Sitting of 16 June 1980

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  TRADE

    Floating Exchange Rates
    Mr. Knoxasked the Secretary of State for Trade how many individuals and how many organisations have made representations to him opposing floating exchange rates.
    The Secretary of State for Trade (Mr. John Nott): I can think of no recent representations that have concentrated on opposing floating exchange rates as such, although the problems caused by fluctuating exchange rates have been pointed out to Trade Ministers and officials on a number of occasions.
    Mr. Knox: Does not my right hon. Friend agree that the British economy worked better with a fixed exchange rate than it has worked with floating exchange rates? In view of the uncertainty that floating exchange rates cause among those engaged in international trade, would he not agree that it would be a good idea for Britain to join the EMS at an early stage? That would at least remove the uncertainty in respect of European trade.
    Mr. Nott: I agree with my hon. Friend that the fixed exchange rate system worked well in the immediate post-war period, but in current conditions, where there is a great divergence in performance and in rates of inflation, and in view of the exchange rate problems connected with the North Sea, I cannot agree that a return to a fixed exchange rate would create any greater certainty for British industry.
    Mr. McNally: Has the Secretary of State received any representations from British industry about the crippling
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    effect of the high rate of the pound? What does he propose to do about making British industry more competitive?
    Mr. Nott: I receive representations on the subject most days, and I understand the problem that a high parity causes for British manufacturing industry.
    Mr. Robert Taylor: If representations are made to the Secretary of State against the floating exchange rate, will he pay no attention to them? Does he not agree that the efficient British exporter is still incredibly successful in the export markets of the world?
    Mr. Nott: It is a misconception to believe that fixed exchange rates would not fluctuate. They would fluctuate more violently than floating rates, because they would have to be changed.

    Paper Products (Overseas Suppliers)
    Mr. Moateasked the Secretary of State for Trade what recent representations he has received about unfair trading practices employed by overseas suppliers of paper products to the United Kingdom market.
    The Minister for Trade (Mr. Cecil Parkinson): Recent representations that have been made to my Department by the paper industry about unfair trading practices have included allegations of dumping of paper products and of price discrimination in the supply of pulp for paper making. My Department is following up those allegations.
    Mr. Moate: Is my hon. Friend aware of the rapidly worsening situation facing the United Kingdom paper industry? Is he aware of the dubious practices and irresponsible increases of capacity that are now being generated by our Scandinavian and Common Market competitors? Does he believe that we can continue with our free and easy attitude towards imports? Is it not a fact that we are now becoming a soft touch? We should toughen up our attitude towards unfair trading practices.
    Mr. Parkinson: I wish that my hon. friend would go to Brussels and retail that description of Britain there. It is not the way in which our Common Market partners see us. We fight our corner for British industry. We are aware of unfair practices and we are pursuing the matter.

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    If my hon. Friend provides specific information, we shall take action.
    Mr. Heffer: Is it not clear that the Brussels institutions are bound to say that we are not a soft touch? They could not say anything else. They would be daft if they did so. Is it not clear that we must examine the matter more seriously than this Government or any other Government have done for a long time?
    Mr. Parkinson: I would not wish to defend the hon. Gentleman's Government to him. I know that the hon. Gentleman himself finds that difficult. For our part, we are prepared to stand by our record and show that we take action when we have information on which we can act.

    Car Imports
    Mr. Hal Millerasked the Secretary of State for Trade what percentages of United Kingdom markets for cars, sold at £3,000 or under and for four-wheel drive vehicles, were taken by imports in 1977, 1978 and 1979 to date, from Eastern Europe and Japan, respectively.
    Mr. Parkinson: I shall publish available information in the Official Report.
    Mr. Miller: As my hon. Friend has the information about imports of four-wheel drive vehicles, in particular from Japan and Eastern Europe, will he not therefore understand the real threat that that poses? In the case of Eastern Europe, will he not consider some limitation? In the case of Japan, will he not make it plain that we require a longer-term agreement than the present annual agreement negotiated on an industry basis?
    Mr. Parkinson: As my hon. Friend knows, the agreement on motor cars is negotiated between the SMMT and JAMA; the Government are not a party

    NEW REGISTRATIONS OF LIGHT FOUR-WHEEL DRIVE VEHICLES, UNITED KINGDOM

    Imported vehicles

    Total

    Japan

    United States

    Other Countries*

    Number

    Percentage of total

    Number

    Percentage of total

    Number

    Percentage of total

    New registrations Number

    1977

    …

    …

    65

    (1)

    1

    (—)

    56

    (1)

    6,890

    1978

    …

    …

    679

    (10)

    175

    (3)

    40

    (1)

    6,616

    1979

    …

    …

    3,387

    (32)

    255

    (2)

    596

    (6)

    10,656

    January-May :

    1979

    …

    …

    979

    (23)

    113

    (3)

    153

    (4)

    4,295

    1980

    …

    …

    1,524

    (32)

    63

    (1)

    326

    (7)

    4,721

    * Including vehicles imported from Comecon countries which cannot be separately distinguished.

    Source: Society of Motor Manufacturers and Traders.
    Information is not available on new registrations of cars sold at £3,000 or under.
    to it. However, the arrangement appears to be working to the satisfaction of those who negotiated it and the Japanese honour the commitments that they have made under that agreement. I have noticed the increase in the market for four-wheel drive vehicles, but they are included in the overall restraint figures agreed.
    Mr. Deakins: Is not the solution for British manufacturers to produce more four-wheel drive vehicles and to reduce the current waiting list, which in London is about 15 months?
    Mr. Parkinson: The hon. Gentleman has a strong point. One disturbing thing that I have come across in my travels overseas is that the British four-wheel drive vehicle is more and more in danger of being priced out of the market. We must produce them more efficiently and have them available for delivery and not price ourselves out of the market.
    Mr. Marlow: Are cars from Eastern Europe dumped in the same way as footwear is dumped here? If so, will my hon. Friend take action about it? Further, since the Japanese take unfair measures to prevent the export of United Kingdom footwear to Japan, will my hon. Friend ensure that we can take equally unfair measures to prevent the import of their wretched cars, which are, after all, not particularly attractive items anyhow?
    Mr. Parkinson: I do not own a Japanese car, but a growing number of people seem to find them attractive and good value. We are not complacent about cars from the Eastern European bloc, but altogether they amounted in the first four months of this year to 1·6 per cent. of our market. That is less than it was in both 1979 and 1978.
    Following is the information :

    Manufactured Goods
    Mr. Deakinsasked the Secretary of State for Trade if he is satisfied with the balance of trade in manufactured goods between the United Kingdom and the European Economic Community.
    Mr. Nott: No, Sir.
    Mr. Deakins: If present trends continue, will we not end up doing an increasing percentage of our total trade in manufactured goods with our partners in the EEC, while incurring an increasing deficit with them?
    Mr. Nott: It depends on which figure one likes to take. Some of the trends in our trade in manufactures with the EEC are encouraging. In the first quarter of this year, our export-import ratios rather improved. The total value of exports to the EEC grew in 1979 at nearly four times the rate of our exports to the rest of the world. The total value of exports increased faster than our imports from the EEC. It depends on which sectors one takes.
    Mr. Grieve: Does not my right hon. Friend agree that the problem of the balance of trade with the EEC, as with the rest of the world, lies in improved productivity, fewer strikes, harder work and better deliveries?
    Mr. Nott: Of course.
    Mr. Canavan: Will not the right hon. Gentleman admit that the Common Market has had an absolutely disastrous effect on our trade and that the Government's recent sell-out on the budget contribution will do nothing at all to improve our trading position, and that it will probably continue to get worse, and even more crippling until we get out of the EEC altogether?
    Mr. Nott: Our balance of trade with Europe has certainly deteriorated since our entry, but our balance of trade throughout the world has deteriorated since our entry. I therefore do not think that the hon. Member can draw any deductions of the kind he does. However, nine out of our 10 leading export markets are now in Europe. Europe is now fundamental to our trading activities.
    Mr. Alan Clark: Yes, but the trading imbalance continues to grow, does it not? At what level of imbalance—if there is such a level—would my right hon. Friend think it worth our detaching ourselves from the EEC?
    Mr. Nott: My own view of the EEC goes much broader than the balance of trade. I believe that our position in the Community is fundamental to the preservation of peace and to our influence in the world. That is the reason why I would certainly not wish to withdraw.

    Balance of Payments
    Mr. Brocklebank-Fowlerasked the Secretary of State for Trade what is his latest estimate of the balance of payments surplus on Great Britain's trade with non OPEC countries for the financial year 1979–80; how this compares with the trade balance with European Economic Community member States; and if he will make a statement
    Mr. Nott: In the year ended March 1980, the United Kingdom had a visible trade deficit of £2·2 billion with the European Community and a deficit of £900 million with the remaining non-oil exporting countries.
    Mr. Brocklebank-Fowler: I am grateful to my right hon. Friend for that reply. Is he aware that the balance of payments surplus of manufactures with the developing world is very substantial, standing at about £2·1 billion? Does he recognise the importance of the developing world as a market for British manufactured goods? Will he take steps to ensure that his colleagues in the Cabinet know of the importance of that, in view of the recent report of the Brandt Commission?
    Mr. Nott: The House will be debating the Brandt report this afternoon. I entirely agree that the interdependence of the developed and developing worlds is crucial for everybody's future security and welfare. My hon. Friend is also right to say that at the moment we have a favourable balance of over £2 billion in manufacturing trade with those countries.

    Multi-fibre Arrangement
    Mr. Trippierasked the Secretary of State for Trade if he will negotiate a strengthened multi-fibre arrangement in 1981.
    Mr. Parkinson: The Government accept that a new multi-fibre arrangement will be necessary when the current arrangement comes to an end in 1981. The exact form and terms of the successor arrangement will be a matter for negotiation, but the Government will, of course, have the interests, and views, of the United Kingdom clothing and textile industries very much in mind in those negotiations.
    Mr. Trippier: Does not my hon. Friend accept that if he gave a commitment to the House today that the multifibre arrangement would be strengthened, those firms which are teetering on the brink and considering closure would hang on for a better trading climate?
    Mr. Parkinson: My hon. Friend knows as well as anyone in the House that the present arrangement has two-and-a-half years to run. The industry must know that over this next critical period, its basic protection under the bilaterals which end in 1981 will be the existing arrangement. Of course we note what my hon. Friend says about the need to strengthen the new arrangement. I hope that he has noted that I said that this is a matter for negotiation and that in that negotiation we shall have the best interests of the industry at heart.
    Mr. James Lamond: But since it has been clearly demonstrated that the present MFA, despite its enormous complexity, has done nothing at all to assist the textile industry, should not we look for something a little more radical from the present Secretary of State, for whom we have a high regard, than increased protectionism?
    Mr. Parkinson: The hon. Member will know that the present arrangement was negotiated by his Government and that it has succeeded in its original objective of maintaining the level of imports from developing countries at around 12 per cent. It is unfair to his right hon. and hon. Friends to say that that agreement is not working, because to a considerable extent it is achieving the desired result.
    Mr. Nicholas Winterton: Does my hon. Friend agree that it is not what is in the MFA that is important, but what is not in it? Does he not agree that the gentlemen's agreement quotas which have been given to the Mediterranean associates have been breached dramatically, thus
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    undermining the confidence of our textile industry? Will my hon. Friend do something about that to make the next MFA much more robust?
    Mr. Parkinson: My hon. Friend seems to specialise in making strong, but—I am afraid—not wholly accurate statements. The truth is that we have a range of agreements which are monitored extremely carefully. They are not breached as if they did not exist. The sooner my hon. Friend joins me in telling the industry that the arrangements that we negotiated on its behalf are being enforced, the sooner we shall restore confidence to the industry.
    Mr. Winterton: What about the Mediterranean associates?
    Mr. John Smith: Will the Minister of State appreciate that the British textile industry is probably in the most parlous state in its history? I understand that mills are closing at the rate of one per week. In those circumstances, will he undertake to consider a recession clause or some other device to tighten up the operation of the MFA?
    Mr. Parkinson: I agree that the fundamental mistake which was made by the right hon. Gentleman's Government was in conceding a continuing increase of the share of the market regardless of whether the market expanded. That was a mistake made by his Government, with which we are having to live. We hope that we can learn from their mistake.

    Origin Marking
    Mr. Nicholas Wintertonasked the Secretary of State for Trade if he intends to legislate to extend origin marking.
    Dr. Hampsonasked the Secretary of State for Trade if he intends to legislate to extend origin marking.
    The Minister for Consumer Affairs (Mrs. Sally Oppenheim): I announced on 21 May that I had issued a consultative document on the extension of compulsory country of origin marking of certain groups of consumer goods. The groups selected cover clothing, textiles, footwear, electrical appliances and cutlery. Those are the groups where two consumer surveys have shown that the country of origin marking is needed for genuine consumer reasons. In the light

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    of the responses received from those likely to be affected by this action, who have been asked to comment by 31 July, I intend to prepare draft orders under the Trade Descriptions Act with a view to bringing them before the House this autumn.
    Mr. Winterton: May I say that unlike the answer to the last supplementary question which I asked, which was a very inadequate and inaccurate answer, I am very grateful indeed to my right hon. Friend for that excellent answer?
    Does my right hon. Friend agree that it is right that the British people should be able to buy British and when they go into a clothing shop should know that the item that they buy is British? Does she agree that at present the origin of a particular garment is very much in doubt? Does she further agree that many British retailers, such as C & A and British Home Stores, do no service to this country by, as it were, apparently offering British-made goods when the vast majority of those goods are manufactured abroad?
    Mrs. Oppenheim: I am always grateful for my hon. Friend's gratitude. The main purpose of the steps that I have announced is to protect consumers so that consumers in the market place can exercise their choice on the basis of adequate information being given. As my hon. Friend will know, branded goods already have to show the country of origin.
    Mr. Allen McKay: Concerning cutlery and Sheffield in particular, will the Minister consider making sure that the words "Made in Sheffield" are stamped only on that cutlery which is wholly made in Sheffield and not on that which is partly brought in from abroad?
    Mrs. Oppenheim: This is one of the aspects of the problem of origin marking which we are discussing during the present consultations.
    Mr. Anthony Grant: I recognise that origin marking provides useful information to the consumer. However, does my right hon. Friend also agree that all the origin marking in the world is no substitute for good quality, at the right price, delivered at the right time?
    Mrs. Oppenheim: I entirely agree.
    Mr. John Eraser: Will the right hon. Lady give to my hon. Friend the Member for Penistone (Mr. McKay) an assurance that where, for instance, blanks are simply plated in Sheffield, they will be subject to origin marking? Secondly, will the legislation extend to advertisements in colour supplements, which are a very big source of gaining consumer orders? If the origin marking provision does not apply to supplements and advertisements, it may well defeat the object of the exercise.
    Mrs. Oppenheim: First, I can give the hon. Gentleman the undertaking that he seeks, which is that the main manufacturing process will determine the country of origin. As I have said, this is the subject of consultation.
    Concerning advertisements and mail order catalogues, we recognise that there are some difficulties because these are outside the Trade Descriptions Act. However, if we become convinced that origin marking in advertisements and mail order catalogues is necessary in the consumer interest, we have no doubt that these difficulties will be overcome.

    Product Liability
    Mr. Proctorasked the Secretary of State for Trade whether he will ensure that the additional cost to the consumer arising from new legislation to cover the provisions of the European Economic Community directive on liability for defective products will be fully explored before any conclusions are reached concerning the United Kingdom position on this directive.
    Mrs. Sally Oppenheim: The Government are carefully examining all aspects of the draft directive and will take account of all the implications in the negotiations with the Community.
    Mr. Proctor: Is my right hon. Friend aware of the varying estimates put upon the cost of this legislation, ranging from £200 million to £900 million? Does she agree that this will be quite unsupport-able both by consumers and by industry?
    Mrs. Oppenheim: My hon. Friend is right to point out that the costs of this measure would be likely to be borne by consumers rather than by the companies concerned. I am certain that some estimates of the likely insurance costs have

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    been greatly exaggerated. Insurance costs will vary between industry and industry and between company and company within the same industry, according to the risks involved. I understand, however, that the British insurance industry is confident that it can provide cover and that the cost of insurance, even for the more hazardous products, is not likely to have any significant effect on production costs.
    Mr. Mike Thomas: Is the right hon. Lady aware that for the consumer who gets passed from retailer to wholesaler to manufacturer, with no one being prepared to accept the buck when a product has been bought, the implementation of the product liability directive would be the most major single advance that we could make at present? Will she—as I think she indicated just now—reject the wholly bogus arguments that are being put forward, that in some way this is so damaging that we cannot do it? Is it something that we must do.
    Mrs. Oppenheim: As the hon. Gentleman will know, consumers' rights are now purely with the retailer. This should be made clear to them at every opportunity. The EEC proposed draft directive would put some of the responsibility, but not all of it, on to manufacturers.
    In reply to the final part of the hon. Gentleman's question, I always reject bogus arguments.
    Mr. Dudley Smith: In view of the potentially serious implications for all of British industry and commerce in this matter, will my right hon. Friend consider publishing the consultations of the Council of Ministers when it has considered this matter, so that there can be further detailed consultation? Will she assure us that there will not be any blind implementation of the EEC directive?
    Mrs. Oppenheim: As my hon. Friend will be aware, the version currently being considered by the Council of Ministers is a revised draft. In view of the number of representations received, both from institutions in this country and from hon. hon. Members on both sides of the House, the Government must reserve their position until all the implications of the full effects of this revised draft are completely clear.
    Mr. John Fraser: Bearing in mind that product liability has the backing of the Law Commission and of the Pearson Commission, following the thalidomide tragedy, will the right hon. Lady make a declaration of principle in favour of product liability, recognising, of course, that there are detailed problems to be sorted out?
    Mrs. Oppenheim: I think that the hon. Gentleman already knows my views on this matter. Anything of benefit to consumers and which does not place a disproportionate burden on industry has my backing. What is important is to see that that balance is maintained.

    Manufactured Goods (Imports and Exports)
    Mr. Robert Sheldonasked the Secretary of State for Trade what further representations he has received concerning the level of United Kingdom imports and exports of manufactured goods.
    Mr. Nott: I regularly receive representations on this subject.
    Mr. Sheldon: Has the right hon. Gentleman read the Bank of International Settlements' annual report, which is openly contemptuous of the Government's monetary policy and which underlines their attitude to the exchange rate of the pound, to the detriment of our exporters and to the advantage of our importers? Will he now change his priorities to make sure that British manufacturing industry is accorded the importance that it deserves?
    Mr. Nott: I would not think of the BIS report as being my choice for bedside reading, and I have not read it. It is not alone in disagreeing with the Government's policies. But, in due course, I am confident that the BIS will realise the wisdom of the Government's policies and will then change its tune.
    Mr. Thompson: Is my right hon. Friend aware of the damage now being done by barter arrangements, both by individual firms and those imposed by Comecon countries, on orderly marketing and industry-to-industry arrangements?
    Mr. Nott: I would much prefer that trade was conducted by settlement with money rather than by barter. However, if we were to opt out of the barter

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    arrangement, I think that we would lose a great deal of trade. We are particularly well equipped in this country to handle it—probably better equipped to handle barter transactions than almost any other country.
    Mr. Barry Jones: Will the right hon. Gentleman re-examine the plight of the textile industry with regard to its need to export? Will he consider the bitter conclusions of my constituents employed by Courtaulds in Flint—that under the present Government it is becoming easier to import than to export?
    Mr. Nott: I think that everyone in the House is deeply concerned about the present problems of the textile industry. I certainly am concerned. I understand that many of these firms have the most admirable, loyal, hard-working employees. They are very unhappy circumstances that we now face. But I remind the hon. Gentleman that the textile industry exports over £2 billion worth of textiles every year. It is a successful industry, although parts of it are at present in great difficulty.

    Synthetic Fibre Carpets
    Mr. Wallerasked the Secretary of State for Trade what has been the increase in imports of United States synthetic fibre carpets since the decision by the European Economic Community Commission not to authorise a quota on such imports.
    Mr. Parkinson: The Commission's decision was based on statistics for 1979. Imports of man-made fibre tufted carpets amounted to 2·3 million square metres in the first quarter of 1980, compared with 1·7 million square metres in the last quarter of 1979.
    Mr. Waller: Does not my hon. Friend accept that the percentage of our market taken by North American imports broadly doubled in the first four months of this year compared with the whole of last year, that United States production is based on artificially low oil and feed stock prices and that the EEC Commission has agreed only to keep the matter under surveillance? Does not my hon. Friend agree that the Government would be fully justified if they were to go back to the Commission and claim that our industry was suffering a serious injury?
    Mr. Parkinson: As my hon. Friend knows, we applied to the Commission for quotas on carpets. The Commission turned down our application. It was argued that import penetration on carpets had reached about 10 per cent., whereas it had reached about 25 per cent. on the two products to which it gave approval for quotas. I am sorry to tell my hon. Friend that there has been very little change in that percentage since the date of our original application. At present, I do not think that the Commission will accept our argument for import quotas.
    Mr. Gordon Wilson: Why did the Minister accept the Commission's decision, when it will clearly harm industry in the United Kingdom? Does not he realise that unemployment in the carpet industry is increasing and that it is having a knock-on effect on industries such as the jute industry, causing the closure of factories in my constituency?
    Mr. Parkinson: When we applied to the Commission, we put those arguments strongly. We need the Commission's cooperation if we are to have quotas that will stick. Under free circulation, goods could come in from other parts of the Community. That is why it is essential to have the Commission's co-operation in fixing such quotas.
    Mr. Fletcher-Cooke: Do not my hon. Friend and the Commission realise that the protection given to yarn manufacturers will be worthless if carpet manufacturers are not protected? Does he not accept that yarn makers sell their protected yarn only to carpet manufacturers and that every carpet manufacturer is going out of business?
    Mr. Parkinson: My hon. and learned Friend has made a good point. We strongly made that same point at length to the Commission. However, as the Commission realises the importance of acting only within the rules of world trade, and as a level of penetration of 10 per cent. is not thought to amount to serious damage, it refused to accept our arguments.
    Mr. John Smith: Does the Minister realise that the problem will get worse? Is it not clear that the United States Congress will do nothing about the dual energy pricing gap and that there is no

    1111
    chance of anything happening until after the presidential election? Instead of lamely accepting the Commission's opinion, is it not time that the Government challenged it, and argued the case for a very important British interest?
    Mr. Parkinson: The right hon. Gentleman is a very impressive armchair negotiator. However, he did not have much to shout about when he did the job. We pressed the case very strongly. According to the rules of world trade, the case for carpets does not stand up at present.

    Department Stores (Consumer Protection)
    Sir Anthony Meyerasked the Secretary of State for Trade if he will consider introducing legislation to provide for a system of classification of large department stores according to the extent to which their trading practices afford protection to the consumer.
    Mrs. Sally Oppenheim: No, Sir. I agree that retailers should be strongly encouraged to adopt trading practices which protect the consumer. If, however, any system of classification is to be introduced—which would be difficult—it should be operated by voluntary bodies in the same way as the classification of hotels and garages.
    Sir A. Meyer: I am grateful to my right hon. Friend for that reply. Is she aware that certain large stores automatically prosecute alleged shop-lifters, without making any effort to satisfy themselves that there was any intention to steal, and that that places respectable people—who may experience a moment of absent-mindedness or stress—in real danger? Should not such stores—notably the Army and Navy—be obliged to display a notice over every entrance, saying "Shopping at this store can be very dangerous to your health?"
    Mrs. Oppenheim: The concern expressed by my hon. Friend is fairly widespread. However, this is a matter for my right hon. Friend the Home Secretary.
    Mr. Gordon Wilson: Will the Minister look at another aspect of the activities of large stores? Will not she consider the impact on imports into the United Kingdom that result from the range of their buying and marketing powers? Is it not a fact that, compared with France
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    or Germany, there are so few sales outlets within the United Kingdom that it makes for easy import penetration of our markets?
    Mrs. Oppenheim: Retailers are in the business of providing consumers with the widest possible choice at the lowest possible price, and at the best possible quality. That is their only role.
    Mr. Adley: Reverting to the specific question asked by my hon. Friend the Member for Flint, West (Sir A. Meyer), does not my right hon. Friend agree that the trading practices of stores—particularly self-service stores—have directly resulted in a massive increase in shop-lifting? Does she not accept that there is no shop-lifting in banks and that if a store insists on inviting people to help themselves, it should not be surprised if they do so? Is she further aware that this practice not only causes expense to taxpayers and to the courts but a great deal of human misery, as numerous mistakes and wrongful prosecutions are made? Will she hold discussions with the Home Office and the Attorney-General to ensure that something is done?
    Mrs. Oppenheim: Not for the first time, my hon. Friend has expressed a concern of which I am well aware. He will know of the considerable cost that faces the retail trade as a result of shoplifting. I do not think that this is a matter that I can properly discuss with the Lord Chancellor or the Attorney-General.

    Christmas Cards (Russian Imports)
    Mr. Chapmanasked the Secretary of State for Trade if he will use his powers under the Trade Descriptions Act to require that Russian Christmas cards be marked with their country of origin when being offered for sale.
    Mr. Parkinson: Inquiries by my Department suggest that this trade is coming to an end. But I now put the USSR on notice that if the problem should persist I shall not hesitate to use the powers of the 1968 Act.
    Mr. Chapman: Will my hon. Friend accept that I welcome that statement and hope that it will prevent a country that suppresses religion from benefiting commercially from it? On reflection, does not my hon. Friend agree—particularly

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    with reference to previous questions—that we should enact legislation to mark all goods with the country of origin and thus stop the evil practice of a disreputable and agnostic country?
    Mr. Parkinson: I note what my hon. Friend has said. My right hon. Friend is about to make a statement on that question.
    Mr. Maxwell-Hyslop: Should not the legislation apply with equal force to Easter cards as Christmas and Easter are both religious festivals in Britain? Is not the consumer entitled to know the origin of such cards—not only those from the Soviet Union—so that he may exercise any conscientious objections he may have about the persecution of religion?
    Mr. Parkinson: I agree with my hon. Friend. I hope that he noticed the speech made last week by my hon. Friend the Member for Eye (Mr. Gummer). He and the hon. Member for Stalybridge and Hyde (Mr. Pendry), have made that point, together with my hon. Friend.

    Air Passenger Safety
    Mr. Michael McNair-Wilsonasked the Secretary of State for Trade if he remains satisfied with current provisions for air passenger safety.
    The Under-Secretary of State for Trade (Mr. Reginald Eyre): The safety of operation of British passenger-carrying aircraft is the responsibility of the Civil Aviation Authority and I am satisfied with the provisions by which the CAA is able to meet this responsibility and with the way the authority carries out its obligations in this regard. In respect of the air safety of foreign aircraft, this is a matter for the State of registry concerned, in accordance with the ICAO convention.
    Mr. McNair-Wilson: While I welcome that reply, may I ask whether my hon. Friend saw the statement that the CAA made last week to the effect that much of Britain's air traffic radar is as much as 25 years old, and that in safety terms it is incompatible with the future needs of London airport? What discussions has my hon. Friend had with the CAA about replacing that equipment as soon as possible? I accept that in May an order was placed with a Dutch company for £9·7 million of radar equipment.
    Mr. Eyre: I must emphasise the confidence that we have in the way in which the Civil Aviation Authority discharges its responsibilities. I have no doubt that the matters that my hon. Friend has raised will be carefully considered by the authority and that we shall take part in that consideration.

    Carpets and Wool Textiles
    Mr. Woolmerasked the Secretary of State for Trade what were the changes in the volume of exports and imports of carpets and of wool textiles for the latest 12-month period.
    Mr. Parkinson: Based on weight, it is estimated that, in the year ended April 1980, exports of carpets decreased by 17 per cent. and imports increased by 38 per cent., compared with the previous 12 months. On the same basis, exports of wool textiles rose by 2 per cent. and imports fell by 2 per cent.
    Mr. Woolmer: Does the Minister recognise the serious consequences that these disastrous trade figures have for the job prospects of textile workers in West Yorkshire? In view of the fall in output of the woollen industry by 6½ per cent. last year, and the 9½ per cent. fall in the output of the carpet industry, what specific measures will the Government take to help these vital industries to compete in the battle for jobs and markets? Will the Government ensure that the textile industry faces a future instead of a rapidly impending crisis?
    Mr. Parkinson: There is a range of agreements under the multi-fibre arrangement designed to give a measure of protection to these industries. May I put some other figures to the hon. Member? Although, last year, import penetration was 21 per cent., we exported 23 per cent. of everything that was produced on the carpet side. Although we imported 23 per cent. of wool textiles, we exported 34 per cent. Therefore, we have a very strong interest in making arrangements which will work within the rules of world trade, rather than breaking those rules. Both these industries are valuable exporters as well.
    Mr. Nicholas Winterton: While recognising that the Government have taken some action, albeit inadequate,

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    against the United States to assist the British carpet industry, may I emphasise that the quotas that have been imposed against the United States are being breached by free circulation to other members of the EEC? I see the Secretary of State shaking his head, but it is true. What action are the Government taking to ensure that free circulation does not take place in accordance with the assurance given to the Government by the Commission?
    Mr. Parkinson: Since we took office, we have under article 115 taken action about once every fortnight to prevent quotas from being undermined by free circulation. We watch the quotas very carefully and we monitor them. I have been in touch with the Commission already about the new rules under article 115 to make sure that they do not prevent us from taking action. I promise my hon. Friend that on a daily basis, we are taking action to prevent the quotas from being undermined.
    Mr. Skinner: Is the Minister aware that since the Tories came to office they have presided over disaster areas in wool textiles, carpets, cars, shoes, steel and everything else on the manufacturing side? In that same period they have encouraged the big banks to make £1,500 million in profits. Also, Ladbroke's has announced a 71 per cent. increase in its profits and Pleasurama Ltd. has just announced a dividend increase of 141 per cent.
    Mr. Parkinson: I know that the hon. Member lives in a world in which everything that is bad began after 3 May last year. Very few people in this House believe that, and no one outside cares a fig for his views.

    Footwear Imports
    Mr. Michael Morrisasked the Secretary of State for Trade what is the current state of negotiations over quota imports of footwear from Eastern Europe.
    Mr. Parkinson: Poland, Czechoslovakia and Romania have been voluntarily restraining their exports of leather footwear to the United Kingdom. We are pressing for the continuation of these restraints. Imports of rubber footwear are subject to quantitative restriction.
    Mr. Morris: Is my hon. Friend aware that the home market has decreased by 10 per cent. this year, and that in Northamptonshire alone more than 70 out of 110 firms are now on short time? In these circumstances will he give an assurance that there will be no increase in the quantities coming from Eastern Europe in the current year? Will he make strong representations for a decrease in the light of the reduced home market?
    Mr. Parkinson: As my hon. Friend knows, because we have regular consultations on these matters, the imports from Eastern Europe, although they cause trouble, amount to only 2½ per cent. of the United Kingdom market. We agree that there is no scope for an increase in those quotas and that is the point that we are arguing with the Commission.
    Mr. Marlow: Does my hon. Friend agree that that 2½ per cent. is 2½ per cent. of the market before the fall and that it has now declined? Is it not true that the shoes that come in from Eastern Europe are bought in at less than the cost of production, and are therefore dumped? Will my hon. Friend say whether he has the power to stop any further imports of shoes from Eastern Europe? If so, will he do so; and, if he will not do so, will he say what other industries he intends to sustain while he continues to sacrifice the footwear industry in this country?
    Mr. Parkinson: The country makes about £1,200 million in exports to Eastern Europe. The House and the Government must decide whether they wish to continue that trade or to give it up. In my view, many jobs in British industry depend on those exports. The problem for the Government is to strike a balance, and we do that by ensuring that there are restraints on a whole range of products from Eastern Europe.

    Manufacturing Industry (Exports)
    Mr. Barry Jonesasked the Secretary of State for Trade if he is satisfied with the export performance of Great Britain's manufacturing industry.
    Mr. Nott: Although export volume has held up very well, in spite of the lack of buoyancy in world trade, it is not part of my job to be satisfied or complacent.
    Mr. Jones: Has not British price competitiveness dropped alarmingly against

    1117
    that of the Japanese, Americans and West Germans? Is not current Government policy of a strong pound and high interest rates working against British exporters? Will the Secretary of State agree that it is likely that this winter a major British company will go bankrupt unless policy changes are made?
    Mr. Nott: Our competitiveness has been seriously eroded in the past two years, and the movements in world currencies, which have meant a strengthening of sterling, caused mainly by the security of North Sea oil, have produced that result. However, our export volume has stayed remarkably stable. It has held up very well indeed at a time when there is a lack of buoyancy in world trade.
    Mr. Stokes: In reiterating what the Minister said, should we not remind the British public and the Opposition that our export achievements as a nation have been magnificent, and that we have been unduly modest about them?
    Mr. Nott: I agree entirely. There is no other major nation that is exporting as much as 30 per cent. of its gross domestic product.
    Mr. Foster: Will the Secretary of State now admit that if interest rates continue to remain high, the pound stays overvalued, the rate of inflation remains high internationally, and industrial investment continues to decline, there will be no way in which British firms can restore their competitiveness in the next two years?
    Mr. Nott: The best way to restore the competitiveness of British industry is for industry to increase its productivity and ensure that wages do not continue to outstrip production. Generally, industry must make products that the world wants to buy. There is no collection of policies that the Government could follow that would make these factors any less important.
    Mr. Bowen Wells: Is my right hon. Friend aware that there has been much criticism of the Export Credits Guarantee Department over its operations in Zimbabwe? It appears that the ECGD does not give as advantageous terms to British exporters as those received by competing countries such as France and Germany.
    Mr. Nott: If there are any complaints about the ECGD's facilities for Zimbabwe
    1118
    I hope that my hon. Friend will bring them to my attention. Generally, the ECGD has the highest reputation among British industry and throughout the world. If there are any particular problems, I hope he will let me know them.

    Central Electricity Generating Board (Monopolies and Mergers Commission)
    Mr. Gristasked the Secretary of State for Trade what are the terms of reference in the case of the reference of the Central Electricity Generating Board to the Monopolies and Mergers Commission under section 11 of the Competition Act 1980.
    Mrs. Sally Oppenheim: I announced the formal terms of reference for this inquiry on 3 June and have placed a copy in the Library of the House. The investigation will cover the efficiency and costs of the board in general, but the commission has been invited to pay particular attention to five areas which I believe deserve special scrutiny. They include internal cost control, purchasing policy, methods of stock control, plant maintenance programmes and planning and appraisal of new investments.
    Mr. Grist: Will cost control cover possible cost differences in the price of imported coal? If so, will employment consequences for this country be taken into account?
    Mrs. Oppenheim: I feel sure that the Monopolies and Mergers Commission will want to pay attention to every aspect of costs, including the availability of cheaper coal elsewhere, if that exists. The cost of electricity supplied in bulk to area boards by the CEGB is a large element in the final bill to the consumer, which has risen substantially in recent years. It is, therefore, important to establish that everything possible is being done by the CEGB to absorb costs and increase efficiency in order to keep prices as low as possible.
    Several Hon. Members rose—
    Mr. Speaker: Order. I shall call the hon. Member for Derby, North (Mr. Whitehead) to ask a supplementary question. His question is next on the Order Paper and is almost identical.
    Mr. Whitehead: Without having the benefit of seeing the main answer, may I

    1119
    ask the Minister to say why the public sector appears to be being treated more harshly in these referrals than the private sector? When will orders be drafted under the 1980 Act to allow restrictive practices in the private sector to be referred to the Monopolies and Mergers Commission?
    Mrs. Oppenheim: That is under active consideration by the Government.

  OVERSEAS DEVELOPMENT

    British Council
    Mr. Spriggsasked the Lord Privy Seal if he is satisfied that he is getting value for money for the contribution made by the Overseas Development Administration to the British Council.
    The Minister for Overseas Development (Mr. Neil Marten): Yes, Sir. I believe that we are.
    Mr. Spriggs: Will the Minister accept the thanks of the Cowley Hill school, the Hard Lane section of the famous Cowley school, St. Helens, which has turned out some of the finest pupils and academics in the world? Is he aware that, despite that gratitude, the school regrets that the officials and staff of the British Council responsible for dealing with correspondence and telephone calls have failed to even acknowledge communications?
    Mr. Marten: I reciprocate those thanks. I shall look into the matter.
    Mr. Cormack: Is my hon. Friend aware of the widespread acceptance of the outstanding work done by the British Council over many years? Will he do everything possible to ensure that it is able to continue.
    Mr. Marten: I am grateful to my hon. Friend. The answer is "Yes".

    Zimbabwe
    Mr. Soleyasked the Lord Privy Seal if he will make a statement on his discussions with Prime Minister Mugabe during his visit to London on 9 May which concerned the aid needs of Zim babwe.
    Mr. Neil Marten: In the discussions which Mr. Mugabe had with the Prime Minister on 9 May he expressed his gratitude for the advisory teams that we had
    1120
    already supplied and urged us to provide generous help in following up their recommendations, particularly as regards the public service. In addition, he sought our assistance in persuading other aid donors to make generous allocations for Zimbabwe. We undertook to do all that we could.
    Mr. Soley: Did the Minister discuss with President Mugabe the report that, unless aid is forthcoming by the end of the year, people in some rural areas of Zimbabwe will suffer severe starvation? What additional aid is being considered in that eventuality?
    Mr. Marten: I did not have direct discussions with Mr. Mugabe, but rural development has been discussed. The ODA mission that returned this weekend has been discussing just that subject with the Zimbabwe Government.
    Mr. Brocklebank-Fowler: What is the latest status of the Zimbabwe debt to the United Kingdom Government? Can my hon. Friend confirm that the £75 million aid that he announced in the House some weeks ago is to be grant aid and not related to the repayment of that debt?
    Mr. Marten: The first part of my hon. Friend's question is for my right hon. and learned Friend the Chancellor of the Exchequer. The negotiations that have taken place with the Zimbabwe Government are ad referendum to the Zimbabwe Government. Therefore it would be discourteous of me to answer that question.
    Dame Judith Hart: Will the Minister accept that rescheduling of debts, terms of grants, loans and consideration of debts are for him and not the Chancellor of the Exchequer?
    With regard to the £7 million emergency aid, which is part of the £75 million, how much has been spent, how much is planned to be spent and how far will it meet Zimbabwe's emergency food needs?
    Mr. Marten: The answer to the first part of the right hon. Lady's question is "No." In the discussions that have just taken place I believe that agreement was reached on how to spend that £7 million. We are ready to disburse that sum when Zimbabwe is ready to spend it.
    Dame Judith Hart: Will some of that money be spent on emergency food aid now?
    Mr. Marten: That will be up to the Zimbabwe Government and will be contained in their agreement with us on how to spend the emergency aid.

    United Nations (Contributions)
    Mr. Armstrongasked the Lord Privy Seal what were the annual contributions made by Her Majesty's Government to the United Nations international children's emergency fund and the United National refugee programme, respectively, in the years 1974 to 1979; and what contribution is to be made in the current year.
    Mr. Neil Marten: Subject to parliamentary approval, in 1980 Her Majesty's Government will contribute £4·3 million and £5 million to the regular programmes of the United Nations international children's emergency fund and the Office of the United Nations High Commissioner for Refugees respectively.
    Tables of contributions in the years 1974 to 1979, together with those to special appears and special projects of the two agencies, will, with permission, be published in the Official Report.
    Mr. Armstrong: Bearing in mind the extreme poverty and social distress under which millions of people are living is the Minister satisfied that he is bringing to bear on that problem the vision and idealism that it deserves if we are to honour our obligations and commitments? Will the hon. Gentleman accept that it is a great shame to talk of cuts in the allocation to UNICEF, for instance? Will he take steps to increase the allocations so that we, may be proud to be British and continue our commitment to deprived people throughout the world?
    Mr. Marten: It is not for me to say whether I have the idealism. That is for others. With regard to our UNICEF contribution, 1979 was an exceptional year, and our contribution was in support of the international year of the child, organised by UNICEF. In 1978, we gave £4·5 million, and the figure for 1980 is £4·3 million. That is a slight reduction, but it is not a figure of which we need be ashamed. As a nation we should be
    1122
    proud of what we do for developing countries.
    Mr. Kenneth Lewis: Will my hon. Friend press the United Nations to give more support to Thailand, which at present has a particular problem with Cambodian refugees?
    Mr. Marten: Certainly I shall. However, we are already giving considerable aid to Thailand and Cambodia to help with the refugee problem.
    Following is the information :

    CONTRIBUTIONS BY HER MAJESTY'S GOVERNMENT TO UNICEF

    Regular programme

    Special appeals and specific projects

    £ million

    £ million

    1974

    1·300

    0·520

    1975

    2·000

    1·025

    1976

    2·300

    Nil

    1977

    3·300

    0·790

    1978

    4·500

    1·192

    1979

    5·800

    1·600

    CONTRIBUTIONS BY HER MAJESTY'S GOVERNMENT TO UNHCR

    Reqular programme

    Special appeals

    £ million

    £ million

    1974

    0·36

    0·53

    1975

    0·33

    1·14

    1976

    0·40

    0·35

    1977

    0·86

    0·25

    1978

    2·34

    4·83*

    1979

    6·00

    1·63*

    * Unaudited.

    The European Community also makes significant contribution to UNHCR's regular programme and special appeals, parts of which are provided from United Kingdom subscriptions to Community resources.

    European Community (Aid to Non-associates)
    Mr. Welshasked the Lord Privy Seal what British proposals have been put forward to the development council of the European Economic Community concerning aid to non-associates.
    Mr. Neil Marten: We have supported proposals for a total programme of 130 million units of account of aid to non-associates in 1980, and we have put forward for consideration projects in Bolivia, Costa Rica, Yemen Arab Republic, Sri Lanka and Bangladesh.
    Mr. Welsh: Will the Minister accept that I consider it right steadily to increase the sum of approximately £90 million over the coming years? Is the Minister aware that the Commission is looking for projects to keep in hand and use when appropriate? Can the hon. Gentleman assure us that we shall be submitting projects to the Commission, and that such projects will be made known to the House or placed in the Library?
    Mr. Marten: The list is rather long. I will publish it in the Official Report.
    Mr. Nicholas Winterton: Does Zimbabwe feature in any project that we have submitted? If not, why not, bearing in mind that, for the first time in its recent history, Zimbabwe is having to import maize and considerable starvation is likely to occur in rural areas?
    Mr. Marten: Zimbabwe has applied for membership under the Lome convention and it will come in under that, and not under the non-associates, which is the subject of the question.
    Mr. John Smith: On a point of order, Mr. Speaker. I was hoping that the Secretary of State for Trade might be able to answer question No. 22, which was not reached. I made a request to the right hon. Gentleman to deal with that question. Would it be in order for him to answer it now?
    The Secretary of State for Trade (Mr. John Nott): Further to that point of order, Mr. Speaker. I, too, was hoping that we would reach question No. 22, but we just failed to do so. The right hon. Gentleman wrote a public letter to me and I have recently released a public letter to him replying to his remarks. I am sure that he will find an opportunity of raising the matter again in the House and I shall be pleased to have an opportunity to respond at the appropriate moment.
    Mr. Smith: Further to that point of order, Mr. Speaker. Would it not be in order for the Secretary of State to answer the question now?
    Mr. Speaker: If a Minister wishes to answer a question at the end of Question Time, it is customary for me to have notice before Question Time. There are two other statements to be made shortly.

QUESTIONS TO MINISTERS
Mr. Straw: On a point of order, Mr. Speaker. I have given you and the Minister concerned notice of the point that I wish to raise. You will recall, Mr. Speaker, that on Wednesday last week I referred to the fact that a question that I had tabled on the way in which the rebate on our EEC contributions was to be repaid was transferred from the Lord Privy Seal to the Chancellor of the Exchequer six days after it had been tabled.
When I raised the matter with you, Mr. Speaker, you ruled that that transfer was in breach of advice from the Select Committee on procedure that only two days should elapse before a question was transferred, and you said that it was discourteous and unfair to hon. Members for the Lord Privy Seal to have acted in the way that he did.
In the light of your ruling, Mr. Speaker, I wrote on Thursday to the Lord Privy Seal asking him to take back the question, in order to restore me to the position that I would have been in had he not transferred the question. The right hon. Gentleman replied today, but has not dealt specifically with that point.
I am aware that you, Mr. Speaker, cannot determine which Minister should answer a question, but I submit that when a Minister transfers a question after the two days that the Procedure Committee recommended, and in clear breach of that Committee report, he should be under an obligation to restore the hon. Member concerned to the position in which he would have been had the Minister not acted in breach of the transfer rules.
The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): Further to that point of order, Mr. Speaker. With your agreement, I can inform the House and the hon. Member for Blackburn (Mr. Straw) that his question will be answered at 3.30 p.m. on Wednesday.
I am most grateful to you, Mr. Speaker, for having, exceptionally, agreed to this procedure. I am also grateful to my right hon. and learned Friend the Chancellor of the Exchequer, who has responded so helpfully and rightly in this matter. I hope that in view of the action

1125
that has been taken, the hon. Member for Blackburn will feel that his rights have been respected.
Mr. Speaker: The point of order gives me the opportunity to tell the House that reports of the exchange last week indicated that I had hit the Lord Privy Seal on the head with a cleaver. I want to make clear that I hit him with a feather duster, and no more.

EUROPEAN COUNCIL (VENICE MEETING)
The Prime Minister (Mrs. Margaret Thatcher): With permission, Mr. Speaker, I should like to make a statement on the meeting of the European Council which my noble Friend the Foreign and Commonwealth Secretary, and I attended in Venice on 12 and 13 June. The summary of the proceedings issued by the Italian Presidency has been placed in the Library of the House.
The Venice meeting was a series of general discussions between the nine Heads of Government about the fundamental problems that we all face within the Community and outside. We had in mind the need to prepare a common European view for the economic summit that is to be held next Sunday and Monday.
All the nations of the European Community have similiar problems of inflation and unemployment and a number now have an adverse balance of payments. We were agreed that the major short-term objective must be to contain inflation by means of appropriate monetary and fiscal policies. We were concerned that the 100 per cent. increase in the price of oil over the past year would lead to a recession in world trade. We were therefore disturbed at the pressure for further oil price increases at the recent Algiers meeting of OPEC. Such an increase can only make worse the economic problems of the industrialised countries and give rise to intolerable burdens for the developing countries. The European Community remains willing to enter into a dialogue with the oil producers.
Having noted the budgetary settlement reached by the Council of Ministers at the end of May, the Heads of Government had a useful, but necessarily preliminary, discussion of the need to put in hand and carry through urgently a review of the Community's financial position. We also took the opportunity to have a first, informal, discussion about the choice of the next President of the Commission.
The European Council issued three declarations, on the Lebanon, on Afghanistan, and on the Middle East. With permission, all three texts will be

1127
circulated in the Official Report. Those on the Lebanon and on Afghanistan reaffirmed the concern felt by the Heads of Government about the position in the two countries.
The declaration on the Middle East restates the two principles that have for many years been the basis of the European position : the right of all the States in the region, including Israel, to existence and security; and justice for all the peoples, which implies the recognition of the legitimate rights of the Palestinian people. A comprehensive settlement requires that all the parties concerned should be bound by these principles.
Beyond that, the European Council decided to make contact with all the parties in order to ascertain their position
"with respect to the principles set out in this declaration, and in the light of the result of this consultation process to determine the form which an initiative on their part"—
that is on the part of the Nine—
"might take."
The diplomatic activity that the Nine will undertake over the next few months is intended to be complementary to the Camp David process on which the United States, Egypt and Israel are still engaged. We hope and believe that in this way the Nine can contribute to the work that will have to be done to prepare for a peace settlement in the Middle East.
Mr. James Callaghan: On the general economic situation and the summit that is to be held on Sunday and Monday, the right hon. Lady's statement is extremely thin and inadequate. Are we to take it that the European Community is going to the economic summit with the view that, because of the increase in oil prices, deflation must be accepted because growth is to be put to one side; the debt problems of the Third world—mounting problems, which are seriously affecting its development—are not to be considered and that action is not to be taken on them; and that unemployment in the Western world as a whole cannot be overcome? If so, that is a grave departure from the attitude that has been taken on these questions at previous summits, when positive policies have been
1128
put forward, in some instances very successfully.
It seems from what the right hon. Lady said that all that the Community is going to the summit for is to complain that oil prices have been increased and that therefore there is nothing that it can do about those problems. That is totally inadequate.
Secondly, the President's statement is apposite to our position at home. It refers to the disturbing level of unemployment among young people and calls—this is where it is apposite to the Prime Minister's policies—for short-term measures in the context of an active employment policy. How does the right hon. Lady propose to reconcile her signature to that statement with her attitude and policy on the cuts in the Manpower Services Commission finance, which the MSC says will render it incapable of carrying out its responsibilities? As the right hon. Lady put her name to the text, when does she propose to bring before the House measures that will help to overcome the problem of unemployment in this country?
Thirdly, there is a series of laudable statements to which we can all say "Amen" but which do not really carry us very much further on the financial position of the Community and other things. The only real issue on which there is any precision and any sharp edge is the Middle East. It would have been very much better if the Council had been much less sharp. All that it has done by its statement on the Middle East is to encourage Mr. Begin in his unwise and illegal policy on the settlements, to give a boost to the PLO, which said that it would destroy Israel, and to embarrass the United States in its efforts. If that is the sort of initiative to which the statesmen of Europe are committing themselves, I say that it would be far better if they kept quiet.
The right hon. Lady referred to the two principles that have been the basis of the European position. It seems that a third principle has been introduced, namely, that the Palestinian people must be placed in a position to exercise fully their right to self-determination. That is a change of British policy. Does it mean that there is to be in the right hon. Lady's policy a new independent State in the Middle East, which

1129
under the right of self-determination can be fully armed on the borders of Israel, Syria and Jordan? [HON. MEMBERS : "Why not?"] Is that the policy of the British Government? If that is so, I can only say to the right hon. Lady and to anybody who says "Why not?", that they are creating another powder keg in the Middle East. The sooner that that is recognised the better.
What is the right hon. Lady's policy on self-determination and the creation of another independent self-armed State? Of course there are rights for the Palestinian people, but what has been happening, and what has Europe fallen for? Europe's motives are suspect as long as it is so concerned about oil. Both protagonists are always trying to line up allies. The PLO has won a propaganda victory by lining up the Europeans to give it a boost the week after it said that it was going to destroy Israel. That cannot contribute to peace in the Middle East. It would have been far better if Europe had said that it would support the discussions that are now to take place between King Hussein of Jordan and President Carter and had tried to involve the other Arab States in those talks rather than going out with new principles about self-determination that will only add to the difficulties in the Middle East.
The Prime Minister: First, with regard to the right hon. Gentleman's question on the economy, instead of having detailed discussions on particular aspects we spent several hours having a general discussion on all of the things that I have included. We discussed inflation. Of course people were concerned about unemployment and adverse balance of payments. Those topics and the energy debate were wrapped up into one.
Some of the right hon. Gentleman's former colleagues, my present colleagues, made the point vigorously that these summit meetings were never meant to end in detailed statements on a number of issues. They were meant, first, to be general discussions in a quite private atmosphere between Heads of Government as they met. It was some time before the habit arose of issuing very detailed communiqués.
The right hon. Gentleman will have observed, if he has read the presidential statement, that each and every one of us
1130
did not put our signature to the presidential statement. It states that
"It was not discussed in detail by the European Council itself except section 7 on energy."
It was a general presidential statement. The only parts that were discussed in detail were the statement on energy and the three declarations on the Lebanon, Afghanistan and the Middle East.
Most of my colleagues thought that this had been an unusually successful meeting and that we had spent a lot of time on genuine and general discussion on the problems without trying to come to artificial communiqué results on many things that would repeat previous communiqué statements. Of course we are concerned about the problems of unemployment, inflation and adverse balance of payments, We cannot trot out immediate and quick replies.
The right hon. Gentleman went on to express a little disappointment about the financial position in the Community. We confirmed the budget settlement that had previously been reached. It will, as the right hon. Gentleman knows, take quite a long time to get a new structural change on the budget. The earliest that it can be expected is July next year, and most of us think that that will be a little bit soon, bearing in mind that the Commission changes and that there will be a number of other things happening between now and then.
The right hon. Gentleman reserved his main criticism for the statement on the Middle East. I remind him that in the declaration of the European Council in June 1977, to which he, I believe, put his signature, the Council stated that
"The Nine have affirmed their belief that a solution to the conflict in the Middle East will be possible only if the legitimate right of the Palestinian people to give effective expression to their national identity is translated into fact, which would take into account the need for a homeland for the Palestinian people."
No one said to the right hon. Gentleman "Precisely what do you mean by a homeland?" because we knew that there would be no quick answer to that point. However, he and all other Heads of Government have accepted for a very long time at the European Council that if one people expects to exist behind secure boundaries it cannot deny that right to another people. What one asks for oneself one must be prepared to accord to

1131
others. That is exactly what we are saying.
We have put into the communiqué for the first time the phrase "self-determination". I accept that. What was previously in a declaration given to the United Nations by the Irish Foreign Minister on behalf of the Nine was a slightly different wording. With respect, it did not mean anything very different. It said :
"The Palestinian people are entitled within the framework set by a peace settlement to exercise their right to determine their own future as a people."
With respect, that is not really very different from self-determination. We have also said very firmly that it is in the interest of putting an end to violence that the Nine consider that
"only the renunciation of force or the threatened use of force by all parties can create a climate of confidence in the area."
We have also said that the two principles—that each accepts the right of the other to live in peace behind secure boundaries—are binding on all parties to the negotiations. I thought that in the communiqué we had covered just about everything that one expects to cover if one is expecting to accord to others the very things that one demands for oneself in living in peace behind secure boundaries.
Finally, in response to what the right hon. Gentleman said, we made it clear that we believe in the future of the Camp David process and regard this as supplementary to it. I believe that that is a true assessment of the situation.
Mr. Callaghan: First, the right hon. Lady correctly says that she did not put her signature to the document. Does she agree with the summary by the Presidency of the proceedings of the European Council—that is what its heading is—which states that there is an
"increasingly disturbing employment situation, particularly as regards young people, there was reaffirmation of the priority need…for short-term structural measures in the context of an active employment policy"?
Does she agree with that? If she agrees with it, is she going to bring forward measures that will ensure that there is an active employment policy?
Secondly, on the question of the Middle East, the right hon. Lady knows as well as I do how words are studied in that
1132
area. The European Council has gone further than has been gone before. The 1977 statement, to which I adhere, took place before Camp David. I do not make much of that. However, it was an important step on the way.
It is clear that there is an evolving situation in which the position of the Palestinians has to be taken carefully into account. What the Europeans are doing by this initiative is cutting across much of what has been going on so far. It would be far better to involve King Hussein privately in these matters and to have negotiations with him rather than to come out with a declaration of this sort.
I can only say to the right hon. Lady that if she is giving her support, as she apparently is, to the creation of an independent State in this part of the world, with all the full rights of an independent State, she is going along with a process that President Giscard d'Estaing initiated and she should not have done so. President Giscard does not support the Camp David process, and never did.
The Prime Minister: With regard to the latter point, the right hon. Gentleman is trying to put words into my mouth.
Mr. Callaghan: On the contrary, they are here in the communiqué.
The Prime Minister: The words in the communiqué I support entirely. They concern the right of the Palestinian people to determine their own future. If one wishes to call that" self-determination". I shall not quarrel with it. I am interested that the right hon. Gentleman appears to be attempting to deny that right. I do not understand how anyone can demand a right for people on one side of a boundary and deny it to people on the other side of that boundary. That seems to deny certain rights, or to allocate them with discrimination from one person to another.
I know, of course, that communiqués are looked at in detail. I looked in detail at the right hon. Gentleman's communiqué, because it was the first time that the phrases "national identity" and "a homeland" had been used, but I hope that at no time did I try to embarrass anyone genuinely seeking a settlement by trying to define it more closely than that.

1133
We are all determined not to undermine the Camp David process and to try to do something positive to assist a genuine settlement in the Middle East. If we do not get one, it will be disastrous for the whole Western world.
With regard to the right hon. Gentleman's points about unemployment, of course we were all concerned about unemployment. As he knows, some countries have a higher rate of unemployment than we have. Of course, we were all concerned about the prospects for young people. In fact, the presidential statement was more detailed than the actual discussion. Each and every one of us accepts that we should try to do everything possible to alleviate the unemployment position, especially for young people. But we are not prepared to print money to do it.
Mr. Callaghan: The right hon. Lady—[Interruption]. We have had a totally unsatisfactory statement from the Prime Minister, and, if Mr. Speaker allows, I propose to pursue it.
I shall leave the question of the Middle East, because it is bound to be followed up in other ways, but on unemployment in this country the right hon. Lady gives general assent to short-term measures to relieve it. Does she intend bringing measures before this House?
The Prime Minister: We already have short-term measures to relieve unemployment. That is exactly what some of the short-time working subsidies are. They give very wide opportunities to young people under the present youth opportunities programme being operated by my right hon. Friend the Secretary of State for Employment.
Mr. Amery: Does my right hon. Friend agree that the Israelis conquered the West Bank from Jordan and that, under resolution 242, it is therefore with Jordan that the Israelis should negotiate their withdrawal? Is it not therefore for the Jordan Government to decide to what extent the PLO should be associated with the negotiations? Why is it for the European Governments to nominate this terrorist organisation as a valid negotiator in the transaction that is to come?
The Prime Minister: I think that my right hon. Friend is asking me what is the specific legal position about the land
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on the West Bank. Only two countries recognise the land of the West Bank as belonging to Jordan. One is ourselves, and the other is Pakistan. The other States have not precisely determined the legal position of that land; nor has the United Nations. We accept that the land of the West Bank legally belongs to Jordan, and so does Pakistan.
My right hon. Friend asked whether it was not therefore for the negotiations to be with King Hussein. As my right hon. Friend knows, King Hussein has indicated that he will negotiate with the Arab States as a whole, and that is his right. The Arab States as a whole have gone very much further than the Leader of the Opposition or I or most people in this country could go, by recognising the PLO as the sole representatives of the Palestinian people. We have not done that, and we could not do that, but we believe that the reality of the situation is that there will not be a comprehensive settlement in this area unless the PLO is associated with it.
Mr. Russell Johnston: Is the Prime Minister aware that it has been widely reported that, for once, she and President Giscard d'Estaing were agreed in rejecting the candidacy for the Presidency of the Commission of Gaston Thorn not on the ground of his ability or of the size of his country but because he was too Community-minded? Will the Prime Minister, who is known for her blunt speaking, give the House an unequivocal assurance that she is anxious to see as president of the new Commission someone who will press enthusiastically for greater European integration?
The Prime Minister: The hon. Gentleman is not right in assuming that that candidacy has been rejected; it has certainly not. There is more than one candidate, and more than one very good candidate. Because we did not come to a unanimous decision, which would have been unlikely on the first discussion, we shall discuss the matter further.
Mr. Maurice Macmillan: Will my right hon. Friend say to what extent she and her colleagues found agreement on how to handle the very large sums of money flowing into the oil-producing countries? Was there general agreement that this could not be resolved in a purely

1135
European context but required wide financial and economic meetings between countries, including Japan, which are dependent on the oil suppliers, and meetings of the developing countries to which the funds generated by oil are so very important?
The Prime Minister: Most of our discussions on that subject were preliminary to the wider economic summit that takes place next Sunday and Monday. If I may put it this way, we felt that whatever recycling arrangements might be proposed, whether through private banks or international institutions, recycling was not enough, because some of the developing countries can no longer afford to go on borrowing money. They really need more grants from some of the OPEC countries, whose very considerable increases have imposed intolerable burdens on some Third world countries.
Mr. J. Enoch Powell: Is the Prime Minister aware that many besides the Leader of the Opposition will be alarmed at the spectacle of the Western European nations preparing to interfere, if only verbally, in the Levant, upon the basis of principles that are at best ambiguous and at worst deliberately contradictory?
The Prime Minister: I accept that they lack the right hon. Gentleman's specific clarity. Because we have gone on for a long time talking about the right of peoples to decide their own future, and because the options have never been worked out and put to the several parties and the many different representatives of the Palestine people, so we have gone on using vague terms such as "homeland", "national identity" and "self-determination". We thought that it was time someone went round and discussed with the parties precisely what these principles were likely to mean in practice and precisely what the options were. There will be nothing vague about the process, but I think that the right hon. Gentleman will agree that a great deal has been vague about the terms that have been used in the past. We are trying to seek clarification of those on the basis that all the parties concerned accept as binding, right from the outset, the principles enunciated in the communiqué.
Mr. Michael Morris: As this was the first summit following the very tough budget negotiations, can my right hon.
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Friend say that the EEC now has momentum again and can carry on with many of the necessary jobs ahead of it in the coming year?
The Prime Minister: From the financial viewpoint, it was an unusually friendly meeting, which will, I believe, free us to take a greater part on the world stage. I believe that, in view of the increasing tensions on the West Bank, we were right to take the view that we could not just leave this part of the world alone. We must try to do what we can to supplement the Camp David process.
Mr. Faulds: Will the right hon. Lady find some way of informing hon. Members on both sides of the House—the media in this country are so irresponsible and partisan—that, as Mr. Yasser Arafat said to me and to the hon. Member for Canterbury (Mr. Crouch) the right hon. Lady's colleague—
Mr. Ogden: Drop dead.
Mr. Faulds: I would have thought that this was a matter of some concern upon which the peace of the world depends. That is the sort of silly, snide comment to be expected from the pro-Zionists in the House. As Mr. Yasser Arafat said to me and to the right hon. Lady's colleague the hon. Member for Canterbury, at a meeting in the small hours of the morning, about 10 or 12 days ago in Beirut, the significance of the outcome of the congress was not the reiteration of the ritualistic phraseology about Zionism, which is perfectly understandable, because that is a racialist dogma, but that the A1 Fatah congress, meeting for the first time in nine years, had entirely endorsed every resolution of the Palestinian National Council—its Parliament in exile—including that which accepted, or was willing to accept, a part of Palestine as its State. That, by implication, can only mean an acceptance of Israel. It is a pity that more of our parliamentary colleagues do not understand that simple point.
The Prime Minister: The hon. Gentleman made many comments. I could not possibly accept the description of Zionism that he gave. I cannot possibly accept what he says about Zionism. Mr. Yasser Arafat and the PLO must accept the right of Israel to exist behind secure boundaries. The Al Fatah statement to

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which the hon. Gentleman referred contained many things that none of us could possibly accept. If these negotiations are to get anywhere with any of the parties, just as the Israeli people will have to accept the legitimate rights of the Palestinian people so the Palestinian people, including the PLO, will have to accept Israel's right to exist behind secure boundaries and be prepared to guarantee those boundaries.
Sir Anthony Meyer: Will my right hon. Friend accept warm congratulations for the part that she played in this evidently constructive meeting? Can she give an assurance that oil-rich Britain will now play a forward part in ensuring that the EEC develops policies for meeting the grave North-South crisis caused largely by the actions of the oil-producing countries?
The Prime Minister: I accept that there is a grave North-South crisis and that part of that crisis is attributable to the sharp increase in the price of oil, which has gone up more than tenfold over the last eight years. Although the increases cause immense difficulties for the industrialised countries, they cause intolerable burdens for the poverty-stricken countries, which are approaching financial crisis. We are extremely worried about how the revenues from OPEC oil will be recycled this time. This will be more difficult than on previous occasions. We shall certainly expect to play a constructive part ourselves. It was with a view to deciding what we should say next week that we spent such a long time on this aspect of the problem in Venice.
Dr. M. S, Miller: In view of the fact that the PLO, only last week, once again reiterated its intention and desire to obliterate the State of Israel, and in view of the fact that the establishment now, of an entirely independent State would put the PLO in a position to do exactly that, is the right hon. Lady not concerned to help the Camp David agreement? That agreement envisages autonomy for the Palestinians that not only could, but would, develop into a Palestinian State after a period of time.
The Prime Minister: The hon. Gentleman began by referring to the PLO statement last week. I made clear that part of the statement of the Nine said that the
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two principles, namely, the right of Israel to exist behind secure boundaries and the recognition of the legitimate rights of the Palestinian people—I quote from the communiqué that we all signed—are
"binding on all the parties concerned, and thus the Palestinian people, and on the PLO, which will have to be associated with the negotiations."
It is clear that unless those two principles are accepted as binding there would, and could, be no settlement at all.
Mr. Cormack: Did my right hon. Friend and her colleagues discuss the urgent necessity of expressing the clearest and most concentrated abhorrence of the appalling atrocities in Afghanistan? Does she agree that there is a case for the West acting in concert and applying the same sort of sanctions as those applied against Iran?
The Prime Minister: We issued a separate statement on Afghanistan, which made the point that we abhor totally the atrocities and the continued invasion of Afghanistan by the Russians. I think that sanctions against Russia would not secure the objective that my hon. Friend seeks. That is one of the facts that one has to face. We must go about the matter through diplomatic action and decide what we shall do later in the year if the invasion persists and the number of Russian troops in Afghanistan remains of the same order.
Mr. Heffer: Is the right hon. Lady aware that many of us who want to see the State of Israel live within secure borders and who have long been her friends are very disturbed with the policies of the present Government in Israel. They are not helping the situation. At the same time, we want to see the Palestinian people with a State of their own. We do not feel that the so-called initiative coming from the Heads of the European Common Market countries is the best way to deal with the situation.
Is the right hon. Lady aware that some of us feel that it would be far better, acting together with the United States, which is very much involved, to try to reach an agreement and then to get the Soviet Union to help to make certain that such an agreement was carried out?
The Prime Minister: I cannot agree with the hon. Gentleman that that would

1139
be the best way forward. I would, however, accept—as I hope most people would accept—that what we really wish to achieve is a settlement in this area, believing that this would be in the interests of the Israeli people there, of the Arab people there, and of the whole of the Western world. We believe that we have taken a small constructive step along that path, in conjunction with our American friends, who are continuing to follow up the Camp David agreement.
Mr. Speaker: Order. I propose to call four more hon. Members from either side. That will be a very fair run.
Mr. Adley: Is my right hon. Friend aware that there will be a widespread welcome for the accord that she announced today and pleasure that the EEC is at least prepared to look to the future in the Middle East, where many of us believe there will never be peace unless and until the Palestinians have their own State? Is not trying to discuss the future of the Middle East without the Palestinians as useful as trying to discuss the future of the laws of cricket without consulting the MCC? Will my right hon. Friend devote to this problem the same energy and, we hope, the same success as she devoted to solving the problem in Zimbabwe, with people inevitably and rightly determining their own future.
The Prime Minister: I am afraid that this problem will take a considerable time to solve. I do not think it helps if we try to go too quickly and to conclude that there would be an independent Palestinian State. I would not necessarily conclude that myself. There are a number of other possibilities. It is for the people there—along with the European initiative—to indicate how they see the options and how they would react to them and then, as the last phrase of the communiqué states
"in the light of the results of this consultation process to determine the form which an initiative on their part could take."
It seems to me to be an example of the fact that time spent on reconnaissance and on trying to clarify principles is seldom wasted.
Mr. Ogden: Will the right hon. Lady confirm that the conversations that she is reported to have had with the French President about the New Hebrides took
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place? There seems to be a discrepancy between what the press reports say about the conversations that she has had and the information being given by her right hon. Friends in the Foreign Office. Can she tell us anything about those reports concerning the New Hebrides?
The Prime Minister: I spoke to the French President about the position in the New Hebrides, and my hon. Friend the Minister of State will shortly be making a statement about them. I pointed out that we had agreed that we would act jointly in pursuance of our duties there, and that when the French sent the armed gendarmes we believed that we were acting fully within our obligations in sending the Marines. As the French sent armed gendarmes and we have no armed police, we sent the Marines. We believe that that was joint action, and it is our wish to continue to act jointly.
Dr. MawMnney: Will my right hon. Friend accept that this House uniquely understands Germany's unhappiness at the prospect of having to make a net contribution of £1 billion to the Community? Will she make available to Chancellor Schmidt her expertise in this region, so that together they can bring about a restructuring of the finances of the Community?
The Prime Minister: I entirely agree with my hon. Friend. We were to have been the largest net contributor this year, and we know exactly what it felt like to have that obligation placed upon us. Germany, although a very much richer country, per head, than we are, now has that obligation. We are still the second largest contributor, although a long way behind Germany, and France is behind us in contributions. The other countries are net beneficiaries, and some of them are very much wealthier, per head, than those that are making the contributions. Herein lies the need to restructure the budget.
It has always seemed to me to be quite absurd that we should be making extensive contributions to quite wealthy countries in Europe when the real need in the world is to help those who are suffering from considerable poverty.
Mr. Maclennan: Reverting to Palestine, may I ask whether the Prime Minister realises that by seeking to equate

1141
the rights of Israeli citizens with the rights of Palestinians she is seeking to equate what cannot be so equated and begging the question whether the Palestinians have, in international law, a proper case to be recognised as a State?
Does she not recognise that however important the diplomatic role of the European Council may be it does not have a legislative role that can prescribe in international law whether it is appropriate for the Palestinians' aspirations to statehood to be recognised?
Does the right hon. Lady not recognise, also, that by admitting that she is not sure whether statehood is the appropriate end-point for the Palestinians she is contradicting the communiqué, which recognises what it calls the right of self-determination, in the light of the fact that it has been categorically asserted so often that statehood is what the Palestinians seek?
The Prime Minister: I think that the hon. Gentleman—and possibly a number of other hon. Members—are making great distinctions without a difference. The word "homeland" has been used for quite a long time in connection with the legitimate rights of the Palestinian people. The two principles have been expressed for a very long time. If the hon. Gentleman had listened carefully he would have heard the difference. May I read out the text again? It says that
"the time has come to promote the recognition and implementation of the two principles universally accepted by the international community : the right to existence and to security of all the states in the region, including Israel, and justice for all the peoples, which implies the recognition of the legitimate rights of the Palestinian people."
Other communiqués have gone on to define those legitimate rights in terms of national identity, and words such as "homeland". We have gone on to say that
"The Palestinian people, which is conscious of existing as such, must be placed in a position, by an appropriate process defined within the framework of the comprehensive peace settlement, to exercise fully its right to self-determination."
I should have thought that it was very difficult to quarrel with that if the result is that we get a comprehensive settlement within the region as a whole. I stress again that there can never be a settlement unless both the Palestinian
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people and the Israeli people recognise each other's rights and the right to continue to exist securely.
Mr. Moate: Will my right hon. Friend comment on the question of the enlargement of the Community by the admission of Spain and Portugal—a matter on which earlier statements by the French President have cast some doubt? Will she confirm that this question was discussed at the summit? Is she now satisfied that there is an absolute commitment in principle to their membership, and that, in practice, no delays or obstacles will be put in the way of the early accession of those two nations?
The Prime Minister: We did no more than mention it in passing. We did not discuss it. I make clear that we take the view that we wish to go ahead with negotiations for the admission of Spain and Portugal. I do not wish there to be any doubt about that.
Mr. Ioan Evans: Were the proposals of the Brandt Commission considered? If so, what consideration has been given to the commission's proposals for a summit?
Does the right hon. Lady not think that if we are to have statements about foreign affairs coming from the EEC Commission it would be better to debate them first in the House of Commons, so that the views of the House were known?
The Prime Minister: We did not agree that there should be what is called a Brandt summit. As the hon. Gentleman will gather from what I have said, we discussed a number Of things that concerned the Brandt report.
Mr. Cyril D. Townsend: Is my right hon. Friend aware that many will welcome the Community statement on the Middle East, which is cautious and well-balanced, believing that the United States has no monopoly over diplomatic activity in this area?
Bearing in mind the increasing tension on the West Bank in recent days, will my right hon. Friend make sure that there is no delay in following up this activity?
The Prime Minister: I believe that the contacts will get under way after the change in Presidency, which occurs at

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the beginning of July, and will probably be done through the Presidency. We shall first have to find out whether all the parties concerned are prepared to accept the fundamental principles that we have enunciated as being binding on all parties.
Mr. Arthur Davidson: Is the Prime Minister aware that the statement that will have given most satisfaction to the British people over the weekend was her statement condemning the loutish behaviour of British football fans in Italy? Did she take an opportunity to discuss with her colleagues ways of containing such violence in future, and whether any form of joint action could be taken, so that the good name of British people going abroad could be properly protected?
The Prime Minister: I am very grateful to the hon. and learned Gentleman, because I believe that the vast majority of people in the House will share the views that he expressed. I am sure that he will understand that I did not at that moment raise the question with my colleagues, because in Venice we were trying to do everything that we could to enhance the reputation of Britain, while, unfortunately, in other parts of Italy, there were incidents that most of us regarded as disgraceful. I hope that they will not occur again. They did not do justice to the football team that was representing England.
Following are the declarations:
EUROPEAN COUNCIL, VENICE 12/13 JUNE 1980
EUROPEAN COUNCIL DECLARATION ON THE MIDDLE EAST
1. The Heads of State and Government and the Ministers of Foreign Affairs held a comprehensive exchange of views on all aspects of the present situation in the Middle East, including the state of negotiations resulting from the agreements signed between Egypt and Israel in March 1979. They agreed that growing tensions affecting this region constitute a serious danger and render a comprehensive solution to the Israeli-Arab conflict more necessary and pressing than ever.
2. The Nine Member States of the European Community consider that the traditional ties and common interests which link Europe to the Middle East oblige them to play a special role and now require them to work in a more concrete way towards peace.
3. In the regard, the Nine countries of the Community base themselves on Security Council Resolutions 242 and 338 and the positions which they have expressed on several occasions,
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notably in their Declarations of 29 June 1977, 19 September 1978, 26 March and 18 June 1979, as well as in the speech made on their behalf on 25 September 1979 by the Irish Minister of Foreign Affairs at the 34th United Nations General Assembly.
4. On the bases thus set out, the time has come to promote the recognition and implementation of the two principles universally accepted by the international community : the right to existence and to security of all the states in the region, including Israel, and justice for all the peoples, which implies the recognition of the legitimate rights of the Palestinian people.
5. All of the countries in the area are entitled to live in peace within secure, recognised and guaranteed borders. The necessary guarantees for a peace settlement should be provided by the UN by a decision of the Security Council and, if necessary, on the basis of other mutually agreed procedures. The Nine declare that they are prepared to participate within the framework of a comprehensive settlement in a system of concrete and binding international guarantees, including on the ground.
6. A just solution must finally be found to the Palestinian problem, which is not simply one of refugees. The Palestinian people, which is conscious of existing as such, must be placed in a position, by an appropriate process defined within the framework of the comprehensive peace settlement, to exercise fully its right to self-determination.
7. The achievement of these objectives requires the involvement and support of all the parties concerned in the peace settlement which the Nine are endeavouring to promote in keeping with the principles formulated in the Declaration referred to above. These principles are binding on all the parties concerned, and thus the Palestinian people, and on the PLO, which will have to be associated with the negotiations.
8. The Nine recognises the special importance of the role played by the question of Jerusalem for all the parties concerned. The Nine stress that they will not accept any unilateral initiative designed to change the status of Jerusalem and that any agreement on the city's status should guarantee freedom of access for everyone to the Holy places.
9. The Nine stress the need for Israel to put an end to the territorial occupation which it has maintained since the conflict of 1967, as it has done for part of Sinai. They are deeply convinced that the Israeli settlements constitute a serious obstacle to the peace process in the Middle East. The Nine consider that these settlements, as well as modifications in population and property in the occupied Arab territories, are illegal under international law.
10. Concerned as they are to put an end to violence, the Nine consider that only the renunciation of force or the threatened use of force by all the parties can create a climate of confidence in the area, and constitute a basic element for a comprehensive settlement of the conflict in the Middle East.
11. The Nine have decided to make the necessary contacts with all the parties concerned. The objective of these contacts would

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be to ascertain the position of the various parties with respect to the principles set out in this Declaration and in the light of the results of this consultation process to determine the form which an initiative on their part could take.
EUROPEAN COUNCIL DECLARATION ON AFGHANISTAN
The European Council has noted with deep concern the intensification of the military operations conducted by the Soviet troops in Afghanistan.
>These dramatic developments increase still further the sufferings of the Afghan people. They emphasise the genuinely national nature of the resistance offered by an entire people. They threaten to jeopardise the climate of international relations for a long time to come.
In these circumstances, the European Council wishes to reaffirm its conviction that it is necessary to find without delay the means of reaching a solution which, in keeping with the Resolution of the United Nations General Assembly, would ensure the withdrawal of Soviet troops and the free exercise of the Afghan people of the right to determine their own future. It reiterated its view that a solution could be found in an arrangement which allowed Afghanistan to remain outside the competition among the powers and to return to its traditional position as a neutral and nnn-aligned state
It recalls that it proposed in Luxembourg, on 28 April, that the great powers and the neighbouring states should undertake the necessary commitments to this end : in particular, they should agree to respect the sovereignty and integrity of Afghanistan, to refrain from any interference in its internal affairs and renounce any stationing of troops
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on its soil or any forms of military association with it.
The European Council shares the concern expressed and the conclusion drawn by the 11 th Conference of Foreign Ministers of Islamic States on the continued Soviet military presence in Afghanistan and has noted with great interest the creation by this Conference of a Committee to seek ways and means for a comprehensive solution of the grave crisis in respect to Afghanistan.
The Council repeated its readiness to support any meaningful initiative designed to promote a solution of the Afghan crisis.
EUROPEAN COUNCIL DECLARATION ON THE LEBANON
The Nine affirm once again their full and complete solidarity with the friendly country of the Lebanon whose stability remains dangerously threatened by confrontations in the region, and renew their urgent appeal to all the countries or parties concerned to put an end to all acts liable to damage the independence, sovereignty and territorial integrity of Lebanon or the authority of its Government. The Nine will support any action or initiative which could ensure the return of peace and stability of the Lebanon, which constitutes an essential stabilising factor in the region.
The Nine stress the important role which UNIFIL must play in the southern part of Lebanon. The Nine recall their Declaration of 22 April 1980 at Luxembourg and stress that it is essential that all the parties concerned permit UNIFIL to carry out the tasks with which it has been charged, including the control of the territory up to the international frontier.

