Sitting of 31 March 1980

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

    European Community (United Kingdom Exports)
    Mr. Knoxasked the Secretary of State for Trade what was the value of exports to the European Economic Community in the most recent 12-month period for which figures are available; and how this compares with the previous 12-month period.
    The Secretary of State for Trade (Mr. John Nott): In 1979, United Kingdom exports of goods to the rest of the European Community were valued at £17·0 billion on a balance of payments basis, an increase of 30 per cent. on 1978.
    Mr. Knox: Will my right hon. Friend confirm that exports to EEC countries
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    have increased sixfold since the year before Britain joined the Community? Does not that show how beneficial our membership of the Community is?
    Mr. Nott: I am sure that my hon. Friend's figure must be right, but I should need to check it. Our exports to the EEC grew at four times the rate that our exports grew elsewhere in 1979, which was an excellent achievement.
    Mr. Leighton: Is it not true that our imports from the EEC have risen even faster, and that currently in manufactures we have a deficit of between £4 billion and £5 billion? Does the right hon. Gentleman agree that that is one of the major causes of putting the nation on the dole?
    Mr. Nott: Imports from the Community into the United Kingdom grew at about 25 per cent. in 1979, which was a rather slower growth than our exports to the Community. I do not remember the latter part of the hon. Gentleman's question.
    Mr. Leighton: I asked about the deficit.
    Mr. Nott: Our overall deficit was £2·7 billion. I shall give the hon. Gentleman a detailed breakdown of the figures if he wishes to have it.
    Sir Ronald Bell: Does not my right hon. Friend think that it is better to talk in terms of volume than in money terms, as inflation distorts the figures? Is it

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    not a fact that the adverse element of the trading balance is increasing continually, showing how disadvantageous it has been to be a member of the European Community?
    Mr. Nott: We operate our trade with the Community within a customs union. In my opinion we would wish to keep barriers down in our trade with the Community whether or not we were a member. I do not think that that is a particularly relevant point. I agree with my hon. and learned Friend that the volume figures would look differently from the value figures.

  British Textile Federation
  Mr. Strawasked the Secretary of State for Trade when next he expects to meet representatives of the British Textile Confederation.
  Mr. Woolmerasked the Secretary of State for Trade when next he plans to meet representatives of the British Textile Confederation.
  Mr. Nott: I met the chairman of the British Textile Confederation earlier this month, and my hon. Friend the Minister for Trade and I have recently met its representatives. I have no immediate plans for further meetings.
  Mr. Straw: Will the right hon. Gentleman take this opportunity to give a categorical undertaking that it is the Government's desire to renegotiate the multi-fibre arrangement when it expires next year? Are the Government seeking a longer successor to the MFA than the present three-year arrangement?
  Mr. Nott: We have said repeatedly that we envisage that when the present MFA expires in about 18 months' time it will be necessary to have a continuing arrangement. That is the position, and we have repeatedly said so. The length of MFA 3, if I may call it that, will have to be decided as part of the discussions leading up to it.
  Mr. Woolmer: In those discussions will the right hon. Gentleman consider inserting a recession clause, so that if the home market is growing slowly, if at all, there will not be a massive penetration of imports further to harm the industry? Secondly, will he consider the problems caused by the imminent acces-
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  sion of Portugal, which is clearly expecting to take a substantial part of the textile market in Europe, which if obtained will be to the detriment of our industry in Yorkshire and elsewhere?
  Mr. Nott: I realise that managements and unions in the textile industry are anxious for some form of recession clause in MFA 3, if I may use that shorthand term. The previous Labour Government were asked for a recession clause when they negotiated MFA 2, and they were not successful in obtaining one. These matters are for discussion and negotiation at the appropriate time. As I explained to the TUC textile committee only last week, it would be most foolish for the Government to commit themselves to details before the negotiations begin. I agree that it will be necessary to arrange some sensible and useful transitional arrangements for the accession of Portugal to the Community.
  Mr. Fletcher-Cooke: Does my right hon. Friend accept that he or the Minister for Trade gave the trade unions in the textile industry a categorical assurance that the MFA would be renewed, as far as was in our power, as soon as possible? Is my right hon. Friend therefore taking the initiative in the matter, which I hope he is? He is only one among many, and if he cannot build in a recession clause will he at least see that there is no element of dynamism, which would mean that overseas countries have an increasing quota as time goes on instead of merely a static one?
  Mr. Nott: Discussions have started at an official level about a possible successor to the MFA. I do not anticipate that Ministers will be involved much before the autumn. I am quite clear that all our Community partners know of our position, and there is not much more that I can say that will make it more clear.
  I understand that the textile industry would like a lower global quota than at present. However, I repeat that it would be unwise to commit ourselves to the details of a negotiation that, after all, concerns a regime that will start 18 months from now. We should not get into too much detail at this stage.
  Mr. Dalyell: What, if any, progress has been made in solving the vexed problem of labelling and countries of origin?

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  Will the right hon. Gentleman accept that that problem is greatly troubling the Scottish knitwear industry and other elements in the textile industry?
  Mr. Nott: My right hon. Friend the Minister for Consumer Affairs is considering the matter at present.
  Mr. Trippier: Does my right hon. Friend agree that a decision on the renewal of the MFA is urgent, as a view must be presented to the GATT textiles committee in October?
  Mr. Nott: I know that my hon. Friend is anxious for me to commit myself to my negotiating position in advance of those negotiations. However, I have told him repeatedly that that would mean that the United Kingdom was less able to get a good deal than if we await the moment when the negotiations commence.
  Mr. John Smith: Does the Secretary of State agree that when asked if he would accept the renewal of the MFA he used the phrase "a continuing arrangement", and on previous occasions he has talked of "an orderly marketing system" as the successor to the MFA? As there is doubt about his policy, will he say clearly and unequivocally that the Government are totally committed to the renewal of the MFA, which will put everyone out of their misery?
  Mr. Nott: The semantics of that question are astonishing. The right hon. Gentleman may call it what he wishes—an orderly arrangement, a continuing arrangement or a new MFA. I envisage that, following the expiry of the present MFA, a new arrangement will continue it. It is impossible to predict precisely what arrangement it will be until the negotiations begin.

  Price Fixing
  Mr. Gwilym Robertsasked the Secretary of State for Trade when he expects the Director General of Fair Trading to come to a decision on alleged resale price maintenance referred to in Questions to the Minister of State, Official Report, 28 January, column 526.
  The Minister for Consumer Affairs (Mrs. Sally Oppenheim): This is a matter for the Director General of Fair Trading, who will no doubt be reaching a view in due course.
  Mr. Roberts: Will the right hon. Lady accept that the matter is most urgent in view of the evidence that I provided her with, which showed that people were paying far too high a price for a wide range of consumer goods, as retailers were not allowed to offer discounts?
  Mrs. Oppenheim: I share the hon. Gentleman's concern. However, he will be aware that I cannot comment on specific cases which may be sub judice. In the cases described to me in the hon. Gentleman's letters, it may be appropriate for the Director General to use the powers under the Resale Prices Act. The new powers under the Competition Bill will make it much easier for the Director General to investigate cases where a supplier may refuse to supply because a retailer sought to undercut the minimum prices that he is imposing. I hope that the hon. Gentleman will welcome the new powers in the Competition Bill, which will act in the interests of consumers and traders.
  Mr. Campbell-Savours: Does the right hon. Lady accept that there is clear evidence that major manufacturing and importing distributors, particularly of hi-fi and electronics equipment, are abusing their market position? Is the Minister aware that the other day Tesco allegedly made an application to the Office of Fair Trading for an investigation of certain companies, including Thorn Electrical Industries, on the basis that they were demanding excessively high prices for their products on the home market? Is the right hon. Lady further aware that Argos has also complained that four companies, including National Panasonic and Hitachi, have failed to deliver goods2, and have given spurious reasons for that failure? Can the right hon. Lady—
  Mr. Speaker: Order. The hon. Gentleman's question has become unreasonably long. Hon. Members must try to keep supplementary questions brief and hope for brief replies.
  Mr. Campbell-Savours: Will the right hon. Lady—
  Mr. Speaker: Order. The hon. Gentleman has asked two or three questions already.
  Mrs. Oppenheim: As I said previously, I cannot comment on specific cases that may be sub judice. The Director General

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  has received a number of complaints alleging such practices. It is up to him to decide which legislation is the most appropriate to use if he decides to take action.

  Trade Minister (Discussions)
  Mr. Dykesasked the Secretary of State for Trade when next he plans to hold discussions with his counterparts in the United States of America, Japan Canada and the European Economic Community on trade problems.
  Mr. Nott: Since November 1979 my hon. Friend the Minister for Trade and I have between us met our counterparts in all the countries referred to by my hon. Friend the Member for Harrow, East (Mr. Dykes). We meet European Community trade ministers regularly at the Council of Ministers, and expect to continue to meet our other counterparts frequently, as opportunity offers.
  Mr. Dykes: I thank my right hon. Friend for that reply. This country still rightly believes in free and fair trade throughout the world, and is my right hon. Friend satisfied that there is free and fair trade in high technology products, in particular computers? Will my right hon. Friend confirm that it is impossible for us to sell computers freely on the United States market, whereas IBM can sell freely in Europe and the United Kingdom?
  Mr. Nott: If there is not free and fair trade in high technology products, I ask British industry and hon. Members to bring specific cases to my attention so that we may pursue them. We cannot proceed by means of generalised statements or charges, although I am not suggesting that my hon. Friend is making a charge. We should look at specific cases of unfair trading and attempt to deal with them.
  Mr. Clinton Davis: Following the enactment of the Protection of Trading Interests Bill, does the right hon. Gentleman plan to discuss the vexed question of extra-territorial jurisdiction with the United States, with or without his EEC colleagues? Has he any plans in particular to deal with shipping, where the sole beneficiary of continuing disagreement will undoubtedly be the Soviet Union?
  Mr. Nott: I was in Washington the weekend before last when I discussed that matter with my counterpart in the United States Administration. In particular I discussed shipping with the Secretary of Commerce.
  Mr. Michael Shaw: In such discussions will my right hon. Friend ensure that the world-wide expertise of our service industries is preserved? Does he accept that the danger is that many countries are realising the lead in many fields, such as banking and insurance, and taking steps to narrow our world-wide opportunities?
  Mr. Nott: There is a problem. There are substantial non-tariff barriers and actual barriers against our service industries, such as banking and insurance. I am anxious that the Community harmonisation procedure should move forward here. I am conscious of what my hon. Friend says. Our invisible earnings generally pay for about half our imports. They are vitally important and growing in importance.
  Mr. Edward Lyons: As the United States has a tariff barrier of 45 per cent. against United Kingdom woollen cloth imports and we have only 13 per cent. against United States imports, will the Secretary of State discuss equalising import tariffs in that area?
  Mr. Nott: The question of wool tariffs between the Community and the United States was raised during the multilateral trade negotiations, and the previous Administration did their very best to get that very high American tariff down. Short of MTNs of a similar kind, I fear that it will not be possible to make any further progress in the immediate future. But I share the hon. and learned Gentleman's concern about the level of that tariff.

  Footwear Industry
  Dr. McDonaldasked the Secretary of State for Trade if he will raise at the European Economic Community Trade Council the imposition by the Republic of Ireland of imposed surveillance licensing on the import of footwear from the United Kingdom.
  The Minister for Trade (Mr. Cecil Parkinson): The Republic of Ireland was permitted to maintain surveillance measures during the transitional period of

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  the Treaty of Accession but this authority has now lapsed. My Department is investigating the present position and will take appropriate action. We shall, of course, refer the matter to the EEC Commission if the evidence justifies it.
  Dr. McDonald: Will the Minister also give us his estimate of the consequences of this action on the part of the Republic of Ireland for the already battered shoe industry? Will he assure the House that his action will be urgent and swift?
  Mr. Parkinson: It is very difficult to estimate the effect of the action. I can only say that we have had no complaint of any kind about it from the industry in the last 12 months, and the industry is pretty good at making its views known. However, we shall take speedy action if it is necessary.
  Mr. Fry: Does my hon. Friend appreciate that, whereas the British Government are committed to fair trade, it is by no means certain that all our Common Market partners carry out the letter of the law? Will he pay particular attention to what appears to be happening in Italy? There appears to be a degree of unfair competition with our industry.
  Mr. Parkinson: If my hon. Friend can come forward with any evidence or facts that would substantiate his remarks, we would be very happy to take them up, to examine them, and to work with the industry in preparing a case to prove that action needs to be taken.

  Soviet-manufactured Greeting Cards
  Mr. Robert Atkinsasked the Secretary of State for Trade what steps he has taken to stop the dumping of Soviet-manufactured greeting cards; and if he will make a statement.
  Mr. Parkinson: Responsibility for taking action against dumped or subsidised imports which are causing injury to a Community industry rests with the European Commission. In this particular case" my Department is helping the industry in the preparation of a complaint to put to the Commission for appropriate action.
  Mr. Atkins: I thank my hon. Friend for that answer. Does he recognise that there has been a 40 per cent. increase in Christmas cards alone over the last year,
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  that sales are one-third down on those of last year, and that at least one company, Waldorf Cards, has laid off 80 men and is pulling out of the market? How much longer will this industry be expected to subsidise the British military effort—the Russian military effort? [Laughter.]
  Mr. Parkinson: I shall answer my hon. Friend's question as he meant it, and not as he originally phrased it.
  It is a matter for the industry to put its case against dumping to the Commission. The Department of Trade maintains an anti-dumping unit to help the industry. We are working closely with the industry. We recognise the importance of this matter. We shall be taking action as soon as possible.
  Mr. Dalyell: What would the Minister say to a potential Olympic athlete who inquired as to why we should accept dumped Christmas cards but that he could not go to Moscow?
  Mr. Parkinson: I would advise him to use his discretion as a consumer not to buy Russian Christmas cards, for a start, but to make his own.
  However, the hon. Gentleman knows that if there is unfair competition from these cards, we shall take action against it. The issue was debated very clearly in the House the other day. We do not see anything advantageous for Britain about our athletes taking part in a gigantic propaganda exercise advertising the virtues of Russia.
  Mr. Stanbrook: Is my hon. Friend satisfied with the speed and efficiency with which complaints about dumping are processed in the Community? Will he advise British industries concerned in this matter how best they-can expedite the whole process?
  Mr. Parkinson: One of the very first things that my right hon. Friend and myself did when we were appointed Ministers was to go to Brussels to meet the anti-dumping unit there and to check on the way in which it works. We have issued a booklet showing how to use the anti-dumping machinery which exists. We have also retained an anti-dumping unit to help those industries which require help.
  Mr. Sheerman: Hon. Members on both sides of the House will welcome the fact

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  that an anti-dumping unit exists. However, if this unit is in operation, may I ask how many people it employs and what it actually does? Hon. Members on both sides of the House are very discontented about what it does and how fast it does it, because our industries—carpets, clothing and textiles—are being hammered and ruined while this unit does nothing.
  Mr. Parkinson: I am sorry to have to tell the hon. Gentleman that that simply is not true. The anti-dumping unit processes a substantial number of actions, and the rate at which it acts shows up very well against the rate of performance of his own Government when they were last in power. It is quicker.

  Import Restrictions
  Mr. Whitlockasked the Secretary of State for Trade how many countries' exports to the United Kingdom are subject to restrictions, either formal or informal, in the case of (a) clothing,and (b) footwear, other than rubber and canvas.
  Mr. Parkinson: Imports of clothing from 35 countries are restricted under the multi-fibre arrangement and measures associated with it. Imports of footwear other than rubber or canvas from five countries are subject to restrictions.
  Mr. Whitlock: Does the hon. Gentleman agree that the British market is one of the most open in the world and that it is being penetrated by countries which bend international rules, all too often aided in doing so by retailers and wholesalers in Britain who put their own interests before the interests of Britain? In those circumstances, will he cease supinely to accept agreements which are dictated largely by countries which do not permit that kind of penetration in their markets?
  Mr. Parkinson: The hon. Gentleman has asked a very general question. Perhaps I may tell him that 95 per cent, of all the imports from low-cost suppliers of textiles are controlled under agreements negotiated by his own Government. Of total footwear imports into Britain, 25 per cent, are controlled.
  Mr. Michael Morris: As regards footwear, is my hon. Friend aware that it is the unique combination of dumped imports from Third world countries and the restrictions on exports to industrialized
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  countries such as Canada, the United States and Australia, that makes matters so difficult for that industry? May we expect some change in the Government's attitude on this matter?
  Mr. Parkinson: The Government are very conscious of the problems of the footwear industry. By his regular interventions, my hon. Friend makes sure that we remain so. We are pressing in every way that is open to us, through the Commission, for the removal of tariff barriers against our own footwear, and we have controls over a very substantial part of the imports from low-cost countries, about which my hon Friend was complaining.

