 30,000 children were probably gifted in that sense. The figures for dance and for drama may well be smaller. Not all of those people with these very rare gifts will want to make use of them in their professional lives. Many gifted people, like my noble friend Lord Annan, whose brilliant lecture on Shakespeare the other night showed that he would make a brilliant actor, has chosen to use his gifts in academic life. Not all of these gifted people want to be professional performers, and many of these very gifted children are dealt with perfectly adequately in normal local authority schools or in independent schools, like St. Paul's Girls' School. So the numbers involved that we are talking about are very small, but of course they are terribly important.
If I may come to the first problem to which I wish to draw your Lordships' attention, if you want to exercise a musical or a dancing gift—and there can be few greater gifts that can be bestowed upon anybody than to have the gift to be a musician of genius or a dancer of genius—you have to begin very early. Local authorities are more and more setting up schemes to identify talent and to develop it through music centres and the use of peripatetic teachers in ordinary schools. But there is no doubt at all that some children need a special environment. Noble Lords will know that Mrs. Shirley Williams in the 1976 Education Act exempted schools for music and dance from the general provisions about secondary educational reorganisation which were incorporated in that Act.
Lord DONALDSON of KINGSBRIDGE: My Lords, the noble Lord will remember that noble Lords on his side

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of the House were bitterly opposed to this exemption.
Lord VAIZEY: My Lords, that is perfectly true, although no doubt the noble Lord will also remember that I helped to move various amendments along those lines at that time.
Lord DONALDSON of KINGS-BRIDGE: Yes, my Lords, that is right.
Lord VAIZEY: If we take some of these schools, like Chetham's School, Manchester, which is a very great school, or Wells Cathedral School or the Royal Ballet School, the difficulty is that these schools are charitable foundations. Although they in some respects get a direct grant from the Department of Education and Science, I hope that ways and means can be found for local authorities to give direct support to these schools—as, indeed, is being tried very imaginatively by the London Borough of Brent for the Purcell School—and that other local authorities will not be unduly restrictive when they are called upon to pay the hefty fees for those very few children who need to go to these schools—perhaps in the whole country at most a few hundred in every year.
May I now turn to the second set of questions relating to the colleges—sometimes misleadingly called schools—which take people from 17 or 18 onwards. Some, like most of the arts schools, the Royal Northern College of Music, the Central School of Drama and the Guildhall School, are in the public sector and are adequately financed. Others, including some of the most prestigious, like the Royal Academy of Music, the Royal College of Music, the Upper School of the Royal Ballet, the London Contemporary Dance School and RADA, are in the private sector, and they are finding it increasingly difficult to raise funds. I have for very long thought that for many of them a carefully negotiated entry into the public sector would be for the best. But one problem stands out, and it is the vexed question of mandatory and discretionary grants to students. Roughly speaking, if a British student goes to a university or to a polytechnic to read for a degree, he is in most circumstances qualified for a grant to cover the fees, and
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a maintenance grant, which is of course means tested, to cover his living expenses. But for other students attending private colleges or non-degree courses—this applies especially to dancers and to actors, for the course at the Upper School of the Royal Ballet is a non-degree course, and this also applies to a good number of musicians—the grants for fees and maintenance are at the discretion of the local authority.
Now the fees in the private sector are necessarily large since they have to contribute to all the costs of the institution which in the case of the universities and the polytechnics are covered by the state. These fees are naturally quite beyond most students. In these hard times, this is where most local authorities, or many local authorities, are cutting.
The consequences are that many really brilliant candidates are not able to train and that some outstanding institutions, like the London Contemporary Dance School, are threatened by closure. That is particularly sad because, as many noble Lords will know, Mr. Robin Howard, having overcome enormous personal difficulties, has created this school which is one of the most distinguished in the world, and it is now threatened by closure. It would be a terrible tragedy if this outstanding contribution to the artistic life not only of this country but of Western Europe and North America were to close.
I tried to get the law on this matter amended during the passage of the Education (No. 2) Bill, but my amendment was defeated. I cannot for the life of me see the reason why the dimmest polytechnic student in business studies or the stupidest chemist at a university should get a mandatory grant while a brilliant dancer or musician is left to the vagaries of discretion. Now that the Prime Minister has reaffirmed in the strongest terms at the Royal Academy Dinner the Government's commitment to the Arts and has announced today an extra £1 million to the Royal Opera House fund, perhaps we can look at this matter again.
It is surely illogical, as the noble Viscount, Lord Eccles, has often said, to protect the specialist secondary schools in the Arts and then, the moment the

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children leave the junior school in the Royal Ballet at the age of 16, to leave them to the vagaries of local authority discretion when they get to the upper school. It is a bizarre arrangement. Of course the argument is used that it is difficult to discriminate between one kind of student and another. I think that is the wettest kind of argument I have ever heard. After all it is an old adage that "To govern is to choose" and if civil servants cannot devise a scheme I cannot see why they should have such enormous salaries. I am sure it could be done if there was the political will.
I turn now to what is fundamentally the most important issue of all, namely, employment. The over-supply of people trained for the arts seems to me to be endemic in a free society. If you never dare to sell your talent then you never win the prize for expressing it. It is in the nature of being a free country that more people will try to get into the professional arts than are likely to succeed. In my opinion therefore there will always be unemployed actors, artists and musicians. It is a very difficult thing to measure because people are reluctant to give up this ambition in the face of repeated failures. All our attempts to measure it statistically ran into the sand. It does not make it any less unhappy or miserable for the people concerned because it is something which is in the nature of things, but, if we could limit the supply of training places and help to regulate entry to some extent by setting up proper career patterns, I think we could mitigate the misery and ensure that the really able boys and girls progress in their careers.
Two very promising things point the way. We now have a training council in drama under the chairmanship of Mr. Van Straubenzee, the Member of Wokingham, a training board for music under the chairmanship of Mr. John Hosier of the Guildhall School of Music, and one for dance under the chairmanship of Mr. Michael Wood, formerly of the Royal Ballet School. These boards represent the employers, the unions and the training bodies and their job is try to match demand and supply and to raise standards at the training institutions. I hope that one day we shall see a training board for the arts of which these important existing boards would be constituent elements.
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That would be an enormous breakthrough because it would link one in to the whole power base of the Manpower Services Commission and all the agencies attached to it. It is important because one of the reasons why the arts have been so badly treated has been because they have not been organised as the rest of the economy is organised. That could be a misleading and philistine statement to make, because I share the view that we do not want an enormous bureaucracy dealing with the arts; that would be death, as it has been in Eastern Europe. "The spirit bloweth where it listeth". On the other hand, there is a great body of legislation and rules, like social security, the tax system, and so on, which affect the arts as much as they affect everything else in our lives.
There is little doubt in my mind that those of us in the arts have to organise if we are to win the legitimate rewards which are available to other people in our society who are organised. It is indicative that we have virtually no lobby in the other place or here, whereas the heritage lobby—which, after all, is ultimately dealing with dead art—is immensely strong. The unions, like Equity and the Musicians' Union (for which I feel very warmly because I have worked with them for a long time) are fully seized of this and I think they are growing more and more influential and we shall see more of their impact on Parliament in the next few years.
I come now to my last point. After graduation, there has to be a path to a full career. The most promising development is the National Centre for Orchestral Studies which was set up by Mr. Nick Tschaikov, a former member of the Philharmonic. My report endorsed and developed his idea and it has the support of the Musicians' Union, the BBC and the Association of British Orchestras. It is located at Goldsmiths' College—that is Dr. Richard Hoggart's college—and it gives graduates in music a full-time professional training in orchestral playing, which is something we have never had before in this country. It prepares them for excellence, but the trouble once more is grants. It picks the candidates to play a particular instrument but the candidates might live in the wrong place to get the money to get them through the course.

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I have only a couple of points to make in closing my speech. The major question is, what help do we need from public authorities? First, quite clearly we want mandatory grants for people taking courses in the arts. That really is essential. The second requirement is an open mind about the entry of some private bodies of great distinction into the public sector. That may be unacceptable in the present atmosphere of cutbacks and economic hard times, but it ought not to be. The equation is simple. We want more money for the gifted who form, certainly, a much smaller number than the talented. If the country does not look after the gifted, then, in my judgment, we might just as well give up talking about the outstanding achievements of this country in the arts.
But even on a strict economic calculus the reports that the Gulbenkian Foundation has supported suggests less rather than more public expenditure, for a very simple reason. Perhaps I may explain, since the Minister on the Front Bench at the time could not take it in, although I am sure this Minister will. The present position offers no firm guidance to local authorities as to which are strong and which are weak colleges and schools. Discretion is used to support a large number of private institutions indiscriminately. In our view—and I speak now for the members of the committees which I chaired—too many students are now trained, with a consequent overcrowding of the labour market. We want fewer students to be trained, but trained to an even higher standard. The way to do that is to make the good schools and colleges financially secure enough to enable them to turn away mediocre applicants. At the moment they are having to take in anyone who can pay the fees. So that is why mandatory grants for institutions approved by the training boards are essential for excellence and economy.
My Lords, I have ranged over a wide area of the topic and inevitably I have spoken briefly and superficially about a subject to which I have devoted much study and which I believe to be fundamental to the arts in this country. What used to be lacking was knowledge. The Gulbenkian Foundation has now made knowledge available and the time has
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come for action. The foundation, the unions and the employers have taken some of the action; the training boards are in existence and so is the National Centre for Orchestral Studies. It is now time for the Government to accept their responsibilities.
8.59 p.m.
Lord BEAUMONT of WHITLEY: My Lords, I am delighted to be able to be the first to thank the noble Lord, Lord Vaizey, for having raised this matter with us tonight. We know of his work with the committees of the Gulbenkian Foundation and also some of us know of other work that he does in the arts world, helping the proliferation of the arts and helping others, and we are grateful to him. I think we ought also to express our thanks for the immense help which the Gulbenkian Foundation has given to the arts in this country and to this subject in particular. I think it is right to say that our discussion tonight would not be half as informed as I hope it will be if it had not been for them. Although unfortunately some noble Lords have had to remove their names from the list, we have a distinguished list of speakers and we are delighted to see the name of the noble Viscount, Lord Chandos, who is about to make his maiden speech.
I am going to trespass on your Lordships' time—though not very much of it—to go a little wider than the area covered by the noble Lord, Lord Vaizey. That is because he has covered it so well and there is very little with which I disagree. There will be a certain amount, I think, that will emerge in the course of what I am about to say.
I am speaking tonight on behalf of the general feeling of those of us in the Liberal Party who have paid particular attention to the problems of the arts in modern life and what Government should do and should not do about it. I think it is important to put what is being said tonight against a rather broader background. If one had to make a choice, if the money was so short, as to whether you were going to cultivate excellence or you were going to cultivate as much as possible of the bubbling art which can be encouraged at the grass roots among the people of this country, it is the latter that I would choose. It is, of course, a