NEW HEBRIDES
4.20 pm
The Minister of State, Foreign and Commonwealth Office (Mr. Peter Blaker): With your permission, Mr. Speaker, and that of the House I shall make a statement on the New Hebrides.
On 11 June, following the shooting of a prominent Opposition deputy during a demonstration on the island of Tanna, the New Hebrides Government asked the two resident commissioners to recommend to their Governments the dispatch of British and French forces to the New Hebrides. This request was made during the course of a Cabinet meeting, and both resident commissioners agreed to make such a recommendation to their respective Governments. The Chief Minister's understanding of their agreement was later confirmed in writing.
It was in response to this joint recommendation that the French decided to send some gendarmes from New Caledonia. They informed us of this decision. It was also in response to the joint recommendation and to match the French action, that we decided to send a contingent of the Royal Marines, in order that we might be in a position to act jointly, should the need arise, with the French gendarmes. We informed the French of that decision.
On 12 June the French Government decided to withdraw the gendarmes from the New Hebrides, and did so that day. On 15 June the French resident commissioner made a formal protest to the British resident commissioner about the dispatch of the Royal Marines.
In deploying our troops in Vila, we are not only demonstrating our willingness to live up to our obligations but we are satisfied that we are acting in accordance with the 1914 protocol that governs the joint administration in the condominium.
I am seeking an early meeting with M. Dijoud, the responsible French Minister, in order that we may clarify our joint approach to the problems in the New Hebrides. Meanwhile, it remains the intention of the Government to do all in their power to promote a peaceful solution to the problem, to support the democratically elected Government, and to
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safeguard the integrity of the New Hebrides.
Mrs. Dunwoody: Is it not painfully obvious that the Government have been led by the nose by the French Government? What price now the close accord that seems to have been reached between the Prime Minister and the French President? Is it true that the order to withdraw the gendarmes came from the Elysée Palace? If so, was that in direct contradiction of the written understanding of the joint declaration of the resident commissioners? Will the blockade of Espiritu Santo be maintained? That is vitally important for the maintenance of the territorial integrity of the Government.
If need be, are the British forces prepared to act independently, giving the same information to the French Government that they appear to have given to us, and in accord with the wishes of the elected Chief Minister of the New Hebrides Government? What undertakings have the British Government given to the Rev. Walter Lini about the maintenance of law if the present talks, which he has instituted yet again with Jimmy Stevens, break down?
Mr. Blaker: I entirely repudiate the hon. Lady's first remarks. I do not think that it helps to inflame the position between Britain and France. Quite clearly, we have a difference of opinion. I hope that the hon. Lady will recognise that it is very much in the interests of the people of the New Hebrides—to whom I hope she will pay some attention—that Britain and France should be able to resume their joint approach to the problems of the New Hebrides. Many in the New Hebrides speak French and have links with France. Many speak English and have links with Britain. It is important to continue to work in co-operation to restore stability, to preserve the integrity of the islands, and to give aid.
On the question of the talks between my right hon. Friend the Prime Minister and President Giscard d'Estaing, I have nothing to add to my right hon. Friend's earlier remarks except that they agreed that the two Governments should remain in the closest touch in their handling of the problem and that they should continue their joint effort to resolve the problem by peaceful means.

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I do not know from whom the order came to withdraw the French gendarmes. The blockade of Espiritu Santo continues. The undertakings given by the British and French Governments, on a number of occasions, to support the legally-elected Government of the New Hebrides, the constitution worked out last September, and the integrity of the islands, still exist.
Mrs. Dunwoody: With respect to the Minister, we have been told what the Prime Minister said to the President but we have not been told what the President said to the Prime Minister. It would be helpful to know whether he got a word in edgeways. If the Minister wants information about who made the statement that the order to withdraw the troops came from the Elysée Palace, I can tell him that it came from the French resident commissioner on the news bulletins. It would be helpful if the Minister could tell us whether the Government have the faintest idea what they are doing about the attitude of the French Government.
Mr. Blaker: It would not be proper for me to say what the French President said to my right hon. Friend the Prime Minister. The hilarity on the Opposition Benches will not be well regarded by the New Hebrideans. It is high time that the Opposition took the matter seriously. It has become perfectly clear to me—after three statements in the House—that there is a degree of ignorance and irresponsibility on the part of the Opposition about matters in the New Hebrides.
Mr. Kershaw: Does my hon. Friend agree that this is not the first time that assurances given in private have been falsified by later declarations made in public? Will he not lose any sleep over that? Will he answer two questions? How does he now see the role of the British troops in the New Hebrides, and will he continue to encourage negotiations between the New Hebridean parties?
Mr. Blaker: The role of the British troops is to provide an element of stability and to create an atmosphere in which negotiations can once again take place. I am optimistic about the possibility of negotiations starting again. I am confident drat the Chief Minister, Father Lini, is prepared to make proposals for new nego-
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tiations. I hope that Mr. Stevens will respond.
Mr. Russell Johnston: The Minister made two statements—first, that the French decided to send gendarmes, and informed us and, secondly, that we decided to send Marines and informed the French. Was it stupid and idealistic of me to imagine that a condominium meant that the two parties actually discussed matters with each other, in advance of any action?
Mr. Blaker: We informed the French before we sent the Marines. The French informed us simultaneously with their dispatch of the gendarmes.
Sir Bernard Braine: Bearing in mind that the New Hebrides is a condominium regulated by treaty, and that our partner, France, is now refusing to sanction emergency arrangements, under what lawful authority can British troops be used to put down a secessionist movement? Should we not be careful to avoid using force in a position where, very shortly, we shall be asked to leave the area altogether? Why should the life of a single British Service man be risked in such a ludicrous position?
Mr. Blaker: I agree with my hon. Friend about the desirability of avoiding force, if at all possible. However, opinion in the Pacific is grateful that the British have sent the Royal Marines to the New Hebrides in the interests of preserving stability in the islands.
Mr. Whitehead: In view of what appears to be the unhealthy influence of a group of French landowners on the island of Espiritu Santo, will the Minister say what response has been made to today's statement by the French Government that independence for the New Hebrides should be postponed? Surely we should treat that remark with the contempt that it deserves.
Mr. Blaker: I am not sure that the hon. Gentleman has correctly quoted the remark attributed today to the French Government—although they have discussed the possibility of postponing independence. It remains the position of the Government that 30 July is the target date for independence. I think that the hon. Gentleman would agree that it would not be a responsible action to allow a territory

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to go into independence in a state of insurrection.
The French landowners exist in fairly substantial numbers. Some of them have been engaged in rebellion on Espiritu Santo, against the lawful authority. That illustrates the importance of making every effort to achieve the co-operation of the French Government, so as to ensure that the maximum pressure is put upon Mr. Stevens and the French settlers to agree to a peaceful settlement.
I revert to the question relating to the legal position which was asked by my hon. Friend the Member for Essex, South-East (Sir B. Braine). Obviously, the legal position is a difficult one, particularly in a condominium, the, basic assumption of which must be that the two parties act in co-operation. However, I return to my main point, that it is important to restore joint Anglo-French policy in the interests of the people of the New Hebrides themselves.
Mr. Grieve: Will my hon. Friend never cease to keep in the forefront of his policy our obligation, as one of the co-governors of the New Hebrides, to ensure that the peace of the islands is maintained and that they soon achieve the independence that is promised? In so doing, will he also reject attempts that have been made, not least by the hon. Member for Crewe (Mrs. Dunwoody), to inflame Anglo-French relations—the friendship of our two countries being vital to the future of Europe and much more important than any temporary local difficulty?
Mr. Blaker: I entirely agree with my hon. and learned Friend. I would only add that it would be wrong to imagine that Britain and France alone can solve this problem. When I visit my French opposite number, which I am planning to do as soon as it can be arranged, I hope that we will be able to re-establish our policy on similar lines. However, we must recognise that ultimately it is up to the people of the New Hebrides themselves to work out their own future in a friendly manner.
Several HON. Members rose—
Mr. Speaker: Order. I propose to call those hon. Members who have been rising, but I hope that they will be brief.
Mr. Spriggs: Is the Minister aware that a few days ago I had the privilege of putting a question to him, and I regret that at that time I left an implication of dishonesty with regard to that statement? I wish to withdraw anything that could be construed as suggesting any dishonesty whatever.
Mr. Skinner: I do not know what is happening today.
Mr. Spriggs: I look upon the Minister as someone of integrity. However, can he give an assurance that the democratically elected Government of the New Hebrides will be given every opportunity to take control, as a Government should do after they have been democratically elected?
Mr. Blaker: I am obliged to the hon. Gentleman for the first part of his remarks. One of the purposes of the dispatch of the Marines to the New Hebrides was to reinforce the authority of that democratically elected Government.
Mr. Philip Holland: Can my hon.
Friend give an assurance that the Marines who are now in the New Hebrides will be kept there until the position is stabilised? On the other hand, if for diplomatic reasons it becomes necessary to match the French withdrawal of the gendarmes, is contact being maintained with friendly Commonwealth countries in the area to see whether there is somewhere nearer than the United Kingdom for the Marines to spend their time, perhaps during an interim period?
Mr. Blaker: It is our intention to keep the Marines in the New Hebrides as long as is necessary. We are already in touch with friendly Commonwealth countries in the area, as my hon. Friend suggested.
Mr. Faulds: Does the hon. Gentleman accept that if the French are not prepared to behave responsibly, and intend to pursue their national interests at such a vast distance, some Labour Members will strongly support whatever tough action is forced upon the Government?
Mr. Blaker: I am grateful for the hon. Gentleman's support. I repeat that at the moment our aim must be to restore a joint Anglo-French policy, in the interests of the New Hebrideans themselves.
Mr. Murphy: Does my hon. Friend agree that it is time to override the vacillating and arrogant attitude of the French, and to ensure that law and order is maintained in Espiritu Santo and Tanna? Will the Marines be used to that end?
Mr. Blaker: With all respect to my hon. Friend, I am not sure that I entirely agree with the tone of his suggestion, although we are determined that this problem shall be resolved.
Mr. Ogden: The hon. Gentleman has made many statements during the past few weeks. His attitude has been fair, correct, scrupulously open and honest. Has it possibly occurred to him in the last few days that he may have been too honest, trusting and correct in dealing with the French? They look after their own interests, and we should do the same. How can we co-operate with someone who will not co-operate with us? Will the Minister at least try to ensure that British forces in the New Hebrides are not split between island and island? The secret of any success that we are likely to achieve there is in Espiritu Santo.
Mr. Blaker: The main problem is the rebellion in the island of Santo. However, another purpose of the presence of the Marines is to restore a feeling of stability and confidence in the islands generally. The hon. Gentleman will recall that not long ago there was trouble in the island of Tanna—trouble that was successfully put down. I believe that the presence of our forces will discourage further outbreaks of trouble in other islands. I am grateful to the hon. Gentleman for what he said about my fairness and correctness, although I thought that it was perhaps a double-edged compliment—
Mr. Ogden: That is the whole point.
Mr. Blaker: I am grateful to the hon. Gentleman for making clear what I thought was his point. I do not think that at present it helps to impugn the motives of the French Government. It is my purpose to ensure that, with my French opposite number, we restore a joint Anglo-French policy. The hon. Gentleman knows the area, unlike most of his hon. Friends. I am sure that he will
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realise that a joint Anglo-French policy is in the interests of the New Hebrideans themselves and that that must be in the forefront of our minds.
Mr. Kilfedder: If the French Government refuse to co-operate, will the Government take action apart from the French? In what circumstances will the British troops be used in the New Hebrides? Will they be withdrawn when the date of independence arrives?
Mr. Blaker: The first part of my hon. Friend's question is hypothetical. Of course, when the date of independence arrives it would be normal for British troops to be withdrawn.
Mr. Cyril D. Townsend: Will my hon. Friend pass on to the Service chiefs the appreciation of many Conservative Members of this prompt action, bearing in mind the vast distances involved? I hope that my hon. Friend will continue not to dwell unnecessarily on the over-reaction of the French and the equal and predictable over-reaction of the Opposition.
Mr. Blaker: I shall gladly pass on my hon. Friend's remarks to the Service chiefs, and also the thanks of the House for the speed and skill with which they conducted their operations. What has been striking today has been the responsible nature of the questions from my hon. Friends and the irresponsible nature of the questions from the Opposition.
Sir Anthony Meyer: Is my hon. Friend aware that the cheap flippancy of the hon. Member for Crewe (Mrs. Dunwoody) and certain other interventions has probably been matched in equivalent questions in the French Parliament during the past week? Does he accept that there is great confidence in his determination to preserve a sensible balance in these matters and not to lose sight of the fact that Anglo-French relations are more important than quarrels among beachcombers in the Pacific?
Mr. Blaker: I do not know whether I agree with the last part of my hon. Friend's question. I certainly would not put it that way myself. However, the Opposition should recognise that, after all, we are concerned with the interests of the New Hebridean people themselves.

SCOTTISH ESTIMATES
Ordered,
That the Estimates set out hereunder be referred to the Scottish Grand Committee :—
Class IV, Vote 4, Industry, Energy, Trade and Employment (Scotland)
Class IV, Vote 6, Industry, Energy, Trade and Employment (Other) (Scotland)
Class IV, Vote 22, Manpower Services Commission (Scotland)
Class VII, Vote 1, Housing, Scotland
Class VIII, Vote 2, Other Environmental Services, &c, Scotland
Class IX, Vote 10, Law, Order and Protective Services (Grants and Miscellaneous) Scotland
Class X, Vote 2, Education, Libraries and Arts (Scotland)
Class X, Vote 9, Student Awards (Scotland)
Class XIII, Vote 24, Other Services : Scottish Office
Class XVII, Vote 3, Rate Support Grants (1980–81) to Local Revenues, Scotland
Class XVII, Vote 6, Rate Rebates Grants to local Revenues, Scotland—[Mr. Brooke.]

INTERNATIONAL DEVELOPMENT (BRANDT REPORT)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brooke.]
4.40 pm
The Lord Privy Seal (Sir Ian Gilmonr): The report of the independent commission chaired by Herr Brandt has made a most valuable contribution to public debate in a crucial field. The interest generated both in the United Kingdom and abroad is evidence of this. Indeed, this was acknowledged most recently by the European Council this weekend after its meeting in Venice.
We have now completed our study of the report and I am in a position to give the House some account of our conclusions.
I should first like to give credit to the authors of the report, particularly to my right hon. Friend the Member for Sidcup (Mr. Heath), who played a leading role in the commission's work; to Herr Brandt, who played a vital role as chairman; and to Sir Shridath Ramphal, whose unique experience in that most successful North-South forum, the Commonwealth, was so valuable to his fellow members. I would also like to pay tribute to Mr. Robert McNamara, soon to retire as president of the World Bank, for his work over the years, and not least for his initiative in commissioning the Brandt report.
The analysis of the Brandt report is founded on the view that the world economy is in a state of crisis and, in particular, that the prospects for many developing countries are deeply disturbing. It foresees continued poverty in many countries of the South and persistent low growth in the economies in the North. It argues that these factors will lead to mounting debt burdens, the growth of protectionism and major tensions between countries as they compete for energy, food and raw materials. Overshadowing all this is the arms race.
The Government fully accept that there are very serious difficulties ahead. Indeed, since the report was written, further oil price increases have made many of the commission's forecasts look optimistic. For example, the size of the current account deficit of non-oil developing

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countries is likely to reach $55 billion in 1980. In addition, the developed economies face a balance of payments deficit of some $100 billion. The oil exporting countries, on the other hand, will have a current account surplus of over $130 billion in 1980. These estimates were made before the decisions taken by OPEC last week to raise further the price of oil. These imbalances are likely to show little change in the next few years. The strains facing the economic and financial system will thus be very great; and the human suffering which will lie behind these enormous figures can all too easily be imagined.
We fully recognise the enormous difficulties facing the Third world. But it is not true that the problems lie entirely in the South and that it is merely for the North to respond generously to them. The recent oil price increases, for example, will inevitably affect the capacity of the North for aid and trade. It has been calculated that by 1981 the real income loss to OECD countries will be between $300 billion and $400 billion. If the world economy is to recover from this shock, the economies of the developed countries of the North—the motor of world prosperity—must adjust to the new circumstances. Only then can growth be resumed. In the long run, this is also in the interests of the less developed countries which depend on us for markets, manufactured goods, finance and aid.
We therefore welcome the stress laid in the report on the need for measures of mutual interest. Of course, we recognise the importance of the Third world in the international economy, and we fully accept that its economic health is vitally important not only in itself but for our own well-being. But we believe that it should be recognised that the problems to be solved by measures of mutual interest are themselves mutual.
In approaching these complex problems, I should like first to mention a general problem to which the recommendations of the Brandt report make relatively little reference—inflation. Developments since the report was written have made it clear that this is a central problem for us all. A new round of inflation has been triggered off by a massive and continuing transfer of income to the oil producers. I need not dwell on the evils of inflation. The com-
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muniqué of the OECD ministerial meeting on 3–4 June clearly indicated the wide measure of agreement on the need for tough measures against inflation.
I should like now to turn to three major issues before us—energy, recycling and development. The first of these major problems is to try to ensure that the oil shocks which damaged the economic performance and prospects of developed and developing countries alike in 1974 and again in 1980 do not happen again. Here we are in agreement with much of what the Brandt report proposes. In particular, we welcome its recognition that the problem is one which requires action by all members of the international community : by producers as well as consumers, and in the South as well as in the North. It is vital that all countries, developed and developing, free-market or Socialist, adjust to the new reality of higher oil prices. For developing countries it may mean a reduction in non-oil imports and, therefore, of growth over the relatively long time that adjustment will take. For oil exporters it must mean accepting greater responsibility for the direct recycling of their surplus funds while increasing their non-oil trade with the less developed countries and the North.
The report also suggests an accommodation between oil consumers and producers with the aim of more secure supplies, more rigorous conservation, more predictable changes in oil prices and more positive measures to develop alternative supplies. The Government recognise the urgency and magnitude of the problems facing both developed and developing consumers. For our part, we are pursuing many of the proposals which concern consuming countries in the Community and at the International Energy Agency in Paris. We are taking measures both direct and via the price mechanism to encourage conservation now and in the future. We shall also continue to stimulate the search for new resources—both conventional and those involving new technology.
We recognise that future energy prices depend not only on market forces but on the policies of the oil-producing countries. It is particularly important to avoid disruption in supply. It is also important to avoid sudden leaps in prices

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of the sort which occurred last year. Plainly, therefore, the Brandt Commission's proposal that an accommodation should be reached with the oil producers deserves careful study. We do not pretend that such an accommodation would be easy to reach. But, despite the differing and important interests of the various parties, we hope that common ground will be found. Each country must play its part in ensuring that energy does not continue to be a major constraint on the growth of the world economy.
Mr. Dennis Skinner: Perhaps we can get away from the generalised waffle that took place at the summit and get down to the specifics. Will the Minister explain why this Government, who support the free market and say that they are against the idea of price rigging, cartels, and so on, and are concerned about the price of oil, especially to domestic consumers in this country, when OPEC decides to put up the price of oil, allows ours to go up at the same time without any complaint at all?
Sir I. Gilmour: I think that the hon. Gentleman knows the answer to that. That is due to arrangements which were entered into under successive Governments, particularly the previous Labour Government. BNOC has let out its oilfields and under its contracts with other oil companies it is bound to allow oil to be sold at the market price. It would lay itself open to legal action if it did not do that. That has not in any way altered under this Government.
A further important aspect of the Brandt report in this area is the need to find new supplies of energy in the LDCs. Many LDCs depend to an even larger extent than developed countries on imported oil. A major effort to increase their level of self-sufficiency is a vital aspect of their adjustment. But we recognise that they will need help in doing that. The World Bank is already heavily involved in helping energy development, and it will shortly be reviewing what has been done and what might be achieved in the future. We look to it to examine all the possibilities freshly and vigorously. We also look to increased activity by the private sector, and we hope that the developing countries will
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take more account of the beneficial effects of private investment in this area.
Mr. Christopher Brocklebank-Fowler: A few moments ago my right hon. Friend told the House of the urgent need to find common ground between the OPEC suppliers and Western consumers of oil. Will he tell the House what the Government have in mind by way of new initiatives to bring about a new agreement?
Sir I. Gilmour: I cannot tell my hon. Friend that. The matter will need careful study. We welcome the idea, but so far we have not worked out an initiative, and we have not yet decided whether to make one.
The second area that I should like to consider is the need to recycle funds from surplus holders to those in deficit, both for balance of payments reasons and for development reasons. As I mentioned earlier, over $130 billion will need to be recycled this year, with the prospect of similar amounts in the next few years. In order to achieve that, a major role will be played by the private banking sector. Doubts have been expressed as to whether the banks will be able to cope. Complacency would be foolish, but I believe that the House will agree that the private banking system has shown itself remarkably adaptable and flexible in meeting this challenge. We believe that it can continue to do so in the future. The market will bear the brunt of the burden.
Of course, the market cannot do everything. The role of the international financial institutions will also be crucial. It will be especially important for those countries which have already borrowed extensively, and for those which simply do not have the resources to attract commercial lending. An enhanced role for the International Monetary Fund and World Bank Group is, therefore, important in itself. But it is also crucial because of their influence on flows of commercial lending. In response to increasing needs, the IMF has recently taken important steps to enlarge its available resources and to lengthen the repayment periods for medium-term adjustment.
The World Bank Group is increasing its resources, and it has just introduced an important new policy for lending for structural adjustment programmes. The

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international financial institutions are thus meeting the challenge over lending for balance of payments financing, structural adjustment, and development. Those institutions are, of course, constantly evolving, and I understand that the interesting ideas in the Brandt report relating to their work are already being taken into account in their discussions.
Mr. Tim Renton: In its annual report that was published 10 days ago, the Bank of International Settlements shows that it is moving away from the recommendations made by the Brandt Commission with regard to the IMF substitution account. Should not that be taken into account? Already the recommendations made by the Brandt Commission in this respect appear to be out of date, because the OPEC surplus countries do not wish to exchange their surplus dollars for SDRs.
Sir I. Gilmour: That should be taken into account, but it will not always necessarily be true in the future. No doubt my hon. Friend will be able to give his views on that when he catches your eye, Mr. Speaker.
I turn now to the third problem area, namely economic development. For many countries, in both the North and the South, economic development is a question of improving living standards. For some, however, it is simply a matter of survival. We therefore welcome the work in the Brandt report on the plight of the poorest, and on the need for a general attack on the problems of food and agricultural development in the LDCs.
Dame Judith Hart: Will the right hon. Gentleman give way?
Sir I. Gilmour: No, I shall carry on for a moment, and I shall give way to the right hon. Lady shortly.
My hon. Friend the Minister for Overseas Development will deal with those question I have just outlined in more detail when he winds up the debate. Our aid programme is substantial, even in the present circumstances. Our aid performance compares favourably with other donors. Our official development aid was 0·52 per cent. of our GNP in 1979. We remain committed to the United Nations target of 0·7 per cent. But because of our present economic circumstances, we cannot give a firm date
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by which that will be achieved. I can assure this House that an important guideline of our aid policy will continue to be that it should be directed at those most in need. In particular, much of our aid, both bilateral and multilateral, is targeted towards meeting the urgent need for increased food and agricultural production in the development countries.
We also have some sympathy with the Brandt proposals for reduced tariff barriers for the agricultural products of the South. The contribution in this field of the results of the Tokyo round of GATT negotiations should certainly not be under-estimated. Nor should we fail to give due credit to the special arrange-gements under the Lome convention, particularly for sugar and beef. There may also be possibilities further to improve the generalised scheme of preferences.
Trade, not only in agriculture, but more generally, is of vital importance to the developing country economies. As my hon. Friend the Minister for Trade, pointed out on 28 March, two-way trade between the OECD and the South was 35 times more significant than official development aid. The Government therefore share the view of the Brandt Commission in laying great stress on the importance of international trade in the development process. We believe, however, that the report considerably undervalues the efforts of the industrialised countries, especially in the context of the MTNs and GATT. The Community has also been active in this area, for example, under the Lome convention and the Stabex arrangements. The recently-agreed progressive liberalisation of Community trade in jute goods will be of particular benefit to developing Commonwealth countries such as India and Bangladesh. The House will also have noted the recent successful conclusion of a food aid convention as part of the progress towards an international grains agreement.
We believe that the achievements of the developed countries, particularly in difficult economic circumstances, should be given due credit.
Dame Judith Hart: Will the right hon. Gentleman say when he will be prepared to give way on the point that I wished to raise earlier?
Sir I. Gilmour: I give way.
Dame Judith Hart: I wish to take the right hon. Gentleman up on his remarks about international institutions. He said that he believes that the international financial intitutions are meeting the challenge and discussing the Brandt Commission proposals. We really need the Government's view on the Brandt proposals for a new financial institution. I do not think that the right hon. Gentleman has given that view so far.
Sir I. Gilmour: The right hon. Lady is correct.
The industrialised countries recently made absolutely clear their continued support for the open trading system in their declaration at the OECD ministerial meetings on 3 and 4 June. There are sometimes very difficult decisions to be made in this area. No country's record is entirely without blemish, but, given the difficulties, we have not done badly.
A further important factor affecting development is private investment flows. The economic success of countries such as Singapore and South Korea demonstrates what can be done if favourable conditions are encouraged.—[Interruption.] I think that the right hon. Lady will get a little more satisfaction later—a little more satisfaction.
We therefore agree with the Brandt report where it calls for an end to the mutual suspicion and tension between multinational corporations and host countries. We recognise the value of non-mandatory codes of conduct, such as the OECD's guidelines and the code now being discussed at the United Nations. The House will have noted the recent success in UNCTAD in reaching agreement on a restrictive business practices code. The Government are also actively pursuing bilateral investment, promotion, and protection agreements, as well as double taxation agreements. We believe that such agreements help to build confidence among potential investors. As the House will know, we have also completely suspended our exchange controls, thus freeing the flow of private development funds.
A brief reading of the summary of recommendations in the report will show that many are in the process of being implemented and many are under active discussion in world organisations. It will also be clear to the House from my description
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of the Government's own analysis that many of our conclusions are similar to those of the Brandt report. We therefore share much common ground, but there are many proposals with which many countries, both developed and developing, would have difficulty. There are also some areas where we believe the report does not go far enough. The report could, for example, have taken more account of the Soviet bloc's dismal record on aid and development. Soviet aid to non-client States was a mere 0·02 per cent. of GNP in 1978. Indeed, its recent contribution to development of other countries has a flavour that is more military than economic.
We would place much greater stress on the ability of the private sector to respond to the challenge of development. The chapter on the role of the South usefully touches on steps which LDCs could take by themselves. In my view, there is considerable scope in many developing countries. Measures could be taken, for example, to increase private flows, to influence population growth and to increase trade with other developing countries.
There is also an underlying difference of approach to the question of reforms. This is where I come, obliquely, to the right hon. Member for Lanark (Dame Judith Hart). The report calls for changes to be brought about mainly through the action of Governments. This somewhat exaggerates the capacity of Governments to control the world economy, so much of which is in private hands. The contribution of British investment to the industrial development of developing countries is seldom fully appreciated. In 1978, for example, the net flow of combined official and private resources to the developing world channelled through the United Kingdom amounted to £5·25 billion or 3·27 per cent. of GNP. Moreover, we believe that, at a time of serious economic difficulty, it would be preferable to continue the evolution of the present system in response to the challenges facing us rather than to make wholesale changes to the rules governing development and trade. The same applies to institutions. Such action would seriously undermine confidence and would harm rather than help the economies of many developing countries. By changing gradually to meet needs, existing structures and institutions

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can be used to the best advantage and to mutual benefit.
On the question of follow-up, the report itself suggests a summit of world leaders to launch the emergency programme. We agree that a summit might be useful, but it would need a good deal of preparation and would have to be carefully timed. There are a number of important discussions ahead of us. The international development strategy is to be agreed at the forthcoming special session of the United Nations in August. This will provide a valuable framework for the coming decade.
The same special session is expected to launch a round of global negotiations. These negotiations will cover almost the whole range of problems addressed by the Brandt Commission, including that of energy, which has been rather neglected recendy in such international discussions. The British Government will be looking to these negotiations to provide a real debate about concrete issues, not another round of rhetoric. The Brandt report is an especially valuable contribution to these negotiations because it focuses attention on major issues and on practical approaches to these problems. The House will have noted the conclusions of the European Council, which referred to the particularly interesting contribution which the Brandt report could make to the successful outcome of these negotiations.
It will be clear to the House from what I have said this afternoon that Her Majesty's Government are fully seized of the seriousness of the problems facing both the developing and developed world. I know that many hon. Members are deeply concerned about the prospects. They are right to be concerned. Major efforts will have to be made to tackle these problems by developing countries in the first instance, as they themselves would wish; by the adaptation of markets in response to economic forces; and, in those fields where they can be effective, by Governments.
There is much in the Brandt report on which we and others can build in seeking solutions. This is a matter not of benevolence, but of survival; the outstanding achievement of the Brandt report is to demonstrate conclusively that the interests of all countries of the world, developed or developing, North or South, are mutual; and that all countries
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have a great deal to do in tackling the world's problems. I assure the House that we are ready to play our full part.
5.4 pm
Mr. Peter Shore: We have before us today a remarkable report, of outstanding importance. I can agree with one thing at least that the Lord Privy Seal said, in an astonishingly lacklustre speech—that those who helped draft this report deserve the thanks of us all.
Published only 12 weeks ago, first debated in the House on 28 March, the report is already firmly on the agenda of this nation and will or should be one of the principal topics at the forthcoming summit in Venice on 23 June. I have no doubt that we shall have many more discussions on the vast range of questions dealt with by this report—rightly so, because in essence it is about how mankind can have a better future, or even a future at all.
I should like to outline what I see as the great merits of the report. First, it brings together all the main problems which beset mankind—the abject poverty of 800 million people, the deadly and escalating arms race, the explosive population growth, the critical energy shortage, the threat in large areas of irreversible environmental damage, the unacceptable inequality of circumstance between North and South. The report insists that these things are not separate but interrelated aspects of the human condition and that we need a fresh global strategy if these great problems are to be surmounted.
Secondly, the report convincingly demonstrates that existing policies, both economic and political, are leading mankind into a cul-de-sac. Thirdly, it calls for a new exercise of political will and imagination, which will be essential if we are to escape our present dilemmas.
I could not find a great deal of evidence of political will or imagination in the speech of the Lord Privy Seal. The right hon. Gentleman has convinced me that he has read the report but not that he has absorbed or understood its real message. I shall come to that a little later, but I should like first to pick up one or two of his points.
The right hon. Gentleman identified energy as one of the great problems and

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talked of how we must avoid an "oil shock" of the kind that we had in 1974 and to some extent again only this year. But if we simply say that the best way of dealing with this problem is to build up alternative energy supplies and so on, we are talking about a programme which, even if it started now, would leave us all totally vulnerable for the whole decade ahead. Something much more urgent, serious and immediate is needed than that kind of solution.
On the crucial question of recycling, the right hon. Gentleman said that he thought the private banking sector would be able to continue to finance the colossal scale of indebtedness. That is totally untrue. It just is not credible. I do not know what discussions he has had that have led him to such a cosy conclusion.
The right hon. Gentleman said that our own aid performance compared reasonably well with others. Of course I accept that, but that is not the point. The point of the whole report is the need for a substantial increase in effort to meet phenomenally difficult new problems. We cannot escape the whole argument by congratulating ourselves on a relatively good performance in the past.
Many of the problems described by the Brandt Commission have been with us since the war, yet, with all the shortcomings of economic, trade and aid policies and with all the excessive advantages that have accrued to the industrial nations of the North, there was evidence of progress—painfully slow in many areas, but neverthless clear—until as recently as the end of 1973. For the 25 years that preceded that date saw not only an unprecedented expansion of the world's economy, a doubling and trebling of living standards in the industrialised North, almost uninterrupted full employment, and the end of poverty as the majority experience there, but in the South, too, a substantial growth of trade and development. In spite of a world population explosion, from 2,400 million people in 1950 to an almost unbelievable 4,000 million in 1975, food production kept pace with population growth. Per capita income in nearly all countries rose, although the levels remained pitifully low in many countries. Political independence became during those years virtually the universal experience.
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Certainly further and bold initiatives were necessary. But looking back, we see that it is surely clear that this first hopeful post-war period ended abruptly in late 1973, when the OPEC countries, at a single meeting, quadrupled the price of oil and thus faced the world community with a major new challenge, and a challenge that it has failed so far to meet. It is my belief—I repeat it—that it is the cartelisation of oil production and oil prices that presents the single most important road-block to economic progress.
I say that for these reasons. First, in spite of the massive increase in expenditure and imports, including arms imports, the oil-producing countries, particularly those in the thinly-inhabited desert countries of the Middle East, are unable to turn their vastly increased revenues into effective demand for goods and services. Secondly, given the dependence of the North on imported oil, the North as a whole faced, and continues to face, a major balance of payments deficit—a situation that the North proceeded to "rectify" by deflating internal demand. Thirdly, and still more seriously, oil price increases faced the great mass of Third world countries with a still more desperate situation. They have to pay for essential oil imports out of other revenues which do not grow at a corresponding pace.
The amounts involved by the increase in oil prices have been enormous. In a single year, 1974, the surplus of the OPEC countries leapt from, I believe, $7 billion to $60 billion. At the same time, the current balance of the OECD countries changed from a surplus of $10 billion to a deficit of $27 billion, while the non-oil developing countries plunged from a deficit of $6 billion, to a deficit of $24 billion. Over the five years 1974–78, even though the OPEC countries increased their imports, the OPEC surplus totalled close on $200 billion. That is part of the size of the problem of recycling and the private backing of lending.
Oil prices have not, of course, remained static. Year by year they have increased. In the past year alone, they have again doubled. I am told that in 1980 oil prices will be about 15 times greater than they were in 1973. The surplus of the OPEC countries is now estimated, as the Lord Privy Seal has confirmed, to be running at some $130 billion a year.

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This year the threat to the world economy is even more grave than it has been in the past four or five years. The borrowing limits—I hope that that the Lord Privy Seal will take this in—of many Third world countries have already been surpassed. Recycling, mainly through private Western banks, is beginning to dry up. Brazil and the Philippines are just two countries, by no means the least prosperous in the developing world, that have been unable to obtain private finance during this year.
The IMF, as recent bitter disputes with Tanzania, Turkey and Jamaica have made plain, is not geared, in spite of certain additional facilities, to lending policies that will cope with a long-term situation of balance of payment deficit. Indeed, there are today many countries whose total export earnings are being absorbed by essential minimum oil imports plus the servicing of accumulated debt. It is small wonder, then, that the Bank of International Settlements in its annual report this month—to which hon. Members have referred, although my reference is to a different part of it—speaks of the industrial world facing a long period of "painfully slow growth".
It is my view that the world is moving from recession to slump. That is the urgency of this debate and the urgency of the response that we and others must make. If I am right, the political consequences cannot be calculated, but they will certainly be serious. Mounting unemployment in the countries of the North, the plain evidence of the capacity to produce wealth but the inability to organise effective demand for the goods produced, will not in our generation and time be accepted with resignation or stoicism. There will be demands, ever more clamant, for action, and if democratic Governments cannot or will not act there will be a loss of confidence in democratic institutions themselves. At the same time, protectionism and economic nationalism will be powerfully reinforced, with all the damaging consequences that that will entail for international relations.
Outside the still basically affluent North, the economic consequences and resulting political destabilisation will be far more serious. I spoke earlier of the immense population growth of the 25 years from 1950 to 1975. It is virtually certain that the 4,000 million people of 1975 will reach
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6,000 million in the year 2000—just 20 years on. But, unlike the period 1950 to 1975, when income per head in most areas outstripped population growth, on present trends per capita income will not only fail to grow but will decline. What kind of conflicts and stress will arise it is not difficult to imagine.
In our last debate on international affairs, on East-West relations, I warned that in the world-wide competition for political allegiance and advantage in the Third world peace and democracy were far more at risk through economic failure, political despotism and racial tension than they were through direct Soviet military challenge, although that must not be ignored and discounted, and adventures of the kind that we have witnessed in Afghanistan. I restate that view now.
At this point I can do no better than to quote from the Brandt Commission report itself. It sums it up as well as I think it can :
"Looking first at the North, we see advanced industrial countries in the midst of their worst recession since the end of the Second World War. Six per cent. of the labour force in the OECD countries—about 18 million people—are now unemployed…Productive capacity is under-used to the extent of at least $200 billion, in terms of the annual potential output."
What a waste!
Turning to the South, the report states :
"the current account deficit of developing countries, which amounted to $21 billion in 1977 … reached $50 billion in 1979 and is expected to rise to perhaps $60 billion in 1980. The coexistence of the great needs in the South and the under-used capacity in the North suggest the scope for large-scale transfer of resources based on mutality of interests."
It is against this background—moral, economic, political and strategic—that one must ask how it is that in the past five years the West has failed to see that North-South interests are indeed mutual; has again and again failed to respond to sensible initiatives such as the establishment of a common fund to give greater stability to raw material producers; to be more bold with the creation of new facilities in the IMF and the World Bank; and above all, has failed to stimulate its own economies and to transfer resources on a progressive scale to the non-oil countries of the Third world. Indeed, the failure is all the more remarkable because in 1974—as I well recall, being then the Secretary of State for Trade—when the OECD collectively discussed

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the new situation that was affecting the world economy, it was absolutely clear to all that the deflation of demand in the North was the wrong strategy for the North to pursue.
There is, unhappily, an explanation of this failure to act or to react that brings us face to face with the major division in political philosophy, not only in our own country but throughout most of the northern countries. It is the current obsession with inflation, and an appalling intellectual recidivism into the totally discredited economic doctrines of the 1930s. At the heart of the now dominant monetarist school of economic theory is the belief that Governments have no part to play in demand creation and that, on the contrary, any efforts that they make simply exacerbate the situation that those efforts are designed to remedy. Approximately 35 years ago, in the famous White Paper of the wartime coalition Government—whose author was generally reputed to be John Maynard Keynes—the following statement was made :
"It was at one time believed that every trade depression would automatically bring its own corrective, since prices and wages would fall. The falling prices would bring about an increase in demand and employment would thus be restored. Experience has shown, however, that under modem conditions this process of self-regulation, if effective at all, is likely to be extremely prolonged and to be accompanied with widespread distress, particularly in a complex industrial society like our own."
That is as true today as it was then.
Three years ago the present Secretary of State for Industry spoke for the newly dominant faction in the Conservative Party. In flat contradiction, he said :
"Post-war conventional wisdom held that by raising demand the Government could generate growth. But we have ruefully come to recognise that Governments cannot generate growth. Though Governments cannot generate growth, what they can do is obstruct spontaneous growth."
That is an abdication of responsibility and a rejection of the great post-war commitment. As the While Paper of 1944 states :
"Government accepts as one of their primary aims and responsibilities the maintenance of the high and stable level of employment."
Monetarists cannot, therefore, accept the basic message of the Brandt Commission,
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namely, the basic mutuality of interest that arises from an abundance of surplus capacity in the North and desperate and unmet human needs in the South.
Together with deflation, there is serious cost-push inflation in the Western world. In Britain, the Government have done much of the pushing. At the same time, there is a clear lack of effective demand and, as a consequence, rapidly rising unemployment. Indeed, the Government appear to be so blind to those realities that they are deliberately planning a fall in output, not just this year, but, discounting North Sea oil, for four years ahead.
The effects will be felt not only in Britain, but in the world outside. Far from increasing the transfer of resources to the South, the fall in demand in this country will inevitably reduce still further the opportunities of Third world countries to sell to us. At the same time, our direct aid programme will be not increased, but cut by about 14 per cent. by 1983–84.
Mr. Renton: I have listened to a great deal of the right hon. Gentleman's speech with interest and a measure of agreement. It is a great pity that he is now linking his speech with an attack on monetarism. Is it not true that one reason why the OPEC countries that are in surplus will not invest those funds in long-term assets—in OECD countries or those of the Third world—is that they are frightened of the effect of inflation on repayment values? Those OPEC countries have as much interest as we do in ensuring that inflation is brought under control quickly. That is the only way in which we can persuade them to make long-term investment.
Mr. Shore: That is a fair point. I accept that a major factor is that OPEC countries want guarantees against rising prices if they are to invest their surpluses in an orderly way. One could make a number of suggestions as to how that might be achieved. However, if we argue that we cannot deal with that problem until world inflation has been reduced, we shall be plunged so deeply into depression and slump that the effects not only in the North, but in the rest of the world will be too damaging to contemplate.

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Last weekend, there was some discussion at Venice. I shall quote from The Sunday Times, which stated :
"'The message for the Third World was openly despairing. Its problems in the face of ever rising oil prices,' said the communique, ' were truly insoluble.' British sources put it even more bluntly—' They've got their problems—we've got ours.'"
The article referred to the presidential communique. This afternoon, the Prime Minister has given us little ground for belief that any serious progress was made in discussion of those issues at that first Venice conference. Having listened to the Prime Minister and to the Lord Privy Seal, I have little hope that the British Government will make any great thrust at the summit that will take place in about a weeks time.
I turn now to the other great question posed by the Brandt Commission, namely, the vast expenditure on arms. Over £200,000 million is now spent annually on arms. I wish to make two points. First, there is an enormous disparity between the arms expenditure of the North—I include the Soviet Union, as Brandt does in his classification of the North—and northern aid expenditure. Relatively small shifts from one to the other would make a great impact on the transfer of resources to the South. The Government should look again at the balance between their defence programme and their programmes for overseas aid.
Secondly, arms expenditure is increasing throughout the Third world, including those countries in which basic human needs are largely unmet. Far too much is being spent by regimes that are internally oppressive or potentially aggressive. Several measures are called for. First, there should be an agreed control and reduction of East-West arms sales. That effort has virtually been abandoned during the past two years. The lending countries of the North should more actively urge Third world countries to reduce the levels of their arms expenditure. The NATO countries should undertake a renewed drive towards arms limitation in relation to the Soviet Union. We should seek not just equality of arms between East and West, but equality at a lower level of balance than has so far been envisaged. We therefore need the ratification of SALT
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II. We must urgently press forward with a SALT III, and with the stalled negotiations in Vienna for mutual and balanced force reductions and a comprehensive test ban treaty.
The theme of my remarks will be familiar to those who have read the motion on the Order Paper in the names of my right hon. Friends and myself. We welcome the report of the Brandt Commission. We endorse its central theme of mutuality of interest between North and South. We believe that the arms race should be halted and that there should be a progressive transfer of resources from developed to developing countries. The target of 0·7 per cent of national income would—if achieved—virtually double the present volume of aid, and transfer an additional $30 billion a year to the Third world.
Finally, I shall touch on the last part of our motion : our request that the Government should announce their detailed response to the numerous recommendations in the report of the Brandt Commission. I have a feeling that the Lord Privy Seal feels that he has done that. I am glad that he is shaking his head. For a moment, I was worried that he might have convinced himself that he had made a serious response to the Brandt Commission's proposals. I believe, and I hope that he does too, that a great deal of further discussion is necessary. These are not easy matters.
I itemise the major proposals for the reform of international financial institutions and the creation of new ones. Apart from aid targets, there are new, complex and even exciting proposals for increasing the transfer of resources through proposed new taxes on trade and arms sales. There are varying calls for extra efforts to make progress with the common fund, with the transfer of technology, for agreeing an international code for the regulation of the multinational corporations, the extension of the generalised preference scheme, and some attack on that monstrous regime of agricultural protection and the subsidised export of food which we call the CAP.
Finally, there is that very important question about which the Lord Privy Seal sounded rather dubious, when I would have preferred him to be enthusiastic—the proposal for a world conference at the highest level between representatives

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of the OECD, OPEC, the Group of 77 and the Eastern bloc. That is important if we are to get the necessary impetus and thrust into a response to the Brandt report.
I invite the Lord Privy Seal to consider whether, in view of the importance of these issues, it would not be sensible at an appropriate stage to issue a Green Paper to engender discussions in this House and in the country at large before coming out with a firm and considered Government response to the mass of proposals in the concluding part of the Brandt Commission report.
The Brandt Commission itself has a priority programme for 1980–85, a programme for immediate action for increasing the transfer of resources to developing countries, particularly the poorest among them. That programme envisages immediate action to begin to tackle some of the problems arising out of the shortage and insecurity of energy supply; immediate action to increase food supplies and aid for those who need it; and an immediate early programme for extending the facilities of the monetary institutions of the world. Those proposals should not be held back for laborious or long discussions. They should be the subjects of urgent action and agreement at the earliest possible moment with our major partners in the North.
Materially and morally the arguments support the whole thrust of the Brandt Commission report. These matters should be lead items at the economic summit in Venice, and those who attend it should have firmly in their minds that this report is about matters of the utmost consequence for us all. It is truly about a "programme for survival".
5.34 pm
Mr. Edward Heath: I am grateful to the Leader of the House for arranging for this day to be set aside by the Government for a debate on the Brandt report. I am also grateful to my right hon. Friend, the Lord Privy Seal and to the Shadow Foreign Secretary for the kind things that they have said about the nature of the report and those who contributed to it.
The Lord Privy Seal has given the Government's reactions to many of the proposals. Generally, not only in this
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country but in Europe and North America, as well as in the developing countries, there is broad agreement on the analysis in the report and broad support for the proposals that have been put forward. The one question that is posed to me on every occasion, whether by Heads of Government or by those who are attending meetings, is "How are these proposals to be implemented?" I want to hear—I hope that my right hon. Friend will agree with me—not the fact that the British Government stand ready to play their part in whatever may or may not be done but that the British Government will give a lead to Europe and to the North as a whole in implementing the proposals of the report That is what is now required, and it needs the political will and public support if it is to be carried through. It is to those two things that the Government should address their activities from now on.
I disagree with my right hon. Friend about some of the individual matters on which he touched. He said that he was looking forward to the special assembly of the United Nations in August and the global negotiations beginning in 1981. I do not have great expectations of those two meetings. We have had conferences of this kind for the past 15 years, ever since the first UNCTAD conference in Geneva in 1964, to which I led the British delegation. These conferences have achieved practically nothing. The reason is quite clear. When a world conference tries to take every item on the agenda right across the board it is impossible to reach agreement, particularly at the level at which it is handled—that of official representatives or junior Ministers. For the most part, junior Ministers are in attendance for a minority of the time. Alternatively, we must consider the possibility of a conference on individual items, as we have just seen take place in Delhi on industrial matters, but on individual matters the North can sometimes see advantage when the South does not, and the South can see advantage when the North does not. As a result, no agreement is reached.
This must be the lesson for us in trying to move forward in the future. This is why the Commission put forward the initial proposal of a small group of Heads of Government representative of

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the North, OPEC countries and the non-oil developing countries, in order to thrash out solutions between them, which could then be recommended to the much wider gathering of all nations. Of course, the whole thing could be done under a United Nations umbrella, with the blessing of the Secretary-General. This would require the imprint of the Heads of Government and the instruction to reach agreement on the principles that they lay down. That must happen if we are to make any progress. All my experience in international negotiations and in government convinces me of this absolutely.
I said that we would require the support of public opinion. How can this be gained? It can be done by showing quite clearly the problems of the next two decades, up to the year 2000. Those problems are not realised. There will be an increase in population of 2,000 million—that is, 2 billion—by the year 2000. At present there are 4·3 billion people in the world. By the year 2000 there will be at least 6·3 billion, and more likely 6·5 billion. That means that there will be an increase of 50 per cent. in 20 years. To put it into context, at the beginning of this century there were not 2,000 million people in the world.
What will be the consequences of this? There will be an enormous demand for food, raw materials for factories, and energy. Neither the North nor the South can escape the consequences of this during the next 20 years. Nothing can prevent the population increase, because between 50 per cent. and 60 per cent. of the population of the developing world is 18 years of age or under. It does not matter what population policies we follow, we cannot prevent that generation from having their families. That is particularly so in Latin America, where population policies are not adopted, and cannot be, for religious reasons. By the end of the century we shall find that Latin America will have probably the largest area of population in the world, apart from China and India.
This is the magnitude of the problem—food, raw materials and energy. We may say that the European Community, with wise policies, can be self-supporting in food. That is doubtful. Even if it could be, it could not escape the inflation-
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ary effect of grave food shortages throughout the rest of the world.
In the past year we have seen grain prices increase by 25 per cent. because of food shortages throughout the rest of the world. Apart from coal and North Sea oil, we depend on the rest of the world for our raw materials. We cannot escape the consequences of the shortages of raw materials for our industry. The investment in minerals over the past decade has become a trickle, and is now almost nothing. The reasons are the lack of confidence of the multinationals in the countries in which they want to invest, or conflict in developing countries with the multinationals when they are prepared to invest.
We already know the difficulties that arise over energy. The average per capita world consumption is 2 kilowatts, varying between 0·2 kilowatts in developing countries and 6 kilowatts in this country. By the year 2000 the average per capita consumption will be 6 kilowatts, which is triple the present consumption, and that is in the face of the shortages confronting us. Those are the problems that we have to bring home to our people. After a meeting in Glasgow on Tuesday night a man said to me "I now realise that I have to get something done about this or my children will have a very bleak time."
My right hon. Friend appeared to indicate that the Government could not be expected to deal with these matters, but the key factors can be dealt with only by Governments. No one suggests that Governments should take over the world economy, but they have control of the international institutions. It is there that action is required.
The financial surpluses of the OPEC countries are controlled by Governments, who are prepared to speak only Government to Government or Government to international institution. Governments have a part to play here which no one else can play. Private enterprise man as I am, I believe that it is quite inadequate to say that private enterprise must get on with it. There is a part for private enterprise, particularly the multinationals, which have the money and the expertise, but Governments have to deal with the associated problems.
The Brandt Commission has shown that all these factors are intertwined, and

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we have a mutual interest in finding solutions to the problems. The interest may not be the same in every sphere, but broadly speaking it is there. There is also an intimate relationship between North-South and East-West, which has been thrown vividly into the spotlight by the invasion of Afghanistan.
Afghanistan is one of the poorest developing countries. What did we do to convince the Afghans that we were on their side and wanted them to have a higher standard of living? We gave them the princely sum of £1 million. Their neighbours, Turkey and Pakistan, have been cut off from all aid and assistance for the past five years, because of Turkey's attitude to Cyprus and Pakistan's nuclear stance. We now turn about and embrace those countries. We say that they are our friends, and we want to help them, because the Russians have gone into Afghanistan. That attitude merely encourages belief in the West's insincerity, and makes other countries doubt our future policies. As we have seen in Pakistan, it also leads to rejection of help from the West. Those countries are not prepared to be accused of being our lackeys.
The lesson is that we cannot wait for crises in developing countries. We must think ahead, and win these countries to our side, although we should not attempt to change their position of non-alignment. We should not ignore them until there is a crisis.
No area deserves more serious consideration than the Caribbean, which is on the doorstep of the United States, on which rests the security of the Western world. There is Cuba; we know the grievous position of Jamaica; we have seen what has happened in Grenada; and we know what is happening in St. Lucia. The Caribbean is a clear example of the inter-reaction between East-West and North-South.
Mr. Cranley Onslow: I understood my right hon. Friend to say that he was convinced that there was a recognition of mutuality of interest among every-suppose that he includes the Soviet one who mattered in the world, and I Union. He went on to tell us about the lesson of Afghanistan. Does he accept
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that there is another lesson to be learned—that the Soviet Union does not recognise its interest as being mutual with ours? That is one of the most important lessons to be drawn from Afghanistan.
Mr. Heath: I did not suggest that everyone recognises mutual interests. If that were so I should not be worried. I said that on the Brandt Commission we recognised that mutual interest. My right hon. Friend the Lord Privy Seal also raised the point, so I shall deal with it now.
When the commission was formed, neither the Soviet Union nor China wished to be represented. In our report we were careful to leave the door open on every proposal for the Soviet Union and China. Herr Brandt visited Mr. Brezhnev and discussed the matter. Mr. Brezhnev said that he was glad to hear that the countries of the North were proposing to make some amends for the grievous century and a half of colonial repression. However, as the Soviet Union had played no part in that, they had no part to play in the Brandt Commission. The Soviet position is clear.
I discussed these questions in Pekin.
Chairman Hua and Vice-Chairman Tery Hsiao-P'ing were extremely interested in the work of the commission and particularly in international institutions. As is known, China has now joined the IMF and the World Bank. From the point of view of development, although not geographically, China is a country of the South, and its requirements are enormous.
The North has five problems—high inflation, high unemployment, high interest rates, low growth and a constant increase in the price of the basic raw material on which our entire industrial life depends—oil. We have never before had to face the difficulties caused by those five factors at the same time. It is to that that economists and Governments should be addressing themselves. We have had booms with rising prices, high production, low unemployment and rising interest rates. We have had slumps with high unemployment, low production, low prices and low interest rates. We have never had high inflation, high unemployment, high interest rates, low growth and a constant increase in the real price of the basic raw materials on which we depend.