  Manufactured Goods
  Mr. William Hamiltonasked the Secretary of State for Trade what new plans he has for imposing further import controls on manufactured goods.
  Mr. Nott: I have no such plans.
  Mr. Hamilton: Does the Minister agree that probably the majority of this House would refuse to accept the view that permanent and general import controls would be a solution to our trading problems? Having said that, however, may I ask whether he agrees that there is an increasinly strong case for further selective import controls on a temporary basis, if only to prevent or, at least, to retard the increasing de-industrialisation of the United Kingdom economy?
  Mr. Nott: The claim that the United Kingdom is being rapidly de-industrialised is sometimes exaggerated. I take the hon. Gentleman's point about temporary as opposed to permanent import controls. However, if one were to exclude motor vehicles alone, the export/import ratio declined by only 1 per cent. in 1978 and 1979. Therefore, there is no ground for the scare stories that one hears about the imminent and total de-industrialisation of this country. That simply is not true.
  Mr. Anthony Grant: Does my right hon. Friend agree that temporary import controls all too soon become permanent and become the slippery slope into a form of protectionism from which it is impossible to escape and which would be disastrous for our economic affairs and do nothing to benefit the interests of the consumer or the efficiency of British industry?
  Mr. Nott: I agree with my hon. Friend that those against whom we imposed import controls would, in many cases, probably retaliate against our exports, whether we called the controls temporary or permanent. There are agreed arrangements for temporary controls under the GATT, but I agree that temporary controls would too easily become permanent. We are an exporting nation, with nearly one-third of our gross domestic product in exports, and it is the export penetration of overseas markets on which we should be concentrating.
  Mr. Ioan Evans: Has the right hon. Gentleman seen the effective British Leyland advertisement which gives a catalogue of the massive penetration of foreign manufacturers in this country? Will the Government start a "Buy British" campaign to encourage consumers to buy British goods? It appears that we are being flooded by foreign manufactured goods.
  Mr. Nott: I have seen the British Leyland advertisement, but it does not say what proportion of overseas markets we have in the products mentioned in the advertisement. It concentrates almost entirely on the import penetration of those products, but does not say whether our industries are exporting. The car industry is still among our leading exporters and we still export more than £2,000 million worth of textiles every year.
  Sir Brandon Rhys Williams: Does my right hon. Friend agree that the exchange rate for the pound is artificially favourable to importers? Will the Government reconsider their policy and look at ways, perhaps by exporting capital or reducing the rate at which we exploit our North Sea assets, of bringing the exchange rate for the pound better into balance, for the benefit of our export trade in particular?
  Mr. Nott: I agree with my hon. Friend that we should not discourage the export of capital, and that is why we abolished exchange controls. It is important that we build up some income-producing assets abroad. As for the Government managing the exchange rate or forcing it down, I do not believe that in current circumstances it would be possible for the Government to hold the pound down for long, even if we wished to do so,
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  given that there are international pressures pushing it to its present level.
  Mr. John Fraser: Is the Secretary of State aware that the Metropolitan Police have been obliged to buy their overcoats from West Germany as a result of the EEC supplies directive? Will he renegotiate that directive, so that public sector purchasing policy can at least ensure help for the British industries that need extra orders?
  Mr. Nott: I do not know of any EEC directive that obliges anyone to buy anything anywhere. I understand that the supplies directive requires countries not to discriminate against others in their public purchasing policies. I will inquire into the purchase of the overcoats, but I am sure that we did not have to buy them from West Germany.

  Textiles
  Mr. John Evansasked the Secretary of State for Trade if he plans to reduce the level of textiles imported into the United Kingdom.
  Mr. Nott: Imports of textiles from low-cost sources are already strictly controlled, and on 18 February I announced further restrictions on certain synthetic textile products.
  Mr. Evans: Is the right hon. Gentleman aware that his announcement earlier this year was another example of too little, too late? Is it not about time that he recognised that the British textile industry is dying rapidly and that thousands of workers are being thrown onto the dole? When will he go to Brussels and demand action from the EEC or take unilateral action to protect this once great British industry?
  Mr. Nott: I have had more protests from the textile industry about my having applied the quotas than about the action being too little and too late. As I explained to the hon. Gentleman at the time, the low-cost fibres are a raw material of many British textile producers who export their goods.
  Sir Anthony Meyer: Is it not better to expand trade by removing obstacles to exports, rather than to restrict trade by creating obstacles to imports, since with the expanded trade, our invisibles, which are our major earners, will automatically benefit?
  Mr. Nott: I entirely agree with my hon. Friend. It would be foolish for the country that has the greatest single interest in the expansion of world trade —we have a greater proportion of our gross national product in world trade than almost every other nation—to be a party to restricting world trade, which is what import controls are all about.
  Mr. John Smith: Is the Secretary of State aware that he has received massive criticism from British man-made fibre manufacturers about the fact that a so-called quota to be introduced next year is at a level higher than the import penetration of the year that preceded it? In that circumstance, he is allowing the United States to use the unfair advantage of its low price for energy to decimate a good British market.
  Mr. Nott: Everything about those comments was incorrect. The quotas are not higher than the import penetration of the preceding year.
  Mr. John Smith: One is.
  Mr. Nott: As for decimating the British textile industry, I repeat what I said to the hon. Member for Newton (Mr. Evans), that I have had more protests from the British textile industry about having imposed the quotas than about having done too little.

  Television Sets (Imports)
  Mr. Viggersasked the Secretary of State for Trade what steps he proposes to meet the threat to the United Kingdom television manufacturers from the proposed importation of approximately 200,000 monochrome sets from Thailand.
  Mr. Parkinson: I have discussed this matter fully with representatives of management and trade unions in the industry. My Department is continuing to monitor closely the rate of importation and is exploring the possible courses of action if that rate should rise unacceptably.
  Mr. Viggers: May I thank my hon. Friend for his considerable personal interest and concern in this matter? Does he agree that the best course for all concerned, including the manufacturers in Thailand, would be to agree revised quotas for all importers of monochrome television sets into this country?
  Mr. Cryer: The hon. Gentleman is asking for import controls.
  Mr. Parkinson: I am not sure whether what my hon. Friend wants is possible. One of the options that we are pursuing is a voluntary restraint arrangement agreed between our industry and that in Thailand.
  Mr. Eggar: May I reiterate that we feel that it is essential for the future of the British monochrome television industry that some form of voluntary restraint agreement is reached with the Thais?
  Mr. Parkinson: I am sure that my hon. Friend is right. That is why we are pursuing that objective as a matter of great urgency.
  Mr. Spriggs: Quite apart from the world markets with which Britain trades, we have a special interest in article 3(f) of the EEC Treaty of Rome. Will the hon. Gentleman pay particular attention to that article and ensure that it is put on the agenda for discussion when Ministers meet in Brussels or elsewhere in Europe?
  Mr. Parkinson: I never like to mislead the House and I should not like to do so by pretending that I know what article 3(f) says. I know that the hon. Gentleman always makes serious points and I shall look at the matter and write to him.

  Film Industry
  Mr. Dormandasked the Secretary of State for Trade when next he expects to meet representatives of the British film industry.
  The Under-Secretary of State for Trade (Mr. Norman Tebbit): I meet representatives of the industry frequently, but I have at present no plans for a meeting.
  Mr. Dormand: When the Minister next meets representatives of the film industry will he give them a categorical assurance that the Government believe in the existence of a British film industry? Is he aware that the help that the Government have given recently is totally inadequate to maintain the industry? Is not the fact that the National Film Finance Corporation was able to contribute financially to only four films last year, compared with as many as 60 a few

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  years ago, ample evidence of the neglect that has been shown?
  Mr. Tebbit: The hon. Gentleman will no doubt recollect that my right hon. Friend the Secretary of State made a statement last year about the proposals that we would bring forward for additional finance for the film industry. That remains the position and I hope to be able to help with that matter before too long.
  Mrs. Dunwoody: Will the hon. Gentleman at the same time look for a practical way of helping the Children's Film Foundation, which makes very good films and is much appreciated world-wide for the excellence of its products? Will the hon. Gentleman consider ways of supporting it in the future?
  Mr. Tebbit: I share the hon. Lady's view that the foundation has done some very good work. I believe that she will know that I am due to see representatives of the foundation shortly.

  Company Mergers
  Mr. Neubertasked the Secretary of State for Trade what annual increase in company mergers he estimates will result from his decision to lift the assets threshold from £5 million to £15 million as a criterion for referral to the Monopolies and Mergers Commission.
  Mr. Nott: I would not expect any increase in the number of mergers which raise significant public interest issues as a result of raising the assets threshold. All mergers which create or enhance a one quarter share in any market will continue, regardless of their size, to fall within the scope of the legislation.
  Mr. Neubert: I thank my right hon. Friend for that reply. Now that my right hon. and learned Friend the Chancellor of the Exchequer has eased the tax obstacles, will my right hon. Friend give added emphasis in future to a policy of de-merging in an attempt to stimulate our sluggish and over-concentrated economy?
  Mr. Nott: I am very keen to enable British industry to—if I can use the frightful word that I coined—de-merge as easily as it merges. That is one of the principles that underlie the intentions of my right hon. and learned Friend the Chancellor in the Finance Bill.
  Mr. Emery: Will my right hon. Friend assure the House that he will make certain that industry understands that the economies of scale are often nothing like as great as the diseconomies of scale, and that, rather than increasing takeovers, he will do what he can to encourage small and medium-sized industries, which are usually good and beautiful?
  Mr. Nott: I agree with my hon. Friend that the history of the mergers mania in the 1960s is not a happy one. I think that many of the very large corporations that were created then have proved to be a failure. I believe in a firm mergers policy within restrictive practices policy generally. We intend to keep it going.
  Mr. John Fraser: In considering further reviews of competition policy, will the right hon. Gentleman make it easier for the commission to recommend the breakup of a monopoly when it examines it and finds it to be against the public interest?
  Mr. Nott: I shall certainly consider that.

  Balance of Trade
  Mr. Barry Jonesasked the Secretary of State for Trade what plans he has to meet the Trades Union Congress regarding the United Kingdom balance of trade.
  Mr. Nott: I meet representatives of the TUC frequently in my capacity as a member of the National Economic Development Council, and this topic is often discussed in that forum.
  Mr. Jones: Does not the right hon. Gentleman agree that the TUC is right to be alarmed about the massive surge of imports, and that the Budget, by its appalling neglect over the years ahead of the topic of industrial investment, will make the matter worse? What urgent action will the Government take to protect our highly vulnerable motor car and textile industries?
  Mr. Nott: The only way in which either of those industries can succeed is by becoming more competitive. There is no way in which controls will improve the position of the motor car industry or the textile industry, much of which is highly efficient. If the hon. Gentleman thinks that barriers would make those industries

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  more efficient, rather than less, I cannot agree with him.
  Mr. Alan Clark: Do not more than half the questions on the Order Paper and my right hon. Friend's detailed answers, and his pronouncements on tufted carpets, man-made fibres, footwear and even Channel-hopping fares, and so on, admit the fundamental principle of the need for protectionism—it is effective—subconsciously or consciously? Therefore, may we assume that my right hon. Friend's only objection to applying it more generally is fear of retaliation?
  Mr. Nott: By no means do I admit the need for protectionism. What I admit is the need for fair trade. Protectionism is very different from saying that firms must compete in an open market fairly with the products and the firms of other nations. They are two different things.
  Mr. Heffer: Does the right hon. Gentleman agree, if he accepts the concept of fair trade, that there are many nations—for example, Japan—that do not have strict import controls but hedge round the products coming into their countries in such a way that there are effective import controls? Could we not learn a lesson from some of our competitors and do something similar in the interests of our people?
  Mr. Nott: The hon. Gentleman referred specifically to Japan. About one-third of everything that we import from Japan is already under some kind of restraint.
  Mr. Cryer: Two-thirds is not.
  Mr. Nott: The hon. Gentleman's mathematics are brilliant.
  The industry-to-industry understandings on motor cars have been very successful. The Japanese have held to them. It is not a one-way process.
  Mr. Brocklebank-Fowler: When my right hon. Friend meets the leaders of the TUC again, will he point out the profitability to Britain of our trade with the developing world, with which we enjoy a substantial balance of payments surplus, and therefore point out to them that any action taken to control imports from that source will not be in our national interest?
  Mr. Nott: A great volume of goods that we import from the developing world
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  is already under some kind of import restraint. We do not wish to extend this process further than necessary. We have a substantial surplus on our trade with the developing countries, and it is profitable trade for us. Trade is a two-way process, not a one-way process. We cannot have it all our way.
  Mr. John Smith: The Secretary of State referred to our relationships with Japan. He will be aware of the considerable obstacles put in the way of British exporters seeking to exploit the Japanese market. Some obstacles to the whisky industry were erected recently. What is the right hon. Gentleman doing to create the same opportunities for British exporters in Japan as many Japanese importers have in this country?
  Mr. Nott: I discussed this matter not more than two months ago in Tokyo with my opposite number there. I discussed with Japanese Ministers the raising of the whisky threshold. But that is not a non-tariff barrier erected by the Japanese. The position changed because the sterling-yen exchange rate changed. I shall continue to raise with the Japanese all those areas in which they are, by one means or another, keeping out British goods.

  British Airports Authority
  Mr. Haselhurstasked the Secretary of State for Trade when next he will meet the chairman of the British Airports Authority.
  Mr. Tebbit: My right hon. Friend and I met the chairman on 12 February. I have no immediate plans for a further meeting.
  Mr. Haselhurst: Is it not extraordinary that, having had so long to think about it, the BAA cannot yet say exactly what land it requires in respect of proposals for the development of Stansted? What measures can my hon. Friend announce to do something to ease the serious problems caused for many people by blight?
  Mr. Tebbit: The BAA could not win on this. Had it come forward rapidly with plans showing precise details of the land that it wanted to take, it would have been accused of jumping the gun.
  As my right hon. Friend explained in February, statutory blight provisions will

  21
  apply when compulsory purchase orders are published for the 1,500 or so acres which are proposed to be taken for a new terminal building and associated facilities. That will not, however, apply to the wider area of 2,500 acres for which safeguarding from incompatible development is to be sought.
  In response to my hon. Friend's representations on behalf of his constituents affected by planning blight but not covered by statutory blight provisions, the Government have decided to introduce a clause into the Civil Aviation Bill now before the House which will confer powers on the BAA to acquire by agreement land which may be required for airport development in future but which is not immediately required for that purpose. That clause will not extend or affect the BAA's existing compulsory purchase powers. [HON. MEMBERS: "Too long."] I am sorry to be so long, but the matter is very important to my hon. Friend.
  Mr. Jessel: Will my hon. Friend tell the chairman that he absolutely repudiates the suggestion by the Liberal spokesman on the environment, the hon. Member for Isle of Wight (Mr. Ross), that consideration should be given to constructing a fifth terminal at Heathrow airport?
  Mr. Tebbit: The Government have made it absolutely plain that we do not intend to pursue any proposal to build a fifth terminal at Heathrow, even if the Liberal Party presses it on us.

  Civil Aviation Authority
  Mr. Clinton Davisasked the Secretary of State for Trade when he will meet the chairman of the Civil Aviation Authority.
  Mr. John Huntasked the Secretary of State for Trade when next he expects to meet the chairman of the Civil Aviation Authority.
  Mr. Tebbit: I met the chairman of the Civil Aviation Authority on 25 February and have no immediate plans for a further meeting.
  Mr. Davis: Will the Minister indicate what discussions he had with the chairman of the Civil Aviation Authority concerning the rejection of the Plessey-GEC-Marconi bid for long range primary
  22
  radar in favour of United States equipment? What consideration, in particular, was given by the Civil Aviation Authority to the long-term disadvantages that will be sustained by the British industry as a result of having lost that home bid?
  Mr. Tebbit: The hon. Gentleman says "having lost it". No company has yet received an order for that radar. I should, however, tell the hon. Gentleman that the Civil Aviation Authority did its best to steer this order towards an appropriate British contractor. It gave full, fair and open notice of what would be needed. Unhappily, it looks as though the British industry would have the gravest difficulty in meeting the requirement within the time-scale.
  Mr. Hunt: Is not the Civil Aviation Authority at least 11 months behind the times'? When my hon. Friend next meets the chairman, will he remind him that we now have a Conservative Government pledged to free competition and private enterprise? In the context of that new climate, should not people like Sir Freddie Laker, who have done so much for the air travelling public in this country, be given much more support and encouragement than hitherto.
  Mr. Tebbit: I am sure that the Civil Aviation Authority will give further encouragement to the private sector of the industry as well as the public sector. However, I would not like to go too far in any comment about Sir Freddie Laker's applications. Many of them may come to my Department shortly on appeal.