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false dichotomy. On the whole it is difficult to have one without the other, in either way.
But why I think the grass-roots effort is the more important is because if you have the grass roots then I think it is impossible that the real geniuses and the really talented people, or at least a very large proportion of them, will not burst their way through and find help, indeed find the help that they are finding from the Gulbenkian Foundation and from your Lordships' debate tonight. But I think it is possible to have a sterile situation in which the few geniuses that there are in every generation are sedulously cultivated and the rest of the art world of the country goes cold and stale. I think that is something which we ought never to allow to happen. I am quite certain that the noble Lord, Lord Vaizey, and I are at one in thinking that both are desperately important, but I thought it important that we should not lose track, even in discussing this rather narrow subject tonight, of the basic importance of the arts in society.
To that main point I would add just three shorter ones, almost plucked at random from among the advice I have received from numerous Liberals who work in these fields. The first is the only point on which I think perhaps I disagree with the noble Lord, Lord Vaizey. I do not think I want to see fewer schools dealing with the arts, although I entirely take the point that there must be discrimination in the way that state money is used in supporting pupils in the arts. I think we must get away from the idea, which we sometimes have, that if you cannot get a job in the profession of the arts then in some way your education in the arts has been wasted. It has not. Education in the arts is a wonderful education and can be used by people in themselves in the whole of their lives. Of course it is a pity and of course it is a tragedy, and I would not deny it for a moment, if people with real talent are not allowed to use that. But what I am saying is that that kind of education is never wasted, and I am not entirely certain whether it is right to say that if you concentrate on fewer schools for better education you must necessarily get rid of the slightly less good schools and the less good education. We must
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remember, going back to what I was talking about earlier, that we have the need for the teachers and the animateurs who will in fact keep alive this feeling for the arts in the great mass of the people. We are at last no longer really a philistine country; that artistic feeling does exist in many places and in many ways.
The second minor point I wanted to make was that we must be very careful that we do not concentrate on the special schools to the exclusion of postgraduate entry. I know the Gulbenkian Trust took this fully into consideration when they made a report under the chairmanship of the noble Lord, Lord Vaizey. I do not think it has been mentioned and I think it is important that it is.
The third point I want to raise is the importance of the ethnic arts or ethnic artists. It is very difficult to speak on this matter without appearing to be condescending in some way, without producing half-baked theories as to whether what we need is pure ethnic art from our ethnic minorities or for them to be merging into us. AH I do say is that there is a danger of losing the art that can be produced sometimes in wonderful ways by the ethnic minorities who are with us to stay, and to lose it would be very sad indeed. T. S. Eliot pointed out in his Notes Towards the Definition of Culture that a culture always benefited from the diversity of the sources on which it could count and it always suffered from uniformity. This country is very lucky to have so many ethnic minorities, and one of the things we can actually take from them and use is their arts. Do let us never forget that when we are discussing the main subject of what we are doing about art education.
Before concluding, my Lords, I should like to repeat, or at least re-emphasise, what the noble Lord, Lord Vaizey, said about mandatory grants. It is, as he said, absolutely absurd that somehow in this country, which has produced and is producing great musicians, great artists, great sculptors, where our arts are in some ways in many fields at the top of what the world is producing, it should still be thought of as an optional extra which is of no importance. That is something which the Government should do and can do straight away, and I hope they will do

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something about it, as indeed I hope they will do everything they can to meet the points the noble Lord, Lord Vaizey, has put.
Lord TAYLOR of BLACKBURN: My Lords, I rise on this occasion to support completely the noble Lord, Lord Vaizey, because I totally agree with the propositions that he has put forward.
Lord MOWBRAY and STOURTON: My Lords, order. Is the noble Lord in order? We have a list of speakers and a maiden speaker should be speaking next.
Lord TAYLOR of BLACKBURN: I beg your Lordships' pardon.
9.9 p.m.
Viscount CHANDOS: My Lords, I, too, must thank the noble Lord, Lord Vaizey, for the opportunity to discuss this important and, even more, urgent question. I must say first of all that I can lay no claim to the depth of study and the qualifications which the noble Lord, Lord Vaizey, possesses, and that is particularly so in the area of dance and the theatre. I, too, can claim Robin Howard as an old friend of some 35 years. I have always been interested and aware of what he has been doing at the Institute of Contemporary Dance, but the dance has never played as much a part in my life as music.
At this stage, I should like to pick up a point which the noble Lord, Lord Beaumont of Whitley, made about ethnic contributions. At the Institute of Contemporary Dance, I saw a performance which seemed to me to achieve what I did not believe was possible in dance—namely, a performance that contained such complicated intellectual and, indeed, cerebral ideas that I would not have believed it possible. It was a dance performed by a solo dancer who was black and whether it was due to a genius which was in him irrespective of his colour, or whether it was a particular contribution which came from his ethnic origins, I do not know, but I merely put it forward as a point.
I have in the past had some connections with the theatre. I was in a theatrical management company of charitable status which did not try to make money, and I was a director of a commercial manage-
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ment company which did try to make money. The latter put on some plays of which I was proud and which lost money; and also some plays of which I was ashamed and which made money. Therefore, on a general basis all that I can really say is that I fully support the recommendations that the noble Lord, Lord Vaizey, has advanced tonight; namely, that mandatory grants should be available for the arts as they are for other subjects of higher education, and there should be—but obviously on a longer-term—some reorganisation of education, especially in music, in the colleges.
Having said that, I shall confine any further remarks to the field of music. For, although I have no professional qualifications I have continuously for the past 25 years been involved with various types of musical organisations and two in particular were concerned with young artists. For about 15 years I have been chairman of the National Trust Concert Society which, until two or three years ago, was responsible for putting on concerts in National Trust houses. That active function has now reverted to the National Trust which has grown, which has an organisation and which is happy to take it on. Partly by design and partly because of economic necessity those concerts employed a very high proportion of young artists. If one has a house which can accommodate an audience of perhaps 150, the economics mean that one must look for promising young artists at the beginning of their career. For that we depended upon the most expert professional advice and also on the wide knowledge of a number of my colleagues who had irons in the fire in a similar way in other organisations.
One of the problems that were brought home to us was, for example, that a promising young pianist in this country who, say, enters the Leeds Festival Piano Competition is at a great disadvantage as regards his competitors from, say, Eastern Europe simply because he does not have the exposure to the public, he does not have the opportunities to perform. That is one of the very grave handicaps which, in my view, are faced by young artists in this area.
I would agree, too, with the views expressed both in Gulbenkian and tonight by the noble Lord, Lord Vaizey, that there