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This is not a temporary phenomenon. The attitude appears to be that if the world is driven into a sufficiently deep depression the price of oil will fall. That is a fallacy from beginning to end. Commodities are produced by people who want to sell them. If they do not sell them, they drop the price in order to get rid of them. Oil is produced by people who do not want to sell it. For the most part they want to keep it under the ground for generations yet unborn. They have all the money that they require. They are looking for excuses to cut back production and often they do not even need excuses. On 1 April Kuwait cut production by 25 per cent. and will cut it further. The Saudis are under tremendous pressure to cut production. Mecca was a lesson to the rulers of Saudi Arabia on public opinion and what it is doing with its oil. Iran is producing 2 million barrels a day instead of 6½ million. It will not increase production. If anything, production will drop further. Even in this country people ask why we do not keep our oil under the North Sea for as long as possible. It is argued that we should preserve our precious resources.
With such attitudes, the price of oil will continue to rise for the rest of the century. That is an economic fact of life with which we have to live. It must govern the Government's policies, otherwise they will be unsoundly based. The reason for the continuing rise is that in new pits it takes 10 years before there is any quantity of coal at the top. It takes between 12 and 15 years to build nuclear power stations, and there is a limit on the number that can be built at any one time. We have been working on fast-breeder reactors for 20 years, as have the French, and we still have nothing. We shall probably not have a large output from fast-breeders before the year 2000.
The problems of the South are of a different nature. The South wants commodity agreements for stability. There is mutual interest between North and South here. However, the South wants not only stable prices but higher prices—something that is not in our mutual interest, because it increases inflation. Therefore, we have to put the emphasis on better processing and marketing to help developing countries.
On processing, oil is again a clear example. Saudi Arabia wants petrochemical
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plants. The Saudis say that it does not make world economic sense to transport masses of oil in super-tankers half way round the world, with all the consequent risks of collision and spillage. The world economic sense is to have petrochemical plants in Saudi Arabia and to ship only the products.
The Firth of Clyde, Rotterdam and other places will not like it, but it is going to happen, and therefore we had better take advantage of it and supply the petrochemical plants before the Japanese, the Americans or the Germans do so. That is where our industrial effort ought to be made. Similarly, we should help developing countries with marketing.
To the extent that commodity prices fall, that will help the North with its inflation problem, but it will greatly increase the problem of the indebtedness of the developing world, and, in many ways that may be worse.
My right hon. Friend the Lord Privy Seal rightly mentioned the Tokyo agreement on industrial access. If anyone is to believe in the agreement, Governments must show that they will stand up to internal protectionist pressures. That is required from the British Government, otherwise no one will believe that we are genuine when we say that having supplied them with equipment, we shall take some of their products. We ought to take more of their products, but we all know the problem of persuading someone in Lancashire that he is losing his job because developing countries are supplying us with goods that are cheaper and thereby helping the consumer.
The only answer is to make sure that we always remain at least one step ahead in new technology and thus are able to provide alternative jobs. That will not be easy. Again, it is difficult to persuade a chap in Lancashire, who loses his job in a textile mill, that it is all right because a number of people in Birmingham, Manchester or Sidcup are making microchips or the plant that goes with them. We have to go for a programme not only of new technology but of training on a massive scale to enable people to adjust, and of housing to give them the mobility that they need. That is something that Governments have to deal with. No one else can. It comes under Government planning, training and the resources that they make available for it.
Mr. Raymond Whitney: Does my right hon. Friend agree that in view of the statements of some Labour Members, it was encouraging to hear the right hon. Member for Stepney and Poplar (Mr. Shore) refer to the dangers of protectionism?
Mr. Heath: I agree. I have now reached the stage when I welcome support from wherever it comes.
I turn to the question of transnational companies, which is more difficult in politics than in operations on the ground. I am convinced that it is possible to have a code that the transnationals will accept in their relations with Governments and that Governments will accept in respect of the investment in transnationals. It is working well in Malaysia, for example, in our Commonwealth. It needs general overall agreement, which must be organised by Governments or by an international institution. After all, the transnationals are in the North, not in the South. It could be organised, and it would give confidence to both sides. It is an urgent requirement.
I also have sympathy with the small countries which ask how they can negotiate with giant companies such as Shell, ITT or BP. Those countries do not have the trained people or the negotiating skills. There should therefore be a group which we in the North could form, to ensure that contracts are fair. That would be in our interests. If a contract were later found to be exploitive it would be repudiated, and the transnational company would be in difficulty. As the company would be from the North, we should be in difficulty. That is another, smaller example of mutual interest.
I come to the question of the international institutions, particularly the IMF and the World Bank. The South believes that those institutions were created in the image of the Americans and ourselves because we won the war. Despite the changes that have been made, they do not accept that those institutions represent the present spread of power in the world. That is particularly true of OPEC.
Changes are required, and they need the agreement of the Governments of the North to be brought about. Unless the North takes the initiative in doing what is required, nothing will happen. I know that Mr. McNamara and the IMF are examining the matter, but
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changes are required. I do not want to see a new world institution—far from it—but I want to see the existing institutions ready and adaptable. The crux of the matter is that unless we get institutions in which OPEC has confidence it will not put its surpluses into them.
The next question concerning the South is its indebtedness. It is no use saying that the countries of the South should never have got into debt. Look at the size of our national debt from our national investment. Every country has a similar problem. The countries of the South could not foresee, any more than we could, the constant increase in oil prices or the enormous height of interest rates today. There is no point in apportioning the blame. The problem must be dealt with. The question is, how to do it.
The North can help the least developed countries, through Governments again, at comparatively little cost—probably £4 billion for them all. The previous Labour Government helped 19 countries and the Swedes have assisted 29 countries. Few other nations have done anything. We ought to say to those nations "We have done our part. You do yours, and live up to what is required of the North."
The big problem is the rest of the South, mostly medium-developed countries, some of which are big in area, population and output. For example, Brazil has a total indebtedness of more than 50 billion American dollars. Last year, the cost of its oil, because of increased prices, and the cost of servicing its debt, because of increased interest rates, were more than the value of the whole of its exports put together. What could Brazil do, except incur further indebtedness, which it did?
This year, if Brazil is to meet the further increase in the price of oil and the high interest rates it will have to increase its exports from 14 billion dollars last year to 20 billion dollars this year. How is that country to increase its exports by 50 per cent. in one year? We know the problem of trying to increase our exports by 5 per cent. or 6 per cent. in a year. If Brazil has falling commodity prices for coffee and cocoa, the problem is made that much more difficult. The proportion of Brazil's indebtedness is 2:1 to Governments and international institutions on the one hand and commercial

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banking on the other. Again, Governments have a part to play, but I am concerned at this point with commercial banking.
I disagree with my right hon. Friend the Lord Privy Seal about recycling. The commercial banks, certainly Wall Street and the major banks in the City, have concluded that they cannot go further with recycling. The proportion of recycling in the developing world is as much as the banks can carry. That produces the problem of recycling the growing surpluses of OPEC.
The even greater problem is that if developing countries are forced to default the Western banking system will be in danger. That is another direct connection between North and South. We cannot say of the developing countries "Leave them to themselves, it does not matter what happens", because the banking system is integral to the survival of the Western world.
A few of us can still remember what happened following the collapse of the Credit Anstadt, at the beginning of the 1930s, and its impact on the rest of the banking system. It was followed by the Wall Street collapse, the years of unemployment, the rise of Hitler and the Second World War. If those countries are allowed to default, the Western banking system and Western society will suffer.
It is not a question of taking action over the next 10 or 20 years. We are talking about 1980 and the first three months of 1981. Action is required urgently. The banks realise that. Of course, they will not discuss it. The chairmen of banks in Wall Street or in the City do not discuss such matters publicly. They go on saying that it will be handled all right. If they do otherwise, they will increase the difficulties. However, we ought to know what the problems are, and so ought Governments. Action must be taken within a year, up to Easter 1981.
That is the last of the major problems, but it is our problem as well as that of others. When I read the comment that "They have their problems and we have ours" which appeared in The Sunday Times, I considered that nothing could be more devastating than for a British official to make such a remark, if he made it.
Mr. Tristan Garel-Jones: Is my right hon. Friend aware that in September 1979 the total exposure in the Third world from the City of London alone was $50 billion?
Mr. Heath: Yes. These are enormous sums. The sum from Wall Street is infinitely greater than that from the City, quite apart from the other European banks. That demonstrates the size of the problem and the dangers that will arise unless effective action is taken to deal with it.
What proposals can one make to deal with the problem? I wish to be concrete about it, without going over all the Brandt Commission proposals. The first problem lies with the OPEC surpluses. They may have been considerably underestimated for the coming year. They will continue to increase year after year and they will continue to increase inflation year after year. The Lord Privy Seal said that that factor emphasised the importance of dealing with inflation. In fact, the OPEC surpluses are causing inflation. The only logical way of dealing with that inflation, ceteris paribus, is to have an increase in productivity that will cope with it.
How is that increased productivity to be achieved? It will not be achieved by a deflationary policy. All that that will do is to reduce productivity. That is because overheads have to be spread over a smaller output. That is basic to industrial life.
We have the problem of getting the OPEC surpluses recycled. The commercial banks have reached their limit. We may say "Give the commercial banks guarantees". Some of them might accept that everything that they have done so far is their responsibility and that anything in future will be guaranteed. I do not favour that course. I believe that it would undermine general banking principles and that it would be unwise.
We must persuade the OPEC countries to recycle through institutions, and we must make those institutions acceptable to them. We both want two things; we want guarantees of oil production to the end of the century and we want predictions of oil prices to the end of the century to enable us to know with what we have to cope. The OPEC

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countries want a means of finding investment now that they cannot recycle through commercial banks, and they want a means of getting reasonable guarantees of that investment when it is made. They have lost 25 per cent., in dollars, in five years and they do not want to go through that experience again.
I do not know what evidence there is that the OPEC countries would not welcome a substitution account as a way of getting rid of some of the dollars. My evidence is that they would welcome such a course. It would be possible to arrange for them to have a packet of currencies that would spread the risk.
Another proposal is for the OPEC countries to invest in bonds that could be used by the international organisations for investment. They could be indexed bonds, which would give the OPEC countries the security that they want. There would be an outcry from everybody else in the world, who would say "Why should they have the privilege of indexed bonds while we do not?" These are problems that have to be faced if we want to influence OPEC policy. If we do not, let us stand aside, and let the depression come and the collapse that will follow it. If we are to deal with OPEC we must be prepared to use imagination and to meet its needs to a large extent.
We both need two things, and that is where the dialogue should start. I hoped that the dialogue would start with the meeting of the Nine in Venice, but it did not. I hope now that it will start with the meeting of the Seven in Venice. I hope that this time the British Government will be prepared to give a lead, or at least to support those who are giving a lead to starting the dialogue with OPEC.
With great respect, it is not enough to say that the European Community stands ready to carry on a dialogue. That is a negative approach. We need the Seven to indicate that in specific ways they are prepared to talk to OPEC and to overcome the enormous scepticism and cynicism in the rest of the South about the North, and to show them that the North is prepared to do business. If the Seven indicate that willingness, they may get a response from
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OPEC. We can make it easier for them to meet their problems.
We must recognise that OPEC will require action that will have an effect on the non-oil developing world. This is where we come to the other part of the package. It is similar to the transnational arrangement. There will have to be some help with commodities and some extra access for industrial goods. OPEC needs the political support of the rest of the developing world. It requires the votes of those countries in the United Nations, especially on the Arab-Israeli dispute. Unless it can maintain that position it will not do a deal with us. If we are to be realistic, we must accept those elements.
As for the other aspects of food and energy, a great deal can be done at comparatively little expense. Indeed, if we can overcome the reluctance of OPEC to negotiate with us, I believe that it will share with us in the expense of dealing with food and energy. That will help both North and South to find alternative resources for both and to develop food production. Both courses of action are urgently necessary.
The first package must be to deal with the OPEC surpluses jointly and to show the OPEC countries that we shall make institutional changes. We could even set up a fresh part of the International Monetary Fund on which we could have the same sort of representation as we have on the International Fund for Agricultural Development, which is one-third North, one-third OPEC and one-third non-oil developing countries. That they regard as a proper balance of power. Let us develop that in whatever way we want for expenditure on new energy exploration and on new food production. We shall then be able to make a start on dealing with the problems.
I know that there is cynicism about dealing with the problems in this way. They are global problems, and they can be dealt with only by producing global solutions. No country can deal with the problems on its own. No country is able to deal with the recession on its own. Europe cannot deal with it on its own, and neither can the United States. That is the hard fact of life. Therefore, there must be agreement and action. The

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quicker we get that, the sooner we shall be able to deal with the problem.
Sir Ronald Bell: I am listening to my right hon. Friend with interest. Will he explain how he would apply what he has been saying to the problem, for example, of Brazil, which he gave as an illustration, where there is a large uncovered debt? If the OPEC surpluses were applied to that problem, would it not increase the debt of Brazil and increase the interest charge? How does my right hon. Friend propose that that problem should be solved?
Mr. Heath: That is a perfectly fair question. It must be combined with the topic to which I was about to turn. It is a matter of investment in the developing world, and enabling it to get the fruits of the products of its investment. That is the only way in which, ultimately, we shall be able to overcome the problem. That leads me to the point that I was about to make about those who are cynical towards an overall approach of this sort.
We British should be the first to understand such an approach. We should understand it better than anybody else. It was the way in which we built up our industrial strength. In the nineteenth century we had all the production. The rest of the world—whether it was Brazil, Argentina, the Imperial Russian Empire, Canada, Australia or New Zealand—wanted the things that we could produce. They had the demand, but it was not an effective demand.
What did we say to those countries? We said" You have not got the money, but the City of London will produce the money. You will never see the money, because you will spend it here in Britain on the railways, water supplies and electricity supplies that you want." That is how British industry prospered. When we made a profit we did not say "We shall sit on it as a little surplus." We said "This is another way in which you can invest still more. We shall have still more jobs and employment." We were successful until the Germans and the Americans leapt ahead of us in technology. In the 1960s the Japanese leapt ahead of us all. That illustrates again the importance of staying ahead in developing technology.
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That is a process that we should understand. The Brandt Commission set out to try to break the deadlock on, for example, commodity agreements. There were bitter arguments. That is to be expected of a commission of 18 representatives from five continents of every political and economic viewpoint. We ended up with total unanimity because we had come to the conclusion that we needed recommendations to recreate the world economy and not just to deal with individual items that affected individual developing countries.
That is what is required today. It has been done once before. It was done with the Marshall plan, with America and Europe. It may be said that it is more difficult because there are more European countries and 105 developing countries. It is more difficult, but that is an institutional, organisational problem. However, if it is not solved we shall continue the slide into the economic abyss, and neither North nor South will escape.
The two decades ahead for the coming generations will be bleak, but if leadership is prepared to take a grip on this and to ensure that instructions are given for the programme to be worked out, implemented and carried out in time, the comment that there is no hope for the developing world and no hope for us will be completely fallacious. Then we shall surmount our troubles. We shall overcome them. Once again, we shall be able to embark on a prosperous path and an expanding economy, and there will be hope for both North and South.
6.11 pm
Mr. J. Enoch Powell: This is a difficult debate for those hon. Members to take part in who find that they are unable to share or even in a degree to understand the vocabulary and the assumptions with which the subject of aid, development and the under-developed countries is discussed and with which the Brandt report is concerned. It is made a more difficult task by the breath-taking comprehensiveness and competence of the speech to which the House has just been listening. It is clear that those hon. Members whom I have described are relatively few in number because of the ready acceptance, the excitement and the interest stimulated by the document under discussion, which exemplifies all those charac-

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teristics and assumptions which we find most difficult.
Nevertheless, the attempt to open up the difficulties is worth making. I agree with the right hon. Member for Sidcup (Mr. Heath) that none of these matters could be dealt with without public opinion. Opinion has to be formed. It can be formed and tested only by debate and the comparison of points of view, of definition and of redefinition.
I begin by asking a fundamental question. There is no doubt that the contrast is patent between what we call, with too gross a classification, the developed and the undeveloped countries. Whether the definition is much helped by the use of points of the compass—East and West, or North and South—I beg leave to doubt. But the vast human contrasts in the scene are unmistakable. We characterise them by the contrast between the developed West or North and the undeveloped South or whatever we choose to call it.
How did this come about? How came there to be these masses of population differing so staggeringly on the economic criteria which we apply and in the terms with which we endeavour to describe them? After all, if we went back not millennia but only a few centuries and compared this country with the India over which the Great Mogul ruled, we would find that the technical competence and organisation of Mogul India was perhaps superior to ours—it was greatly admired by the Tudor and Elizabethan travellers—and we would find that by our measurements, imperfect as they are, the standard of living in Akbar's India was fully comparable with the standard of living in the England of Elizabeth I.
What has happened? Why is there this difference, this divergence, this bifurcation? Why are there these masses of people in so contrasted circumstances? I doubt whether the answer to that question is a very simple one. Indeed, I doubt whether a full and satisfactory answer to that question can ever be offered. But I will make a negative assertion : it is not due to any difference in intellectual capacity, human ability or insight. It is an absurd notion that the European is intellectually superior to vast millions of the human race in Asia and elsewhere.
The subtlety, the insight, the power of reflection and of argument to be found in
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India and elsewhere are equal to anything which is within our conception or grasp. As for character and human ability, it would be ludicrous, and a confession of total and boorish ignorance, to say that it is difference in those respects which accounts for these differences of experience.
In case I be misunderstood, may I say at once that I do not believe that the IQ method of analysing the human race produces useful results for this purpose. I doubt whether many of the characteristics which we regard as typically and transcendentally European are purely intellectual. I think they have in them very much of the moral and very much of the social.
The answer must be that those comparable characteristics are differently directed, for whatever reasons, and that the scale of values, the motivation and the whole conception of the world which those populations entertain is different from that within which the material development we are so proud of has taken place in Europe or in the West.
Yet as we contemplate the picture of countries in the depths of poverty, whose poverty reacts and interacts with our own economic objects and ambitions, we are told that what we should do is to elaborate a system for transferring resources from the developed to the undeveloped.
The right hon. Member for Sidcup held the attention of the House not least because of the grand scale on which he developed his organisational structure. But when we turn from the proposals of the right hon. Gentleman to the reality, we find a ludicrous contrast between the ambition to close the gap and to generalise our standards as a universal achievement and the scale of what is envisaged or can be envisaged in practice.
An hour or two ago, the two Front Benches were arguing about the difference between 0·5, 0·2 and 0·7 per cent. of the gross national product. If that were multiplied by 10, would it not be a fantastic proposition to imagine that any organisation to redistribute and re-apply resources of that scale, produced and compulsorily collected in the countries of the North or the West, and governmentally organised, would alter the phenomenon which we contemplate? It seems a crass illustration of the essential

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materialism of our civilisation that we could conceive such a method for closing the gulf between the civilisation and peoples of Europe and the cultures and peoples of the rest of the world.
Mr. Alexander W. Lyon rose—
Mr. Powell: I wonder whether I might develop my thoughts further before giving way happily to the hon. Member for York (Mr. Lyon).
I must not be supposed to be saying that there is no such thing as cross-fertilisation among the branches of the human race. Of course, there is. We have been talking a great deal this afternoon about trade, genuine trade—exchange, that is, between those who think that they gain equally from it. Trade on the grand scale disseminates abilities, possibilities, capabilities, inventions, technologies that could not be evolved in any single centre of culture or civilisation.
Even more important, I believe, is the intellectual and even the moral intercourse between the different branches of the human race. I speculated a little time ago on what might have been the reasons for—I shall use a vulgarism—the "takeoff" of Europe after the Renaissance. I suspect that one of the elements, one of the creative forces then at work, was intellectual aid and intellectual insemination, but not from anywhere else in the then world. Probably the biggest single force behind the Renaissance, perhaps the biggest single force behind the achievements of Europe in the last three or four centuries, was what had been thought, done and said in Greece in the fifth century BC, the knowledge of which, improbably surviving over a thousand years, lit the match of that prairie fire of which we are still seeing the consequences in the technology of the late twentieth century.
Mr. Onslow: I suggest to the right hon. Gentleman that there is a need to qualify what he says. While he spoke in the vulgarism of "take-off", he will, surely, recognise that Greece and Spain two Powers that, in those terms, certainly took off in past centuries, have been low, in recent years, in the scale of economic achievement. There is some moral to be drawn from that.
Mr. Powell: The strange thing is that the consequences of the thoughts of Plato and Aristotle, after being transmuted and
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transmitted over so long a space of time, would have been astonishing to the authors themselves, more astonishing than they are, in retrospect, to us. Those who plant the seed have no means of controlling or knowing what the fruit will be. "The wind bloweth whithersoever it listeth".
This is my natural point of transition to the other chord which I touched in attempting to describe the mutual assistance of the different branches of the human race. That is the moral impact. It is possible for there to be a moral effect, a moral stamp, placed creatively and revolutionarily, by those of one cultural sphere, upon those of another.
In Victor Hugo's "Les Miserables" the bishop, by his gift of the two candlesticks, affects a total transformation in Jean Valjean the ex-convict. It is the effect upon one human being of the renunciation, the insight and the generosity of another human being.
Those people, in the debate upon aid, are not mistaken who believe that there is a moral as well as an intellectual and technical influence; but it must and can come only through the individual. If the French Government had made provision under suitable legislation—or, perhaps, by decree of Louis Quatorze—for two silver candlesticks to be distributed to each ex-convict who left the galleys, I am prepared to assert that not a single human being's life would have been transformed. I am prepared to assert that it would not have been recognised as a transmuting act of generosity. It would have earned curses rather than gratitude.
The mistake we make is to believe that compulsion can do the work of freedom and that the engine of compulsion, the State, can perform what can only be performed by human beings acting, whether in the sphere of commerce, intellect or any other, upon one another. By our narrow concept, our mechanical concept, our materialistic concept of development and of the world, we are giving a stone where what we mean to give is bread.
Mr. Alexander W. Lyon: Will the right hon. Gentleman, in the context of what he says, say what he thinks about the American Marshall Plan at the end of the war that seemed to most people to recycle a lot of resources from America to Europe by Government action, with immense benefits?
Mr. Powell: The hon. Gentleman enables me to make an important distinction. The re-investment of capital in a Europe that was, in the sense in which we are using the term, a fully developed region of the world is totally different from the proposition that one can transform the under-developed countries by a governmentally directed injection of ideas or capital. I should like to take the occasion—it will cost the House only another 30 seconds—to make another distinction. It is between Government aid, properly so called, and that international comity between nations that leads one nation to assist another when overtaken by unforeseeable and exceptional disaster. There is nothing in common between that or the matter to which the hon. Member for York referred and, on the other hand, the propositions, the assumptions and the vocabulary that we use when we discuss national and international Government aid from the developed to the under-developed countries.
My use of the proverbial expression "a stone instead of bread" brings me to the most difficult part of what I wish to say—so difficult that it was with considerable hesitation that I decided to say it. It comes from the saying
"If a man's son ask for bread, he will give him a stone? If he ask for fish, will he give him a serpent?"
That would perhaps, nowadays, be translated"a viper". On that bread, there is impressed a personality. It is the same which is symbolised by the fish. There was a time, not long ago, almost within living memory, when the people of Europe and the people of this country were convinced that they had good news to give to the rest of the world. They were certain of it, and there was good conscience and conviction in what they were doing. It was the good news that God had become man, been sacrificed and arisen, and was available to all mankind.
I do not, for the purpose of my argument, seek the assent or dissent of any hon. Member to that proposition. My point is that a century and less ago we were acting upon the rest of the world in the strength of a conviction. Whatever else was associated with it, we acted in that strength. We do so now no longer. I think our danger may be that we are endeavouring to escape from the conse-1196
quences of a lack of faith, of faith in ourselves and of confidence in ourselves, by a resort to an arid, statistical materialism, which in turn can be used as the screen for the ever-present desire to impose one's standards upon others, to exalt one's achievements over those of others, and to find a reason for exercising power over one's fellow men.
6.31 pm
Mr. Cranky Onslow: That was a remarkable speech, and it would be very difficult for me to follow it, even if I wanted to do so. I hope, therefore that the right hon. Member for Down, South (Mr. Powell) will forgive me if, in what I want to say, I merely allude from time to time to one or two of the points on which I am most clearly and evidently in agreement with him.
My right hon. Friend the Member for Sidcup (Mr. Heath)—who, unfortunately is not with us now—must acquit me of cynicism if I disagree with him, because it is the right of each of us in this House to express his view and the right of no one to brand us as cynics because we do not agree. I wish to disagree with much of what he said and with much of what is in the report.
In one thing I agree with my right hon. Friend the Member for Sidcup, and also with the right hon. Member for Stepney and Poplar (Mr. Shore), namely, that we cannot afford to ignore the problems of the world and that the oil crisis is a key to many of them. It would have been well if more attention had been paid by both right hon. Members to the realities rather than the generalities of the situation, and if the Brandt report had focused on the intractable situation that we know to exist. It would have been better if, for instance, my right hon. Friend had suggested to us how it is that he sees OPEC as a homogeneous organisation that one man can represent; how Colonel Gaddafi, the Ayatollah Khomeini, the President of Mexico, and the ruler ad interim of any other oil-producing State, can be persuaded to agree in advance on the price that they will make the West pay for allowing itself to be blackmailed. It would have been better if my right hon. Friend had said how well he thinks it would go down in the United States if he went there and said that we must behave in such a way as to

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obtain the support of OPEC, because at the United Nations the Americans need our votes and the votes of the underdeveloped countries on the Arab-Israeli issue.
I mention those examples only to show that there are areas that, had my right hon. Friend come slighdy closer to them, he might have illustrated as being more difficult than he left us as supposing them to be.
I might as well begin by saying that I disagree first with the cover on the report, and with the map on it. A line is drawn between what we are led to believe are North and South. It is thick, black, arbitrary and misleading. There is no good reason, except an arbitrary judgment, why any one country should appear on either side of that line. If the line represents an economic concept, why is South Africa on the south of it? I hold no brief for the Afrikaaners, but I dare say that if anyone wishing to protest against the Russian equivalent of the Soweto riots took his chance in Red Square in Moscow he would suffer a good deal more severely than if he did it in Johannesburg. So why is South Africa on the south of the line and the Soviet Union on the north of it? A political, not an economic, criterion must have led to that decision.
Mr. Eric Deakins rose—
Mr. Onslow: No, I shall not give way, because I shall no doubt provoke a great many people, and the only way to be fair is to give way to none of them.
Why are Venezuela, Mexico and the Gulf oil States on the south of the line? Why are South Korea, Hong Kong, Singapore and Malaysia there? What puts them all in the South, if there is any such place—which there is not?
The only fair picture that could have been drawn on the cover of the report would be one that colour-coded each country according to its economic performance over, say, the last 10 years, and awarded whatever colour one might care to choose to those that had done best and black to those that had done worst. The result would have been pretty pointillistic but also very much more revealing and much more honest than the picture that is presented to us here, because the pattern of international development has been
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random and unpredictable, and it continues to be. There is no way in which we can predict it precisely.
There is no way in which we can justify the idea of a North-South confrontation. It is a figment of the Western liberal imagination, exploited to our own detriment. We ought to recognise it as such.—[Interruption.] If any of my hon. Friends are offended by what I have just called them, I apologise, but I said that I would provoke them.
Let it be clear, then, that there are no economic criteria, no allowances made for accidents of climate, of geology, of religious upbringing, or of all the determinants that are as important to economic progress in any one country as the political system—and, goodness knows, that is important enough. Let us say, then, that we have a misleading cover, a misleading map, and that much of the text inside is misleading.
There is no outright avowal—although the Opposition Front Bench spokesmen seemed to see it—that one of the planks upon which the so-called programme rests is a system of redistributive taxation on an international scale. I do not think that the word "tax" is mentioned anywhere in the document, although the implications are fiscal and punitive. There may be advocates of redistributive taxation on a domestic scale on the Government Benches. I hope that there are not, but, if any there be, I hope that they will think twice before identifying themselves with the objectives of the report. They will find themselves—if they have not read this far—on page 291, where there are two specific recommendations that might as well go on record. The report states that
"The flow of official development finance should be enlarged by : 1 An international system of universal revenue mobilisation,"
—there is a phrase from which even our own dear Chancellor of the Exchequer would probably back away—
"based on a sliding scale related to national income".
A little lower down we have :
"3 Introduction of automatic revenue transfers through international levies on some of the following : international trade, arms production or exports; international travel"
—and so on.
These are tax measures. The report does not say so. It does not touch upon

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the questions of international representation. It merely leaves them lying there. We should turn away from them, because they really are objectionable. It is no credit—[Interruption.] No, I shall not make an exception for my hon. Friend the Member for Norfolk, North-West (Mr. Brocklebank-Fowler). I am sure that he will be making an equally brilliant speech shortly. I shall not let him intervene, any more than anyone else.
I am sure that it would have been much more honest if the commitment to taxation had been clearly and unmistakably spelt out and if the question of representation had been tackled as well, which it is not on any page of the report. My hon. Friend can read the report again and he will not find anything in it about representation.
The second point that is misleading and objectionable is the inference that the substantial increase in the transfer of resources to the developing countries—to which the report dedicates itself—must axiomatically result in the resources so transferred being better used. There is no reason why that should be so. There is absolutely every reason to suppose that that is not so, because the resources are much more likely to be used well by those who have generated them than by those into whose lap they fall in the manner of a pools win.
There is a fundamental economic misconception there, and coupled with it the fundamental misconception about the Marshall plan, with which the right hon. Member for Down, South has just dealt with in a thoroughly masterly fashion. I am delighted that he has done so because it will mean that at last The Times will no longer be able to suppress the argument on the subject.
I wrote a letter in answer to Lady Jackson—or some other member of the "Aid Mafia"—who had used the Marshall plan analogy, pointing out that it was rubbish. I did not use the word "rubbish", because I did not think that The Times would print it, but I thought that at least The Times would respect the argument. I am sorry to say that The Times does not like that side of the argument, so the letter was not printed.
There is an argument that there is a fundamental difference between making
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funds available for the reconstruction of an economy or a society that lacks only liquidity and lobbing them out into parts of the world where skills are lacking and where infrastructure does not exist. The Marshall plan lasted for only four years. If anyone who thinks that there is a comparison to be made is prepared to say how long a term the latter-day equivalent or Brandt plan would have to continue to transfer resources, perhaps we shall hear from him during the debate.
The prosperity of the world depends on the prosperity of the industrialised part of the world, and that is overwhelmingly the West. We should observe that. Resources that can be released should be used where they can do most good, and that is in the West. My right hon. Friend the Member for Sidcup said that we must recognise that it is not easy to persuade an unemployed textile worker that the fact that he is out of work is all right because a number of people in Birmingham and elsewhere are making microchips. Of course that is not easy. It is not an answer to tell him that we must spend a lot of money in massive retraining, massive restructuring and massive relocation of housing. "Massive" is a lovely word, but what does it mean?
Where do the priorities lie? What are the choices? Who comes first—the unemployed textile worker or someone 5,000 miles away? The overwhelming economic argument is that if we could redeploy and re-use the skills in our midst—skills that lack only the funds, we should be doing a better service to the whole world. We should generate resources, open up trade, restructure our economy, lessen the need for protectionist measures and generally move forward, instead of taxing ourselves to a standstill—which is, I am sorry to say, the report's recommendation.
Another passage of the report, dealing with defence spending, is fundamentally misleading. On page 117, it states that
"The world's military spending dwarfs any spending on development. Total military expenditures are approaching $450 billion a year, of which over half is spent by the Soviet Union and the United States, while annual spending on official development aid is only $20 billion. If only a fraction of the money, manpower and research presently devoted to military uses were diverted to development, the future prospects of the Third World would look entirely different."
That might be so if the diagnosis were correct, but it is a faulty diagnosis, for

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three reasons. First, it ignores the fact, which we all know, that internal and external security are essential to economic progress. Even the comic opera in the New Hebrides teaches us something about that point. If we consider past events in the Lebanon, Vietnam, Cambodia, Malaysia, Angola, Uganda, Ethiopia or even Zimbabwe, it is possible to detect a connection between money spent on promoting internal and external security and the conditions in which economic progress can occur. There is not the difference that is suggested in that section of the report.
I do not believe that it is true to suggest, as does the report, that there is little or no domestic expenditure to promote development in all the countries with which it is concerned, or that there is little or no private overseas investment. That is not true, because the figures do not compare like with like. The most serious flaw is the assumption that the best alternative use of funds released from the defence budget would be in the form of overseas aid. I reject that. I believe that many hon. Members and most outside the House also reject it.
I turn to the last part of my criticism, which I have tried to keep brief. In some ways it is the most important part. The authors of the report seem to have supposed that they were operating in some sort of international vacuum. They seem to have kidded themselves into believing that the world is a Utopian society, where we have only to propound a theory to make it possible to put it into practice. They deluded themselves into that extraordinary frame of mind. I know that that happens when great men study the problems of development.
The Pearson report, which hon. Members will remember, succeeded in not mentioning China in all its many pages. To most intents, the Brandt report follows suit. My right hon. Friend the Member for Sidcup told us a little about the reason for that. But a country that is capable of producing an inter-continental ballistic missile, and which has within its boundaries one-quarter of the world's population, probably has some bearing on the world's future. I do not think that we can produce a programme for world survival that takes no account of the prospects of China and its people over the next two decades.
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If that is a criticism of substance, I now turn to one that is even more so. Those who have the report in their hands will find on pages 45 and 46 a reference to the Soviet bloc that states :
"The Secreariat had a dialogue with Soviet experts of the Institute for World Economy in Moscow, who assured them that they were observing the problems of the Third World closely. They pointed out that they had undertaken great efforts for the development of the people within their own boundaries, and also in a number of developing countries. They stressed the quality of Soviet aid and argued that necessary military expenditures limit their capacity to provide greater foreign assistance. They emphasised the need for improvement in East-West relations and progress towards disarmament. The Soviet experts were fully aware of the great needs of developing countries. They strongly favoured changes in the international economic and financial system and institutions."
If they praise the quality of Soviet aid, they can scarcely praise the quantity, which it is agreed is rather less than 0·04 per cent. of Russia's gross domestic product per annum.
How could my right hon. Friend the Member for Sidcup and his colleagues put their names to a report that left that mealey-mouthed apologia for Soviet imperialism without a single comment upon it? What sort of world do they think they live in? Do they really believe that it is enough? The only answer that I can find is on page 10 of Hen-Brandt's introduction, which advocates the greater involvement of the Soviet Union and its allies.
We know that the real obstacle to world progress is the fundamental conflict perpetuated by a Communist creed. If that creed were to change, if its political influence were to disappear, it would be the largest single contribution to a more peaceful and prosperous society in any part of the world that anyone could possibly conceive. I do not think that that will happen. I know that the Communists are dedicated to ensuring that it does not happen. The concept of a constant extension of Communist domination is the only moral authority to which the men in the Kremlin can lay claim within their own domains. They have no other justification for being there, on the basis on which they are there. That will not change overnight. We are in a situation in which we cannot ignore the fact that the Communists are out to frustrate the

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objectives that the report seeks to advance, yet the report says nothing about them. I find it incredible that my hon. Friend should have been content to say—and it was news to me—that Herr Brandt visited Mr. Brezhnev, who gave him a brush-off answer.
The Russians are not simply interested spectators, watching the world get into a mess; they are right there in the middle of it, and they are trying to make the most of the mess for their own purposes. The report says nothing of that. That is an absolutely fatal flaw in its whole drive and tenor. Its recommendations may or may not have to stand the test of time, but it is not written against the background of the world as we know it. That is a tragic missed opportunity.
I have spoken to many of the report's supporters, and they say "It is a bit of a curate's egg. There is some nonsense in it, but basically it is pretty good stuff, and we should go along with it." They are entitled to that view. I hope that some of them will admit it today. To my mind, the report is not a programme for survival. I hope and pray that it will not prove to be a recipe for disaster. However, I am quite sure of one thing—it is a self-inflicted wound in our attempts to create a better place for every human being who lives in this world and who wants to do better in it.
6.50 pm
Mr. Alexander W. Lyon: We listened earlier to a magnificently statesmanlike speech from the right hon. Member for Sidcup (Mr. Heath), which was in marked contrast to the speech from the Government Front Bench. It was copied, though not by the same kind of stature, by the speech of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). However, the speeches of both right hon. Members were also in marked contrast to the things that they said, and the attitudes that they exhibited, when they were in government.
This report is a magnificent document. It is a searing analysis of the world as it is, and, contrary to what was said by the hon. Member for Woking (Mr. Onslow), I believe it to be the world as it is. It is also a leal challenge to the stature of politicians throughout the world to face up to those problems. That is true of
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the document, which has been written by people who on the whole have left active politics and have passed the moment when they were involved in decision making.
If, at the time of the IMF loan crisis in 1976, my right hon. Friend the Member for Stepney and Poplar had said what he has said now, we would not have adopted the policies for deflation which were adopted then as a result of Cabinet decisions. The turning point came not in Whitehall but rather when my right hon. Friend the Leader of the Opposition and my right hon. Friend the Member for Leeds, East (Mr. Healey) came back from the conference of world leaders in Puerto Rico determined to start on the monetarist policies that we are now following even more intensively under the present Government.
That is a commentary upon what is wrong with the report and what we might expect to be wrong in the response which is made to it. It is a commentary to which the House should address itself today. No one can exceed the right hon. Member for Sidcup in stating the propositions contained in the report. All of us have read it, and I do not want to labour the point again. However, we must ask what we intend to do about it.
When I came into the House 14 years ago, along with Frank Judd, who was then a Member of the House, and my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley), we formed a group to push overseas aid in the House. It was a small group and it seemed a small thing to do. We did not expect any great success. It was not due to our efforts—I have no doubt about that—but the whole thing took off. It may not have taken off in relation to economic development in the developing world, but the remainder did so because within a few years there was a massive lobby throughout the country in support of overseas aid. It made Governments think. If there were changes in Government policy, a great deal was due to the pressure which came from ordinary people, particularly in the Churches, over overseas aid.
What characterised our attempts in those days, as well as the attempt of the overseas aid lobby, was something which I am afraid the right hon. Member for Down, South (Mr. Powell) overlooked in his quotation from the Bible. We were concerned with what Jesus was saying

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when he asked "Do you really believe that the parent who is asked for bread would give a stone, and would your heavenly Father give less?". That is what animated us. We were animated by the politics of compassion and the thing to which the right hon. Gentleman turned—the creed by which our civilisation has come into being, by which we have stamped this century.
But that is not enough. Compassion is not what this is about. It is not that we must now depend on persuading our people to be charitable towards the Third world. We must say, as the right hon. Member for Sidcup said so well, that this is in our own interests, and that it is the only way in which we shall overcome the problems which face us. Of course, that will not have the assent of the right hon. Member for Down, South, still less that of the Treasury Bench.
What was wrong with the Government's response today was that it came from the Deputy Foreign Secretary. Had the Government been serious about this matter, their response would have come from the Chancellor of the Exchequer. It could not come from the Chancellor of the Exchequer, who has adopted a monetarist creed, because the whole thesis of the report is that monetarism is not an answer to the kind of problems which it analyses.
The thesis is that we must adopt a system which is basically Keynes writ large. In fact, if Keynes had been listened to at Bretton Woods, instead of being out-manouevred by American delegates, we might have had a system which would not have collapsed in the early 1970s, which would have done something to build up the Third world. We are not talking about compassion or charity. This is the only way in which the world will revive its trading position, and encourage growth throughout the world which will help us encourage growth here at home. Of course, we are in relative decline compared with our major manufacturing countries. But that is a small part of our problem. It is a problem which could be overcome if world trade was increasing at the kind of rates at which it increased in the 1950s and 1960s. We must stimulate world trade.
The most important part of this report is the question of what we do with the surpluses. It is significant that both Front Bench speakers talked about the
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OPEC surpluses. However, it is only recently that the West and Japan have run out of surpluses. Indeed, at the time of the Puerto Rican conference it was Germany and Japan who were acquiring the surpluses and causing the run-down in world trade. The question is what is to be done in a world in which some countries acquire resources at enormous rates, and hold them to themselves, if at the same time other parts of the world want resources only to stimulate their economy.
Here I take exception to the suggestion made by the right hon. Member for Down, South and the hon. Member for Woking about the Marshall plan. Of course, I accept that the Marshall plan was directed towards a basic infrastructure which needed reviving. But when I listened to the right hon. Member for Down, South expatiating upon the renaissance heritage which has been handed down to us, I thought of the time when I was in Uganda, before Amin, and talked to a farmer who had increased his crops by about four-fold. He did so because he received training from someone from the West, who taught him how to use his resources and helped him to buy the grain and the primitive equipment which brought about that change. There was not a lot in it. What he got from the West was microscopic compared with the overall need of the world. But he improved the quality of his crops immensely.
I do not go along with the current fashion which says that over the first 10 or 15 years we got overseas aid all wrong by putting it into industry rather than into agriculture. After all, India today, largely as a result of overseas aid, is the tenth largest industrial nation in the world. That was done with help from the West.
However, if we are to make an impact upon the problems posed by the right hon. Member for Sidcup, I accept that we ought to build on what the South has, which is its capacity to develop its agriculture. We must channel the resources in order that the South can develop its agriculture, and to some extent its other basic raw materials. As a result, we would be able to make a startling change in the capacity of the South to help the North—and therefore, the North to help the South—in a limited

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period or time, with probably a limited shift of resources.
We are challenged to make a redistribution of resources. It will come about anyway. In my infancy, in the overseas aid lobby, I preached the politics of compassion and said that we should give because it was right to give. Of course, we did not give on the scale that was required. But OPEC took it and developed its own marketing procedure and structure in world trade to divert resources to itself. It did that by a conscious decision. For so long as the world needs oil there will be an irreversible shift of power and resources to OPEC from the West. That will also be true of the rest of the South in so far as we need the kind of materials that it can produce. If it is food—in 20 years when we have to feed 6,000 million people, food might be the most expensive part of the life that we shall live, and we shall probably need it from the South—that resource will be diverted. If it is raw materials, other than energy, that resource, too, will be diverted.
I represent a constituency which has within it a third of the confectionery industry of this country and that industry is dependent to a great extent on cocoa. I know what was done in West Africa. An East German was brought in to organise the marketing of cocoa. The result was an increase in the price of cocoa beans and, therefore, of Rowntree's chocolates. That was a diversion of resources from my constituency to the West African infrastructure. That also is an inevitable part of this process.
Therefore, we must recognise not that we need compassion or charity, but that we shall have to face an increasing diversion of resources from the North to the South in any case. However, it will be unplanned, uncharted, and will lead to the kind of conflict and difficulties which ultimately will make the whole system break down.
We need to get back to a system such as Bretton Woods posed for us. We need some kind of international forum in which the channelling of resources can take place on a planned basis so that it helps the whole world, not just parts of the world. The best way is to develop the IMF and the World Bank and to use the SDR as a reserve currency. I take the view of the right hon. Member for Sidcup that we do
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not need any more world institutions. But what Jamaica and Tanzania have shown us in recent years and what we have learnt from the experience of 1976 is that the IMF cannot produce the imagination that is required to deal with the problems of the developing world. It has disgracefully abandoned Tanzania and Jamaica, and to some extent Turkey, to the prospect of a change of regimes which will be markedly anti-Western—much more so than the existing regimes—in countries which have done an enormous amount to build up their own resources.
When I was in Tanzania 18 months ago President Nyerere told me that his country had increased its production of maize to the point where it could supply the whole of the maize that Zambia wanted for the following year out of the crop that it had garnered. Yet we slapped him in the face by failing to give him the resources of the IMF and the help that he needed in the aftermath of the invasion of Tanzania by Uganda and the military riposte that he had to mount.
If we are to match the challenge of this report, we need to change our political outlook and to recognise that the measures that we are now taking to deal with our industrial decline are not right either for us or for the world. We need a new international economic policy which will be shared not only by the West but particularly by OPEC and the developing nations.
7.5 pm
Mr. Julian Amery: The speeches that we have heard show that the House as a whole is conscious that we are facing not just an economic problem but a political and even a moral problem. My right hon. Friend the Member for Sidcup (Mr. Heath) underlined that point strongly.
I would not necessarily say that the North-South problem is more important than the East-West problem, but it is clear to all who have thought about it that the determination of the East-West problem will be greatly influenced by the way in which we tackle the North-South problem.
My right hon. Friend the Member for Sidcup gave us an idea of the enormous scale of the problem facing us. The scale is colossal, but the problem is not new. When the great depression hit us in 1930,

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with nearly 3 million unemployed, and with the collapse of production at home and of raw material prices abroad, we tackled the problem within the framework of that part of the world for which we were responsible. Between 1932 and 1960 the British Commonwealth saw an extraordinary revival of the prosperity not only of this country but of the countries that one might say belonged to the South.
It may be instructive to look back and see how it was done, because there may be some lessons to be drawn from it. The revival, which took off dramatically before the Second World War began, was based on the creation of a trade and payments area. The trading side was based essentially on the principle of Imperial preference, but it was seconded by commodity agreements—particularly for sugar, but there were others as well—and by fairly careful administrative planning.
After the Second World War the idea of aid, which had scarcely been accepted before the war, came on to the map, and there was a good deal of judiciously channelled aid. The home Government—I had something to do with this in later years—were able not only to determine the aid programmes but to see that they were properly carried out.
Perhaps more important than the tariff and quota and commodity agreements side was that there was a single currency—sterling. That had the great advantage that, as all the central banks of the territories, whether independent, such as Australia, or dependent, such as the African territories, banked their reserves with the Bank of England, any fluctuations in the terms of trade did not have to be settled overnight with balances built up in favour of the raw material producers when raw material prices were high and run down when the terms of trade went the other way. The result was a spectacular improvement in the conditions both of this country and of the countries with which we were politically associated.
I have to add that other factors were conducive to this success—and it was a great success. One was that after the Second World War there was a boom as the world began to recover and raw materials came to be in great demand. Stability was assured by the Common-
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weath system, as it was in those days. There was no threat to the external security of the countries concerned, because Britain was capable of ensuring their defence. Much the same can be said of most of the countries of the French Union.
We are now in a different position. There is not a single currency between groups of nations; there is an anarchy of currencies. There is widespread political instability internally, and there are also external threats, as can be seen in Angola, Ethiopia and many other countries. Wars, civil wars, and misgovern-ment have destroyed the stability that existed previously. There is also the current recession, underlined by the enormous increase in oil prices.
There is no question of going back, but can we learn any lessons from the past? We cannot recreate the British Commonwealth as it used to be, or the French Union; that is all over. But are there any lessons to be learnt? I should like to ask a few questions. My right hon. Friend the Member for Sidcup and the hon. Member for York (Mr. Lyon) sought to achieve global solutions to the problem. The world has shrunk a great deal, and yet I wonder whether we should be thinking in terms of regional solutions. If we try to achieve a global solution—which would be best—by trying to revive or recreate Bretton Woods, would we succeed, or would we simply waste years arguing about the detail?
Certain groups of countries are, by geography, economic interest or historical association, more closely linked to each other than others. Although this country has had many interests in Canada and South America, the American interest predominates in South and Central America and Canada, and it seems likely that the influence of Japan will dominate in South-East Asia, and perhaps in China and even Australasia.
Looking back over the history of Europe, we see that our links have always been closest with Africa and the Middle East. Should we be thinking in terms of trying to recreate—obviously not on an imperial or neo-colonial basis, but on a voluntary basis—the sort of relationship between the European Community and Africa, and possibly the Middle East, that used to exist between Britain and

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the southern countries of the old Commonwealth? I am suggesting that this should be not an exclusive relationship that would keep out the Americans or the Japanese but one that would give preference to the European market, which is a bigger market for the Third world countries than the American market. It would give preferential terms to Africa and the Middle East, and it would perhaps move towards the building up of a European monetary system that would provide Third world countries with an alternative reserve currency to the dollar.
Mr. Donald Anderson: The weakness of the hon. Gentleman's proposition is that it assumes a willingness on the part of the receiving countries to enter into such a relationship with a developed country. The South American countries may not be willing to have a semi-exclusive relationship with the United States, and the South-East Asian countries may not be willing to have such a relationship with Japan.
Mr. Amery: The hon. Gentleman is right. There are many difficulties, and therefore I stress that I am not suggesting an exclusive relationship. But the balance of mutual advantage may incline the countries concerned to make flexible arrangements with the particular industrial centre to which their goods most naturally go. Certainly, in respect of Africa and to a considerable extent the Middle East, Europe is that market. We see already their difficulties in relying so heavily on the dollar. If we could develop a European monetary system it might go some way towards meeting their anxieties. That concept is not new. It is accepted in the Lome convention and it is accepted by the associated States to the European Community.
I am not going to try to answer the question, but I wonder whether we should consider going beyond the generalised system to specific and mutual preferences between, say, Africa and the Middle East and possibly other countries and the European Community, as existed in the Commonwealth in the old days. The greatest step might be to make the European monetary system—we would have to belong to it if this were to happen—a reserve currency to which associated countries to the European Community
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might wish to link themselves to some extent.
Inevitably, there are political overtones to what I am saying. No economic policies, no provision of aid or investment, and no agreements on tariffs or on monetary arrangements will work unless they are secure in political and defence terms. People will not invest their money unless there is a prospect of internal stability and of security against external aggression. Perhaps that is where Europe comes in. We cannot guarantee internal stability, but where we have great interests we can make greater provision—I tried to make this point during the debate on the Defence Estimates—for developing and building up the sort of rapid deployment forces that the French used with great effect in the Shaba crisis in Zaire, and more recently in Tunis. We cannot dictate policies to independent countries, but we can indicate how we can best protect their interests and ours and how we can work out with them mutually advantageous solutions consistent with their dignity as independent countries.
7.18 pm
Mr. Guy Barnett: I am glad that the right hon. Member for Brighton, Pavilion (Mr. Amery) has introduced the Commonwealth into this debate. It struck me as slightly odd that the Brandt report hardly makes mention of the Commonwealth, even though the Commonwealth Secretary-General, Sir Shridath Ramphal, was a member of the commission, and the Commonwealth Secretariat made a considerable contribution to the report. Although the right hon. Gentleman and I disagree to some extent about the approach to the Commonwealth, I am glad that he has introduced the subject. I shall refer to it later in my speech.
We all feel at a disadvantage compared with the right hon. Member for Sid-cup (Mr. Heath), who, in a considerable speech, gave the House a full canvas of the appalling problems facing the world at large. He gave a grim warning of what would happen if the world—and particularly Britain—goes on as previously. He described a worsening situation. He, and the report, pointed to growing shortages of food and energy. The most frightening prospect that came across in his

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speech, and also in the speech of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), was the prospect of a world economic collapse and the consequent civil disorder and military conflict that would arise from that. Every hon. Member who has spoken, at least from this side—if I may exclude the right hon. Member for Down, South (Mr. Powell)—has recognised the importance of the Brandt report in these respects.
I go along a long way with my hon. Friend the Member for York (Mr. Lyon). Although the report is a considerable document, many of its prescriptions and analyses of the problems are not new. We have been aware of them for a long time. My hon. Friend asked the fair question : why did the right hon. Member for Sidcup, when he was Prime Minister, or when he was a significant Cabinet Minister in the 1959–64 Government, not pursue the policies that he now regards as important?
I do not mean any criticism of the right hon. Gentleman personally. My hon. Friend the Member for York made similar criticisms of Labour Governments. What has characterised the members of the commission is that they have held significant positions in government yet have not carried out the policies that they are now, properly, advocating.
Sir Bernard Braine: I am sure that the hon. Gentleman does not wish to be unfair to my right hon. Friend the Member for Sidcup (Mr. Heath). It is in the recollection of those who were in the House at the time that he took a major lead in trying to move the world towards a greater liberalisation of world trade when he was President of the Board of Trade. Therefore, it is not true to say, or to imply in the context of this debate, that he has discovered virtue only recently. He has been a consistent champion of a global approach to these problems.
Mr. Barnett: I am grateful to the hon. Member. He may not have recalled it, but I was in the House at that time and was well aware of the lead that his right hon. Friend took in the UNCTAD negotiations, which is presumably what he has in mind. I was about to refer to that very matter. I hope, therefore, that no one will accuse me of injustice or unfairness.
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Nevertheless, neither the hon. Member nor anyone else can argue that any Government over the last couple of decades have taken seriously the prescriptions of the Brandt report.
The question that I am asking is one to which we must address ourselves : why, if the compassion that we may have, and even our own interests, are well served by adopting some of the report's recommendations, have we not done so? I remember the right hon. Member for Daventry (Mr. Prentice), when Minister for Overseas Development in a Labour Government, saying that we must give aid to developing countries because it was in our own interests. That is what a member of a Government said a dozen years ago, yet the aid given by Governments, in my view and that of many other hon. Members, is nothing like commensurate with the need.
As I said, I do not want to engage in recriminations about the past, but it is fair to ask whether the Brandt report will gather dust as the Pearson report did. Will it be taken seriously? We can hope that it will be taken more seriously than other analyses of the problem and suggested solutions to it, since we have now reached a crisis in world affairs because of the actions of the OPEC countries.
I agree that we can expect developing countries to take a leaf out of OPEC's book, when they have the opportunity and if the North fails to respond to the proper demands that are made. It is no surprise to me that members of the Group of 77 are beginning to realise that they have no prospects of solving their own problems without far more effective participation in the solutions and when they are only on the receiving end of decisions by the North about trading, investment, financial relations and the rest. Unless they participate in the decisions, they will be bound to take whatever steps the situation demands. Part of the answer must be that they should play a much more active part in decisions taken largely on their behalf.
The right hon. Member for Sidcup properly introduced a note of urgency into the debate. It was not enough for the Lord Privy Seal to say that the Government broadly accepted the report's conclusions and that they might be argued for in international councils. He said that Britain could give a lead.

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That brings me to the speech of the right hon. Member for Brighton, Pavilion. Britain is exceptional because, among the countries of the so-called North, we are a member of a non-aligned group. With Canada, Australia and New Zealand, we are a member of an association of great importance in terms of these problems. That group, the Commonwealth, has grown up, to the point at which it can play a much more effective part in world affairs. The proof is in the effectiveness of the Lusaka conference last year and the massive contribution that the Commonwealth made to the Zimbabwe settlement.
The Commonwealth has now proved that it can tackle certain political problems. I profoundly regret that, even though such a contribution has been made, one hears stories about deteriorating relationships between the Foreign and Commonwealth Office and the Commonwealth Secretariat. I have no doubt that the Secretary-General of the Commonwealth made a considerable contribution to the Lusaka conference and to the negotiations which resulted in the Zimbabwe settlement.
The odd thing about our remarkable position is that it sometimes seems, from the way in which Governments and individuals speak, as if we did not want the association of the Commonwealth. One discovers that the French are envious of the relationship that we enjoy—a relationship of equality with the other countries, which exemplifies its relevance to these problems and shows that some of the things that the right hon. Member for Brighton, Pavilion was saying may not be relevant in the 1980s.
Certain aspects of the Commonwealth contribution are peculiarly important today. An essential element in development is education. Ever since the late 1950s the Commonwealth has made a significant contribution here. We have already debated the Government's attitude to overseas student fees. That was part of the important contribution that we could make to Commonwealth education, which I believe to be vital for development.
As someone who many years ago made a small contribution as a teacher in a Commonwealth country, I recognise the vital importance of education. It needs to be underlined, because some people have
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said, in effect, "Education has not solved the problem, so we can afford to neglect it". Education itself and, indeed, development itself have very few prospects without proper attention to the issue of health. I notice from recent reports, for instance, that the mosquito is beginning to gain a hold in many African countries. The debilitating effect that it can have on students at school, farmers or individuals at work can be devastating in relation to a developing country.
I talk about the Commonwealth in a specific context, because the context in which I see it is that it can act as an example of what can be done. I think that one of the useful contrasts that can be drawn between the Commonwealth and the United Nations agencies is that the Commonwealth invariably does things on the cheap—largely because it does not have very much money. But an organisation such as the Commonwealth fund for technical co-operation does an immense amount of valuable work with very few funds indeed.
As I have done before, I commend to the Government the importance of that body. Even though its funds are minute, that is something to which, through the Commonwealth itself, the Government could recommend increased contributions by this country and other Commonwealth countries. It has a twin benefit—first, that it does effective work, and, second, that the fund is administered by the Commonwealth as a whole and, therefore, responds to the demand that is coming from the developing countries and the world at large to be able to play their part in making decisions where the decisions need to be made.
Let us be in no doubt as to the consequences of failure in respect of some of the report's recommendations. I spent two and a half years of my life in Kenya towards the end of the colonial period there. We were very fearful then of the political instability that would arise in that country if economic disaster were to befall it. We had good reason to believe that, because only a year before independence the country was stricken by a very serious famine.
There are problems arising in that country now as a result of very different circumstances. In spite of our fears, the fact is that the Kenya economy has made very remarkable strides. Recently, in

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spite of the peak year of 1977, the fact is that the 1978 statistics revealed Kenya's difficulties. Last year the gross farm income fell by nearly 22 per cent. This was due mainly to a fall in world coffee and tea prices. This can only have a devastating effect on an economy that is so dependent upon the success of its agriculture. It can mean rural poverty. It can mean rural unemployment, and a drift of people to Nairobi and other towns.
1 speak of Kenya because I happen to know it, but it is a situation that can be repeated over and again throughout the African continent. Some of us have spoken about the dangers of political instability that can result from economic collapse. The signs of it are already beginning to appear in certain developing countries as a consequence of such circumstances. Therefore, I believe that there is a vital situation to be dealt with.
I want to make one or two brief suggestions as to contributions that can be made. The right hon. Member for Sidcup said that we ought to be making an immediate contribution; we ought to be looking at our industry to see the degree to which it might be relevant. I make one suggestion. I do not claim to be an expert in the field of energy, but I should like to suggest solar energy. What contribution is British research now making to a form of alternative energy that is directly relevant to the situation in the developing world? It seems to me to be something on which we could be concentrating, because, although solar energy may not have much of a future in the United Kingdom, it could provide a solution to many problems in developing countries. It could provide a very useful contribution to employment in Britain if we were to get into that field.
Dame Judith Hart: My hon. Friend probably knows that about two years ago the then Ministry of Overseas Development set up an advisory committee on alternative sources of energy appropriate to the Third world, including solar energy. What I do not know is whether it is continuing.
Mr. Bamett: I am grateful for that information. I have to plead ignorance. I am delighted to hear what my right hon. Friend has told the House. I should
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be very interested to hear this evening how that experiment has gone on.
But there are other issues. Surely this country must be one of the experts in offshore oil exploration and exploitation. Have we a contribution to make in that direction? I do not know. I know that there is talk of the possibility of exploration and exploitation off the coast of Bangladesh, for instance. That is one example, and there may be others where that could be relevant.
Those are only suggestions as to the kind of contributions that we could be making. It seems to me that Britain can make two immediate contributions. The first is through the Commonwealth and by a more active pursuit of our membership of the Commonwealth, because there is a lot more sympathy and readiness to cooperate with us than many in this country believe. The second contribution to be made is by looking at specific contributions, by anticipating demand rather than waiting for it and then missing it. So many times in the past we have complained about the failure of the British car industry to provide any vehicle other than the Land-Rover—and then not enough of them—to meet the needs of tropical countries.
We must not fall down this time. We in this country are in the unique position to give something of a lead. We have a unique relationship with the Commonwealth which will enable us to do so, and a lot of our tradition and history makes us peculiarly relevant to the solution of many of the problems with which the Brandt Commission is concerned.
7.36 pm
Mr. Christopher Brocklebank-Fowter: Some of us have waited for four months for this debate. We have waited with a sense of anticipation, because when the report was published in April we were promised by the Government that they would consider its contents carefully and that they would report to the House in due course their consideration of the report. Some of us, in all parts of the House, are a little disappointed today, because, despite those promises, it seems clear that over the months little consideration has been given to major areas of the report.
Although I normally look forward to, and remember with pleasure, the speeches

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of my right hon. Friend the Lord Privy Seal, I confess that today's offering was one of the worst and the least meaty that I have ever had the misfortune to hear from him. It was a speech that repeated what has been said in answer to questions over the previous months—that this was all a serious matter and that we should go on considering it.
I beg my right hon. Friend to take note that many on the Conservative Benches believe that the issues in the report are not concerned only with the giving away of money to profligate people in countries for which we have no great affection—far from it. The whole purpose of what the report has set out to do is to draw our attention very forcibly, as my right hon. Friend the Member for Sidcup (Mr. Heath) has done this afternoon, to the fact that the issues are central to the whole future of the British economy for the next decade and to the end of the century at least. To treat it as a trivial document which can be glanced at en passant and then forgotten is not to do justice to the work, skill and ability of the considerable number of people who have played so great a part over several years in bringing about its publication.
I regret that my right hon. Friend the Lord Privy Seal gave only an assurance that the Government accepted that there were problems ahead. Apparently, he accepts that measures are needed in order to cope with our mutual interests. He regrets that much of the inflation from which Britain and Europe suffer results from oil prices. We know all that. We have known that for more than a year.
We had hoped that the Government would reveal how they would cope with those problems and what their policies would be for the next five years. Not only is our own narrow interest at stake, but—more importantly—we could make a leading contribution to the solution of the major problems that affect Britain and a large part of the world. My right hon. Friend referred briefy to energy and the need to recycle petrodollars. He spoke of the need to search for common ground but said that we were not ready to begin that, even if we decided that it would be a good thing. He demolished the very position that he had just spelt out.
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My right hon. Friend then referred to the role of banks and the private sector. Rather glibly, he said that they were meeting the challenge. It is absolutely clear that they are not meeting that challenge. As my right hon. Friend the Member for Sidcup said, they are incapable of meeting it. As they are incapable of recycling petrodollars into the world economy, that economy continues to diminish. Britain's share of that economy will lessen and unemployment will continue to rise, because of our poor competitive position.
My right hon. Friend then referred to the importance of aid. I thought that his remarks were inappropriate, because they came from a Government that had just cut aid by 6·1 per cent., 6·8 per cent. and 14·1 per cent. over three years. That cut takes no account of the adverse effect of devaluation during those three years.
My right hon. Friend said that there was a role for the private sector. Of course there is. Indeed, Conservative Members are particularly aware of that. We know that multinational companies are important. They establish plantations, recover mineral resources and encourage investment overseas. They provide education for the work forces, a discipline of employment, and bring people into the cash economy. However, private investment alone has no hope of coping with the problems that the developing countries face. As the Brandt report points out, there must be a massive transfer of resources. Both aid and investment are needed. However, the scale is larger than private industry can organise.
I recognise the part that a free foreign exchange will play in facilitating overseas investment by private companies. I hope that they will find stability in the countries that need investment. I also hope that companies will reach agreements with the Governments of those countries in which they wish to invest to ensure that that investment is made on an equitable and secure basis.
Once again, I must criticise my right hon. Friend. I apologise for being so critical. He did not refer to the need for an emergency programme. The Brandt report spells out that although some major problems can be dealt with at relative leisure—within a period of 10 years

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—others cannot be left for five years. I was appalled that the Government made no response to those specific points, particularly the need for a global food programme. We all know that the world population is likely to increase by 50 per cent. during the next 20 years. In other words, before the year 2000 the world population of 1910 will be added to our present population.
Agricultural production is failing in many of the developing countries. The price of food in the world will rise rapidly unless something is done to reverse that trend. We still import nearly 50 per cent. of our food requirements. It is clear that it is in our interest to do all that we can to avoid shortage.
The second point in the emergency programme is the need for an international energy strategy. We should remember that energy in the developing world means not only nuclear energy or oil, but solar energy and wood.
Dame Judith Hart: Biomass.
Mr. Brocklebank-Fowler: I am grateful to the right hon. Lady for that little gem. I think that I know what she means, and I am sure that the House understands. All those types of energy are crucial. The developed world has a great part to play in enabling the developing world to produce alternative sources of energy so that their need for the oil that we require for our heavy industry is not so considerable.
The third point in the emergency programme refers to the need for major reforms in the international economic system. It is clear that if money is taken out of the world economy and invested un-productively by the OPEC countries that money is not being recycled for the possible purchase of manufactured goods from the developed world. We must recognise that need exists in the developing world. It is the job of the international monetary system to translate that need into demand, so that the demand can provide the employment that we in Western Europe seek.
Fourthly, the emergency programme involves the large-scale transfer of resources to the developing countries. The record of the United Kingdom may be comparable with those of the other Western Powers as regards aid. That is not the point. We do not give as much
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as is necessary if we are to ensure that the poor countries get off the ground and absorb our exports. We are heading for a deeper recession than ever before. OPEC moneys are being withdrawn from circulation.
I remind the House of a report by the former Select Committee on Overseas Development in about 1975, a Committee chaired by my hon. Friend the Member for Essex, South-East (Sir B. Braine). The report referred to India. According to the report, the whole of India's export earnings surplus and the whole of its moneys available for the purchase of manufactured goods were absorbed in one go by the first 1973–74 increase in OPEC oil prices. That process has continued. Indeed, there is another one in the pipeline. Every major price increase withdraws the purchasing power of a developing country, on which jobs in Britain depend.
How do the sceptics suppose we shall avoid such a slump and recession, with the unemployment, civil unrest and violence that can accompany such periods? The right hon. Member for Down, South (Mr. Powell) referred to the impression of the Western personality on developing countries. He regretted it. I think that he wished that we were able to withdraw it. However, it is too late to repeal the effect of Western civilisation on the developing world.
Many developing countries have been drawn into the international economic system. Many of them have rising expectations and want to be in the cash economy. They want improved standards of living, education and health. It is too late to say that they should go back to being the primitive tribal societies that they were before their earliest contacts with Western civilisation. That is too ingenuous an argument for us to take seriously in this day and age.
The truth is that this country needs an appropriate strategy covering all the great Departments of State. The significant thing about the Brandt Commission report is that it affects not only the Foreign and Commonwealth Office but the Department of Trade, the Department of Industry, the Department of Employment, the Department of Energy, the Ministry of Agriculture, Fisheries and Food, the

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Ministry of Defence and the Treasury itself. What we expect today and want in the future is a coherent response, drawing together all the threats of interdepartmental interest in Whitehall and presenting the nation with a blueprint for the next stage in our national development
Britain, more than any other country in the world, is dependent on world trade. We export 32 per cent. of our gross national product, and 29 per cent. of our exports go to the developing world. These amount to sales in excess of £12 billion. We make a £2·1 billion profit in our trade in manufactures with the developing world. Therefore, we need all our Departments to examine together, in a major Cabinet sub-committee, the ways of co-ordinating the various Government Department's policies in order to ensure that Britain makes the best of its policies at a time when decisions will be particularly hard to take. I should be very interested to know what computer studies have been made on the Treasury computer of models which set out the various alternative courses of action open to us.
This country has emerged from its period of post-colonial power. We have lost our confidence and have become inward-looking. Those of us who supported Britain's accession to the EEC hoped that in that Community we should find another kind of security and another forum within which to develop our self-confidence and to express ourselves. I believe that the basis is there and that if we can persuade our partners in Europe, with us, to take this report seriously, we can in the process rediscover our own importance as a major trading nation. That will be done only if the Government show the nation leadership. My right hon. Friend the Member for Sidcup today showed the nation leadership in considerable measure. I hope that we can look forward, by means of a Green Paper or a White Paper in the future, to the Government's providing leadership for the House.
7.54 pm
Mr. Russell Johnston: It is a pleasure to speak after the hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler), who has such a distinguished, consistent and brave record on matters concerned with the problems of
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disadvantaged countries. I am one of those who believe in the televising of proceedings in the House of Commons, and I feel that it would have been of great benefit to the public to watch the right hon. Member for Sidcup (Mr. Heath) deliver his long and masterly address this afternoon without glancing once at a piece of paper. It would have done a great deal to restore public confidence in the capacity of politicians.
This is an enormous subject, covering questions of nationality, economic disparity, morality, merit and opportunity, some, if not all, of which—and even the most idealistic of us realise this—will take a long time to solve.
The right hon. Member for Stepney and Poplar (Mr. Shore), in opening for the Opposition, said that the report was about how mankind could achieve a better future. One could hardly ask a wider question.
I thought that it was symbolic that this debate was preceded by two statements. The first concerned the European Community. Certainly, the right hon. Member for Sidcup would agree that the chances of the broad lines of the Brandt report being implemented will suffer a severe setback if the Community fails to agree within itself.
If the nations of Northern affluence demonstrate an inability to solve their problems of relative affluence; if the general public, despite dramatic and even ghoulish media treatment of the terrible events in Uganda and elsewhere, still have little genuine understanding of the awfulness of life in the developing world; and if we cannot make the European Community work, I cannot see any prospect of effectively bridging the formidable heights and gulfs of opportunity throughout the world. If the developed countries are unable to set aside their nationalism, there is little chance of influencing the underdeveloped countries to develop an international approach.
The second statement was on the New Hebrides—a small patch on the map. It is a symptom of our continuing Western incompetence that we are spending considerable sums of money flying marines in VC-10s to a remote island that is regarded as a paradise on earth. The argument there is about that island's independence. If that happens in that idyllic

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setting, it is hardly surprising that much worse happens in less congenial spots in Africa, Asia and South America.
It is difficult to criticise the Brandt report, because it is full of statements of what is good, what is right and what should be done. The real question is whether the report will have any practical effect whatever. I agree entirely with the strictures on the Government by the hon. Member for Norfolk, North-West. I did not get the impression from the Lord Privy Seal that Government policy in the United Kingdom would be changed in any way as a result of the study of the Brandt report. In fact, there was not much evidence of any study at all. Nor for that matter was there any indication that EEC policy would be notably changed. It has already been mentioned that our overseas aid has been cut by about 14 per cent. across the board over the next four years.
I shall turn now to the things that Brandt did not face up to. The disturbing thing about the Government's approach was that they did not even criticise the report. They did not say that it was a good thing and that they would act on it. They did not say that it was bad. Indeed, they did not say anything at all. The approach was entirely anodyne.
There were three factors that Brandt did not face—religion, nationalism and climate. The right hon. Member for Down, South (Mr. Powell) made some surprising remarks about the last with which I did not agree. We cannot define why people do something or what they will do only in economic terms. To attempt to do so avoids fundamental considerations.
For example, although as a Liberal I was critical of the totalitarianism of the Shah, I acknowledge that he was endeavouring to inject technological advances into Iran's economy. It is no comfort to see his regime replaced by a theocratically dominated regime that rejects the concepts of pluralism and tolerance, which I believe lie at the heart of civilisation. Even worse, that Administration and their ideas have widespread democratic support, with an upsurge from the heart of the people. That was difficult to predict. The Brandt report tends to assume that human behaviour is predictable, although there are a large number of variables, of which
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religion is a notable one. Religious leaders in other faiths also display little interest in technological advance, which they often see competing with their concepts of the eternal verities.
It has been stressed that the Brandt Commission, comprising 11 members from the South and nine from the North, was unanimous. I do not believe that these religious leaders would care about that. The right hon. Member for Sidcup said in passing that it was as difficult to control population growth in South America because of the built-in religious factor. However, we should at least consider the problem and engage in public debate about it
We should also consider the push of nationalism. Crossing the Channel, especially by sea, one sees the rabies notices, the French word for which is "rage". I feel that that is a good word for nationalism, an attitude that we and the French share in good measure.
The report strongly attacks protectionism and arms dealing. There is an early-day motion in the name of the Leader of the Opposition and several of his right hon. and hon. Friends extolling the report. That fits clumsily with the Opposition's regular calls for import controls. At root, like their view of the European Community, such attitudes stem from nationalism. Nationalism is the divider.
I accept the attack on arms dealing. However, as a cynical friend said the other day, "Give an underdeveloped country money and it will buy not bread but Mercedes or machine guns". I do not take a high-and-mighty attitude about this, but I do not know the answer. We have been through similar stages of development and may not have entirely emerged from them. In the end, the Brandt report said nothing new about arms proliferation not dealt with by East-West negotiations about arms reduction. It is wrong to suggest that arms dealing can be considered other than in East-West terms.
We should then consider climate. The Brandt Commission never addressed itself to why various parts of the world are at different stages of development. The cradle of civilisation was not in the dark satanic mills of northern England or the shipyards of central Scotland. It was the warm, wet banks of the Euphrates and the Nile. Why did the

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centre of civilisation not remain there? I agree with the right hon. Member for Down, South that there are no differences in innate capacity or intelligence quotients, but different climates give rise to different attitudes. For example, for many years Liberia was extolled as the one country in Africa that was independent. Although people travelled to and from the United States, there was no imperial rule. Why did Liberia not become like Denmark or Norway? At the end of the day there was a blood bath, and Liberia was taken over by a master sergeant.
Mr. James Johnson: Perhaps the missing factor is the Nonconformist conscience of the United Kingdom in the nineteenth century.
Mr. Johnston: That may be. However, we should recognise that what we as Northern Europeans see as progress is not necessarily recognised as such by others, who do not always see our society as progressive. In Iran the bulk of the people did not wish for the sort of society that the Shah was seeking to impose. I do not understand it, but it is so. Countries will develop at different rates, because their mores are different. The report would have been different had it faced that fact.
I shall confine myself to three further points, even though we are going on till midnight, as many hon. Members wish to speak. The report lays stress on mutual interest. That interest has been defined in terms of the North wishing to hang on to what it has, but realising that that depends on raw materials from elsewhere and on peace, and of the South wanting to emerge from poverty and achieve some of the expectations that are taken for granted in the North.
We should quantify that mutual interest. The hon. Member for Norfolk, North-West referred to the Treasury computer, which sent shivers of horror down the spine of the hon. Member for Aberdeen, North (Mr. Hughes). However, it is a fair point. Herr Brandt confessed that, as Chancellor, he did not pay much attention to these matters, because he was preoccupied with domestic affairs. There is no point in talking in generalities. That mutual interest needs
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to be demonstrated and quantified. It needs price tags. Otherwise, it will remain only a general statement.
There is then financial stabilisation. Despite what the hon. Member for Woking (Mr. Onslow) said, the report mentions a tax on trade, travel, the sea bed and arms. As regards the sea bed, it is not long since we agreed to what amounted to maritime nationalism by extending our boundaries to 200 miles. Many people said "Hurrah, what a good idea", but I did not think that it was a good idea to lessen the opportunity for international control over a significant part of the globe where considerable resources lay. It is difficult to step back from such a position. It is easy to talk about it, but difficult to do something about it.
I conclude on the size and nature of the contribution made by the North to changing the situation. I am not sure that I go along with the hon. Member for York (Mr. Lyon), who said that compassion and charity are not enough. I am not even sure that they are the same thing. They do not mean the same to me. I think that compassion is better than charity, but that may be a linguistic difference between us.
However, I know for certain that if we are talking about 0·7 per cent. of GNP by 1985 and 1 per cent. by the end of the century we are not talking about much. As the right hon. Member for Down, South said, we are talking about giving stones to people who ask us for bread. That is an accurate description of our response to the problem.
The report has shortcomings, and it is a compromise, but it is a compromise of hope. If we do not follow it, we shall slide into the abyss that the right hon. Member for Sidcup referred to. The Government believe in asserting themselves. They say so day in and day out. Let them assert themselves positively on the report. It is a gigantic task, beset with difficulties, but we must try. We are not trying now.
8.12 p.m.
Sir Bernard Braine: The hon. Member for Inverness (Mr. Johnston) asked a question but did not provide the answer. He asked why ancient civilisations had disappeared. Surely the answer lies in Toynbee's

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theory of history—the theory of challenge and response. If a civilisation does not respond to challenge; if, with the barbarian at the gate, it does not defend itself; if it does not deal with threats from within, and if it does not adapt and change, it will assuredly be destroyed. That is what has happened throughout history.
That surely is what the Brandt report is trying to tell us. That is precisely why my right hon. Friend the Member for Sidcup (Mr. Heath) told us. The world is in crisis and the world economy is in a mess. There are certain actions that we can take that may lead us out of our difficulties and provide a ray of hope. If we do nothing, we shall continue to drift, with the inevitable consequence that our civilisation will give way to stronger forces.
Like other hon. Members, I have long been interested in the theme of world development. I have explored it from different angles and have visited many developing countries, from the Caribbean to China and from Africa south of the Sahara to the villages of India. I have been the chairman of two Select Committees on overseas aid and development.
It is easy to describe the appalling deprivation that one has seen and to parade the statistics of starving children, malnutrition, illiteracy and diseases, but it is infinitely more difficult to see how we can eliminate the worst features of world poverty. It is also more difficult than it was in the early 1960s, when developed countries such as Britain jointly accepted the challenge and provided resources for aid.
My right hon. Friend the Member for Sidcup, and the right hon. Member for Down, South (Mr. Powell) served in Governments that accepted the challenge and sought to make a contribution towards alleviating world poverty. It was not all waste, or throwing away scarce resources on people who did not understand how to use them. There were notable successes. There was an inching forward, and improvements in the standard of living of many developing countries.
We agreed then to devote at least 1 per cent. of our GNP to overseas development, of which at first 0·5 per cent. and later 0·7 per cent. was to be in the form of official aid. Alas, with few honourable
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exceptions, those internationally agreed targets have never been realised and in the past three years there has been no increase, in real terms, in investment of either public money or private resources in poorer countries. Indeed, the richer countries have shamefully dragged their feet in the search for a fairer international trading system.
Aid has always been only part of the answer. It hardly makes sense to give aid to a developing country and then to deny access to our markets for its products, or not to ensure a fair return on what it produces. It is not aid but trade that constitutes the main engine of development. The Brandt report makes that point clearly when it says :
"The issue today is not only, or even mainly, one of aid; rather of basic changes in the world economy to help developing countries pay their own way."
The irony of the situation is that many of the earlier assumptions about the efficacy of aid have proved false. With the raising of oil prices by the OPEC countries and the onset of world recession, the keys to recovery are no longer held exclusively by the richer nations. It sometimes sickens me to hear Western leaders pontificating about recovery when they are not in control of the situation.
Some developing countries have moved fast since the early 1960s—much faster, in terms of increases in per capita income and improved living standards, than European nations did during their own industrialisation in the nineteenth century. In some cases, the achievements of developing countries have been breathtaking. Hong Kong, Singapore, South Korea, Taiwan, Brazil, Mexico and others have developed such dynamism that they are now able to compete in the most sophisticated world markets and have seen their share of world trade in manufactures double in the past decade.
Mr. Dealkins: Is that so surprising? In the nineteenth century there were few industrialised nations. To industrialise was a new and bitter experience. There were no precedents, and no one from whom a country could learn. There was nowhere from which to import technology. Surely developing countries today, particularly the newly-industrialised countries, have all those advantages and more.
Sir B. Braine: The hon. Gentleman is right. Nothing that he says conflicts with what I am saying; on the contrary, it illustrates the wrong-headedness of the argument of the right hon. Member for Down, South. Money has no colour, scientific and industrial techniques have no nationality, and it is just as possible for a Punjabi peasant to discover how to make two blades of grass grow where one grew before as it is for a prairie farmer.
If we genuinely want to deal with the problem of world poverty we must accept that it can be done only by an exchange of proven techniques. It has nothing to do with race or anything of that sort. I concede to the right hon. Member for Down, South that one of the most formidable barriers to development lies in the attitudes of primitive peoples. Admittedly, there is a tremendous contradiction in India. At one end of the scale are some of the world's best scientists, and entrepreneurs who can teach Western business men a few tricks about the techniques of capitalism. At the other end of the scale there are about half a million villages in the dry areas where the constant pressure of population has created a problem of abysmal poverty. We have a tremendous contradiction within one society. That is no argument against extending to India or to any other developing country the techniques that we have perfected in the West.
A recent GATT report made plain that over the previous five years developing countries have played a major stabilising role in the world economy and have accounted for a rising proportion of total exports from Western Europe, North America and Japan. It has not been a case of the developing world waiting cap in hand for the advanced countries to give them a little aid. If it had not been for some of the developing countries, world trade would have been even more sluggish in the past few years than it has been. If we are to understand what confronts us, it is essential that we grasp that simple fact.
The significance of the Brandt report is that for the first time it brings us up sharply against the realities of the world in which we live. Running through it is a single, powerful theme, namely, that we should no longer think in terms of
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aid to developing countries but in terms of mutual benefit and mutual survival. That is why it is such an important document, and perhaps why this is turning out to be such an interesting and valuable debate.
There can be no doubt about the idiocy of the present world order, in which 15 million people were unemployed in the industrialised countries in 1975. I have checked the latest figures and I find that the unemployed in the industrialised countries now number about 19 million. In 1975 there were about 300 million unemployed or underemployed in the developing countries. Goodness knows what the figure is today. Around the world there are hundreds of millions unemployed and production facilities under-utilised. Against that background can we wonder why we are in a world slump?
Who is likely to be hurt most by the continuing drift in the world's economy? The wretched poor will undoubtedly remain wretchedly poor and the starving will continue to starve. I wonder how many hon. Members have seen the report in today's edition of The Daily Telegraph, which tells us that millions of people in 17 African countries are now facing starvation. Hundreds are dying daily. I have heard no reference at Question Time to that appalling situation. It reminds me of what was happening in Cambodia only last year and the year before, and what was happening 10 years before in Bangladesh. It is a condition that is to be found in some parts of the world every few years, while the rest of us do little about it.
Even so, in relative terms it will be the richer countries—I am not talking about the starving, because they will starve anyway—that will have the most to lose if the world economy continues to drift. They will face increasing economic difficulties, which will lead inexorably to political and social tensions that their peoples will find unacceptable. They will do so for two main reasons.
First, unless there is a substantial increase in world demand, the advanced countries will face increasing difficulty in competing effectively in third markets, either with each other or with newly industrialised countries, in consumer and even capital goods.