  OVERSEAS DEVELOPMENT

    Overseas Governments (Assistance)
    Mr. Viggersasked the Lord Privy Seal what are the basic principles upon which assistance is given to overseas Governments by his Department.
    The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Richard Luce): I refer my hon. Friend to the statement made by my hon. Friend the Minister for Overseas Development on 20 February.
    Mr. Viggers: Does my hon. Friend agree that trade can bring a lasting benefit and can, therefore, be more helpful than individual acts of generosity and aid?

    23
    Does he agree, on this basis, that protectionism, wherever practised, can be more damaging than heartlessness?
    Mr. Luce: First, I should perhaps say that my hon. Friend the Minister for Overseas Development—the hon. Member for Banbury (Mr. Marten)—is on an overseas visit which was planned before the new arrangements for ODA questions were known. I am, therefore, answering questions on his behalf.
    The point made by my hon. Friend the Member for Gosport (Mr. Viggers) was borne out in the Brandt report. When looking at the relationship between the industrialised world and developing countries, one should consider not simply matters of economic assistance but also the important role that can be played by trade and investment as vital engines for development. For those who are concerned about improving the standard of living of developing countries, the policy of protectionism would be totally inhibiting to prospects of developing their standard of living.
    Mr. McElhone: Does not the Minister agree that his answer is totally hypocritical in the light of further savage cuts of £114 million between now and 1982–83? Will not the hon. Gentleman be honest with the House and say that the countries that have received, or are receiving, increased aid, such as Turkey and Pakistan, are receiving that aid only because of a defence posture that is agreeable to the Government?
    Mr. Luce: To describe our present economic assistance policy as undergoing "savage cuts" is an emotional overstatement of the situation. It is surely known that we as a country are able to provide effective assistance to the developing countries only if we have a strong economic base ourselves. We shall have a strong economic base only if we start by cutting public expenditure at the present time. Departments, such as those dealing with aid administration, cannot be exempted without making the situation exceedingly unfair for other Departments that have to take their share. We must create wealth before we can contribute in a major way to the Third World.
    Mr. Bowen Wells: I agree that a weak Britain is a great hindrance to trade and the development of overseas countries. I believe that my hon. Friend said that the
    24
    Minister for Overseas Development was reviewing the overseas development programme. Presumably, he is still reviewing the overseas development programme. Why therefore, have allocations within overseas development administration already been made, particularly a reduction in the amount of money invested by the Commonwealth Development Corporation over the next four years?
    Mr. Luce: I said earlier that on 20 February the Minister for Overseas Development made a full statement about our policy with regard to aid over the next few years. Our total policy is contained in that statement. He stressed strongly that we would give greater weight in the allocation of our aid to political, industrial and commercial considerations.
    Mr. Deakins: When the Minister receives requests, as in the recent case of Turkey, for aid for what are basically strategic and defence purposes, will he in future, pass the buck to the Ministry of Defence which has an expanding budget and can well afford such tasks?
    Mr. Luce: I hope very much that the hon. Gentleman is not under-estimating the serious threat posed by the Soviet Union in the pursuit of our policies. If we are to counteract that effect, it is the Western world that gives economic assistance to underveloped countries not the Soviet Union.

    Less-Developed Countries
    Mr. Brocklebank-Fowlerasked the Lord Privy Seal, in the light of the Brandt commission report, what priority he attaches to projects and programmes to alleviate poverty and to expand food production, in the less-developed countries.
    Mr. Luce: The Government welcome the Brandt report as a comprehensive analysis of the question of international development and of the very serious problems which undoubtedly face developing countries. As my hon. Friend the Minister for Overseas Development said in his statement to the House on 20 February we shall, within the limits of our resources, seek to relieve poverty in the developing world. This includes help with the expansion of food production.
    Mr. Brocklebank-Fowler: How can my hon. Friend reconcile that reply with the Brandt commission recommendation in respect of official development assistance? Does he not agree that the Government have announced a disproportionate, if not savage, cut in official development assistance?
    Mr. Luce: I respect fully the strength of view held by my hon. Friend, who, over the years, has taken a strong interest in the problems of developing countries. I suggest to him that if he looks carefully at the figures, he will find that in real terms the drop in expenditure next year over this year is only just over 1 per cent. and that, cumulatively, over a period of four years it is only 14 per cent. in real terms.
    I reiterate that it is important for us to have a strong economic base before we can make a really productive contribution to other countries. My hon. Friend may like to know—he is probably already aware—that we contribute, as a proportion of our gross national product, a far higher proportion than many other countries and higher than the average for OECD countries.
    Mr. R. C. Mitchell: Did the Government have any consultation with the right hon. Member for Sidcup (Mr. Heath) a member of the Brandt commission, before making their Budget proposal on overseas aid?
    Mr. Luce: I have no doubt that the hon. Gentleman has read the Brandt report. It covers a wide range of issues, not only economic assistance. It is just as important to talk about preferential trade policies and the need to increase private investment overseas, which are essential engines of development, as it is to talk in terms solely of economic assistance.
    Mr. John Patten: Is my hon. Friend aware that at least eight separate United Nations organisations are concerned with giving help to developing countries in order to improve their food production? Does he not agree that the Government could put pressure on the United Nations to rationalise these aid-giving organisations so that less money is spent on bureaucracy and that what little money can be given goes on helping those countries with agriculture?
    Mr. Luce: There is a great deal in what my hon. Friend says. It should be known that we have heavy commitments on the multilateral side which we do not propose to reduce. But we think that some of the organisations to which we are committed, in terms of economic assistance, need to take a sharp look at the manner in which they donate their funds.
    Mr. Ennals: Does not the hon. Gentleman feel that a 14 per cent. cut really is a savage cut? Does he not feel, in the light of the Brandt report and all that was said in the debate last Friday, that to reduce aid steadily to the level where it was, or worse than it was, in 1974–75, including the effect on Commonwealth countries, is a matter for some shame and disgrace?
    Mr. Luce: I can only repeat to the right hon. Gentleman that the average contribution of Britain is 0·48 per cent. of GNP in economic assistance. The average for OECD countries is 0·35 per cent., so our contribution is substantial. Until we have a strong economic base, we shall not be in a good enough position to help our friends.
    Several Hon. Members rose—
    Mr. Speaker: Order. We were one minute late starting overseas development questions, so I will call one more.

    Zimbabwe
    Mr. Canavanasked the Lord Privy Seal whether he will make a statement about aid for Zimbabwe.
    Mr. Spearingasked the Lord Privy Seal what provision he has made in expenditure in the aid programme for 1980–81 for assistance to Zimbabwe.
    Mr. Luce: As an initial commitment we have announced grants, subject to parliamentary approval, of £7 million for immediate reconstruction assistance, £500,000 for joint funding with voluntary agencies and £1 million for UNHCR's refugee repatriation programme These amounts are additional to the £9·2 million being sought in the 1980–81 estimates to continue the existing programme of training for Zimbabweans. We are considering the extent of the further assistance to be provided over the next few years, and

    27
    will make an announcement as soon as possible.
    Mr. Canavan: May we have an assurance that, despite the cuts in overseas aid expenditure announced in the White Paper last week, the Government will be as generous as possible in agricultural, industrial and educational programmes, which will help the people of Zimbabwe? Will the Minister ignore the squeals of protest coming from some of the Smith supporters in this country, who for years were just lining their own pockets out of the exploitation of the people of Zimbabwe?
    Mr. Luce: I confirm as strongly as I can to the hon. Gentleman that we will do our utmost, within our economic circumstances, to assist Zimbabwe, so that it can be helped to get off to a good course after independence. In addition to the reconstruction that we have announced initially—it is only £7 million—we shall shortly be announcing our programme for the next three or four years.
    Mr. Spearing: Can the Minister confirm that the sum of £8 million, I think he said, is part of the grants not yet allocated in the current Estimates? Since the overseas aid development fund has gone down by £148 million, is he not saying in effect that it has gone down by £148 million because somebody will have to take that extra cut?
    Mr. Luce: The hon. Gentleman leaves me totally baffled. I think that the hon. Gentleman will get a clearer picture when he hears our full statement, which we hope to make shortly, about the programme for Zimbabwe in the next three or four years. When he sees that, he will get the matter into context.
    Mr. Emery: What action has the Foreign Office taken to further the approval given by the Prime Minister to the suggestion of the hon. Member for Honiton that Britain should take a lead in setting up a world development fund to help Zimbabwe, contributed to by the EEC, the Americans and other nations?
    Mr. Luce: I would say to my hon. Friend, who knows a great deal about Zimbabwe, that Britain has made contact with all the countries in the Commonwealth and the Western world with a view to urging them to make the best possible contribution towards that country's de-
    28
    velopment. It is not for Britain to preempt whatever decisions Mr. Mugabe and his Government may make after independence. It is up to them to make their proposals known to us, but we are certainly expressing the hope that our friends in the EEC, the United States and elsewhere will respond as well as we shall.
    Mr. McElhone: In giving aid to Zimbabwe—cerainly much more than £7 million is required—will the Government also take into account the grave economic position of Zambia, where, because of the blowing up of bridges by Rhodesian forces, things are very grave?
    Mr. Luce: I am grateful to the hon. Gentleman. I agree that, over the last few years, Zambia has suffered the consequences of the war, as have other countries bordering Zimbabwe. Our programme for this financial year amounts to £30 million, which I am sure the hon. Gentleman will agree is not insubstantial; we shall also have a substantial programme for the coming financial year.

EUROPEAN COMMUNITY (AGRICULTURE MINISTERS' MEETING)
The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker): With permission, Mr. Speaker, I wish to make a statement about the Council of Agriculture Ministers' meeting in Brussels on 26 and 27 March, at which I represented the United Kingdom with my hon. Friend the Minister of State.
After a brief discussion on some of the Commission's proposals on prices and economies the presidency engaged in a series of bilateral meetings with each Minister. I gave our view that there should be no price increases for the commodities in structural surplus—milk, sugar and wine. I recorded our demand for the continuance of the Consumer butter subsidy, the need to retain the beef premium scheme until a better system could be agreed and the need in the price fixing to provide the whisky industry with the export refunds to which it is entitled.
When the Council reassembled, the President reported that there was no prospect of progress being made at this week's meeting. He expressed the hope that it

29
would be possible to move towards a solution at the next Agriculture Council, which is due to take place on 21 and 22 April.
Because of the delay in reaching a settlement on agricultural prices for 198081, the Council had to consider extensions to a number of regulations that would otherwise have expired.
The Commission also proposed the extension of one of the agrimonetary regulations, which deals, among other things, with the calculation of monetary compensatory amounts.
The regulations agreed to a year ago now gives an unreasonable advantage of up to at least 5 per cent. to foreign food exporters to Britain and puts Britain's food exporters at an unfair disadvantage. As some other member States were unwilling to amend the regulation so as to decrease our disadvantage, I refused to extend the regulation beyond 31 March.
At a previous meeting of the Council agreement had been reached to devalue the green franc on 31 March for those items whose marketing year ended on that date. When the Council was asked to confirm that this applied to the theoretical end of the marketing year rather than the extended marketing year I demanded and obtained from the Council a statement approved by all Ministers that
"any Member State may ask for a reduction in negative MCAs and that agreement to such a decision should be independent of agreements on matters of another nature".
This clear statement should therefore prevent the reduction of negative MCAs from becoming a matter for negotiating positions in the future.
Mr. Mason: Is the right hon. Gentleman aware that we welcome his stand on a price freeze for products in structural surplus and his request to maintain the butter subsidy? Has he noticed that butter in storage is expected to rise from 69,000 to 88,000 tonnes in the coming year, at an extra cost to the British taxpayer of £24 million? Has he therefore made any proposals during this latest negotiation round to cut the butter surpluses and hence the cost to the United Kingdom budget?
Secondly, why did the right hon. Gentleman propose to tax British imports of food from the Community? Although agricultural exports would have been
30
helped, the British consumer would have been punished again. With four devaluations of the green pound in the last 12 months, farmers have benefited to the tune of £340 million, while there has been a 4 per cent. increase in the food price index solely due to those four devaluations.
Recognising that we import twice as much food from the Common Market as we export to it, would not our food bill rise again with the changes that the right hon. Gentleman requested? Finally, what will be the position on the regulation that he has blocked beyond today, 31 March?
Mr. Walker: On the point about the butter subsidy, obviously the proposals to freeze the price of milk products and to continue with a consumer subsidy on butter were two positive proposals to that end. On the regulation, I find the right hon. Gentleman's statement extraordinary and in total contradiction to the Opposition's position on economic matters. The right hon. Gentleman is suggesting that we should favour a system that positively operates against the advantage of British producers and that we should continue with the system as it operates at present, under which, for example, Irish producers have a 4·4 per cent. advantage and the Belgians a 3·9 per cent. advantage over British producers. The right hon. Gentleman is saying that he would welcome that, no matter what damage it did to British producers—
Mr. Mason: No, I am not.
Mr. Walker: Yes, he is—because it might be to the immediate advantage of consumers.
For a long time under the previous Government, British agriculture and horticulture were at a disadvantage because of the MCA system. I now intend to see that it works to their advantage.
Mr. Grimond: Is the Minister aware that while the industry will welcome the firm stand that he is taking on various matters, the proposals, or lack of them, that have emanated from the meetings are cold comfort to an industry suffering from high interest rates and high costs? Can the right hon. Gentleman tell the House what the next steps may be in an attempt to open up the French market

31
to mutton and lamb? Will the Government take action on matters within their power to reassure the industry that it will receive the help that it so badly needs for production and investment?
Mr. Walker: Last week I announced the biggest increase for the fat sheep subsidy that has taken place. Prior to that, the right hon. Gentleman will know, we introduced the biggest increase in hill farm subsidies for sheep and cattle. The three devaluations of the green pound that were mentioned will help. In spite of these measures, I agree with the right hon. Gentleman that farm incomes in Britain are under considerable pressure from other factors. It is the duty of Governments to sustain those incomes. That is why I tried at this meeting to remove the unfair advantage to foreign importers.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call those hon. Members who have been rising and then move on to an application under Standing Order No. 9.
Mr. Peter Mills: Will my right hon. Friend bear in mind that Conservative Members congratulate him on the stand that he took in Brussels? Will he confirm that the agreement on MCAs will help our food exporters? Will he also confirm that the previous Administration did absolutely nothing to help our food exports? Will he remember that I shall not be satisfied until British lamb is as freely available in France and the rest of Europe as French wines and cheeses are here?
Mr. Walker: The potential of British exports to Europe, without the disadvantage of a penalty, is considerable. One of the reasons why we import far more from the Community than we export to it is four years of massive MCAs against British exporters and in favour of European exporters to Britain. I intend to try to reverse that trend, to the advantage of the British economy. I totally agree with my hon. Friend about the export of sheepmeat.
Mr. Spearing: Will the Minister confirm that his request for an overvaluation of the green pound will have the effect of putting up levies on food from third countries to levels higher than the Com-
32
munity would otherwise demand? Would that not increase food taxes on consumers in this country? Has the Minister received any communication from the Corn-mission about the import of liquid milk?
Mr. Walker: I made no proposals to overvalue the green pound. My proposals in no way affected negative MCAs. That proposal affected purely the now substantial band of nearly 5 per cent. that affects potential positive MCAs. Therefore, the question does not arise. I was not asking for an overvaluation of the green pound. I was asking for the green pound to be treated as a currency at its present levels in the way that it should be treated, so that there should not be a positive disadvantage against it. The subject of liquid milk did not come up and was not discussed at the meeting.
Mr. Sims: May I thank my right lion. Friend for pressing the need for price fixing to provide export refunds due to the Scotch whisky industry? In view of the failure to establish an alcohol regime, may I assume that consideration is being given to making restitution payment under the cereal regime? If that is the case, can I have my right hon. Friend's assurance that he will press this matter vigorously, in view of the substantial sums involved and the long period during which this matter has been outstanding?
Mr. Walker: My hon. Friend is right. Substantial benefits will accrue to the United Kingdom. There are, in my judgment, back payments of about £40 million due to us and payment could accrue to our advantage at the rate of more than £20 million a year. I therefore told the Commission that it was totally unsatisfactory that this should be dealt with under the alcohol regime and that I wanted this issue to be dealt with at this year's price fixing of cereals.
Mr. Hooley: Is it correct that the Minister's proposals on the MCAs will increase Britain's contribution to the EEC budget?
Mr. Walker: It is impossible to say without knowing the effect on the pattern of trade.
Mr. Geoffrey Johnson Smith: In view of today's statement, what prospects are held out by my right hon. Friend for the dairy industry, and what advice can he give it?
Mr. Walker: One of the important features of the dairy industry is that we have a substantial potential for export. Part of what I was attempting to achieve at this Council meeting was an improvement of that potential. The best scope for our dairy industry is in manufactured and processed goods, particularly cheeses. It is in that context that we seek the best possible competitive position that we can obtain. As we are a country which is only 65 per cent. self-sufficient in dairy products, the future of our dairy industry must be good.
Mr. Douglas: Will the Minister comment further on the structural oversupply of milk and how his resistance to price increases is likely to affect us in the short term? Will he say more about the reaction of the French Government to the resistance to the devaluation of the green franc?
Mr. Walker: There has been a temptation on the part of the French Government on previous occasions to use devaluation as a negotiating base. Although they wanted a technical change—it had been agreed that they would devalue on 31 March, though the change in the marketing year altered that—I thought that it was a good opportunity to obtain from the French Government, amongst others, a declaration that in future this would be given as of right. The declaration that I read out in my statement had to be approved by all members of the Council, including the French Minister. I think, therefore, that the situation will improve.
There is considerable disagreement in the Council about the future price of milk products. Every other member State wants an increase way above that proposed by the Commission. We continue to adhere to our view that while milk is in surplus we should maintain a freeze on milk prices.
Mr. Straw: In his reply to my right hon. Friend the Member for Barnsley (Mr. Mason) the Minister claimed that he was more concerned with the interests of producers than with those of consumers. Will the Minister have a word with his right hon. Friend the Secretary of State for Trade, because whenever Labour Members raise similar questions about industries with which we are involved—including the need for protection
34
—we are told that the interests of the consumers and the need for jobs must come way before the interests of producers?
Mr. Walker: For many years there has been a mechanism that adjusts the finances of exports and imports of food products to take account of the movement of currencies. For a long time that has been to the immense trading advantage of Germany, Holland, Denmark and other European countries. At a time when it might now be moving towards our advantage it would be absurd to try to change the rules.
Mr. Leighton: While expressing pleasure at the Minister's stand in refusing price increases for products that are in surplus, may I ask him for an assurance that at the forthcoming summit the Prime Minister will not agree to increases in food prices as part of a package on the budget in line with suggestions made recently by Chancellor Schmidt?
Mr. Walker: The Prime Minister totally agrees with the view that I took in Brussels.
Mr. Strang: If it is the central objective of the Government in price fixing to secure a freeze on the price of all products in structural surplus in order to reduce the cost of the EEC budget what sense can there be, at this time of all times, in seeking a change in the rule in order to apply levies on food imports in order to force our food prices above the common price levels on the Continent?
Mr. Walker: I would have thought that the hon. Gentleman, in the light of his experiences in Brussels,, would 'understand that that was not what I was trying to do. When the hon. Gentleman was in charge he agreed to a system of levies that applied to the United Kingdom differently from all those countries in the EMS. That was greatly to the disadvantage of British agriculture and horticulture. I am trying to remove that disadvantage.