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is a strong argument for raising the standards of entry to the musical colleges; reducing the number of students in the musical colleges; improving the ratio of teachers to students; and raising the standards on leaving, often after, I think, a fourth year, especially for string players.
A musician friend of mine, who already has an international reputation, I think expressed it fairly succinctly when he said that what we wanted was rather less of a finishing school and rather more of the conservatoire. At this time I do not propose to go further along the lines that the noble Lord, Lord Beaumont of Whitley, has followed about the general virtues of music for education. I agree with the noble Lord, but I do not think that this is the occasion on which to expand on this.
For a moment I should like to draw on my personal experience. I can claim no formal musical education whatever other than that I made an unsuccessful attempt to play the piano up to the age of nine. The lady who taught me, no doubt an inept pupil, could not resist pulling my then copious hair, and I abandoned this in an attempt to avoid baldness. Nevertheless, I cannot imagine what my life would have been like without music. It may not be a very scientific way—I might have learned much more quickly if I had understood more about it—but, simply by using my ears, it has come to play an almost major part in my life and there are very few days when I do not listen to music.
Therefore, I think that when we talk about the balance between concentrating on the excellence at the top—that is, producing performers of the highest quality—we are talking about education as well. When the noble Lord, Lord Beaumont, talks about a few musicians of genius, I do not think that he has quite understood what the noble Lord, Lord Vaizey, has said, which is that when we talk about excellence we are talking about a quality of a first-rate orchestral player, not of a world-famous star.
How much does musical life in this country owe to the efforts of, for instance, Sir Robert Mayer?—who has exposed children to something that they did not imagine. I think that we owe an equal debt to Sir William Glock, whose work
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on the original Third Programme has continued so that musical horizons which never dawned even on our parents have been available to everybody in this country who, of course, went to the trouble to listen.
There is something formidable about what is regarded as serious music. I suggest with some diffidence that perhaps it is just as important to achieve first-rate performances of second-rate works as well as not particularly distinguished performances of great masterpieces. In Vienna the New Year concert of what seems to me to be very second-rate music, and what Sir Thomas Beecham charmingly described as his "lollypops", brings into the musical field people who would not otherwise listen.
There is one point for which perhaps I could make a special pleading. It is something about which I know a certain amount. Since its formation I have been the chairman of a body with a charitable status which administers a baroque orchestra in this country which I think I can describe as second to none, though some critics have said that it is the finest in London. This is a development over not more than the last 10 years in this country, perhaps even shorter. It raises particular problems about training. The performance from original scores on original instruments, or copies of them, and in a style which, after a certain amount of research, is as close as we can get to what the composer intended, is very exacting. No doubt the position in the colleges is improving rapidly as there is a feedback through the professors and teachers who are themselves experts in this particular kind of performance, an expertise which they have probably had to achieve the hard way in their working life. I think that it is peripheral to the general argument, but it reinforces the importance of the high standards in the music colleges and, above all, of the necessity for a fourth year when required.
The economic prospect at the moment is, I think all your Lordships will agree, fairly bleak for the immediate future, but we must look beyond this, and whatever solution is arrived at, it is certain that the next 10 years or so will bring a totally different world for us to live in and that it will be hastened on us by new technologies. In some form or another, we

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must deal with increased leisure, whether it is due to working a shorter week, to earlier retirement or, alas, to continuing unemployment. In that world the arts—I have spoken with feeling about music but I am sure this applies equally to the other two—have an important role to play. If we do not build on that now, let alone allow to perish the valuable institutions we have, it will be much too late to do anything about it when the new world to which we look forward comes.
9.21 p.m.
Lord BIRKETT: My Lords, what a pleasure and privilege to be allowed to be the first to congratulate the noble Viscount, Lord Chandos, on such a confident, civilised and, above all, enormously knowledgeable maiden speech. How appropriate also that it should be on the arts that he spoke, considering the enormous gifts to the arts, the dedication to them, that lie within his family, a family whose name, I am happy to say, is embodied in what is now one of the most famous and distinguished theatres in Europe. But I am sure your Lordships will not thank me for expatiating upon the noble Viscount's forbears but will want me to say how enormously we enjoyed him himself and his maiden speech. It is not often that one can say, hand on heart, that one agreed with every single word of a maiden speech, but that indeed I can say, and I know I echo all your Lordships when I say how very much we hope to hear him often in this House.
I wish also to add my voice to those who have congratulated the noble Lord, Lord Vaizey, on introducing this debate, on such an important topic. It has been covered by Lord Vaizey and those who have spoken subsequently so widey that I do not intend to detain your Lordships for long. I intend in fact to take up only one aspect of Lord Vaizey's opening remarks but to echo them perhaps even more fervently than he did. He said that employment was a major factor and I believe, to take him up on the wording of his Question—which is the difficulties facing young people in the arts—that the biggest difficulty facing young people in the arts is the profession which they hope to enter. In many cases, the profession they hope they are entering is either in
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decline or on the point of going out of existence altogether. If not, they face other difficulties of employment that their training can scarcely have equipped them to face.
I wish to talk about two areas with which I have had some slight acquaintance in my working life. One of course is the theatre, and here there is a particular problem. Everybody knows—it has almost become a cliche of our own, by now limited, self-advertisement—that our acting and theatres are the greatest in the world, are a world attraction and are one of the few remaining aspects on which we can confidently congratulate ourselves. I think that our acting schools might share in that; certainly the distinction of their direction and the enthusiasm of their pupils would lead one to believe so. It is, therefore, for the theatrical profession in general, and certainly for the casting directors of those great theatres who have some potential to offer work to young people, a desperately dispiriting thing to find that they cannot do it. They are not empowered to offer work to brilliant young talent emerging from acting schools.
I do not want to involve myself in a debate about union procedures and union attitudes about which I am not totally informed. But to prevent young people entering a profession because of the dire and catastrophic under-employment of the older members of it may be sympathetic in a way but cannot in the long run be anything except suicidal. A policy which allows no young blood in until better times—those better times which by now are becoming legendary, certainly in financial terms, and which I doubt we shall ever see—will eventually wind up supporting a profession which can offer only King Lear and Gloucester, and in which Edgar and Edmund are no longer castable. I beg the unions in their attitude to consider that the normal cycle of human life must be preserved in acting, as it must in any other field.
So far as the films are concerned, the problem is different. There is a flourishing film school in the National Film School, but there are 'indeed other film schools, and they, too, are flourishing. They face a different problem—this time not from the unions, who have made an understanding approach to this matter and have in fact undertaken to see that the

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path into employment is not strewn with too many obstacles for the graduates of these schools. No, the problem for them is quite different. The problem is that the profession which they are entering has long been regarded as self-sufficient, so commercial, so rich, and indeed in some cases so disgraceful, that it needs no help whatever from private funds, or Government either; that the moguls of the world happily support it and grow rich upon it, and that no further action is necessary.
A small corner remains in this attitude which says that of course there is film art. It can confidently be left to the British Film Institute, because film art consists of either old films or foreign films—not exactly our own industry. Your Lordships will be relieved to know that I do not intend to weary you at this hour of the night with a lecture upon the dire economic circumstances of the British film industry. Your Lordships have been wearied with it before, and not only from me. Nevertheless, I believe that the point I am making, though I make it in slightly joking terms, is real. There must be an understanding that to enter a film industry which makes films—and like any other art they have their high points and their low points—requires some kind of opportunity to be offered in a national film industry. You cannot work exclusively in an archive, and you cannot be expected to go abroad immediately.
So the problems of the film industry are concerned with an understanding that some chance is needed later, and that films do not always involve millions. In fact there is a growing caucus of films in this country which shows that you do not need an excessive and almost plutocratic amount of money to be able to make a film. From the amateur world of the 8 millimetre film maker up to the minor film maker, and the off-shoot film maker in full 35 millimetre professional circumstances, films are possible on a limited but nevertheless exciting scale. That fact needs to be realised by the public, by the Government, and by institutions of all kinds when considering the output of our film schools.
Lastly, I wish to take up one further point of the noble Lord, Lord Vaizey. He drew a very nice contrast between the gifted and the very gifted, as I understand
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it. It was a contrast, if I jotted down his figures fast enough, which involved 10 million children going in and 30,000 coming out. That represents a tapering effect, and as I understand it, it is the funnel of interest tapering to the group of real talent. If we are to accept those figures, and certainly the principle behind them—and it is difficult not to—I think we must realise that it is very early that we have to start looking at our children to see how they are going through that long, exciting but in the long run probably not encouraging tunnel.
We do a great deal for our teenagers, for our 14, our 15 and our 16-year olds; we have competitions at the end of the road for our graduates; we have competitions for our university students; and we have grants—I appreciate all the points which have been made about the mandatory grant, but I am no expert on it and cannot speak to it—but as yet we do not do much among children before their teens, up to the age of 11 or 12, to encourage them to perform or exhibit, even on the most amateur terms, on school terms, their excitement and their talent in art. I believe (I have spoken briefly before on this subject, and I shall be even briefer now) that an international, or at least a national, children's art centre, where the children of the world, as opposed to the up-and-coming already-forming graduate talents of the world, can meet each other to perform and to excite each other about the artistic possibilities of the world, is something which, somehow, we must design, and fight for; because it is at that age that we shall start that long process to which the noble Lord, Lord Vaizey, has so eloquently referred, which leads them to become the practitioners of the arts whom we all admire.
9.37 p.m.
The Earl of GOSFORD: My Lords, first of all I should like to congratulate the noble Viscount, Lord Chandos. I, too, made my maiden speech in an arts debate, two or three years ago; and I was very interested to hear of his involvement in these thorny matters. Interestingly enough, more or less all the protagonists in that debate are here this evening. I should also like to thank Lord Vaizey for asking this Question, and for extending it from his original Question, which was going to be restricted to the performing arts.