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Secondly, the world population is now 4·4 billion. It will reach 6 billion by the end of the century, with certainty. Most of that increase will take place in the poorer countries. Inevitably, that means that within the next two decades the entire world—not merely regions in Africa and Asia—will face serious food shortage that cannot be remedied merely by increasing production in Europe and North America.
It is no use railing against population increase in the poorer countries. One might just as well rail against storm or tempest. Family limitation will come in developing countries only with rising living standards, as it did in Europe, North America and Japan and is now taking place in China. It is no use the right hon. Member for Down, South shaking his head. Family limitation will not precede rising living standards; it will follow. That has been the pattern in the world until now.
Mr. J. Enoch Powell: In Britain the increase in family sizes took place in the previous century. Family sizes were small and stable until the nineteenth century. It was in the nineteenth century that the change took place.
Sir B. Braine: I doubt that very much. In the eighteenth century family sizes were considerable.
Mr. Powell: No.
Sir B. Braine: We shall differ about that. One of the first results of movement of population into urban industrial areas in Britain was a large increase in population. My contention is that only with a rise in living standards did the size of the family fall. It has continued to fall. That has been the pattern in every other industrial country. In the meantime, while we are waiting for that to happen, the ever-growing army of the poor and hungry will threaten world stability. It was 18 months ago that in New Delhi the Secretary-General of the Commonwealth Secretariat said :
"An unequal world which ordains that many must go hungry is an unsafe world. Islands of affluence within seas of want are more than an affront to morality or a challenge to piety. They are a provocation to anger and to conflict."
That has always been so, but it has never been more so than today.
The Brandt report focuses our attention on ways of avoiding what seems to be an
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inevitable march to catastrophe. First, there will be a need to restructure international relations to demonstrate that we in the relatively rich countries understand the problem and wish to find solutions that are practical and fair. The Brandt report states repeatedly that the developing countries must themselves be associated with such solutions.
It is an unfortunate state of affairs that the OPEC countries are not linking their surpluses automatically with the World Bank system. I do not believe in the proliferation of institutions. We do not need more institutions. However, it is a fact that the OPEC surpluses are being invested in an odd and patchy way. We could face the future with a little more confidence if we had one world institution dealing with a problem as effectively as the World Bank has dealt with its own sphere of responsibility. But that is not the reality.
Secondly, we in this country have to set our faces against protectionism in any form. We should not forget the lessons of our own experience. The great postwar expansion of trade took place as tariff barriers were reduced. Lower-cost imports might well mean the loss of some jobs, but there would be the compensation of a check on inflation and an increase in the purchasing power of developing countries. One of the factors of this world recession has been the continuing maintenance of trade between ourselves and developing countries. The cost of adjustment within our own economy would be small compared with the cost of switching from old and dying industries to new technology-based industries, anyway.
Why should we be frightened of change? In the United States, between 55 and 60 per cent. of jobs are lost every 10 years, and they are replaced by better jobs. One of the reasons why we in this country have fallen so far behind our industrial competitors in recent years is that we have chosen to keep dying industries going.
I am convinced that the single most valuable step that we can take is to promote agricultural revolution in at least some of the poorer countries. I do not believe that a massive transfer of resources is needed to achieve substantial results. The Brandt report says that agriculture provides 44 per cent. of the poorest

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countries' GDP and 83 per cent. of their employment. In other words, the way to change the picture lies in the improvement of agriculture in these countries.
In the last 20 years the developing countries have grown dangerously dependent on the West for their foodstuffs. Last year, they imported 45 million tons of grain. Brandt says that they are not growing enough to feed their people, and projections indicate that they will encounter a food gap of at least 20 million tonnes by 1990, which amounts to about one-third of their consumption. That is a dire prospect.
I am not making light of the formidable obstacles in the way of further agricultural development in the developing countries themselves—the need for land reform, making better use of water resources, providing better credit facilities, and, above all, changing the emphasis in favour of small farmers, small rural industries, and so on, which is a political decision difficult to take in many instances. The experts have been looking at this for a considerable time and in some areas have achieved remarkable results with relatively small inputs. There is no doubt that given the right inputs of finance and technical expertise, food production, especially in South Asia, could be doubled or even trebled quite quickly. What is more, it could be linked with the production of fuel crops.
The hon. Member for Greenwich (Mr. Barnett) asked what this country was doing to encourage the development of solar power and other alternative sources of energy. The developing countries are being crippled by their oil bills. Brazil is a particularly bad case of a country crippled by a huge bill for oil imports. Already she is producing 14 per cent. of her motor spirit from plants. That is sensible development. There is no reason why the developing countries should not be encouraged to do this alongside other agricultural improvements.
What is needed above all is a new creative initiative that not only Governments but ordinary people can understand. Over the years, I have agreed with the right hon. Member for Down. South about a good many matters. However. I disagreed profoundly with his speech today. I have argued elsewhere for a new Marshall plan to meet the problems
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that we are discussing. In 1947, in an act of unprecedented generosity and political wisdom—it was not just materialism—the United State gave away 2·5 per cent. of her gross national product over a period of five years to put a war-weary and physically shattered Europe back on its feet, and was rewarded in due course not only by the recovery of Europe and tremendous expansion in its productive capacity but in terms of her own economy as well.
The right hon. Member for Down, South argued that the Americans were simply helping people who had possessed an infrastructure and who knew how to run Western business and operate Western industries but had gone through a period of misfortune and collapse. True, but I still argue that there are some developing countries where, if resources were made available, results could be achieved in a relatively short time. There are not many examples, but they exist. Taiwan is an example of a country that, following a massive injection of American aid, was ultimately able to cope on its own and is now one of the great trading countries of the world. There are other examples.
Brandt suggests a new approach to financing development. The Government should give serious consideration to the ideas advanced, about which my right hon. Friend the Member for Sidcup spoke eloquently and authoritatively. It is not that OPEC surpluses have not been recycled; they have been. But the system of using commercial banks has not been operated in a way conducive to balanced economic development.
Some means has to be found of marrying the expertise of the IMF and the World Bank and these massive oil money surpluses. I am not sure whether any new institution, such as the world development fund suggested in the Brandt report, is necessary, but there is surely a new role for the International Monetary Fund—to become the international banker—a bankers' bank—to keep a regulatory watch over commercial bank lending and to help developing countries with severe payment difficulties. Oil surpluses, as long as they last, should be used to encourage food production and alternative sources of energy if the world economy is to move forward with any confidence.
The Brandt report performs a most useful service in focusing attention on

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these matters, all the more so since it shows that the poor of the world, far from constituting an insuperable problem, offer the industrialised countries a way out of their own difficulties. We plainly need one another. The world has grown too small for the rich to ignore the poor any longer. We have everything to gain by recognising this mutuality of interest and building on it. The reverse is also true. If we do not co-operate and grow together, we shall perish together.
8.37 pm
Mr. James Johnson: I am sorry that the Lord Privy Seal has left the Chamber. Being a kindly man, I would prefer to attack him to his face rather than behind his back. I am enjoying the debate immensely. Of the four speeches at the start of the debate, three were spanking contributions. We are in debt to those hon. Members. I wonder, however, what to say about the Lord Privy Seal's speech. Abysmal? Pusillanimous? There was no content in it.
There is, however, one gleam of hope. When challenged by my right hon. Friend the Member for Lanark (Dame Judith Hart), the Lord Privy Seal turned and whispered to his hon. Friend the Minister for Overseas Development saying, perhaps, "You will attend to this". I have the impression that we shall get answers to our questions when the Minister replies.
Mr. Robert Hughes: My hon. Friend is an optimist.
Mr. Johnson: We shall see. The hon. Member for Essex, South-East (Sir B. Braine) talked about his adventures in Africa. Like the hon. Gentleman, I have been lucky enough to be a member of delegations and have paid other visits to countries in Africa. Like him, I have been lucky enough to help independence movements in Africa. When he and I and those like us travel to the Third world we meet all sorts of types. We can meet politicians; we can meet lawyers; we can meet wealthy business men. But this is a very tiny minority of their people, the vast majority of whom are tied to the land. They work from dawn till dusk—particularly the women. They are, dependent upon constant physical hard labour to eke out a livelihood, and
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they live in extreme poverty and destitution. This is the so-called Third world. These are the people that we are talking about. This is what the Brandt Commission calls the South.
To escape this poverty and monotony, what do they do? Many of them leave the land and make for the towns. These footloose families get themselves into the most indescribable slums in Lagos, Nairobi, and so on, and they are worse off than when they began in these euphemistically termed shanty towns. They lack the disciplines of their village, however poor was their environment. Even more important, they are then moving more into the position of the white man and becoming more individualistic. They are losing the benefits of the extended family system.
This is a terrible plight that we have imposed upon them by taking to them the so-called torch of civilisation. Therefore, we have debt to pay. There is a moral side to it all. It is not just a matter of putting £5 million into building a big dam in Upper Volta or elsewhere to give them cheap power. It is much more than that.
It would be foolish of me to make a long speech when so many of my colleagues are waiting. It would take a good while to tackle even a few of the many issues raised in the Brandt report. But all my experiences overseas, and all the lessons they have taught me, confirm everything that is set out in the commission's findings. I believe that the report is an encyclopaedic analysis of our global malaise. It would appear from the debate that many people are not accepting all that they find in its pages, but I cannot imagine anyone on either side of the Chamber who has been overseas—and particularly in the Third world—who would not accept the findings.
A sombre outlook faces us, and mutual help is essential. The people on each side of the line will have to get together and collaborate, otherwise there will be no end to poverty and destitution. Without collaboration we can only ameliorate the conditions; we cannot eliminate them.
I should like to quote half a dozen lines from the report which summarise my attitude and are in agreement with what I have found. They appear on page

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46 of the report, where we read the following :
"A painful look for the poorer countries with no end to poverty and hunger, continuing world stagnation combined with inflation;…increasing threats to the environment and the international commons through deforestation and desertification, overfishing and overgrazing, the pollution of aid and water. And overshadowing everything the menacing arms race … A number of poor countries are threatened with the irreversible destruction of their ecological systems; many more face growing food deficits and possibly mass starvation."
That is the outlook for those poor people in the so-called Third world.
We have to pick up the tabs. The Northern nations, both capitalist and socialist—I lump them together here and am talking not only of Canadians but also of East Germans—must, in their own self-interest, join in this mutual task to ensure survival. I welcome the emphasis on survival. Along with that, the globe must be made more peaceful and less uncertain.
I listened to the speech made by the hon. Member for Woking (Mr. Onslow), in which he said "But you cannot do that because there is a nasty, big, bad ogre called the Soviet Union." We accept that the Soviet Union exports more Migs and tanks than it builds power dams and highways. It is keener on instigating uncertain conditions in Africa than on building fish farms and the like. There is some substance in the hon. Gentleman's remarks.
I wish to keep to the theme of world peace. We must ensure that those in the Third world are able to get more food, and able to lift their standard of living. That task is superhuman because men and women af good will are fighting the political shellbacks and ideologues of Washington, and Moscow and the bureaucrats of London and Brussels. I was appalled to find that, last September in Mogadishu, orders for food went by telex to the EEC. The EEC discussed the matter and confirmed the order. But even now certain stocks of food, which have been paid for, have still not arrived in the camps on the Ogaden and Eritrean borders. I shall amplify those remarks later. To cap that, the ILO and the World Bank estimate that 800 million in the Third world are destitute. That means that they are merely surviving.
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By chance, I picked up today's newspaper and saw that yesterday at the United Nations Dr. Raphael Salas, the executive director of the United Nations Fund for population activities, said that 2 billion people would be added to the global population in the 1980s and 1990s. By the end of this century, 80 per cent. of mankind will live in the Third world. Given those facts, there is not the slightest cause for any complacency. Unless urgent measures are taken to alter the living conditions in the Third world, deprivation and poverty will worsen.
Those conditions are a powder keg for social instability, leading to political instability, and so to intervention by other powers. About two years ago in Khartoum at the OAU, Mr. Sekou Toure from Konakry, who had not attended for five years, told his colleagues that Africans like themselves were too fond of indulging in border disputes following the departure of the white man. He said that they did not so much fight each other as invite outsiders to come and settle the squabble. That is a terrifying situation.
I want to continue on this theme, because these people cannot get off the bottom unless they get aid and are allowed to live in peace. The two most important words in the report are "peace" and "aid". Hence, I wish to comment on the position in the Horn of Africa, and to use it as an illustration of intervention and instability. The consequences are appalling. In my opinion, the Horn of Africa is the most unstable and dangerous spot on the globe. I know that we talk about those who arc in refugee camps in Cambodia, Kampuchea and elsewhere and about people in boats off Hong Kong. But I believe that the situation in the Horn of Africa is the worst in the world.
I shall shortly give some figures, but I should now like to quote from a letter in The Observer, signed by Sir Leslie Kirkley, who is the chairman of many good causes, not least the Disasters Emergency Committee. He is also connected with Oxfam. The letter states :
"The effects of war and drought in East Africa have created one of the worst disasters in modern times. Some 8 million lives are at risk".

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The letter goes on to quote other places, and adds :
"One and a half million refugees from the Ogaden need immediate help in Somalia. Millions of others, who have fled their homes because of war or who have been made weak through lack of food caused by drought urgently need help".
That applies to Ethiopia, Eritrea, Djibouti, Sudan, Northern Kenya and the Karamoja belt in Uganda. Up to 8 million people are in possible danger, and about half that number are in destitution in camps.
The Disasters Emergency Committee consists of CAFOD, Christian Aid, Ox-fam, the Save the Children Fund, and others. Anyone who cares to watch BBC television will be able to see an excellent documentary on Wednesday next at 9.25 on this disaster zone in the Horn of Africa. I hope that it will make an impact on those who watch it.
The suffering is partly due to the elements and to climatic change. But in my view it is basically due to the machinations of Powers in the North, and has been since the end of the last century. We have devastated these parts. The Italians and ourselves have played a part, as have the French. However, now the villains of the piece are, obviously, the Soviet Union and Cuba.
I believe, as we all do, that all empires are equally evil and obnoxious, be they black or white. Indeed, even allowing for apartheid, I have come to the conclusion that black Imperalism can be even worse than white. The white imperalists have left the Horn in the militarist occupational sense. But we have new imperalists there. I should like to know what the Soviets and the Cubans are doing in the Horn. They are there with their gunships, blasting away up to 6,000 feet against the Eritreans. They have also occupied the Ogaden, which is ethnic Somalia, and they are there as judges, policemen and the like. We have this unholy combination of war as opposed to peace and devastation and destitution caused by climatic change. For so long as we have unsettled social conditions due to warlike activities, there will be no hope of economic development or of lifting up the living standards of the people in the area.
Millions of people have had to flee their homes because of the fighting. They
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need help urgently. They are not a burden, but an obligation to those in the well-stocked North. We can go out from this Chamber and have a meal anywhere. I understand that water has not been delivered to the poor devils in the camps in the Ogaden and elsewhere because of shortage of cash to pay for it.
I add my heartfelt plea to the pleas of Sir Leslie Kirkley and others for help for these poor people. These are the casualties of the Third world. These people need help. It is no use talking about power schemes, fuel energy, investments and banks in New York. These people need help now. I hope that the Minister will do his utmost to help in this matter.
8.57 pm
Mr. Tim Renton: I listened with interest and sympathy to the hon. Member for Kingston upon Hull, West (Mr. Johnson). I hope that he will forgive me if I do not follow his theme as there are other points that I should like to make about the Brandt report. Many other hon. Members also wish to speak and I do not wish to detain the House for too long.
Anyone taking part in this debate on the Brandt report must feel a strong sense of depression. In the six years since I became a Member of Parliament there have been many international initiatives about help from tthe North to the South, to use an easy catch phrase, which have not led to anything. There was the Jamaica conference, which was to lead to commodity support funds and a great extension of commodity stabilisation schemes, UNCTAD IV and UNCTAD V, meetings of the Group of 77 which turned into meetings of the Group of 120-plus. I know that the right hon. Member for Lanark (Dame Judith Hart) was present at many of those meetings, yet I think that she would agree that overall the amount achieved over the past 10 years—the first development decade—has been pitifully small. One wonders whether this report, written and signed by so many eminent persons, will go the same way as so many other reports written and signed by so many other eminent people in the past.
It would be easy to dismiss this report, as my hon. Friend the Member for

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Woking (Mr. Onslow) started to do—unfortunately, he is not in his place—as institutionalised neo-Keynesianism on an international scale—a scale that we have not seen before. But despite some of its faults, we must take the report seriously. It points us to the problem—potentially the tragedy—that is larger than any other in the world today. It also shows that the solution to that tragedy is, by and large, in our hands. We can solve the problem if we are intelligent and flexible enough to do so. By that, I mean that the Brandt report emphasises the mutuality of interest that exists. It is very much in the interests of the OECD countries to help the poorer developing countries to purchase more of our equipment and to develop a little faster than they would otherwise have done, in order to start to solve the problem of starvation that is on the doorstep of hundreds of millions of people. I quote from one paragraph in the Brandt report on that subject :
"If the developing countries outside OPEC had cut their imports of manufactured goods to meet the increased oil prices of 1973–4, there would have been three million more unemployed in the OECD countries. In fact, by maintaining their trade in manufactured goods with the newly industrializing countries alone the industrialised countries (according to OECD estimates) have gained on average 900,000 jobs in each of the years 1973–7. This indicates how critically the North has come to depend on the South for its markets."
That is a clear expression of mutuality of interest. It is also worth reminding Labour Members of that paragraph, because it lies ill for those who call constantly for increased protectionism to support the recommendations of the Brandt Commission without thinking through how much employment is still being created in this country, and countries such as ours, by our continuing volume of exports to the less developed countries. If we become protectionist, barriers will be put up against our exports to those countries.
One of the strangest things that future historians will note about this century will be that demand for our products existed in the developing countries, that there was a slump in our own country because of the lack of demand for goods that we manufactured and that we failed to marry up the two. When they consider the sophistication in trade today—telexes, the
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World Bank, the IMF, conferences, the Brandt report and good will—next century's historians will be amazed that we did not marry up the two positions.
There is an obvious bridge between the two, and the Brandt report is at its weakest when discussing that bridge. Here, I refer to the money that is needed to finance the cost of growth and the increase in demand of the LDCs for manufactured goods that will be supplied in the years ahead by the OECD countries. In the short term there is only one place from which that money can come—the surpluses of the oil-producing countries. Brandt makes a great mistake in dealing with the subject of recycling surpluses when he stresses the use of SDRs, the substitution account and developing the substitution account. Those are not the sort of assets in which the OPEC countries wish to invest at the moment.
For one thing, who would invest in something called a "substitution account" ? It does not sound safe, does it, from the word "go" ? When inflation is running at 20 per cent, in the Western world, the OPEC countries want solid assets which they can be more or less certain will have retained their value when they cash in their investments in five or 10 years.
They are not content with SDRs and substitution accounts. My right hon. Friend the Member for Sidcup (Mr. Heath), in his moving speech, said that he knew of no evidence for that. I would submit to him—I am sorry that he is no longer here—that the evidence lies firmly in the annual report of the Bank of International Settlements, which has just been published. It shows that last year, when the total new investments by the oil-exporting countries rose to $53 billion from S13 billion a year before, they invested 75 per cent. of that surplus in short-term money market assets, denominated either in the United States or in the United Kingdom or in deposits in foreign currency markets.
Therefore, the OPEC countries were investing almost totally in Treasury bills or something comparable, because they could not be confident of the value of anything else that they were offered. Those investments by themselves produce a disproportionately and dangerously distorting effect in foreign currency markets, because if the bills are only 90 days long

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and at the end of the day the OPEC countries have less confidence in the United States dollar, they simply cash in; that produces a run on the dollar, so they are already distorting our existing financial mechanisms.
Above all, by investing in this manner—never before have they invested as much as 75 per cent. in short-term money market assets : the previous highest figure was 55 per cent. in 1974, when they started having major surpluses—they show how little confidence they have now in long-term assets.
By investing in this way, OPEC countries are not being encouraged to put their money where in simple terms we can see that it is needed—that is, through an international institution into
long-term investments in the developing world. It is easy to analyse the problem——
Mr. Alastair Goodlad: Will my hon. Friend give way?
Mr. Renton: If my hon. Friend will forgive me, I do not want to take too long. I know that he is an expert on this subject, and I hope that he will be able to make his own speech.
It is therefore clear to me that the IMF or the World Bank—I hesitate to judge which of those institutions is right for this purpose—must be encouraged to create an asset which is much more attractive for the OPEC countries to invest in. I believe that that asset should be a weighted basket of currencies, and that it would have to be at a floating interest rate, tied to an RPI or some other index of inflation. Only in that way will the OPEC countries make more of their money available to an international institution, for the money in turn to be led on.
I was glad that my right hon. Friend the Member for Sidcup did not press the suggestion of a new institution. That would be a mistake. We have made such mistakes in this country before : whenever we saw a problem we created a new quango to deal with it. We see a problem now in recycling these funds. Let us use the existing institutions and make what is to be offered—first to the lender, the OPEC countries, and then to the borrower in the third world—as simple as possible. That also gets to the heart of it.
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People do not understand SDRs or the substitution account and, therefore, they run away from them. But to offer to borrow in francs or marks, or even sterling, at a floating rate of interest, and then equally to lend on, with some adjustment for the interest, however that may be decided, again in the basket of currencies, is an explicable and demonstrable form of banking in which the IMF or the World Bank must indulge more if they are to use the OPEC surpluses. The magnitude of the problem demands an enormous but a simple solution—not a complicated solution.
I end with a rather cynical judgment and comment. On this issue the parties across the Chamber are by and large united, with the exception, perhaps, of the right hon. Member for Down, South (Mr. Powell) and my hon. Friend the Member for Woking. They are united in that all Back Benchers agree that something should be done, and all Front Benchers agree when in power that, passionate speeches apart, nothing will be done. I very much hope that the next few years will show that that cynicism is not justified. I hope that in winding up the debate, my hon. Friend the Minister for Overseas Development will give us a positive lead as to the steps that the present Conservative Government will take to start to bridge the terrible gap demonstrated by the Brandt report.
9.11 pm
Mr. Eric Deakins: The hon. Member for Mid-Sussex (Mr. Renton) made an interesting speech. I hope that the Treasury, in particular, will have listened with care to his constructive suggestions for dealing with the problem of the OPEC surpluses and their recycling. The hon. Member's speech, like most of those in the debate so far, was impassioned and closely argued. The only speech that we have heard this evening which has not fallen into that description was, unfortunately, that of the Minister. I shall not say anything more about that. It has been criticised already by a number of right hon. and hon. Members on both sides of the House.
There have been two major themes in the debate. Some hon. Members have taken the line that we should be talking about the wide issues, almost the philosophical issues. Here the speech of the

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right hon. Member for Down, South (Mr. Powell) was a case in point. But the hon. Member for Woking (Mr. Onslow) attacked root and branch many of the assumptions and aims of the Brandt report. Although in a minority, those speeches expressed powerfully a point of view that is widely held outside the House. Most of the other speeches, including that of the hon. Member for Mid-Sussex, were practical in the sense that they were trying to see their way through to possible solutions to the problems posed in the report.
I wish basically to be as constructive as possible. But before specifying five problems and suggesting possible solutions—problems, incidentally, which will probably be of even more interest to Opposition Members than to the House generally—I shall take issue with one or two matters in the report itself. I do not wish to go into any details on them, since I had the advantage of taking part in the very good debate held in Private Members' time on a motion moved by the hon. Member for Cambridge (Mr. Rhodes James). The right hon. Member for Sidcup (Mr. Heath) was good enough to sit through the whole of that debate without taking part, which was greatly appreciated by everyone present. Now that we have heard the right hon. Member today, we appreciate what we missed then. His was a marvellous speech, and we are all grateful to him for it.
Where I take issue with the Brandt report is, first, on the moral dimension of the problem, which I think the report very much underplays. I shall return to that matter in my concluding remarks.
Secondly, I take issue with the report on its addiction—I can put it no higher—to policies of faster economic growth. Perhaps the right hon. Member for Down, South would refer to them as policies of greater and greater materialism in the Western world in order to help the poor countries. It is immoral to go for policies of faster growth. However, I shall not develop that theme, as I did so in the debate of a few weeks ago.
In the speeches of most hon. Members and in the Brandt report there is an underlying assumption that the gap between rich and poor will eventually be closed. However, even if faster growth in the West occurred, that argument would be
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fallacious. For example, there are about 630 million people in India, and 1,000 million people in China. If those countries had the same standard of living as Britain, which is in the middle income bracket of the rich countries, there would be about 100 million motor cars in India, and perhaps 200 million in China. That might be marvellous for workers in the newly industrialised countries and for those in our beleaguered car industry, who might be able to produce those cars, but what about the consumption of energy? What about the consumption of raw material in the construction of such cars? There are not enough natural resources in the world to give all the people on this planet the standard of living that we enjoy.
The Brandt report is good, because it concentrates on the need to get rid of absolute poverty. With the right policies, we can look forward to achieving that. However, we shall then be faced, as we discovered during the eighteenth and nineteenth centuries, by a bigger problem—that of relative poverty. The solution of that problem will require a global redistribution of resources. With the best will in the world, that cannot be effected by rich countries, or by their citizens. Eventually, we shall need some form of international government.
I turn to five specific problems of concern to my party and me. I hope that this list will not be considered exhaustive. First, there is the problem of public opinion in the rich countries, including Britain. Secondly, we must consider the practicability of growth, as distinct from its desirability. Thirdly, we must face the problem that our industries are declining in the face of competition, particularly from the developing countries. Fourthly, one must mention the problem of multinational companies. I understand that they are now called transnational companies, but that means the same thing. Last, but by no means least, we should all be concerned about the measures that poor countries must take.
It is disastrous that the Government have ended our small development education programme. The right hon. Member for Sidcup said that we needed the support of public opinion. If we are to get that support, public opinion must be informed and educated, Perhaps only a

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few tens of thousands of people will be so informed, but that number will increase. People will then be prepared to support policies that may involve sacrifices in their standards of living.
The Brandt report is clear on that point. On page 259 it states :
"The Commission considers it essential that the educational aspects of improved North-South relations be given much more attention in the future. It is imperative that ordinary citizens understand the implications for themselves of global interdependence and identify with international organisations that are meant to manage it."
With the exception of the Government, most hon. Members would agree with that sentiment. The Government have only given a lead in the wrong direction.
In addition to suggesting the restoration of a type of development education programme, one could make another positive suggestion. During the Second World War, towns and villages were linked with Her Majesty's fighting ships and so on. The local people were linked with one section of the fighting forces. They did a great amount of work to raise money, to knit comforts and so on. Is it beyond the bounds of possibility for the Government or some organisation to start a scheme whereby towns and villages in this country are linked with towns and villages in parts of India. There could then be, in the towns and villages in this country, exhibitions and other demonstrations of the standard of living and way of life of the people in the linked village in India. That would encourage British people to be aware of the problems of developing countries. Air fares being what they are, we can never hope that people will be able to travel all over this planet merely to see what living conditions are like in other areas. Therefore, I offer that suggestion, which would cost no money. All that it would require is a lead from someone in authority.
The scond problem is that of economic growth and its practicability. We know that we must pay higher prices for energy and raw materials in this country. We must accustom our people to the prospect of almost nil growth. Even if people consider faster growth desirable, it is likely to become impracticable. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) made the point today
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that we were moving not just into a recession, but possibly into a slump.
If we are to shape our economic policies in this country in order to face the realities of the next 20 years, we must think in terms of a continuation of some of the factors that the right hon. Member for Sidcup mentioned. We cannot eradicate all the difficulties in the next 20 years. It does not lie within our power as an individual nation to eradicate them. We must learn to live with these problems. It is better to try to learn to live with them than to resent them and constantly try to move our society in a completely different direction economically. That would prove impossible.
Thirdly, we need not import protection for our declining industries, as the Labour Party wants, but adjustment assistance so that new industries can be set up in areas of declining industry. It has been known for the last 10 or 20 years that our textile and footwear industries have been declining, and in more recent years the electronics industry has been declining. We know that they are bound to continue to decline no matter what any Government do, because overseas countries can produce the goods more cheaply and effectively than we can—and good luck to them. Therefore, we must learn gradually to phase out those industries.
We must not make people redundant and throw them on the scrap heap. Many of them have marvellous skills, and they represent a great investment in national resources. That investment should not be wasted. Given retraining facilities, which, sadly, have been cut by this Government, it should be possible, with good will and resources, to provide alternative employment. I do not expect to carry Conservatives with me on this point, but if private enterprise is reluctant, unwilling or unable to provide this new investment in new industries in areas where people live, the State or some national organisation may have to step in and do so instead.
We in the Labour Party must decide what we want to do when we talk about controlling the multinational companies and their activities. If it were not for the multinationals there would have been far less improvement in living standards in the poorer countries. That does not mean that we could not have seen faster growth, but the multinationals have played their part.

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We must decide for what purpose we think multinationals should be controlled. There is a suspicion that we want to control their investment, which is merely another means of saying that we want them to invest in jobs for British workers, but not to invest in jobs for Malaysian, Hong Kong or other workers in countries whose standards of living are about one-twentieth or one-thirtieth of those that we enjoy in this country. Morally or practically we cannot argue that investment by multinationals should be controlled for that reason. If we did, workers in other countries would have something to say.
There are also suggestions that we should control the way in which multinationals operate overseas in order to improve the pay and conditions of those working in their factories in poor countries. That is a laudable ambition. However, it appears to be a cloak for saying that, if the pay and conditions of those workers cannot be raised to an acceptable level, we shall not accept the goods produced in those factories. It is another excuse for import controls. The moral reason is overlaid by protectionist feelings that have crept in over the past couple of years on both sides of the House. That is not a reason to control multinationals. If workers overseas wish to control their pay and conditions, they can develop trade unionism, as we did, on a collective basis to improve conditions.
Last but not least, multinationals could be controlled in poor and developing countries with regard to contracts for mineral extraction and use of resources. However, that should be for international and not national action. The report deals with the matter at page 191. The solution there is probably the right one. There should be standard contract terms and conditions laid down, with an international appeal body. That would help multinationals, poor countries and rich countries to work together.
I come finally to the most sensitive and delicate area in this long catalogue of problems and possible solution. It is understandable that the report was somewhat mealy-mouthed in dealing with it. What measures should be taken by the poorer States to improve living conditions for the bulk of their people? On page 42 the report states :
"Only they can ensure that the fruits of development are fairly distributed inside their
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countries, and that greater justice and equity in the world are matched by appropriate reforms at home."
On page 139 it states :
"In countries where essential reforms have not yet taken place"—
and that excludes very few poor countries—
"redistribution of productive resources and incomes is necessary."
That is quite a Socialist concept, and I was not surprised that the commission put it forward. However, it is only half a solution.
More serious aspects of the problem need to be considered. I should like to quote possibly the greatest development economist of all, Gunnar Myrdal. In his book "Asian Drama", which was boiled down to a Pelican publication, "The Challenge of World Poverty", some years ago, he said this of the reforms needed in poor countries :
"These centre on breaking up inegalitarian and rigid economic and social stratifications. In agriculture, land reform stands out as the crucial issue. Birth control must be spread among the masses of people. A fundamental redirection of education and a vigorous adult education campaign are needed"—
and here we come to the crunch—
"Corruption must be stamped out and stricter social discipline enforced."
There is a great deal to be done by the poor countries themselves. The problem that will increasingly face the rich countries is how far we dare go in pointing out the deficiencies and taking steps to remedy them without being accused of gross interference in their internal affairs.
The moral dimension did not figure largely in the report, and, apart from the speech of the right hon. Member for Down, South, it has not figured much in the debate. I agree with the Brandt report that helping the poor countries is in our interests, but, even if it were not, it is a moral imperative for many of us.
This is the most important debate since the six-day debate in October 1971 on our entry to the Common Market. I should like to quote from that great capitalist and convert to concern for developing countries, Robert McNamara, the president of the World Bank. In his annual report for 1973 he said :
"Should we not make the moral precept our guide to action? The extremes of privilege and deprivation are simply no longer acceptable. It is development's task to deal with

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them. You and I—and all of us in the international community—share that responsibility."
9.30 pm
Mr. Iain Mills: The hon. Member for Waltham Forest (Mr. Deakins) made an interesting speech and I shall touch on one aspect of it later. The situation that we are discussing has all the potential for a future massive disaster. Growth of population is here. The seeds of growth and the generation of young people could combine to lead the world to do one of those strange things, such as the race of the lemmings and the creatures that dash into the sea—that nature does every so often.
It seems to me, though this is speculative, that some form of action is not only desirable but essential to prevent, not merely a possible economic disaster, but a disaster with far-reaching consequences beyond the economy. It would be a tragedy if all the intellects that have been applied to the problem, not only in our debate, but in the production of the Brandt report could not achieve some form of solution, however inadequate.
In the developed countries we have businesses that desperately need markets for their goods. In the less developed countries we have markets that are desperate for those goods. Finding a solution by matching those two circumstances may not be easy, but it must be a priority.
I shall not comment on the global issues, as so many other hon. Members have done so ably. I shall refer more to practical, detailed matters. As always in our great debates, analysis is far easier than solution. The solution of massive redistribution of wealth through aid and help from developed countries is not a viable long-term solution. Surely the long-term solution must be for the developing countries to develop self-sustaining wealth centres through manufacturing industry and better agriculture.
If they cannot do that, we shall reach the crisis in the cycle that always develops at a later stage. Part of our effort should be directed not merely to redistribution, but to providing the right climate of encouragement for those countries, with the aid of Governments and private enterprise, to develop their own means of sustaining their future necessities. They will need the help of Governments on a grand scale, but will they not also need the
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existing skills and abilities of transnational and multinational companies?
I declare an interest as one who was employed for decades by multinational companies and who spent part of that time in developing countries in the Africas. I like to think that there are parts of the globe where multinational companies have played a highly beneficial role.
Given the possibility of prices increasing steadily and inevitably, even if OPEC countries achieve a magical, unified oil price structure so that we know what increases will take place each quarter, the scale of the increases will ensure that the problems of industrialised countries and particularly of less industrialised countries will continue for several decades.
That is a further argument for the self-sustaining, decade-long type of solution which can be provided only by manufacturing industry, service industries and better agricultural methods in the developing countries. Should we not apply all our effort and valuable resources to develop that instead of thinking merely of aid and redistribution?
If developing countries are to achieve the objective of self-sustaining wealth creation, they need the ability to add value to their indigenous raw materials. To do that I suggest that encouragement is essential through Government aid and through creating the right climate for multinational, transnational and small companies.
I offer a few examples of GDP per capita in dollars in 1977. The Ivory Coast had a GDP of $1,251, Zambia $455, Singapore $2,780, Malaysia $1,005, Sri Lanka $231 and Burma $120. Those are poor examples and it is easy to pick holes in them, but they provide a general guide. Those are countries that have taken a practical and realistic grasp of the opportunities offered by private enterprise through multinational or transnational companies. They have managed to drag themselves up by their boot straps with a little help from their friends.
The hon. Member for Waltham Forest commented on transnational companies. I held a meeting last week at which I asked some representatives of leading multinationals to justify their operations. I shall pass on some of the discussions that we developed at that meeting. As an ex-employee of a multinational company,

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I believe it to be a valid argument that the operation of business world-wide works on the checks and balance of profit and is subject to business disciplines. The management system is set not only the objective of achieving growth, better market share and better profit but of avoiding waste. Managements are totally accountable within their organisations.
The work of many multinational and transnational companies abroad is done by people of the country. Gone is the day when the bright young man or woman from Britain with the right training could expect a sinecure, a chauffeur-driven car with an indigenous person at the wheel and a swimming pool. Those features may still exist in some remote corner of the world, but the large multinational companies now reserve those privileges for very few, if any. The use of expatriates has declined very much because of the good moral intentions of many companies as well as pressure from local governments.
On the whole, market forces will ensure that the processes and the products that are introduced to countries overseas are appropriate to those countries. I suggest that the introduction of those elements is much more use to the residents of the country concerned that some of the grandiose projects than can arise from Government aid.
1 do not underestimate the role of the multinationals in the long term. They are there to stay. They do not go to other countries to exploit and to lift off their investment after a few years. There are thousands of such companies that are reliably, morally and well managed that are looking for a long stay. If they are in business for the long term and not for a fast buck, good behaviour and good corporate citizenship are much in their interests if they are to develop a successful role in the local community.
That factor emerges in a spin-off and a multiplier. Their benefit lies not only in the wealth that they create, which I suggest is often worth 10 times, 20 times or 30 times the profits that they may take out. If equity is locally held, there is a multiplier effect for the shareholders. The wages and salaries that are paid are self-sustaining. They are not taken out of a grant that finishes at the end of the year. They are redeveloping themselves because
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of the business process. Services are bought locally, materials are bought locally and taxes are often heavy abroad.
Any good multinational company will provide training and benefits to its employees and its customers. I accept that that can be classed as a form of colonialism. However, the sportsground and the company housing estate with better hygiene facilities than the Government provide are, in my experience, well known in parts of Africa. If we wish to see an engine of dynamism in developing countries, we should look not merely for the redistribution of nationally bought resources but for less elective processes and more initiative and more incentive for private enterprise to play a greater role in the development.
My right hon. Friend the Member for Sidcup (Mr. Heath) referred to the need for a code of practice. I wholeheartedly agree with that proposition. For every bad company there may be 1,000 good companies, but we must have a code of practice. That would allow the country, its representatives, the employees and the partners in the cycle of operation of a multinational to understand fully what they should expect. I cannot think of any responsible multinational company which would restrict its operations other than to go along with that code of practice.
In addition to the comments that I have made already, partly based on my own experience and partly based on watching with admiration the success of the Prime Minister of the new Zimbabwe, which is a shining example to many other countries so far—and which I hope continues to be—I suggest that a realistic attitude towards the role of private investment, towards the role of agriculture not in national hands and towards the role of investment abroad from sources other than Government ones is a most practical engine of wealth creation and of growth.
We have debated to a small extent moral, and to a large extent practical, solutions. However, many of the difficulties of the developing countries are of their own making. It would be less than honest not to say that I feel deep suspicion on occasions of regimes which allow their citizens no real rights, which are restrictive and whose political dogma seems to be more important than their practical

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realism. If the leader of a regime wishes to follow extremist policies, whether they be of the Left or of the Right, in the end, because of his keenness to achieve his political system, he will in some way make his country less able to grow crops, sustain manufacturing industry and build up its economy.
But we should not just sit here blinded to the needs of developing countries. Aid should be judged and given first on the basis of need. I remind the House of the Vietnamese boat people. We can all think of many other cases of extreme nationalism and political attitudes which have created a need for aid, taking it away from the real basic job of helping the less developed countries to develop.
Although I am the last person to suggest that we relate aid totally to politics—because that will make some starving children even more hungry—there seems to be a need somehow to do it. Perhaps I have not read the relevant chapter in the Brandt report as fully as I should have, but I searched and found little reassurance that in some way the pressures on extreme political regimes to moderate their policies in exchange for help was a moral necessity from our point of view.
If we are to be successful in the end in creating a new machine and a new engine of growth, we must recognise that the reconstruction of industry in the developed countries while the developing countries take an increased share of those traditionally home-produced goods is vital. A dynamism in our own industrial reconstruction, in our export growth and in the shape of the materials and products we produce is therefore essential. I agree that some sort of assistance for readjustment is vital. France has already pioneered this, and Holland has already started to follow her example. If we are to see old industries die and the products originally made by them go to developing countries to become, in the end, to our benefit, there is a role for the Government to play in this which must not be forgotten. The role that Governments, managements, trade unionists and employees alike must recognise in this readjustment is that innovation will be the very starter motor and the petrol on which that engine runs.
I have spent the last five years of my life trying to manage innovation, and
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I know what a difficult job it is. I suggest that in Britain managements, trade unions and Governments have not realised and accepted the necessity for innovation and for each to shape in its own way and in its own role in manufacturing industry how to encourage innovation.
It is vital that we do something. If we do something, our achievements will only be as good as the resources provided and the mechanism we provide to make those achievements. The provision of Government aid on a large scale alone cannot ever be successful in the long term. The encouragement of the machine of private enterprise is vital.
If we can create this development in countries overseas, I plead that we give some sort of first status to our Commonwealth friends. In our relationship with the Commonwealth we have something for which every Marketeer would give his right hand. It is a relationship which is not valued in sheer cash terms. It is defined in terms that are difficult to put into words. We should ensure, whatever initiatives are taken, that we do not forget them and that we try to use them as the core for a new, more vital and dynamic relationship, with the developing world.
Mr. Speaker: Order. In view of the tone and significance of the debate I have deliberately not asked for short speeches. I merely inform the House now that at least another 10 hon. Members would like to contribute. As the winding-up speeches are likely to begin at about 11 pm, I would ask hon. Members to bear that factor in mind.
9.46 pm
Mr. Donald Anderson: It is of value to stress the contribution that the private sector can make to development in terms of innovation and dynamism, but it is insufficient. Just as it is insufficient in the declining industrial sector of our internal economy, so it is in the world economy. The hon. Member for Meriden (Mr. Mills) spoke about the validity of the code of conduct. The hon. Gentleman has only to turn to the example of South Africa to see the inadequacy of the code of conduct in respect of transnational.
The Brandt Commission officially exists no longer. The ideas that it expresses

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are clearly not new, but the urgency and realism of its analysis are unique. The message has been passed to the world community. We now ask ourselves what should be our response as a democratically elected member of part of that community. Some newspaper responses have stated that the North-South conflict could be the cause of a third world war. It was described by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) as the great issue of mankind. Yet, sadly, one has to say that the Government's response has been lacklustre and disappointing, adding little to the response to the debate of 28 March. The response amounted to finding the least that one could get away with, while showing a degree to good will to the points raised in the report.
The commission stresses that the measures it recommends are a package. It draws from that package a medium-and longer-term programme. The North and the South should decide themselves which features are the most urgent and those that are physically and politically capable of being implemented. For the North, there is the unpopularity of foreign aid and the drive for protectionism, particularly in sectors of my own party and the fear of LDC imports. The task of the Government is to educate our electorate about the mutuality, stressed by many hon. Members, and, also, the moral case for aid. That moral case is felt among many of our young people and in many Church groups.
Equally, as many hon. Members have stressed, there is a burden on the developing countries themselves in terms of population policy and in terms of the elites there to go beyond their narrow class and national interests. In terms of a Government educating people about the overriding importance of this subject, one is not encouraged, in this country, by the Government's expenditure plans 1979–80 to 1983–84, which envisage a cumulative reduction of £307 million in the aid budget and an increase in defence expenditure, over the same period of £2,278 million.
There is need for an early initiative—the first of many—and a recognition that the proposals constitute the only set of proposals with any chance of acceptance in the 1980s whatever hesitation may be felt about the details of that programme.
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The alternative is the road to greater protectionism and a greater confrontation between the countries of the North and the countries of the South. If we accept the validity of the analysis in the report we must surely accept the validity of the warning that the search for solutions is the condition for our mutual survival.
To what extent, then, is it fair to say that the analysis is cogent but that the conclusions are perhaps less than realistic? Certainly it is not surprising that such a diverse panel should agree these recommendations. With respect to the right hon. Member for Sidcup (Mr. Heath), all its members were international citizens. All occupy the centre ground of world politics and assume a basically unchanged world, with unchanged world economic and political structures. A sceptic might ask "Why is it that people assume a greater enthusiasm for the subject when they are not in a position to have control over the policies that their own Governments pursue?"
Why is the crisis not now recognised? Why is it likely that the report will have the same fate as the Pearson report, gathering dust on Government shelves? Is it conceivable that the impact of the energy crisis will galvanise Governments now into attaching an importance to this report that was certainly not attached to the Pearson report, in spite of the sentiments of good will that followed it about 10 years ago?
It is agreed that the solutions posed are not new ones. Indeed, they resemble the UNCTAD call for a new internal economic order—the transfer of financial resources, commodity agreements, and the opening of Northern markets. Yet perhaps the complexity of the aid policy has been understressed. It depends on the uniqueness of each governmental situation in individual countries. Since there is more poverty than aid money, it is perhaps inevitable that donors, being selective, find aid policy as just another tool of their individual foreign policy.
Free trade, equally, is not a panacea, because Northern economies may be severely damaged before there is a sufficient mobilisation of purchasing power from the developing world.
Again, the commodity agreements are cumbersome to manage and subject to

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great violation. I am sceptical about the proposed trade tax, because a tax, by its very nature, discourages a given economic activity when part of the measures by which the LDCs can be assisted is by a development of world trade.
I am glad that the right hon. Member for Sidcup modified the recommendations of the commission in not calling for the creation of new bodies—the international trade organisation, on page 185, and the world development fund, on page 252. Perhaps I can express some sympathy with the sentiments of Lord Carrington, in his speech to the United Nations last September, when he said :
"We must all guard against the creation of new bodies whose primary function is the exchange of rhetoric."
The creation of new bodies would, indeed, take time, and there is an overriding urgency in the recommendations of the report, so perhaps we are better advised to adapt the existing bodies.
I agree, too, that the commission is realistic in encouraging the North to help the South to learn to help itself, by means of the untying of aid and of internal policies that encourage investment. To this extent I accept the partial thesis of the hon. Member for Meriden. The major constraints on the implementation—economic, social and political—hardly need stressing, but if obstacles could not be overcome it would not be worth setting out on the road, and a very depressing future would face all mankind.
In his contribution the right hon. Member for Down, South (Mr. Powell) appeared to say that the role of development aid was not that of Governments but of individuals—moral man in the immoral society. Whatever may be the economic attractions of that thesis, it has no relevance to a world that is in desperate need of assistance and that is facing a looming economic crisis.
There is a growing recession in the North, with a rise in the number of Governments who are temperamentally sceptical about the value of foreign aid. In the South, there is a growing nationalism and an attachment to sovereignty. The policies in the South often determine the pace of their internal development. The relative success of Kenya, as opposed to the relative failure of Uganda, is derived from the internal policies of that
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country, whatever may have been the role of external agencies.
The implementation of the report requires the co-operation of many States that see their interests as contrary to Brandt's proposals. In that context we think of the more militant members of OPEC. To show how deep is the international context in which the recommendations have been formulated, we think of the move to greater defence expenditure following the Soviet invasion of Afghanistan.
There is an unfriendly climate for the realisation of the five-year emergency programme. In that unfriendly—nay, hostile—climate, what do we expect from the Government? Do they accept the analysis, and do they accept the urgency of that analysis? We should support the current initiative from Austria and Mexico for a summit. What are the existing alliances both within the Community and within the Commonwealth? Because of our established connections with the Commonwealth we should seek means to regulate multinational corporations by encouraging or requiring them to become agents of economic development—training, fair employment practices, technology transfers, the inclusion of standard contract terms, and so on. The Government should use all diplomatic means to influence a climate in favour of Brandt. We know that our major partners, such as the Germans and the French, are embroiled in their internal election campaigns. We have no such constraints. We could mount an initiative. That, sadly, does not appear to be likely from the Government's response thus far, even though we know that if the OPEC surpluses are not recycled it will push the world further down the recessionary spiral.
Brandt has finished his work. The report says to the world community "Over to you". Our work as citizens—and, one hopes, as a British Government—should now begin. We need to educate. We need a vision. We need action in support of these vital recommendations. We hope that the ultimate response of the Government will be more forthcoming.
It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.
Ordered,
That, at this day's sitting, the Motion in the name of the Prime Minister for the Adjournment of the House may be proceeded with, though opposed, until Twelve o'clock.—[Mr. Waddington.]
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Waddington.]
10 pm
Sir Ronald Bell: I found myself in unexpected agreement with a good deal of what was said by the hon. Member for Waltham Forest (Mr. Dea-kins). I hope that he will not be embarrassed by that. I did so particularly as to the practicality of some of the comments that have been made, especially as to the possibility of attaining equivalence of living standards throughout the world. However, on that point, I thought that the hon. Gentleman was a little pessimistic, because one day the ingenuity of the human race in finding substitute materials will be so great that I am sure that what he at present sees as a physical barrier to that kind of progress will be removed. Nevertheless, I am sure that in the short or medium term his comment was absolutely right.
It is, therefore, with all the more regret that I could not agree with the hon. Gentleman about the importance of the moral factor. That is where the Brandt Commission made its basic mistake, because, in spite of the hon. Gentleman's criticism that it did not put sufficient emphasis on the moral factor, I thought that it put a great deal too much emphasis on it. In fact, it is set out as the keynote on page 7 that the report should
"contribute to the development of worldwide moral values"—
whatever that may mean. It is described as :
"the great social challenge of our time"
and its purpose is
"to shape the world's future in peace and welfare in solidarity and dignity."
There is much more to the same effect in the same kind of words.
I think that it was the late George Saintsbury, that remarkable literary critic, who said that he could judge a book when he had read the first page. One could
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apply that sentiment to the whole of the report by basing oneself on the first page of Willy Brandt's introduction. It is obviously well meant, but it is really phrasemongering in excelsis. I hope that it will not embarrass him, but I very much preferred the speech of my right hon. Friend the Member for Sidcup (Mr. Heath), because there at least I could detect a theme. I could not agree with all of it, as he will probably realise, but it was cogent, powerful and consistent throughout.
Sir Bernard Braine: And convincing.
Sir R. Bell: That is what I am coming to. I want to examine the underlying basis of all this. Ultimately, the report is based on the moral argument. My first comment is that it is rather a facile moral argument, because it is based throughout on the assumption that more equal is more just. I know that a good deal of post-war politics—perhaps even prewar politics—is based on the belief that the doctrine of more equal being more just is an axiom and is something about which one does not have to argue. Certainly, there is not one sentence of argument in the Brandt report to justify the underlying assumption that more equal is more just.
In place of argument we get apocalypse—that is to say, we are told that, in effect, it must be so, because if we do not level out the world is running forward to red ruin, war, collapse and disaster.
You have asked for short speeches, Mr. Speaker, and, therefore, I shall not go into questions of war, collapse and disaster. I would just say that having made that analysis more or less explicitly, the Brandt report goes on to propose its basic remedy, which is a massive transfer of resources from the temperate zone to what is called "the South". If there is one word that occurs more than any other in the report it is the word "massive". If we ask ourselves what is meant by "massive", we are given a certain numerical value. It is about £30,000 million a year. Someone asked for how long. That is in the report, too, at page 251. Twenty years, anyway. The suggestion is that it should build up year by year over the next 20 years to the end of the century, presumably becoming greater each year.

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When we think of it, the business of pumping resources into backward countries has already gone on for 30 years—and probably a good deal longer. I suppose that it is a good deal longer, but I start with the big attempts at groundnuts, sunflower seeds, the Colonial Development Corporation—the programmes that were launched after 1945. Since then, with no real respite by Britain and other countries, the process has gone on in a truly massive way.
The result has been described by many hon. Members. My right hon. Friend the Member for Sidcup described very well the present nature of the problem. If it is done by way of grant, financially, that is easy; we pay the money over and it has gone. If it is done by way of loan, which is mainly how it has been done, the problem builds up cumulatively. With respect to those who talk about the price of oil, it is not true that the impending insolvency of borrower countries was not perceived by anyone who cared to look at the problem before the increase in the oil price. It was obvious that they were accumulating an ever-higher burden of debt and an ever-higher liability for interest payments, and that their increase in production never looked like financing it, except for a few exceptional countries to which I shall refer later. Basically, this is a policy which, as a priming of the pump, has so far failed.
The argument in the report is that we should therefore double, redouble and re-redouble the process. It is going back to the old groundnuts argument—that each year will be better despite the loss in the previous year. The idea is that if we swamp them with money and, as the report states, give them the security of knowing each year, for 20 years, what is coming to them, in some way the pump will be primed.
I suppose that there are a few places and occasions where and on which we succeed in that process, but not many. I believe that we have done great harm to many of these countries by that process. The report, after all, is the beatification of the begging bowl. We are pauperising some of these countries—bringing them to mendicancy. I do not suggest that my hon. Friend the Member for Meriden (Mr. Mills) would go so far as to agree with me that the real service that we can render to these countries is to
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get them to understand that in the end it all depends on them.
Mr. Russell Kerr: Treat them mean.
Sir R. Bell: It is nothing to do with treating them mean; it is teaching them the lesson that we learnt—the lesson that the hon. Member for Feltham and Heston (Mr. Kerr) can find in Samuel Smiles and many other excellent writers. A very good form of overseas aid would be to send them a whole lot of copies of Samuel Smiles' admirable book.
If we analyse that into economic mechanics, in almost all cases the answer for those countries is to start small in agriculture, commerce and industry, and to build up. That has happened in Taiwan, Korea and certain other countries. Agriculturally, it is happening in Malawi. I do not suggest that Taiwan and Korea have received no foreign aid. They have received some aid, but it has played no significant part in their meteoric rise. Starting small and building up self-generated prosperity has been the secret of their advance. If we merely pour in financial aid, we get unbalanced, artificial and non-viable development, as we have seen in many cases.
Sir Bernard Braine: What cases?
Sir R. Bell: I could give my hon. Friend specific examples from other countries, but I should be preventing other hon. Members from speaking if I did so. I shall be happy to give him examples after the debate, if he so wishes.
Sir B. Braine: My hon. and learned Friend is making a general case against aid. He says that it has failed, but he declines to give the House examples. The House is entitled to know what he has in mind.
Sir R. Bell: I was trying to save time, but in order to pacify my hon. Friend I shall give two examples. One example is that of a magnificent hospital in Maracaibo. It was one of the finest hospitals in the world, but it had no patients because it had no nurses and no doctors. In those circumstances it was a little silly to build it. Another example is that of a marvellous hydro-electric and steel-making complex on the River Orinoco, which was electrocuting the fish because there was no coke with which to make the

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iron, and therefore the steelworks did not work, and the river ran pointlessly. Those are two examples, and there could be others. My point is that far too much money is spent on prestige projects. My hon. Friend the Member for Meriden said that multinational companies must be modified, because if a multinational company moved out of an area there might be a collapse, because there was no substratum—
Sir B. Braine rose—
Sir R. Bell: I am sorry, I cannot give way. My hon. Friend spoke for 25 minutes earlier, and that was an adequate contribution.
My final point is the most difficult of all to make. We were told—I accept it—that in the next 20 years the population of the world will rise from about 4,000 million people at present to about 6,500 million people. It was suggested in the report that the top prority should be a crash programme of food aid in order to abolish starvation and poverty in the world, but is it a moral obligation on the people of the temperate zone to provide subsistence for an unlimited increase of people in the tropical regions of the world? I know that that question shocks people, but it must be asked. Why should the most advanced peoples in the world—who are probably slightly declining in number—who, because they are advanced, have restricted their families, have the moral duty of supporting an increase of 2,000 million in the equatorial and tropical regions of the world where family limitation does not exist?
If people are prepared severely to depress the standards of living in the temperate zone, as one would have to do to achieve that end, and to see themselves, in the final mix of world population, massively outnumbered—[Hon. Members : "Ah."] yes, and we know that population pressures find expression in migration pressures. If we are prepared to do that, that point should be put clearly and squarely to the people of this country and of the other countries of the temperate zone, so that they know what they are being asked to do.
If the people choose to accept the consequences of that gamble, that is their decision, but what is not excusable is not to mention that point at all, but just
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to slide over it on the easy assumption that when one raises living standards, birth rates come down. They do in some parts of the world, eventually. There is not the slightest evidence that they ever have done so among the Asiatic or South American people.
Sir B. Braine: What about Japan? My hon. Friend is talking absolute nonsense.
Sir R. Bell: My hon. Friend really must content himself with the 25 minutes for which he spoke earlier.
Sir B. Braine: But this is rubbish.
Sir R. Bell: Japan's was an extraordinarily organised operation in abortion—a massive and remarkable operation, which certainly will not be rivalled in India, Pakistan or South America. Let us be realistic about that : everybody knows that that is true. It cannot be done at all in the next 20 years. One day, perhaps it will, but meanwhile the suggestion is that the people of the temperate zone have a moral responsibility to feed and to keep alive an increase of 2,500 million in the next 20 years in the tropical and equatorial regions.
These are the considerations that underlie the Brandt report. My complaint about it is not its lack of good intentions but that it has not faced the implications of what it proposes, but has taken refuge behind fashionable phrases that are all too glibly exchanged among pseudo-liberals in all parts of politics and in all parts of the Western world.
10.17 pm
Miss Joan Lestor: At the beginning of this debate I thought that one of the telling texts from Tawney that would apply to some of the things that I wanted to say was that, whatever the differences are of colour, capacity and abilities among human beings, however important on their own plane, they are as nothing compared with the common humanity that unites them all. On the high plan on which I wanted to enter this debate, I tried to apply that philosophy to the hon. and learned Member for Beoconsfield (Sir R. Bell) but I failed.
It was difficult to succeed in the face of the propositions advanced by the hon. and learned Member, which amounted in the end to the claim that if people cannot or do not control their populations, we

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in the rich West should do nothing and should allow them to starve. That is an extraordinary concept when we are debating a report that does not emphasise aid or mere handouts, or even make it the main part of its text. The right hon. Member for Sidcup (Mr. Heath) made that absolutely clear. The whole thrust of the argument of the Brant report is that we should look further than simply aid or short-term solutions.
This debate, for me and I think for many other hon. Members, has an air of unreality. Hardly was the ink dry on the Brandt report than the Government announced a cut of 14 per cent. in overseas aid over the next four years. That must have dashed the hopes of those who put their signatures to the Brandt report, and those of us who thought that, perhaps, because of the implications of Brandt for the developed as well as the developing world, something would come from it.
The problem has been well put, as one would expect, by my hon. Friend the Member for Waltham Forest (Mr. Deakins). When the House last debated this matter on a Friday in March, there was wide agreement on the propositions in the Brandt report.
There are, surely, two aspects of this problem—how one bridges the gap between the rich and the poor, in the present long-term shortage of resources, which will never extend to the developing countries, and how one avoids the suffering and the problems that we have faced as an industrialised nation. There is a long-term and a short-term proposition. I think that it is these to which the report was addressing itself.
Whatever are the deficiencies in the report—and some of us have put the emphasis in various places—it has brought us to face the challenge of the question whether we take refuge in burying the report because of Britain's short-term interests—or the belief about what are its short-term interests—or whether we say that here we have an opportunity, faced with the appalling problems in our own country and the West, to take on a new challenge and to bring about mutual solutions to the benefit of both sides of the great North-South divide. It is therefore a question not of benevolence but of mutual survival.
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The situation in Britain has already been described. More and more people are rapidly becoming unemployed because we cannot find markets for the goods with which we previously dominated the world and which previously people demanded. We have to match with that situation the question how one abolishes hunger, disease, malnutrition, and so on in the poorest countries.
The report says that countries that have not reached 0·7 per cent. in aid must do so by 1985 in order to contribute to the developing world, and that the annual target of 1 per cent. must be reached by the end of the century—in 20 years' time. Presumably, most of us in the House will still be alive at the end of the century. It is a very short period, in which we are faced with the stark reality of making this contribution and this switch in our philosophy and our economic policies if many people in the rest of the world are to survive.
Unlike my hon. Friend the Member for Waltham Forest, I believe that the Brandt Commission attempted the moral argument in respect of this matter. Had the moral argument been put many years ago it might have been easier to persuade people in the West that that argument, plus economic necessity, would persuade Government's to have the courage to make the necessary change.
The argument about military expenditure, which has not been stressed much this evening, appals me, as I think it appals many of us. I believe that the report says that 0·5 per cent. of one year's military expenditure would pay for all the farm equipment needed to increase food production in the developing world and would allow countries suffering from food deficiency to approach self-sufficiency within 10 years. That is a staggering concept. In a sense, it is simple as that. Yet we are bent on a path that is going rapidly in the opposite direction.
If that is the choice in the present situation, clearly the choice must be made. When people talk about defence cuts and when the Brandt Commission talks about cuts in military expenditure, the point must be made—it is very rarely made in our defence debates—that the developed nations of the West, modern nations, now have overkill in terms of weapons of not 100 times but 300 times. The tragedy that flows from this is that the more the

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developing world sees the developed world amassing weapons and preparing for war, the greater their insecurity becomes. The greater their insecurity becomes, the more they are pushed along the same road, because the values and fears visited upon us are in turn visited upon them.
Therefore, one of the most important facts brought out in the report was the stark contrast between the developed nations and what they and many others are now spending on arms, and how a small amount of that, a tiny reversal, could contribute to ensuring that at least some of the 12 million children who are destined to die before the age of 2 will have a chance to live.
I do not find it amusing that the hon. and learned Member for Beaconsfield shrugs his shoulders at such a situation. He implied that if people would not accept birth control or learn to limit their families, the rich nations of the world should do nothing. He hinted that we should allow children to die. That is appalling. Whether or not the Government are prepared to do anything about the Brandt Commission's report, the stark facts of poverty and the stark reality of the misery that faces many people lie before us.
One other aspect of the Brandt report is of interest. That aspect is characteristic of some of the arguments that were made even before the report was published. It characterises many of the debates that we held on aid, trade, exports and imports. In 1979, 22 per cent. of our exports went to the developing countries, another 40 per cent. went to OPEC countries and 60 per cent. to non-OPEC developed countries. In contrast, only 18 per cent. of our imports came from Third world countries. We had a trade surplus with the Third world of £600 million, in contrast with a trade deficit of £3,100 million with the EEC countries. Those figures tell me a great deal. I was aware of such figures before we went into the Common Market, but since joining the Community we have become caught in our own trap.
Unemployed steel workers and closures in the steel industry can be linked direct with the Third world. Because of our lack of interest and development, the Third world is too poor to buy the steel
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that it needs to develop its economies, and partially to alleviate the poverty and misery that exists. The report makes a fundamental connection between events here and what is happening in many other parts of the world. The bridge must be crossed if Britain and similar countries are to survive.
Third world countries have provided, and could provide, major growth markets for British manufactured exports. One must bear in mind the employment opportunities that that could involve. The Government announuced that they would cut back overseas aid at about the same time as the report was produced. They dealt a severe blow to many who had hoped that the Government would grasp the nettle. They had thought that the Government would take up the challenge in the Brandt report and admit that the country was facing enormous economic difficulties.
We have lost markets. Many of our manufacturing industries have been taken over and surpassed by other nations. If we face that problem, in conjunction with the demands and needs of the developing world, and in conjunction with the trade that those countries need in terms of the manufactured goods and infant technologies that we can provide, mutual benefit and responsibility will bind us together.
I said that the debate had an air of unreality. The Government will admit that the report is excellent and they will outline many of the problems that we have yet to face. However, they will not be prepared to do anything about it. They will say that they have set themselves a certain economic policy from which they cannot depart. The tragedy is that if we do not recognise the implications of the Brandt report, Third world countries and the industrialised countries of the West will suffer.
10.30 pm
Mr. Charles Morrison: I agreed very much with the hon. Member for Eton and Slough (Miss Lestor) when she related the Brandt report to the position in this country. I do not think that it can be stated often enough that the Brandt report is at least as much about the future of the domestic economy as it is about the development of the Third world. Therefore, although it is a pleasure to see two Foreign Office Ministers

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on the Front Bench, the Government would have demonstrated a greater understanding of what the report was about if, instead, there had been at least one Minister from the Treasury or the Department of Trade on the Front Bench.
The Times leading article immediately following the publication of the Brandt report commented :
"As a description of the problems that face us, and a warning of what could happen if we fail to respond, the report can hardly be faulted. It ought to become one of the basic documents of the decade."
It is not uninteresting that the Vote Office has already handed out more than 450 copies of the report, and I assume that every Minister has a copy of it in his Red Box as he goes home each night. In addition, when Herr Brandt himself had a meeting in Oxford it was attended by more people than had attended any meeting in Oxford since 1938. Also, newspaper comments abound, and there has been a stream of seminars to consider the report.
That is all very encouraging, because it shows that there is an awareness of the world scene that is not always credited. It also shows that there is real concern about the future, which is not entirely surprising. After all, the world is a pretty bleak-looking place when one considers the recession, poverty, hunger, unemployment and the arms threat, let alone the constant threats from Soviet imperialism. None of those factors is likely to increase hope or happiness about the future. Therefore, a report that has been described as
"a devastating indictment of human folly"
but which, more importantly provides guidelines and signposts for the, future is timely. Not long ago a report with the sub-title "A Programme for Survival" would have been thought portentous and presumptuous, but not now. There is now a growing realisation not just that we still have major economic problems but that the world is in a mess and that new initiatives are needed.
At I listened this afternoon to my right hon. Friend the Member for Sidcup (Mr. Heath) I was reminded of earlier warnings issued in the House in the 1930s to which few at the time paid attention but for which, later, everyone paid a price. The Brandt report provides the idea for new
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initiatives. No one at this early stage can say that all its proposals are correct in every respect, but the broad thrust of the recommendations must be right, and the Governments of this and other countries that are genuinely interested in solutions to the world's problems would be totally misguided to ignore them.
Again I refer to The Times leading article, which summed up the Brandt approach in this way :
"If the world is seen as a single nation it makes sense to raise the living standards of the poor to stimulate trade and economic growth. It also makes sense to meet grievances before they provoke war."
Those comments provide a pretty apt answer to the remarks made by my hon. and learned Friend the Member for Beaconsfield (Sir R. Bell).
Few in this House will doubt that the richer countries of the world have some sort of moral obligation to assist the poorer countries to develop. However, we have now reached the stage at which moral duty in that context has become increasingly synonymous with self-interest. To put it another way, the argument that from time to time many of us have had in our constituencies, defending the concept of aid, is largely outdated. The development of Third world countries is now at least as much in our interests as theirs. It probably always has been, but until now the argument has been much more difficult.
Even so, aid will not be acceptable for long and there will be no further investment and transfer of resources if, in developing countries there is not political stability and effective administration to make good use of aid and encourage investment. Whatever the consequences for the countries of the North, if there is to be a transfer of resources there must be political stability. Without that, that transfer will not occur.
Too often in the past aid has been wasted, misguided and misused, for good reasons and bad. One has only to look at the economic chaos in some African countries to be reminded of that. I therefore believe that the North has a major duty and a vested interest to do what it can to assist political development in the poorer countries. As the emergency programme for 1980 to 1985 in the report points out, the scope of what is required in our mutual interest, even in the very short term, is mind-boggling.