KLEIN BROTHERS, SALFORD
Mr. Frank Allaun: I beg to ask leave, Mr. Speaker, to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific

35
and important matter that should have urgent consideration, namely,
"a dispute at a Salford clothing factory where the overwhelming majority of women are on strike to secure trade union representation, and the refusal so far of the employers to accept the services of ACAS."
I shall be brief and stick strictly to the rules.
The firm involved is Klein Brothers, of Liverpool Road, East Salford. The matter is specific, because the workers are on strike. It is urgent, because unless ACAS is brought in tempers will rise and attitudes will harden on both sides. The matter is important, because a small factory employing 75 women workers is involved, and those workers have joined the National Union of Tailors and Garment Workers. They are now standing outside the gates of the House of Commons. The firm employs about 110 workers, including supervisors and clerical staff.
To refuse to meet the officials of the union when the majority of workers ask for that is surely feudal in 1980. My right hon. Friend the Member for Salford, West (Mr. Orme) asks to be associated with the application.
The matter is important, because most of the employees of the hundreds of small factories in the Greater Manchester area would like to have union representation. Their eyes are closely fixed on the dispute. There is strong support for the women, who have acted with courage and determination. The issue deserves debate in the House.
Mr. Speaker: The hon. Member for Salford, East (Mr. Allaun) gave me
36
notice before 12 o'clock today that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"a dispute at a Salford clothing factory where the overwhelming majority of women are on strike to secure trade union representation, and the refusal so far of the employers to accept the services of ACAS."
The hon. Gentleman has raised a matter of considerable significance. As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the order but to give no reasons for my decision. I listened carefully to the hon. Gentleman's request for an emergency debate but I have to rule that his submission does not fall within the provisions of the Standing Order and therefore I cannot submit his application to the House.

ROYAL ASSENT
Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. National Heritage Act 1980

2. Betting, Gaming and Lotteries (Amendment) Act 1980

3. Can Hill Cemetery Act 1980 STATUTORY INSTRUMENTS, &c.

STATUTORY INSTRUMENTS, &c.
Ordered,
That the draft Agricultural and Horticultural Co-operation Grants (Extension of Period) Order 1980 be referred to a Standing Committee on Statutory Instruments &c.—[Mr. St. John-Steyas.]

ORDERS OF THE DAY
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [26 March].
  WAYS AND MEANS

    AMENDMENT OF THE LAW
    That is is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of—

    (a) any amendment with respect to value added tax so as to provide—

    (i) for zero-rating or exempting any supply;

    (ii) for refunding any amount of tax;

    (iii) for varying the rate of that tax otherwise than in relation to all supplies and importations; or

    (iv) for any relief other than relief applying to goods of whatever description or services of whatever description; or

    (b) any amendment relating to the surcharge imposed by the National Insurance Surcharge Act 1976 and applying to some only of the persons by or in respect of whom the surcharge is payable.—[Sir G. Howe.]

    Question again proposed.

  BUDGET RESOLUTIONS AND ECONOMIC SITUATION
  3.53 pm
  The Secretary of State for Social Services (Mr. Patrick Jenkin): Today in the Budget debate we are to concentrate on the social services. It is impossible to look at social service policy other than in the broad economic context.
  The heart of my right hon. and learned Friend's Budget strategy is summarised in the figures set out in table 9 of the Red Book—the five-year projection of public spending, public borrowing and taxation. The last line of this table shows the public sector borrowing requirement falling from 5½ per cent. of GDP in 1978–79 to 1½ per cent. in 1983–84.
  In the Government's view, that is the only possible route to the rescue of our economy from the inexorable and depressing decline which we have witnessed over the last couple of decades. If Governments spend too much, the public sector absorbs too high a proportion of the national product and crowds out the
  38
  private sector. If Governments borrow too much, high interest rates hit investment and home buyers. If Governments tax too much, incentives are eroded and enterprise is stifled.
  Table 9 of the Red Book, which in effect sets out my right hon. and learned Friend's medium-term financial strategy, is the background against which the House and the country have to look at the social service programme. If we do not cut public borrowing, if we do not bring down interest rates and if we do not reduce taxation, the people who will suffer most in the longer run will be the people least able to protect themselves.
  There is another table of figures to which I should like to draw the House's attention to reinforce this point. It is table 5·1 on page 170 of the public expenditure White Paper. This sets out for the years from 1974–75 to the end of the period 1983–84, at constant prices, total public sector debt interest payments. Though not all of this is funded direct from taxation, every penny of it has to be paid by the people of this country in one way or another—in their rates, in their water charges, in their fuel bills, on their public transport, indeed on virtually every public service we use. What does this table show? It shows that the total debt interest rose from just over £8,500 million in 1974–75 to over £10,000 million in the year that is just ending. It is projected to fall back to just over £8¾; billion by 1983–84.
  Throughout the Labour years, from 1974 to 1979, this country spent more on debt interest than it did on retirement pensions. By 1982–83, under this Government, we shall be spending more on pensions and less on debt interest.
  Mr. Charles Fletcher-Cooke: Did my right hon. Friend hear the Leader of the Opposition yesterday suggesting that the Chancellor of the Exchequer should be borrowing yet another £2 billion in the current year? Has he made a calculation of what further debt interest would be payable by the taxpayer if the Chancellor followed that advice?
  Mr. Jenkin: My hon. and learned Friend is absolutely right. The figures put into context the remarks by the Leader of the Opposition on television yesterday. He said that we should borrow another £2 billion. That was his soft

  39
  option. The consequence would be that debt interest would continue to cost more than pensions year after year after year. Is that the Opposition's policy?
  Mr. Denis Healey: How does the Secretary of State reconcile what he says with the facts in the table to which he has directed our attention? That table shows that in his first year debt interest rose by £300 million, which is more than the average increase in the past six years.
  Mr. Jenkin: The Leader of the Opposition knows that the debt interest that we are paying now is on the £40 billion of extra debt incurred when he was Chancellor of the Exchequer.
  I have sought to make these points because it is desperately important that in all the debates that we shall have in the net few weeks on health and social security we constantly bear in mind the crucial and inescapable economic background.
  The right hon. Member for Salford, West (Mr. Orme) is fond of referring to me, as he did in Committee, as the Treasury mole at the DHSS. If by that he means that I understand the economic imperatives as clearly as the Chancellor of the Exchequer and the Chief Secretary, I take that as a compliment. It is certain that neither I nor any succeeding Secretary of State for Social Services can care properly for the old, the sick and the disabled until the economy creates the resources to pay for that care.
  My right hon. and learned Friend's Budget strategy, despite, or indeed in the light of, all the sound and fury from the right hon. Member for Leeds, East (Mr. Healey) on Thursday, remains the only viable strategy on offer. There does not begin to be a glimmer of any conceivable alternative from the Opposition.
  The right hon. Member for Leeds, East, when in office, argued for policies to cut borrowing, cut spending and cut taxes. The only trouble was that he was incapable of cleaving to virtue for more than about five minutes at a time. My right hon. and learned Friend's Budget sets out the path of virtue for four years ahead in table 9 in the Red Book. It is a notable advance in the field of public finance, for which my right hon. and learned Friend deserves every credit.
  40
  It is against that background that I turn to consider the two main programmes for which I am responsible, namely, health and personal social services and the social security programme.
  The central fact about the Health Service is that the growth in spending between 1978–79 and 1982–83—the last year covered by the Labour Government's last White Paper—projected an increase of 7·7 per cent. or about 1·9 per cent. per annum. During the election we gave a pledge to maintain that growth. The figures in the public expenditure White Paper demonstrate that that pledge has been kept 100 per cent. The White Paper shows that growth between the estimated outturn in 1979–80, the current year, and the end of the Public Expenditure Survey Committee period, is planned at 8·2 per cent., or almost exactly 2 per cent. per annum.
  The real growth next year will be about one half of 1 per cent., but that is exactly the level of growth planned by the right hon. Member for Norwich, North (Mr. Ennals).
  In line with other central Government expenditure, the cash limit for the National Health Service provides for a 14 per cent. increase in prices between 1979–80 and 1980–81 and in earnings from due settlement dates. It is not the Government's intention, so far as the NHS is concerned, that this cash limit should operate as a covert squeeze on volume.
  We are providing separately for pay increases arising from existing commitments, for the staging of past awards and specifically for the increases resulting from the Clegg report on nurses' pay. This includes a special provision in 1980–81 to cover the recent Whitley agreement on reducing nurses hours to 37½ a week. We are also making full provision for the final stage and full year effect of the Clegg awards for ancillary workers and ambulancemen. However, health authorities will be expected to press ahead resolutely with the elimination of the bogus incentive schemes and other unsatisfactory working practices identified by Clegg. If allowance is made for savings on this account and for various other factors, I am satisfied that, given responsible pay bargaining on both sides, the cash limits for health authorities on current expenditure for 1980–81 are realistic

  41
  and fair and, subject to inflation remaining roughly as forecast, they should be enough to achieve the planned level of spending.
  Mr. John Ryman: Is the Minister saying that it is the Government's intention to implement the recommendation of the Clegg Commission about the ancillary workers in the National Health Service? The Minister of Health, during a lobby in the House last Thursday, said that he was absolutely amazed by the recommendation, which made no sense at all.
  Mr. Jenkin: The hon. Gentleman is referring to the professions supplementary to medicine rather than to the ancillary workers, such as boilermen and porters. The professions supplementary to medicine are currently engaging the attention of the appropriate Whitley council. I fully understand the sense of indignation that many of the members of those professions feel, especially about hours and their professional status, but it is primarily for the Whitley council to reach a solution to the problems. Ministers are carefully monitoring the position.
  Mr. Anthony Grant: I should not like my right hon. Friend to imagine that the criticism of what I regard as an asinine report of the Clegg Commission is confined to one side of the House only. There are many Members on both sides who feel that the report is nonsense.
  Mr. Jenkin: I understand my hon. Friend's point of view, which has been widely represented both inside and outside the House. However, in the first instance, it is for the relevant Whitley council to resolve the problems that have arisen as a result of the Clegg report.
  There is not much scope for redistribution of money between the regions this year. Nevertheless, I have decided that the best-off region as defined under the RAWP formula should receive an increase of 0·3 per cent. so that the worst-off regions can receive increases up to twice as large—up to 0·6 per cent. In addition, although the sums of money are by no means large, I have sought to recognise, in some small measure, the special population problems of East Anglia and Oxford to which I know a number of my hon. Friends attach importance.
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  When the allocations were announced last year by the right hon. Member for Norwich, North, the worst-off region was pearly 9 per cent. below its target and the best-off region nearly 13 per cent. above. After this year's allocation the worst-off region is down to 7·5 per cent. below and the best-off down to 12·7 per cent. above target. It is not an epoch-making change, but I hope that the House will agree that it is a change in the right direction.
  On Thursday, the right hon. Member for Salford, West complained bitterly about the increase in charges. I understand this necessary ritual, because that is what it is. The leader in The Guardian on Friday described the Opposition's protests as "somewhat hypocritical". It stated:
  "Labour, which introduced health charges in 1951, has never repealed them. Moreover, it put up dental and ophthalmic charges in three out of its last four years."
  Mr. David Ennals: Is the Minister ignoring absolutely the fact that during five and a half years of Labour government prescription charges did not rise at all but that since he took office he has decided upon increases to multiply the charges by five? He must understand that on this side of the House our anger is not hypocritical but genuine.
  Mr. Jenkin: No doubt the right hon. Gentleman will make his view known to the writer of The Guardian leader. The truth is that Governments of both parties have not been able to avoid maintaining the charges or increasing them. We believe that it is sensible to let charges make their contribution towards increased spending. What really matters is that the facilities of the Health Service should be there when they are needed.
  As my right hon. and learned Friend the Chancellor announced, the prescription charge will rise to £1 on 1 December next. But the exemptions remain unchanged. Some 305 million prescriptions are dispensed each year. Of these, two-thirds are exempt from charges, and they cover about 60 per cent. of the population. The cost of prescriptions is rising, and by December 1980 the average cost will be about £2·90 each. So the charge will be about one-third of the cost, paid by about one-third of the patients, with none of the cost paid by two-thirds.

  43
  Nor is it necessary for those who have frequent prescriptions to bear the full charge. Anyone not entitled to exemption can limit his outlay on medicines by buying a season ticket. The new prices from 1 April will be £12 for an annual certificate and £4·50 for a four-monthly certificate. Next December, the season ticket charges will be increased proportionately. People should realise that the season ticket entitles the holder to as many prescriptions as he needs.
  Mr. Donald Stewart: Does the Secretary of State accept that his figures showing the exemption from charges of two-thirds of those who will need prescriptions are quite irrelevant? The benefits of an insurance scheme must bear some relation to the contributions made. Contributions have been rising and the benefits have been going down.
  Mr. Jenkin: The right hon. Gentleman is labouring under the same delusion as a large number of members of the public who think that the Health Service is paid for out of their national insurance contributions. Apart from a very small part, it is not. It is paid for out of taxation. It is of the utmost importance to people who are exempt that they should be so. Given the rising cost of prescriptions, given the wide exemptions, given the very reasonable price of a season ticket, and given the need to finance the rising spending in the Health Service, I believe that an increase in the prescription charge is fully justified.
  Mr. Laurie Pavitt: Will the Secretary of State tell us by how much season tickets have risen since he came into office until the new rate of £12? Will he confirm that every taxpayer pays 78p a week for medicine and that only the sick pay twice?
  Mr. Jenkin: I am not sure from where the hon. Gentleman gets the figure of 78p. I shall write to him about the increase in the season ticket charge.
  Several Hon. Members rose—
  Mr. Jenkin: I cannot give way; I must press on.
  Dental charges are going up from 1 April in order to keep pace with rising costs, as, of course, they did under the previous Government. However, from
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  next year we are ending the exemption for young people aged between 16 and 21 who have left school and are not exempt on grounds of low income or for other reasons. We have also decided, as part of the contribution which charges can make to the cost of the Health Service, to introduce a charge of £2 for a sight test in the general ophthalmic service.
  Mr. Reginald Freeson: That is a new health charge.
  Mr. Jenkin: Does the right hon. Gentleman seriously imagine that it is possible to keep for all time to an existing list of charges?
  Mr. Freeson: Another of the Prime Minister's election promises broken.
  Mr. Jenkin: With respect to the right hon. Gentleman, that is not what was said. At the time it was said—and it was perfectly true—that we had no plans to introduce any new charges—[HON. MEMBERS: "Oh".] This is a small additional charge in an area where charges are already made, and overwhelmingly people will see the charge as being reasonable. The changes will require legislation and the necessary amendments will be tabled to the Health Services Bill on Report.
  Mr. Eric S. Heifer: May I take the right hon. Gentleman back to the question of prescription charges? Is he aware that certain sections of workers who will be included in the one-third who have to pay the full amount—for example, construction workers—suffer a higher percentage of illness because of the nature of their employment? They will now be put at a great disadvantage by the extra charge that the right hon. Gentleman has introduced.
  Mr. Jenkin: I do not know the average earnings in the building industry, but I think that £12 for a year is not an excessive amount for someone who requires repeated prescriptions. I believe that that is a good bargain—
  Mr. Heffer: If they are lucky enough to get a job.
  Mr. Jenkin: If they do not, they will be exempt on the basis of low income. The hon. Gentleman cannot have it both ways.