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However, this bestows a great responsibility on me, as I must declare my interest as a visual artist and as honourary chairman of the Artists' Union.
I say right away that I agree with Lord Vaizey on the matter of the mandatory grants, and I supported his amendment to the Education (No. 2) Bill. I also agree with several sentiments which he expressed in his speech. Not least, I share his burning enthusiasm for the arts in this country. However, as he will well know, I do not agree with him that the answer lies in limiting the supply of training places. There are dangers here which I shall endeavour to explain. In effect, I believe the answer is very much broader. First, the problems as regards art and design courses are similar to those outlined by the noble Lord. The foundation course gets a discretionary grant, the degree course a mandatory grant by the local education authority. To enter a degree course you must have qualifications ranging from three A-levels to five O-levels. The preferred route through the various foundation courses caters for 96 per cent. of the students; 3 per cent. get straight into the degree courses but must also be academically qualified as above. That leaves roughly 1 per cent. who can still get into degree courses with no qualification, but the college must get permission from the validating body.
Here arise some of the dangers. One of the dangers which is recognised is that mostly middle-class children are in higher education—which is also recognised as not a good mix. The other danger is that academic qualifications may become the norm, thus cutting off the chances of those who are inarticulate through any other means. May I read from the page of questions which I sent to the Minister earlier today? Is a subject like mathematics when used as a generalisable skill, say, as an A-level qualification, regarded as being of greater value than an art A-level? If so, what is the reason behind this?
I differ from the noble Lord, Lord Vaizey, and I agree with the noble Lord, Lord Beaumont of Whitley, in that I do not believe that there should be more money for the gifted. There ought to be more provision for all to have a chance of further education; and if their talents
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lie in the arts they should not be denied the discipline of training, even though this might eventually lead to a different career, especially as talent may not be immediately obvious but may come through after several years' training. I am indebted to a friend for giving me a list of people who have benefited from visual arts education but have taken up different careers. They span from Makepeace Thackeray to David Storey, the playwright, Gerald Hoffnung, the composer and musician, Gerald Mansell, of the BBC; the noted art critic, John Berger, Roseburg, the poet; and we all know the Beatles, to name but a few.
I am also indebted to a head teacher who sent me the following information:
"The most important single fact about the education of artists and designers is that there is not enough of it. Speaking now of degree level education, the present proportion of the post-school age group who enjoy the benefits of advanced further education (i.e. higher education) is approximately 13 per cent.—and this is the figure for all subjects. Virtually no other developed country educates so few of its post-school population, and the figure is now stabilising, or dropping, after a fairly rapid rise from around 6 per cent. in the early 1960's. New courses in higher education are almost non-existent; … The number of students taking degree courses in art and design is of course an extremely small proportion of that 13 per cent.; I think the figure is now around 4,500 graduates per year in all art and design subjects … The number of people graduating in Fine Art each year, I think, is around 1200. This is also the number who enter the system, more or less".
I should like now to quote from Lord Redcliffe-Maud's document, Support for the Arts in England and Wales, (founded again by Gulbenkian) and dated 1976: I read from the paragraph headed "Education and training"
"The excellence of our artists, professional and amateur, and our increasing enjoyment of old and contemporary art depend in each case more on education than on anything deliberate arts patronage can do. A revolution, therefore, in educational policy over the next ten years which brought the arts nearer the heart of the curriculum in British schools (and teacher-training institutions) is what I would most dearly like to see ".
He goes on:
"… what we need is another revolutionary change, this time in the scale of national expenditure. Within the next five years or so, the adult education movement must receive priority such as it has had at no time in our history, and when it does the arts must at last have their chance ".
This is underlined by the progressive approach of the National Union of Students. They make several points: that

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reducing teachers and courses reduces choice; that school-leavers should be able to choose a worthwhile course, not necessarily with a job in view but a good all-round education. They point out that we are moving into times of less employment and therefore more opportunity and growth in the leisure area, where a cultural outlet is necessary to soak up creative energy. They believe that a good healthy stock of artists will be necessary for more opportunities not only to use art in the service of the community, but also linked courses such as fine art and practical printing techniques et cetera, to help gain export markets needed so desperately by Britain by good marketing through original design.
We should perhaps remember the importance of industrial design in the building of the great Wedgwood company by the coming together of the artist Flaxman and Wedgwood himself. The National Association of Teachers in Further and Higher Education—NATFHE—of course are worried about the cuts and the effects of the intention of streamlining through the new body, the Technicians Education Council.
I should like to ask the Minister my next question. As a result of the Further Education Circular 1/80, what steps are the Government taking to protect the vocational and degree level art and design courses which are necessarilly staff intensive? Special provision must be made to protect some of these courses which, while they do not attract a mass of people, arc none the less essential. The fear is that technical courses will stay and fine art courses will be scrapped first, thus ending up with colleges run only for certain studies.
I come to my next question. As a result of the local authority resources failing to keep abreast of the pay increases, will the Minister give an assurance that the staff/student ratios will not decline any further? One fear is that the Delaney system will have disastrous effects on the establishment of the art colleges, not least the practical element of overseeing in laboratories and expensive equipment. Here I agree with the noble Viscount, Lord Chandos, the teacher/student ratios must not worsen.
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Further education must strengthen links with industry. The London College of Printing is, I believe, very much affected as many processes are required and injection of the real world by part-time teachers brings in expertise from a wide range of disciplines. The fear is also therefore that cuts in staff will kill vitality, and the fear is a return to academicism. May I ask the Minister also what steps are the Government taking to protect part-time teachers, so necessary for the DA courses? I should like to quote from a speech made by Norman St. John-Stevas entitled "Arts in Education", on 21st March 1980. He said:
"In conclusion, I would like to say that education in the arts can no longer be regarded as the aquisition of specialist knowledge unrelated to everyday life. It is a vital ingredient in living a fuller life, in building a richer society ".
Finally, we move into the area of employment of artists and designers. The demand for designers is great. It is all a question of attitude. It is well known that artists and designers form part of managerial teams in the most successful firms abroad, notably in Japan. Design is an integral part of the whole industry. The Government have underlined their belief in the arts and I applaud the creation of a Minister with a seat in the Cabinet. But art is nothing without artists, who must feel as secure as the vest of society in order to carry out their work. As the Redcliffe-Maud Report said: "We underpay our artists".
I should like to quote from the TUC working party report on the arts which says this:
"There is no doubt in the working party's view that society does not benefit fully from the work of performing and creative artists. Much of the exploitation and under-employment of artists arises from the unsatisfactory terms and conditions of their employment, which are often of a casual nature. For every one of the stars and other brilliant successes in the arts there are many artists who make their contribution from a position of acute economic insecurity, which militates against them making a significant contribution to society ".
There is no category for an artist so far as the DHSS and the Department of Employment are concerned. They neither fit on to the professional register nor the worker register. Where are all the provisions that other countries are promoting, such as a percentage of building costs? Bulgaria, for instance, recognises that