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I wish to refer briefly to population. My right hon. Friend the Member for Sidcup reminded us of some of the more hair-raising population statistics. In them and in their implications, more than anywhere else, lie the seeds of the destruction of mankind. We can have transfers of resources well in excess of expectation, a perfect energy strategy and global food programmes, and we can reform the international economic system to perfection, but all will come to nought if we cannot control population growth. On page 116 the report states :
"We also believe that development policies should include national population programmes aiming at satisfactory balance between population and resources and making family planning freely available. International assistance and support of population programmes must be increased to meet the unmet needs for such aid."
I put that recommendation, above all others, top of the programme of priorities, top of the tasks for the 1980s and 1990s, and top of the emergency programme.
Man claims to be a wiser animal than others. If that is not demonstrated by his ability to control the size of the human population, the human race will meet the same destructive fate as other excess animal or bird populations in the wild.
Most people take a passing interest in the world about them but few bother very much with its less pleasant realities. Brandt forces us to face them and proposes solutions for the survival of civilisation. Only at our peril do we ignore those problems and solutions.
10.39 pm
Mr. Tom McNally: Like my hon. Friend the Member for Waltham Forest (Mr. Deakins), I was in the House for the debate on the Private Member's motion of the hon. Member for Cambridge (Mr. Rhodes James). The most notable aspect of that debate was not the silence of the right hon. Member for Sidcup (Mr. Heath) but the fact that it was an unreal debate, because we missed the voices of the right hon. Member for Down, South (Mr. Powell), the hon. and learned Member for Beacons-field (Sir R. Bell) and the hon. Member for Woking (Mr. Onslow). This debate has been more real, because we have heard some of the prejudices that the
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Brandt report, Government and Opposition will have to overcome if we are to make a reality of the report's aspirations.
The speeches made by Conservative Members on the motion of the hon. Member for Cambridge made it appear that the Brandt Commission was pushing at an open door. However, the report calls for a concentration on aid to the poorest, and the Government have abandoned that concept. The report calls for greater access to technology and training, but the Government, by their increase in the fees for overseas students, have barred many developing countries from such access. The report calls for greater access to markets, but even in my own party there is a growing demand for protectionism. Not only are we not going as far as the report wants; in many respects the Government's policy is going in the opposite direction.
I do not say that in order to pour cold water on the debate. It has all the importance that many hon. Members attached to it, but it is also important to realise that those of us who support the report are calling for a reversal of Government policies and of their concept of the aid and development programme.
We are arguing that the Government have got it wrong. The Prime Minister has got it wrong when she argues that, much as she supports the idea of a development programme, it will have to wait for recovery. As the Brandt report emphasises time and again, the recovery of the West and the development of the Third world are not separate processes. They have to go together. They are part of the same global development.
The right hon. Member for Down, South would pour scorn on such an argument. He says that it is a matter for the drive of personal choice. I believe that the level of aid, which has struck at the same level under successive Governments, owes more to the cowardice of politicians and the fear of the occasional slap on the wrist in the John Junor column than it does to the feeling of the British people.
When tragedies occur, such as those in Kampuchea or Uganda, the British people respond instinctively and generously. I sometimes feel that we might even challenge the Treasury to put on the tax forms each year a box saying "I will pay an aid levy" and challenge the Churches and development organisations in February

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and March to launch a programme saying "Fill in the box. Pay the aid levy". Let us test the individual and individual choice. The media could show the reality of what is happening in Kampuchea or Uganda.
Mr. J. Enoch Powell: Have a flag day.
Mr. McNally: Indeed, but such a flag day paid for by the Inland Revenue might be more effective.
Mr. Powell: No, voluntary.
Mr. McNally: Yes, voluntary, through the tax form. It seems that the right hon. Member for Down, South and I will be pressing the Treasury to put such a box on the next tax form.
I am not an expert on international finance, but when I read the Brandt report and other specialist documents I get a gut feeling that one of the dangers that we shall face in the 1980s relates to the management of international finance. On reading the Brandt report's references to the IMF and other accounts of its activities, I wonder whether the IMF carries out what Herr Brandt describes as its responsibility to cure maladjustments in economies
"without resorting to measures destructive of national or international prosperity."
I wonder whether the IMF is not too rigid, especially in its dealings with developing countries, so that its very cure is destructive of national prosperity.
A number of hon. Members referred to the examples of Jamaica and Tanzania. It is almost unbelievable for the IMF to ask Michael Manley to increase unemployment by at least 11,000 at a time when unemployment in Jamaica is 40 per cent., or to ask the President of Tanzania to increase prices by 25 per cent. to 40 per cent. while managing a real cut in wages. If we want countries, democracies and societies to survive, we must not allow the international monetary system to take the attitude of the bloodletter and to leave the patient weaker at the end of the treatment than he was at the beginning.
Third world debts have risen from $74 billion to $300 billion in the past 10 years. Some observers are predicting that it will reach $800 billion by 1985. In these circumstances I worry that so much emphasis has been put on the private market and private banking in servicing
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those debts. I am not an expert in these matters, but in my mind there is an uneasy echo of an earlier age when private banking extended too far into vulnerable economies. I am mindful of the possible repercussions for our own economic system if the structure were to collapse.
I turn to a problem that the Labour movement will have to face and to which my hon. Friend the Member for Waltham Forest referred. The Brandt report rightly states that
"restructuring is a continuous process in efficient economies through which more productive activities replace less productive ones—as in leather goods, shoes, textiles and ships."
In one sentence Brandt dismisses about 1 million British jobs. We must face the problem of how to satisfy our debt to the Third world in terms of its desire to enter our markets and yet explain to workers in the industries that I have mentioned how we shall replace their jobs.
I believe that the often discredited multi-fibre arrangement might show a way ahead—namely, a more finely tuned agreement that lets in goods from the poorer developing countries while recognising that multinational companies within developing countries, which can plant in them highly sophisticated and highly competitive industries, may not have the same access.
Brandt is a trifle naive when he talks about the rights of trade unions in some of the poorer countries. The sad truth is that they do not have the same rights and have not developed in the same way as have the British trade unions. It is too much to ask that British workers should allow multinationals to transfer their industries to countries where jobs, safety, pay rates and trade union rights are not protected to the same extent and then call for access in the name of free trade.
That is something that my party has to face. We must come to terms with our desire to help the developing countries with the need to accept that there is nothing especially honourable in saying "My principles are so high that I shall sacrifice your job." We must have a much more considerate attitude to those in industries that are threatened by the developing countries. The logic of

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the argument of some Conservative Members does not stand up to examination. We must have far more intervention. I hope that the right hon. Member for Sidcup will not be embarrassed if I say that the Brandt report is a very social democratic and interventionist document, with which we have to come to terms in respect of domestic policy.
I was fascinated, listening to the right hon. Member for Down, South and hon. Members who have criticised Brandt. It is easy to find criticism. When, however, I read how smallpox has been eradicated by Western technology and when, as I have seen on a number of visits to Asia and Africa, two blades of grass are growing where one grew previously, I cannot accept the right hon. Gentleman's example of the Christian ethic. If we are to capture, or recapture, the moral certainty that he once saw in the Christian ethic, it is not only in words but in deeds that we have to live up to that ethic. I believe that Brandt offers that opportunity.
It is necessary for us to resuscitate our own Western economy in order to bring about a vibrant economy in the developing world. A moral imperative is also involved. Perhaps, as T. S. Eliot said in another circumstance, it is a happy coalition of intelligent self-interest. The arguments of those who have spoken in favour of Brandt and a concerned Western world involvement in the Third world have hung together with greater logic than anything heard from the detractors.
The hon. and learned Member for Bea-consfield is living in a false world if he believes that he and those who think like him can remain in prosperity while leaving the rest of the world to starve. They will not let us. That is a lesson that we should learn.
10.52 pm
Mr. Alastair Goodlad: I begin by springing to the defence of my right hon. Friend the Lord Privy Seal, lonely though I feel, against the ungenerous attack made on him by the right hon. Member for Stepney and Poplar (Mr. Shore) and others. We should not allow the customary sobriety of my right hon. Friend's delivery to belie the underlying conviction with which he supports the measures to which he referred. My right
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hon. Friend regards the distinguishing mark of Toryism as the recognition of the overriding importance of circumstance. His speech was evidence of the Government's recognition of the ominous circumstances that we face and the urgency with which the Government view their responsibilities. We are only at the beginning of the task. There is a long way to go.
My right hon. Friend pointed out that trade is 35 times more important than official aid to the less developed countries. I should like to follow the excellent remarks of my hon. Friend the Member for Meriden (Mr. Mills) about multinationals. As the Brandt report points out, the multinationals control between one-third and one-quarter of all world production. The total sales of their foreign affiliates in 1976 were over $800 million, approximately the same as the then GNP of all the non-OPEC LDCs put together.
The report emphasises the mutual benefits of the multinationals' involvement in LDCs but criticises what it describes as the excessive power of multinationals in international trade and the use of artificial transfer prices and unethical commercial and political activities. Chapter 12 of the report contains wide-ranging proposals for the regulation of international companies and a proposed regime for international investment. Not all these proposals will gladden the hearts of company boards, already pressed by multitudes of problems, but none can deny their vital importance. The sections on contract, the transfer of technology and patents, particularly deserve the closest attention by Governments and companies. If we succeed in reaching agreement in those areas the prospects for prosperity in both the North and the South could be substantially enhanced.
Investment has not been evenly spread in the Third world, other than purely financial investment in tax havens such as the Bahamas and the Cayman Islands. Seventy per cent. of the investment in the Third world has been in only 15 countries, over 20 per cent. has been in Brazil and Mexico, and over 25 per cent. in the OPEC countries.
Many developing countries believe that foreign capital, technology, management and marketing skills carry with them disadvantages that outweigh their potential benefits. If we succeed in removing the

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grounds for such beliefs we shall have made a very worthwhile contribution both in the North and the South.
Of course, private capital is no substitute for aid. It has ignored some countries and selectors most needing aid. Rut part of the purpose of the report is to rectify that situation, and what we in the House and the country must agree on is that private capital has been a tremendous engine for prosperity where it has flourished, and has an important future role to play. Its benefits must be more widely spread and its blemishes eradicated.
Commentators and political historians all have their favourite watersheds—the Anglo-Irish treaty of 1921, the fall of Singapore, Indian independence, Suez, the resignation of the Treasury Ministers in 1959, the use of the oil weapon in 1973, and so on. It is a characteristic of watersheds that we cannot always recognise them when we are crossing them, but we are crossing one now.
Future generations will judge us on whether we take the easy path of sacrificing the future—or the possibility of the future—to the national preoccupations of the moment; or, on the other hand—as I believe can be and will be the case—taking a very hard-headed look at long-term necessities and charting a course accordingly.
My right hon. Friend the Lord Privy Seal quoted in his book "Inside Right" the remark made by Dr. Johnson about George Lyttelton :
"Politics did not so much engage him as withhold his thoughts from things of more importance."
That is not a temptation to which we are likely to succumb. The Government's authority, both nationally and internationally, has never been higher. With elections imminent in the United States, in Germany, in France and in Japan, the responsibility for maintaining the momentum that the Brandt report has started is heavier than ever. Make no mistake, there is a momentum, particularly among the younger people in Western Europe.
The forthcoming special session of the United Nations will be very difficult, not least because of the rifts within the group of 77 and the lack of unity within OPEC. Having devised and agreed on a practical strategy, we as a country are suited by
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our history and our Commonwealth connection to press that strategy hard by traditional diplomatic methods and to act as a catalyst in the establishment of good will and understanding.
That irritating phrase of Dean Acheson's about losing an empire and not finding a role can now happily be laid to rest. The fulfilment of national roles need not necessarily be sinister or ridiculous. The present generation, I am sure, perceives our country's role as forwarding the purposes outlined in the report. I have every confidence that we shall do so.
10.58 pm
Mr. Ioan Evans: The hon. Member for Northwich (Mr. Goodlad) has, rather late in the debate, defended the Lord Privy Seal. The Lord Privy Seal seemed to come under attack from every quarter. It was not a personal attack on him. I realise his difficulties, with the Foreign Secretary in the other place and a Prime Minister who wishes increasingly to take part in foreign affairs.
Having had a debate on this subject on 28 March—when the report of the Brandt Commission had already been available for a good while—we know that the Government were not then ready to say what their reactions were to be. But now, three months later, in a debate of this kind, I think that the House was expecting that the Government would tell us which of the commission's recommendations they accep'ted and which they did not accept.
Questions remain in the debate that one would have thought the Government would answer right at the beginning. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) asked whether the Government would publish a Green Paper on their position on the Brandt report, so that the nation would know their response. Will that question be answered tonight? I would go further than my right hon. Friend, because I think that we need a White Paper. The Brandt report is a form of Green Paper. We now need an indication of the Govment's response. Will they support a top-level political summit, as proposed in the report? The Lord Privy Seal touched on that matter but did not give a definite answer. I put that question to the Prime Minister today. It appears that foreign policy on the Middle East is being

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decided in a gondola in Venice. The EEC Ministers are determining their common policy to put to the economic summit in Vienna, yet when I asked the Prime Minister about their response to the Brandt report she said that the matter had not been discussed. She said that they touched on certain matters in the Brandt report—but the report touches so many things. It appears that the EEC Ministers do not intend to deal with the report at that important summit on economic affairs. The Government have not played their part.
Will the Government review their position on the level of official development assistance in the light of the report's recommendations? The Government's policy on overseas aid was announced after the report was published. They should have had the decency not to cut back on overseas expenditure until they had given some thought to the matter. In their mad policy to cut expenditure they have cut overseas aid, and that at a time when the report calls for a massive increase.
We have seen the report of the EEC discussion in Venice over the weekend. The preparations among the EEC countries to concentrate on food, energy and finance at the special session of the United Nations General Assembly—to which the Prime Minister referred—are thought by the developing countries to be too restrictive. In the light of the Brandt report, are the Government giving sufficient emphasis to trade, commodities and Third world industrialisation? Those are the matters that we should be discussing. The feeling of the House is that we should give more aid.
There have been exceptions to that view. I would like to hear the interpretation of the hon. and learned Member for Beaconsfield (Sir R. Bell) of the Good Samaritan. We have heard the Prime Minister's interpretation. Apparently, not only should we simply pass by and do nothing; we should clobber them. That is the philosophy of the hon. and learned Member for Beaconsfield. I think that the House has completely rejected that view.
The public expenditure estimate submitted by the Government shows that aid is to fall from £790 million last year to £779 million this year, and to £680 mil-
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lion in the new financial year. The Brandt report talks about the need for the rich countries to divert more aid to the underdeveloped countries, yet this Government are going in the other direction.
We have discussed petrocurrencies and the multinationals. We must decide what we shall do as a Government and as a people—not what others will do, or even what the Third world will do to help itself. Of course it must help itself, but it cannot do so unless it is given some assistance to put it on the way. We know that the Government have monetarist policies and that they are swinging the axe on public expenditure. The answer must be to examine the policy of the Western world on arms expenditure.
I am glad that the hon. and learned Member for Beaconsfield has returned to the Chamber. He thought that he had won the argument by saying that it would cost £30,000 million to help two-thirds of humanity, and that we could not tolerate it. In fact, world military expenditure is over £200,000 million annually.
The moral question is : are we to help the cause of peace by aiding two-thirds of humanity living in starvation conditions, or are we to continue this mad arms race in which we are involved? Every two minutes £1 million is spent by the world on arms. How many millions of pounds have been spent since we began debating this issue at 4.40 this afternoon? It goes on day by day.
The Government are increasing their arms expenditure from £7,720 million to £8,740 million by 1984. They need to do not a U-turn but an about-turn. They are going in the opposite direction from that recommended in the Brandt report.
Sir Ronald Bell: A U-turn is an about-turn.
Mr. Evans: The Government need to go in reverse, not just round corners.
I should like to refer to the four examples in the Brandt report. I hope that Conservative Members will listen, because these will be telling arguments in defence debates. Willy Brandt, in his introduction, states :

" 1. The military expenditure of only half a day would suffice to finance the whole malaria eradication programme of the World Health Organisation, and less would be needed

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to conquer river blindness, which is still the scourge of millions.

2. A modern tank costs about one million dollars; that amount could improve storage facilities for 100,000 tons of rice and thus save 4,000 tons or more annually : one person can live on just over a pound of rice a day. The same sum of money could provide 1,000 classrooms for 30,000 children.

3. For the price of one jet fighter (20 million dollars) one could set up about 40,000 village pharmacies."

The fourth example is the telling one in terms of arms expenditure :
"One-half of 1 per cent. of one year's world military expenditure would pay for all the farm equipment needed to increase food production and approach self-sufficiency in food-deficit low-income countries by 1990."
That is the question to which we have to address ourselves.
We want the Government to produce a White Paper in response to this issue because, as the Brandt report states, this is a time of real crisis.
One Conservative Member did not want to talk about the dangers facing us now. I should like to come to one of them. The Brandt report's recommendation for "An Emergency Programme : 1980–85" gives the four principal elements, all of which should be dealt with equally :

" 1. A large-scale transfer of resources to developing countries.

2. An international energy strategy.

3. A global food programme.

4. A start on some major reforms in the international economic system."

I conclude with a quotation from Earl Mountbatten of Burma. In a document issued by the World Disarmament Campaign, he said :
"As a military man who has given half a century of active service, I say in all sincerity that the nuclear arms race has no military purpose. Wars cannot be fought with nuclear weapons. Their existence only adds to our perils because of the illusions which they have generated."
I do not want to read the whole text, but, referring to the Middle East initiative, Earl Mountbatten said :
"Is it possible that this initiative will lead to the start of yet another even more vital miracle and someone somewhere will take that first step along the long, stony road which will lead us to an effective form of nuclear arms limitation, including the banning of tactical nuclear weapons? After all, it is true that science offers us almost unlimited opportunities but it is up to us, the people, to make the moral and philosophical choices, and since this threat to humanity is the work of human beings, it is up to man to save himself from
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himself. The world now stands on the brink of the final abyss. Let us all resolve to take all practical steps to ensure that we do not, through our own folly, go over the edge."
Those were the words of Lord Mountbatten of Burma a year ago, before his sad death. I believe that that is a message to the people about the nuclear threat. The Government will be committing a criminal folly if they spend £4 billion or £5 billion to add to the nuclear threat that faces humanity. They can better spend that money by giving it—as recommended in the Brandt report—to help the starving millions of people in the world to live a better life and to enable us to live it with them.
11.11pm
Dame Judith Hart: I am glad to follow the remarks of my hon. Friend the Member for Aberdare (Mr. Evans). I emphasise that the speech of Lord Mountbatten that he quoted was a speech that our press chose not to quote. It was not quoted anywhere in the popular media, although it was a valuable contribution.
I wish to quote one of my favourite passages from the Brandt report, which is also one of the only light-hearted phrases in it. It says :
"It is not enough, as one of our commissioners put it, to sit around tables talking like characters in Chekov plays about insoluble problems."
I hope to discover from the right hon. Member for Sidcup (Mr. Heath) which commissioner said that.
This has been a remarkable debate. It has been one of the most significant debates in the House for a long time. We should not measure its significance by the attendance at the end of the day, because we are not voting on this matter tonight, but the content of the debate has been significant. I am certain that the Lord Privy Seal and the Minister of State will have taken full note of the fact that, with one or two idiosyncratic aberrations, there has been a total unanimity of view on the Brandt report's general concentration on the world crisis, its identification of mutuality of interest, and its identification of human solidarity and a commitment to social justice. I hope that the Lord Privy Seal will take note of that because, in contrast, his speech failed to reflect the degree of concern that the House has expressed.

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I may be wrong—and the Lord Privy Seal will no doubt correct me if he thinks that it is proper to do so, or, if he regards it as a matter that falls under the Official Secrets Act, he will not allow himself to do so—but I suspect that the Brandt report has been the subject of discussion by an interdepartmental official committee. I doubt whether it has been the subject of Cabinet discussion. That is to be deduced from the fact that—unusually for him—the Lord Privy Seal did not seem to be totally familiar with the issues that he outlined to the House at the beginning of the debate. I am not unduly suspicious, but I think that that is what has happened.
I believe that both the right hon. Gentleman and the Minister of State have been supplied with official briefs that do not reflect a real involvement by Ministers in the issues presented by Brandt. Yet the Prime Minister will have to have reactions to take with her to the second Venice summit. Are those reactions to be only those that we have heard from the Front Bench tonight? I hope not. I hope that the Prime Minister will allow herself to be influenced by the views of the House of Commons. Others will be. Herr Schmidt will be identified with the Brandt issues. We know that the Netherlands, Italy, Denmark and, indeed, France are likely to wish to consider them seriously. Japan is taking them very seriously.
Unexpectedly, perhaps, to Conservative Members, I will not make a speech about aid tonight. I rest upon what my hon. Friends have said—that, faced with this challenge of Brandt, it is sad and disastrous that we have chosen this moment to cut our aid programme. Foreign aid is one aspect of the direct transfer of resources to the Third world, but it has been cut by 14 per cent., as opposed to 6 per cent. increase committed for the next four years when the Labour Government were in power.
But aid is only one aspect. I think that the Lord Privy Seal will agree that this is not essentially—it cannot be—a party issue. One of his hon. Friends compared the problems identified by Brandt to the issues presented to the House in the 1930s, in terms of gravity and of the mistakes made by many people then. That is a valid point. Were I to deliver a Socia-
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list critique of the Brandt report, I would say that it does not go far enough in some respects, but its content can command the support of us all.
My fear is that the Government have got themselves into a position of psychological defensiveness because of their public expenditure cuts, owing to their belief that Friedmanite monetarism must, across the board, challenge any kind of international Keynesianism as a philosophical dogma. Because of their cuts in aid, they feel that they must ask for defensive briefs whenever they discuss the Brandt report.
The aid cuts are deplorable. The Government could take a very different approach, even within the context of the predominant attitude of the Cabinet towards economic problems and their solution. Brandt stresses mutuality of interest—a concept that has been around for a long time. We used to call it "interdependence". I wrote an article for The Times in 1976 when that phrase was current.
The Government cannot fail to agree that there is a deep mutuality of interest in resolving the problems that will face us as a result of the increase in population. To what has been said on that subject I will add only that, whatever is done by effective family planning programmes, which of course are needed, the females already born will be bearing children between now and 2023.
The problems presented by population growth and the demands upon food resources, energy resources and mineral resources are matters on which everyone must agree that there is a mutuality of interest, because those problems can be resolved only—be it, one way or another, by public or private development—by developing the untapped resources of food, energy and minerals in the Third world and by inducing the process of development, thereby bringing about the conditions that create population decline and smaller family size.
We are bound to agree on that. There can be no failure on the part of the Government to recognise the realities of the crisis. It is a crisis that cannot and and will not go away.
Looking at it in terms of our sharper, narrower British self-interest as against the global concerns, I do not know how

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often it is realised that the aid programme, quite apart from the development in the broader sense, maintains, every year, 415,000 jobs in this country. When we have unemployment at 1½ million, and when it is scheduled to climb to over 2 million, 415,000 jobs is a lot of jobs. They come directly from the aid programme.
If one manages to get the thrust net only in aid but in trade and all the other respects which Brandt discusses—the thrust that will achieve the self-generated economic growth, which is the objective of all of us for the developing world—415,000 jobs will be as nothing.
The very famous page 238 of the Brandt report includes the statement that
"the industrialised countries…have gained on average 900,000 jobs in each of the years 1973–77."
I give another figure. It is not from Brandt. It is a figure from the United States Bureau of Intelligence and Research, which did a piece of work on the effect of the transfer of $20 billion a year to non-OPEC developing regions. In year 1 the bureau estimated that the effect of that would be as follows : the volume of world exports would increase by 3 per cent.; the volume of OECD exports would increase by 3·1 per cent.; the volume of developing country imports would increase by 8·4 per cent. That gives an indication of the mutuality of interest, of interdependence, of the value to us and to OECD countries of achieving some of the objectives set out in the Brandt report.
I want to mention two particular matters in the brief time available to me. I should have liked to say a lot about import controls and to agree with those of my hon. Friends who have pointed to this as a matter that must concern Labour Members in getting our policies right in terms of protecting both our infant industries and our threatened industries, and at the same time protecting those developing countries that we wish to protect. My view is that we can do it if we have a system of selective quotas, because—[Interruption.] It is my view and I do not want to be drawn on it, because I have other matters to go into.
I agreed with the right hon. Member for Sidcup when, during his splended con-
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tribution, he emphasised the methodology of international conferences. He is right. I am not certain which type of summit is best but I agree that conferences that last for a month and that are attended by junior officials with prepared briefs—into which a junior Minister may fly to make a speech in the plenary session and rush off again—are no way to solve the outstanding North-South issues.
I wish to turn to an immediate issue that was raised by the right hon. Member for Sidcup. No Friedmanite inhibitions can impede that issue. There is an immediate need to recycle surpluses into programme lending. The Brandt report correctly points out that the transfer of resources to provide capital for long-term development is essential. However, low-income countries, middle-income countries and the global economy as a whole need an injection of money if the developing countries are to order goods from the developed world. Such an injection would help to provide the necessary stimulus to get us all out of the depression. That is the only step that will take us out of the longest and deepest depression that we have known for 30 years.
It would appear that the depression is taking us into a new dimension in world terms. What are we to do? It is true that as a result of OPEC petrodollars a great deal of money is sitting in the banks of the European and advanced countries. Because of the depression, that money is not being lent for investment in the developing countries. I disagreed to some extent with the right hon. Member for Sidcup when he implied that private banks had no contribution to make. That is not true. Some private banks have money that they could lend. It has been said that security is needed for such lending. The recycling of money that is sitting in private banks, earning high profits but doing nothing, could be underwritten by international institutions. Whatever the mechanism—special drawing rights, and so on—we must find an international and institutional method of underwriting such loans.
Do we need a new institution? The right hon. Member for Sidcup thought not. He would prefer to rely on the existing institutions of the World Bank and the IMF. I have always opposed new institutions. There are plenty of international institutions. However, this is

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not a job for the World Bank. According to its articles, it cannot undertake such work. That leaves the IMF. The right hon. Gentleman seemed to argue that we should reform the IMF so that it could take on this new job. I do not think that the IMF is capable at this moment of that degree of radical reform.
I say nothing now that I have not told directors of the IMF. A number of the developing countries—not only Tanzania and Jamaica but Turkey, Portugal, Peru and Ghana—have run into deep crisis because of shortage of foreign exchange caused because they had to face increased oil prices. They were oil-dependent countries that had to buy oil; they had nothing else. They had to face the consequences of our inflation, because they were also dependent on importing our manufactured goods and had to face a period of a general decline in the prices of the basic commodities on which they relied for their foreign exchange earnings. So they were in trouble.
The IMF formula is universally applied both to developed and developing countries. It was applied to us. But there is an important difference. A Minister of one developing country described the IMF formula as a fourwheeled chariot. It is "Devalue, deal with your money supply, cut wages and cut public expenditure." When the IMF told Britain "Cut public expenditure", whatever the agonies we went through, it was saying "Cut the rate of growth of your public expenditure." But when one tells a developing country "Cut public expenditure", one is giving it a prescription for nil or negative growth, because only public expenditure can finance the infrastructure needed for economic development.
There is no profit in building schools and educating children; no profit in hospitals and health services, in the basic infrastructure that is necessary for development. The IMF has consistently failed or refused—I am not sure which—to understand this.
I do not think that, with the best will in the world, the IMF will be capable of enough reform in its attitudes to be able to do the new job that needs to be done. Therefore, my predilection is to say, despite my dislike of new institutions, that the IMF cannot do this job, that
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somebody must, and that therefore we may need a new sort of bridging institution—not one with a massive bureaucracy and the rest, but a new technique that can enable the job to be done.
Mr. Brocklebank-Fowler: Is not the only way to get the private surpluses into investment in the developing world to ensure that the security of that investment and the rate of return are competitive in the money market? What does the right hon. Lady suggest is the answer to that problem, which is apart from any major institutional change that may or may not be necessary in the World Bank?
Dame Judith Hart: We may need an international underwriting.
Mr. Brocklebank-Fowler: Of investment?
Dame Judith Hart: That is right.
Whatever the inhibitions of the Lord Privy Seal and the Minister about Keynesianism in the world as a whole, and their inhibitions related to their belief in Friedmanism, of which I know the right hon. Gentleman is not a wholehearted supporter, we have here a definition of problems that everyone can agree upon. We also have an immediate problem for the solution of which the Government can agree that whole hearted support is demanded at the forthcoming summit in Venice. I hope that the Prime Minister will there say "There are some problems for us within our context. We do not happen to think that aid is a good thing, and we have cut our aid programme, but we agree that there is a mutuality of interest and a deep need in particular to find a solution to the short-term critical need for the recycling of surpluses and for allowing the Third world to play its part in resolving the problems of the North."
I end with two quotations. One is a quotation that I have on a very attractive poster in my room at the House. It is produced by the students aid lobby organisation, Third World First, and comes from King Lear :
"So distribution should undo excess and each man hath enough.'
The other quotation is something that the President of Sri Lanka said last August at a meeting of the Society for International Development and which I think

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sums up everything that the Brand report is telling us. He said :
"The interdependence of our economies is such that if we falter, we will not be able to buy the goods you produce. Our poverty, which in many cases we have learnt to live with, will inevitably pull you down as well."
11.36 pm
The Minister for Overseas Development (Mr. Neil Marten): My hon. Friend the Member for Mid-Sussex (Mr. Renton) and the hon. Member for Kingston-upon-Hull, West (Mr. Johnson) said that they hoped that I would answer all the points raised in this debate and give a lead. I am afraid that I must disappoint them. First, there is not enough time and, secondly, I do not think that I could possibly do so.
I am always aware, as I am sure everyone else is, of my own deficiencies. Today I was even more acutely aware of them, after hearing the powerful speech of my right hon. Friend the Member for Sidcup (Mr. Heath) and the references by the right hon. Member for Down, South (Mr. Powell) to Plato, Aristotle and Victor Hugo. It is not my scene. Within limitations, I shall do the best I can to answer this debate.
Following up the remarks of the right hon. Member for Lanark (Dame Judith Hart), the points raised in the debate will be considered by the Prime Minister before she goes to Venice. That is what parliamentary debates are for. I agree with the right hon. Lady that this issue is not a party matter in the true sense of the word. It is more of a personal issue, concerning people's views on the Brandt report and aid generally.
The right hon. Member for Lanark also talked about aid keeping so many jobs going, and gave some figures. I have to correct the record. I am not picking her up, but she had the figures wrong. I believe that she said that 415,000 jobs were kept going by aid. For Britain alone, the calculations made a year or so ago showed that there were only about 40,000 jobs. That is not a negligible difference.
Dame Judith Hart: I apologise. The figures were given by the Minister's Department.
Mr. Marten: I do not know when. The latest figures that we have is for the last year. The right hon. Lady also mentioned the question of population, which was touched on by my hon. Friend
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the Member for Devizes (Mr. Morrison) and my hon. and learned Friend the Member for Beaconsfield (Sir R. Bell). The commission tells us that although the rise in population growth rates may be slowing there could still be 2 billion more people in the world by the year 2000, and 90 per cent of that increase will be in the developing world. This accords with United Nations projections. We recognise that already in many developing countries economic progress has been eroded by high rates of population increase and that many such countries are looking for assistance to tackle this problem.
In 1979 the United Kingdom provided early £9·2 million in population aid and we shall continue to support population programmes as fully as the many claims on our resources permit. In particular, we have maintained our support for the United Nations Fund for Population Activities and the International Planned Parenthood Federation—both of which will receive £2 million this financial year—and the World Health Organisation's research programme in human reproduction.
This has been a remarkable and wide-ranging debate. There have been very different and sometimes strong reactions from right hon. and hon. Members to the issues raised in the commission's report. The key concept underlying the report is that of the North-South co-operation and the common pursuit of shared objectives on the basis of enlightened self-interest. Questions have been raised about the extent of that self-interest and, again, views expressed during the debate have been varied.
I agree with the right hon. Member for Stepney and Poplar (Mr. Shore) and my right hon. Friend the Member for Sidcup about the fundamental importance of oil prices and supplies in the world economy. They are indeed at the centre of the problems of world inflation, recession and development. We accept that the trend, in real terms, will be upwards, and that we must all adjust to the consequences. There is no way that we can do this without pain. The question is how to achieve it with the least disruption, and how to induce more stable prospects for the future. My right hon. Friend was quite right to put his finger on this point but, as others, such as my

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hon. Friend the Member for Woking (Mr. Onslow), pointed out, other realities must be taken into account.
These realities limit very much the scope for a purely British initiative of the kind that my hon. Friend the Member for Norfolk, North-West (Mr. Brocklebank-Fowler) and others suggested. It is because the problems are global and are linked, and because they need the co-operation of all the actors on the stage, that the solutions are difficult, hard to seek, and not quick to find. Let me give a simple example. An agreement to stabilise the market for any raw material—oil or otherwise—simply will not work if it does not have the backing of the majority of the producers and consumers. My hon. Friend the Member for Woking was right to underline vigorously this point about the Russians.
In our view the main questions pinpointed in the Brandt report are issues for an emergency programme, or for more urgent attention. My hon. Friend the Member for Norfolk, North-West saw these problems as requiring action over the next five years. My right hon. Friend the Member for Sidcup was concerned about the next few months. We believe that we must concentrate on these few main issues—energy, food and recycling—in the global negotiations. My right hon. Friend was despondent about that process, but we believe that it can be turned into a real examination of what is needed, with plain talking and a relatively narrow agenda leading to practical results. If it seems that a limited high-level political gathering might help that process forward, we shall be ready to consider it. As my right hon. Friend the Lord Privy Seal said, this would need careful preparation and timing.
Meanwhile, there are some immediate problems, not least of finance, and the adequacy of the banking system, to which several hon. Members have given much attention. I am glad that my right hon. Friend thought that the right way forward was to adapt the present institutions rather than create new ones.
Mr. Brocklebank-Fowler: Will my hon. Friend tell the House whether we can look forward to receiving a detailed analysis of the policies put forward in the Brandt Commision's report and, if so,
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what form that will take? Do the Government expect to publish a Green Paper or a more serious response that the one we had to the debate this evening?
Mr. Marten: I shall come to that point later.
I was just pointing out that it was right to use the present institutions, rather than create new ones. Certainly, it would be a much faster process. The International Monetary Fund stands at the centre of the monetary system. It is already girding itself to help take much more of the strains than in the past. Only recently Turkey, which was mentioned by several hon. Members, agreed with the fund on drawings going far beyond its quota. The normal limit has previously been 300 per cent. of its quota. That was not enough in Turkey's case. The managing director is already acting to mobilise extra funds if required and is exploring new possibilities with the surplus countries and others, as the IMF interim committee decided at the end of April.
The IMF managing director himself stressed the fund's new approach as lately as 3 June. The hon. Member for Stockport, South (Mr. McNally) may care to note this after his most agreeable speech. The managing director said :
"The Fund must be prepared, when necessary to lend in larger amounts than in the past. Also, the structural problem faced by many countries may require that adjustment take place over a longer period than has been typical in the framework of Fund programmes in the past. Further, lending by the Fund must reflect in practice the sort of flexibility, with an awareness of the circumstances of members, that is called for in the Fund's current guidelines for conditionality.
As to the policy approach to be followed by the Fund, this must endeavour to create conditions conducive to improvement in the supply of resources and broadening of the productive base. Such developments will require, of course, supportive measures on the demand site … It is only through the pursuit of such a comprehensive macro-economic approach…that domestic saving can be promoted in the context of a sensible plan of investment. The adjustment programmes we support would thus be an integral part of a longer term strategy for fostering investment and economic growth."
Dame Judith Hart: Surely the Government does not regard it as part of their duty to defend hook, line and sinker the IMF.
Mr. Marten: I do not believe that anyone was suggesting that.

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That shows that the criticisms of the right hon. Member for Stepney and Poplar and the hon. Member for York (Mr. Lyon) are out of date, if they were ever valid at all. They both mentioned, as examples of the inflexibility of the Fund, the difficulties experienced by Tanzania and Jamaica. The hon. Member for York spoke of the IMF having "disgracefully abandoned" these countries. He talked about the IMF giving Tanzania a slap in the face, but although negotiations between Tanzania and IMF officials did, at an earlier stage, reach an impasse, they have now been resumed, and are currently under way again. There is a real hope of reaching agreement on a standby programme. The Government hope that these negotiations will be successful, but that is a matter for the two parties concerned, and it is not for me to prejudge the outcome.
As to Jamaica, the IMF has provided considerable assistance in the past, as has the United Kingdom. It is true that the Jamaican Government have broken off discussions with the fund on a new programme. We hope that these negotiations will get back on the road, but I believe that it would not assist the resumption of negotiations for me to offer further comment at this stage.
There has been a good deal of interest in ideas but forward for some kind of scheme, like the post-war Marshall Plan. We have heard both the similarities and the differences between now and then argued tonight. It is against that background that the Brandt Commission recommends early attainment of the 0·7 per cent. aid target.
The huge scope of the financing needs of the non-oil developing countries is not in contention. What is not agreed is whether the bulk of these transfers can continue to take place through the commercial banks. My right hon. Friend the Member for Sidcup feared that they could not. Others have also pointed to signs that some individual countries may be unable to borrow on the scale that they need.
In fact about 80 per cent. of all debt is owed by about six or seven fairly advanced developing countries. Some of these, such as Mexico, will clearly face no problems. Other borrowers, such as Peru, have already taken steps success-
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fully to adjust. Others again may find that it would be wise to seek early fund help to enable them to redirect their investment plans and resume growth on a rather different path. The World Bank has launched a new scheme for longer-term programme loans to support structural adjustment. These can be combined with medium-term help from the fund, repayable over 10 years. They can also be combined with commercial bank lending through co-financing. In the shorter term, many countries will be able to draw on relatively high reserves.
We do not, therefore, believe that a crisis is upon us in the next few months, or that the changes now being made will be inadequate to prevent a breakdown of the whole banking system. As my right hon. Friend the Member for Sidcup said, we have a major interest in that matter, and we agree with him that we must look to the international institutions for any further necessary adaptation. We shall indeed lend our weight to the work that they are carrying out, particularly on the report's recommendations.
The right hon. Member for Stepney and Poplar and my hon. Friend the Member for Norfolk, North-West asked the Government to consider publishing a Green Paper setting out our detailed views on the report. We have already promised to provide such a detailed paper as soon as possible, I hope by the end of the month—to the sub-Committee on overseas development of the Select Committee on foreign and Commonwealth affairs, of which my hon. Friend is a distinguished member. It will be for the sub-Committee to publish the paper if it wishes. We shall be happy if it decides to do that.
Dame Judith Hart: This is a crucial point for the House. A paper to the overseas development Sub-Committee of the foreign affairs Select Committee is unlikely to reach the Floor of the House for a long time, and then only at the discretion of the Select Committee. We need a statement of Government intent for discussion as soon as the Government have reached a view. Can the Minister give us such a commitment? I am sure that I speak for both sides when I say that that is what the Houses wants.
Mr. Marten: I cannot give the right hon. Lady a commitment here and now

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but I shall certainly look into that point to see what can be done.
Mr. Brocklebank-Fowler: The Select Committee has made clear that if such a document were made available it would enable the Government to publish the document straight away for the information of the House.
Mr. Marten: That would be a sensible solution to the problem.
Mr. Nigel Spearing: I declare an interest as a member of the select Committee and its Sub-Committee. Does the Minister agree that it would be an advantage to the House and everybody else if the Select Committee could question the Government on the memorandum and that that should be done before the Summer Recess? Will the hon. Gentleman bear that in mind, and can he give any indication of the timing of the memorandum?
Mr. Marten: I have just said that we hope to produce the memorandum for the Select Committee shortly. As to questioning people, it is up to the Sub-Committee to summon those whom it wishes to question.
The hon. Member for Greenwich (Mr. Barnett) asked what contributions Britain was making to developing the alternative energy sources of developing countries. We are pursuing an initiative launched by the previous Government, financing a programme of research and development into new and renewable sources of energy for less developed countries. The programme is concentrated mainly on small-scale, low cost sources of energy, adapted to the needs of village communities. As time is pressing, I shall write to the hon. Member about the programme in Bangladesh, to which he referred.
The hon. Member for York rightly said that we should build on what the South already has. He mentioned agriculture in that connection. I agree with him. Here, there are also signs of hope for the poorer countries. Paradoxically, it is the better off, more industrially advanced developing countries that will suffer most from the energy price changes. Like us, they are locked into a pattern of development that depends upon the consumption of hydrocarbons, and they cannot change that pattern without a considerable shift in resources.
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Countries further back on the road have, to some extent, a greater opportunity to choose. That is where emphasis on labour-intensive development, using appropriate technologies, can yield important returns. In no sector is that more vital than in agriculture and the production of food.
Progress was disappointing during the 1970s, especially because of slow agricultural growth in the poorest countries. The 4 per cent. annual growth target that we should all like to see met is still far from achievement. Of course, the darker world prospects also have implications for agriculture, not least on the price of fertilisers and the necessary pest controls. There is a great deal that developing countries can do to achieve faster growth, and I am glad that that has received such attention both in the Brandt report and from special international bodies such as the FAO, the World Food Council and the recent World Conference on Agrarian Reform and Rural Development.
The FAO has underlined the two major policy areas where action is specially needed. The first is the low share of public investment going to the rural and agricultural section, which even in India, with its advanced industries, holds 80 per cent. of the population. The FAO would like to see that share raised to an average of 17 per cent. of public investment in the developing countries.
The second major step would be to improve the terms of trade between the countryside and its farmers and peasants and the urban consumer and the industrial sector. Too often the terms are distorted by subsidies to consumers and industrial investors and by artificially low prices to farmers. When I am travelling in the developing countries and talking about these issues, including the price of food, I always cite the example of the Common Market and its policy of high prices producing a surplus of food. If only the developing countries would latch on and study that, no doubt they would achieve a surplus of food in no time.
Alongside these major policy shifts there is the creation of a proper infrastructure to support agriculture with extension services linked to national and international research work, food storage and pest control, and an efficient system for delivering advice and inputs for the small farmer at the right time. I very

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much welcome what the Brandt report says on all these matters in chapter 8. In our own programme we continue to give great emphasis to agriculture and rural developments. This is not at odds with the Government's decision to give commercial and industrial factors greater weight alongside developmental ones. British business in 1979 captured well over 10 per cent. of all World Bank contracts going to foreign firms for agriculture projects. This is both good business and good development.
The Brandt report quotes several estimates of the external resources that are needed to set up both agriculture and other developments in the countries in the poverty belt of Africa and South Asia. The commission recommends a special action programme of at least $4 billion dollars a year for 20 years in soft aid for these countries. It especially endorses the inclusion of large regional projects on water and soil management and disease eradication, to be supervised by new regional machinery and backed by greater technical assistance. We shall continue to do what we can for these countries, which already occupy a large place in our own aid programme, not least because so many of them are our Commonwealth friends.
We have some doubts about the sweep of the Brandt recommendation for an action plan. The FAO has clearly advised that the best way to faster agricultural growth is not by new jumbo projects, which make heavy demands on scarce money and staff, but by small-scale schemes to make more intensive use of presently cultivated land. We cannot overestimate the importance of speeding up agricultural growth. Without greater food production an increasing number of human tragedies will rise to meet us through famine, natural catastrophe and civil war.
The real value of aid is its effect on long-term development. This is what eventually enables the recipients to stand on their own feet and even to help rescue others. Development takes time and it cannot be switched on and off. We want more flexibility in our programme. We do not want to impair the progress of long-standing and valuable investment projects.
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The hon. Member for Kingston-upon-Hull, West (Mr. Johnson) asked what we intended to do for the victims of war and famine in the Horn of Africa. I am going to Khartoum later this week to attend a conference organised by the Sudan Government on refugee resettlement problems. I have decided to allot 5,000 tons of grain from small reserves for emergencies in 1980 to help feed refugees in Somalia. I gladly take this opportunity to announce that decision. We have also committed £850,000 to the appeal of the United Nations High Commission for Refugees. We have committed over £110,000 to help United Nations agencies and British charities to get food and medical services to northern Uganda, and we are considering urgently what further bilateral help might be possible.
We are finding our share of the cost of the Community's programme for these countries. That includes nearly half a million pounds for emergency aid in Uganda and 10,000 tons of cereals and 600 tons of butter oil for refugees in Somalia.
The unique value of the Brandt report is the clear way in which it paints a picture of the interlocking problems that face the world. We do not believe that the commission has found all the answers to the problems; nor do all the answers interlock. However, it is far better to have a wide range of ideas and suggestions to explore than a dearth of them, and I am grateful for all the views that have been expressed in the House, which the Government will consider——
It being Twelve o'clock, the motion for the Adjournment of the House lapsed, without Question put.

WALES (THE BERWYNS)
Motion made, and Question proposed. That this House do now adjourn.—[Lord James Douglas-Hamilton.]
12 midnight
Mr. Delwyn Williams: I find myself in the strange position of being a committed conservationist opposing a conservation measure. I hope to explain that curious dilemma. I wish to draw the attention of the House to the indiscriminate blanket conservation order proposed by the Nature Conservancy Council which, if approved, will affect no

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less an area than 53,000 acres in the counties of Powys, Clwyd and Gwynedd. The area affected is basically the Berwyn range of mountains and foothills and a large tract of land to the north and south of Lake Vyrnwy in my constituency.
The Nature Conservancy Council was established by the Nature Conservancy Council Act 1973. It is funded entirely by grants from the Secretary of State for the Environment, but, regrettably, its meagre budget bears no relation to the extent of its powers. Speaking as a countryman born and bred in a rural area, I know that the vast majority of farmers are conservation-minded. I would go so far as to say that the vast majority of people in this country are conservation-minded. It is right that we should be.
We, the human species, are the trustees of our land for the animal kingdom. In recent years, one has to say that the animals would have a substantial action for a breach of trust if they sought legal advice. Man daily destroys their interest by despoiling their natural habitat, by polluting the water on which they depend and poisoning, by chemicals, the grass and foliage on which they feed, and by a myriad of other mindless acts against which the animal kingdom fights to survive. For a long time, that fight has been a losing one, made more difficult by the failure of some species to evolve successfully in changing circumstances.
The Nature Conservancy Council Act was one of many measures taken to redress the worsening balance against nature. It was, and is, welcomed by all civilised people. However, the human indigenous species of upland areas struggle to survive as well in their native indigenous habitat. So, too, is the balance of modern life swinging against them, with increased costs, especially prohibitive transport costs, in remote rural areas. They struggle for a living, and now 110 families in the area concerned face a diminution in the value of their land and their expectancy of income as a result of this proposed, ill-conceived conservation order.
I understand that the council's argument is that the proposed site is of special scientific interest because of its bird life and botanical richness. The main birds are the hen harrier and the merlin. I accept that the hen harrier needs more
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land for its traditional prey of voles and small birds, but I do not accept that 20 pairs need 53,000 acres to support them. The hen harrier is not indigenous to the area. It is essentially a bird of the northern moorlands. It has been shown to be a resilient and adaptable breed. It has recovered to a great extent because its main enemy, the gamekeeper, is in more danger of extinction than is the hen harrier. Newly afforested moorland provides a valuable new habitat. It is estimated that 600 nests a year are constructed in this country. The hen harrier is also more numerous in other parts of Western Europe.
The merlin has a total Welsh population of about 150 pairs, representing a quarter of the British total. The Berwyn area contains 22 pairs. However, the merlin also occupied the Llanbrynmair moors and has shown that it can adapt to live in afforested areas. Many people feel that it faces a much greater threat from chemical pesticides than from loss of habitat. I do not wish to go into the merits of the argument tonight. Suffice to say that the area north of Moel Sych is sufficient for the birds of prey to survive. I urge the Minister of State to confine the area to the land north of Moel Sych.
The merlin is less feared by gamekeepers than the hen harrier, feeding, as it does, on pipits, twites and ring ousels, a piece of information, Mr. Deputy Speaker, that I am sure will rivet you at this hour of the night.
I think that it is accepted that the steady conversion of a grouse moor to sheep walk will aid the decline of the red grouse and the merlin, which depend on heather communities, but the good news is that the merlin and, in particular, the hen harrier are no longer the target of gamekeepers, who have been the greatest danger to them for a long time.
Other species involved are the golden plover, which has a population of over 30,000 pairs, so that it is not in any immediate danger, and the short-eared owl, which has only 20 breeding pairs in Wales out of a total of 1,000 pairs. Indeed, the increase in afforestation is on its side.
The plant species have already been dealt with by the special scientific site at Moel Sych. This was the justification for it—to protect hare's tail cotton grass,

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bog moss, cross-leaved heath, cranberry, and so on. I cannot think that they are entirely rare or absolutely unique to this area. The majority of them could be preserved in the area already designated and by "gem" sites.
It is absolutely vital that the Nature Conservancy Council gets the good will of the farming community. It may well be claimed that tenants and owners were consulted but, to put it mildly, the letter received by the farmers was completely misleading. If it tells the Welsh Office that only a handful officially protested, let it wait and see what happens when the true facts are known.
The SSSIs put constraint upon occupiers. They cannot affect grants. Indeed, for the Ministry to say that the task of the Nature Conservancy Council is purely advisory is to mislead farmers and tenants. At Bowness Common, in Cumbria, a raised mire caused the refusal of grants, which embarrassed the farmer concerned. Irrespective of the mires and the question whether an area is suitable is the inevitable delay and uncertainty while these matters are thrashed out. Initially, the Nature Conservancy Council was only consultative, but now other statutory bodies have to pay regard to what it says. For instance, grants to the Forestry Commission can be dependent upon the outcome. Indeed, in the Berwyns in the future capital grants on buildings, fields, drainage, fences, walls, gates, shelter belts, and so on can all be in danger of being prejudiced by this blanket order.
Already one-fifth of Wales is designated as an area of national park, an area of outstanding natural beauty, or an SSSI. This is over one-fifth of the land mass of my nation.
In its letter to the Farmers' Union of Wales, the Welsh Nature Conservancy Council spoke of coming to mutually acceptable arrangements with farmers, and talked of compensation, but the truth is that it has no money to pay that compensation. It speaks with a velvet tongue but does not have the bank balance to back up what it promised the farming community.
It is the struggling farmers of Mid-Wales who will pay the price of conservation for the majority of the town dwellers who come into our beautiful area to drink in the beauties of the countryside but who do not pay the price. If the
1306
Raynor proposals on agriculture are implemented, farmers in designated areas will be further discriminated against, in that the present prior approval system for capital grant-aided works in conservation areas will be scrapped, and in the future farmers will be obliged to secure the agreement of the relevant authority for their proposed farm works as a precondition of eligibility.
I know that Mr. John Hooson, the Welsh NFU chairman, and Mr. Julian Fenwick, the FUW chairman, are avid and practical conservationists. We are lucky to have them, and I ask my hon. Friend the Minister to respond in a positive way to their good will. I ask him to take such a course of action that we who live in Wales will continue to live in an area where we can still hear the mew of the buzzard and see the lofty eminence of the red kite and the merlin, and of all the other birds that enrich our heritage and that it is our bounden duty to protect.
We shall not see these birds if the farming community have this conservation order implemented against them. We depend very much on the farmer as the guardian of the countryside. If we militate against him by imposing an ill-advised statutory duty, what will he do? He will look at the birds, and if he is angry he will perhaps shoot them out of the sky. This will be a tragedy that I, as a conservationist, do not want to see. I implore my hon. Friend to take such a course of action in the future as will preserve the good will of the farming community—not just in Mid-Wales but in the whole of the United Kingdom. If the indiscriminate blanket conservation order is allowed to go through in my area it will be repeated throughout the United Kingdom and the loss will be to those who believe in conservation and to future generations. We shall lose that vital good will of the farmer, the farm worker and those concerned with the land.
There are grants available for such items as shelter belts, which can be obtained by any farmer. The Agricultural Development and Advisory Service will give him advice on where to plant them for the benefit of bird and plant life. If I do nothing else this evening. I hope that I shall succeed in bringing that to the attention of the farming community in the United Kingdom.

1307
At the beginning of my speech I pointed out my terrible dilemma, namely, to speak against a conservation order. The order will militate against the interests of conservation. I cannot urge upon the House too strongly to take note that such blanket conservation orders do nothing but harm, and militate against those who so passionately wish to preserve our heritage for future generations.
12.11 pm
The Under-Secretary of State for Wales (Mr. Michael Roberts): I begin by saying that I am, as are no doubt a good many other hon. Members, most grateful to my hon. Friend the Member for Montgomery (Mr. Williams), for raising at this time the Nature Conservancy Council's proposal to schedule about 53,000 acres of the Berwyn mountain range in North Wales as a site of special scientific interest.
I welcome this opportunity, which not only allows me to discuss the proposal itself, as it affects that upland area of Wales, but gives me the chance to clear up one or two misconceptions over what is involved. As right hon. and hon. Members will know, the Nature Conservancy Council is the prime agency of the Government charged with the specific responsibility for nature conservation and for disseminating advice and promoting its understanding throughout Great Britain.
I do not think that it would be amiss if I were to remind hon. Members that the NCC was established by statute in 1973 to replace one of the then committees of the Natural Environment Research Council, and to be independent of that council. The legislation requires the Nature Conservancy Council to discharge several functions that previously had been the responsibility of the NERC, and among those, as right hon. Members will be aware, is the duty of notification under section 23 of the National Parks and Access to the Countryside Act 1949. That duty requires the NCC to notify local planning authorities where it is of the opinion that an area of land is of special scientific interest, whether by reason of the flora, fauna or geographical or physiographical features to be found or seen there. In order that the Nature Conservancy Council could properly discharge that function it was given a specific power whereby research in relevant
1308
matters could be commissioned or sponsored, and that leads me to the subject of the matter that we are discussing tonight.
The matter that my hon. Friend raised has aroused the considerable interest not only of right hon. and hon. Members but of many individuals and organisations with an interest in land use. Not the least of those are the farmers, landowners and their representatives. I must not forget to mention the particular interest shown by those with conservation aspects in mind.
In view of the concern that prompted my hon. Friend to raise the issue—and I congratulate him on the depth of knowledge that he has shown—I think it only right that I should convey to the House my understanding of the background that preceded the NCC's recent announcement that it proposed to schedule and notify such a large area of upland Wales as a site of special scientific interest. It is a large area. If I may make a short digression, the Nature Conservancy Council has indicated that apart from the New Forest, with an area of 71,000 acres, and a few coastal sites such as the Wash, at 163,000 acres and Morecambe Bay, which covers about 73,000 acres, the Berwyn site is not only the largest in Wales but is probably the largest inland SSSI yet proposed for notifying in England and Wales.
Over a period of many years the Nature Conservancy Council has been under some pressure to give particular attention to certain areas of Wales that were of ornithological significance, and in particular the upland areas of the North and South Berwyns and an area of Llanbrynmair Moors.
In 1977, and after publication of its two volume "Nature Conservation Review", which, incidentally, describes and grades virtually all of the important conservation sites in England, Scotland and Wales that had been evaluated up to the time of publication, the NCC came under pressure from the Royal Society for the Protection of Birds to schedule certain areas which, after many years of investigation by its members, the society believed to be of significant importance to the conservation of certain species, particularly the predatory birds. The council considered the information made available by the society and compared and evaluated this against the findings of its

1309
own specialists, and a number of joint investigations were put in hand.
As a result of these ornithological investigations the council found that sources of potentially serious conflict between the competing interests of agriculture, forestry and conservation might exist. As soon as it reached these conclusions it decided that it would immediately discuss its findings with the Ministry of Agriculture, Fisheries and Food and with the Forestry Commission. The first of a number of meetings between officials of the three agencies took place in October 1978 and the outcome, as my hon. Friend is aware, was an agreement that the individual interests would best be served by the commissioning of an independent appraisal of the problems likely to arise where their interests would come into conflict.
The appraisal began in December 1978, on the appointment of Mr. R. G. A. Lofthouse, a former chief surveyor of the Ministry of Agriculture, Fisheries and Food, with over 30 years of experience in agricultural land use problems, I should point out that the choice of Mr. Lofthouse was unanimous.
All parties acknowledged the urgency of the matter, and I think it a commendable achievement that Mr. Lofthouse was able to complete and submit his report, on what was indeed a complex matter, within 12 months of his appointment. The report has, of course, been the subject of a good deal of scrutiny and discussion and I believe that, as a result, a good measure of agreement now exists between the three agencies concerned. My hon. Friend will be pleased to know that it is intended that this report will be circulated in the near future.
What is, of course, significant in all this is the commissioning of the report itself, which is the first major example in Wales of a concerted and determined attempt by the Government agencies concerned to achieve a balanced land use policy in order that sources of potential conflict are at least minimised, if not eliminated altogether.
As I have said, the special study began in December 1978. While it was in progress the NCC continued with, and I believe satisfactorily concluded, its scientific investigations and examination of the survey data that had been collected by the RSPB.
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Now that it has satisfied itself of the scientific value and extent of the ornithological interest and other relevant matters, the council will, of course, be open to a challenge that it is in breach of its duty under the National Parks and Access to the Countryside Act 1949 if it does not schedule the area and formally notify the relevant local planning authorities of that fact. As a preliminary step, in February the NCC communicated its proposals to all the land user interests that it believed would be affected, and I understand that the only outstanding matters are the clarification of a few boundary positions that prevent formal notification being issued now. However, the NCC expects to be able to take this final step in the near future.
It is important that right hon. and hon. Members should know that the council does not lightly undertake the scheduling of an area of land as a site of special interest. The council has laid down a very strict and comprehensive set of procedures for its officials to follow. They are designed to prove conclusively the scientific value of the area under consideration, and its officials are required to be meticulous in their observation of those rules. They must obtain all information about the site from whatever sources are available—county trusts, local societies and perhaps other knowledgeable organisations and individuals.
Ownerships have to be determined and, if permission can be obtained, the site visited. Owners and occupiers of the land concerned must be informed of the purpose of the visit and of the statutory duty placed on the NCC. The value of the area must be assessed in relation to other sites, and if the site is then considered worthy of scheduling, officials seek the co-operation of the owners of the land by meeting and explaining to them the reasons for scheduling. Relevant Government Departments, statutory authorities and local planning authorities are also consulted before scheduling properly begins.
When the stage at which proper maps and schedules are available is reached, the NCC distributes copies to all known interested parties in order to obtain their further observations on the proposal. A period of at least three weeks is allowed for the return of comments before the final steps towards formal notification are taken, but the time can be extended if desired.

1311
That is the position achieved by the NCC for its Berwyns proposal, and I am assured that its officials have made regular personal contact with more than 90 per cent. of those who are likely to be affected. A small percentage have, however, steadfastly refused to discuss any part of the matter. Scheduling is, therefore, a very full and careful process. It cannot be hurried, and several years may be needed for the detailed operations insisted on by the NCC.
The extent of the area proposed for notification in the Berwyns has drawn expressions of alarm from both farming and conservation interests. It would therefore be as well for me to mention, by way of information, the following facts : the area of land covered by the special study amounted to about 157,000 acres, and that encompassed the land of particular concern to the RSPB, which was about 67,000 acres, whereas the area proposed for notification is 53,153 acres in extent.
It has been made very clear by my hon. Friend and by the representations that my right hon. Friend and I have received that the major concern of farmers and their representatives—not only those affected by this proposal but generally—that their major concern is the effect that scheduling and notification of their land as SSSI may have on the successful outcome of an application for an agricultural capital grant to improve that land. Here, I should perhaps take the opportunity to make clear that notification of an SSSI is merely a statement of the scientific interest of the land concerned. No direct constraints are imposed on the owner, lessee or occupier as a consequence. It is only in cases of grant application that such notifications have any bearing, and then only if a conflict between the agricultural and conservation interests is not capable of being resolved by negotiation between the parties.
I think it worth noting that to date negotiations in which my right hon. Friend's agricultural advisers have been involved have, in the majority of cases, resulted in the resolution of potential difficulties. Each case is looked at on its merits and only rarely has a valid application for agricultural grant been refused solely for conservation reasons. There are currently 441 scheduled sites in Wales, covering about 446,000 acres.
1312
Only a proportion of this land, however, is classed as agriculturally capable of improvement and consequently the number of grant applications that have been made is limited. Even so, agreement was generally found.
Of the Berwyn area it has been estimated that between 30 and 40 per cent. would be excluded from grant considerations because it is common land, and only about 10 per cent. of the remainder is likely to qualify as being readily improvable in agricultural terms. The area of potential conflict between agriculture and conservation in the Berwyns would therefore seem to be relatively small, and the normal consultation process should prove adequate in the future as in the past.
My hon. Friend referred to the Government's proposal to abolish the present system of prior approval, and I think I should explain that what is intended is that the onus for any necessary initial consultations should be placed on the farmers in sensitive areas the consultations would of course involve authorities such as the NCC. If there is any disagreement it will be a requirement that the ADAS be brought into the consultation before work starts, and the aim would be that any mediation should be completed within two months.
If agreement is achieved, work could proceed; otherwise it would be for my right hon. Friend, as now, to consider the merits of the case in order to decide whether grant should be paid or withheld. In a case where there is initial disagreement a farmer would be advised that grant could be at risk should he proceed in advance of successful mediation or a decision in favour of his claim.
My right hon. Friend has responsibilities for agriculture, forestry and conservation in Wales but is of course required to consult the Nature Conservancy Council in all cases involving an application for agricultural grant for the improvement of land scheduled by the NCC as an SSSI. The decision on whether the agricultural interest outweighs that of conservation and, hence, whether grant should be paid is, however, his.
One matter apart from agricultural grants that I think I should mention is the fact that under section 15 of the

1313
Countryside Act 1968 the Nature Conservancy Council has the power to give financial support to those owners, lessees or occupiers who are prepared to manage their land in a manner that will be conducive to nature conservation. The amount of consideration paid in these circumstances would of course be a matter for negotiation between them.
It is apparent from his words tonight that my hon. Friend has a deep concern for the farming community. I therefore trust that what I have said has gone some way towards the alleviation of that concern. What I should like to stress, in conclusion, is that my right hon. Friend and I are looking forward with considerable interest to the developments that could arise from the widest possible consideration of the implications of the Berwyn mountains study.
As I have already said, within Wales my right hon. Friend has personal responsibility for conservation, forestry and agriculture—the three important
1314
activities with the major potential for conflict in a rural upland area. Actual conflict in these matters can be costly, time-wasting and conducive to disputes, so any new thoughts that can be applied to avoiding the chance of conflict before it arises are of the greatest interest to us and, I venture to suggest, of considerable interest for other parts of Great Britain.
I believe that the Berwyn mountains study might well be the beginning of that new thinking, directed towards a land use strategy that would reconcile the different interests on a basis of open agreement. It is certainly too soon in the day to be confident of the outcome, but I am quite clear that this is a most valuable fesrh approach and that with adequate good will from all sides it can be turned into an exciting new strategy model.
Question put and agreed to.
Adjourned accordingly at half-past Twelve o'clock.

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

DIEGO GARCIA: USA MILITARY CAPABILITY
Lord BROCKWAY: 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 the State Department of the USA informed the Foreign and Commonwealth Office, as required by the Anglo-American agreements of 1966, of its intention to send a task force of seven naval ships, carrying tanks, troop-carriers and other military equipment, to the base at Diego Garcia.
The SECRETARY of STATE for FOREIGN and COMMONWEALTH AFFAIRS (Lord Carrington): My Lords, the United States has a long-term programme for strengthening its military capability in the Indian Ocean area. This programme includes the pre-positioning of equipment to be available for use by forces deployed rapidly to the region in an emergency. At Diego Garcia such equipment will be held in converted merchant ships which will periodically be rotated within the Indian Ocean area. They do not constitute a naval task force. Her Majesty's Government were fully consulted over the proposal to send these ships to Diego Garcia in accordance with the provisions of the 1976 exchange of notes.
Lord BROCKWAY: My Lords, may I ask the Minister whether it is not the case that the 1966 agreement required that this Government should agree to other than modest routine military movements? Was this not much greater than that? If the
820
British Government had previous consultation, did they agree to an action which was not in conformity with the policy both of this Government and of our European allies against military threats and intervention?
Lord CARRINGTON: My Lords, the noble Lord is quite right. The 1976 agreement provides for consultation between the two Governments over use of facility in other than normal circumstances.
Lord SHINWELL: My Lords, may I ask the Foreign Secretary whether the decision referred to in the Question was taken by NATO? Does this mean that NATO has now changed direction, not confining itself to the situation in Europe but taking a rather global view of the situation?
Lord CARRINGTON: No, my Lords; this is a decision taken by the United States.
Lord SHINWELL: My Lords, does that mean that it has not been supported by NATO?
Lord CARRINGTON: My Lords, the decision was taken by the United States. I hope that the NATO allies will support it.
Lord BROCKWAY: My Lords, the Minister has not answered my question. I asked whether there was previous consultation and agreement before the American movement. Was this action not in contravention both of the United Kingdom policy and European policy against military threats and intervention?
Lord CARRINGTON: No, my Lords. This was done with the agreement of the British Government.

SMALL BUSINESSES: PAYMENT OF BILLS
2.39 p.m.
Lord BRUCE of DONINGTON: 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 they propose to take to

821
redress the growing injustice experienced by thousands of small businesses who now have to wait, on average, some 70–80 days to be paid for business debts owing by large companies and corporations, local authorities, state industries and Government departments; and who are now forced to pay high interest rates for loans to preserve their cash flows, and who are increasingly threatened by bankruptcy.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard): My Lords, the Government have every sympathy for small businesses when payment for their goods and services is unreasonably delayed. For the Government, I can repeat what my noble friend the Minister of State for Defence said in the House on 24th March: Government departments are under standing instructions to settle all bills as promptly as possible. As regards state industries, sponsoring departments are reminding those industries of the need to settle bills promptly.
In the private sector the CBI are pursuing a similar campaign with their larger members and we strongly endorse their action. Indeed, I would take this opportunity to impress again on all large organisations, be they public or private, the need to have special regard for the position of small firms when making payment for goods and services.
Lord BRUCE of DONINGTON: My Lords, is the noble Lord aware that his Answer will bring little satisfaction to small businesses in the country which are suffering from this trouble at the present time? Will he draw to the attention of his right honourable friend the Minister of Transport the situation regarding contractors and sub-contractors working on the M.11 whose bills in many cases have been delayed for over three years? Will he consider as a possibility the step of drawing to the attention of his honourable friend in another place the code of fair trade in regard to practices of this kind? Will he finally bear in mind that, owing to the attitude of the Government, the situation is rapidly being created whereby large firms, although they apparently cannot afford to pay their bills to small businesses, nevertheless make offers for their acquisition?
Viscount TRENCHARD: My Lords, I do not think that I can add to what I have said in my first Answer. If the noble Lord will give me details of his allegations in relation to the M.11, I will make sure they are considered by my right honourable friend the Minister of Transport. Fair trading provisions exist in law and in codes of practice. The Institute of Purchasing and Supplies has, I believe, recently also issued one. The CBI, as I have mentioned, is working on it. As to whether this practice is as widespread as noble Lords believe, I find this a little perplexing from my industrial background. It is well known in business circles that long credit is not the biggest advantage of small firms and therefore it is in the interests of all larger buyers to pay as promptly as possible and certainly within the terms laid down.
Lord DERWENT: My Lords, would my noble friend say what is the normal practice of Government departments when they find that one of their contractors or sub-contractors is not paying as punctually as it might?
Viscount TRENCHARD: My Lords, I think it must depend on the circumstances. If noble Lords will provide those circumstances, certainly sponsoring departments will be ready to discuss the matter with the parties concerned.
Baroness SHARPLES: My Lords, is my noble friend aware that I have received a considerable amount of correspondence—well over 100 letters—from small businesses? A great number of these employ perhaps only 35 people each and they have a black list. The very large companies who do not pay within the recognised time—perhaps 90 days is in the contract and sometimes they do not pay for as long as 120 days—remain on the black list until they pay their bills within the time prescribed.
Viscount TRENCHARD: My Lords, again, if my noble friend would like to give me details it will certainly help us when we come to consider the recommendation of the Law Commission on the possibility of automatic interest after a certain date. If she will give me the

823
details she has spoken of, it will help the Government to consider that report.
Lord LEE of NEWTON: My Lords, is the noble Lord aware that a Select Committee of this House has received evidence that Government departments are delaying payment of their debts to small firms? Is this because of the high interest rates that they can gain out of them?
Viscount TRENCHARD: No, my Lords, it is not in relation to high interest rates, and if there is evidence of the wilful delaying of payments, then I should very much like to hear it. Like many other large organisations today, I am aware that some Government departments, because of difficulties concerning either computers or staff, have got behind on payments at certain times; but there is no policy of wilful delay on the official terms. We did actually defer the payment of regional grants, which went through Parliament, by four months.
Lord KILMARNOCK: My Lords, may I ask the noble Lord whether he is aware that in the public evidence given by one of the joint stock banks to your Lordships' Select Committee on Unemployment this problem was particularly stressed by a main high street bank in relation to small business? In view of that, will not the Government perhaps consider taking special powers as regards this malpractice?
Viscount TRENCHARD: My Lords, not other than in the context I have mentioned, when we come to consider the Law Commission's Report.
Lord BRUCE of DONINGTON: My Lords, is the noble Lord aware that the replies he has so far given in this House are thoroughly unsatisfactory and do not indicate any real interest in, or desire to alleviate, the plight in which small firms find themselves? Will he take note and investigate further a practice, to which reference has already been made in the Financial Weekly, of large firms placing on deposit at the current high rates of interest monies they would otherwise have to pay to their small contractors or
824
sub-contractors who themselves have to pay extortionate rates of interest under Her Majesty's present Administration in order to keep their working capital intact?
Viscount TRENCHARD: My Lords, I think that when the noble Lord comes to read the report in Hansard he will not be able to substantiate the accusation he has made. We are certainly extremely concerned about this subject, as my reply made very clear. We are seeking to ascertain how widespread the matter is, which was the substance of all my supplementary answers, and the noble Lord will no doubt take note of the degree to which Government can indeed control transactions between suppliers and the degree to which individual suppliers—even small suppliers, with good products to offer to large organisations—are not already in a position, if this happens to them once unnecessarily, to prevent it from happening again. But there is the one area in which we have positively undertaken to look at the recommendation of the Law Commission.

FUEL BILLS: ASSISTANCE TO PRIVATE PERSONS
2.48 p.m.
The Earl of LAUDERDALE: 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 was their total expenditure in money of the day on help to private individuals in meeting their fuel bills in each year since 1974.
Lord CULLEN of ASHBOURNE: My Lords, rather than read out a table of figures, I will, with permission, place them in the Official Report. The estimated annual equivalent of the heating additions to supplementary benefit paid in November 1974 was £20 million. From November this year the Government will be spending over £200 million a year on help to poor consumers with their fuel bills.
Following are the figures referred to:

Estimated annual equivalent of heating additions to supplementary benefit in payment in November-December; and, from November 1979, of the fuel enhancement to family income supplement

Benefit expenditure on the Electricity Discount Scheme for the Winters 1976–77, 1977–78, 1978–79

£ million

£ million

1974

20

—

1975

35

—

1976

61

11·1

1977

83

21·6

1978

93

34

1979

111*

—

1980(projected)

200

—

*The 1979 figure is known to be a low estimate of annual expenditure because, when the statistics were collected in November implementation of the age-related heating additions introduced in the autumn package of help with fuel bills had only just begun.