  45
  We are also looking at other sources of income for the Health Service, and they include the possibility of recovering a greater proportion of the cost to the NHS of road traffic accidents and tackling the abuse of the National Health Service by foreign visitors. The Health Services Bill gives a new power to health authorities to engage in fund-raising activities.
  Let me put all this in context. Ten years ago, at the end of six years of Labour government, the proportion of the cost of the National Health Service met by charges was 3·3 per cent. In 1980–81 it is expected to be 3·35 per cent. By the end of the PESC period, the proportion met by charges will rise by no more than a further percentage point or two. The Service will remain overwhelmingly financed by taxation. In the light of these figures, the well-orchestrated roar of disapproval from the Labour Benches that greeted the Chancellor's announcement in his Budget Statement turns out to have been just as misplaced as it sounded synthetic at the time.
  Mr. Stanley Orme: The right hon. Gentleman referred to the one-third of those requiring prescriptions who would have to pay the full amount. What is his view of the working poor, the people for whom many Conservative Members were wanting a higher child benefit? I am referring to people on low wages who will have to pay the £1 per item.
  Mr. JenkinThe right hon. Gentleman knows that children are covered by the exemptions.
  Mr. Orme: I did not say "children".
  Mr. Jenkin: But the right hon. Gentleman was talking about child benefit. Now he says that he was not talking about children. The right hon. Gentleman must get his interventions clear. He knows that, in addition to those who are exempt on the grounds of receiving supplementary benefit or family income supplement, exemption will be enjoyed by those who are at work but whose incomes are not much above the level of supplementary benefit. Children are exempt and they will remain so.
  At 1979 survey prices, the total cost of the Health Service next year will be nearly £8·2 billion. I have no doubt that there is plenty of scope for getting
  46
  better value for this money. I have already referred to the restrictive practices and bogus incentive schemes. The initiative there lies primarily with the management of health authorities. But I am also taking steps to see that the most glaring examples are brought to the attention of management by my Department. We shall want to know, if action has not been taken, why it has not been taken.
  I am very encouraged by the positive efforts now being made throughout the country by people at all levels in the Health Service to seek savings and to root out waste. Many spending decisions are of course taken by clinicians, and doctors and nurses need to know the cost of the decisions they take. My Department is currently working with the Health Service to improve the cost information available to doctors and other health care professionals.
  I have one other important piece of news before I leave the subject of the Health Service. Over the six months to 30 September 1979, the latest date for which we have figures, it looks as though the number of people on the waiting lists may have fallen by about 50,000. However, at 700,000 there are still far too many people awaiting admission to hospitals, and I know that it will be the constant concern of all the staff involved, clinical and non-clinical, to get this figure down.
  Mr. Allen McKay: The Minister has been talking about waste and about the one-third who will have to pay the full price for their prescriptions. Is he aware that doctors will face a dilemma in wishing to prescribe double the amount of medicine to avoid certain patients having to have two prescriptions and pay £2? Has he considered the position of a doctor who is not certain what type of drug to prescribe and who at present will put the patient on a small amount of medicine to see how that patient progresses? Will not the doctor be tempted to forgo that trial period and instead prescribe a full amount?
  Mr. Jenkin: The hon. Member for Penistone (Mr. McKay) is addressing himself to a perfectly sound argument which will clearly have to be taken into account. The amount of each prescription is a matter for the medical profession, which will

  47
  do what it considers best in the interests of its patients. No doubt is being cast on the sums that will be raised from increasing the prescription charge. We have plenty of experience on that score from past years under Governments of both parties.
  I turn now to the personal social services. The White Paper shows that spending on the social services by local authorities is projected to rise from next year by about 2 per cent. a year. That should be sufficient to maintain standards, given the rising number of elderly people in the community and the steadily increasing numbers of children in care.
  I have never sought to conceal from the House or from anyone else that I recognise that local authorities this year and next have faced, and will face, difficult decisions. But as I go round the country I find marked differences in the ways that different authorities are approaching this task. In some, savings are being made by raising charges, by cutting down on administration and by trimming non-essential services. In others, elected members seem too ready to accept without question significant cuts in services for vulnerable groups. It really is the exceptional local authority officer who will voluntarily propose reductions in his own immediate headquarters staff.
  It is for elected councillors to insist that savings should be found wherever possible by cutting down administration rather than by attacking services. I am doing that in my Department. Since 1 May nearly 2,000 DHSS posts have been saved—almost 2 per cent. of the total. In my headquarters departments the cuts are proportionately three times as big—6·5 per cent. of the total. We have one fewer Minister than the previous Government. A further 2,400 posts will be saved in this coming year. It requires constant, unremitting pressure from elected Members to force officials to make administrative savings.
  The Association of Directors of Social Services has complained bitterly that the personal social services have been singled out for bigger cuts than other departments. In its memorandum, which many right hon. and hon. Members will have received, it does not make clear what level of spending was the starting point against which the cuts of which it com-
  48
  plains have to be seen. It looks as if it may have taken the original Budget estimates for 1979–80 of the Labour Party for its base this year. Many hon. Members from all parties now recognise that those figures were totally unrealistic. I note that the right hon. Member for Heywood and Royton (Mr. Barnett) is present.
  Let me make one or two other points about the personal social services. Unlike education, and unlike the Health Service, the personal social services are only part of caring in the community. Lord Wolfenden's report estimated that there was a bigger input to the personal social services from the voluntary sector than from the statutory sector. When economies have to be made, we are right to look to the voluntary sector to take on a larger share of what has to be done. Family support, support from neighbours, self-help groups, local and national voluntary bodies, all have a part to play. Indeed, local authorities such as North Yorkshire county council—which I visited on Friday—which are deliberately setting out to use their resources to mobilise voluntary support in the Community, will extend the networks of care and support far more widely than the social service department could ever hope to do by itself. My right hon. and learned Friend's Budget, in the £30 million package of reliefs for charities, has given a great boost to the voluntary movement, which will help considerably with the raising of funds.
  Joint finance also has a major contribution to make to local authority services. The planned expansion of joint finance money has not been affected by the cuts, and next year, 1980–81, will see a 16 per cent. real terms increase in joint finance money. That increase, together with any unspent allocations from previous years, equals 1 per cent. of local authority budgets for the personal social services. Moreover, we have recently told authorities that though support should normally be phased out over not more than seven years, extensions or renewals for individual schemes would be considered.
  During his Budget Statement the Chancellor referred to the cost of the social security programme. Even leaving out that part of the cost of child benefit which replaces the child tax allowances, the social security programme has grown by

  49
  50 per cent. since 1971. In the same period, total public expenditure has grown by about 30 per cent. and national income by only 15 per cent.
  In 1970–71 social security accounted for 17 per cent. of public expenditure. Today it accounts for about 27 per cent. Part of the increase is, of course, due to the rising numbers of the elderly. Part is due to the rising numbers of the unemployed, but a substantial part has been due to real improvements in the level of benefits, and new benefits and increased family support.
  Like most right hon. and hon. Members, I do not regard that as undesirable. On the contrary, we all know of social needs in the community which we do not yet meet properly and where we cannot match the provision made by other countries.
  In the light of the economic imperatives with which I opened my speech, it is inescapable that the growth in the social security budget should be curbed. I say "growth should be curbed", for even after making the savings that I have announced the social security budget is still programmed to grow at about 2 per cent. a year. Let me repeat that: the social security budget is growing at 2 per cent. a year.
  Anxiety about the rising burden is nothing new. The House will remember that in 1976 the right hon. Member for Leeds, East, then Chancellor of the Exchequer, let it be known that he was considering ways of reducing the burden that the unemployed put on the taxpaying population. He asked, in a broadcast in Wales, whether it was right to put
  "the whole burden of national sacrifice"
  on those who are working while continuing to protect those who are not working. Commenting on that, Ian Aitken, political correspondent of The Guardian, said:
  "Ministers are acutely aware that continuing inflation, combined with a high level of unemployment, has substantially increased the burdens on the working population while those who rely on state benefit are protected from the impact of the crisis.'
  I am sure that the right hon. Gentleman remembers the incident well.
  The right hon. Member for Heywood and Royton said, in a speech a day or two earlier, that the burden of social security transfer payments was becoming
  50
  increasingly heavy and that there might be some justification for seeking means of reducing it. Well, well, well. The Treasury wanted to do something about the burden of short-term benefits in 1976, but, as we all know, it did not get its way. The Cabinet would not let it. As a result, the burden continued to grow, and nothing was done to curb it. The previous Government went on borrowing in order to pay for a rising burden on the social security budget, with the result that in the year just ended debt interest amounted to £10·2 billion, whereas pensions amounted to £8·8 billion. There was an excess of £1·4 billion of debt interest over pensions. I am sure that the right hon. Member for Leeds, East realised that that could not continue.
  Mr. Denzil Davies: Will the Secretary of State confirm that the Government intend to apply cash limits to unemployment benefits, as the Financial Secretary to the Treasury was reported to have said last week? If that is so, how will it be done?
  Mr. Jenkin: My hon. Friend the Financial Secretary will reply to the debate. He tells me that he did not say that. However, the right hon. Gentleman will be able to put that question to him.
  We know, too, that Labour Ministers recognised the justice of taxing the short-term benefits. Last Thursday I quoted from a letter to me from the right hon. Member for Salford, West, in which he said that he agreed with that in principle. I also call in aid the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), then Financial Secretary to the Treasury. Speaking in Standing Committee D on 23 June 1977 he said:
  "Not only do I agree with the taxation of short-term benefits, but I think that everyone who has ever been concerned with these problems has agreed with it."—[Official Report, Standing Committee D,23 June 1977; c. 1182.]
  He is right. All Labour Members have agreed. It is against that background that the House should look at the proposals to increase the short-term—
  Mr. Joel Barnett: Accepting the fact that short-term benefits should be taxed, is the Secretary of State now saying—or if not, will he do so—that when he taxes them, he will put back the 5 per cent. that he is now taking off?
  Mr. Jenkin: The right hon. Gentleman will understand better than most hon. Members that that is a question that has to be faced when the decision is made.
  It is against that background that the House should look at the proposal to increase the short-term national insurance benefits by 11½ per cent. rather than the 16½ per cent. needed to give full price protection. This is to be seen as an interim step pending the introduction of proper taxation in 1982, or as soon thereafter as can be managed. My right hon. and learned Friend the Chancellor announced proposals to bring unemployment benefit into tax by then, and I have announced proposals to transfer to employers the first eight weeks' responsibility for covering sickness. On the latter, my right hon. Friend the Minister for Social Security will launch a consultative paper this week, setting out the details of what we propose and seeking the views of trades unions, employers and others.
  Taxation of the short-term benefits has been an objective of all major parties for some years. In the past, administrative obstacles have been allowed to stand in the way. They will stand in the way no longer.
  Mr. David Price: Does my hon. Friend agree that these problems will be brought together in a tax credit scheme? Are the Government dedicated strategically to the introduction of a tax credit scheme?
  Mr. Jenkin: My hon. Friend will know that I still maintain a warm regard for the principles of tax credit. He will also know that the costs of introducing a tax credit scheme on anything like the lines of the 1972 Green Paper would, in present economic circumstances, be prohibitive.
  Earnings-related supplement is now a good deal less important than it was when it was introduced in 1966. Employers' sick pay schemes are much more widespread, and the sums now paid by way of redundancy payments are a good deal higher than they were. In these circumstances, limiting ERS, as proposed, next January and ending it in 1982 seems logical, but I emphasise to the House that the safety net remains intact. The short-term supplementary benefit rates set the level below which none shall be allowed
  52
  to fall, and those rates will be fully price-protected.
  With regard to child benefit, the House will wish to consider whether what the Chancellor has proposed—an increase of 75p per child, with an extra 50p on the lone-parent premium—is fair in all the circumstances. I have three points to make in this connection. The first is that the 75p is an increase of 18¾ per cent. since the last increase in April 1979—equal to an annual rate of increase of 11 per cent. That is exactly the effective increase in the personal allowances in the Budget. There is, therefore, no question of families with children falling behind.
  Secondly, one of the arguments for child benefit that I and others have made on many occasions in the past is that it helps to combat the "Why work?" syndrome. However valuable it may be in this respect, it is nevertheless expensive. For instance, it would cost an additional £¼. billion in a full year to increase child benefit by £1·20.
  Mr. Ralph Howell: Will my right hon. Friend explain how increasing child support for working families, much less than for those of nonworking families, will affect the "Why work?" syndrome?
  Mr. Jenkin: My hon. Friend has anticipated the point that I was about to make. The fact is that relatively few families benefiting are caught by the "Why work?" syndrome. In a difficult year it makes sense to give the working families added help through the family income supplement and by an extra boost to the single-parent premium, but in the longer term the child benefit remains the right way to tackle the problem, when it can be afforded.
  Nor is it true to argue that families are doing worse than they would had child tax allowances been retained. In 1976–77—the last year when CTAs and family allowances were paid—if we take the then levels and revalue them to next November, they would be worth, for a family with two young children, £6·90 per week. By next November, a family with two young children will receive child benefit of £9·50 per week. That is for basic-rate taxpayers. For families below the tax threshold, the improvement is, of course, very much greater.