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artists newly out of art schools will not yet have developed nor necessarily have found a market. They allow an artist to take a job which is most suited to him and to take half a day off to pursue his career in the arts. Also, I believe that Bulgaria has several thousand artists who are in fact living off their work as full-time arts artists.
May I ask the Minister whether he will approach the Arts Council to look into provisions that could be made to help young artists immediately on leaving art school?—as I believe these major grants and awards usually go to mature artists. I should like to quote now from a speech by the right honourable gentleman Mr. St. John-Stevas at a meeting of the representatives of the regional arts associations on 9th November last year. He said:
"I intend to do all that I can to enable those in the regions to enjoy our great national achievements in the arts but the regional arts associations have a special role to play."
In order to encourage devolution from the centre, as expounded in the Redcliffe-Maud Report, how much effect has the report had on the level of commitment to the arts by the local authorities? That report says:
"The new local authorities created by the 1972 Act are the chief arts patrons of the future. Local government is the democratic instrument whereby individual members of a community combine their efforts for common purposes within limits laid down by Parliament. Local communities in district and county have recently lost some of their traditional functions (sewage disposal, for example, water and health) but they now have the power (though no legal duty) to ensure that all members have the opportunities to practise and enjoy the arts.
"The future of the arts in England and Wales now chiefly depends on the extent to which, and the pace at which, these local councils come to regard the use of their arts patronage powers as part and parcel of the social fabric which they already help to sustain through their provision of education, housing, the social services, roads, land-use control, police, fire-protection, and the rest of local government. "
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So I differ with Lord Vaizey on the need for less rather than more public finance.
I am heartened by Norman St. John-Stevas's quote on 28th April this year:
"Nor are the benefits those of prestige and influence only. The arts can genuinely be said to pay their way. In every field from literature to painting they earn money for Britain. This is especially true of the performing arts: a high proportion of the tourists who flock to our country every year are drawn by the magnet of the British theatre. "
But I do not agree with him when he said the following, in June 1979:
"… private patronage frees art from the threat of censorship and establishmentarianism which constitute the unacceptable face of state support for the arts ".
The reason why I am a bit doubtful about that is that in the document put out by the Association of Business Sponsorship of the Arts it is said:
"It is very important firstly to distinguish between patronage and sponsorship. We are only dealing with the latter and it is also important to talk to businesses not in terms of the effect that they ought to be helping art (that is quite clearly not so) but more in terms that there are perfectly normal business reasons for being involved in art sponsorship. If ABSA can look after the interests of business when it is involved in the sponsorship of the arts, and can ensure that business will get a good return on its investment it will be the best possible way of ensuring the continuing increase in the total amount spent by industry on the arts in the UK".
I, like every Member of your Lordships' House, I am certain, dislike any kind of censorship whether it be by state or private hands.
Let me end by pointing out that the Richard Hoggart-chaired inquiry, again sponsored by Gulbenkian, that Lord Vaizey spoke about at the beginning, will tell us a lot more about the artists. Its terms of reference really are the inquiry into the economic situation of the living artist. I hope it will be only a short while now before that is prepared.
9.53 p.m.
Lord CRATHORNE: My Lords, may I, first of all, congratulate our maiden speaker, the noble Viscount, Lord Chandos. It was a truly marvellous maiden speech, without any question one of the finest I have heard in this Chamber. Seeing the noble Baroness, Lady Elliot of Harwood, still in the Chamber, it is a rather fascinating fact that her half-sister married the noble Viscount, Lord Chandos's grandfather, and I shall leave your Lordships to work that one out! At this late hour, I expect that the shorter my speech the better it will sound to your Lordships, so I shall indeed be brief.
As with everyone else who has taken part in this debate, I should like to thank my noble friend Lord Vaizey. He has certainly most persuasively argued that Government really does have an obligation to ensure that the high standards that exist in the performing arts in this country are maintained. Even if one looks at this question from a very simple economic viewpoint, high standards produce excellent returns for this country. There is no need to elaborate on the number of people who come to this country merely to see our theatre, concerts and ballet. I wonder whether maintaining these high standards need cost the Government any additional money, and perhaps the Minister will be talking about this aspect of the question tonight.
I wonder whether it is not just a question of a redeployment of the existing resources that are spent on training. There is no question that part of any redeployment must surely be in the giving of mandatory and discretionary grants to students, which have been much talked about this evening, and I very much hope that the Government will look at this point carefully again. It will clearly be a tragedy if the talented cannot train simply for lack of funds; and of course, if the talented cannot train, then the institutions to which they would be going simply have to pack up.
Along with other noble Lords, I know the work of the London School of Contemporary Dance very well, and they have made a truly remarkable contribution in the sphere of contemporary dance.
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They are genuinely threatened with closure and if that happens it will surely be a tragedy. I was interested in what my noble friend Lord Vaizey said about the all-important issue of employment and, indeed, this has been mentioned in other speeches. I should like to make two points about this, one which has been made already and one which has not been. The first was made by the noble Lord, Lord Birkett, and I agree with him that this is not the place to discuss in any detail the union problems that exist in theatre and in film. But we know that it is very difficult for a trained and talented actor to become a member of Equity, and I do not know whether there is any way in which the Government can help. I rather doubt it, but it is worth mentioning because it poses real problems for young performers.
The second point should be heartening to all of us, and it really extends a point made by the noble Viscount, Lord Chan-dos, which is that in the next 10 years we are going to see an incredible technological revolution. We are continually living through technological revolutions, but the things that are soon going to be with us will make an enormous difference to the performing artist. There will be an enormous growth in the demand for the services of those engaged in the performing arts. We shall see tremendous developments in the home video market, the video disc market and the pay television market, which is already a great success in America and will probably start in this country in the latter part of this year. Satellite TV will become a reality in about 1983, and will probably be bigger than all those markets put together. We have the fourth channel, we have breakfast television and we have an extension of the commercial radio network.
All these markets will require specially created material, and I have no doubt that the potential employment for performers will be greater in the next few years than at any time since the war. This is surely another reason, and a happy reason, why the Government must look very carefully into this most important question which my noble friend has most correctly allowed us to discuss tonight.
9.59 p.m.
Baroness TRUMPINGTON: My Lords, we owe a deep debt of gratitude to my noble friend Lord Vaizey, first because he initiated this very worthwhile debate, and, secondly, because he has provided us with the great joy of listening to the maiden speech of my noble friend Lord Chandos. May I add my congratulations to those which my noble friend has already received? When there is talk of abolishing this House, those who wish to do so might care to reflect that we should all be the poorer if we were deprived of hearing speeches such as the one delivered by my all too modest noble friend—a moving and brilliant specialist speech which could have been made only by someone who has devoted a lifetime to the service of the arts. It was a rare experience to listen to him.
Much that I should have liked to say has already been said, and I suppose that noble Lords will be thankful for that! However, while echoing the hopes of others, I feel that there is a certain difference between the needs of those who are gifted as actors, or who are concerned with drama, and the needs at an early age of those who dance or who are associated in any way with music. To put it baldly, actors have a way of making good, whatever their education, but the gifted child in the realms of dance and music needs specialist training from an early age.
Specialist training needs money, and there is no doubt that it is often very hard for music students to get discretionary grants. Private school fees are very high because they are not subsidised, but local authorities are often not prepared to meet these high fees. This is of particular application to opera students. Public bodies may jib at the fact that they do not get superb results from everyone they subsidise, but they must expect a percentage of non-high fliers in order to produce that pearl of great price. For example, within the last two years the London Opera House closed down. One of the reasons given for this was that it was not producing a high enough percentage of successful talent. It had, in fact, produced a number of stars, including Kiri te Kanawa, together with a very
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large number of talented and efficient performers who are still immensely active in the opera houses of Britain, Australia, Canada and America.
Lord DONALDSON of KINGSBRIDGE: My Lords, if I may interrupt the noble Baroness, she spoke of the London Opera House. I think she meant the London Opera School. The Opera House is still open.
Baroness TRUMPINGTON: I do apologise. I thought I said "London Opera Centre", and I am glad to be corrected. I should hate to be misunderstood, because this is a vital point. There were of course a number of people who did not make the grade at the London Opera Centre and, by the very nature of things, there had to be. I hope that this supports the point that I have already made.
The worrying aspect is that talented youngsters will be forced to look outside this country for their training. There are brilliant teachers. Many speakers have mentioned Robin Howard, who is an old friend of mine. He has employed one of the most brilliant teachers in his school of ballet. Brilliant teachers, however, without pupils or without a school will obviously look elsewhere for work. Do we really want there to be a talent drain from this country? Unless we support the young, that is surely what will happen. Indeed, it is already happening. I cannot believe that that is what this Government want.
10.4 p.m.
Lord AUCKLAND: My Lords, I should like to join in the tributes paid to my noble friend Lord Chandos on a most distinguished maiden speech—as we might have expected from a member of the very distinguished family from which he comes. The more we hear him speak in this House, the better the House will be. I intervene briefly in this debate for two reasons only. First, for some years I was a trustee of a repertory theatre in Surrey, near where I live. Secondly, for a few years I was a chorister at my school, and therefore have a particular love of music.

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The repertory theatre movement in this country is really the breeding ground (if I may use that expression) not only for young actors and actresses but for designers, directors and others. It is also true that, through the repertory theatre, some of our finest actors and actresses graduate. Certainly the theatre in which I have an interest, although not a financial one—the Thorndike Theatre, named after the great Dame Sybil Thorndike and her very distinguished late husband—produced a number of plays with very young actors and actresses, and particularly "The Match Girls", which had a tremendous success there, although not as great a success in the West End as it deserved. But if ever there was a real example of some talented young actors and actresses, that play certainly provided it.
The repertory theatre movement generally, both in England and in Scotland—and I instance here the splendid Pitlochry Theatre, which I have had the pleasure of visiting and which is such a great tourist attraction, as well as catering for the native population—is suffering financially. Certainly so far as the Thorndike Theatre is concerned, due to inflation there has been a cut-back of some 50 per cent. on young actors and actresses; and although occupation of the theatre by audiences is in the main well over 90 per cent., and for many performances 100 per cent., there are serious problems of cost. Last year there was a 25 per cent. escalation in costs and of course the increase in admission charges is something which every theatre wants to avoid. This is particularly serious for the young actors and actresses who really are subsidising these theatres. The wages which they are paid are very much below the national average, but they still continue to give splendid performances. Without our repertory theatres in this country the potential for young actors and actresses would be dire indeed.
Turning for a moment to music, those of your Lordships who work in the City of London will know that in a number of the churches there are some splendid lunchtime concerts where those who work under pressure can unwind for half an hour to an hour. These concerts are given by the young students from the Royal College of Music. Not infre-
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quently I go along and listen to these highly talented pianists, violinists and singers, who give immense pleasure to their audiences. But I wonder whether my noble friend has anything to say about the future of these young players, particularly the violinists and the woodwind players, in view of the cut-back of some of the BBC orchestras—and I do not want to get involved in that question at this late hour. There is no doubt that the musical life of this country will suffer if this cut-back is anything like permanent.
We as a country have for long led the world in music, since the 14th and 15th century, and it is the same with the stage. My noble friend Lord Vaizey has asked a Question of enormous importance this evening, and it is to be hoped that with the plethora of experienced speakers we have had this evening the Government can hold out some hope, even if it be medium long-term hope, for these young men and women on the stage and in the world of music who give such pleasure nationally and internationally.
10.12 p.m.
Lord TAYLOR of BLACKBURN: My Lords, may I apologise on three counts. May I first apologise to the noble Viscount, Lord Chandos, for butting in when I did earlier? I do apologise most sincerely to him for that. I also apologise to the acting Leader of the House because I did not give notice that I intended to speak in this debate. May I apologise too to my noble friend Lord Vaizey for not putting my name down on the list of speakers, and to my colleagues on this Bench that for the first time I have stepped down here to make a speech? So I have done the four apologies in one, and f your Lordships all accept my apologies, that is it.
I want to say very briefly that I have been chairman of a local education committee and have served on various education authorities up and down the country many times and in many ways. One of the things I have always been very worried about is the way in which we distribute grants to people who perhaps have not got academic talents but nevertheless are first-class in the world of the arts. I come from a place called Blackburn