The Earl of LAUDERDALE: My Lords, in thanking my noble friend, may I ask whether he would not agree that this tenfold increase, achieved within a year of the new Administration taking office, is greatly to the Government's credit?
Lord CULLEN of ASHBOURNE: My Lords, I am grateful for the supportive remarks of my noble friend.
Lord STRABOLGI: My Lords, will the noble Lord confirm that the agreed code of practice over disconnections will be sympathetically adhered to, as people with lower incomes are finding it increasingly difficult to pay their fuel bills with the escalating costs since the present Government came into Office?
Lord CULLEN of ASHBOURNE: I have no doubt about it, my Lords.
Lord KILMANY: My Lords, arising from that reply, may I ask my noble friend what further help is being considered in this direction?
Lord CULLEN of ASHBOURNE: My Lords, a study is in progress on the scope for further initiatives to help the elderly and disabled to save fuel by
826
insulating and draught-proofing their homes and by making more efficient use of heating appliances.
Lord GRIDLEY: My Lords, with regard to his last answer, may I ask my noble friend about help for the disabled? Can he tell your Lordships specifically whether that help will apply to those who have suffered disability in war, or as a result of war, and whether it will apply to a different category of disabled people who have suffered during peace?
Lord CULLEN of ASHBOURNE: Yes, my Lords. It would certainly apply to all people who were disabled in wartime. The fuel package directs particular help to the disabled. The merging of the middle and upper rates of supplementary benefit heating addition, at the considerably enhanced new, higher rate of £3·40, will benefit many disabled people who previously qualified for the middle rate, to the tune of an extra £78 per year each. Also, under a fail-safe arrangement which was announced on 27th March, supplementary benefit claimants or their dependants who are in receipt of attendance allowance, constant attendance allowance or mobility allowance, will automatically be entitled to the new higher rate heating addition.
Lord AVEBURY: My Lords, will the noble Lord agree that if higher standards of insulation were to be prescribed for new dwellings, and more resources were to be made available to local authorities and individuals to improve the standards of insulation in existing dwellings, a considerable fraction of the £200 million, which he mentioned as going to the poorer consumers, could be saved? Also, what cost benefit analyses have been undertaken by the Government, so as to reach the conclusion that the present levels of insulation prescribed, and the present levels of grants to local authorities and individuals, are the optimum?
Lord CULLEN of ASHBOURNE: My Lords, I regret that I cannot answer those detailed questions, but a study is in progress on this matter.
The Earl of LAUDERDALE: My Lords, is the noble Lord aware that his answers will give great satisfaction, and will provide information about a dark

827
corner which is open to propaganda by the other side? Is he aware that this surely shows that we are spending not only more, but more wisely than our predecessors?
Baroness PHILLIPS: My Lords, would the noble Lord not agree—
Several noble Lords: Order!
Lord CULLEN of ASHBOURNE: My Lords, I really was not going to say anything very much, except to thank my noble friend.
Baroness PHILLIPS: My Lords, I should not like to be in any way ungracious enough to spoil those thanks. I merely want to say that, surely, the increased money being paid out is because the cost of the gas and the electricity has gone up. So, in fact, no extra money has been paid out.
Lord CULLEN of ASHBOURNE: My Lords, the noble Baroness will realise that the scheme that we are carrying out now will operate for all forms of fuel and not purely for electricity, as did the last Administration's scheme.

THE OLYMPIC GAMES: AEROFLOT LONDON AIRPORT SERVICES
2.53 p.m.
The Earl of KIMBERLEY: 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 will stop Aeroflot operating into and out of London Airport till after the finish of the Olympic Games in Moscow.
Lord TREFGARNE: No, my Lords. We have an air services agreement with the Soviet Union which has the status of a treaty. Under that agreement, Aeroflot is entitled to operate services between the Soviet Union and the United Kingdom, as is British Airways. Her Majesty's Government are not seeking to intervene in trade with the Soviet Union where this can be justified on commercial grounds, and we take the same approach to air services.
The Earl of KIMBERLEY: My Lords, I thank my noble friend for that Answer. Am I right in thinking that the air services agreement does not apply to charter flights which Aeroflot might apply for; and, if so, could he give details?
Lord TREFGARNE: My Lords, it is true that charter services are not covered by the air services agreement. They would need specific approval, and it has been made clear that if such applications are made they will be considered at the highest level.

BUSINESS
Lord DENHAM: My Lords, with the leave of the House, at a convenient moment after 3.30 this afternoon, my noble friend the Foreign Secretary will repeat a Statement on the Venice meeting which is being made in another place.
It may also be for the convenience of your Lordships if I announce that dinner will be available this evening at the usual time. The Committee stage of the Social Security (No. 2) Bill will be adjourned at approximately 7 o'clock for about an hour, and the Second Reading of the Gas Bill will be taken during this adjournment.

THE NEW HEBRIDES: STATE OF EMERGENCY
2.55 p.m.
Lord CARRINGTON: My Lords, with your Lordships' permission, I shall make a Statement on the New Hebrides. On 11th June, following the shooting of a prominent Opposition Deputy during a demonstration on the island of Tanna, the New Hebrides Government asked the two Resident Commissioners to recommend to their Governments the despatch of British and French forces to the New Hebrides. This request was made during the course of a Cabinet meeting, and both Resident Commissioners agreed to make such a recommendation to their respective Governments.
The Chief Minister's understanding of their agreement was later confirmed in writing. It was in response to this joint recommendation that the French decided

829
to send some gendarmes from New Caledonia. They informed us of this decision. It was also in response to the joint recommendation and to match French action that we decided to send a contingent of the Royal Marines, in order that we might be in a position to act jointly, should the need arise, with the French gendarmes. We informed the French of this decision.
On 12th June, the French Government decided to withdraw their gendarmes from the New Hebrides, and did so that day. On 15th June, the French Resident Commissioner made a formal protest to the British Resident Commissioner about the despatch of the Royal Marines. In deploying our troops in Vila, we are not only demonstrating our willingness to live up to our obligations, but we are satisfied that we are acting in accordance with the 1914 Protocol which governs the joint administration in the Condominium.
My honourable friend the Minister of State for Foreign and Commonwealth Affairs is seeking an early meeting with M. Dijoud, the responsible French Minister, in order that we may clarify our joint approach to the problems in the New Hebrides. Meanwhile, it remains the intention of Her Majesty's Government to do all in our power to promote a peaceful solution to the problem, to support the democratically elected Government and to safeguard the integrity of the New Hebrides.
2.57 p.m.
Lord GORONWY-ROBERTS: My Lords, the House will be grateful to the noble Lord for making that Statement and, I think, generally in support of the attitude that the Statement projects. I myself must confess—and I am not the only one—to a certain sense of astonishment as to the French reaction, particularly in the last two or three days. Here we have two friends and allies of long standing, who have been co-operating with considerable success in a difficult situation in the condominial control and government of a dependency, and, after nearly three years of progressive consultation, in which I myself was very glad to take part at one time, reaching a constitutional position of agreement with all the represent-
830
ative bodies in the New Hebrides—that is, representative in the democratically elected sense—both francophone and anglophone, as to the timetable for an orderly and constitutional move into independence.
That was done to the great credit of both Governments, French and British, with the full agreement of Ministers on both sides. Unfortunately, certain elements attempted to disturb the integrity of the new state and, clearly, under the 1914 Protocol, and most certainly under the recent agreement of 3rd June last, which the two Ministers signed, such a situation obliged both condominial partners to take whatever steps were necessary: first, by seeking a peaceful solution; and, secondly, by putting into effect police action, if that was necessary. Indeed, it was the French Government that took the initiative. They were in a better position, territorially, to send some 55 gendarmes into the New Hebrides. They began it, by agreement with us. We followed suit, playing our part. At that point, it seems that our other partner withdrew their own contribution and have formally protested to us because we played our part.
There is a sense of mystification and of acute concern on two points: first, that there should be this sudden lack of agreement between the two partners after coming to the point of agreeing to the constitutional move forward to independence and the dates agreed for it—that is a serious matter indeed; secondly, that the situation should, because of that lack of co-operation at this late stage, not only exacerbate the dangers in the New Hebrides themselves, but, as I said earlier, perhaps encourage other movements, although we hope not, in the many other island states in the Pacific. And the Pacific is full of them. The best efforts of the British Government, whatever Government have been in power, have been exerted in order to hand over such archipelagic territories to independence with their territorial integrity assured, and we have succeeded very well indeed. It would be a very great pity if the New Hebrides not only itself underwent a process of breaking apart but also, by so doing, perhaps set on foot other equally disastrous movements in other parts of the Pacific.
Knowing a little about this matter, I can only say that I share the mystification of

831
the Government. I am sure that we on this side of the House will wish to support the noble Lord in every effort he makes now to restructure—I think that is the appropriate word—Anglo-French co-operation so that the New Hebrides can speedily return to course; namely, the movement, on a constitutional and democratic basis, to full independence on the due agreed date.
Lord BANKS: My Lords, I should like to join in thanking the noble Lord the Foreign Secretary for making this Statement this afternoon. When a Statement on this matter was repeated in the House on Friday of last week I asked for an assurance that the British and the French were in agreement on how to deal with the situation. The noble Lord, Lord Trefgarne, was reassuring. He said that the British and the French were in the closest touch, and in answer to the noble Lord, Lord Leatherland, he said that that meant in the closest agreement. Yet events over the weekend, as the Statement has made clear, have shown that the concern expressed in this House on Friday was justified. It became clear that the French did not agree with the dispatch of the Royal Marine Commandos and that the withdrawal of the 55 gendarmes was not purely coincidental.
On behalf of those of us on these Benches, I should like to assure the noble Lord that we fully support the Government in upholding the democratically elected Government of the territory in urgently seeking agreement with the French Government—whose policies, as the noble Lord, Lord Goronwy-Roberts, has said, are not easy to understand—and in seeking to secure a peaceful settlement. There is one question which I should like to ask the noble Lord: will the Royal Marine Commandos have any special, immediate, and visible role, such as guarding public buildings, or will they merely be held in reserve?
Lord CARRINGTON: My Lords, condominium is a very odd form of government. Any of your Lordships who have been to the New Hebrides, as I have been, will realise what difficulties it imposes and places upon those who live in the New Hebrides and those who are trying to govern. There have inevitably been difficulties over the past years because
832
of that form of government. However, as the noble Lord, Lord Goronwy-Roberts, has said, as a result of an agreement between the British and the French Governments there is agreement on a constitution, and an election took place recently which was supervised by the United Nations and which was declared by them to be free and fair. I am glad to say that the French Government recognise that. M. Dijoud told me when I saw him in London last week that the French Government did accept that these elections were free and fair—and the outcome of them. The French Government have also accepted that independence should take place on 30th July.
I think that after that agreement it would be a great pity if we did not proceed along the lines that we had always said we would. It will not be the fault of Her Majesty's Government if we cannot get agreement on this, because we intend to work with our French partners to get acceptance of the outcome of the election and to get independence on the date that we have already announced.
With regard to the question asked by the noble Lord, Lord Banks, the purpose of sending the Royal Marines was obviously to create stability in the islands and to provide reassurance. The job that they will do will be decided jointly between the Government of the New Hebrides and the French and the British Resident Commissioners.
Lord ALPORT: My Lords, the House was informed last week that this particular matter was under discussion between the Prime Minister and the President of France at the Venice meeting. Was there any indication during that discussion that the reaction of the French would take this extraordinary form?
Lord CARRINGTON: My Lords, my right honourable friend the Prime Minister did discuss this matter briefly with the French President and they agreed that they would remain in the closest touch over the handling of the problem.
Lord BROCKWAY: My Lords, in view of the very serious situation, may I ask the Minister whether he will immediately negotiate with the Foreign Secretary in France in order to reach a solution to this problem?
Lord CARRINGTON: My Lords, there is a problem about that: it is that my French opposite number is not responsible for this problem. M. Dijoud is the Minister concerned. As I understand it, he works in the home department, so my opposite number is not concerned with the problem. Therefore, I do not think that there is much point in my meeting him. And I do not, frankly, think that there would be much point in my right honourable friend the Home Secretary meeting his opposite number in the home department in France! For the time being, at any rate, I think it would be better if Mr. Maker and M. Dijoud continued to meet.
Lord LEE of NEWTON: My Lords, as one who has tried to negotiate with the French both in Europe and in the New Hebrides, is the noble Lord aware that he has my sympathy? Will he ensure that they are not permitted to use the arrangement which brought the condominium into existence to allow their colonists in the New Hebrides to get away with activities which are utterly unlawful and which could not stand the test of the democratic approach—because, quite obviously, they are now trying to undermine the authority of a democratically elected Government?
Lord CARRINGTON: My Lords, as I said earlier in response to a question, I think from the noble Lord, Lord Goronwy-Roberts, M. Dijoud, when I saw him in London last week, specifically said that the French Government accepted the outcome of the elections.
Lord GORONWY-ROBERTS: My Lords, the French were joint signatories with us, and others, of the constitution which fully guarantees the interests—linguistic, commercial and others—of the francophone minority in the islands. May I add to my noble friend's question this one: is the noble Lord aware that we entirely agree that the negotiations, which I gather have now been resumed between our own Minister of State and the Minister for Foreign Territories—I believe the term is territoires étrangers—constitute the right forum in this case and feel that if an attempt is agreed between them to solve the difficulties on Espiritu Santo and on Tanna by peaceful
834
means, through negotiation, all well and good? But would the noble Lord accept under advisement the need to say to our partners that, if such a final attempt at a peacefully negotiated solution fails, then we do expect that our partners will once more join with us in taking the steps necessary to sustain the authority of the properly elected Government of the New Hebrides and to make certain that that territory moves into independence on the due date in a constitutional and ordered manner?
Lord CARRINGTON: My Lords, although I confess that I have been rather puzzled by some of the things that have happened in these last two or three days, I have no reason to suppose that the French Government would not agree entirely with what the noble Lord opposite has said.
Lord HATCH of LUSBY: My Lords, I wonder whether the noble Lord the Foreign Secretary can clarify one aspect of his Statement. On Friday in his absence his noble friend Lord Trefgarne, in answer to a question from me, assured the House that the marines who were being sent were to give full support to the democratically elected Government and its chief Ministers. This presumably would include the suppression of any rebellion against that democratically elected Government, and yet it is reported that the French have a veto on the movement of those marines once they arrive in the New Hebrides. Can the noble Lord clear this up?
Lord CARRINGTON: My Lords, I think that the legal position because of this condominium is a little obscure. But I myself can conceive of no circumstances in which there was need to maintain order or to safeguard the welfare of the population in which the French should not agree to the use of our troops.
Lord ELWYN-JONES: My Lords, are not the developments of the last two days so damaging to more than Anglo-French relations that some attempt ought to be made at direct communication with President Giscard d'Estaing about this scandalous state of affairs?
Lord CARRINGTON: My Lords, there appear to have been some misunderstand-

835
ings. I know that my right honourable friend the Prime Minister and the President of France had a meeting about this on Friday, and I hope very much that these misunderstandings will now be cleared up.

BRITISH OLIVETTI LIMITED BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
EAGLE & GLOBE STEEL LIMITED BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

SOCIAL SECURITY (NO. 2) BILL
3.13 p.m.
The MINISTER of STATE, DEPARTMENT OF EDUCATION and SCIENCE (Baroness Young): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(Baroness Young.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL of LISTOWEL in the Chair.]
Clause 1 [Reduction of compulsory up-rating of certain benefits]:
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 1:
Page 1, line 7, leave out ("1979–1980") and insert ("1980–1981").
The noble Lord said: One of the main features of this Bill is Clause 1. Clause 1 seeks a reduction of compulsory up-rating of certain benefits, and in the view of all of us on this side of the Committee this is perhaps the most important clause, although we would not seek to suggest that some of the other clauses are not almost as important. If I may say so with very great respect, I think noble Lords should understand quite clearly what this clause seeks to do. It makes possible a reduction in the compulsory up-rating of certain
836
benefits in 1980 and in the two following years. In each of these years unemployment, sickness and industrial injury benefit, maternity allowance, the unemployability supplement to industrial disablement pension, invalidity pension and allowances and the adult dependant editions of these benefits may be increased by an amount which is 5 per cent. less than other benefits and 5 per cent. less to restore their value against prices.
I want noble Lords to listen, as I am sure they will because your Lordships always do, to what this really means. I want to suggest that there is not one of you who can honestly support this. Never before—well, not for 50 years—have a Government come before Parliament and introduced legislation to reduce benefits, the last time being in the 'thirties. This Government perhaps do not realise that by so doing they are creating an apartheid of the poor people of this country, people who in the normal way cannot make ends meet; hundreds of thousands who in the normal way have to apply for supplementary benefit. It really is a most serious business when a Government come along and introduce legislation of this kind. For the first time for 50 years unemployment and sick pay are being cut in real terms.
I find that many noble Lords regard the term "social security" as meaning supplementary benefit, which is a means-tested benefit. I do not want to presume too much, but perhaps I may be allowed to say there are two kinds of benefit in this country: national insurance and means-tested benefits. National insurance benefits are benefits which are given as a direct outcome of people contributing every week by way of national insurance contributions. They are obliged by law to do so. They pay the contributions on the understanding that if certain situations arise they will get certain benefits. It is their entitlement by right—not by charity, but by right—because they have paid in for it. Yet here we find, for the first time for 50 years, a Government asking its Members of both Houses to support this, to reduce unemployment and sickness benefit, maternity allowance, invalidity pensions and so on.
There are hundreds of thousands receiving invalidity benefit. I shall ask my noble friend Lord Underhill to inform

837
your Lordships as to what the real position is, because the Government do not know the number of people in receipt of invalidity benefit. In the last few months they have given four different accounts. I may be wrong, but if so my noble friend will put me right and I never mind being put right. It is quite wrong to come before either House of Parliament with a view to introducing a scheme where apparently you do not know the exact extent of the problem.
Baroness MACLEOD of BORVE: I wonder if I might intervene here. Several times the noble Lord has said that the Government are seeking to reduce benefits. I do not think that is correct. What the Government are seeking to do, as I understand it, is to reduce the increase from 15 per cent. to 10 per cent.—not reducing the benefits; reducing the increase.
Lord WELLS-PESTELL: That is a most unusual argument, to say the least of it. It is an understood thing in this country, originally laid down in the 1975 Act, that certain benefits went up annually in line with prices and others went up in line with earnings. One of the things this Government have done has been to cut out increasing benefits in line with earnings and they have decided to increase them by prices. To answer the noble Baroness, the Government estimated after the Budget that, come November of this year, 1980, the inflation rate would go up by 16½ per cent. so that people in receipt of benefits would require an increase of 16½ per cent. in order to break even. Many of us know that at the present moment inflation is running at 21·9 per cent. and no member of the Government is prepared to say that it will fall to 16½ per cent. this coming November. Pensions and other benefits are going to be increased only by 16½ per cent., and certain benefits are going to be increased by only 11 per cent. If that is not reduction, then nothing is reduction. The Government are reducing the value of those benefits by 5 per cent. I am glad the noble Baroness intervened because we must clear these things up, and I take no exception to that at all.
At Second Reading it was said, "Ah, but we must all make our contribution". I would not quarrel with that. Of course,
838
we have all got to make our contribution if the financial position of the country so demands. There are some of us who can make a contribution. But we have always had, under every Government, a very substantial number of people—millions in fact, if you include the children—who have been living below the poverty line for years; and such a number exist at the present moment. Can we honestly say that families living below the poverty line must also make their contribution? It is too ridiculous for words.
It is even more ridiculous when you and I know that in the next couple of weeks people will be paying £600 for two seats at Wimbledon, and that is not the only example of extreme expenditure of money. But if they can afford it, I would not deny their right to do so. What I am saying is that reasonable, fair-minded, large-hearted Members of your Lordships' House must understand that we cannot expect people who are already living either on or below the poverty line to make their contribution.
So I want to say what I said at Second Reading. I do not expect noble Lords opposite to vote against the Government. I am a realist. I know the affection that I have for the noble Baroness opposite, and many noble Lords, if not all, on the Government side would want to support her. But I ask your Lordships to ask yourselves whether this is an occasion when you can support the Government; whether you really want it known that you went into the Division Lobby to reduce the benefits of people who can least afford it, reduce the benefits of people who, when they get a full benefit, cannot make ends meet; that you supported a 5 per cent. reduction.
The effect of this amendment would be to postpone the 5 per cent. reduction in the real value of short-term benefits and invalidity benefits for one year to November 1981. In principle we are totally opposed to any reduction in the value of these benefits, which already in the vast majority of cases represent a substantial fall in income for the unemployed and sick. This year, however, even if Clause 1 of the Bill was not enacted, the value of these benefits would fall. The reason for this is that it is becoming increasingly clear that the estimated inflation rate of 16½ per cent. for the 54

839
weeks up to the 24th November, on which this year's up-rating of benefits is based, will prove to be too low. If the inflation rate remains at, say, 20 per cent. then the 5 per cent. becomes 8½ per cent. because that shortfall is not going to be made up, so far as I can understand what Government Ministers have said.
During the Committee stage of the Bill in another place the Secretary of State himself, when explaining the figure of 161 per cent. on 24th April, said:
"That"—
meaning the 16½ per cent.—
"is the best estimate that the Treasury could make in the few days before the Budget of the likely rate of inflation from last November's up-rating date to next November's up-rating date. To some extent I share the honourable gentleman's puzzlement on whether that will be attained. Anyone looking at this objectively must do so".
When has the Treasury ever got anything right? The Secretary of State went on to say that he could give no undertaking as to what would happen if in the event the estimate proved too low and there was a shortfall in the up-rating. I understand this. It is not easy to make judgments of this kind months ahead. And I can understand the Secretary of State saying: "I can give no undertaking". It is not that that I am concerned with. What I am concerned with is not making up the shortfall so far as this is concerned, but giving these benefits, which are national insurance benefits, the full rate of up-rating, namely, 16½ per cent.
What I have said, quoting from the Secretary of State, was said some two months ago. If the issue was then in doubt, it is in doubt no longer. Nobody now believes that the inflation rate will be down to 16½ per cent. by November, and nobody can seriously believe that the inevitable shortfall will be made good with effect from this November, whatever the Government may decide to do in 1981. Deliberately to add another 5 per cent. to the shortfall, which is going to be very considerable, would be totally unjustifiable even in the terms of the Government's misguided policy. The amendment seeks to prevent this, and I ask your Lordships to say that, however much they support the Government—and I recognise that it is their duty to support the Government—this is the one thing on which they cannot have it said
840
that they voted to give a very substantial section of the community, who are always either on or below the poverty line, a reduced benefit, bearing in mind that it is an insurance benefit to which I believe they are legally entitled. I think that the Government's action is wrong.
3.32 p.m.
Baroness WOOTTON of ABINGER: I should like to support in the strongest possible terms the amendment which my noble friend has just moved. What makes the Bill more disgraceful is not only that it takes away the real value from one of the more pecuniarily handicapped sections of the population, but that this follows on a Budget a year ago which gave very substantial sums—more than enough to cover what is involved here—to persons in the upper brackets of the income tax scale. A sum of £1,560 million was given back in income tax to persons with incomes over £10,000 a year, nearly £700 million of it to persons with incomes of over £20,000 a year. We will say for the Government that, having done that last year, they did have second thoughts this year and they have not repeated that exercise. But they have done the reverse. They have now taken to recouping their depleted exchequer at the expense of the unemployed, the sick and the disabled.
Baroness GAITSKELL: I too should like to support my noble friend on this amendment, with one sentence. This Government will go down in history as a Government who cut the taxes of the richer 10 per cent., 8 per cent.—whatever it was—people in the community and then proceeded to cut the benefits of the poor sections of the community in this country. It is an indictment to which the Government have lived up.
3.35 p.m.
Lord UNDERHILL: My noble friend did say that he would be asking me to deal with the question of the numbers and the problem involved in invalidity benefit. I think your Lordships will agree that it is important we get this matter clarified quite early on in consideration of this Bill. It will be recalled that on Second Reading I referred to there being 650,000 persons on invalidity benefit and I mentioned a communication from the Royal Association for Disability and

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Rehabilitation—RADAR. I complained that 250,000 persons would suffer the 5 per cent. abatement, although they were not liable for payment of any tax whatever, and another 150,000 would pay less tax than the abatement. Your Lordships will note that I use the word "abatement" even though most of us would like to refer to it as a cut.
The noble Baroness, Lady Young, in replying, very kindly corrected my figures, and I quote from column 1189 of the Official Report where she said my figures were not correct:
"So far as invalidity benefit tax is concerned, 100,000 would pay less tax than they would get in abatement; 150,000 would pay no tax at all. That makes a total of 250,000, not 400,000 people to which he referred".—[Official Report, 2/6/80; col. 1189.]
I am certain the noble Baroness gave those figures quite clearly as they had been supplied to her. I am not suggesting that the figures as supplied to her were in any way incorrect.
On checking to see just what had gone wrong I found that similar figures were given by the Secretary of State in another place on 29th April at column 363. These confirmed the figures which the noble Baroness had given. But I found that a fortnight after the Secretary of State gave those figures in another place it was stated in a Written Reply:
"On the assumption of a total of some 850,000 beneficiaries"—
an additional 200,000 to the figures which had been given to your Lordships—
"at any time in 1980–81, a very rough estimate of 400,000 was given in the previous Reply referred to as the possible order of magnitude of numbers of invalidity benefit recipients annual income would not exceed personal tax allowance if the benefit were brought into tax this year".
Then I found that on 21st May the Secretary of State said in another place, at column 555:
"The answer in the case of the invalidity benefit—the argument is here at its strongest and I accept it—is that of about 850,000 invalidity beneficiaries 250,000 people would not be liable to tax and about 150,000 people would be liable to pay less tax than would he yielded by the 5 per cent. abatement".—[Official Report, Commons, 21/5/80; col. 555.]
What do we find? The figures in the last quotation are the figures which I mentioned to your Lordships. So now we have a complete circle and we are back to the figures which I gave, which
842
the noble Baroness had to correct, and her correction was in line with the statement made on 29th April in another place but which was corrected some two to three weeks afterwards in another place.
If we are to consider this clause we must really know what is the measure of the problem; I am certain the Committee will agree with that. If the Government's figures are, first of all, 200,000 out in the number of beneficiaries, and then they are out by another 150,000 in the number of persons who either pay no tax or receive no tax at all, it is very difficult to understand how the Government came to these figures. The general question of invalidity can be dealt with on another amendment, but I think it is rather important that we should get a clear statement from the noble Baroness as to whether the figures given in another place on 12th May are the actual figures or whether the figures which the noble Baroness gave to your Lordships, based on an earlier statement in another place, are the correct ones. We need to know in order to measure exactly what is the problem and how the Government worked out the amount of money involved.
Baroness YOUNG: I wonder whether it would be for the convenience of your Lordships at this moment to have the Statement from my noble friend the Foreign Secretary. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

EUROPEAN COUNCIL: VENICE MEETING
3.39 p.m.
Lord CARRINGTON: With your Lordships' permission, I shall make a Statement on the European Council.
My right honourable friend the Prime Minister and I attended the meeting of the European Council held in Venice on 12th and 13th June. The Summary of the proceedings issued by the Italian Presidency has been placed in the Library of the House. The Venice meeting was a series of general discussions between the Nine Heads of Government about the

843
fundamental problems we all face within the European Community and outside. They had in mind the need to prepare a common European view for the Economic Summit which is to be held next Sunday and Monday.
All the nations of the European Community have similar problems of inflation and unemployment and a number now have an adverse balance of payments. The Heads of Government were agreed that the major short-term objective must be to contain inflation by means of appropriate monetary and fiscal policies. They were concerned that the 100 per cent. increase in the price of oil over the last year would lead to a recession in world trade. They were therefore disturbed by the pressure for further oil price increases at the recent Algiers meeting of OPEC. Such an increase can only make worse the economic problems of the industrialised countries and give rise to intolerable burdens for the developing countries. The European Community remains willing to enter into a dialogue with the oil producers.
Having noted the budgetary settlement reached by the Council of Ministers at the end of May, the Heads of Government had a useful but necessarily preliminary discussion of the need to put in hand and carry through urgently a review of the Community's financial position. The nine Heads of Government also took the opportunity to have a first, informal, discussion about the choice of the next President of the Commission.
The European Council issued three declarations, on the Lebanon, on Afghanistan, and on the Middle East. With permission, all three texts will be circulated in the Official Report. Those on the Lebanon and on Afghanistan reaffirmed the concern felt by the Heads of Government about the position in the two countries. The declaration on the Middle East restates the two principles which have for many years been the basis of the European position: the right of all states in the region, including Israel, to existence and security: and justice for all peoples, which implies the recognition of the legitimate rights of the Palestinian people. A comprehensive settlement requires that all the parties concerned should be bound by these principles.
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Beyond that, the European Council decided to make contact with all the parties in order to ascertain their position—and I quote—
"with respect to the principles set out in this declaration, and in the light of the result of this consultation process to determine the form which an initiative on their part (that is on the part of the Nine) might take".
The diplomatic activity which the Nine will undertake over the next few months is intended to be complementary to the Camp David process on which the United States, Egypt and Israel are still engaged. We hope and believe that in this way the Nine can contribute to the work which will have to be done to prepare for a peace settlement in the Middle East.
Following are the texts referred to:
EUROPEAN COUNCIL DECLARATION ON THE LEBANON
The Nine affirm once again their full and complete solidarity with the friendly country of the Lebanon whose stability remains dangerously threatened by confrontations in the region, and renew their urgent appeal to all the countries or parties concerned to put an end to all acts liable to damage the independence, sovereignty and territorial integrity of Lebanon or the authority of its Government. The Nine will support any action or initiative which could ensure the return of peace and stability of the Lebanon, which constitutes an essential stabilising factor in the region.
The Nine stress the important role which UNIFIL must play in the southern part of Lebanon. The Nine recall their Declaration of 22 April 1980 at Luxembourg and stress that it is essential that all the parties concerned permit UNIFIL to carry out the tasks with which it has been charged, including the control of the territory up to the international frontier.
EUROPEAN COUNCIL DECLARATION ON AFGHANISTAN
The European Council has noted with deep concern the intensification of the military operations conducted by the Soviet troops in Afghanistan.
These dramatic developments increase still further the sufferings of the Afghan people. They emphasise the genuinely national nature of the resistance offered by an entire people. They threaten to jeopardize the climate of international relations for a long time to come.
In these circumstances, the European Council wishes to reaffirm its conviction that it is necessary to find without delay the means of reaching a solution which, in keeping with the Resolution of the United Nations General Assembly, would ensure the withdrawal of Soviet troops and the free exercise by the Afghan people of the right to determine their own future. It reiterated its view that a solution could be found in an arrangement which allowed Afghanistan to remain outside the competition among the powers and to return to its traditional position as a neutral and non-aligned state.
It recalls that it proposed in Luxembourg, on 28 April, that the great powers and the neighbouring states should undertake the necessary commitments to this end: in particular, they should agree to respect the sovereignty and integrity of Afghanistan, to refrain from any interference in its internal affairs and renounce any stationing of troops on its soil or any form of military association with it.
The European Council shares the concern expressed and the conclusion drawn by the 11th Conference of Foreign Ministers of Islamic States on the continued Soviet military presence in Afghanistan and has noted with great interest the creation by this Conference of a Committee to seek ways and means for a comprehensive solution of the grave crisis in respect to Afghanistan.
The Council repeated its readiness to support any meaningful initiative designed to promote a solution of the Afghan crisis.
EUROPEAN COUNCIL DECLARATION ON THE MIDDLE EAST
1. The Heads of State and Government and the Ministers of Foreign Affairs held a comprehensive exchange of views on all aspects of the present situation in the Middle East, including the state of negotiations resulting from the agreements signed between Egypt and Israel in March 1979. They agreed that growing tensions affecting this region constitute a serious danger and render a comprehensive solution to the Israeli-Arab conflict more necessary and pressing than ever.
2. The Nine Member States of the European Community consider that the traditional ties and common interests which link Europe to the Middle East oblige them to play a special role and now require them to work in a more concrete way towards peace.
3. In the regard, the Nine countries of the Community base themselves on Security Council Resolutions 242 and 338 and the positions which they have expressed on several occasions, notably in their Declarations of 29 June 1977, 19 September 1978, 26 March and 18 June 1979, as well as in the speech made on their behalf on 25 September 1979 by the Irish Minister of Foreign Affairs at the 34th United Nations General Assembly.
4. On the bases thus set out, the time has come to promote the recognition and implementation of the two principles universally accepted by the international community: the right to existence and to security of all the states in the region, including Israel, and justice for all the peoples, which implies the recognition of the legitimate rights of the Palestinian people.
5. All of the countries in the area are entitled to live in peace within secure, recognised and guaranteed borders. The necessary guarantees for a peace settlement should be provided by the UN by a decision of the Security Council and, if necessary, on the basis of other mutually agreed procedures. The Nine declare that they are prepared to participate within the framework of a comprehensive settlement in a system of concrete and binding international guarantees, including on the ground.
6. A just solution must finally be found to the Palestinian problem, which is not simply one of refugees. The Palestinian people, which is
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conscious of existing as such, must be placed in a position, by an appropriate process defined within the framework of the comprehensive peace settlement, to exercise fully its right to self-determination.
7. The achievement of these objectives requires the involvement and support of all the parties concerned in the peace settlement which the Nine are endeavouring to promote in keeping with the principles formulated in the Declaration referred to above. These principles are binding on all the parties concerned, and thus the Palestinian people, and on the PLO, which will have to be associated with the negotiations.
8. The Nine recognise the special importance of the role played by the question of Jerusalem for all the parties concerned. The Nine stress that they will not accept any unilateral initiative designed to change the status of Jerusalem and that any agreement on the city's status should guarantee freedom of access for everyone to the Holy places.
9. The Nine stress the need for Israel to put an end to the territorial occupation which it has maintained since the conflict of 1967, as it has clone for part of Sinai. They are deeply convinced that the Israeli settlements constitute a serious obstacle to the peace process in the Middle East. The Nine consider that these settlements, as well as modifications in population and property in the occupied Arab territories, are illegal under international law.
10. Concerned as they are to put an end to violence, the Nine consider that only the renunciation of force or the threatened use of force by all the parties can create a climate of confidence in the area, and constitute a basic element for a comprehensive settlement of the conflict in the Middle East.
11. The Nine have decided to make the necessary contacts with all the parties concerned. The objective of these contacts would be to ascertain the position of the various parties with respect to the principles set out in this Declaration and in the light of the results of this consultation process to determine the form which an initiative on their part could take.
3.44 p.m.
Lord GORONWY-ROBERTS: My Lords, I should like to thank the noble Lord for making that Statement, although I would personally have wished to have had a little more definition here and there. However, it is good to think that there will be a European view put forward at the Economic Summit at the end of this week, and we look forward to seeing what that common view proves to be.
On the question of oil, one does, of course, welcome the emphasis on the serious impact on the world economy made by the recurrent and somewhat abrupt and substantial increases in oil prices—an impact which is perhaps particularly deeply felt in developing countries as well as developed countries.

847
One finds a certain lack of clarity and urgency in the single sentence in which future action is described. It says:
"The European Community remains willing to enter into a dialogue with the oil producers".
Personally, I should have wished to have detected a stronger note of urgency about the need to get to the bottom of this problem which is affecting the whole world. As I have said, it is affecting not only the developed, but the developing countries as well.
On the budgetary settlement, the Statement speaks of,
"the need to put in hand and carry through urgently a review of the Community's financial position".
One welcomes the word "urgently", in that context. Herr Schmidt, the Chancellor of the Federal Republic of Germany, is reported as saying that the review should be ready by the middle of next year. That was a statement made after the meetings, but it has been quoted and perhaps the noble Lord can confirm that it was, in fact, said.
I should like to ask whether Her Majesty's Government take the same view as the German Chancellor. It would seem to many of us—to most of us, I think—that this review should, in fact, be ready as a precursor of actual action by at least the middle of next year so that a more durable and equitable structure can be assured for the budget from 1982 onwards. Our own position is reasonably taken care of up to and including 1982, but the review is necessary for a continuation of the better thoughts that have come into the negotiations of the Nine in the last few months on the question of the budget.
Will the review also include a radical reappraisal of the Common Agricultural Policy? I expect that it will do so. I should think that it would be impossible to restructure the budget without, in fact, reappraising, in a very radical way, the CAP.
The second important section of the Statement refers to the Middle East. May I say in passing that we all welcome the repetition of our attitude as a Community on the serious situations in Afghanistan and in the Lebanon.
Lord SHINWELL: My Lords, what does my noble friend mean by, "we all"?
Lord GORONWY-ROBERTS: My Lords, I would hope that we all agree that it is necessary to repeat the attitude of this country and of the Nine towards what has happened and is happening in Afghanistan and in the Lebanon—
Lord SHINWELL: My Lords, that is different.
Lord GORONWY-ROBERTS: I would hope so. On the Middle East, I should like to ask whether the reference to the declaration being,
"intended to be complementary to the Camp David process on which the United States, Egypt and Israel are still engaged",
means that there will be effective and close consultation with the United States with a view to correlating whatever initiatives the Nine take in regard to the Middle East and certainly with the view to avoiding any dicotomy as between American, Egyptian and Israeli policy on the one hand, and European efforts on the other.
We would welcome the emphasis in the declaration on the United Nations' Resolutions 242 and 338. They still remain the fundamental basis for a comprehensive solution in the Middle East and one welcomes the reference to them in the declaration and also to the prospective role of the United Nations in the effective implementation of any comprehensive settlement that may be attained in the Middle East. I think that that part of the declaration is sound.
This is not the time for us to canvass the nature of any meetings and the constituents of any meetings that may prove feasible or necessary in the future. Suffice it to say that the main need at the moment is a concerted European attitude to the Middle East aiming at a comprehensive settlement, but one which is truly complementary to the efforts or the American President, the Egyptian President and the Israeli Prime Minister.
Lord BYERS: My Lords, I too should like to thank the noble Lord for making this Statement. I propose to comment on only one aspect of it. Is the noble Lord aware that, to many of us, the proposal that the PLO should be a party to negotia-

849
tions with Israel is totally incomprehensible? I should like to ask him whether the Nine, when they drew up their communiqué, were aware of the statement which had been issued before the Venice Meeting by the PLO from Damascus, to the effect that it was their aim to liquidate Israel politically, economically, culturally, ideologically and in every other way; and whether, if they knew that that statement had been made, it did not at least have some influence upon their decision to incorporate the recognition of the PLO as a party to Israeli negotiations? How can anyone expect Israel to negotiate with a group that is bent on her total destruction? I believe that there is now a real danger that proposals such as these will undermine not only Camp David, but the efforts of the United States.
3.50 p.m.
Lord CARRINGTON: My Lords, I very much agree with what the noble Lord, Lord Goronwy-Roberts, said about the problem of oil. There is no doubt that the continual increase in the price of oil leads to almost impossible problems for the developing countries of the world. It is open to question whether the right forum in which to solve these problems is a meeting between the European countries and OPEC. I do not think that there is any point in having a meeting just for the sake of a meeting. When one has a meeting one wants to be sure that it will lead to some kind of useful end. But nobody in any sense disputes the importance which the noble Lord attaches to that particular aspect.
On his question about the budgetary settlement, I also agree with him that there is a very considerable urgency that the restructuring of the budget—which must, of course, take account of a revision of the CAP—should be carried out as quickly as possible. There is a great urgency for it to be carried out, but whether it can be done by the middle of next year, I do not know. However, the sooner it can be done the better. It will not only have to take account of the Common Agricultural Policy, but it will also have to take account of the enlargement of the Community; consequently, the quicker it is done, the better. I do not think that any of us ought to be under any mis-apprehension about the difficulties that
850
such a radical restructuring will bring, and we must only hope that reality will make it possible for us to do this quicker than happened last time, when the original financing of the Community was achieved.
The noble Lord, Lord Goronwy-Roberts, also asked me about the Middle East initiative; he asked to be reassured that it was complementary and would not cut across the American autonomy talks and the Camp David talks. I give the noble Lord that reassurance. That is why the initiative was phrased in that language. I think that it is vital that it should not cut across the American process. Of course, we shall be talking not only to the Americans, but to the Israelis, the Jordanians and the Palestinians about all this. I hope that we shall go hand-in-hand in anything that we do. I believe that Europe has a particular role to play here in that, in political terms, there are certain obvious difficulties facing the United States over the next months, and in the meantime, perhaps Europe can do something to help matters along.
I turn to the question which the noble Lord, Lord Byers, asked about the PLO. He will see that in the Communique it is said that the PLO must be associated with the talks. There is no baulking the fact that the PLO is an important ingredient in the Middle East, and to shut your eyes to it is to deceive yourself into thinking that it is possible to reach a solution without taking the PLO into account. Naturally, the PLO will have to accept the principles which the Nine have enunciated in their Statement, which include recognition of the State of Israel, as, indeed, Israel will have to take account of the principles in the recognition of the rights of the Palestinian people. This is, and seeks to be, an even-handed situation. Nobody disapproves more than the Government of the language used by Al Fatah—it was not used by the PLO—in Damascus. With respect to the noble Lord, Lord Byers, it is a different wing of the PLO.
Lord BYERS: My Lords, no.
Lord CARRINGTON: My Lords, nobody deplores that language more than I. and it is totally unacceptable when it refers to the destruction of Israel. However, the principles of the declaration of the Nine make that abundantly plain.
Lord JANNER: My Lords, I should like to endorse the points which have been made by the noble Lord, Lord Byers. The statement was made by the Al Fatah, the head of which is Arafat who is the leader of the PLO. The statement, which was referred to in terms by the noble Lord, also says:
"The armed conflict must be escalated across all borders of confrontation with the Zionist enemy"—
which, of course, means Israel—
"The strategic alliance with the socialist countries, led by the Soviet Union, must be strengthened".
Are we not blind to the fact that by encouraging the PLO we are creating a further enemy in the Middle East?—that the PLO is in constant contact with the USSR? What on earth are we talking about when we talk about defence—against whom? Another state in the Middle East which would be controlled by the allies of the USSR and Libya? What on earth is the matter with us? Do we not remember what happened to Czechosolovakia in 1938, and what happened at the time of the Munich Agreement? Cannot we take those experiences into consideration? Does the European set-up really expect Israel—that small state—to depend upon promises of contracts made with the PLO?
Lord CARRINGTON: My Lords, I have already said that if the PLO is to be associated with any talks on a settlement, it will have to acccept the principles that the Nine set out—I hope that the noble Lord will read the Statement. I have said that what Al Fatah has said is totally unacceptable as regards the destruction of Israel. If the noble Lord really imagines that just because one does not like something, one can ignore it, then he is not living in the real world.
Lord BYERS: My Lords, can the noble Lord clarify one point in his answer to me? Can he say whether the Nine will insist, before the PLO is associated with negotiations, on the acceptance by the PLO of the right of Israel to exist? This is a very important point.
Lord CARRINGTON: My Lords, no negotiations are taking place at the moment.
Lord BYERS: My Lords—
Lord CARRINGTON: My Lords, if the noble Lord will allow me to finish before he interrupts me, he might be the wiser. I was saying that no negotiations are taking place at the moment. The Nine are proposing that there should be contact—soundings, if you like—between all the parties concerned, to see whether we can get any further forward. Those soundings will take place on the basis of the principles which have been enunciated in the Communiqué.
Lord NUGENT of GUILDFORD: My Lords, is my noble friend aware that his attitude and that of his colleagues in Venice, in recognising that the PLO are a factor, must be taken into account in achieving peace in the Middle East? Is he also aware that the anxieties of the Israelis—which are well understood—should cause the Israelis to remember what has been achieved in their relationship with Egypt? Is he aware that it was not so very many years ago that the Egyptians were swearing that their one objective was to exterminate every Israeli from Israel? It is possible to change your mind if you bring people into the general comity of nations. Is my noble friend aware, therefore, that the attitude which he and his colleagues have taken seems, at any rate to many people, to be a very constructive one?
Lord CARRINGTON: My Lords, I must say it seems so to me too, and I am most grateful to my noble friend. Before the noble Lord, Lord Shinwell, jumps up, in passing I would only say that I have spent a good deal of the last 16 months sitting down with either terrorists or past terrorists.
Lord SHINWELL: My Lords, is the Foreign Secretary aware that when he talks about the European desire to promote peace in the Middle East, what they have done by intervening in the Middle East affair is much more likely to provoke another war, much sooner than many people anticipate? Is the noble Lord aware that I have been associated with the subject of defence ever since I came to your Lordships' House, and that my purpose has been to create an organisation in order to deter and prevent war? But if the British Government change their sense of direction over the Middle East situation so far as defence is concerned,

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you can "include me out", as the great Samuel Goldwyn said upon another matter. I will have no association with it at all.
When they were discussing the Middle East affair, were they discussing the motives of each of the nine countries in coming to the decision that the PLO has to be recognised? Were they aware that even King Hussein, on behalf of Jordan, refuses to recognise them, and is also definitely opposed to a Palestinian state being situated on the West Bank? I do not want to raise a debate at this time, and certainly not with the noble Lord, Lord Nugent, who I must say dismayed me by what he said. I can hardly believe that a person of his moral attitude on general matters could consider speaking as he has done about the situation there.
May I ask a final question? Is the Foreign Secretary aware that, apart from the declaration that was made unequivocally by the Palestinians immediately before the meeting that he attended, and about which there can be no doubt, their attitude was clear? A document has been published on behalf of the Palestinians by an Arabian Professor—I do not know whether the noble Lord has seen the document—which makes it clear beyond any possibility of doubt that the intention of the Palestinians, no matter what the Europeans or what the noble Lord or Lord Nugent or anybody else may say, is to destroy the state of Israel. So far as I am concerned, I am going to have no part in it, and let the British Government understand that.
Lord CARRINGTON: My Lords, I am afraid that I disagree with the noble Lord, Lord Shinwell, in almost every respect, particularly when he says that he thinks that the European initiative will make things worse and lead to war. I wonder whether the noble Lord, Lord Shinwell, has any idea what is happening on the West Bank at this particular moment, and whether or not he has any understanding of how the Palestinians on the West Bank are feeling at the moment in circumstances which are not due to the PLO but due to the Israeli Government in the settlements they have created there. The situation there is extremely grave. I wonder whether the noble Lord, Lord Shinwell, has any idea about what the
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ordinary, moderate Arab feels about the situation with regard to the Palestinian refugees and the Palestinians?
What the Government and the Nine have sought to do is to introduce an evenhanded resolution, one side of which says that the state of Israel must be recognised and must live within secure boundaries, and for the other part to say that there should be a recognition by the State of Israel of the rights of the Palestinians, and then to go on to say that in the light of these principles they are going to approach all parties and contact them. If the noble Lord thinks that that kind of resolution is more likely to lead to war than anything else, I think he had better have a look and read it.
Lord BOOTHBY: My Lords, may I ask the noble Lord whether he realises that his Statement today will bring great relief and great satisfaction to those of us who believe that the Israelis alone can give freedom to the Palestinians, and the Palestinians alone can give security to the State of Israel, and that until they both do just that there will he no hope of peace in the Middle East?
Lord CARRINGTON: My Lords, that is precisely what the Nine were saying, and I am grateful to my noble friend.
Lord HATCH of LUSBY: My Lords, may I draw the noble Lord the Foreign Secretary away from the Middle East for a moment? I understand that it was reported in certain sections of the German press before the Venice meeting that Herr Schmidt intended to raise the issues arising out of the Brandt Commission Report. Could he tell us whether this was discussed at Venice and, if so, what line the British Government took there?
Lord CARRINGTON: My Lords, it was discussed, not at great length but at some length. It will of course be discussed at greater length at the Venice summit this weekend. In the meantime the British Government's view is being set out clearly today by my right honourable friend the Lord Privy Seal and my right honourable friend the Minister for Overseas Development in two major speeches in another place, and I wonder whether the noble Lord would be content to read them tomorrow morning.
Lord BRUCE of DONINGTON: My Lords, may I press the noble Lord on one point of detail in regard to his Statement about the budget of the Community? As I understand the position following the Brussels conference, some £300 million to £320 million was to be repaid to the United Kingdom via the financial mechanism under Title 4 of the Commission's budget. However, the remainder of the £400 million to £420 million was to be subject to some specific regulations under Article 235. Can the noble Lord give any indication as to whether the regulations proposed under Article 235 were given any discussion at the Venice meeting and, if so, with what result?
Lord CARRINGTON: My Lords, not specifically, but the agreement reached in Brussels on 29th and 30th May was accepted by the Heads of Government, and the noble Lord is perfectly right in explaining the methods by which the repayment to this country will be made.

SOCIAL SECURITY (No. 2) BILL
House again in Committee on Amendment No. 1.
4.7 p.m.
Lord NUGENT of GUILDFORD: Before my noble friend replies to the debate on Lord Wells-Pestell's Amendment No. 1—from which we seem to have gone rather a long way—I should like to answer a point powerfully put from the Benches on the other side by the two noble Baronesses in backing up the noble Lord's amendment. They particularly attacked the Government side because the reductions proposed in Clause 1, which will of course make an economy in public expenditure, are set against the background of a Budget which has reduced taxation and particularly has reduced it at the top end.
That, combined with the powerful speech made by the noble Lord, Lord Wells-Pestell, in moving his amendment, leaves noble Lords on this side of the Committee looking pretty shabby unless we have some justification for the support that certainly I am going to give to my noble friend. The noble Baronesses have opened up the debate in this way, and, although it is a bit of a Second
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Reading point, I nevertheless think it is fair to answer it. I support my noble friend because I believe that these budgetary policies of lower taxation and reduced expenditure are going to give us the basis for increased production, and, therefore, benefits for all.
My personal belief is that lower taxation, especially at the top end where the most important wealth creators are, will bring about an increase in incentive and therefore an increase in wealth and an increase in production. Incidentally, at the top end, which was particularly criticised by the noble Baronesses, this will keep in this country some of the highest earners whom we have been tending to lose. This will lead us to reverse the unhappy decline from which our country has been suffering—an accelerated decline in the last five years—both in terms of national life and of employment; to check that, to reverse it, and to begin to create new wealth. This will on the one hand give us the opportunity to increase benefits, and on the other hand to increase jobs.
It is against that background that I see the policy of my noble friends. Therefore, unpleasant though this is—and nobody likes providing less than we might otherwise have done for those who are worst off—the only possible justification for these policies for any man or woman with blood in their veins is that we believe they will succeed—give us two or three years—in reversing the trend and thus giving us a prospect of increasing those benefits in the future. I feel therefore that my noble friend deserves the support of this side of the Committee in this severe policy, which it certainly is, that we are pursuing at the present time. We are convinced we shall succeed with it and, if we do, the strictures which the noble Baroness, Lady Gaitskell, put upon us will be reversed by history and this Government will be credited for achieving something which no other Government have been able to achieve since the war.
Baroness PHILLIPS: At a slightly different level—and this may answer the noble Lord, Lord Nugent of Guildford—if noble Lords opposite do not wish to be accused of being hard-hearted, it is salutary to recall that the Bill is described as for the purpose of reducing benefits.

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One cannot get away from the fact that that is exactly what is happening. However, earlier a Question was tabled by the noble Earl, Lord Lauderdale, asking about the amount of money spent in payment of fuel bills. One cannot help wondering whether there is not some relationship between that earlier Question and the discussion we are now having. It is customary to have "kangaroos"—in other words, a Back Bencher tables a Question which puts the Government in a good light—and the noble Earl was thanked for putting down his Question and the Minister said that more money was being paid out. But as all bills are increased substantially, probably more money is being paid out although perhaps it is being paid to the same number of people. I must point out that with the passing of this Bill, as any Government are committed to maintaining a standard below which people may not fall, although the benefit may not be paid the supplementary benefit will certainly rise. Thus, even if we discard the policy of being hard-hearted, it seems that the Government's economic position will not he very much better in the final outcome of operating this Bill.
Lord SOPER: I support the amendment. The Bill is wrong, and I should have preferred to have its throat cut on Second Reading, and if that sounds a somewhat blood-thirsty observation for a pacifist, I feel blood-thirsty about this Bill because it is fundamentally immoral, and the various efforts that have been made to justify it fall to the ground with a very loud bang. I canvass the proposition, which was widely advertised in the press, that one of the reasons behind the Government's proposal of the Bill was that there were quite a number of people taking advantage of the amenities and that such skrimshankers should be repulsed. The noble Baroness very indignantly defended the Bill from any such observation and condemnation, and I of course accept her word. But if it is not for that reason, let us look perhaps for a second reason which would be justifiable, and that is the money which the Government need and will find from the prosecution of these measures.
I believe that fundamentally they will in the long run find it much more costly to
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proceed with the Bill, and in any event it seems ludicrous and fantastic to imagine that the Government are so condemned by the economic stringencies of the present time that they must rely on a comparatively modest sum of money to be extracted from those who are least capable of paying it in order to keep this country on its feet. It is of course true that the Government are committed to vast expenditures in the arms race; one nuclear submarine less and every poor person in the country could be very much advantaged. Although it is not particularly germane to this argument, I believe that a Government who prefer to oppress, as by this measure they will, those who are least capable of defending themselves, and at the same time expose the rest of us to the incalcuable and tramatic effects of a world beset with arms, create a situation which is an insufferable piece of nonsense as well as being quite unacceptable in terms of ethics.
But if we on this side of the Committee cannot convince the Government of the wretchedness of their arguments, may I, without presumption, endeavour to wring their withers? I have been engaged in social work for many years and it has become increasingly obvious to me that to attempt to access the relative contributions that people make to the welfare of the society in which they live is an onerous and most complicated task. But when one thinks of those who are least capable of looking after themselves—those who are in receipt of supplementary benefit and the many who, though they are entitled to them in the kind of society in which we live, do not possess themselves of those benefits—and when one at the same time remembers the wise words of my noble friend who spoke of the enormous increase in the finanial amenities offered to those who are already prosperous, it seems to me incomprehensibly wrong to say that we are so compelled by the stringencies of our present economic system to put this increased burden on one small group in the community—and it is not such a small group.
May I, without offence, ask noble lords opposite if they have really assessed the sort of suffering that will be necessary and inevitable if the Bill goes through? It is for that reason, not for party reasons at all, that as a social worker and one who believes that the right contributions and

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sacrifices should be made proportionately so that those who are invited to make them can in fact make them and still keep their heads above water, I think the Bill should not go much further. If we cannot cut its throat, let us dismember it with a thousand cuts, because that seems to be the only honourable course to take.
Lord DRUMALBYN: Perhaps I might comment on this subject from a rather different point of view. When one considers the state that some countries are in today and the reasons for it, it makes the problems that are presented by this part of the Bill comparatively insignificant. What we are suffering from now is inflation and anything we can do to bring inflation down is worth doing. At present, inflation is running at, say, 20 per cent. per annum, which means that progressively throughout the year people will be less well off, particularly those who are in receipt of national insurance in one form or another. Supposing inflation reached 50 per cent.—I will not go so far as to suppose it reaches 400 per cent. as it has done in some South American countries—just think what would be involved then. In the course of one year, the recipients of unemployment benefit, retirement pension and the rest would have their incomes reduced by three-quarters.
That is what we are trying to stop, because once inflation gets on the way it is much easier for it to go on increasing than for it to stop; and it is vitally important that we should stop it. There is no God-given reason why the unemployment benefit, retirement pension or anything else should be raised to the level that it was 12 months earlier; this has been a comparatively recent development in the history of the national insurance scheme.
It has always been understood—there has in fact been an underlying understanding—that the pay-as-you-go scheme is based on the position that one makes such contributions as are laid down and one receives such benefits as can be afforded by the nation. Of course, this is a matter of judgment. It is not a question about being honest about this; the noble Lord opposite asked, how could any noble Lord honestly support the clause? We on this side of the Committee
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do honestly support the clause, because we believe that it is a necessity, though a most unwelcome one—
Lord WELLS-PESTELL: It is an absolute disgrace.
Lord DRUMALBYN: It is a most unwelcome necessity, but it is not a disgrace to do what is necessary. We believe this is the sole criterion at the present time, and it is for that reason that we support the Bill—
Baroness GAITSKELL: May I ask the noble Lord a question before he sits down? He spoke about anything that can be done to bring down inflation. Is there nothing that the Government can do in terms of making cuts involving some of the rich people in this country? Why must they turn to the poor?
Lord DRUMALBYN: We are talking about the national insurance scheme and social security benefits, and in paying out benefits we cannot go above a certain proportion of the national wealth. Obviously to go above that would be entirely self-defeating. Again this is a question of judgment at any given time. All I am saying is that it must not be accepted that at all times it can be said that in return for a certain contribution one will receive a certain benefit in terms of purchasing power; that cannot be so. We have been very fortunate over the years in being able to increase the real value of social security benefits. There was bound to come a time when there would be a change around. We hope that it will be for only a short time; and it will be for an even shorter time if we take the correct measures now.
4.22 p.m.
Lord GORDON-WALKER: I should like to say a few words on what the noble Lord, Lord Nugent of Guildford, said—he is not present at the moment—when he attempted to justify the reduction in regard to the higher levels of income tax, while at the same time cuts are being made against the poorest people in the land. He said something that cannot possibly be proved He said that if income tax at the higher levels is reduced, it leads to incentives, people make more, and so on. That is a piece of pure doc-

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trine. It is just as likely that if income tax is reduced at the top, people will simply spend more. A great many of them may take longer holidays or increase their expenditure in various ways. In that case the reduction of high taxation is itself inflationary; and that reduces the argument we have just been listening to. What the noble Lord, Lord Nugent, said did not seem to me to reduce in the slightest degree the cogency of the points advanced by my noble friends.
Lord DONALDSON of KINGS-BRIDGE: The noble Lords, Lord Nugent of Guildford, and Lord Drumalbyn, have justified something which of course they do not want to do—I give them credit for that—on grounds which are totally unacceptable. It is not acceptable to reduce the emoluments to the poorest on the basis of an intellectual gamble; it is absolutely disgraceful. It is perfectly all right to take the gamble a certain distance. Of course people have different views, and I suppose that in the country today, of the people who are intellectually equipped to decide this question, 60 per cent. may agree with me and 40 per cent. may agree with the noble Lord—maybe. To make this kind of petty saving at the expense of the poorest in the community is an action based purely on a belief, not held by a majority of people, that the Government's plans will work. We all know this, and we say that it is absolutely unjustifiable to attack certain things, even though one considers that economies must be made.
I joined the Labour Party in the late 'twenties or early 'thirties—I cannot remember precisely when—for one reason only: because the National Government cut the dole. I have never forgiven them for that, and I have never changed sides, though I have wobbled a little in the middle. Now I am swinging away because of what this Bill is doing.
Lord WALLACE of COSLANY: It seems from the remarks just made that the consciences of a number of noble Lords have been touched. I fully appreciate the effects of inflation. The noble Lord, Lord Drumalbyn, was perfectly right in his reference to inflation. I can say that after having, this weekend, paid just under 50p for a large loaf, which means virtually a 10 shilling loaf, which is quite a consideration for the average family.
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I want to relate the question of income tax relief to the actual cuts—and indeed they are cuts—in the Bill. Clause 1—de-indexing the invalidity pension—will save £140 million in a full year. Clause 2 —freezing of the earnings rule for retirement pensioners—will save £16·5 million. Clause 3—reducing the linking period for spells of unemployment and incapacity from 13 weeks to six weeks—will save £20 million. Clause 4—abolition of earnings-related supplement—will save £360 million. The most amazing thing, the proposal which has received the greatest publicity—reduction of £12 in supplementary benefit entitlement of strikers' families—will save £1 million.
My arithmetic leads me to the conclusion that that is a total of £562·5 million. The tax relief given in the Budget—which has been referred to—was £4,500 million, of which the richer section of the community, 7 per cent., receive £1,560 million in relief. So if the tax relief were to be reduced by only £500 million, the cuts now proposed need not be made. That is the arithmetic of the situation, and we feel so strongly about this matter because a reduction of £500 million would in fact make a tremendous difference to people who are already suffering because of their personal disabilities.
4.27 p.m.
Baroness YOUNG: There is no doubt that we have had a tough opening to the Bill, and I must say that on listening to the speeches of noble Lords opposite I did not feel that they bore very much relevance to the amendment that is before the Committee. We have had, in effect, a "Clause stand part" debate and we have ranged over almost all the issues of the first six clauses of the Bill, quite apart from the central issue of Clause 1.
First, I should like to correct a number of inaccuracies which crept in during the course of the debate. They were picked up most effectively by my noble friends Lord Nugent of Guildford and Lord Drumalbyn, and I am most grateful for their interventions. I wish to state from the Government Front Bench that of course we would not be considering the Bill, nor what it contains, if we did not believe that we were in a very serious economic position. It is quite absurd,

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and quite wrong, for anyone to say that we are making these proposals because, quite apart from anything else, we think that it is agreeable to say to a number of people what we know they prefer not to hear.
If there had been another solution—and it would be nice to hear it from noble Lords opposite—I cannot think why the previous Government did not discover it when in office, particularly between 1974 and 1979. If we are quite honest—and my noble friend Lord Nugent was very honest on this point—neither party has been very successful, or not as successful as we would wish, at managing the economy, and that is precisely why we are in the present difficult position. We are making a great effort to try to put things right. One thing is absolutely clear. I made this point on Second Reading, and it has been repeated by my colleagues: we must cut down Government expenditure; and the total social security budget, now running at £20 million annually —a quarter of all Government expenditure—must bear a share of the cuts.
In seeking to make economies, my right honourable friend the Secretary of State, Mr. Jenkin, has looked at the whole of this budget and has tried to make adjustments where they will cause least damage. I should like to make it clear that we are not in fact making cuts against the poorest part of the community. Those on supplementary benefit are of course the poorest and they, along with retirement pensioners, have been fully price protected.
Lord DONALDSON of KINGS-BRIDGE: Would the noble Baroness forgive me for interrupting her? Did she quote a figure of £20 million?
Baroness YOUNG: It was £20,000 million—£20 billion, yes. It is so large that I find it rather difficult to imagine; and if it sounded a bit smaller, then that is perhaps because we all find it rather easier to comprehend figures which are a hit smaller. But, no—the social security budget is £20,000 million annually. I should like to thank my noble friend Lady Macleod for her intervention, because, of course, everybody is getting an increased benefit; the situation is that some are not getting an increase as big as others.
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Now those who are affected by Clause 1 and who are not getting quite such a large increase in benefit are, of course, those who currently do not pay tax on their benefits. It is generally agreed—and I think noble Lords opposite will agree with us in this matter—that these benefits should be brought into taxation, and that, indeed, is the Government's ultimate aim. The fact is that this cannot be done before April 1982, very largely for operational reasons—particularly, I understand, to put all this on the computers and work out the necessary programmes. So we have an interim measure of a 5 per cent. abatement of these benefits. The savings achieved by the abatement amount to only about one-third of the approximately £450 million additional revenue which would accrue if the benefits were taxable.
Baroness WOOTTON of ABINGER: Would the noble Baroness give way for one moment? If you do not pay your taxes, you are charged interest: if the Government cannot get your taxes ready in time for you to pay them, they put them on a year early.
Baroness YOUNG: Perhaps I can come on to the point about numbers that was raised by the noble Lord, Lord Underhill. There is in fact no contradiction between the two lots of numbers that have been given. The figures that I gave at Second Reading—that is to say, the 650,000—are the figures of long-term invalidity pensioners, and they are the group that we have been talking about under Clause 1. Of those, it is estimated; as I said before, that approximately 250,000 either would not pay tax or would be unaffected. The 850,000 figure which was referred to is in fact the number of both the short-and the long-term beneficiaries, and some of those may be getting benefit for only as little as a week. This, of course, has produced different figures because we are using different numbers. I think it is just as well to be quite clear on that particular point.
The amendment before the Committee would have the effect of deferring the 5 per cent. abatement until the November 1981 up-rating; but, as I have explained, it is because the Government need to make savings now that they have introduced the abatement as an interim measure. If the benefits concerned were not subject to a 5 per cent. abatement at this Novem-

865
ber's up-rating, we would not achieve savings of about £130 million, and this is a substantial proportion of the total package in 1981–82.
As I indicated at the beginning, the purpose of this Bill is to make savings in Government expenditure. It is not an easy Bill to introduce into your Lordships' House, and we all recognise the strength of the feeling that exists. But right at the outset of our discussions I should like to disabuse your Lordships of this myth that, somehow, by not reducing taxes, as we have done in the two Budgets, we could have all sorts of expenditure which we have not indicated. The noble Lord, Lord Soper, made his suggestion. He said that we should cut down on defence expenditure—not, I think, something which most people, in the very uncertain world in which we live today, would agree with, but at least he is entitled to his point of view. But the noble Baroness, Lady Wootton, and the noble Baroness, Lady Gaitskell, and I think the noble Lord, Lord Gordon-Walker, and the noble Lord, Lord Donaldson, all referred to this point.
In his first Budget last year, the Chancellor cut income tax in 1979–80 by approximately £3,500 million. The bulk of that reduction in income tax actually went to those paying tax at the basic rate or below the basic rate. So in fact it went to help direcly those who are least well off. At the same time, the reductions in income tax were accompanied by a rise in VAT as part of a deliberate policy to switch taxation from direct to indirect taxation. One very largely financed the other, and it is wrong to suggest that one could have withheld the income tax reductions and still been able to secure the increased revenue from VAT. Similarly, this year, there were reductions in personal income tax but also increases in direct taxes on alcohol, tobacco and petrol, to maintain their real value. Here, too, it would have been impossible to have had the one without the other. One could not have increased the excise duties to reflect inflation while refusing to make any increase in the incomes tax allowances, which were equally affected by inflation.
Neither Budget, therefore, has provided a large net give-away of taxation which, even if it had been Government policy, could have been used to finance a higher level of public expenditure.
Baroness WOOTTON of ABINGER: Will the noble Baroness explain how she reconciles her figures with those which were given in a Written Answer in the Commons Hansard for 3rd July 1979? Will she look at the figures there, which indicate very much larger figures for the total reductions in income tax at the higher levels than she has quoted in her figures, and perhaps let me know how these are to be reconciled?
Baroness YOUNG: I shall certainly look at the point which the noble Baroness makes. I have not got the particular Question and Answer before me, but I shall certainly make a note of that and let her know the answer to the point she makes. But I can assure her that I have taken advice from the Treasury on this matter, and I have every reason to think that the principles I have outlined are Government policy and are correct. I therefore think it is just pretending to people, pretending to ourselves, to suggest that somehow there is a way to get more for people at a moment when the country is not producing more; and it is not kind to them. It is deluding ourselves when we, at least, ought to know better, and it certainly is not kind to others to pretend that we can get a lot more in these very difficult times.
I have been grateful for the support that I have had on this particular amendment. We are going to have a lot of other amendments, and a great deal more discussion on this Bill. It is one, as I have already indicated, that the Government would not have introduced if we did not believe that it was part of a package to try to set the country back on a road to recovery, so that we can achieve the level of benefits that we should like to see for everybody in this country. I might remind your Lordships, as we are dealing with a number of benefits, including the invalidity benefit, that it was of course a Conservative Government which first introduced invalidity benefit in 1971.
Lord PITT of HAMPSTEAD: Before the noble Baroness sits down, will she be kind enough to tell me how, if in fact taxes on cigarettes and alcohol were increased slightly in order to cover this expenditure, it would in fact have disturbed the Government's strategy?
Baroness YOUNG: The point I was trying to make was in answer to one from the noble friend of the noble Lord, Lord Pitt, that, had we not reduced direct taxes, there would have been a great deal more money to pay for social security benefits. As I was trying to indicate, we have reduced a number of direct taxes—part of our manifesto commitment —and most of the benefit has gone to those paying at the standard rate or below, and has taken a great many people out of direct taxation altogether. But that has been countered by indirect taxes —the increase in VAT in the first Budget and the increase in the other indirect taxes, which I have mentioned, in the second. In this way, it indicates that the overall level of tax has remained relatively in balance, and there is therefore not a great deal to give away for extra benefits.
Lord PITT of HAMPSTEAD: The noble Baroness realises that she has not answered my question, I hope.
Lord WELLS-PESTELL: I feel very distressed as a result of the debate that we have had this afternoon, and particularly distressed by the contributions made by the noble Lord, Lord Nugent of Guildford, and the noble Lord, Lord Drumalbyn, both of whom I claim, I think rightly, to know very well indeed. I have always enjoyed a good relationship with them and we shall go on enjoying the same relationship, I hope; but I think they both missed the point.
The point is that the Government should have devised a strategy whereby it was not necessary to save what is, after all, a miserly sum of money at the expense of that section of the community that cannot possibly afford it. The noble Baroness said," Ah, but we did not do that. We have not affected those on supplementary benefit". Does the noble Baroness not know that there are hundreds and hundreds of thousands of men, women and children who are not in receipt of supplementary benefit but who are either on or just below the poverty line? They are the people who are going to be affected by this.
Lord DRUMALBYN: The noble Lord has come back to the point of the poverty line. Can he say where the poverty line
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exists, if it exists at all; who defines it and how it relates to the total amount that people can get by way of combined pension and supplementary benefit or unemployment benefit and supplementary benefit?
Lord WELLS-PESTELL: If I remember aright, it was defined by a number of bodies. One was the Supplementary Benefits Commission. Professor Donnison said something about it recently. The Child Poverty Action Group did a considerable amount of research into the matter and published a document on this matter only a few months ago. There are several, including Professor Townsend of Exeter University.
I think that the people who are concerned with this are quite satisfied that there are a very substantial number of people who are not in receipt of supplementary benefit but who are in receipt of other benefits who have not got a sufficient amount coming in to enable them to get all the necessities that they need. The point that I am making is that there are. I understand, still about 30,000 persons who are entitled to supplementary benefit and who do not claim it. I accept that that is not the fault of the Government. But they do not claim it. They are the people who are going to be affected by these cuts. If the noble Baroness asks—as she did ask—what is our suggestion about it, we say this. When the Social Security Bill was introduced by the Government in another place, there was no thought then of a Social Security (No. 2) Bill. The Social Security (No. 2) Bill saw the light of day only just before the Social Security Bill finished in the Commons. It was found that by introducing the Bill now before us a few hundred millions could be saved. What we are saying is that it was really a most disgraceful way of saving a very small sum.
The noble Baroness talked about the "give away" of the first Budget when she said there were £3,500 million given away and that a good deal of that—she did not specify how much—went to the ordinary person. That is perfectly true. But, certainly, an equal amount went to those who were already enjoying a fairly good income. We have heard the figure today of something like 7 per cent. of the people paying tax receiving £1,560 million. It was done in this way. I am trusting to

869
memory (which is not a very good thing to do) but I believe I am right in saying that the top level of 83 per cent. tax—and I accept that this is outrageously high and that I would not want to pay 83 pence in the pound tax—was brought down to something like 61 per cent., 62 per cent. or 63 per cent. There was no need to do that. As my noble friend Lord Gordon-Walker asked, "Where did the money go?" It went to increase inflation, as we all know. That is where the money went.
The Government said that people must be given an incentive; that they will then work harder. But let us be fair to those people. They work very hard as it is and many could not work harder if they wished to do so—they leave home early in the morning and come home late at night. I know a few such people, not many, but a few. The incentive was to enable them to spend more money; the incentive was not to work harder, because they could not do so in many instances. What we are saying is that the Government suddenly rushed into an action which, after a comparatively short space of time, they saw to have been a mistake. In fact, they did not do their sums properly when they decided to give away this £3,500 million. It was only after they had given it away that they realised that there was not so much money in the kitty and they had to look round to make cuts.
I am saying that we accept that the cuts are necessary but that what we do not accept, and shall never accept, is the way in which they were made—touching that section of the community that will really suffer. They are those who are going to suffer the 5 per cent. cut in the benefits.
Baroness YOUNG: May I say, before the noble Lord sits down, that so far as the Government's economic policies are concerned, it is perfectly true that on coming into office we faced a very serious situation, including a number of postdated cheques from the previous Government which we had to pick up and to meet by way of public sector pay settlements? Could I say that over the whole consideration of the abatement of the up-rating, the fact is that the benefits which are concerned in this are benefits which are not taxed at present and which we hope will be brought into taxation? It may be helpful to the Committee if I repeat the words of my right honourable friend the Secretary of State in another place on April 29th, when he said:
"When it"—
that is, the invalidity pension—
"comes into tax subject to the availability of resources, we shall put it back to what it would have been had it stayed in step with the retirement pension this November".
That is proof of our good faith in this matter. This is to meet a particularly difficult short-term situation.
Lord WELLS-PESTELL: Could we have this in good, sound, common English? Instead of talking about "abatement of up-rate", let us talk about stealing 5 per cent. from people.
4.48 pm.
On Question, Whether the said Amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents 75; Not-Contents, 92.