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  In all the circumstances I believe that the increases in child benefit and child premium that the Chanceller announced last week are fair.
  The Government have been in office for less than a year. We faced perhaps the most difficult inheritance since the war, and the strategy on which we have embarked to restore the nation's fortunes requires a steady reduction in the share of the national income taken by public spending. Despite this, we have done a great deal not only to safeguard but to improve the social services.
  Retirement pensions have been fully price-protected and will be uprated next November. Pre-1950 Service widows have been paid a pension for the first time ever. War widows' pensions have been exempted from income tax. Tax on pensioners' savings has been cut. We have given a categorical pledge that pensioners can look forward to sharing in rising living standards. For the disabled, the attendance allowance was increased by over 19 per cent. last November and will go up by 16½ per cent. next November.
  The mobility allowance was raised by £2 last year and will go up by a further £2·50 this year—a 45 per cent. increase in two years—and 15,000 disabled people under 65 have received the mobility allowance sooner than our predecessors had planned. The disabled will be able to claim the long-term supplementary benefit rate after only one year instead of waiting for two years, as at present.
  For one-parent families we have done a great deal. By November, the child benefit addition will have gone up by 50 per cent. Lone parents will have a new, more generous, sliding scale of disregards for earnings, and will get the higher rate of supplementary benefit after one year instead of two.
  We have decided that the maternity grant will become non-contributory and paid as of right to about 60,000 mothers who at present do not qualify.
  We are maintaining the planned increase in spending in the National Health Service.
  A major new package of help with fuel costs for needy households will bring an additional £100 million of help next year, of which £65 million is new money.
  Mr. A. W. Stallard rose—
  Mr. Jenkin: Despite all this, some of our critics are using language as extravagant as it is absurd. Mr. Ron Hayward was quoted in the weekend press as saying, at Broadstairs, that the Tories were aiming
  "to murder our entire Welfare State".
  If I am supposed to be murdering the Welfare State I am setting about it in a pretty rum way, for the public expenditure White Paper projects an increase in spending on health and social services from just under £9½ billion this year to over £10 billion in 1983–84—an increase of nearly 7 per cent. in four years. Spending on social security will rise from under £19 billion in the present year to over £19½ billion in 1983–84.
  Given the economic and financial imperatives that I outlined at the start of my speech, the Government's record in social services demonstrates our commitment to bring real help to those in our society who stand most in need of it. It is not only the record of a Government who are realistic and responsible; it is the record of a Government who care.
  4.37 pm
  Mr. Stanley Orme: As it is apparently fashionable to quote from The Guardian,I quote from The Guardian of last Saturday, in which Melanie Phillips wrote that the social security changes cut deep into benefits and that
  "the concept of Beveridge's welfare state was now seriously threatened."
  I endorse that comment, for the Government, in effect, are going to the very basis of the Welfare State as it was created.
  I said last week—I was accused of being extravagant in my language, but I believe that my criticism was justified—that this is a class Budget and is aimed at disadvantaging a section of our community who can ill afford it. Many of the increases in expenditure that the Secretary of State for Social Services has been talking about are based on an increase in unemployment within our society within the next 12 months to two years.
  We have to go back to first principles and to restate as a party that the Health Service should be free at the time of need for all who are in need of it, and that it should be paid for during our working lives through direct taxation. The principle of social benefits to meet immediate

  55
  need, not least for the family, and the national insurance principle—which the Government are now breaching—of paying benefits to those who are entitled to them, should be maintained. But the Government are making a basic change.
  The Government have emphasised—and the right hon. Gentleman has mentioned it this afternoon—that the social security changes in the Budget have been introduced in an effort to slow down what the right hon. Gentleman calls the extortionate growth in the cost of social security. The Government have claimed that, given these financial objectives, they have provided specific help for the elderly, for those on supplementary benefit, for lone parents and for low-income families.
  The Budget reflects a collection of Tory mythology about social security—and in particular about the work-shy and the unemployed—which has inspired changes in the relationship between national insurance and social assistance which undermine the principles of the Welfare State. Furthermore, the Budget represents a record of broken promises, particularly to families in work and out of work as well as to the elderly.
  The right hon. Gentleman went on the defensive, quite naturally, about child benefit. Earlier, I asked about prescription charges. My point was that the working family itself, not the children, which is on a comparatively low income will have to carry the burden of the prescription charge of £1 per item. Such people will not be excluded. The point is that for such families child benefit has not been increased in line with inflation. Therefore, it is an added burden if the husband or wife needs a prescription.
  I cannot see how the right hon. Gentleman can justify that increase, not only to the House but also to his hon. Friends, after all that he has said about child benefit. The fact remains that it has not been increased in line with inflation. It should have been increased by £2, but an increase of £1·20 would have taken account of the 18 months during which there was no increase at all. An increase of 75p means a reduction in real terms. In fact, the right hon. Gentleman again paid lip service to his commitment to tax credits, yet this tax credit has been severely damaged by the Government, who have not met their commitment.
  Mr. Frank Field: Is not the situation much more serious than my right hon. Friend has suggested? Child benefit was increased by £1 in April 1979, but that was largely a transference from the tax to the benefit side. In fact, for most families, the last real increase took place in November 1978. Therefore, we are measuring this increase over a period of two years, and, while there has been a cut in child benefit as measured over the last 18 months, there has been an even greater cut in child benefit if measured over the two years.
  Mr. Orme: My hon. Friend is absolutely correct. The last increase was the 70p increase which the Labour Government made in November 1978.
  For a moment we should look at the principles contained in the Beveridge report, which was implemented by the incoming Labour Government in 1945 and in their social legislation in 1948. Paragraph 21 of the report stated that the principle was as follows:
  "benefit in return for contributions, rather than free allowances from the State, is what the people of Britain desire."
  To that end, national assistance must be felt to be less desirable than insurance benefit—that is, a safety net and not a prime instrument of social policy. Successive Governments since the war have followed that principle, including Conservative Governments. They have extended it through the earnings-related scheme.
  This Government have now broken that principle. By abolishing ERS and by de-indexing short-term benefits so that they are below the value of supplementary benefit, the Government are deliberately creating a new class of supplementary beneficiary—the unemployed and the sick, The White Paper estimates that there will be 270,000 more supplementary benefit claimants, not dependants, by 1980–81 and a further 185,000 by 1981–82. Thus, supplementary benefit has become a first and not a last resort. It is estimated that a further 110,000 people will be pushed on to supplementary benefit by the loss of earnings-related supplement.
  Year after year, we have heard from the right hon. Gentleman talk about getting rid of people on supplementary benefit and getting rid of the poverty trap. Yet the Government are deliberately creating a situation in which far more people will be in receipt of supplementary benefit in

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  the next year or two. That underlines two further assumptions. First, the Government claim that they are giving maximum support where it is most needed, but the supplementary benefit rates—the Government's official poverty line—are already scandalously low, particularly in relation to the cost of children. According to the Supplementary Benefits Commission, they do not permit people to
  "participate fully in the life of the community".
  Therefore, the Government are condemning hundreds of thousands of people, many of whom have paid national insurance contributions, to absolute poverty.
  During our debates on the Social Security Bill, which is now in the House of Lords, we went to a great deal of trouble to bring the rates into line. Is that Bill now defunct? Are its clauses no longer operative? We should like an answer to those questions, because we are entitled to one.
  Mr. Field: Is it not sheer hypocrisy?
  Mr. Orme: My hon. Friend will remember the hours that we spent in an attempt to bring the rates into line.
  Secondly, the emphasis on supplementary benefit obscures the extent of poverty in general. Supplementary benefit claimants will benefit from free school meals, exemption from prescription charges and so on. Overnight, the poverty trap will become more bitter for those who escape supplementary benefit qualification. There are at least 2½ million people with incomes 20 per cent. or less above the supplementary benefit line. They will receive no additional help. How many of them will benefit from tax cuts?
  Therefore, there are some urgent questions which the Government must answer. First, the Government have said that they believe in the principle of national insurance. To what extent does the right hon. Gentleman support that principle? The Government have introduced a Budget which is based on an extension of means testing and a new poor law mentality. What will be the administrative costs in respect of this greatly increased number of supplementary benefit claimants?
  The Government estimate in the Social Security Bill that a further 1,000 staff will he necessary. Yet I remember the
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  right hon. Gentleman quoting Professor Donnison, saying that the supplementary benefit system was about to collapse and that the staff could not cope with it. Now he is putting hundreds of thousands more people on to supplementary benefit. We want to know how the staff will cope with that increase. From where will the extra staff come? How much will it cost in administrative terms?
  I turn to the breaking of the link with unemployment and sickness benefits. In that regard, I think that the right hon. Gentleman has been less than honest. Why does not he stand on his own feet? At this stage, he has not introduced taxation of short-term benefits. He has introduced a severe measure against the unemployed, a measure which has no discretion in it whatever.
  My right hon. Friend the Member for Heywood and Royton (Mr. Barnett) asked a very good question. What will happen in 1982 when taxation of short-term benefits is introduced and when such benefits are reduced? They have been reduced by 5 per cent. this year, and they will be reduced further in 1981. How does one assess the benefits? The Government must answer that question in some detail.
  Mr. Ennals: Does my right hon. Friend agree that many people who will take the 5 per cent. cut in real terms do not come within the tax range at all? Therefore, they are the poorest of the poor.
  Mr. Orme: My right hon. Friend underlines the argument that I was advancing. The effect is indiscriminate. There are some who will suffer a cut who would not do so if there were taxation.
  In the 1950s and 1960s Britain was going through economic and industrial change. We had to cushion the effect of that change. Some older industries were closing down and newer industries were opening. The pattern of our industry was changing. There was a great contraction, especially in the manufacturing sector. Governments introduced redundancy payments and the earnings-related supplement. Unemployment benefit was set at a reasonable level. In most instances it was reinforced by the earnings-related supplement. These measures were introduced mainly by Labour Governments. They saved Britain from what could have been, in many instances, civil strife. They

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  allowed industries to be reorganised or closed. They provided a breathing space and allowed people to look for new employment.
  During the 1950s and 1960s it was never envisaged that we would have more than 300,000 long-term unemployed. Unemployment benefit is regarded as a short-term payment because unemployment has always been seen as a short-term measure. We are now moving into a very different pattern.
  I stress to the Financial Secretary to the Treasury that we have avoided the difficulties that have arisen in other countries. At present there is a major steel strike. A similar occurrence in France led to riots and deaths. It has led to nothing of that nature in Britain. The benefits that I have outlined have provided a cushion or safety net with which the trade union movement has co-operated. We have witnessed industrial change that would not have been possible if we had not introduced such benefits.
  The Government are breaking down the benefits, especially the earnings-related supplement. It is robbery to abolish the supplement. The British people have contributed to it since 1966. The right hon. Gentleman talked January to January. There will be some who will contribute to the earnings-related supplement scheme who will not be able to draw the supplement in the final year.
  Mr. Allen McKay: The Secretary of State referred to redundancy payments and sick benefit schemes. Those payments and schemes are partly made up by the earnings-related supplement. What will take over the part that the Secretary of State is to remove? Will the missing element be made up by the employer, or are the Government planning to make another grant to assist the employer to close the gap?
  Mr. Orme: I understand that the Financial Secretary said at a press conference last week that the contribution was not to be reduced but, for other reasons, increased. There will not be a quid pro quo. Perhaps the Financial Secretary will confirm what I have said when he replies.
  Long-term unemployment is a major problem within our society. We are now moving towards the figure of 400,000 men
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  and women—largely men—who have not worked for more than 12 months. That is a disgrace in a modern society. We should make a major effort to eradicate such a blot on our map. Instead of cutting benefits for the unemployed, the Minister should be increasing long-term benefits for those who have been unemployed for more than 12 months. Many people in that position are family men. Many of them live in areas that my hon. Friends represent. In those areas men now losing their jobs at the age of 40 or 45 years have little chance of regaining full-time employment.
  I am not saying that the right hon. Gentleman is acting consciously in the sense that he wants to bash the unemployed.
  Mr. Heffer: He is.
  Mr. Orme: I am trying to give him the benefit of the doubt.
  Mr. Heffer: I will not give him that.
  Mr. Orme: The fact is that the unemployed will be made the scapegoats for all our social and economic ills. I was a child in the late 1920s and 1930s, when there were 3 million unemployed. They were made the scapegoats. We were told that people did not want to work. It was said that work was available and that the unemployed would not take it up. We saw whether people would work during the Second World War. These social problems are crucial to the structure of our society. The Government's moves are divisive. Those who have suffered and will suffer will not forgive.
  Mr. Heffer: When I first went to Merseyside after the war, I worked with a building labourer who had been out of work before the war for nine years. That man, having obtained a job after the war, never stopped working. He was like a machine. He worked all day. When I said to him "You do not have to work as hard as that, you can ease off a bit", he said "For nine years I never worked. It is a joy to be working again." Conservative Members said at that time that ordinary working people in areas such as Merseyside did not want work. They claimed that they were lazy. They said it then, and they are saying it now.
  Mr. Orme: It was the unemployment of earlier times that led the late Aneurin

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  Bevan to refer to those who created such conditions as being lower than vermin.
  One of the moves behind the reduction of unemployment benefit is to force people into low-paid jobs, where they are available, and to take jobs at rates that are unacceptable in our society. That is underwriting the bad employer and the plant that is not organised. It will bring the reaction that most of my right hon. and hon. Friends expect.
  There is much talk nowadays of scroungers. The right hon. Gentleman said this afternoon that social security is too expensive. He argued that it all goes to scroungers and that the payments are handouts. Of the £19 billion that is anticipated for 1980–81, 65 per cent. will be accounted for by national insurance contributions. The beneficiaries are merely receiving what they have contributed. It seems often to be suggested that we are talking about someone else's money and that benefits are being paid to those who have no entitlement. It must not be forgotten that we all make the contributions. We do so to make provision for the rainy day when people are forced to turn to sick benefit and unemployment benefit.
  The average working person will say that he will gladly work all his life and make the contributions as long as he does not have to draw the benefits. However, if he is forced to draw the benefits he will consider that he is entitled to the correct benefits. Nearly 60 per cent. of the budget goes in various ways to the elderly. Retirement pensions and supplementary pensions account for nearly half the budget. Unemployment benefit accounts for nearly 4 per cent. and supplementary benefit accounts for 9 per cent. The savings to be effected on social security will be borne largely by reductions in short-term contributory benefits. This will destroy the contributory principle. It is a serious step.
  I have referred to the ERS concept. The average worker's contribution is slightly under £9 a week and the employer's contribution about £18 a week. With all these benefits being removed, the worker will want to know what his contributions are for. What will the Government say to that? Perhaps the Financial Secretary will deal with the level of contributions in the year 1980–81 and the reduced benefits.
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  Benefits for strikers' families is an emotive issue. The Government, with great assistance from the media, are trying to find a scapegoat for their policies. Like the Employment Bill, they are a means of attacking the trade union movement through legislation. I have read in the newspapers, even in The Guardian, of the battle between Ministers from the Department of Health and Social Security and the Department of Employment. Will a Minister from the Department of Employment be included in the Committee on the Bill?
  Mr. Patrick Jenkin: My right hon. Friend the Secretary of State for Employment has his name immediately after mine on the Bill. The press reports are nonsense.
  Mr. Orme: Is the Secretary of State for Employment standing back from the effects of that legislation, even though he has his name on the Bill? The right hon. Gentleman did not tell us whether a Minister from the Department of Employment will be included in the Committee.
  Only in exceptional circumstances do strikers receive benefits. Last year the benefits paid to strikers' families were a tiny proportion of the total benefits paid. We should stick to the principles of a civilised society, where we have given the lead to other countries.
  On average, the first £15 of any benefits claimed by a striker for his family is for him to pay. Then there is a further £12 a week on top of that, which makes a total of £27 before a striker's family starts receiving benefits. [Interruption.] The hon. Member for Enfield, North (Mr. Eggar) is laughing. I see nothing funny in strikers' families suffering.
  Mr. Ralph Howell: Why does the right hon. Gentleman not believe that unions have a duty to pay benefits to strikers?
  Mr. Heffer: What if it is an unofficial strike?
  Mr. Orme: Trade unions pay dispute benefits in some instances, but frequently the amount is less than £12. Some unions do not pay dispute benefits. We received the announcement on Wednesday, and the Bill was printed and published by Friday. The Government are moving quickly.
  The legislation affects not only official strikes but unofficial strikes, lock-outs and

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  all industrial disputes. The Government may initially deal a blow to the trade unions, but the unions will regroup. The Government's legislation will only worsen industrial relations.
  This seems to be The Guardian's day. Has the right hon. Gentleman seen the letter in The Guardian today from Mr. David Heywood, which suggests that the Government are making a direct attack on trade unionists and workers in dispute? What reply does the right hon. Gentleman have for Mr. Heywood? The Government have fired the bullets. They have set the scene for worsening industrial relations.
  Mr. Patrick Jenkin: Mr. Heywood is not an employee of my Department but an official of his trade union. The right hon. Gentleman has asked me to express a view. I believe that Mr. Heywood's letter has overstepped the mark of how far it is legitimate for a trade union official representing public service employees to become involved in Government policies. That is a matter that I shall be putting to Mr. Heywood when I next meet him.
  Mr. Orme: It is unnecessary and unfortunate that the right hon. Gentleman created such a situation.
  Mr. Tim Eggar: Before the right hon. Gentleman completely runs out of synthetic indignation, will he take the opportunity of reaffirming that the Labour Party does not support Mr. Heywood's suggestions in any way?
  Mr. Orme: The dispute is between Mr. Heywood's union and the Government. The Government have got themselves into this mess and they must get themselves out.
  I warned the Government not to be too much encouraged by the recent public opinion poll. The proposals have not yet taken effect. I further warn them that there can be no compromise by the Labour Party and the trade union movement over these measures.
  I have experience of the people whom these cuts will affect. Government Ministers do not know what these cuts will mean to average people. From their Olympian heights they are deciding what is good for the workers, but the workers may soon tell them differently.
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  The right hon. Gentleman did not answer the question that I asked on Thursday about invalidity benefit, which has been reduced by five points. Invalid care allowance, NCIP and HNCIP are linked to invalidity benefit. Will those benefits therefore also not be increased by 16½ per cent.?
  Mr. Patrick Jenkin: The right hon. Gentleman should be aware that long-term invalidity benefit has never been subject to tax and, therefore, is subject to the 5 per cent. abatement. The other three benefits that the right hon. Gentleman mentions are not affected, because basic ally they are not benefits on which people are expected to live.
  Mr. Orme: I understand that, but for uprating purposes they are linked to invalidity benefit. Disablement organisations believe that benefits will be directly reduced, and that means a cut for the disabled.
  In his statement, the right hon. Gentleman made much about the fuel bonus and about help for pensioners and people in receipt of supplementary benefit. The fact is that the increases announced are only for people on supplementary benefit, and the Government have not returned to what the Labour Government introduced, which was based on a rent and rate rebate as well. Therefore, whereas 4½ million people got fuel bonus under the Labour Government, the number of recipients has been reduced considerably because the bonus is to be given only to people in receipt of supplementary benefit.
  I turn to the National Health Service. We have dealt with prescription charges at some length. The right hon. Gentleman has said that by 1982 the charges which are now part of the funding of the NHS will increase from 3 per cent. to 5 per cent. The present Government are hitting at the basis of the NHS. They are encouraging the private sector. They want to create a two-tier Health Service. They are turning to raffles and fundraising as a mean of financing it. That is completely unacceptable. The Sunday Mirror has made the point in regard to kidney machines. The Minister of State's letter was diabolical. It said, in effect, that the way to finance the Health Service was to match pound for pound. That is not the concept of a health service. One should not be able to buy health above