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and we had Kathleen Ferrier in Blackburn. She was refused a grant from the local authority there because academically she could not qualify for that grant. Because she did not qualify, she did not get to any school or any organisation that would help to train her, and therefore she went on her parents' request.
What I want to do, like Lord Vaizey, is to make sure that these people are entitled to a grant in the same way that other people are entitled to a grant. I think that is vital. If we have got people in our communities who are good in the arts in any way at all, we ought to encourage them and we ought to give them the encouragement by providing financial resources. I do not want to go on any longer, but I completely support the noble Lord, Lord Vaizey, in the way that he has gone on this.
10.14 p.m.
Lord DONALDSON of KINGSBRIDGE: My Lords, I fear that the noble Lord's Question will get a fairly frosty answer from the noble Lord opposite. It is indeed refreshing to hear a new recruit on the other side make a plea for proper planning, for a carefully negotiated entry into the private sector (is not that something rather like nationalisation?), for more Quangos, and for more spending on the arts.
I agree with pretty well everything which he puts forward, but I must remind him which side he is on. His leader and her colleagues are highly sceptical of all planning and believe with doctrinaire passion in competition and the free market. The Government are contemptuously opposed to Quangos and yet the noble Lord proposes in his drama plans a new one without which the plans could not work. And in all his suggestions there must be more, not less, expenditure.
I repeat I am in favour of pretty well all that he suggests. But I doubt whether this evening's Question will get us much nearer to what he is asking for. Doctrinaire though the Tory devotion to the market may be, I am glad to note that even this somewhat philistine Government accept that the arts cannot flourish without subsidy. The Minister is now asking the business world to put up £500 million
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for the arts. I admire this optimism. The figures of who does what show how formidable his task is. At the moment the Government distribute £70 million through the Arts Council and another £93 million through the museums and libraries. The local authorities put up £69 million and the business sponsors £5 million. So the right honourable gentleman has £495 million to go for and good luck to him. But, however successful he may be the arts will for ever, in my opinion, depend upon Government as their main supporter. So the question of more money for training in the arts is not one the Government can shrug off.
The noble Lord has served a particularly useful function in differentiating clearly between art in education and vocational training. The two are quite different and need separate discussions. I wish for a moment to look at art in education which generally speaking has not been discussed much this evening. When going around schools, which for three years I did quite a lot of, I was enormously impressed with two arts which seemed to be well put forward to children. One of them was painting. In nearly every school—both the big and the small, and the forward and backward—one saw exhibitions of children's art with a great deal of dross but some real talent. And that seemed to me—I would not say all that one could ask for—very much in the right direction.
As regards music I wish to join with the noble Viscount in saying that it is also my passion. I should like to take the opportunity to congratulate him on his splendid speech. I was so pleased that he spoke of Sir Robert Mayer and William Glock who have, in fact, done a very great deal personally to transform things here. However, as regards music, I found, as I went around, that there was a good deal of good elementary education and presentation of music to children at a young age. It was nothing like as good as they are doing in Hungary and nothing like as good, I think, as the Suzuki system in Japan, both of which, by taking children very early, are producing more converts to the subject than we are able to do. However, I think that we are doing quite well here.
I have two grandchildren in a comprehensive, both of whom have music

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scholarships and I must say that I think that the education they are receiving is extremely good. That is not true of all schools—it could not be true—but I think that in their case it is very good. As regards drama, the most important aspect is the peripatetic companies to which the noble Lord's report refers, which go round to schools, and places like the Cockpit in London which have schools in, and who, roughly speaking, do theatre in education. What worries me about theatre in education is that largely the troupes who deal with it are attached to local theatres which are financed by local government, and I am afraid that they may be cut. I shall not ask the Minister to give me an answer tonight, but I think that I shall put down a Question for Written Answer to ask about the position of theatre in education over the last four or five years. I believe that it is bad, and if that is so, then it is very serious. It is one of the most hopeful movements in the whole of art in education. As to dance, I saw very little. I saw one or two dance activities going on, but there is a great deal to be done here and it is probably the least forward of them.
Looking back on one's own experience, I had an extremely expensive education, like some other noble Lords, and I was exposed to all these things. The exposure to painting did nothing for me until many years later when I became interested. As for the exposure to dancing, I danced the hornpipe in a sailor suit with somebody who is now a High Court judge and that went down very well, but it was a long time ago. As for drama, I acted in a couple of plays at school and I say with some pride that the noble and learned Lord who sits on the Woolsack had a very prominent and successful part in drag in one of them. As to music, it has become a basic part of my life, as the noble Viscount, Lord Chandos, said. I began to learn the violin at the age of seven and I have never looked back in my intense interest in music, which I think is the noble Viscount's position. So much for the schools.
On the whole, quite a lot is happening. But there was a nasty report in The Times last week suggesting that some of the art colleges are suffering from cuts and may have to close. I should like to know whether we can be given information,
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either today or by letter, about that. I do not necessarily want it tonight. However, it is very important that these colleges should not be closed down.
I want to turn to the vocation business, which is an entirely different matter. However, before doing so, let me say that over the intermediate stage—that is, not the elementary school child, but the boy or girl of 15 or 16 years of age who is quite interested in music—there are a number of very serious problems. The noble Lord, Lord Somers, who could not stay to speak tonight, gave me a few figures. Do noble Lords realise that it costs £1,400 to buy a bassoon; that it costs £500 to buy a trumpet, £800 to buy a French horn, £600 to buy a flute, and so on? This is an absolutely new situation. I bought my first clarinet for £11, although admittedly that was a long time ago and I cannot say I still have it, but I remember buying it very well.
I have received complaints, particularly from people in North Wales who regard themselves as being in a neglected area in this world, who say that to obtain intermediate teaching in musicianship is almost impossible there. I should like the noble Lord to look at this and possibly talk to me about it later on. The other point about Wales is that actors who act in the Welsh language need special help and find it very difficult to get.
Returning to the question of vocational training in the higher sense, here, in spite of the Tory reluctance to indulge in planning, it is quite crazy to leave matters to sort themselves out. The noble Lord, Lord Vaizey, has made a very powerful case. The problem is particularly urgent in music and dance for, as the noble Baroness, Lady Trumpington, said, both are almost wholly dependent on technical training as opposed to painting or drama, where natural genius can sometimes, but not always, flower with little or no training. But excellence in music or dance can be achieved only with, first, talent and then training. Therefore, it is extremely important.
Following the general lines of the noble Lord's excellent Gulbenkian report, Training Musicians, it seems that we should have mandatory and not discretionary grants to the five specialist music schools

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and, I would add, to the 30 or so choir schools. I think that the question of mandatory or discretionary grants is crucial. It is the matter about which I am perfectly certain we shall get a raspberry, and not a strawberry from the noble Lord, Lord Mowbray and Stourton. However, I agree with the noble Lord, Lord Vaizey, that if the Minister and his colleagues wanted to find a way of doing this, it could be done. It could be done at the cost of certain other people, but every now and then one must have priorities, and I think we ought to do it. The various speeches tonight have stressed the importance of this in a moving way from all sides of your Lordships' House, and I hope the noble Lord, Lord Mowbray and Stourton, can get his colleagues to look at this again. Of course it could be done, although it would create a lot of trouble with other people; but, then, that is what Ministers are for.
Planning comes in here because somebody has to look at the prospects for professional musicians and dancers and make sure that the number being so expensively trained with mandatory grants of which the taxpayer pays 60 per cent., should be kept in line with the vacancies available. The orchestral players, for example, have just been conspicuously reduced by the BBC, and in his drama training study called Going on the Stage the noble Lord suggests a new Quango to do this for drama. My view is that there should be a similar Quango—in a sense, he has already told us that the training boards might so act—in each of the four fundamental arts we are discussing.
I endorse the noble Lord's main recommendation that vocational training at a specialist level should command mandatory grants in a limited number of training institutions approved by a high-level committee drawn from the relevant profession and the same committee should be responsible for keeping the numbers roughly in line with professional opportunities for employment. This is all quite complicated and we cannot elaborate it now, but the basic idea is quite simple, perfectly practicable, will cost money and, in my opinion, I regret to say, will not be done, though it ought to be done.
10.27 p.m.
Lord MOWBRAY and STOURTON: My Lords, despite the lateness of the hour, I must thank my noble friend Lord Vaizey and express gratitude to him for the opportunity to debate this important and very interesting topic. We have had an extremely impressive list of speakers, and many interesting and useful contributions have been made by noble Lords whose experience and concern in training for the arts commands the respect of the House. I am very conscious of my own relative inexperience in this area, but I have listened with great care to all that has been said and I shall endeavour to clarify the Government's position on the matters raised.
I too pay tribute to my noble friend Lord Chandos for his most eloquent and delightful maiden speech. It is delightful to have among us such a man, remembering his splendid father and his equally splendid ancestor, Sir John Chandos, of Poitiers fame. To have had his descendant expounding so charmingly on music has been a great pleasure, and the words of praise of the noble Lord, Lord Birkett, were extremely apt. Lord Birkett mentioned that better times were hoped for. I am reminded that one of William the Conqueror's knights had inscribed in French on his sword le bon temps viendra. Hope springs eternal and hopefully one day somebody will find that the good times have arrived.
The commitment of the noble Lord, Lord Vaizey, to the development of the arts is well known and has been witnessed again tonight. He has mentioned his leadership of the two inquiries sponsored by the Gulbenkian Foundation into training for drama and dance. The first, Going On The Stage, was published in 1975, and the second, Training Musicians, in 1978. These have done much to promote useful discussion and debate, and the noble Lord, Lord Vaizey, has performed an invaluable service to the arts in this respect.
The noble Lord, Lord Beaumont, began by speaking of the importance of getting the brilliant pupil identified and trained. This subject is one which I remembered being the theme of many of the speeches of the noble Lord, Lord James of Rusholme, in so many of our