CONTENTS

Amherst, E.

David, B. [Teller.]

Hutchinson of Lullington, L.

Ardwick, L.

Davies of Penrhys, L.

Ilchester, E.

Aylestone, L.

Denington, B.

Jacques, L.

Bacon, B.

Donaldson of Kingsbridge, L.

Janner, L.

Balogh, L.

Elwyn-Jones, L.

Leatherland, L.

Banks, L.

Gaitskell, B.

Listowel, E.

Beswick, L.

Gordon-Walker, L.

Llewelyn-Davies of Hastoe, B.

Birk, B.

Goronwy-Roberts, L.

Lloyd of Kilgerran, L.

Blease, L. [Teller.]

Gosford, E.

Lovell-Davis, L.

Blyton, L.

Greenwood of Rossendale, L.

Mackie of Benshie, L.

Boston of Faversham, L.

Hale, L.

Maelor, L.

Brockway, L.

Hall, V.

Meston, L.

Bruce of Donington, L.

Hampton, L.

Mishcon, L.

Burton of Coventry, B.

Hatch of Lusby, L.

Northfield, L.

Byers, L.

Henderson, L.

Oram, L.

Cledwyn of Penrhos, L.

Houghton of Sowerby, L.

Pargiter, L.

Collison, L.

Howie of Troon, L.

Peart, L.

Phillips, B.

Soper, L.

Underhill, L.

Pitt of Hampstead, L.

Spens, L.

Wallace of Coslany, L.

Plant, L.

Stewart of Alvechurch, B.

Wells-Pestell, L.

Ritchie-Calder, L.

Stewart of Fulham, L.

Whaddon, L.

Ross of Marnock, L.

Stone, L.

Wigoder, L.

Sainsbury, L.

Strabolgi, L.

Wilson of Radcliffe, L.

Segal, L.

Strauss, L.

Wootton of Abinger, B.

Shinwell, L.

Taylor of Mansfield, L.

Wynne-Jones, L.

NOT-CONTENTS

Airey of Abingdon, B.

Gibson-Watt, L.

Massereene and Ferrard, V.

Alexander of Tunis, E.

Glenkinglas, L.

Morris, L.

Allen of Abbeydale, L.

Godber of Willington, L.

Mowbray and Stourton, L.

Alport, L.

Gormanston, V.

Murton of Lindisfarne, L.

Ampthill, L.

Gowrie, E.

Norfolk, D.

Avon, E.

Gridley, L.

Northchurch, B.

Bellwin, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Nugent of Guildford, L.

Belstead, L.

Orkney, E.

Brentford, V.

Halsbury, E.

Penrhyn, L.

Caccia, L.

Hanworth, V.

Reigate, L.

Campbell of Croy, L.

Hatherton, L.

Renton, L.

Clwyd, L.

Hawke, L.

Rochdale, V.

Cockfield, L.

Henley. L.

Romney, E.

Cottesloe, L.

Hives, L.

St. Aldwyn, E.

Craigavon, V.

Holderness, L.

Sandford, L.

Cullen of Ashbourne, L.

Home of the Hirsel, L.

Sandys, L. [Teller.]

Davidson. V.

Hood, V.

Selkirk, E.

Denham, L. [Teller.]

Hornsby-Smith, B.

Sharples, B.

Derwent, L.

Hylton-Foster, B.

Soames, L. (L. President)

Drumalbyn, L.

Ironside, L.

Stamp, L.

Dundee, E.

Kimberley, E.

Strathclyde, L.

Effingham, E.

Lauderdale, E.

Strathcona and Mount Royal, L.

Ellenborough, L.

Long, V.

Trefgarne, L.

Emmet of Amberley, B.

Lucas of Chilworth, L.

Trenchard, V.

Evans of Hungershall, L.

Luke, L.

Trumpington, B.

Exeter, M.

Lyell, L.

Vickers, B.

Ferrers, E.

Mackay of Clashfern, L.

Vivian, L.

Fortescue, E.

Macleod of Borve, B.

Wakefield, of Kendal, L.

Fraser of Kilmorack, L.

Malmesbury, E.

Ward of Witley, V.

Gainford, L.

Margadale, L.

Westbury, L.

Geoffrey-Lloyd, L.

Marley, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

4.56 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 2:
Page 1, line 12, at end insert—
("Provided that the increase is to come into force not later than 20th November 1980.")
The noble Lord said: This amendment would ensure that this year's uprating date was not later than the week commencing Monday 17th November. The Government have taken power, in the Social Security Act which recently received Royal Assent, to fix the up-rating date at any time up to the end of November. Ministers have repeatedly argued, as did the noble Baroness, the Minister, at the Report stage of that Bill on 6th May (column 1528 of Hansard) that the object of that change was to prevent the date from creeping steadily forward year
872
by year. It had already crept forward from 17th November, 1975, to 12th November last year and by this November it would have crept forward a full week to 10th November.
I have always accepted—as did the Opposition spokesmen in another place —that it would not be unreasonable for the Government to prevent this by putting the uprating date back to 17th November this year. The proposal to postpone the uprating for a further week, to 24th November, however, is simply a device —and I say this very carefully—to rob pensioners and other beneficiaries of a week's increase to which they are morally, although, it will be argued, not legally, entitled. It is a totally indiscriminate cut affecting not only national insurance beneficiaries, but those on supplementary benefit as well: the poorest in the land whom Ministers claim from time to time, as they have claimed today, to be protecting from the cuts.
Replying to a similar amendment in another place, the Under-Secretary of State, Mrs. Chalker, was quite frank about this. She said:
"It is perfectly true that by taking a further week, which has now happened, and by announcing the uprating at 24th rather than 17th November there are considerable savings to be made. I make no secret of the fact that there has been pressure on the Government and the DHSS to make those savings".
That was from the Standing Committee B, 3rd Sitting, part III, 24th April, 1980, at column 322. The amount at stake is not small; on the Government's own estimate, it is £60 million. I will not burden the Committee with reading further what took place in the Standing Committee.
The Government's attitude to this question was neatly summed up by the Financial Secretary to the Treasury in the Budget debate on 31st March. When asked to explain why the up-rating date was being moved from 10th to 24th November, he replied:
"To quibble over a couple of weeks is absurd".
Your Lordships will find that quotation in Hansard of another place, 31st March 1980, column 164. We take the view that for people living on the breadline, an arbitrary cut of £12—that is what it amounts to for a pensioner couple—is anything but a quibble. Therefore I move this amendment, which will add the words:
("Provided that the increase is to come into force not later than 20th November 1980.")
Baroness YOUNG: The intention of this amendment is to prevent the 5 per cent. abatement of the increase in short-term and invalidity benefits unless the up-rating of these benefits takes place by Thursday, 20th November 1980. In so far as it limits the abatement to 1980, it would also prevent the abatement in, future years even if the Secretary of State were to make an order under Clause 1(4). This amendment would require us to do one of two things. Either we would have
to up-rate these benefits by 20th November, when the Government are already committed to the week beginning the 24th November for the up-rating this year or we would have to forgo the 5 per cent. abatement of short-term and invalidity benefits.
We have already been over the ground as regards the latter of those proposals and I do not wish to repeat all the arguments again. The fact is—and I am sure the noble Lord, Lord Wells-Pestell, will know this as well as I do—the up-rating of social security benefits is a complex matter. It is essential that all benefits which are to be up-rated are increased in the same calendar week. For administrative reasons, the amendment would require the bringing forward of the up-rating date this year by a whole week to the week beginning Monday, 17th November.
I was very glad to hear the noble Lord recognise that there is nothing at all illegal in what we are proposing. As he has quite rightly said, the effect of what we are proposing has corrected the slippage in the date of the week in which up-ratings are made annually. He is also right in saying that the effect of it will he to produce a saving of about £65 million this year. This is something which we believe is essential, along with the other economics of which I have referred. The noble Lord may no doubt like to know that for 1981 we must, under existing legislation, up-rate by 23rd November, so there could not be another week out next year. I hope, for the reasons I have given, that your Lordships will decline to support this amendment and will feel that what the Government are proposing in this context is the right line of action.
5.4 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 79; Not-Contents, 86.

CONTENTS

Amherst, E.

Beswick.L.

Bruce of Donington, L.

Ardwick, L.

Birk, B.

Burton of Coventry, B.

Aylestone, L.

Blease, L. [Teller.]

Byers, L.

Bacon, B.

Blyton, L.

Cledwyn of Penrhos, L.

Balogh, L.

Boston of Faversham, L.

Collison, L.

Banks, L.

Brockway, L.

David, B.

Davies of Leek, L.

Kilmarnock, L.

Ross of Marnock, L.

Davies of Penrhys, L.

Leatherland, L.

Sainsbury, L.

Denington, B.

Lee of Newton, L.

Seear, B.

Donaldson of Kingsbridge, L.

Listowel, E.

Segal, L.

Elwyn-Jones, L.

Llewelyn-Davies of Hastoe, B.

Shinwell, L.

Gaitskell, B.

Lloyd of Kilgerran, L.

Stamp, L.

George-Brown, L.

Longford, E.

Stewart of Alvechurch, B.

Gordon-Walker, L.

Lovel-Davis, L.

Stewart of Fulham, L.

Goronwy-Roberts, L.

Maelor, L.

Stone, L.

Gosford, E.

Meston, L.

Strabolgi, L.

Greenwood of Rossendale, L.

Mishcon, L.

Strauss, L.

Hale, L.

Northfield, L.

Taylor of Mansfield, L.

Hall, V.

Ogmore, L.

Underhill, L.

Hampton, L.

Oram, L.

Wallace of Coslany, L. [Teller.]

Hanworth, V.

Pargiter, L.

Wells-Pestell, L.

Hatch of Lusby, L.

Peart, L.

Whaddon, L.

Henderson, L.

Phillips, B.

Wigoder, L.

Houghton of Sowerby, L.

Pitt of Hampstead, L.

Wilson of Radcliffe, L.

Howie of Troon, L.

Plant, L.

Wootton of Abinger, B.

Ilchester, E.

Ritchie-Calder, L.

Wynne-Jones, L.

Jacques, L.

NOT-CONTENTS

Airey of Abingdon, B.

Godber of Willington, L.

Mowbray and Stourton, L.

Alexander of Tunis, E.

Gormanston, V.

Murton of Lindisfarne, L.

Allen of Abbeydale, L.

Gowrie, E.

Norfolk, D.

Alport, L.

Gridley, L.

Northchurch, B.

Ampthill, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Nugent of Guildford, L.

Avon, E.

Orkney, E.

Bellwin, L.

Halsbury, E.

Orr-Ewing, L.

Belstead, L.

Hatherton, L.

Penrhyn, L.

Caccia, L.

Hawke, L.

Reigate, L.

Campbell of Croy, L.

Henley, L.

Renton, L.

Cockfield, L.

Hives, L

Rochdale, V.

Cottesloe, L.

Holderness, L.

Romney, E.

Craigavon, V.

Home of the Hirsel, L.

St. Aldwyn, E.

Cullen of Ashbourne, L.

Hood, V.

Sandys, L. [Teller.]

Davidson, V.

Hornsby-Smith, B.

Selkirk, E.

Denham, L. [Teller.]

Hylton-Foster, B.

Sharples, B.

Drumalbyn, L.

Kimberley, E.

Soames, L. (L. President.)

Dundee, E.

Lauderdale, E.

Strathclyde, L.

Ellenborough, L.

Long, V.

Strathcona and Mount Royal, L.

Emmet of Amberley, B.

Lucas of Chilworth, L.

Teviot, L.

Evans of Hungershall, L.

Luke, L.

Trefgarne, L.

Exeter, M.

Lyell, L.

Trenchard, V.

Ferrers, E.

Mackay of Clashfern, L.

Trumpington, B.

Fortescue, E.

Macleod of Borve, B.

Vickers, B.

Fraser of Kilmorack, L.

Malmesbury, E.

Vivian, L.

Gainford, L.

Margadale, L

Wakefield, of Kendal, L.

Geoffrey-Lloyd. L.

Marley L.

Ward of Witley, V.

Gibson-Watt, L.

Massereene and Ferrard, V.

Westbury, L.

Glenkinglas, L.

Morris, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.11 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL had given Notice of his intention to move Amendment No. 3:
Page 1, line 12, at end insert—
("Provided that from the first week of the tax year in which any of the specified sums become chargeable to income tax each of them shall be increased to at least the amount to which it would have had to be increased at the previous uprating if this section had never come into force.").
The noble Lord said: In view of the fact that Amendment No. 4, which is in the name of my noble friend Lord Banks, is very similar to my own and I prefer his to mine, I do not intend to move this amendment.
Lord BANKS Lord BANKS moved Amendment No. 4:
Page 1, line 12, at end insert—
("Provided that from the first week of the tax year in which any of the specified sums become charged to income tax each said sum shall be increased to that sum to which it would have been increased in consequence of reviews in the tax year 1979–80 and any subsequent tax year but for the provisions of this section").
The noble Lord said: I am grateful to the noble Lord, Lord Wells-Pestell, for not moving his amendment in favour of mine. They both have the same simple purpose, but before I explain it may I say that we on these Benches are as heartily opposed to the 5 per cent. abatement as anyone in this House. The national insurance fund is not in difficulties. We believe that this attempt to find £500 million a year in this way is not only undesirable, but unnecessary. If it is required to take £500 million off the public sector borrowing requirement, which is what happens if you accumulate money in the national insurance fund, we are quite sure that this is not the way in which to do it. It will affect the Exchequer only to the extent of about £90 million.
As we have already heard, the abatement applies to short-term benefits and invalidity benefit and involves a cut in real value, in that instead of these benefits being increased by 16½ per cent. they will be increased by only 16½ per cent. This is quite arbitrary and unfair, but we are told that it is an interim measure until these benefits are taken into tax. During that interim, it will affect people who do not pay tax as well as those who do pay tax, and people who do not pay tax will receive the cut. But the question arises: will the value be restored when these benefits are taken into tax? Will that cut which has been made during the interim be restored? If it is not, then everybody—those who pay tax and those who do not—will be penalised in the future. If it is not restored, the abatement will be perpetuated for all time and compounded.
The Secretary of State in another place has indicated that if resources are available it is the intention of the Government to restore the value of invalidity benefit, because the invalidity pension has, in the past, been treated as a long-term benefit and this measure will open up a gap between it and the retirement pension. But it is only if resources are available that this is to be done and, as I said in the Second Reading debate, that phrase is at best an aspiration, and at worst an escape hatch. But in our view it should be done for all the benefits when they are taken into tax. The value which they have lost through the abatement should be
878
restored to them. That is what this amendment would achieve. I beg to move.
Lord WELLS-PESTELL: I do not want to keep the Committee for any length of time. My noble friend Lord Banks has put the position very clearly and succinctly, and I do not think I can improve upon it in any way, other than to say that all he has asked for, and all we are asking for, is fairness and justice in this matter.
It is patently obvious to us that if benefits are reduced for a certain reason and for a particular period, then, if and when they are taken into tax, they should all—not just the invalidity benefit—be brought up to the level of what they would have been if they had not suffered an abatement of 5 per cent. I hope that the noble Baroness the Minister is in a position today to be a little more positive and a little more forthcoming than her right honourable friend was some time ago in another place, that she will give us a real assurance that this will be done and that we shall not be put off with the usual phrase "if circumstances permit", because we all know that circumstances will not permit something being done if a person does not want to do it. So I hope that she will be able to give us a categorical reply.
The LORD ADVOCATE (Lord Mackay of Clashfern): The Government have announced their intention of bringing benefits for the unemployed into the tax system in April 1982. And if, by 1982, the Government can achieve their aim of transferring to employers the responsibility for sick pay during initial weeks of incapacity, as proposed in the Green Paper published in April, most of the payments for short-term incapacity would also become taxable from that point. Other benefits will be brought into taxation as soon as possible thereafter. In the meantime, the 5 per cent. abatement in 1980 is an interim measure. No decision has been taken on whether there will be an abatement in either or both 1981 and 1982—and there are later amendments covering this matter—and this must be considered in the light of the circumstances at the time.
The amendment seeks to ensure that all the benefits affected by Clause 1 will be restored to their full value once they are

879
brought into taxation. It would, in our view, be most unwise at this stage to enter into such a general commitment so far ahead. The Government have undertaken that when the short-term benefits—sickness benefit, industrial injuries benefit, unemployment benefit and maternity allowance—are brought into taxation, their level will be reviewed in the light of all the relevant factors, including the economic circumstances at the time. This is as far as we think it is right to go.
There is a more positive side, however, to the argument, for, as my noble friend Lady Young said during the debate on Second Reading on 2nd June, my right honourable friend the Secretary of State for Social Services has already given an undertaking that, subject to the availability of resources, invalidity benefit will be fully restored once it is brought into taxation. He extended this assurance to cover unemployability supplement, which is the counterpart of invalidity benefit under the Industrial Injuries Scheme. These benefits differ from the other benefits affected by Clause 1 in that they are long-term maintenance benefits. Untaxed invalidity benefit is currently paid at the same rate as retirement pension which, as your Lordships know, is taxable. For many people who are chronically sick, invalidity benefit plays the same long-term role as retirement pension. Because of this, the Secretary of State was able to give the special assurance about restoring its value as well as restoring the value of its industrial injuries counterpart, when these benefits are brought into taxation. It has been suggested that this does not go far enough. In our view, the undertaking which my right honourable friend the Secretary of State has given is as clear and as firm as any responsible Minister could make in the present economic circumstances. For these reasons, I hope that your Lordships will not approve this amendment.
Baroness PHILLIPS: I should like to return to the point of economics. It is unnecessary to labour the point which so many noble Lords have rightly made about the poverty and the sheer hardship which will be imposed by various parts of the Bill. However, a few years ago I did a piece of research into the tax position of people in a lower income
880
group. It became apparent, even after quite amateur research, that in many cases it cost far more to collect the tax than the tax collected. It seems to me that this is a clear case where we shall bring people on invalidity long-term benefits into the system and take tax from them.
The noble Lord, Lord Drumalbyn, asked about the poverty line. That is not very difficult to determine. Those who are on fixed benefits have to shop in the same markets as those of us who are lucky enough to earn money which is subject to an up-rating, a cost of living bonus. If the invalidity long-term pension or benefit were to be subject eventually to tax, even the noble and learned Lord the Minister who has put forward the point of view of the Government would find it very interesting to discover whether it is worth while—if the whole object of the exercise is to save money, as we understand that it is. We presume that it is not to punish the invalidity benefit recipients, because they are unlucky enough to have to collect it.
May I therefore quite seriously suggest in relation to the amendment of the noble Lord, Lord Banks, that there is this other aspect; namely, whether it is really an economic proposition to collect tax from those you are not taxing already.
Equally, the poverty line can be very easily determined. These people will most certainly go below the poverty line and will then come on to supplementary benefit. Thus there will be no saving; it will be simply a question of handing back money and having to employ far more officers of government in order to carry out this exercise.
Lord MACKAY of CLASHFERN: I will not weary your Lordships by going again into general matters, but so far as the cost of taxation, which I think is the main new point which the noble Baroness has raised, is concerned, this is the point which the Government are making. This is the reason why it will take some time to introduce the scheme. The Government hope that their proposals will be reasonably cheap and economic to apply to the benefits in question. That is the reason why we cannot bring in the system now and why we shall have to wait until at least 1982 before it applies.
Baroness PHILLIPS: Do we understand that if it is found to be uneconomic the Government will not bring it in?
Lord MACKAY of CLASHFERN: I think that noble Lords could rely on the Government not to tax for taxation's sake. In other words, unless there is a reasonable yield, having regard to its cost, the Government would not be inclined to bring it in. It is fairly plain, as the noble Baroness said, that there is no intention of having a tax system simply for the purpose of punishing people. The tax system is designed to produce revenue for the State. It is only if these changes would produce a net revenue for the State that there would be any question of bringing them in.
Lord BANKS: I must confess that I find the reply of the noble and learned Lord very disappointing. If the Government could have brought these benefits into tax overnight, presumably they would have done so. If that had been done, then they would have become immediately subject to tax. And in two or three years' time the benefits would have been uprated in the interim in line with prices and then they would also have been liable to tax. The Government would not have been afraid to accept that commitment. We are asking them to accept precisely the same commitment in this amendment, yet they now say that because they are
going to have abatement for one or two years in the interim they cannot accept a commitment which they would have been quite happy to take in the normal course of events. That seems to me to be a nonsense. I feel that this is an important point of principle, and an important amendment, and that it should be pressed.
Lord DAVIES of LEEK: Another point—and I should like an answer to it—is this: how difficult will this be for people who, for the first time in many cases, will be taxed? They will face the difficulty of having to fill up a form. If I may give a personal instance—I happen to be able to wade through them—I wrote a letter of 10 pages and a three-year analysis of tiny bits of income. But 90 per cent. of these people are not able to shuffle forms. They will be left to drift, and some of them will be in an age group where it is difficult to get help. I believe that it will put a greater burden on the people who collect the tax than we should put upon them for the paucity of the sum which will be collected.
5.26 p.m.
On Question, Whether the said amendment (No. 4) shall be agreed to?
Their Lordships divided: Contents, 77; Not-Contents, 82.

CONTENTS

Amherst, E.

Greenwood of Rossendale, L.

Peart, L.

Ardwick, L.

Hale, L.

Phillips, B.

Aylestone, L.

Hampton, L. [Teller.]

Pitt of Hampstead, L.

Bacon, B.

Hanworth, V.

Plant, L.

Balogh, L.

Hatch of Lusby, L.

Ritchie-Calder, L.

Banks, L.

Henderson, L.

Ross of Marnock, L.

Beswick, L.

Houghton of Sowerby, L.

Sainsbury, L.

Birk, B.

Howie of Troon, L.

Seear, B.

Blease, L.

Ilchester, E.

Segal, L.

Blyton, L.

Ingleby, V.

Shinwell, L.

Brockway, L.

Jacques, L.

Stamp, L.

Burton of Coventry, B.

Kilmarnock, L.

Stewart of Alvechurch, B.

Byers, L.

Leatherland, L.

Stewart of Fulham, L.

Cledwyn of Penrhos, L.

Lee of Newton, L.

Stone, L.

Collison, L.

Listowel, E.

Taylor f Mansfield, L.

David, B.

Llewelyn-Davies of Hastoe, B.

Underhill, L.

Davies of Leek, L.

Lloyd of Kilgerran, L.

Wallace of Coslany, L.

Davies of Penrhys, L.

Longford, E.

Wells-Pestell, L.

Denington, B.

Lovell-Davis, L.

Whaddon, L.

Donaldson of Kingsbridge, L.

Mackie of Benshie, L.

Wigoder, L. [Teller.]

Elwyn-Jones, L.

Maelor, L.

Wilson of Radcliffe, L.

Gaitskell, B.

Meston, L.

Winstanley, L.

George-Brown, L.

Northfield, L.

Winterbottom, L.

Gordon-Walker, L.

Ogmore, L.

Wootton of Abinger, B.

Goronwy-Roberts, L.

Oram, L.

Wynne-Jones, L.

Gosford, E.

Pargiter, L.

NOT-CONTENTS

Ailesbury, M.

Gibson-Watt, L.

Murton of Lindisfarne, L.

Airey of Abingdon, B.

Glenkinglas, L.

Norfolk, D.

Alexander of Tunis, E.

Godber of Willington, L.

Northchurch, B.

Alport, L.

Gowrie, E.

Nugent of Guildford, L.

Ampthill, L.

Gridley, L.

Orkney, E.

Avon, E.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Orr-Ewing, L.

Bellwin, L.

Penrhyn, L.

Belstead, L.

Hatherton, L.

Reigate, L.

Bessborouth, E.

Hawke, L.

Renton, L.

Caccia, L.

Henley, L.

Rochdale, V.

Campbell of Croy, L.

Hives, L.

Romney, E.

Cockfield, L.

Holderness, L.

St. Aldwyn, E.

Cottesloe, L.

Home of the Hirsel, L.

Sandys, L. [Teller.]

Craigavon, V.

Hood, V.

Selkirk, E.

Cullen of Ashbourne, L.

Hylton-Foster, B.

Sharples, B.

Davidson, V.

Kimberley, E.

Soames, L. (L. President.)

Denham, L. [Teller.]

Lauderdale, E.

Strathclyde, L.

Drumalbyn, L.

Long, V.

Strathcona and Mount Royal, L.

Dundee, E.

Lucas of Chilworth, L.

Teviot, L.

Ellenborough, L.

Luke, L.

Trefgarne, L.

Emmet of Amberley, B.

Lyell, L.

Trenchard,V.

Exeter, M.

Mackay of Clashfern, L.

Trumpington, B.

Ferrers, E.

Macleod of Borve, B.

Vickers, B.

Forester, L.

Malmesbury, E.

Wakefield of Kendal, L.

Fortescue, E.

Margadale, L.

Ward of Witley, V.

Fraser of Kilmorack, L.

Marley, L.

Westbury, L.

Gainford, L.

Massereene and Ferrard, V.

Young, B.

Geoffrey-Lloyd, L.

Mowbray and Stourton, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.34 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 5:
Page 1, leave out lines 16 to 18.
The noble Lord said: This amendment would exempt the basic rates of unemployment benefit, sickness benefit and maternity allowance from the 5 per cent. cuts which the Government propose to make this year and the similar cuts which they are seeking power to make in each of the next two years. The Government seek to justify these cuts on the grounds that the benefits ought to be taxed. There is indeed a reasonable case for taxing these benefits if it can be done without undue administrative cost and complexity. If a Labour Government had proposed to tax them, however, they would certainly have given very serious consideration to the question whether the benefits themselves ought to be increased at the same time. They have been allowed to fall far below the long-term national insurance benefits in recent years. If they are to be taxed in the same way as the long-term benefits there is obviously a case for reducing the difference between the benefit rates. But that is not the Government's intention, as I understand it. On the contrary, they propose to reduce the benefits
payable for unemployment, short-term sickness and maternity still further by abolishing the earnings-related supplement.
However strong the arguments for taxing the benefits may be, in my view they cannot justify what the Government are doing in Clause 1. The proposed cuts are arbitrary and, I think, indiscriminate. They will fall equally on those whose incomes are above the tax thresholds and those whose incomes are below them. Families with children will be hit particularly hard because, in addition to the 5 per cent. cuts in the adult benefit rates, they will also suffer from the grossly inequitable way in which the value of the additions for children is being cut this November.
The Government—and I do not say this unkindly—should be honest and admit that what they are doing has nothing whatever to do with taxation. It is quite simply a deliberate decision to cut back the standard of living of the unemployed and the sick. One result of these cuts will be a big increase in the number of people forced to claim means-tested supplementary benefit. We are told that there will be about 110,000 more supplementary benefit claimants as a result of this. Ministers have claimed that because the supplementary benefit rates will not be subject to the 5 per cent. cuts the poorest

885
will be protected. But the estimate of 110,000 is based on the assumption that one in four of those becoming entitled to supplementary benefit will not claim it. This was the point that I tried to make on a previous amendment when I said that some 30,000—and I was quite wrong about that; I suppose it is really between 30,000 and 40,000 people and their dependants—will be affected. Perhaps 100,000 people in all will not be protected and their income will fall below the supplementary benefits safety net.
This is an argument which really stands up, and I do not think it can be refuted. Any argument can be refuted on the basis, "We have got to cut", and that seems to be the only answer that one gets today, as happened on the Social Security Bill, when the attitude was, "We are in a deuce of a state, we have to save money and it must go right across the board". As I have said two or three times already, we accept that there is a need to save money: what we are saying is that the poorest section of the community must be protected.
When the noble Baroness, Lady Young, was replying to me on the first amendment, she said, "We are doing this because the supplementary benefit rate will not be subject to the 5 per cent." As I said, one has to recognise that there will be between 35,000 and 40,000 people and their dependants—possibly 100,000 in all—who will not be protected and whose income will fall below the supplementary benefit net. I hope your Lordships will feel that this is a reasonable amendment. I think it is, and I hope that your Lordships will support it. I beg to move.
Lord DRUMALBYN: The argument that the noble Lord has put forward is in some respects a cogent one, but it is not a new one. We have all been faced—those who have had to deal with these things—with the problem that some people who are entitled to benefits do not take them up. I do not know whether my noble friend will be able to deal with that point: I hope she will. But it does not seem to me that that in itself would be a full justification for excluding the requirement to reduce the benefits for these groups, the sickness benefit, the unemployment benefit and so on, by 5 per cent.
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One has to remember that in principle it must be right on a system of this kind —and one has to remember the changes in the system that have taken place over the years—to subject this kind of benefit to tax in the same way as any other form of income. Virtually any other form of income is subject to tax if indeed it falls within the taxable area. The noble Lord is perhaps right in drawing attention to the problem here, and I would urge the Government to take every possible step to see that those people who do fall below the supplementary benefit level are enabled, perhaps better than they are at the present time, to claim. There is nothing to prevent their claiming. The question is what can be done to help them.
Baroness YOUNG: When savings in social security expenditure have to be made, it seems right that part of those savings should fall on those benefits which ought to be taxable but which in fact are not. The benefits which it is generally agreed should be taxable are the benefits which replace earnings. Unemployment benefit, sickness benefit and maternity allowance all fall into this category, and therefore they should be included in the abatement proposals in Clause 1. The clause as a whole is designed to save around £130 million net in a full year.
I would assume that it is not intended by the noble Lord, Lord Wells-Pestell, or his noble friends who support the amendment, that the personal benefits with which the amendment specifically deals should be protected, while injury benefit—which corresponds to sickness benefit—and adult dependency increases payable with these benefits, should be abated. I will, therefore, refer in passing to these other issues.
It has been suggested that by abating maternity allowance this Government are adding to the difficulties faced by expectant mothers and the risks to the unborn child. However, we are confident that this proposal will not have the serious effect that some have predicted. There are a number of reasons for this. Maternity allowance is paid only to those women who have a recent history of employment. Many of them will receive in addition maternity pay under the provisions of the Employment Protection Act. Most will have an income above the tax threshold during the year in which maternity allowance is paid.

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The £5 million savings from abatement of the increase in this allowance have to be considered, and I think can be defended against this background.
I should also like to remind your Lordships that this Government intend to introduce two significant measures which will help expectant mothers. The first is that we have agreed that the maternity grant, which is intended as a contribution to the expenses of having a baby, and is paid to the great majority of mothers, will become non-contributory from 1982, and so benefit some vulnerable women who are at present excluded, particularly the young mothers. The second is the proposal to allow employed women paid leave to attend prenatal clinics, which will give them the same opportunity to get a check-up and treatment as women who do not go out to work.
Unemployment benefit and sickness benefit are short-term benefits designed to replace earnings during breaks in employment. Most claims for these benefits last only a few weeks. The majority of beneficiaries will, therefore, have an income from earnings as well as from benefits during the tax year in which the benefit is paid. At present only the earnings are liable for tax. It is clear that the income from sickness or unemployment benefits should also be brought into taxation. I think there is no disagreement about that principle between us. For reasons which we have already explained, this cannot be done before April 1982, and these benefits are, as an interim measure, being made subject to the 5 per cent. abatement. This will yield important savings: £75 million gross in a full year for these benefits as a whole. Given that these short-term earnings replacement benefits are not yet taxable but ought to be, and taking account of the other factors that I have mentioned, I believe that the Government are justified in seeking a contribution from these benefits towards the overall savings that must be made.
I have been asked to deal with an important point; it was one that was raised by my noble friend Lord Drumalbyn about what will happen to those who will fall below the supplementary benefit line as a result of the provisions in Clause 1. Those "who would not be protected"—that is to say, people who come below the
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supplementary benefit level—would be protected because, of course, they would become eligible for supplementary benefit. They must, of course claim supplementary benefit. I should like to put on record again that this Government, like their predecessors, are most anxious that people should claim supplementary benefit where they are entitled to. There is a range of means to encourage them to take up supplementary benefit and these would be used, as they have been in the past, to encourage people to do so. I hope that that goes some way to satisfy the point raised by my noble friend Lord Drumalbyn on that matter.
If this amendment before the Committee were carried it would be impossible to justify the abatement of industrial injuries benefit, which is the only short-term earnings replacement benefit not covered by this amendment, and which, paid at a higher rate, corresponds to sickness benefit. Nor, I think, would it be envisaged that abatement should apply to the increases for adult dependants paid with these benefits. The total savings lost would be about £85 million gross. For reasons which we have already gone into in Committee and at Second Reading, this would be unacceptable to the Government, as it represents a very large part of the savings this Bill is designed to achieve. I hope, therefore, that the Committee will not support the amendment.
Lord WELLS-PESTELL: I have said before that I do not think there is anything between us and the Government on the question of taxation of benefits. Many of us have held that view for some considerable time. But I think it raises a very real moral question, if not a legal question, as to whether a Government have the right to cut benefits which under the Act should be increased year by year according to the level of prices. This is what will happen this coming November, with the exception of certain benefits. I have pointed out to your Lordships that we are dealing with insurance benefits, benefits that people have paid for as a result of their national weekly insurance contributions. If the Government cannot see their way clear to tax benefits for another two years, then in my submission they ought not to impose cuts of the nature and in the areas in which they are doing it.

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I think I took down correctly what the noble Baroness said: I hope she will correct me if I am wrong. She said that unemployment and sickness benefits are designed to replace earnings. They never were designed to replace earnings. Unemployment benefit and sickness benefit were never equal to a persons' earnings, or if they were it was in very few cases. So that is not the intention. The benefit is designed to help people who have the misfortune to be unemployed or sick, and merely repeat the argument of my noble friend Lord Banks when he says that if there is going to be a delay in bringing them into taxation then one ought to allow the benefits to continue at their proper level, in this case 16½ per cent. and not 11 per cent.
Baroness YOUNG: Before the noble Lord, Lord Wells-Pestell, sits down, may I clear up one point. He asked if I had said that unemployment benefit, sickness benefit and maternity allowances were all designed to replace earnings, and I said the answer was, yes. The fact is that these are short-term benefits and they come to people who for one reason or another, either because of short-term unemployment or sickness or, in the case of a woman, because she is having a baby, do not have the earnings. They may not fully replace the earnings, but they do replace earnings. They are, therefore, part of an income and it is expected in every case that the person who has these particular benefits will go back into work again and will pick up his salary or wage or whatever it may be. I think, therefore, it is perfectly correct to describe them as replacing earnings.
Baroness WOOTTON of AB1NGER: I should like to ask the noble Baroness whether there is any precedent for this procedure. The Government are proposing to impose a tax on certain people who have been exempt from tax. I do not know whether it is in one year's time or two years' time.
Baroness YOUNG: We shall be able to bring these benefits into taxation in 1982; that is to say, in two years' time.
Baroness WOOTTON of ABINGER: It is the year beginning 1982; that is about two years' time from now. In the mean-
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time the Government say, "We will cut down the real income that we are paying you, which we previously promised to keep up at its real value, pending our ability to put the tax on you". Is there any precedent whatever for anticipating a tax in this way by causing the persons who are to be subject to it in two years' time to reduce their incomes two years ahead of time? This amplifies the point I put rather quickly to the noble Baroness in my interjection on a previous amendment.
I do not think there is any precedent at all for it and I consider it is monstrously unjust. Taxpayers who are in arrears are charged interest. It is true that with most of these benefits the people concerned will be on PAYE and this point may not arise, but the principle is if one is in arrears with one's tax one is charged interest. The Government are now imposing upon them a negative interest by charging them, so to speak, an interest on tax they will be liable to pay in two years' time. I regard it as perfectly monstrous from every moral and ethical point of view.
Baroness YOUNG: I think the noble Baroness, Lady Wootton, would agree with me that her party thinks in principle that these benefits ought to be taxed. Enough of her friends in another place have gone on record as saying that as a principle it is desirable that the benefits should be taxed, because the tax system should adjust for those who have the benefit and some other form of income and those who simply have the benefit, and so on, so that the system could be seen to be fair.
The noble Baroness asked me if there was a precedent for this. Subject to any information that I may have, so far as I know there is not a precedent for it. But the truth of the matter is that we are in an unprecedented situation in this country. We believe that we are in a very serious economic position, and if anybody thinks to the contrary they cannot really have studied the situation as thoroughly as they should have done. We are, therefore, looking at a whole range of issues. I hope I said enough in my reply on the first amendment to indicate that my right honourable friend the Secretary of State had looked at the whole of the social security budget to see where

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economies might be made out of the £20,000 million that it costs, and made them in areas which we accept are not easy but which we believe will be less damaging than others.
In this area, where one has people who could perfectly well be poor but be retirement pensioners who are paying tax now, we feel we should try to do something, as it were, to make a fairer distribution between those who are on injury benefits or invalidity benefits in this particular case who would have had the full up-rating but would not have been taxed. Therefore, we are assuming a 5 per cent. less up-rating. There is a rough justice about it; I said so at Second Reading and my friends in another place have said so. We accept that there will be some hard cases; it is not perfect. But my right honourable friend the Secretary of State has said on invalidity benefit that when people are brought into taxation in 1982, as resources permit they will be brought up to the level of retirement pensioners and they will have this leeway made up.
Baroness WOOTTON of A BINGER: I have served for 44 years in the magistrates' court and I have heard every excuse one can think of for criminal actions. But I
never thought to hear in this Committee an action which is not criminal, but which I think is profoundly immoral, justified by the fact that the Government are in an unprecedented situation. Does an unprecedented situation relieve them from ordinary common moral obligations?
Baroness YOUNG: I am very glad the noble Baroness, Lady Wootton, prefaced her remarks by saying that she had been a magistrate for 44 years. May I make it quite clear that there is nothing illegal in this? We may disagree as to whether or not this is something we should have done. Her Government found themselves faced by very difficult issues and I am quite certain that many of her noble friends and her friends in another place thought it immoral when they had to make very substantial cuts in Government expenditure in reply to the International Monetary Fund. We did not go around saying to them at that stage that they were acting immorally. They were faced with a difficult situation which they tried to meet. We are doing the same.
5.56 p.m.
Their Lordships divided: Contents, 63; Not-Contents, 90.

CONTENTS

Amherst, E.

Goronwy-Roberts, L.

Peart, L.

Ardwick, L.

Gosford, E.

Ritchie-Calder, L.

Bacon, B.

Hale, L.

Ross of Marnock, L.

Banks, L.

Hall, V.

Shinwell, L.

Beswick, L.

Hampton, L.

Stewart of Alvechurch, B.

Birk, B.

Hanworth, V.

Stewart of Fulham, L.

Blease, L. [Teller.]

Hatch of Lusby, L.

Stone, L.

Brooks of Tremorfa, L.

Houghton of Sowerby, L.

Strabolgi, L.

Burton of Coventry, B.

Ingleby, V.

Strauss, L.

Byers, L.

Jacques, L.

Taylor of Mansfield, L.

Chitnis, L.

Kilmarnock, L.

Underhill, L.

Cledwyn of Penrhos, L.

Leatherland, L.

Wallace of Coslany, L. [Teller.]

Collison, L.

Lee of Newton, L.

Wells-Pestell, L.

David, B.

Llewelyn-Davies of Hastoe, B.

Whaddon, L.

Davies of Leek, L.

Longford, E.

White, B.

Davies of Penrhys, L.

Lovell-Davis, L.

Wigoder, L.

Denington, B.

Mackie of Benshie, L.

Wilson of Kadcliffe, L.

Donaldson of Kingsbridge, L.

Maelor, L.

Winstanley, L.

Elwyn-Jones, L.

Northfield, L.

Winterbottom, L.

Gaitskell, B.

Ogmore, L.

Wootton of Abinger, B.

George-Brown, L.

Oram, L.

Wynne-Jones, L.

NOT-CONTENTS

Ailesbury, M.

Allen of Abbeydale, L.

Avon, E.

Airey of Abingdon, B.

Alport, L.

Bellwin, L.

Alexander of Tunis, E.

Ampthill, L.

Belstead, L.

Bessborough, E.

Hatherton, L.

Orkney, E.

Caccia, L.

Hawke, L.

Orr-Ewing, L.

Cockfield, L.

Henley, L.

Penrhyn, L.

Cottesloe, L.

Hives, L.

Rawlinson of Ewell, L.

Craigavon, V.

Holderness, L.

Reigate, L.

Cullen of Ashbourne, L.

Hood, V.

Renton, L.

Davidson, V.

Hornsby-Smith, B.

Rochdale, V.

Denham, L. [Teller.]

Hylton-Foster, B.

Romney, E.

Drumalbyn, L.

Kimberley, E.

St. Aldwyn, E.

Dundee, E.

Lauderdale, E.

Sandford, L.

Ellenborough, L.

Long, V.

Sandys, L. [Teller.]

Elliot of Harwood, B.

Lucas of Chilworth, L.

Sharples, B.

Emmet of Amberley, B.

Luke, L.

Soames, L. (L. President.)

Exter, M.

Lyell, L.

Stamp, L.

Ferrers, E.

Mackay of Clashfern, L.

Strathclyde, L.

Forester, L.

Macleod of Borve, B.

Strathcona and Mount Royal, L.

Fortescue, E.

Malmesbury, E.

Sudeley, L.

Fraser of Kilmorack, L.

Mancroft, L.

Teviot, L.

Gainford, L.

Margadale, L.

Trefgarne, L.

Gibson-Watt, L.

Marley, L.

Trenchard, V.

Glenkinglas, L.

Massereene and Ferrard, V.

Trumpington, B.

Godber of Willington, L.

Monson, L.

Vivian, L.

Gowrie, E.

Mottistone, L.

Wakefield of Kendal, L.

Gridley, L.

Mowbray and Stourton, L.

Ward of Witley, V.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Murton of Lindisfarne, L.

Westbury, L.

Norfolk, D.

Young, B.

Halsbury, E.

Northchurch, B.

Harmar-Nicholls, L.

Nugent of Guildford, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.5 p.m.
The DEPUTY CHAIRMAN of COMMITTEES (Lord Jacques): The next amendment is Amendment No. 6. If this amendment is agreed to I shall not be able to call Amendments Nos. 7 or 8.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 6:
Page 1, leave out lines 19 to 22.
The noble Lord said: I beg to move Amendment No. 6. This amendment would exempt the adult dependency additions to unemployment benefit, sickness benefit, invalidity pension and maternity allowance from the proposed 5 per cent. cuts. In my view, precisely the same arguments apply to this amendment as to the amendment to leave out lines 16 to 18 which I moved a short time ago. However, there is an additional argument which has to do with the basis on which these additions would, in due course, be brought into tax.
In the vast majority of cases adult dependency additions are paid to married men in respect of their wives. Many women nowadays object to the term "dependency" and it is probably time that we found a much more acceptable term. For practical purposes, however, the test of entitlement to the addition to
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benefit for a claimant's wife is simply whether her earnings for the particular week are more than a prescribed figure. Perhaps I may give an example. If a man falls sick and his wife is in full-time or even half-time work, he will receive sickness benefit for himself with additions for his children, but not for his wife. If, after a few weeks, she stops work, he will be able to claim an addition to his sickness benefit for her. Although that addition is payable to the man and not to his wife, it would seem logical that, if and when the benefit is taxed, the wife's addition should be treated for tax purposes in the same way as her earnings. I hope that I have made that point clear. In other words, her personal allowance should be set against it. If this were done it is likely that the addition would actually be taxed in only a small minority of cases.
To apply the 5 per cent. cuts to the adult dependency additions on the pretext that they ought to be taxed is, therefore, singularly unfair and ought to be strongly opposed by anybody concerned with the rights of married women and by anybody who feels that they should be treated for tax purposes quite separately. I believe that that is right. I beg to move.
Baroness YOUNG: The effect of these amendments would be that the adult dependency increases would go up by 5 per cent. more than the personal benefit

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with which they are paid. The effect of that would be to leave the Secretary of State with a duty to increase the adult dependency additions paid with unemployment benefit, sickness benefit, maternity allowance and invalidity pension by the full amount needed for price protection. That would mean, of course, 16·5 per cent. as opposed to the 11·5 per cent. which we have proposed under the clause. The dependency addition payable with invalidity pension would then become £16·30 a week—that is the same as the retirement pension addition—instead of the proposed rate of £15·60 a week. For the other benefits the addition would be £13·35 a week rather than the proposed rate of £12·75 a week.
Most of these additions are being paid in respect of a dependent wife. Together with the personal benefit with which they are paid they provide, as it were, a "married" rate of benefit. One of the difficulties is that if the amendment were to be accepted, the addition would become a larger proportion of the total benefit in payment. There would, in effect, be a shift in resources in favour of a married couple as opposed to a single person. This, in fact, would disturb the relativities that have been established between a single person and a married couple in this particular area.
Under various earnings rules an adult dependency addition can still be paid even though the dependant has earnings. In the case of unemployment benefit, for example, a dependency addition may be paid unless earnings—that is earnings net of expenses—exceed the dependency increase; in the case of invalidity pension unless earnings exceed £45 a week. This amendment seems particularly inappropriate in cases like this where the dependant has earnings which are already disregarded. Claimants with adult dependants who have no earnings are, of course, protected where necessary by the availability of supplementary allowance which will remain fully price-protected.
It may be helpful to the Committee to know that although we speak of "invalidity benefit", it is, in fact, a generic term which has, as it were, five parts to it. There is the invalidity pension, where the pension will be up-rated by the 11½ per cent. and not the 16½ per cent.; the
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invalidity allowance which, again, will be up-rated by 11½ per cent. rather than the 16½ per cent.; and the dependent allowance addition, usually for a wife, which again would be up-rated by the 11½ per cent. But, of course, the children's benefits remain unaffected in all this.
The noble Lord, Lord Wells-Pestell, asked me a quite specific point about the taxation of a wife's income. This is a matter to which I can give only a short answer at the present time. As I understand it, the benefit that is paid is regarded as the husband's money and not as the wife's money. In those circumstances, it is likely to be taxed as his benefit and his income. If there is anything further that, on reading Hansard, I should add to that, I shall, of course, write to the noble Lord, Lord Wells-Pestell. I hope that I have said enough to indicate that, once again, this is not an amendment which the Government would feel able to accept. I hope that I have explained the circumstances, that if it were to be accepted it would, in fact, affect this relationship between the benefits paid to married couples and those paid to single people.
Lord WELLS-PESTELL: I wonder whether the noble Baroness would allow me to set an example of flexibility and say that, having listened to what she has had to say, I acknowledge that she has raised one matter of which I had not thought. Therefore, I should like to read what she has said in Hansard tomorrow and discuss it with my colleagues. If it is necessary to come back to it, we have another stage which will enable me to do so. If we are satisfied with it, then, of course, we shall not pursue the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.15 p.m.
Lord BANKS Lord BANKS moved Amendment No. 7:
Page 1, line 19, leave out ("2").
The noble Lord said: I should like to move Amendment No. 7 and, with the leave of the Committee, to speak to Amendments Nos. 8, 9, 10 ,11, 12, 13, 14 and 15. All these amendments seek to prevent the abatement of the invalidity pension, the invalidity allowance and the invalidity pension's adult dependant's

897
allowance, and also to prevent similar abatements in respect of the unemployability supplement of the industrial injuries scheme.
I made it clear on an earlier amendment that we on these Benches are against the abatement generally, but, if it is to go through, we believe that there is a very strong case for exempting invalidity benefit in particular and disabled people generally. After all, invalidity benefit has always been treated as a long-term benefit. The others are short-term. Furthermore, invalidity benefit has already been subject to one cut as a result of the No. 1 Bill. Invalidity benefit in future will be increased in line with prices only, and not in line with prices or earnings, whichever is the higher.
Other long-term benefits for chronically sick and disabled people—war and industrial disablement pensions, the non-contributory invalidity pension and the housewife's non-contributory invalidity pension—are being increased by 16½ per cent., not 11½ per cent. We must, of course, remember that in practice inflation may well he much higher than 16½ per cent.
The noble Baroness has just described how invalidity benefit is composed. There are two principal parts to it. First, invalidity pension, which is paid to those who pay national insurance contributions, who are under retirement age and who are chronically sick or disabled. Hitherto this invalidity pension has been paid at the same rate as the retirement pension; that is to say, £23.30 for the single person and £27.30 for the married couple at the present time. The 5 per cent. abatement will mean a drop in real value of £1.15 per week or £60 per annum for the single person, and £1.85 per week or £96 per annum for the married couple.
Secondly, there is the invalidity allowance which is paid in addition to those who first become unable to work more than five years before pension age. If they first become unable to work under the age of 40, that allowance is £4.90; if they become unable to work between the ages of 40 and 50 it is £3.10, and between the ages of 50 and 60 for men and 50 and 55 for women it is £1.55. This benefit continues to be paid when disabled people reach retirement age and switch from the
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invalidity pension to retirement pension. The present rates of invalidity allowance are the same whether the individual is on invalidity pension or retirement pension.
However, as a result of this Bill, the highest rate of invalidity allowance will increase by 80p. per week, which is by 16½ per cent. for a retirement pensioner, but only by 55p. per week, or 11½ per cent. for an invalidity pensioner. There will be a similar difference in the other rate of invalidity allowance. At the highest rate of invalidity allowance the claimant will lose another £13 in addition to what is lost on the invalidity pension, or £109 per annum in all. At present the invalidity pensioner receives an addition of £7.10 for each dependent child. This is to go up by only 5½ per cent.—not 16½ per cent. —owing to a new way of calculating, and the amendment which we are now discussing will not affect that. But it is a factor to be taken into account when considering the position of the invalidity pensioner.
The change in the method of calculation has meant a loss of 70p for each child—70p. that would have been obtained under the old method of calculation. In addition, the invalidity pensioner—and this is another factor which must be taken into account—is seldom eligible for supplementary benefit. The invalidity pension is lower than the long-term supplementary benefit rate, but it is higher than the short-term supplementary benefit rate, so that the invalidity pensioner cannot claim supplementary benefit—he cannot qualify for it—because he cannot qualify for the lower rate which is paid for the first two years at the moment, although for the first year only after November. We know that the invalidity pension is not taxable and that it is intended to bring it into tax. We know that this is an interim measure, and we discussed on earlier amendments whether or not this is a fair measure. In my view it is decidedly unfair.
In the Second Reading debate, the noble Baroness, Lady Young, told us that 150,000 claimants would pay no tax at all, that 100,000 claimants would pay less than the abatement, and these would all be affected; a total of 250,000. On 21st May in another place the Secretary of State gave different figures, 250,000 and 150,000, making a total of 400,000. The noble

899
Lord, Lord Underhill, has referred to this discrepancy already on an earlier amendment.
Baroness YOUNG: I am sorry to interrupt the noble Lord, Lord Banks, but I gave a reply to that. The figures I gave apply to those receiving invalidity benefit in the long-term. The figures that were given in another place apply to all those receiving invalidity benefit whether in the short or long term. Therefore, there is not a fundamental discrepancy; they are different sets of figures.
Lord BANKS: I am grateful to the noble Baroness for that explanation, and I am sorry if I missed that point when she replied to the noble Lord. At any rate it is a considerable number of people, whichever way we calculate it, who are affected and who get what the noble Baroness called "rough justice". I certainly think it is rough; I am not quite so sure about the justice. Well, I am sure that there is not really any justice in it. We know that there is a possibility that the value of the invalidity pension may be restored when it becomes liable to tax, but this is subject to the availability of resources and we cannot be certain that in fact that loss through the abatement during the interim period will ever be made good.
The amount of money saved by including the invalidity pension is £55 million a year. If we are short of £55 million a year, do we need to get it by cutting arbitrarily and unfairly the benefits of the sick and disabled in this way? I do not think that we do, and I beg to move.
6.22 p.m.
Viscount INGLEBY: I speak as a Cross-Bencher and not a member of any political party, and it seems to me that this 5 per cent. abatement is rough justice, as indeed the Minister in another place has admitted. It will hit some 400,000 severely disabled people whom it is not the Government's intention to hit, because they would not pay tax if these benefits were taxable as they will be in two years' time.
I quote from the Secretary of State in another place on 21st May 1980, at column 555, when he said:
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"… of about 850,000 invalidity beneficiaries 250,000 people would not be liable to tax and about 150,000 people would be liable to pay less tax than would be yielded by the 5 per cent. abatement".
So there are 400,000 severely disabled people who are going to be penalised, although it is not the Government's intention to do so.
The effect on an individual severely disabled single person is that he will have between £60 and £73 less to live on in the year from November 1980, and married couples will have from £96 to £109 less to live on in that year. This is very rough justice indeed. I know that the Minister is sympathetic on these points, and I hope that she will think again on this one, because if not I shall be forced to go into the Division Lobby in support of the noble Lord, Lord Banks.
Lord WALLACE of COSLANY: I am grateful to the noble Viscount, Lord Ingleby, for his intervention because we have at least had the remarks of one person who knows what it is all about. I will not go into any great detail because the noble Lord, Lord Banks, has made his case, and I would not presume to encroach on the field of an acknowledged expert. I think that the noble Lord can be, and is, regarded in this House as an expert on this particular matter.
Let there be no misunderstanding—and I speak in a personal sense as well as a political sense in this case. These are vital amendments to those who can least afford reductions of income. We can argue about all the clauses of the Bill, but this particular subsection is vital. Those who are affected are affected three times over, because we must not forget the economies to be made by the local authorities in the social services. These economies will be applied in varying degree according to the council's intention to economise—and this is a matter of other argument—and will affect people in this category. For the long-term sick and disabled those cuts are a sufficient worry without any further cuts.
Do not forget, too, that many of these people have paid national insurance contributions for years, and now will lose the right of the earnings related supplement. Reference has already been made to the noble Baroness's winding-up remarks about "rough justice". She

901
used the words twice during the Second Reading of this Bill in this House, and again today. I entirely agree with the noble Lord, Lord Banks; it is not just an element of rough justice, it is plain downright injustice.
On the Second Reading of the Bill, I appealed to the consciences of Members of your Lordships' House. Without any over-emphasis on this issue, I say that the moment of decision is now before you. I am not arguing whether economics are called for in public spending. We could argue until the cows come home which is right and which is wrong, but the issue we are dealing with now is definitely wrong. There is something brutal and wrong in placing burdens of this character on the long-term sick and disabled. If burdens have to be carried, then let the healthy, wealthy, and securely employed shoulder them. It is not a large amount to shoulder. Although I am "retired", I would be quite willing to pay a little more in tax if the Government would relent on this matter. I am sure that there is hardly a person in this House who would disagree. The sick and the disabled have enough burdens on their shoulders already due to their own disabilities, and the Government have already admitted that this is rough justice. I appeal to the Committee to let another place have another chance. There was no easement in another place when this was discussed. There were some members of the Government party who were definitely against this. Let the other place think again about this. We can do our duty. We are a free Chamber in the sense that we can reach decisions without the pressure of the party whips.
This is a case, above all, where not only conscience counts but where the question of party loyalty does not arise. We have to consider our obligations to our worse-off sections of society, most of them cheerful and willing to carry on as well as they possibly can, and they do not deserve this injustice. I appeal to the Committee. If the Minister can withdraw this paragraph I should be more than grateful. I do not want to force it to a Division, but I would support the noble Lord, Lord Banks, if he does. I hope that the Committee will realise its responsibilities tonight.
Baroness YOUNG: The noble Lord, Lord Banks, when introducing the amend-
902
ment, said he was speaking at the same time to a number of others, and I hope the Committee will feel it appropriate if I speak to the central point of Amendment No. 7, which was the one supported by my noble friend Lord Ingleby, on invalidity benefits. The noble Lord, Lord Banks, explained the position clearly about invalidity pensioners and what the effect of the Bill would be. As I attempted to explain earlier, the invalidity benefit has five components, three of which are affected by the Bill. The child allowances and additions are not affected by it, nor are the long-term new pension proposals. It is therefore right that we should get clear what we are talking about in this connection.
My noble friend Lord Ingleby mentioned that 400,000 people would be affected and, although I do not wish in any way to make a debating point out of something of a very serious nature, the fact is that the 400,000 whom he maintains would be worse off as a result of the Bill include not only those long-term beneficiaries but those receiving benefit in the short-term for what may be a matter of as little as a week. The figures I gave on Second Reading are those for long-term beneficiaries and, as I have said—and the point has also been made by my right honourable friend the Secretary of State—there are those who would not be in tax if the benefit were taxed now, and will not in the future, and those for whom it will just break even, so there would be about 250,000 who, it could be said, would be worse off as a result of these proposals.
Neither I nor my colleagues would wish to go into this and other measures if we did not feel the economic situation was sufficiently serious, and we have said that this is rough justice, a remark which I stand by because there is rough justice about a great many of these benefits. There is, regrettably enough, a lot of rough justice about life itself and, as I have tried to show, if you are poor a retirement pensioner you get the retirement pension up-rated by 16½ per cent. but you would or could be subject to tax and you may, at the margin, be suffering. If you are getting invalidity pension, you will up till now always have got the same up-rating on retirement pension as everybody else, whether or not you really needed it and whether or not you should have paid tax. Some may have been better off and it is

903
arguable—and noble Lords opposite might well argue that it is a sort of rough justice—that some have done better than they should and have done better than their equivalents who are getting a retirement pension.
I do not believe this is a debating point in the sense that I would wish to make it one and argue the case, because the case rests on the whole principle of saving Government money. But there is a measure of rough justice running through this which one must accept, and my party recognises that. Of course, as we go through, we would like to iron out all the anomalies, but unfortunately we cannot do so at this time. I wish, however, to take up a particular point made by the noble Lord, Lord Banks, about eligibility for supplementary benefit. I think I am right in saying that he said the invalidity pension fell between the short-term supplementary benefit rate and the long-term rate, and that invalidity pensioners therefore failed to qualify for supplementary benefit. They cannot in fact get the long-term rate of supplementary benefit payable after one year from this November, and there are two points I should make on that. One is that, as with housing costs and other extra needs, the invalidity pensioner may qualify for supplementary benefit. Secondly, this Government have done what their predecessor did not do; namely, they have enabled the non-contributory invalidity pensioner to get the long-term supplementary benefit rate by virtue of the time spent on the non-contributory invalidity pension. This is a small change but I believe it to be a valuable one.
As a party, we recognise the importance of invalidity pensions; after all, we introduced them in 1971. There is general agreement that they should be taxed, as with all other benefits, and I think I am right in remembering that the Labour Government after the war, in 1948, introduced taxation of all benefits. That was subsequently changed, but there is a measure of agreement about these matters. I remind the Committee once again what my right honourable friend the Secretary of State said about these benefits and repeat the assurance he has given to restore the rate of invalidity benefit when it is brought into taxation and to cover unemployability supplement as well—another point to which the noble Lord,
904
Lord Banks, referred, but in a subsidiary way to his main argument about invalidity benefit.
Our main argument is about the interval between the position now, when the benefit is not being fully up-rated, and the time when it will be fully up-rated but will be taxed, and that is the particular difficulty which arises, a difficulty I have described as rough justice. I recognise that the Committee feels very strongly on this and I particularly recognise that my noble friend Lord Ingleby and his colleagues, who know a great deal about this subject—far more than I do—feel very strongly about it. I ask my noble friend to accept that we would not have considered these matters if we did not feel that the economic situation of the country was sufficiently serious to justify looking at all parts of Government expenditure for economies. We believe that the social security budget, one-quarter of all Government expenditure, must bear a part of this reduction, and that is why we are introducing the Bill. I hope very much that, with this explanation, the Committee will not accept the amendment or the series which has been linked with it, and will accept my assurance that it is something which the Government believe must be done. That is why we have introduced the Bill and why we cannot at this stage give in to the request to accept the amendment.
Lord BANKS: I am grateful to the noble Viscount, Lord Ingleby, and the noble Lord, Lord Wallace of Coslany, for their support of the amendment. I regret that the noble Baroness, Lady Young, has not found it possible to support this series of amendments, though I did not think she would because we are not really arguing in this Committee stage, as we so often are in Committee, about the merits of the proposals contained in the legislation. The noble Baroness agrees that the measures are not desirable in themselves and she said the Government would not be pursuing them but for the fact that they think the economic situation demands it. The difference between the two sides of the Committee on this matter is not a question of which is the best way of dealing with the problem of the disabled; it is a division as to whether it really is necessary, given the economic difficulties, to save £55 million from the benefits which are given to the disabled.

905
Earlier today and at some length on Second Reading we argued about that, and a very strong case was put forward to reject the economic argument which the Government adduced. It would not be appropriate on this amendment to launch into that again, and, since there is no division between us and the noble Baroness on the question of the merits of the proposals, which neither she nor we like, the only thing we can do is test the
opinion of the Committee to see whether it is the feeling of noble Lords that we must raise this £55 million by reducing the benefits which are paid to the disabled.
6.39 p.m.
On Question, Whether the said amendment (No. 7) shall be agreed to?
Their Lordships divided: Contents, 65; Not Contents, 83.

CONTENTS

Amherst, E.[Teller.]

Gladwyn, L.

Ogmore, L.

Ardwick, L.

Goronwy-Roberts, L.

Oram, L.

Bacon, B.

Hale, L.

Peart, L.

Banks, L.

Hatch of Lusby, L.

Pitt of Hampstead, L.

Beswick, L.

Houghton of Sowerby, L.

Ritchie-Calder, L.

Birk, B.

Hylton-Foster, B.

Ross of Marnock, L.

Blease, L. [Teller.]

Ingleby, V.

Stamp, L.

Blyton, L.

Jacques, L.

Stewart of Alvechurch, B.

Boston of Faversham, L.

Kilbracken, L.

Stewart of Fulham, L.

Brooks of Tremorfa, L.

Kilmarnock, L.

Stone, L.

Burton of Coventry, B.

Lee of Newton, L.

Taylor of Mansfield, L.

Chitnis, L.

Llewelyn-Davies of Hastoe, B.

Underhill, L.

Cledwyn of Penrhys, L.

Lloyd of Kilgerran, L.

Wallace of Coslany, L.

Collison, L.

Longford, E.

Wedderburn of Charlton, L.

Craigavon, V.

Lovell-Davis, L.

Wells-Pestell, L.

Crowthcr-Hunt, L.

Mackie of Benshie, L.

Whaddon, L.

David, B.

Maelor, L.

White, B.

Davies of Leek, L.

Milner of Leeds, L.

Wilson of Radcliffe, L.

Davies of Penrhys, L.

Mishcon, L.

Winstanley, L.

Donaldson of Kingsbridge, L.

Monson, L.

Wootton of Abinger, B.

Elwyn-Jones, L.

Noel-Baker, L.

Wynne-Jones, L.

Gaitskell, B.

Northfield, L.

NOT-CONTENTS

Airey of Abingdon, B.

Godber of Willington, L.

Northchurch, B.

Alexander of Tunis, E.

Gowrie, E.

Nugent of Guildford, L.

Alport, L.

Gridley, L.

Orkney, E.

Ampthill, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Orr-Ewing, L.

Avon, E.

Penrhyn, L.

Bellwin, L.

Hatherton, L.

Rawlinson of Ewell, L.

Belstead, L.

Hawke, L.

Reigate, L.

Bessborough, E.

Henley, L.

Renton, L.

Caccia, L.

Hives, L.

Rochdale, V.

Carrington, L. (A Principal Secretary of State.)

Holderness, L.

Romney, E.

Hood, V.

St. Aldwyn, E.

Cockfleld, L.

Hornsby-Smith, B.

Sandys, L. [Teller]

Cottesloe, L.

Killearn, L.

Sharples, B.

Craigmyle, L.

Kimberley, E.

Soames, L. (L. President.)

Cullen of Ashbourne, L.

Lauderdale, E.

Spens, L.

Davidson, V.

Long, V.

Strathclyde, L.

Denham, L. [Teller.]

Luke, L.

Sudeley, L.

Drumalbyn, L.

Lyell, L.

Teviot, L.

Dudley, E.

Mackay of Clashfern, L.

Thorneycroft, L.

Dundee, E.

Macleod of Borve, B.

Trefgarne, L.

Ellenborough, L.

Malmesbury, E.

Trenchard, V.

Elliot of Harwood, B.

Mancroft, L.

Trumpington, B.

Exeter, M.

Margadale, L.

Vivian, L.

Ferrers, E.

Marley, L.

Wakefield of Kendal, L.

Forester, L.

Massereene and Ferrard, V.

Ward of Witley, V.

Fortescue, E.

Mottistone, L.

Westbury, L.

Fraser of Kilmorack, L.

Mowbray and Stourton, L.

Young, B.

Gibson-Watt, L.

Murton of Lindisfarne, L.

Glenkinglas, L.