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  another person just because one has the money to do so.
  The principle of the NHS is that we are all entitled to use it and that it exists for all of us. The present Government are moving away from that principle. It is no good underwriting Mr. Jimmy Savile, OBE, in trying to raise £6 million for Stoke Mandeville hospital, which needs refurbishing. If that hospital needs refurbishing—as it probably does—that should be a charge upon the NHS and should not be thrown open to charity and to other people deciding priorities in the NHS.
  Mr. Patrick Jenkin: Will the right hon. Gentleman answer this question? Since the growth in the spending of Health Service money is precisely what his Government planned—the percentage increases year by year, exactly—what would he have cut in order to be able to rebuild that hospital?
  Mr. Orme: First, we would not have increased VAT by 4 per cent. Perhaps the Secretary of State would tell us what the rate of inflation was when he took office. What about that?
  Mr. Patrick Jenkin: In real terms.
  Mr. Orme: If the right hon. Gentleman wants to know about priorities, let me say that the NHS needs more than 2 per cent., and I would want to see a future Labour Government allocating resources—
  The Financial Secretary to the Treasury (Mr. Nigel Lawson): Where is the money coming from?
  Mr. Orme:—to meet the demands in the NHS. But that is a matter for the future. [Interruption.] The Financial Secretary asks where the money is coming from. He knows that in the next couple of years North Sea oil will come on stream. He knows that his Government will attempt to use that revenue for tax cuts and in order to win the next election. I want to see a Labour Government using that revenue for the social priorities in our society and not giving it to the better-off.
  Labour's answer must be a return to first principles in regard to the Welfare State and no compromise whatsoever with the Government. Proposals to fight the
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  Government, inside and outside Parliament, to fight them in conjunction with the trade union movement—
  Mr. Field: Mr. Heywood.
  Mr. Orme: Yes, and Mr. Hayward—Ron Hayward.
  Mr. Eggar: Is the right hon. Gentleman supporting Mr. Heywood?
  Mr. Orme: I am sure that these are the worst aspects of this Budget. I am convinced that in its day of action the TUC will make this a centre point in the discussions and demonstrations that take place throughout the country—[Interruption.] I do not know why the hon. Member for Enfield, North (Mr. Eggar) is laughing so much.
  Mr. Eggar: Will the right hon. Gentleman give way?
  Mr. OrmeNo, I shall not not give way.
  The proposition that the right hon. Gentleman has put before us is very depressing indeed. It will lead to the dismantling of many of the fundamental aspects that we fought to establish and which have been maintained by successive Governments since 1948. It will have a dramatic effect upon the British people when it begins to work its way through. What we must do is to defend the Welfare State and to attack the worst excesses which the present Government are putting forward, despite their parliamentary majority. We must then forge a policy which will return us to the basic and first principles upon which the Welfare State was founded.
  Several Hon. Members rose—
  Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. Before I call Back Benchers, perhaps I may say that the Chair has a very long list of right hon. and hon. Members who wish to speak. Short contributions would be very helpful and would enable a great many Members to be called.
  5.15 pm
  Mr. Terence Higgins: My right hon. Friend the Secretary of State for Social Services raised in his opening remarks a number of specific points. I hope to take up some of them during

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  the course of my speech, although I wish to be as brief as possible. My right hon. Friend also stressed, very rightly, the basis on which our whole social security rests, namely, the economic management of our country. Therefore, while I represent a constituency which has been said to have the most elderly population of any in the country, and one with many difficult social problems in the sector covered by my right hon. Friend, I think that all my constituents recognise that unless we get the economy right we cannot hope to see any real increase in the standard of provision for those in need.
  I congratulate my right hon. and learned Friend the Chancellor of the Exchequer on a number of specific measures that he has taken in the Budget, some of them to help individual groups of people and some of them to increase incentives and to add to our nation's wealth. In particular, the provisions that he has made for charities, to help them from a fiscal point of view, will be widely welcomed. I certainly would not wish to underestimate, as the right hon. Member for Salford, West (Mr. Orme) seems to do, the important contribution that charitable donations can make in our society.
  My right hon. and learned Friend the Chancellor made a number of specific points on share options and profit sharing, and, most particularly, on incentives for small businesses. I believe that these measures will be helpful in providing the real resources that we need to deal with social and economic problems.
  I take up one point which the right hon. Member for Salford, West made about the provisions for deeming a certain amount of the contribution towards strikers' families on supplementary benefit. This is certainly a move in the right direction. I have long found it extraordinary that the trade union movement should take the view that contributions made to trade union funds ought not to be used to support the financing of a strike. However, I ought also to make this point in answer to the right hon. Member for Salford, West. In the difficult economic circumstances that we face, we must have a sense of priorities. If we compare, for example, expenditure on the NHS, on the one hand, with, on the other,
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  support for strikers' families, I do not believe that we ought to say that supporting strikers' families at the taxpayers' expense is more important than using public funds to build more hospitals. It is this sense of priorities that is extremely important.
  Dr. Brian Mawhinney: Will my right hon Friend give way?
  Mr. Higgins: No. With great respect, I want to stick to Mr. Deputy Speaker's wishes, if my hon. Friend will allow me.
  I want to comment on the balance between direct and indirect taxation. Last year my right hon. and learned Friend the Chancellor made a significant change in adjusting that balance, which I think was widely felt to be a balance that was not correct, by moving the burden from direct to indirect taxation. I somewhat regret the way in which his operations this year have worked out. He pointed out that he could not fully offset the effects of inflation on income tax, and he gave less than the full allowance in the raising of indirect taxes.
  Unless I am mistaken, it seems that the balance between direct and indirect taxation, taken overall, has moved somewhat, though perhaps not greatly, in the opposite direction to that which my right hon. and learned Friend adopted last year. That is unfortunate, though I realise why it has happened. My right hon. and learned Friend is concerned about the effects of increases in indirect taxation on the cost of living index.
  I regret that the Chancellor did not increase the tax on tobacco by more. We should seriously consider whether tobacco and cigarettes should be taken out of the cost of living index and put into a cost of dying index. They have important implications for the DHSS and the cost of the National Health Service. If we could get agreement on that, we might see a more rational approach to the matter.
  I also regret that my right hon. and learned Friend has not done more on capital taxation. I am glad to hear that his review of those taxes is complete, and I hope that he will be able to take us into his confidence on the general principles that have been revealed by his study. While we take the earnest of his intention that he claimed in his Budget speech, we need to move in that direction because,

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  as my right hon. and learned Friend rightly points out, the damage done by those taxes is disproportionate to their yield.
  I come to my main point. My right hon. Friend the Secretary of State drew attention to the interest payments by the Government compared with pensions payments. The fundamental basis of the Budget, namely, control of the money supply, has always been important and the recent Green Paper on monetary control is greatly to be welcomed. I have always regarded control of the money supply as essential to good economic management, but there are problems of data and mechanisms which need to be looked at. I hope that in the light of discussions on the Green Paper we shall be able to rectify some of the problems that all of us who have served in the Treasury have faced.
  There is a fundamental distinction to be made, not on whether there is a distinctly monetary policy, Keynesian policy or whatever, but on how one controls the money supply. The big question is whether we have what I call phoney monetarism—a big public sector borrowing requirement, which we have to finance from the non-bank public at high rates of interest, and control the money supply that way—or a small public sector borrowing requirement, which we can finance at much lower rates of interest and still control the money supply.
  The relationship between the PSBR and the money supply is far more complex than that, but the basic distinction that I have outlined is important. I welcome the fact that my right hon. and learned Friend fully accepts that we have been landed with a situation in which we have had to adopt the first alternative, when we should have been implementing the second way of controlling the money supply.
  The measures that the Chancellor has taken to get down the PSBR are welcomed, though he proposes to reduce it in 1980–81 by an increase in taxation, in real terms, rather than by cutting public expenditure on the scale that I believe it needs to be cut if we are to get the right long-term pattern. There was a widespread feeling that the public expenditure cuts in the original 1980–81 White Paper, published some months ago, were inadequate. The new White Paper, which
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  includes that year, details some additional cuts, but I do not believe that they are as large as we need. We need to make further progress in that direction.
  One matter that gives cause for concern is that we are faced with a number of means of cutting and controlling public expenditure which may not be as secure as we should like. Let me identify one. It appears that cash limits are to be used to a considerable extent to reduce public expenditure further in 1980–81. If that is so, we are saying that there are many cuts that we shall make in the coming year, but we do not know what they are, although we shall achieve them by imposing tighter cash limits. If we cannot find them in advance, I am not sure how we shall be able to find them in the course of the year.
  That method, which may tend to invalidiate the whole approach of cash limits—because if we start by fixing them too low that is dangerous—gives cause for concern. I hope that we shall not constantly get new Supplementary Estimates because cash limits have not stuck.
  It was implicit in what my right hon. Friend the Secretary of State said that public sector pay increases have been hived off from the rest of the cash limits. The Select Committee has commented on that issue. In terms of controlling public expenditure and the money supply, that is a dangerous development.
  On top of that, two further factors create an air of uncertainty. The first is the assumption that shortfalls will continue, even though spending Departments must be getting rather used to the idea of having a shortfall and may therefore compensate by planning overspending so that the shortfall does not materialise. Secondly, there is a substantial change in the size of the contingency reserve, which seems to be much bigger for the coming year than for subsequent years. The reasons for that are not fully explained.
  For all those reasons, I am worried that the extent to which the Government's determination to control the money supply, on which depend the control of inflation, the operation of the economy and the basis of the social services, is not as secure as it could be. We have a particular responsibility to ensure that the plans set out by the Chancellor of the Exchequer are fulfilled.

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  The proposals in the public expenditure White Paper are, presumably, based on a medium-term assessment of the economy. We are told that that is to be found in the Red Book, but that covers a much shorter period than does the White Paper. Although we have a financial forecast for the whole period, we do not have a forecast for the other main variables, such as gross domestic product and so on, on which, presumably, the whole of the Government's plans have been based.
  Therefore, I hope that the Government will be prepared to publish that forecast and will not rely on the fact that it has been transferred from the White Paper into the Red Book, so that somehow we lose the past three years—which ought to appear in that document if we are to know what we are talking about.
  There is a danger that the public will get the impression that if we are to reduce the rate of increase in the money supply, which I regard as important, that necessarily means that we are not able to have an increase in aggregate demand at the same time. All these relationships are complex, but I do not take the view that control of the money supply and the reduction of its rate of increase necessarily mean that aggregate demand must fall.
  Conservatives believe fundamentally in the profit motive, and in the sanction of losses as well, but we must extend that from the microeconomic level to the macroeconomic level. I am a little worried that there is no proposal in the Red Book which, in the light of the forecasts, while showing a substantial reduction in the rate of increase in the money supply, also shows towards the end of the period an increase in aggregate demand that may tend to give a hope of profit and investment, on which the long-term growth of the economy and the growth of our social services, in real terms, which we should all like to see, must ultimately depend.
  5.29 pm
  Mr. David Ennals: As most of my comments will be almost entirely critical, perhaps the Secretary of State for Social Services will not mind if I start with one complimentary comment. I welcome the higher than average rate of the mobility allowance increase that he has announced. The allowance was introduced by the Labour Government
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  and twice increased by them. The right hon. Gentleman is increasing it by 21 per cent., which will be welcome.
  I suspect that that 21 per cent. increase is a better indication of the likely inflation rate than the 16½ per cent. movement in prices that the right hon. Gentleman and his right hon. and learned Friend the Chancellor of the Exchequer have prophesied. To the extent to which the inflation rate is higher than 16½ per cent. and approaching anything like 20 per cent., the harder will be the blow to those whom the right hon. Gentleman has determined to push down to the 11½ per cent. figure—the unemployed, the sick, those on invalidity pension and their dependants. The more his estimate is wrong, the more serious will be the depression in child benefit, which is to increase by only 75p instead of at least the £1·20 that my right hon. Friend the Member for Salford, West (Mr. Orme) said it should be.
  Family support will be squeezed still further by a Minister who, in Opposition, made such bold claims to be the champion of child benefit. How often when we were in Government and he was in Opposition he lectured the House about child benefit and its significance and advanced all the arguments for it! I presume that he will now say, as he said about tax credits, that he still has a warm regard for child benefit. That is just about all that he can say.
  With the decision on child benefit, the programme of what I can only call the punishment of the increasing number of the unemployed, as well as the decrease in invalidity pensions and benefits for dependants, and the sick decision to push prescription charges up to five times their level under Labour, I reckon that the right hon. Gentleman must have lost almost every battle that he fought in the Cabinet—if, in fact, he fought any battles.
  I have said on a previous occasion that the Secretary of State always seems to me to speak like a Treasury Minister, not like a Secretary of State for Social Services. Perhaps that is the role that he plays behind closed doors. I know that the Prime Minister came to his defence on Thursday, but, between them, the Prime Minister, the Chancellor and the rest of his Cabinet colleagues have made a monkey of him. He and those for whom he should be

  73
  responsible are basically having to take the rap as a result of the Budget.
  There are two other issues that I want to raise. First, I want to follow up the point made admirably by the right hon. Member for Worthing (Mr. Higgins) about smoking and to take it a little further. In whatever other league we may be slipping, Britain leads the world in lung cancer incidence. Fifty million working days are lost annually through smoking-related diseases, with a loss of production and higher sickness benefits. There are also the cost of pensions for dependants of the roughly 50,000 who die prematurely every years as a result of smoking-induced induced diseases and the £85 million that I estimated—the right hon. Gentleman probably thinks the same—is roughly the cost to the National Health Service of dealing with those who suffer from diseases attributable to smoking.
  The 5p extra on the price of a typical packet of 20 king-size cigarettes is inadequate. A 10p increase—I am not suggesing that it would have been universally popular, but it would have been popular with the non-smokers, who are now, happily, in the majority in this country—not only would have discouraged a lethal and unpleasant habit but would have raised at least another £100 million. That assumes that a significant proportion of smokers would have stopped smoking or reduced their consumption. The figure would be £180 million if there had been no effect on the smoking population. Even the figure of £100 million is three times what the Chancellor will gain from the increase to £1 in prescription charges. What an absurd balance of judgment the right hon. and learned Gentleman has made on this issue! I hope that the Government will be beaten on this matter in the Committee considering the Finance Bill. There are in the House a growing number of hon. Members associated with the anti-smoking lobby. I hope that they will see that the figure is changed.
  No doubt the Secretary of State also hoped that his package of measures to give special help to those least able to cope with rising fuel costs would gain a measure of support. I support them. It was essential to give more than the poor provision that his Government provided this winter, particularly to help people cope with the astronomically rising fuel
  74
  costs, some of them imposed by the Government themselves.
  But what has happened to the rest of the Government's "massive effort"—I quote the Secretary of State for Energy—to reach Britain's energy-saving targets? The Chancellor talked a great deal about enterprise, but there was not a word about energy conservation. The right hon. and learned Gentleman did not sound as though he had much energy himself when he was making his Budget Statement, but that is another matter. There was no tax encouragement of energy conservation, except 10p on the price of petrol and whatever that means for the retail price index.
  The Government are persistently cutting back spending on existing energy-saving programmes. Most recently, the budget for the home insulation scheme was halved, to £12·5 million, and it must now be stretched to cover claims by council tenants, who will no longer have a separate allocation for insulating council houses.
  The Secretary of State for Industry has decided that the selective grant scheme which helps businesses to replace energy-inefficient plant, insulate premises and install or improve combined heat and power schemes will be stopped in June this year. That is a deplorable decision. It should have been put right in the Budget, because one of our prime targets is to achieve energy saving.
  I am not suggesting that our energy-saving targets are ambitious. I think that a target of a 20 per cent. cutback in energy demands over the next five years is modest. Yet the Government are proceeding at the same time with costly programmes to install over the next 10 years nuclear power stations costing between £10 billion and £15 billion or more. Those programmes will in part be paid for by those least able to look after themselves.
  Mr. Robin F. Cook: Did my right hon. Friend note in yesterday's edition of The Observer the allegation that the committee of Ministers on energy conservation has met once since this Government were elected? That graphically underlines my right hon. Friend's theme.
  Mr. Ennals: I did not see that report, but I am grateful for my hon. Friend's