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debates on the brilliant child, and of course we are now discussing the brilliant child in relation to the arts.
While the Government recognise the value of the Gulbenkian Reports, and not least those which centre on individual aspects of the performing arts, and the contribution which they make to the development of both education and training in these fields, it must be stated that these are independent inquiries which have been, and will be, carefully studied by the Department of Education and Science, and I trust, by the many other bodies closely affected by their recommendations. In the final analysis, however,—and I know that the noble Lord, Lord Vaizey, will understand this—the Government have no commitment to adopt any recommendations made, and could do so only after the fullest consideration of the effect which they would have on public expenditure.
Both the noble Lords, Lord Vaizey and Lord Donaldson, rightly referred to the marked improvement in standards in dance, drama and music, and attributed this, in the main, to the high level of training available in this country. We must certainly remember that there is much in the present system from which we can take satisfaction; and I was glad to hear the point made that many children of school age with an artistic talent can be catered for in their own schools, or by means of special arrangements made by local education authorities.
I feel very strongly that industry has a role to play in sponsoring the training of exceptionally bright children in the performing arts. In the past, especially in central Europe, the Churches used to support musicians and artists in their work. Could not commerce and industry take over some of this good work? The noble Lord, Lord Donaldson, mentioned that my right honourable friend had been suggesting this; and I do not see why they should not help these children with their special training, in the same way as companies finance concerts, opera and ballet performances, and the theatre.
The noble Lord, Lord Donaldson, mentioned the cut-back in orchestras. There is a very hopeful sign. Discussions are going on at this moment between four parties: the Arts Council of Northern
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Ireland, the Ulster Orchestra Society, the BBC in Northern Ireland, and Gallaher Ltd. It is proposed to form a Northern Ireland orchestra of up to 70 players, and it is hoped that at least 33 of the new posts in the symphony orchestra might go to players from the BBC Northern Ireland Orchestra. This is an example which, if it does come off—and it is only at the discussion stage—will be one occasion where industry is entering into discussion in order to help.
The report Training Musicians to which I have referred rightly stressed the central position of local education authorities in this area. The report made a number of interesting and positive recommendations, which I am sure will have been studied with care by local education authority music advisers. These dealt with the identification of musical ability in primary and secondary schools, the encouragement of non-specialist teachers to become more involved in musical activities in schools, the supporting of weekend and evening music centres, and a number of other detailed points. Perhaps the key recommendation, linking the others, was that local education authorities should be prepared to provide musical training in whichever of a number of possible ways is most appropriate to the particular circumstances of an individual area and the particular needs of each individual pupil. This is a useful reminder that individual needs and circumstances differ, and that local education authorities are particularly well placed to assess these, and, if they consider it necessary, to make or support special arrangements.
Interest in music, and in particular in learning an instrument, has of course very greatly increased among school children, and examination entries, for example, are rising steadily, though many of course have no intention of seeking a career in music. There has certainly been a marked and welcome improvement in the standard of music education in the maintained (or state) sector over the last 15 years or so—many schools now have school orchestras of a very worthy standard, for example—though there is a national shortage of qualified music teachers. The music centres which a number of local education authorities sponsor, usually at weekends, provide very

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good opportunities to carry study forward to the very highest standard of excellence—
Lord TAYLOR of BLACKBURN: I am sorry, my Lords, but the Minister is not aware of what is going on among local authorities in regard to cut-backs, and the cut-backs are on this side.
Lord MOWBRAY and STOURTON: My Lords, perhaps the noble Lord will allow me to finish my speech, and then he will hear what I have to say. It is too early to interrupt me to tell me what I am not going to say.
Lord TAYLOR of BLACKBURN: I apologise to the noble Lord.
Lord MOWBRAY and STOURTON: My Lords, talented musicians at maintained schools are also able to apply for junior exhibitions at the main music colleges, which are sponsored by education authorities. Some of these arrangements may be under pressure as a result of the public spending economies which are having to be insisted upon, but in general, it seems to me, there is a background of increasing musical education and training, which is encouraging.
My Lords, few would dispute that special arrangements may be needed for school-age children with outstanding talent or promise in instrumental playing. Your Lordships will be aware that in 1973 the previous Conservative Government introduced a direct grant scheme to provide precisely this for pupils at the Yehudi Menuhin and Royal Ballet Lower Schools. This, in part, replaced assistance formerly channelled through the Arts Council. The principles accepted by the Prime Minister when she was Secretary of State for Education and Science were that there was a limited need for specialised training of a high order; that these excellent schools should not have to compromise their very high standards for financial reasons; and that pupils of the necessary talent should not be denied access to a place for lack of parental means. About 150 pupils are at present supported by fee remission grant, which totalled some £440,000 in the 1979–80 financial year. This is a high per capita outlay, but few would dispute that this has been a successful and desirable arrangement. As a
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Government, we are fully committed to the continuation of these arrangements.
My Lords, the noble Lord, Lord Beaumont, and my noble friend Lord Chandos asked about ethnic art. We know there is public support for the performing arts, and it is of course a matter for the Arts Council, whose patronage is very extensive. I am sure they will study with interest the points which the two noble Lords have made on this particular topic. My Lords, other schools considered tonight, such as Chetham's School of Music, the Wells Cathedral School and Purcell School, have much to offer as well. Many local education authorities have been willing to sponsor children at these schools, particularly Chetham's School, and I understand that the scale of this particular form of support was steadily increasing until 1979, when some intending pupils were unable to persuade their authorities to give support. In some cases, too, the support given may have been at a fixed level, leaving the parents to find a large balance of the fees, which I know are somewhat hefty.
The schools are worried that last year's check in local education authority support may be repeated, and that more pupils who would otherwise have been admitted will not be able to take up places. This must, of course, be a matter for the authorities concerned, who may wish to have regard, not only to their policy on discretionary awards but to the alternative provision which may be possible. Thus, concern by the music schools about support by local education authorities has led them to propose to my noble friend the Minister of State at the Department of Education and Science that they should be supported by direct grant from the Government on the lines of the Yehudi Menuhin School and the Royal Ballet Lower School.
My noble friend (that is Lady Young, of course) has told the schools that their bid for financial support will have to be considered in the context of the assisted places scheme, which your Lordships will recall discussing at length when the Education (No. 2) Bill was before us earlier this year, and this the Minister is doing. Any extension of existing arrangements for Government support for specialised schools would have to come

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from the resources available for that scheme, and would also be subject to the same timing. This means that the earliest any assistance could be available might be for the September 1981 intake, as that is when the assisted places scheme is to start. At the moment, our position on this is completely open, but we shall let the three schools have our answer as quickly as possible.
I have taken a little of your Lordships' time to explain the Government's position on this particular point, and I hope it will be of interest to noble Lords.
Lord VAIZEY: My Lords, perhaps I may say how grateful I am for that particular point.
Lord MOWBRAY and STOURTON: I thank my noble friend. My noble friend Lord Drogheda, who, unfortunately, owing to the lateness of the hour at which this debate was to come on, had to go to another engagement, gave me notice of the two chief points that he would have liked to talk about. They were ballet schools and the London School of Contemporary Dance. Like my noble friend Lady Trumpington, I, too, must be in on the act. I, too, know Mr. Robin Howard. I have known him for 35 years, in fact. For good measure, I know his mother Lady Lorna and his sister, Kiloran, as well. The noble Viscount, Lord Chandos, and the noble Lord, Lord Crathorne, expressed anxiety on this point and the noble Lords can be assured that we are looking at this point sincerely and sympathetically.
Turning to the further education sector, the noble Lord, Lord Vaizey, would, I know, be the first to acknowledge that the mixed bag of provision in the performing arts, which stretches across age levels and across both the independent and public sectors, is an inheritance largely due to historical accident. The noble Lord, Lord Donaldson, I remember, told us he had danced the hornpipe when he was young. My only dancing achievement when I was young, in 1929, was that I was Madame Vacani's star pupil with the sister of the Chairman of Committees.
Lord DONALDSON of KINGSBRIDGE: My Lords, I went to Miss Vacani's when I was young.
Lord BEAUMONT of WHITLEY: As I did, my Lords.
Baroness TRUMPINGTON: My Lords, so did I.
Lord TAYLOR of BLACKBURN: My Lords, as somebody who was born in 1929,I hope we are not going to dance the hornpipe in here tonight.
Lord MOWBRAY and STOURTON: My Lords, we hope not. However, it is a fact that most of the art schools or colleges and several of the music and drama schools are in the public sector and are therefore maintained by local education authorities, while others remain independent, having been established on that basis. Any attempt to rationalise this diverse provision must take into account the competing claims on public resources of other, quite unrelated, disciplines and the consequential effect on educational resources.
The question of mandatory and discretionary grants to students has been described as a "vexed" question. We have no doubt that it is, have we? The noble Lord, Lord Donaldson, spoke about the theatre and education and the noble Lord, Lord Auckland, referred to the same point.
The present awards system is based on the principle that awards should be mandatory for students taking full-time courses of first degree or equivalent level or teacher-training courses, irrespective of the subject of study. Courses comparable to first-degree courses can also, on application, be designated individually for mandatory awards; this applies to courses in drama, dance and music as well as in more academic disciplines. Noble Lords will realise that, except in music, most such courses are designed for performers and in consequence do not require academic study of a level which can be regarded as comparable to that of a first degree. This is particularly so for courses in dance which for professional reasons are designed for 17-year-olds. Nevertheless, local education authorities do have the power to make awards at their discretion for courses which are not designated for mandatory awards.
I am most grateful to the noble Earl, Lord Gosford, for giving me notice of the questions to which he wanted an