Norfolk, D.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 8 to 15 not moved.]
The DEPUTY CHAIRMAN of COMMITTEES (Baroness Wootton of Abinger): I have to point out that if Amendment No. 16 is agreed to, I shall not be able to call Amendment No. 17.
6.48 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved amendment No. 16:
Page 2, line 41, leave out subsection (4).
The noble Lord said: In moving this amendment I wish to refer also to Amendment No. 17, and to deal with both amendments in one speech. Amendment No. 16 would prevent the Government from making the 5 per cent. cuts in November 1981—that is in consequence of a review in the tax year 1980–81—and Amendment No. 17 would prevent them from making the cuts in November 1982. In our view the unfairness of the cuts would increase with each year that they were repeated.
If the Government were proposing to make an immediate cut of nearly 15 per cent. in the basic benefit rates, it would be most unlikely that even their own Back-Benchers would support them. To make the cut in three instalments does not make it any more defensible. No doubt the Minister will argue that the Government hope not to have to make any further cuts in 1981 and 1982, but the fact remains that they are seeking the power to make such cuts. In deciding whether they should be given that power we must consider what would be the implications if it were in fact used.
The precise effects cannot be calculated in advance because of the cumulative effect of the up-ratings in the next three years. The total reduction in the real value of the benefit would for this reason be somewhat less than 15 per cent., and perhaps I may assume that it would be around 14 per cent. For a married man drawing a sickness benefit, a 14 per cent. cut in the present value of his benefit would mean a reduction of £4.20 per week. If he qualified for invalidity benefit after six months of sickness, a 14 per cent. cut in that benefit would mean a weekly reduction of up to £5.90, despite the fact that if the benefit were taxed he would probably not be liable for income tax in that year.
I have a shrewd suspicion that the Minister will argue that, for invalidity benefit at least, any unfairness will be only temporary because the Government have undertaken to make good the cuts when the benefit is brought into tax; but, as I understand it, that undertaking applies only to invalidity benefit, and it is qualified by the words "subject to the availability of resources". We do not know what improvements in the economy would be needed to convince the Treasury that those resources should be made available; and I do not know whether the noble Baroness the Minister can say what sort of convincing the Treasury would need.
If I may speak to Amendment No. 17, I can do so very briefly by saying that the case for the second of these amendments, which is to leave out paragraphs (b) and (c), is particularly strong. The Government hope to bring the benefits into tax as soon after April 1982 as possible. For some of the benefits, the intention seems to be that taxation would commence in April 1982. What justification can there be, then, for making a further 5 per cent. cut in the benefits in November 1982, after they have been brought into tax? This is how I see it.
At the very least we are entitled to, I was going to say, demand an absolute assurance that no such thing as that will in fact happen. But the proper course for the Government to take, I submit, would be for them to withdraw paragraphs (b) and (c) by accepting this amendment. If in 1982 they are still in office and wish to make further reductions in the living standards of the sick and the unemployed, there is nothing to prevent them coming forward then with new legislation; but I feel that the Government should pay regard to what I have said, not only in respect of the first amendment but particularly in respect of the second one because, as I say, my understanding is that there will be a 5 per cent. cut in the benefits in November 1982, after they have been brought into tax. Perhaps the noble Baroness the Minister can say something about that. I beg to move.
6.54 p.m.
Baroness YOUNG: Under Clause 1(4) the limited up-rating of short-term benefits, invalidity pension and their adult dependency increases may be

909
extended by Affirmative Order to either or both of the 1981 and the 1982 up-ratings. The effect of Amendment No. 16, which the noble Lord, Lord Wells-Pestell, has just moved, would be to remove the whole of this power, while the effect of Amendment No. 17 would be to allow a limited up-rating to take place in 1981, but not in 1982.
Before going into the detailed arguments about this matter, the noble Lord asked me quite specifically whether I could say anything further about the proposals when invalidity pension is brought into tax. I must tell him now that I cannot go any further than the statements that I have made, and repeated, not only at Second Reading but in other debates in the course of the afternoon. However, I should like to say at once that I understand the concern expressed by noble Lords about the effect of repeating the 5 per cent. abatement in 1981 and/or in 1982.
I should make it clear that a number of organisations representing the people affected by this Bill have written short papers on the effect of Clause 1, and I have no doubt at all that many noble Lords will have seen some or all of these papers. Some of these documents include notes on the effect that repeated abatements would indeed have on the benefits concerned, and I should therefore like to make two points about these notes which I hope will be of some reassurance to noble Lords.
First, in order to make statements about the level of benefits in 1981 or in 1982 one has to make certain assumptions, one assumption—an important one—being about the future level of inflation. Any figure given on the future value of a particular benefit can therefore be only a hypothetical figure. Secondly—and I think this is most important—all the notes assume that the Government will limit the up-ratings in 1981 and 1982. But I should like to make it quite clear that the Government have taken no decisions upon whether the abatement will be repeated in 1981 or in 1982. They will consider the whole question in the light of the circumstances at the time. Social and economic considerations are very closely linked in this area; both will be very much in the mind of the Government
910
when the decision comes to be made. I hope I have said enough to indicate that decisions of this kind were not lightly taken this year, and any decision in the future on what would in effect be a cumulative measure would have to be taken with at least as much care as this one has had over the last weeks.
The 5 per cent. abatement in 1980 is an important part of the Government's overall strategy to achieve savings in public expenditure. It is essential that the Government have the powers to put to Parliament through an Affirmative Order proposals for a future abatement, should the necessity arise. The amendments would remove that power, and I cannot advise noble Lords to accept this amendment. However, I will repeat the assurance that the points your Lordships have made will be very much in our mind, and that the seriousness of the issues, like the seriousness of our national difficulties, is not going to be minimised by Ministers when they take the decisions next year.
Lord WELLS-PESTELL: I should like to consider what the noble Baroness the Minister has said. Although she has made only a brief statement, it seemed to be to the point, and I should like to read Hansard tomorrow and reserve the right to come back, should it be necessary, at Report stage. Subject to the permission of your Lordships, I should like to withdraw Amendment No. 16.
Amendment, by leave, withdrawn.
Baroness YOUNG: I think that perhaps this would be a convenient moment to break this Committee stage for the dinner hour. I therefore beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

GAS BILL
7 p.m.
The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie): My Lords, I beg to move that this Bill be now read a second time. This is a very short Bill. Its provisions, although limited, are never-

911
theless very important for the promotion and efficient use of this vital energy resource. There can be no doubt about the important part that natural gas now plays in the nation's economy. During the past 10 years, the consumption of gas in Great Britain has more than trebled and natural gas, or North Sea gas, although there are sources of natural gas in the Irish Sea, now accounts for 20 per cent. of our total primary energy consumption. Substantial developments already planned will enable gas to play an increasingly important role in our future energy scene. The British Gas Corporation are, however, faced with short-term supply difficulties; and it is to deal with these that the Government have introduced this Bill.
During the past year, as a result of the oil price increases and uncertainties over oil supplies, the corporation have been faced with a tremendous surge in the demand for gas in all the market sectors—industrial, commercial and domestic. They had, of course, already planned a programme to expand supplies over the next few years to cater for the predicted increase in consumption. However, the current unprecedented demand considerably exceeds those expansion plans and the corporation could not meet it without seriously putting at risk supplies to their existing customers during a time of peak winter demand.
I should like to stress that this is a question not of overall shortage of gas but of not having sufficient distribution and storage capacity to meet the potential demand in full during a severe winter. It would be easy enough for British Gas to take on extra customers during the summer, when demand for heating purposes is low, but what would happen during the winter when all their customers were demanding peak supplies? Failure to meet such demand could necessitate cutting off whole areas or industries at short notice. Apart from the obvious disruption for customers this would raise serious safety problems.
The British Gas Corporation have already announced plans to advance a number of capital investment projects in order to increase supplies, with particular emphasis on supplies at peak periods. They have recently acquired the partially-
912
depleted Rough gas field in the Southern Basin for use as a seasonal store and they are constructing salt cavities to provide further storage. They are advancing the construction of the fourth onshore pipeline from St. Fergus in Scotland so as to relieve bottlenecks in the supply system bringing gas from the Northern North Sea southwards. And they are also planning to obtain supplies from new sources both in the Southern Basin and their own Morecambe field in Morecambe Bay. As your Lordships will appreciate, such projects cannot be brought to fruition overnight. British Gas are therefore at present, except in the most exceptional circumstances, having to limit new connections to those premises which they have a statutory obligation to supply; that is to say, premises within 25 yards of an existing gas main, subject to the maximum statutory entitlement of 25,000 therms a year. These figures are often rather confusing; 25,000 therms would, roughly, be what would be used by a council estate of, say, 50 average-sized houses, or a medium-sized light factory working at fairly high capacity.
Although Section 13 of the Energy Act 1976 limited the entitlement of new customers to 25,000 therms a year, it provided that the corporation must continue to supply premises which were receiving more than this amount before the Act came into force with the maximum annual amount they received before that date. This obligation applies even where the premises are now in different ownership or where the premises are not currently consuming gas at all. The fact that such supplies may be taken on tariff means that the corporation are not able to control the offtake of very considerable volumes of gas. The corporation's present practice is to negotiate special agreements—that is, contracts where the price is negotiated—in cases where customers require more than 100,000 therms a year. These agreements incorporate conditions as to the rate of offtake, thus giving the corporation control over peak demand. However, because of the restriction in Section 25(6), of the Gas Act 1972, they are only able to enter into such agreements where the tariffs in force are not appropriate.
This Bill therefore relieves the British Gas Corporation of their obligation to supply anyone with more than 25,000

913
therms a year, and gives the corporation powers which will enable them to enter into special agreements for supplies above that level. Thirdly, as a consequence of those provisions, the Bill frees the corporation from certain constraints on the fixing of tariffs for supplies above the maximum statutory entitlement. If I can give a simple analogy, with the usual warning that analogies pressed too far can be misleading, your Lordships may be aware that when you take a London taxi—if you can still afford to do so—up to six miles will be on the regular clock but over six miles you may have to negotiate the price with the taxi driver himself. A roughly analogous position comes into force with this Bill. The effect of these provisions is that any customers requiring more than 25,000 therms a year will have to rely on contractual arrangements for their gas supplies rather than on a statutory entitlement. I shall have a little more to say about this in a moment.
My Lords, I should now like to turn to the detailed provisions of the Bill. The three substantive proposals, which amend and modify the application of various provisions in the Gas Act 1972, are contained in Clause 1. As I have already explained, Clause 1 (1) amends the British Gas Corporation's statutory obligation to supply, as set out in paragraph 2 of Schedule 4 to the Gas Act, so that they shall not be obliged to supply any premises with more than 25,000 therms a year. Section 13 of the Energy Act 1976 relieved the corporation of their obligation to supply more than this amount in so far as new customers were concerned, but premises which had been receiving supplies above that level prior to November 1976 were given the right to continued supplies at that higher level.
The Energy Act 1976, therefore, created, in effect, a preferred class of customer who enjoyed an indefinite right to large volumes of gas in preference to potential new customers, some of whom might have a more pressing need for supplies. It is certainly the case that there are new developing industries which need to use gas because of their special industrial processes and which would be prepared to pay a price reflecting their need. Furthermore, even though their pre-1976 supplies might have been taken under an interruptible or firm contract, such preferred customers could exercise the
914
right, if they so chose, to take their continuing supplies on tariff; such supplies, as I have mentioned, are not subject to offtake restrictions. The effect of subsection (1), together with subsection (4), is therefore to revoke the right of pre-1976 customers to gas supplies above 25,000 therms a year.
I should like to make it clear that nothing in the Bill affects the British Gas Corporation's existing contractual obligations. Customers who already receive their gas supplies under contract will continue to receive their supplies under the terms of their contract. Commercial arrangements are, of course, a matter for British Gas, but I should like to take this opportunity of repeating an assurance that was given by my right honourable friend the Secretary of State for Energy in another place. This is that the corporation do not intend to use the powers in this Bill to make reductions in the amounts of gas currently being supplied to industrial and commercial tariff customers receiving over 25,000 therms a year. It has to be recognised, however, that both those tariff customers and customers already receiving their supplies on contract should be prepared to pay the same price that potential new customers would he prepared to pay.
My Lords, perhaps I might turn next to Clause 1(3), since subsection (2) is consequential on its provisions. This is designed to deal with cases where the BGC supplies premises with more than 25,000 therms a year—that is, more than the maximum statutory entitlement under the Bill—and in particular with those customers at present receiving their supplies on tariff.
Under Section 25(6) of the Gas Act 1972 the BGC may only enter into a special agreement where the tariffs in force are not appropriate owing to special circumstances and their current practice, as I said earlier, is to set the tariff/contract dividing line at 100,000 therms a year. It is essential that the corporation should have the power to negotiate special agreements in all cases where a supply above 25,000 therms a year is required, and subsection (3) of Clause 1 enables them to do this irrespective of whether or not the tariffs in force are appropriate. The BGC intend to offer special agreements to all their customers at present receiving tariff supplies of bet-

915
ween 25,000 and 100,000 therms a year, thus bringing such supplies within the scope of contractual restrictions on offtake.
The purpose of Clause 1(2) is to allow the BGC to continue to charge for a supply of gas in excess of 25,000 therms a year at an appropriate published tariff rate during any period when a special agreement is not in force. Section 25, subsection (5) of the Gas Act prohibits the corporation from exercising undue discrimination against any persons, or class of persons, in fixing tariffs. Section 24(1), of the Act lays on the corporation a general duty to avoid undue preference in supply, although subsection (2) of that section excludes special agreements from this provision. These prohibitions will continue to apply to tariffs of up to 25,000 therms a year—that is, over the whole range of the corporation's statutory obligation to supply.
Although the intention is that all supplies over 25,000 therms a year will be governed by special agreement, there will inevitably be circumstances in which some supplies over that limit are taken when there is no special agreement in force. This might happen, for instance, while a contract is being negotiated or where a tariff customer either deliberately or inadvertently consumes more than his statutory 25,000 therms entitlement. In order to prevent the purpose of the Bill from being frustrated, the corporation must be able to set standby tariffs to deal with such cases without being restrained by comparisons with the level of other tariffs. The alternative would be to cut off supplies—a drastic step that they would of course prefer to avoid. Clause 2 make it clear that the Bill, in parallel with the Gas Act 1972, does not extend to Northern Ireland.
My Lords, I hope that I have clearly conveyed the objectives and effect of this Bill. Your Lordships will be aware of the problems facing certain sectors of industry at the present time because of the British Gas Corporation's inability to meet all the demands for gas arising out of the uncertainties over oil supplies. These proposals, by bringing a greater volume of gas supplies within contractual arrangements, will give the BGC greater control over peak demand and will thus enable them to distribute the supplies available in the most effective way pending
916
our undoubted longer-term improvement in supplies to which we can look forward. I commend the Bill to your Lordships and beg to move that it he now read a second time.
Moved, That the Bill be now read 2ª.—(The Earl of Gowrie.)
7.15 p.m.
The Earl of LAUDERDALE: My Lords, to me it is always agreeable—it does not often happen—to have the opportunity of congratulating my Government on doing the right thing. I wish that I could say things of this kind more often. We have already heard in recent months of the critical decision by the Government to move gas prices towards reality so that what is paid by the consumers goes some way towards meeting the replacement costs of a finite resource. Although this is painful to domestic and industrial consumers alike, it is none the less long overdue and welcome on that account.
Here we have a relatively little measure designed to make sure that all industrial consumers are henceforth treated equally in that the Bill puts new and expanding industries on an equal footing with those which are long-standing clients of the British Gas Corporation. This is heading in the right direction. But there is one question that one ought to raise in passing. It has been mentioned in another place, but one gathers that the industrial interests concerned were not wholly satisfied with the replies given.
This is the position of priority assured to domestic consumers under Schedule 2 to the 1972 Act and Section 13 of the 1976 Act. We know that any domestic consumer within 25 yards of a main has been entitled to a fantastic volume of up to 25,000 therms. We want to be quite certain that industry will get at least equality of treatment with that position hitherto enjoyed by the domestic consumers. The matter was raised in another place in Committee, and no doubt will be raised again here. One hopes that when raised again the reply will be satisfactory to the industry.
Looking at this little Bill, one cannot but look also at the vast scale of possibilities that arise as a result of natural gas from the United Kingdom continental

917
shelf. At present, as is widely known, there is a ban on the flaring of gas treated as a waste. If the gas cannot be flared of course that saves the gas meantime but causes a cut-back in oil production. This has been noticed in many quarters.
But now we are looking forward to creation of the gas gathering pipeline that has been widely canvassed so that what are now the waste gases shall be piped and put to good use. When we consider the enormous volume of gas reserves indentified in the Statfjord Field in the Norwegian sector, and further north above the 62nd Parallel also in the Norwegian sector recently discovered, we become aware of the tremendous potential for a relatively new and hitherto untapped energy source to be brought to our service.
The most obvious industrial end-use is the petrochemicals industry once the British Gas Corporation have taken off the methanes for use as domestic or industrial heating gas. There are the ethanes, propanes and butanes, commonly known as liquid petroleum gases (LPGs) which can be taken off and put to use. The availability of these enormous resources just off our coasts, or within tolerable reach of them—a few hundred miles only—means that the British petrochemical industry has a terrific opportunity coming to it in a few years' time.
The availability of cheaper feedstock to hand is something that must whet the appetite of everybody. Because of that, the widely canvassed proposal most recently studied by BGC and Mobil for a gas gathering pipeline is something the industry as whole—indeed the public at large—would like to know a good deal more about. One is aware that a study has been received—and one gathers favourably received—by the Government which was put together by BGC and Mobil proposing a T-shaped pipeline that would run about 400 or 500 miles north-south through the gas-producing zones and have a T-junction to bring it ashore to Scotland. That scheme has been widely canvassed but, on the whole, very little is known about it.
One is aware from the press, if from nowhere else, that a great tussle is going on between the producers, on the one hand, and the likely consumers, on the other, as to who, if either of them, shall
918
dominate this pipe; whether either will be allowed to dominate it; and what measures the Government will take to make sure that neither side does dominate it; how the institutional investors are to be brought in and whether they are willing to be brought in. All these questions await answer from an anxious and interested industry, if not also from the public at large. Therefore, this is an opportunity to ask Her Majesty's Government, first, whether they are going to give the go-ahead to this project and, secondly, what, in their view, is a reasonable target date for completion.
I think everyone wants to know whether and, if so, when, the BGC/Mobil study will be published. Will it be published in its entirety or, as is widely feared, will it have been thoroughly edited beforehand? Will the route proposed in that study be the final route? After all, there are at least two pipelines leading to the United Kingdom from the gas fields of the Northern North Sea, and it is certain that one of them will no longer be working to capacity after about 1985. So there may be a case for considering the incorporation of existing pipelines into the scheme when it finally goes ahead.
We are led to believe that BP have put forward proposals of a more comprehensive kind than those set out, so it is said, in the BGC/Mobil study. Will there be ample time for discussion between the Government and interested producers and users to discuss the route of the line before final decisions are taken? All these are questions that clamour for an answer. Perhaps the most important question of all is just how the Government intend to conduct consultations with some 30 or 40 interested parties, how quickly these can be speeded up and, equally, how thorough can they be? These questions are asked having regard to the British national interest that this scheme should be pushed ahead as fast as possible; speed is necessary if only to provide a structure on the bed of the North Sea to which the sources of supply in the Norwegian sector may also adhere (if that is a convenient term) should they prefer to do so rather than to take a line across the Norwegian Trench to Germany and the Continent. These are all questions crying out for an answer. Time is not necessarily on our side but, equally, the danger of a wrong

919
decision on the route is something which I trust the Government have very seriously in mind.
To return to the essence of this Bill, here is a Bill which seeks to bring more common sense into the consumption of a major national resource. It is one which has been squandered due to non-market pricing. For that reason alone, quite apart from the object of raising the questions I have raised, I give a warm welcome to my noble friend and his Bill.
7.24 p.m.
Lord WYNNE-JONES: My Lords, the noble Earl, in introducing this Bill, made it fairly clear that the Bill is the consequence of bad housekeeping. I am not blaming the present Government for this at all, because it is something for which all Governments must take the blame, and in particular I think the British Gas Corporation must take the blame, because we are told that the storage facilities and the whole method of dealing with the distribution of gas may not be adequate to cope with the demand from industry. The reason is that over the years, whatever the British Gas Corporation may say, the priority has been to take the cheap and easy way of getting rid of gas: that is, distributing it through the ordinary distribution system to the domestic consumer.
I hope I may be forgiven for saying this, because I called attention to that fact in 1967 when we had a debate in your Lordships' House on fuel and energy, which I introduced In my introduction to that debate, I called attention to the problem of natural gas because at that time we were only just beginning to benefit from natural gas and I had taken a little trouble to inquire from the chemical industry, with which I was in one way or another associated, as to what their demands would be for natural gas. They told me at the time that in their view the chemical industry could consume 860 million cubic feet of gas per day, which was more than half the total amount of gas being brought ashore from the North Sea. In my own remarks on that occasion (13th April 1967) I said this at column 1425:
"Here is a balance which must be struck between the possible use of natural gas industrially and the possible use of natural gas as a general domestic fuel".
920
Such a balance has bever been struck except by relying on the accident of the market. We are being told today—in fact the noble Earl, Lord Lauderdale, has just told us—that he was glad the Government were coming round to a rational point of view. I see nothing rational about saying that you are going to let the market decide. That is not "rational"; it may be expedient and it may be a useful way of doing things, but I submit that to call it "rational" is a misuse of terms which I am surprised to find a Scotsman indulging in.
It is important for us to realise that if we are going to have a policy in regard to energy we have to look at these matters and consider them carefully. We have no policy for energy; Europe has no policy for energy; the world has no policy for energy. Why? Because it is generally accepted that we should rely upon the market to decide. If you have the market deciding, it is obviously the same thing as saying you do not have a policy. You just leave it. You do not have to do anything; you do not need to think about it. It is no use worrying about whether the gas is better used this way or that way. That is irrelevant, because the market will decide. That mysterious, blind goddess will decide for us. That may be acceptable, but do not let us imagine that it is a policy. It is the negation of a policy. I would submit that this trivial Bill is before us because we have not had a policy and because we have not tried to understand how gas should be used.
I do not blame the Government for producing the Bill; I do not blame the British Gas Corporation for asking for it, because they are in a jam. The Bill is the result of being in an awkward position, and, being in that position, one says, "Let us out of this position by saying that we will not have to supply gas to a certain number of people." Of course, that is an immediate negation of the market on this issue, but it is no doubt regarded as a temporary move.
What I should like to ask of the Government is a very simple question. When will they cease to produce trivia, and when will they come before the country and say "We have a policy"? The answer is that they will not, but, nevertheless, I ask them when they will do this, because it is of importance to the country. It is

921
recognised by everyone who has looked at the energy situation in this country, and in the world, that the next 20 years will be crucial years. They will be years when grave decisions have to be reached.
If we say that we are going to leave everything to be decided by the market, all right. That is a method that can be adopted. But it is not a policy. It is the negation of a policy, and I predict that it will end not in disaster—things rarely do end in complete disaster—but in confusion and a lot of hardship in this country and elsewhere. Therefore, I implore the Government to begin to take seriously this problem of energy. I do not oppose this Bill. From this side, we will certainly support the Bill, because it is essential in the circumstances, but it is the product of bad housekeeping.
7.33 p.m.
The Earl of GOWRIE: My Lords, my noble friend Lord Lauderdale praised us for bringing forward this Bill and the noble Lord, Lord Wynne-Jones, did not blame us for bringing it forward. That is, I suppose, some modified comfort to me, as I am quite used in this House to being attacked on energy issues by the noble Lord opposite and by my noble friend from behind me. But this time both think that we have, perhaps, got it about right.
My noble friend asked me about the gas gathering pipeline study. My right honourable friend the Energy Secretary will be making an announcement on this very shortly, and I am sure my noble friend will understand that I cannot pre-empt that Statement. But if, as he hopes, he makes it, I will, of course—for the usual channels require me to—repeat it in this House. I understand that the British Gas Corporation and Mobil, who carried out the study, established contact with many licensees during the course of the study. I would say to my noble friend that a licensee who wishes to express views in the light of the published report will, of course, be free to speak to any organisation which may be set up to carry forward the design and construction of the pipeline. The BGC/Mobil study will be published at the time of my right honourable friend's Statement.
My noble friend asked me what a reasonable target date might be for the
922
gas gathering pipeline. Our target date is 1984–85. Anything much later will increase the risk of substantial flaring, and, like my noble friend, I am dead against continued substantial flaring, as he knows. My noble friend asked me whether domestic customers will continue to receive preferential treatment. Neither the present legislation nor the proposals in the Bill give domestic customers preferential treatment. The 25-yard limit applies to all premises, whether domestic, commercial or industrial. This may, in practice, tend to favour domestic customers, since they are more likely to be not within 25 yards of a main and to consume more than 25,000 therms. But I do not accept this as an argument, either for altering the 25-yard limit or for restricting the obligation to supply so far as domestic customers are concerned.
In any event, British Gas are planning to increase their supplies to industry by over 1 billion therms over the next five years. By removing the statutory right of pre-1976 customers of British Gas, regardless of their particular circumstances, to large volumes of gas, the Bill puts both old and potential new customers on an equal footing. This is the point of the Bill which my noble friend recognised, and I am grateful to him for that.
I am also glad that he drew attention to the exciting scale of our resources in natural gas. The more one looks at the energy potential of this country, whether in oil, coal, gas or our present or potential nuclear capacity, the more optimistic one becomes about our chances in an energy-hungry world, always assuming that we conserve wisely and do not blow our inheritance; or perhaps I should say here do not flare our inheritance. That is why our policy is to sell gas to our large industrial and commercial customers at prices broadly related to those of competing oil products.
I would just say to the noble Lord, Lord Wynne-Jones, that that is not trivial. That certainly is a policy. It is a policy of having to face market issues, rather than leaving everything to be decided by them; because if you left everything to be decided by them you would have to take the blows of whatever buffets an uncertain energy supply in the world outside this country might give you. So I cannot agree that we do not have a

923
policy there. I, of course, believe that the price mechanism is in the longer term the best overall method of achieving a balance between supply and demand, and we feel that this Bill is necessary to remove an impediment to British Gas implementing this policy.
Finally, the noble Lord, Lord Wynne-Jones, was a little hasty in blaming the British Gas Corporation. I sometimes have criticisms of the British Gas Corporation. I do not stand at this Box simply to go in to bat for it. Nevertheless, the low prices, which were not fundamentally the Gas Corporation's fault, inevitably meant an enormous surge in demand, and that surge in demand created imbalances and difficulties for it on the supply side which it could not easily correct, and which this Bill is therefore, logically, in terms of the rest of our energy pricing policy, designed to correct.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.
Lord LYELL: My Lords, I beg to move that the House do adjourn during pleasure until eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.37 till 8 p.m.]

SOCIAL SECURITY (NO. 2) BILL
House again in Committee on Clause 1.
[Amendment No. 17 not moved.]
Clause 1 agreed to.
Clause 2 [Abolition of compulsory up-rating of amount certain pensioners may earn without abating pensions]:
Lord REIGATE Lord REIGATE moved Amendment No. 18:
Page 3, line 21, at end insert ("but only until the end of the tax year 1980–81").
The noble Lord said: I beg leave to move the amendment standing in my name on the Marshalled List. It is in the nature of a probing amendment. During the Second Reading debate, in which I did not speak, I noticed that there were one or two references to the earnings
924
rule, some of them from this side of the House, which I felt did not augur too well for the future of the abolition of the earnings rule. This is a matter to which I have devoted my attention for more years than I care to remember since I first introduced a Private Member's Bill on the subject in 1955.
After the last debate which took place in your Lordships' House about a year ago, I had cherished the hope that somehow or another within my lifetime the earnings rule would be abolished. It was therefore with some dismay that I realised that the relaxation has temporarily been suspended, which does not forebode very well for the ultimate abolition of the earnings rule. In particular, I note that my noble friend Lord Boyd-Carpenter said at one stage that he thought the earnings rule would still be here at the end of this Parliament. I shall be very disappointed if that is so.
The noble Lord, Lord Wells-Pestell, knows of my interest in the matter. I have therefore put down this amendment simply and solely to have some reassurance from Her Majesty's Government that they remain as dedicated to the abolition of the earnings rule as I would wish them to be, and in the hope that the Government will give some indication as to when they hope the relaxation can be resumed and when they look forward to the total, ultimate and final abolition of the earnings rule.
Lord CULLEN of ASHBOURNE: As my noble friend has made clear, the intention of this amendment is to limit the freezing of the earnings limit for retirement pensioners to the 1980 and 1981 up-ratings. Its effect would be to freeze the earnings limit until November 1982. This is because the up-rating review is carried out at the end of a tax year and determines the increase in benefits in the November of the following tax year. This year's up-rating follows a review in the tax year 1979–80. If there were no review of the limit until after the tax year 1980–81, the next review would be in 1981–82 and the limit would not be unfrozen until November 1982.
But as to the intention of the amendment, may I begin by making it clear that we would not be introducing Clause 2, to freeze the retirement pensioners' earnings limit at its present level of £52 a week,

925
unless in our opinion it was absolutely necessary. I do not think that I need to go into the recent history of the earnings rule in any detail, but it will doubtless be remembered that it was a Conservative initiative that brought the earnings limit to its present high level. It is necessary to freeze the limit simply because of the overriding need to restrain public spending and at the same time to protect the most vulnerable. But I must emphasise that we have no wish to maintain this restriction on the earnings limit a moment longer than it is necessary to do so. I understand entirely the concern for older people to have the choice of working if they can find suitable employment, and the feeling that the earnings rule is a discrimination. But the fact is that women between 60 and 65 and men between 65 and 70 who can do a full-time job are not among the most vulnerable; and it is better that savings should be made here than that they should have to be made in respect of those who are less well placed.
We would hope, as my noble friend Lady Young said on Second Reading, that it will be possible to lift this restriction from November 1981. But we would need to be on very sure ground before we wanted to see an outer limit of 1981 or 1982 written into the Bill. What will be possible next year or the following year is something that can be decided only in the light of circumstances at the time. A lot of things have had to yield place to the need to contain public expenditure and when the time comes to entertain some relaxation in the restrictions on public spending, priorities will have to be decided. We cannot decide them now, and so we cannot commit ourselves at this stage to a timetable for raising the earnings limit. Our ultimate aim, of course, is to do away with the earnings rule for retirement pensioners altogether. We will do this just as soon as we can, but it is not possible to give a timetable at this stage.
Lord REIGATE: I suppose that I must, in all courtesy, say to my noble friend that I am most grateful for his reply, which was not unexpected. I am a little surprised that there was not a single voice from the Opposition Benches, Liberal or Labour, in view of the interest they have always displayed in this matter in the past. I accept the validity of my noble friend's arguments, although I regret that he cannot
926
give me the answer that I really was asking for; namely, confirmation that the Government will be able to abolish the earnings rule, somehow or another, within the lifetime of this Parliament.
I noticed that my noble friend, if I may use a vernacular phrase, trotted out the old argument about priorities. This is not just a question of priorities. Within the sphere of social services, obviously there are always priorities which can be advanced with a better claim than this particular matter of the relaxation of the earnings rule. However, may I ask my noble friend who is speaking for the Government to realise that this is not just a question of social need or different priorities. It is a question of the total reform of the social security of this country, which has so far been met by general relaxation.
What we really are fighting for is a replacement of the retirement pension with the old-age pension, as of right. That must be done, regardless of other priorities which may sometimes obtrude themselves. I am a little disappointed in my noble friend's reply for that reason and would ask him to re-read the debate at Second Reading and notice that the only critical voice from these Benches on the earnings rule was that of my noble friend Lord Boyd-Carpenter. And if he will go back to the debate which took place on an earlier occasion, my noble friend will notice that three Conservatives who took part in it and who voted against their Party were all former Ministers of the Ministry of Pensions and National Insurance: my noble friends Lord Boyd-Carpenter, Lord Inglewood and Lord Drumalbyn.
I apologise for mentioning my noble friends in their absence but the fact is that all of them are former Ministers in that department and are what might be described as "old boys of the John Adam Street school" who have always stood faithfully in support of the earnings rule. I do not, and many people think as I do. Therefore, I hope that in the lifetime of this Parliament, under a Conservative Government, we shall see the earnings rule totally abolished.
Lord BANKS: Since the noble Lord has referred to the absence of a voice from the Liberal Benches, may I be permitted to remind him of the fact that just a little

927
over a month ago we had a debate on this in this House on an amendment to the No. 1 Bill, which I moved in the identical terms in which it had been moved by the noble Baroness, Lady Young, and the noble Lord, Lord Cullen of Ashbourne, just about a year prior to that date. Certainly we on these Benches have not in any way relaxed our very strong and longstanding opposition to the earnings rule.
Perhaps I may make one further comment. I could have understood it a little better if the noble Lord, Lord Cullen, had said that in view of the fact that there was a serious economic situation it had been decided that it was not possible to proceed at this stage to the abolition of the earnings rule but that the limit would be up-rated, as it is at the present time, but to restrict it to the level of £52 regardless of what is happening to the index of prices is in fact going in the opposite direction to that to which the Government are pledged, as I am sure the noble Lord would agree.
On Question, Amendment negatived.
8.12 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved amendment No. 19:
Page 3, line 21, at end insert ("with effect from the tax year 1982–1983").
The noble Lord said: The effect of Clause 2(1) is to abolish the requirement to raise the earnings limit for retirement pensioners annually in line with average earnings. The amendment would postpone the operation of Clause 2(1) until November 1983; that is the up-rating based on a review in the tax year 1982–83.
I do not think it is necessary for me to remind your Lordships that in 1979 the Conservative election manifesto said:
"It is wrong to discourage people who wish to work after retirement age and we will phase out the earnings rule during the next Parliament".
In his post-Budget statement on 27th March, however, the Secretary of State said:
"At a time when other groups are having to make sacrifices we believe that it is right to hold the earnings limit at its present level of £52 a week for the time being".—[Official Report, Commons, 27/3/80; col. 1665].
Clause 2(1) would enable this to be done.
When this question was debated on an amendment to the No. 1 Bill, the noble Baroness the Minister reaffirmed the
928
Government's commitment to phasing out the earnings rule in these words:
"As circumstances allow"
but added:
"Ways of achieving this aim and the costs involved are currently being studied and the Government will announce the outcome of this consideration in due course".
It is clear that "as circumstances allow" does not mean in this Parliament, and if my memory serves me correctly—and I am really trusting to memory because I do not have a note of it—I then advised her to see her right honourable friend the Prime Minister and find out from her what the Government proposed to do. In fact, the Secretary of State said during the Committee stage of this Bill in another place:
"I am not in a position today to adhere to the commitment that we can do it all in this Parliament"—
and he hinted that the earnings limit might be frozen, not just for one year, but for two. In saying that, I am relying on the Official Report of the Standing Committee 'B' on 7th May 1980 at column 757.
That would mean that by November 1982 the amount a pensioner can earn without any loss of pension would probably be about half of what it was last November, talking in real terms. It would also mean that the cost of abolishing the earnings rule would be far more than it would be at present, thus, as I see it, making it more difficult for the Government to find the resources needed to do so. This amendment would prevent that from happening by ensuring that the earnings limit continues to rise, thus enabling the Government to fulfil their manifesto commitment. I beg to move.
Lord CULLEN of ASHBOURNE: The noble Lord, Lord Banks, referred to the fact that I had taken part in a debate on this subject a year or two ago. I am just as keen as my noble friend Lord Reigate that we should get rid of this earnings rule as quickly as we possibly can. I think the very fact that we are having to slow down in getting rid of the earnings rule and even going further in not up-rating the earnings limit at this time, must make it clear to your Lordships that we consider that the present economic situation in the country is very bad and that is why we are having to eat our words on our manifesto commitment. I feel

929
that in answering the last amendment I have given the Government's views fairly straight and I feel that we cannot accept this amendment.
On Question, amendment negatived.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved amendment No. 20:
Page 3, line 22, leave out subsection (2).
The noble Lord said: Clause (2) would enable the Government to freeze the pensioners' earnings limit this November despite the fact that the November up-rating will be based on a review carried out before the Bill becomes law and this amendment would prevent it. Under the law as it stands, with earnings rising at about 20 per cent., the earnings limit would have to be raised in November from £52 to at least £62 a week. In other words, freezing the earnings limit this year will mean a loss of up to £10 a week for pensioners who continue earning during the five years between the ages of 65 and 70.
In relation to the basic pension rate, which will be £27½15 for a single person from this November, that is a very substantial cut indeed. Relatively few pensioners will lose the full £10; only those whose net earnings are £66 a week or more. But large numbers will suffer losses amounting to more than the five per cent. cut imposed on those receiving short-term benefits and with even less justification since both the retirement pension and the pensioner's earnings are already subject to income tax. We feel that this is a perfectly reasonable amendment and that it is one that the Government should accept, bearing in mind that it will mean a considerable loss, of up to £10 a week for pensioners who continue to work between the ages of 65 and 70. I beg to move.
Lord CULLEN of ASHBOURNE: The effect of this amendment would be to delay the freezing of the retirement pensioners' earnings limit until the 1981 up-rating. The earnings limit is being frozen at its current level of £52 a week as a necessary contribution to the measures to hold back public expenditure, and the need for these measures is immediate. It is important, therefore, that the freeze should operate this year and should not be put off; otherwise the effect of its contribution is lost. If we did not feel as strongly as we do about this we should not be putting these matters forward this time.
As the financial memorandum implies, it is not possible precisely to estimate the savings. That will depend on the actual behaviour of pensioners and other people over pension age in employment and on the movement in earnings, but will be of the order of £1 million for every 1 per cent. rise in earnings. For example, if earnings rose at the predicted rate for prices over the year November to November, the savings would be around £16½million in a full year.
Savings of this order are not enormous but they are certainly significant, and they fall on a group which by definition has got substantial earnings. We cannot accept that savings of this order should be forgone, and, despite the persuasive way in which the noble Lord moved his amendment, I feel we really cannot accept it.
8.22 p.m.
On Question, Whether the said amendment (No. 20) shall be agreed to?
Their Lordships divided: Contents, 39; Not-Contents, 65.

CONTENTS

Banks, L.

Houghton of Sowerby, L.

Stewart of Fulham, L.

Beswick, L.

Janner, L.

Stone, L.

Birk, B.

Kilmarnock, L.

Taylor of Mansfield, L.

Blease, L. [Teller.]

Lee of Newton, L.

Underhill, L.

Boston of Faversham, L.

Llewelyn-Davies of Hastoe, B.

Wallace of Coslany, L.

Brooks of Tremorfa, L.

Lovell-Davis, L.

Wedderburn of Charlton, L

Cledwyn of Penrhos, L.

Maelor, L.

Wells-Pestell, L.

David, B.

Peart, L.

Whaddon, L.

Davies of Leek, L.

Ponsonby of Shulbrede, L.[Teller.]

White, B.

Elwyn-Jones, L.

Wigoder, L.

Goronwy-Roberts, L.

Ritchie-Calder, L.

Wilson of Radcliffe, L.

Gregson L.

Ross of Marnock, L.

Wynne-Jones, L.

Hale, L.

Seear, B.

Hatch of Lusby, L.

Stewart of Alvechurch, B.

NOT-CONTENTS

Airey of Abingdon, B.

Gowrie, E.

Orkney, E.

Bellwin, L.

Gridley, L.

Rawlinson of Ewell, L.

Belstead, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Renton, L.

Caithness, E.

Rochdale, V.

Cockfield, L.

Hanworth, V.

Romney, E.

Cottesloe, L.

Hatherton, L.

St. Aldwyn, E.

Craigmyle, L.

Hives, L.

Sandys, L. [Teller.]

Cullen of Ashbourne, L.

Holderness, L.

Selkirk, E.

Denham, L. [Teller.]

Hornsby-Smith, B.

Shannon, E.

Drumalbyn, L.

Hylton-Foster, B.

Sharpies, B.

Dundee, E.

Killearn, L.

Soames, L. (L. President.)

Ellenborough, L.

Kimberley, E.

Stamp, L.

Elliot of Harwood, B.

Luke, L.

Strathclyde, L.

Elton, L.

Lyell, L.

Strathcona and Mount Royal, L.

Falmouth, V.

Mackay of Clashfern, L.

Sudeley, L.

Ferrers, E.

Macleod of Borve, B.

Teviot, L.

Forester, L.

Mancrocft, L.

Thorneycroft, L.

Fortescue, E.

Margadale, L.

Trenchard, V.

Gainford, L.

Marley, L.

Trumpington, B.

Gibson-Watt, L.

Mowbray and Stourton, L.

Vivian, L.

Glenkinglas, L.

Murton of Lindisfarne, L.

Ward of Witley, V.

Godber of Willington, L.

Nugent of Guildford, L.

Young, B.

Moved accordingly and, on Question, Motion agreed to.

Clause 2 agreed to.
Clause 3 [Alteration of period of interruption of employment and of periods relating to invalidity allowance and unemployability supplement]:
8.29 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 21:
Page 3, line 36, leave out ("unemployment") and insert ("interruption of employment").
The noble Lord said; I beg to move the amendment standing in my name. Under Section 14 of the Social Security Act 1975 unemployment or sickness benefit is payable, apart from the three waiting days, for any day of unemployment or incapacity for work which forms part of a period of interruption of employment. Section 17(1) of the same Act defines a period of interruption of employment as
"any two days of interruption of employment, whether consecutive or not, within a period of six consecutive days".
Thus for both sickness and unemployment, if linked with a previous spell, it is necessary to be off work for only two days within a week, which need not be consecutive, in order to qualify for benefit.
The effect of Clause 3(1) of the Bill would be to retain the existing rule for unemployment benefit but to limit entitlement to sickness benefit to periods of four or more consecutive days of incapacity. The amendment would have the effect of
932
restoring the existing rule for sickness benefit. The proposed change would not only remove entitlement to sickness benefit for very short spells of incapacity; it would also affect, for example, a person who was off sick for two or three days, who returned to work for a day and then had to take a further period off. The first two or three days would not only not qualify for benefit; they would not even count towards the three waiting days. Thus a person could be off sick on six out of seven consecutive working days without qualifying for benefit.
This proposal is closely related to the Government's proposals to transfer responsibility for payment during the first eight weeks of sickness from the national insurance scheme to employers. The suggestion in the Green Paper published in April is that employers should not have to provide sick pay for spells of three days or less in any circumstances, not even where two spells would normally be counted as one under the linking rules. The Government are clearly anxious that national insurance sickness benefit should not operate more generously than employers' sick-pay schemes; but the right way to ensure that is to make employers bring their arrangements into line with the national insurance scheme, not to deprive contributors of their existing rights under the national insurance scheme.
During the Committee stage of the Bill in another place, the Under-Secretary of State, Mrs. Chalker, suggested that many of those claimants regarding short spells of sickness were not concerned about the

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benefit but claimed as a matter of routine because the doctor had given them a certificate. One does not know how she came to those conclusions; one does not know on what information and fact, if any, she based them. It is true that many employees already get full pay from their employers for short spells of sickness, though this is far more common, if I may say so, among white-collar workers than among manual workers. However, for those who do not, the loss of half a week's wages can be a very serious matter, especially when we are talking, as by definition we are, about people who experience repeated spells of sickness.
We feel that what the Government want to do does militate against working people who find themselves in this kind of situation. We do not think it is fair. We do not feel that by the closest investigation or examination it could be regarded as fair, and therefore we ask the Committee to accept this amendment. I beg to move.
Lord CULLEN of ASHBOURNE: Clause 3 makes two changes. One of these changes is that short spells of incapacity lasting three days or less will no longer count for benefit purposes. Payments of benefit will not be made for these periods nor will they link with other periods of incapacity or unemployment. This change will only be made for periods of incapacity. Days of unemployment will still count for benefit purposes if there are two days of unemployment within a period of six consecutive days.
The amendment seeks to reverse this change and to ensure that the present rules continue to apply. These rules are that, for both unemployment and incapacity, two days in any six consecutive days count for benefit purposes. The Government are unable to agree that these rules should remain unchanged. The proposed change will provide benefit savings of over £2 million a year. In addition, it will produce useful administrative savings as the system will no longer have to deal with the half-million or so claims that are made each year for these short periods. The change thus helps to simplify the scheme a little and this should, I think, be welcomed. A further point is that the change will be of
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assistance to doctors as well as to the social security system. This is because doctors will no longer have to provide statements so that people can claim benefit for brief periods of incapacity.
Most people who are sick for three days or less do not qualify for benefit under the present rules. This is because the first three days of a period of interruption of employment are what is known as waiting days, for which no benefit is payable. The change will therefore have very little adverse effect on individual claimants. Those who are affected will generally be people who have earnings for that week for the days that they do work.
It may be asked why the same change is not being made for unemployment benefit. In part, the answer lies in the different character of the contingency and in the different administrative implications. But there is also the important point that where short-term working can readily and satisfactorily be adopted as an alternative to longer-term lay-offs, and where someone who is unemployed can keep his hand in with odd days of work, it is valuable to have benefit arrangements which lend themselves to this, as the two-in-six rule does. We are satisfied that the proposal in Clause 3 is a desirable change and I therefore ask noble Lords to reject the amendment.
Lord UNDERHILL: I am surprised that the Minister said that these were desirable changes. I thought the argument had been put forward that these were undesirable changes which were necessary—not that they were desirable changes.
What concerns us is that most of the organisations which deal with the disabled are extremely worried about this clause. I am wondering whether the Government have really kept in mind what might be one of the possible effects—and this is certainly a matter about which the organisations which deal with the disabled are very concerned. I am referring to the possibility that persons who would endeavour to return to work may not do so because of this shorter period and therefore the benefits which will be paid out must be offset against any savings. At the end of the day the Government may find that they have not saved any money.

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I am surprised that the Government have placed so much emphasis on the administrative advantages and the advantages to doctors. Surely we must consider in the first instance the position of those who are affected—those who suffer long-term sickness and those who are disabled.
Lord CULLEN of ASHBOURNE: It is very difficult to know how many people might behave in the way in which the noble Lord has suggested; it is really almost speculation. We believe that very few people will behave like that and that the help which we are giving to the doctors and the small amount of money that will be saved will be advantageous.
Lord WELLS-PESTELL: I wonder whether we could come to some agreement that all that the Government are doing by the Bill is trying to save money by hook or by crook or by fair means or foul? I am getting a little tired because every reply that has been given so far has been, "Well, of course, we are going to save that and we are going to save something else." We are concerned about the individual who is unemployed or sick. We are not in the business of saving the doctors or saving administration. That is not what it is all about: it is about unemployment and sickness. If the doctors have to be protected in some way there are other means of doing it. If we are overburdened with administration—and there may well be a case for thinking that we are—then we shall deal with that in some other way.
I said earlier that it means that a person can be off sick for six out of seven consecutive working days without qualifying for benefit. It is quite preposterous that somebody can be away sick for six out of seven consecutive working days and does not qualify for benefit. What will happen to him? As regards the unemployed, are we afraid that if we make it too easy then those in casual work will not look for permanent work? Are we afraid that people will go down to their doctor and by some means or other cajole him into giving a certificate? It really does not seem fair. All that we are concerned about on this side of the Committee is not to encourage people to pretend that they are sick, or, if they are unemployed, to encourage them not to go to work; we are concerned that they should be treated
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in the way in which they have been treated now for some years. It seems grossly unfair that the only real reasons that should be given for this are, first, that it will save money; secondly, that there are administrative difficulties, and thirdly, that it will be a great help to the doctors.
Lord CULLEN of ASHBOURNE: The noble Lord is quite right in saying that the overall point of the first five clauses of the Bill is to save money. One hesitates to go on reiterating that because it becomes extremely boring to noble Lords. However, that is, as he rightly said, the main point of what we are doing. The other arguments, such as helping the doctors, although obviously very useful, are subsidiary.
Lord WELLS-PESTELL: So, it really does not matter that if somebody is sick for six days out of seven he does not qualify for benefit?
Baroness YOUNG: Let us consider the circumstances. It is just possible to be ill, in these circumstances, for six days out of seven, but it is rather unlikely. Suppose someone fails to go to work on Monday and is away for three days. The point of the clause is that he would not qualify for the benefit. He then goes back for one day, which would be Thursday, and he then has to be off for the next three days. Of course, I accept that it is possible to have a job that takes one over seven days or one goes off. I suppose for the Friday, followed by the Monday and Tuesday, and then goes back for one more day and has to do it again. As I understand it, if it is a consecutive period of time, after the first three days one would get something. So it would have to be broken employment. I agree that it is possible, but I think that if the noble Lord considers the matter he will agree that it is unlikely. To advance his whole case on something which is possible, but unlikely, is not very satisfactory.
Lord WELLS-PESTELL: I have been opposite the noble Baroness the Minister many, many times. I have heard her say time and time again, "It is possible, but not likely". She cannot hope always to give that reply and get away with it.
On Question, amendment negatived.
8.45 p.m.
Lord BANKS Lord BANKS moved Amendment No. 22:
Page 3, line 43, after ("weeks") insert ("or, in the case of a period comprising any days of incapacity for work, 13 weeks").
The noble Lord said: I beg to move Amendment No. 22 and speak, with the leave of the Committee, to Amendment No. 23. Under existing legislation any two or more days when the claimant is incapacitated for work or unemployed may be connected, provided they are not separated by more than 13 weeks. The Bill proposed originally to reduce the 13 weeks to six. In another place that was amended to eight.
Amendment No. 22 seeks to retain the present position; that is, the 13 week linking rule for sickness and invalidity benefit. The proposed change in the Bill brings an advantage to the unemployed person in that if he is unemployed, again between the eighth and the fourteenth weeks he starts a new period of 312 days during which he can draw unemployment benefit. Unemployment benefit is limited to 312 days. But so far as sickness is concerned, after 168 days incapacity, the claimant qualifies for invalidity benefit. Return to work, followed by a further spell, or further spells, of incapacity does not prevent the accumulation of the 168 days necessary to qualify for invalidity benefit so long as the separation between the spells of incapacity is never more than 13 weeks.
Clause 3 reduces the 13 weeks to eight weeks, as I have already pointed out. Invalidity benefit is payable—and this is a very important point—at a higher rate than sickness benefit. A linking period of only eight weeks instead of 13 weeks could constitute a more serious disincentive to return to work after a prolonged illness or accident. The person incapacatated may feel disinclined to take the risk of returning to work if he knows that he has the much shorter period of eight weeks in which, if he has a recurrence of incapacity, he will return to the higher rate of invalidity benefit rather than be reduced to the lower rate of sickness benefit.
There is much expert opinion to back this view. Professor Acheson, Director of the Medical Research Council Environmental Epidemiology Unit at Southampton
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General Hospital, an expert on multiple sclerosis, has said that a reduction of the linking period would be detrimental to a number of patients, particularly those with multiple sclerosis. A spokesman for Arthritis Care was certain that arthritis sufferers would be affected. He drew attention to a condition called "lupus erythematosus". This comes and goes a great deal and is quite incapacitating in the bad patches. Nine of 10 of those suffering from it are young girls, and he anticipated that a shorter linking period would deter many of them from attempting to work.
John Wilder, the Director of the Psychiatric Rehabilitation Association said:
"I can assure you that the rehabilitation of chronic psychiatric patients is difficult enough as it is without producing further obstacles such as Clause 3".
The National Schizophrenia Fellowship has written to the Secretary of State to say that:
"For those whose incapacity is initially sporadic in character, who, for example, recover sufficiently to take work for a time but then break down under the strain (as may often happen to schizophrenics), this new provision will work hardly, without, so far as can be seen, any justification in compensating benefit or equity".
Qualification for invalidity benefit becomes harder as a result of the proposed change from 13 weeks to eight weeks, and the risk of losing invalidity pension becomes greater. This can cause serious economic hardship. The difference between the two benefits is not inconsiderable. For a married man under 40 years of age when first incapacitated, with two children, on the rates to operate from November 1980, the difference will be £732 over a 28-week period. In addition, some will receive a lower rate of invalidity allowance as a result of the change, as the amount of this supplement to invalidity pension is determined by the age at which the total incapacity first commended. Some, who under the 13-week rule would have their period of incapacity linked back to an earlier age group, will not be so linked under the eight-week rule. For a person who failed to be linked back in this way to the under-40 age group the loss, if he lived for a further 25 years and at the rates to prevail from November 1980, would total £2,600.
The Government argue that under the 13-week rule some people were qualifying

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for invalidity benefit after a succession of widely spread, but short, periods of illness. But I think that Ministers have been forced to admit that there is a lack of evidence to support that assertion. There does not seem to be any proof that this is, in fact, what is happening. Amenclment No. 22 would retain the 13-week rule for both sickness benefit and invalidity benefit. Amendment No. 23 would retain the 13-week rule for retaining invalidity benefit once the 168 days have been acquired under the eight-week rule. Naturally, I would hope that the Committee would support Amendment No. 22, but if the noble Baroness were to say that she could not support Amendment No. 22 but could support Amendment No. 23, I would seek the leave of the Committee to withdraw Amendment No. 22 to make way for Amendment No. 23. However, failing such a declaration from the noble Baroness, I hope that the Committee will support Amendment No. 22. I beg to move.
8.53 p.m.
Lord WALLACE of COSLANY: No doubt noble Lords in all parts of the Committee have received representations on Clause 3 as a whole from various people of repute, various organisations dealing with the sick, the mentally sick and the training of young people. I understand—and this may be subject to the Minister giving us some confirmation—that the Government have given an undertaking that they will monitor the effects of changing the linking rule and that, if there prove to be problems, the period can be changed again through the use of regulations. It is not very clear what form this monitoring exercise will take or how it will be possible to estimate the number of people deterred from seeking work who might otherwise have done so. Both commonsense and the experience of those concerned with rehabilitation suggest that the change will have a disincentive effect. We believe that the Government should retain the present linking period unless and until it is established that the change will have no damaging consequences.
There are a number of points that could be made, and I want to make two. First, it is not evident from the text of the Bill that those in receipt of the non-contributory invalidity pension will also be affected
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by the change in the linking rule. If they lose entitlement to benefit, they will have to wait for 196 days before requalifying, as the noble Lord, Lord Banks, mentioned. In addition, there is an important point affecting the training of people, especially young people. The change in the linking rule may also have a deterrent effect in relation to courses at employment rehabilitation centres. Those who go on such courses are paid by the Manpower Services Commission for the duration of the course; so far as entitlement to benefits is concerned, it is equivalent to working. Figures supplied by the Manpower Services Commission show that about 45 per cent. of completed courses last between eight and 13 weeks and only 3½ per cent. for 13 weeks or more. Of those who complete courses, 51·5 per cent. have not yet entered employment or further training three months later. A certain proportion of these will be assessed as unfit for work. If their course lasted between eight and 13 weeks they would revert at present to invalidity benefit, but as a result of Clause 3 they revert to the lower sickness benefit. The fear of this happening must act as a disincentive to entry into such courses.
There are a number of examples that I could quote on this. I think that here is a very distinct case where the Government could give an undertaking to have a rethink without committing themselves to giving any definite undertaking. I suggest that that would be the right course to take, in which case we could return to the matter later at Report stage.
Lord MACKAY of CLASHFERN: I should like to deal first with Amendment No. 22. As the noble Lord, Lord Banks, has explained, the intention of the amendment seems to be to provide that spells of incapacity shall link with each other if they are not separated by more than 13 weeks. But the wording of the amendment would not achieve that objective. It would not be practicable because it fails to take account of the fact that a period of interruption of employment can extend over several years and can include both spells of incapacity and spells of unemployment. A "period" can therefore comprise days of incapacity for work even though the latest spell is a spell of unemployment.
But, even if it were possible to achieve the intended effect of the amendment,

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the Government could not see their way to accept it. It would result in an unacceptable complication of the benefit arrangment. It would also be more costly than the existing position and would not, therefore, accord with the purpose of the Bill.
On Amendment No. 23, we certainly understand and sympathise with the intention of this amendment. As has been explained by the noble Lords who have supported it, it is concerned with the person who, after a long illness during which he has been entitled to invalidity benefit, then returns to work. The intention of the amendment, as I understand it, is that if he falls sick again within 13 weeks, the incapacity shall be regarded as a continuation of the earlier spell so that he may regain title to invalidity benefit straight away.
There are, however, several considerations which need to be mentioned. First, as has been explained at some length and with some frequency already, the purpose of the Bill and of this clause, is to make savings; the amendment would reduce the extent of those savings. Secondly, the amendment would introduce complications into the administration process, whereas the Government's concern is for simplification. That is a subsidiary point, but an important one.
Thirdly, our medical advice—and I know that a number of different cases can be figured—is that if relapse does not occur early on, it is just as likely to occur outside the 13-week period as within it. In other words, the 13-week period has no magic about it for catching this sort of thing. You could get the kind of case that has been envisaged happening outside the 13 weeks just as much as within it. Therefore, if this is an injustice, it happens just now, and to reduce the period does not appear to make much difference to that.
Fourthly, the Government have already taken into account the persuasive arguments put forward by the very energetic organisations which represent the disabled, to some of which reference has been made. Whereas the original intention of the Government was that the linking period should be reduced to six weeks, the Government have accepted an amendment in another place to make that
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period eight weeks, which is the figure which now appears in the clause.
We must accept that no particular linking period would satisfy everybody. The Government's view is that 13 weeks is unnecessarily long and that six weeks should be adequate for the generality of cases. But the extension to eight weeks should go a long way to satisfy those who would prefer a longer period. Moreover, the Government have indicated—and this, in our view, is important—their intention to monitor the effect of the new rule so that if any adjustment is needed the regulation-making power can be invoked.
The only way to test out the sort of cases that have been mentoned is, we would submit, to put this clause into operation and then monitor the results. One cannot do it adequately unless the rule is first changed. In this connection we shall of course be paying particular attention to the kind of case to which the amendment is directed.
With regard to the particular case that the noble Lord, Lord Wallace of Coslany, mentioned, my understanding of the position is that attendance at the centre counts as part of the period of interruption of employment. That is my understanding of the particular case to which he referred. I am afraid, however, that, not-withstanding the persuasive arguments put forward in support of these amendments in the alternative, the Government cannot see their way to support them, and I ask the Committee not to accept either of these amendments.
Lord BANKS: I am grateful to the noble and learned Lord, Lord Mackay of Clashfern, for his thorough answer to this amendment. I should like to consider both this amendment and the next one in the light of what he has said. In view of that, I beg leave to withdraw Amendment No. 22.
Amendment, by leave, withdrawn.
[Amendment No. 23 not moved.]
9.2 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 23A:
Page 4, line 17, after ("disregarded)") insert ("and in section 18(2) of that Act").
The noble Lord said: I think that it will not be necessary to remind the

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Committee that the purpose is basically the saving of money. I raise this point because there seems to be an anomaly in this part of the Bill. The effect of Clause 3 as it stands is that the linking periods for spells of unemployment will be reduced from 13 weeks to eight weeks, but the period of employment required to requalify for unemployment benefit will remain at 13 weeks, if I have understood this correctly.
This means that a man who is unemployed for 311 days and then goes back to work will be able to qualify for another 312 days' benefit after working for eight weeks and one day—again if I have understood it correctly—while a man who is unemployed for 312 days will not requalify for benefit until he has worked for 13 weeks. I find this both unfair and somewhat confusing. I am sure that those to whom this will apply will also think it confusing, but they will also think that it is grossly unfair.
If the linking period is to be reduced to eight weeks, then I suggest that both equity and simplicity demand that the requalification period should also be reduced to eight weeks, and this amendment would certainly do it. If the amendment is not right, if it is not suitable, if it does not apply, I should be grateful if the Minister would explain the matter in simple terms, because I find it confusing. I beg to move.
Lord CULLEN of ASHBOURNE: I agree with the noble Lord that this is confusing and it is complicated, and I shall do my best to explain it in simple terms. As noble Lords will be aware, unemployment benefit is paid for a maximum of one year (312 days) in any one period of interruption of employment. Once a claimant has received this one year's benefit he can requalify for a further year's benefit only after he has worked for at least 13 weeks and for at least 16 hours in each of those weeks. The intention of this amendment is to reduce this requalification period from 13 to eight weeks no doubt with a view to keeping it in line with the revised figure of eight weeks which, it is proposed, should apply for the purposes of linking periods of interruption of employment.
Although the present periods for linking purposes and re-qualification happen to
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be the same; that is, 13 weeks, they serve entirely different purposes and there is really no connection between them. The re-qualification test was devised to provide, for the generality of claimants, a fair means of demonstrating a substantial return to the employment field, following exhaustion of unemployment benefit without which it has never been thought that further benefit should be paid. The conditions for re-qualification have in fact only recently been eased.
Prior to April 1978 a person had to have worked for at least 21 hours in each of 13 weeks. Under the Social Security (Miscellaneous Provisions) Act 1977 the number of hours to be worked in each week was reduced to 16 hours, this being the standard test applied for employment purposes under the Employment Protection (Consolidation) Act 1978. A further reduction in the conditions for re-qualification as proposed in the amendment would undermine the concept of a substantial return to the employment field, which, as I have explained, is the main purpose of the test. Moreover, the proposed change would be an additional cost of around £10 million. The noble Lord may not have been familiar with this, he may wish to think about it, but I hope that in the meantime he will withdraw his amendment.
Lord WELLS-PESTELL: I am grateful to the Minister. I confess that some of what the noble Lord said—I hope he will not misunderstand this—did not readily make sense; I still find myself confused as to the difference between the eight weeks and 13 weeks and I cannot see any justification for it. However, I should like an opportunity to read in the Official Report what the Minister said and feel free to return to it or get in touch with him before Report stage if I am not clear. Meanwhile, I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.9 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 24:
Page 4, line 22, after ("effect") insert ("in relation to any benefit other than unemployment benefit").
The noble Lord said: Clause 3, as we know, reduces the linking period for spells

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of sickness or unemployment from 13 weeks to eight weeks, so that in future two periods of interruption of employment will be treated as one if they are not separated by more than eight weeks. Clause 3(4) gives the Secretary of State power by regulation to increase the linking period to more than eight weeks. The amendment would prevent him from doing that for purposes of unemployment benefit. The main reason for the proposal to shorten the linking period to eight weeks is to reduce the number of people who qualify for long-term invalidity benefit by virtue of a series of short spells of sickness separated by up to 13 weeks. For the unemployed, however, shortening the linking period is advantageous because unemployment benefit is payable for only 312 days in one spell or series of linked spells. Thus, a man who has a second spell of unemployment within 13 weeks of a previous spell can draw benefit only for the remainder of the 312 days, after which he ceases to be entitled until he has qualified by 13 weeks' employment.
Reducing the linking period to eight weeks means that, provided the two spells are separated by at least eight weeks, he qualifies for another 312 days' benefit instead of for only the number of days remaining from his previous spell. The Secretary of State may decide in the light of experience that the eight week period has an unduly harsh effect on the long-term sick and ought to be extended, say, to 10 weeks or even restored to the present period of 13 weeks. If so, we would not want him to extend the linking period for unemployment benefit at the same time, thus depriving the long-term unemployed of the small advantage they will gain from Clause 3, and the amendment is designed to ensure that that would not happen.
Lord CULLEN of ASHBOURNE: Clause 3(4) gives power for the linking period to be increased by regulations to a longer period than eight weeks. The intention of the amendment is to ensure that the linking period will remain at eight weeks for unemployment benefit, even if it is changed for the incapacity benefits. The noble Lord's reason for proposing the amendment is that for the unemployed the reduction in the linking period is beneficial. I understand that the noble Lord wants to probe our thinking on this
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point. Unemployment benefit is paid for a maximum of one year in any one period of interruption of employment. So the big difference between unemployment and incapacity where linking rules are concerned is that the more the separate spells of unemployment link, the sooner benefit is exhausted, while the more separate spells of incapacity link, the sooner preferential invalidity benefit replaces sickness benefit. But I ought to add an important footnote. After unemployment benefit has been exhausted, a claimant has to work as an employee for at least 13 weeks before he can re-qualify for benefit. This requalification rule is not affected by this clause. The linking rule change affects someone who has not yet exhausted his benefit.
Your Lordships may find it helpful if I use an example to illustrate the beneficial effect on the unemployed of the reduction in the linking period. If, under current rules, a claimant draws unemployment benefit for less than a year, gets a job, but then has to make another claim within 13 weeks, his new spell links with his old and he continues "clocking-up" days of benefit from where he left off. Thus someone who was unemployed for eight months, found work for about three months, and then claimed benefit again within 13 weeks of his previous claim, could continue to receive unemployment benefit for only a further four months before exhausting his 12 months' maximum entitlement. He gains through not having to serve waiting days (without benefit) at the beginning of the separate period of unemployment, but he is likely to lose far more because he runs out of benefit within the four months.
If, as proposed in Clause 3, the linking period is reduced from 13 weeks to eight weeks, the second spell of unemployment quoted in the example would no longer link with the first. Thus the claimant would be starting a fresh period of interruption of employment. He would have three waiting days to serve, but he could now receive unemployment benefit in the second spell for a maximum period of 12 months before having to requalify, rather than four months under the present rules. I cannot advise noble Lords to accept the amendment.
The regulation-making power is included in the Bill to provide some flexi-

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bility, so that upward adjustments to the linking period can be made without having to resort to primary legislation. But before any adjustments are made, two points need to be established. The first is whether it would be desirable to increase the linking period for incapacity benefit. The Government view is that an eightweek period is an appropriate one for both unemployment and incapacity benefits. But there has been concern that this may be too short a period for the long-term sick who wish to re-establish themselves in employment, or for those suffering from a recurrent illness. The Government have therefore agreed to monitor the affect of the reduction in the linking period. If this should show that the reduction causes serious problems—and we do not expect this to be the case—then it may he necessary to review the period.
But, as the Notes on Clauses make clear, we would then need to establish whether it would be practicable to have different linking periods for unemployment benefit and the incapacity benefits. This is the second of the points that I referred to earlier. Different linking periods for different benefits would undoubtedly complicate the scheme both for those claiming benefit and for the staff administering the benefits. We would therefore need to consider the position very carefully.
Let me give a brief illustration. If there were an eight-week linking rule for unemployment benefit and a 13-week linking rule for incapacity benefits, and incapacity followed shortly after unemployment, the incapacity linking rule could jump back over the spell of unemployment and link with an earlier spell that the unemployment spell had not linked with. The scheme is quite complicated enough, for good reasons, without making it any more complicated.
Subsection (4) gives the Secretary of State power to make regulations to increase the linking period for either unemployment or incapacity benefits, or for both. As I have just demonstrated, it is essential to retain this flexibility, and I therefore advise noble Lords not to accept this amendment.
Lord WELLS-PESTELL: I am grateful to the noble Lord the Minister for giving such a full explanation. As was the case
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with a previous Amendment of mine, I should like to look at this particular matter very carefully and, if it is not clear, to take advice and perhaps return to it. May I say in passing that if at any time the Government decide to advise those noble Lords supporting them to accept one of our amendments, will they give us ample notice, because otherwise I do not think we could withstand the shock. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 3 shall stand part of the Bill?
Lord WALLACE of COSLANY: In proposing to your Lordships that we do not accept Clause 3, I would make an appeal to the Front Bench on the Government side: please do not say again that the intention of this Bill is to save money, because we shall start screaming our heads off if we hear it any more. We know what the Government are up to. We do not think they are very good at doing it, but at least we know where they stand: they are going to rob the poor to give it to the rich.
I am going to summarise Clause 3 very briefly. First of all, the potential loss of benefits is a significant factor when someone has to decide whether to attempt to return to work after a long illness or severe disablement, and when his or her capacity to meet the demands of work is in doubt. Then, it is equally significant for someone who has to decide whether to keep up the struggle of working between bouts of incapacitating illness. The difference between a three-month period of grace and a six-week period is medically and psychologically important; and the change in the linking rule resulting from the passage of Clause 3 will therefore deter many chronically sick and disabled people from attempting to continue work. Then, any savings that might result from the change must be set against additional expenditure on benefits for those who are thus deterred; and, finally, the Government probably do not intend to create an additional disincentive to work, and they should think again about Clause 3.
That, I would say, is a very brief but fairly accurate summary of all the various arguments we have had on the different

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amendments; and to save the time of the Committee I would formally ask your Lordships not to agree to the inclusion of Clause 3.
Lord CULLEN of ASH BOURNE: The noble Lord has spoken to his proposal very shortly indeed, and I propose to answer equally shortly. He has more or less vetoed my saying that the whole point of Clause 3 is to save money. The other arguments are subsidiary, as I have already explained; so I would ask your Lordships to agree that Clause 3 should stand part of the Bill.
Lord WELLS-PESTELL: I do not think the Committee should take this rather lightly. I do not think the Government realise how deep is our concern that they should ever have considered introducing a Bill of this kind. We consider it one of the worst Bills, and Clause 3 goes a long way to illustrate our reasons for concern and discontent. We accept that in Parliament there will be various views. We expect the Government to introduce legislation which will not be acceptable to us—the Education Bill, the Transport Bill, the Housing Bill, the Local Government Bill when it comes and, recently, the Employment Bill. We have no quarrel, if I may say so, with Bills of that kind, because they represent a different philosophy, and we are always prepared to fight on that ground.
But this Bill has been something very different. We regard it as being an attack on a section of the community whose members cannot really speak or fend for themselves. We realise that we have no chance of changing this Bill—not by a single word or a single letter. At Second Reading some of us were very much minded to put down an amendment to the effect that the Bill be read six months hence. We did not do so because it is not the practice to do that in your Lordships' House; but we felt so strongly about it. I myself had drafted an amendment to the Long Title; and, among other things, to increase benefits. But I do not believe in gestures; and it would have been nothing but a gesture, because, again, one would not have stood a chance.
We have chosen Clause 3 because we feel that it is a particularly pernicious clause. We do not propose to divide on
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it. We use it as an opportunity of trying to convey, whatever noble Lords opposite may think, how strongly we feel about this Bill; and we hold our views as strongly and sincerely as noble Lords on the Government side. We do not allow them in the last analysis to come between us. My noble friends and I want to make it perfectly clear that we feel that, so far as we can remember, there has not been a Bill before your Lordships' House that has been more objectionable than this one; one that will have a devastating effect, as I said earlier, on a section of the community that cannot really speak or fend for itself. Rightly or wrongly—and noble Lords opposite have been very patient—we choose to say this on Clause 3 because we feel it ought to be said somewhere and that this is as good a clause as any to say it.
Baroness YOUNG: Before we conclude the proceedings on this—and I am not going to repeat all the arguments that we have had before, because I accept that we will disagree about this—I think it very important, while recognising the complexities and difficulties of the Bill, to see all this in proportion. As I and my colleagues made clear at Second Reading, although we are introducing these measures specifically to save money—and we shall save money by them—there is a safety net on it. It is really a complete exaggeration to suggest that the whole of the Welfare State is being disbanded.
The fact is that the safety net of the supplementary benefits will continue and, although the long-term rate of supplementary benefit gets a little less than price protection this year—and we discussed that in the Social Security Bill—and will be realigned with the retirement pension, the Government are giving extra help to families with children through the Family Incomes Supplement and other child benefit additions and to single parents. Further, the mobility allowances for the disabled will be increased from November from £12 to £14·50 a week and the attendance allowances—and I might draw the Committee's attention to the fact that this was something that was introduced by the last Conservative Government—will go up in line with prices along with industrial disablement pensions which also go up similarly.
I think that one must keep a sense of proportion. Some of these things are

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difficult. We have been over the ground earlier in the Committee proceedings but, even on these matters, we must keep a sense of proportion over the consequences of a whole series of Government policies. I feel, as I have said before, that it would not be right to leave the social security budget without having to make any economies in this major field of Government expenditure; and I think that the ones that have been chosen by my right honourable friend the Secretary of State are the ones that we believe will be least damaging; and we have provided the safety net.
Clause 3 agreed to.
Baroness YOUNG: We have made very good progress on the Bill and I think it would be the wish of noble Lords that we should conclude the Committee proceedings for today now that we have got nearly halfway through the Bill. I beg to move that the House be now resumed.
House resumed.

  FOOD STRATEGIES
  FOOD STRATEGIES
  EXPORT CREDIT AND AID
  EXPORT CREDIT AND AID
  COUNTRYSIDE: ACCESS AND THE LAW OF TRESPASS
  COUNTRYSIDE: ACCESS AND THE LAW OF TRESPASS
  ZAMBIA: FOOD PRODUCTION
  ZAMBIA: FOOD PRODUCTION
  CIGARETTE SMOKING: HEALTH EFFECTS AND REVENUE
  CIGARETTE SMOKING: HEALTH EFFECTS AND REVENUE
  FISHING BOAT REGISTRATION: KILLING OF DOLPHINS
  FISHING BOAT REGISTRATION: KILLING OF DOLPHINS
  CIGARETTES, ALCOHOL, AND DRUGS: DEATH AND EFFECTS ON HEALTH
  CIGARETTES, ALCOHOL, AND DRUGS: DEATH AND EFFECTS ON HEALTH
  BORSTAL GOVERNOR: BAN ON CONFERENCE ATTENDANCE
  BORSTAL GOVERNOR: BAN ON CONFERENCE ATTENDANCE
  ALBANIA: DIPLOMATIC RELATIONS
  ALBANIA: DIPLOMATIC RELATIONS