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answer. I will point out to him now one of his answers, but I must ask him when he addresses your Lordships' House in future to comply, please, with the conventions and not just to refer to "Norman St. John-Stevas"—he is the right honourable the Minister, or your Lordships' right honourable friend. We do not refer to him in that way.
The Earl of GOSFORD: My Lords, may I say that I am sorry.
Lord MOWBRAY and STOURTON: My Lords, I thank the noble Earl. The noble Earl raised the question of the effect of cuts in local government expenditure on awards for foundation and diploma courses. I take it that the noble Earl has in mind non-advanced courses which do not attract mandatory awards. Undoubtedly, there will be some effect but it is difficult to say at present how reductions in expenditure on local authority discretionary awards will affect particular areas. So far as foundation courses are concerned, those which form an integral part of a degree course do attract mandatory grants. Courses intended to bring a student up to the standard at which they can embark on a degree course, however, do not.
The Government's expenditure plans assume that local education authorities' expenditure on discretionary awards will remain broadly at the present overall level of about £80 million a year. This does not, of course, imply that every local authority will be maintaining its expenditure at the present level, and indeed there is evidence that some local authorities are having to reduce severely the number of discretionary awards they are making in 1980–81. It is difficult to estimate the extent of local education authority economies on discretionary awards and their effect on particular fields of further education, and it may be that their effect is being felt disproportionately by students wishing to undertake courses in the performing arts. While we are of course aware of the consequences of this, both for individuals and for institutions, it remains the responsibility of each local education authority to decide upon the priority to be given to discretionary awards compared with other pressing claims on
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resources, and upon the priorities they are prepared to give to courses of various kinds.
The Government have no intention of interfering with or advising authorities on the use of their discretion: it is up to them to formulate their own policies and to make awards in accordance with their own judgments of local circumstances and the merits of each case. It is my impression that authorities take their responsibility for discretionary awards very seriously. This is no easy task and particular difficulties arise in the field of the performing arts in identifying the standard of the courses concerned.
Moreover, I should like to point out that, if some of the more profligate local authorities reduced their unnecessary spending, they would have more money to provide grants for children with great artistic talents. Still, I am sure that those who have spoken tonight applaud the efforts of all those authorities which have found it possible in these difficult times to give discretionary grants in deserving cases.
I do not think that we should take too gloomy a view of the future prospects for local authority discretionary awards, either. Though some have found it necessary to make economies in this area in the short term, these may become less necessary as longer-term expenditure plans are formulated and applied.
Noble Lords will know, from the debate we had at Report stage on the Education Act 1980 on Lord Vaizey's amendment, that the Government have no plans to change the present legislative position on mandatory awards. We recognise that difficult problems may arise for would-be students of the performing arts where authorities reduce their expenditure on discretionary awards. But they are not alone in this predicament, and it would be quite inequitable to extend the scope of mandatory awards to courses in the performing arts while ignoring the claims, for instance, of lawyers, social workers and many others who depend on local authority discretionary awards as well.
Lord VAIZEY: If that is the case, my Lords, why are they prepared to give mandatory grants to business studies in chemistry but not for dance and drama? If you are going to make that kind of

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argument, it is a very "wet" answer, if I may say so.
Lord MOWBRAY and STOURTON: My Lords, I will write to my noble friend on that point. If anybody else is interested, they can have a copy of the letter.
We have concluded that such a call on public resources could not be justified when we are asking for restraint in other areas. Even if we were able to, however, the problem for performers would not be wholly solved since, as I have already explained, a number of courses for performers are not advanced courses. To make awards mandatory for all non-advanced courses of further education would of course be prohibitively expensive. It would be virtually impossible to find an equitable basis for extending mandatory awards only to selected non-advanced courses of further education, and it is not self-evident that courses in the performing arts could be regarded as having priority.
This brings me to the question on which the noble Lord, Lord Vaizey, touched. At present, the education and training systems of this country produce more qualified aspirants to careers in the performing arts (with the possible exception of string players) than can be accommodated in the volume of professional activity as we know it at present. Against this background, it is probably not in the long-term interest of any but the most talented young people to encourage them to think in terms of a professional career in any of these fields: and it is difficult to justify spending public money to give awards for such training as an automatic right. I appreciate that Lord Vaizey's proposal, that courses should be designated for mandatory awards only at accredited institutions, is designed to reduce the number in training; but there can be no guarantee that it would do so. With mandatory awards assured, the selected institutions might well increase their intakes.
Special mention has been made of the National Centre for Orchestral Studies, and I should like to add my own appreciation of the work of the centre. Nevertheless, it is a performers' course and students must look to their local education authority for discretionary awards. The noble Lord said that it is time for the
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Government to face up to their responsibilities. This has been echoed by other noble Lords. Let me say a word first about the visual arts, on which the noble Earl, Lord Gosford, also spoke.
We shall, of course, study with interest the impending report from the Gulbenkian Foundation, but I think I should make the point that there are currently 41 colleges offering degree courses in the fine arts catering for a wide range of interest, and it is unlikely that there can be any aspirant frustrated by the absence of the right kind of course. At the lower level, vocational courses are about to become subject to national validating arrangements under the Technician Education Council's Committee for Art and Design.
I was going to answer some more of the questions of the noble Earl, Lord Gosford, but, if he will allow me, I will write to him, and, again, if any other noble Lord would like to have copies, I will arrange for that.
The Earl of GOSFORD: My Lords, may I thank the noble Lord the Minister for that kind offer of writing to me, and may I take up his offer of receiving a copy of the letter he sends to the noble Lord, Lord Vaizey?
Lord MOWBRAY and STOURTON: My Lords, as for our responsibilities in the area of school age provision for training in the performing arts—and most of us would accept, I am sure, that we are talking here about providing for high talent in music and dancing—we have to recognise, on the one hand, the special role of local education authorities in identifying and assessing need; and, of course, the quite special funding by means of direct grant at the Yehudi Menuhin and Royal Ballet Lower School to which I have already referred. My noble friend Lady Young is currently considering with great care the case made to her for similar funding for pupils at three other music schools and they can expect an answer from her before very long.
Discretionary support by education authorities is not, of course, a responsibility of government. It has been made abundantly clear by the local authority associations that local authorities should

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be entirely free to make their own decisions in those areas, including awards, where they are charged with a discretionary responsibility. The Government have no wish to intervene in matters which are properly the concern of local authorities, who must determine their own priorities in the light of their particular needs and resources, as I have said. Moreover, if the Government started to sponsor arts training directly, it could become a never-ending drain on the Exchequer from all the folk whose hopes of financial support had suddenly been raised.
There may, as noble Lords have suggested, be a case for looking again at the scope of mandatory awards, though I can see little prospect of any extension in present economic circumstances. However, I assure your Lordships that the Government will be keeping the question under review in the light of local education authorities' future plans for discretionary awards. I can assure the noble Lord, Lord Donaldson, that we are not trying to shrug anything off and we are not trying to issue raspberries or strawberries!
I am afraid that I have not offered very much by way of further finance for training gifted children in the performing arts, although we all agree on the desirability of this. Still, I think we have tonight given the various aspects of this topic a most useful airing, and who knows but that some businessman or commercial organisation may read about this debate and be spurred on to sponsor the training of a bright child—for example, a future musician, actor or dancer. Also, I hope very much that local education authorities will feel encouraged to continue with their crucially important and very worthwhile work in this field.
My Lords, if I find I have left out certain things—and I am sure I have—apart from what I have said to the noble Earl, Lord Gosford, I will promise to write. I will also write to the noble Lord, Lord Donaldson, about art in the art colleges. I would like to thank all your Lordships who have contributed to this very interesting debate and to apologise for my inadequacy if I have not answered sufficiently well.

MAGISTRATES' COURTS BILL [H.L.]
Reported from the Joint Committee with amendments, and recommitted to a Committee of the Whole House; Bill to be printed as amended.
  CREMATION: THE BRODRICK REPORT
  CREMATION: THE BRODRICK REPORT
  CREMATION: IMPROVED ADMINISTRATION PROCEDURES
  CREMATION: IMPROVED ADMINISTRATION PROCEDURES
  CREMATION: PROPOSALS OF AD HOC COMMITTEE
  CREMATION: PROPOSALS OF AD HOC COMMITTEE
  CHINA: COMPUTER TECHNOLOGY SALES
  CHINA: COMPUTER TECHNOLOGY SALES
  BOLIVIAN MINING AID PROJECT
  BOLIVIAN MINING AID PROJECT
  UK CONTINENTAL SHELF EXPLORATION LICENCES: TAX ARRANGEMENTS
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  DRUGS SEIZURES: PUBLISHED STATISTICS
  DRUGS SEIZURES: PUBLISHED STATISTICS
  HEROIN SEIZURE FROM MY "HUATING"
  HEROIN SEIZURE FROM MY "HUATING"