  75
  intervention, because it confirms my point.
  We must somehow or other push the Government into taking energy conservation seriously instead of going more and more deeply, and, I believe, dangerously, towards increasing nuclear power, particularly with all the uncertainties and dangers that may be associated with it. To commit ourselves to that sort of expenditure when the central issue between the two Front Benches has been the miserable and miserly cuts that the Secretary of State has sought to make in the social security programme shows the extraordinary way in which he and his colleagues have looked at this country's needs. It is the unemployed, especially the long-term unemployed, who will suffer as a result of the measures that have been taken.
  5.39 pm
  Mr. Percy Grieve: The right hon. Member for Norwich, North (Mr. Ennals) was at least slightly more temperate in his comments on the Budget than his right hon. Friend the Member for Salford, West (Mr. Orme), who was hysterical and exaggerated. But even the right hon. Member for Norwich, North permitted himself such expressions as that the way in which my right hon. Friend the Secretary of State for Social Services had treated the prescription charge was a sick decision. That is nonsense, and the right hon. Gentleman knows it.
  The philosophy of both right hon. Gentlemen is plainly that there is an enormous pool of resources to be doled out by whatever Government are in power irrespective of need. The right hon. Gentleman has reiterated that a sick decision was taken over prescription charges. How can he use that description when the old, the young, the chronically sick and those in need can get a season ticket to meet prescription charges? What he says is rubbish.
  Mr. Ennals: Does the hon. and learned Gentleman agree that the sick aspect of the matter is not simply the amount by which the Government propose to increase prescription charges but that the cost of any improvement in the Health Service is to be borne by the sick and not by the generality of the population? That is
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  what is sick about the matter. It is the principle.
  Mr. Grieve: The right hon. Gentleman's intervention shows what nonsense he is talking. This will leave more money in the Health Service for the care of those who are sick in hospital and for the building of more hospitals. The right hon. Gentleman knows perfectly well, having been Secretary of State for Social Services, that the amount of money available to the Health Service must be limited. Otherwise, it could take pretty well the whole resources of the State.
  No one in the House has benefited more from the Health Service than I have. I pay tribute to it. Our hospitals are having to cut down on vital services such as cardiology and kidney treatment because money has been spent in blanket fashion whether or not people need treatment. This indicates the mood and philosophy of Labour Members.
  I wish to congratulate my right hon. and learned Friend the Chancellor on a constructive Budget, looking several years ahead, to right the problems that face this country. His proposal will not only put into reverse the gross overspending of the last six years under the Labour Government but will make sure that public expenditure, in the long term, is cut. This will mean that in the table put before the House there will be not an ascending level but a descending level of Government expenditure. This is vital if we are to save ourselves, as a country, from bankruptcy.
  I was astonished when the right hon. Member for Salford, West spoke of our having avoided the evils and ills of other countries. That is true in some measure. But we have not avoided having the worst productivity in Europe. We have not avoided one of the highest levels of unemployment. We have not avoided, time and again, one of the highest levels of inflation. We have not avoided one of the worst records of strikes. It was time that these matters were put right. The electorate voted the Government into power to carry out this task. The Government will do it. My right hon. and learned Friend's Budget is an important step on the way towards doing so.
  Mr. Ennals: Inflation has been getting worse all year.
  Mr. Grieve: A matter raised by the Opposition is the deeming of the contribution to be paid by the unions or by the individual towards his social security when a man is on strfike. The most intemperate language was used by the right hon. Member for Salford, West. Yet for years the electorate has been demanding just such a change. Throughout the period of the last Conservative Government the electorate was asking "Why are we, the taxpayers, subsidising strikes?" It is not only anomalous. It is bad for labour relations and bad for the country. I shall briefly try to state the reasons.
  It is significant, I suggest, that in no other country in Europe, or, I believe, in the world, are strikes subsidised in a similar fashion by the taxpayer. The situation is not only anomalous. It encourages irresponsibility. That is the vice. When someone can say to himself or a union or those running it can say that it does not matter whether they go on strike and the taxpayer will pay, there is no sanction in the background to make people consider the factors in the situation. It is wholly wrong that the taxpayer should be asked, and should have been asked all these years, to subsidise strikes when Britain has been one of the most strike-ridden countries in the world—[HON MEMBERS: "That is not true".]—and when strikes have done infinite damage to the fabric of our society and economy.
  I cannot deal with the whole of the social security aspect of the Budget. I should, however, like to make a brief comment on the proposed taxation of short-term benefits. Opposition Members' comments have all proceeded from the philosophy that people should receive subventions from the State whether or not they need them. It is surely obvious that some people desperately need short-term benefits. Their earnings will not bring them into a tax bracket at the end of the year in which the benefits are received. They will not pay tax. But some people who are off work ill have large incomes to which they return when they resume work. It is crazy that in a society like ours which has been approaching bankruptcy such people should not pay tax at the end of the year on the advantages they have received from the State while temporarily incapacitated.
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  I quite understand that my right hon. and learned Friend found himself able to proceed very little further in reducing direct taxation. I hope very much that next year, in the light of this Budget and what I hope will be an improving state of the economy, he will be able to continue the policies on which we were elected to power.
  I regret that my right hon. and learned Friend has not felt able this year—although I understand the motivation—to carry out the complete review and reconstruction of capital taxes for which Conservative Members continue to look. It is essential that there should be such a reconstruction. One knows, from constituency experience, the number of businesses and farms that have to be sold to meet the wholly excessive level of duties imposed on inheritances and gifts.
  I welcome the measure that has been taken this year of doubling the threshold of gift tax, or capital transfer tax, to £50,000. I also welcome the increase of the level of capital gains tax to £3,000.
  I intend, Mr. Deputy Speaker, to observe your appeal that hon. Members should be brief, but I should like to say a word about another matter in the Budget to which my right hon. and learned Friend the Chancellor made a brief allusion.
  Mr. David Penhaligon: Will the hon. and learned Gentleman give way?
  Mr. Grieve: I have not yet embarked upon the point, but I shall give way.
  Mr. Penhaligon: Is there any area of services for those who are sick, elderly or disabled where the hon. and learned Gentleman would like to see an improvement in State help?
  Mr. Grieve: Those that I wish to see improved are comprehended in the long list that my right hon. Friend the Secretary of State gave the House today. One would obviously like to see improvements made in many spheres, but one would like to see them made when the state of the nation is such that they can be afforded.
  I refer now to the taxation of husbands and wives. For far too long, the taxation of husbands and wives has been completely anomalous. Originally, as hon. Members will be aware, the two incomes

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  —whether earned income or investment income—were united. The husband and wife paid tax as if they were one. Under the last Conservative Government, there was a measure of reform. Husbands and wives were permitted to separate their incomes for fiscal purposes when incomes were earned. But the anomaly in regard to investment income remained. This is not only a tax upon income. As a result of that measure, it is an additional investment income surcharge.
  In a world in which men and women are equal, this is completely anomalous. It was held to be unconstitutional in Germany in 1957, in Italy in 1976 and in Ireland in January of this year, in the case of Murphy v. the Attorney-General. This is because it militated against the institution of marriage. It encouraged people to live in sin and to get a divorce if they could because they would be better off in consequence. This not only merits the attention which my right hon. and learned Friend is to give it. After he has considered it, it merits reform and at least the option for married couples to be taxed as single people.
  I commend my right hon. and learned Friend for a courageous Budget, formulated in the interests of the country and with a view to restoring us from the brink of bankruptcy to which the Labour Government brought us over five years.
  5.51 pm
  Mr. Donald Stewart: The speech of the hon. and learned Member for Solihull (Mr. Grieve) made the Secretary of State's speech appear a model of charity and compassion—and at the time I thought that the latter was pretty hard-faced. The hon. and learned Gentleman said that the increase in prescription charges would mean more money for the sick and for hospitals. In fact, it might put many more people in hospitals than would otherwise go there. I am surprised that a member of the hon. and learned Gentleman's profession should have made so many outrageous statements without evidence.
  Of course, we all agree that there is no bowl of resources that we can dip into for ever, but there are some priorities that any civilised society should maintain.
  The right hon. Member for Worthing (Mr. Higgins) made a lucid and interest-
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  ing speech. I did not grasp it all—he was talking as fast as he is reputed to run—but I agree with what he said about the tax on tobacco. I am amazed that the Chancellor went so easy on tobacco. I say that with sincerity, since at the moment that he was talking about that tax my pipe was burning a hole in my pocket. The Chancellor has been exceptionally lenient here. I agree with those who say that this cost should come out of the retail price index.
  The Secretary of State said today that this was a caring Budget, but his speech, like that of the Chancellor, showed that this Government care for some people more than others. The Chancellor's apparent strategy is that sacrifices now will bring salvation later. The measures in his two Budgets may mean that at the end the United Kingdom's industrial base is considerably diminished, or even destroyed altogether. One recalls the old line about the operation being a success although the patient died.
  The Government are accepting that industrial investment will decline and unemployment will continue to escalate. That is dangerous medicine for the future of the United Kingdom. It is made more dangerous still by the attack on the living standards of ordinary people. Whatever reasons are given for these measures, people know that the wealthy are being looked after. Under last year's Budget, the wealthiest 5 per cent. collected 30 per cent. of the tax relief.
  The measures to attack abuses in social security are another indication of the Government's attitude. I do not say that abuses do not exist, but they are trivial alongside the evasion of income tax.
  I was surprised and a little alarmed at the Minister's statement the other day that the Government gauged social security fraud on the same basis as the percentage of pilferage from Oxford Street stores. If that is the Government's arithmetic, the sooner they file their petition in bankruptcy the better.
  I am sorry that the Chancellor made no reference to our EEC contribution. We had been led to believe by wild statements of the Prime Minister that we would get back about £1,000 million. We have received so far not a penny—and the Budget reflects that fact.
  The raising of the prescription charge is an attack on the poor at their most

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  vulnerable. The accusation at the last election that the Tories would raise these charges was denounced as a great lie. We now know who is guilty of the great lie.
  This measure is dastardly enough in itself, but it contains another danger—that it will produce extra finance to such an extent that future Chancellors of both parties will be reluctant to abolish it.
  The Budget makes no mention of an increase in the death grant, which is still a derisory £30. According to a recent parliamentary answer, at current values it should now be £145. Normally, insurance benefits should reflect contributions, or people will come to regard them simply as a tax-raising swindle.
  The effect of the 10p rise in the price of petrol will be serious in areas that have no bus or train services.
  According to the Secretary of State for Industry—the right hon. Member for Leeds, North-East (Sir K. Joseph)—the 1980s should be a decade golden with the benefits of North Sea oil. The people of Scotland see increasing poverty and deprivation in a country which produces over £2,000 million of oil revenue in the current year. In spite of this increasing oil wealth, the money is not being diverted to the problem of unemployment. Even in a British context, that is theft of Scottish wealth.
  In Canada, the province of Alberta, which is an oil-producing state, receives an extra share of the wealth instead of it all being diverted to the national exchequer. Where is the special oil fund promised to Scotland in the 1974 Tory election manifestos? There is not a sign of it. Yet in Scotland poverty affects 38 per cent. of the population, who, according to Townsend, live below, on or just above the poverty line. The shortest way to combat family poverty would have been to increase child benefit, but here again the Scrooge philosophy has operated.
  In spite of all the Chancellor's pleas about lack of cash for these essential needs, we have the contrast of the failure to levy a tax on the fantastically swollen bank profits. In his Budget speech the right hon. and learned Gentleman said:
  "it is …irrational to attribute these profits to some wickedness on the part of the banks." [Official Report, 26 March 1980; Vol. 981, c. 1466.]
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  Quite so—the wickedness was that of the Government. It was their policy that enabled this windfall to grow without any effort or any increased production by the banks. Now they are to be allowed to get away with the lot.
  Even the Daily Mail, hardly an organ of the Socialist Workers' Party, felt constrained to ask:
  "Why dither over imposing a windfall tax on hank profits? If that's not done now, while the coffers are overflowing, it's not worth doing at all."
  Mr. Tristan Garel-Jones: Does the right hon. Gentleman agree that my right hon. and learned Friend said that he could see no reason in principle for not imposing such a tax on these windfalls and that he intended to consider the matter further?
  Mr. Stewart: I agree that the Chancellor said that. However, I do not imagine that that will prevent bankers from sleeping at night. I can tell the hon Gentleman that that tax will never be imposed if it is not done this year. Even the Daily Mail recognises that.
  I make the following suggestions to the Chancellor—
  Mr. Stallard: The Chancellor should resign.
  Mr. Stewart: I had not included that suggestion. The Government are not open to good advice of that kind. The Government should use oil revenues to get Scottish industry going again through the Scottish Development Agency. They should increase child benefit and ensure that it is index-linked. If we consider ourselves a civilised society, we owe that to the poor. The Government should reintroduce the regional employment premium. When it was abolished by the previous Labour Government 20,000 jobs were lost.
  A system of relief on petrol tax should be introduced in areas that are completely dependent on motor transport. A feeling is growing throughout the House that as a temporary measure we must introduce an import levy on semi-manufactured and finished products in order to make our industry competitive.
  This Budget has been a double tragedy for the people of Scotland.
  Mr. Grieve rose—
  Mr. Stewart: No, I cannot give way. I am about to finish. The Scottish people did not vote for this Government. If they had voted for Scottish control of Scottish resources, a Budget on those lines would have reflected the proper situation.
  6.1 pm
  Mr. Ralph Howell: I approve of much that is in the Budget and I give it my full support. I am particularly glad that we are making further cuts in public expenditure, because it is important that we should. I am also glad that we are abolishing earnings-related benefit. The principle of one safety net is correct. The State should see to it that there is a safety net and that the provision of benefit should be uniform. I am naturally pleased that at last, after I have been campaigning for almost 10 years, we are to tax short-term benefits. However, I fail to understand why it will take two years to introduce that measure. All the same, we must be grateful that something is to be done.
  I am pleased that we are tackling the problem of paying State benefits to strikers. I think that both the Opposition —who are criticising the measure—and the Government have got it wrong. I believe that the country wishes the Government to introduce such a measure but to tackle the problem more thoroughly. I do not think that the "deeming" idea will work. The country would have been disappointed to find that had the measure been in operation during the steel strike —during which £8 has already been paid out in strike pay—about £5½ million would still have been paid out. If that situation obtains in future, the country will feel that we have not acted sensibly and that benefits to strikers should have been withheld completely. It is the duty of trade unions to support strikes. The Government cannot get away with the idea that they can adopt a neutral position if at the same time they are handing out benefits to strikers.
  Although we are going along the right road in many respects, we are going along it too slowly. There is danger in being slow, because many aspects of our way of life have been wrong for a long time, and the sooner we put them right the better.
  I am not sure whether the eventual intention is to tax supplementary benefit and, if so, whether it will take two years
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  to put the measure into effect. In the past the Treasury has said that it would require an army of civil servants to implement such a provision. The Treasury seems to have abandoned that idea now and to be saying that the work could be done without a great increase in staff. I believe that if the Treasury were pressed hard such a measure could be brought into operation within 12 months.
  My main disappointment, however, is that we have not tackled the "Why work?" problem. Many Ministers have paid lip service to solving this problem, but by leaving income tax at the highest initial starting rate in the world–30 per cent.—we are prolonging the problem. The problem is also exacerbated because we are still taxing those who earn only 40 per cent. of the national average wage. That cannot make sense. We must get it into our heads that the only way to solve the "Why work?" problem is dramatically to raise income tax thresholds and simultaneously to reduce the initial rate.
  What possible sense can there be in taking about £7,000 million in income tax from people who are earning less than the national average wage while giving back to them between £5,000 million and £6,000 million in housing subsidies, family income supplement and the like? That does not make any sense. We should recognise that we need a complete reorganisation of the system if we are ever to get on top of the problem.
  What we have done about child benefit aggravates the "Why work?" problem. I have never been in favour of increased child benefit, but I have asked for a uniform child benefit. I had hoped that the Government would move in that direction, but the Budget proposes an increase of 75p per child and an increase of between £1.55 and £3.20 to the families of men who are not working. That will lock into the system a great number of people who will be unable to afford to work. Many people who are claiming supplementary benefit cannot afford to work, because of the system. It is important that we recognise that and find a solution to the problem.
  I enjoyed the recent broadcast by my right hon. and learned Friend the Chancellor. He used a diagram that indicated that the French economy was forging ahead, with the economy of West

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  Germany following closely and our economy and production sagging badly. However, the fact that the Treasury is looking beyond our shores for the answer to our difficulties is a breakthrough.
  I urge the Government to take time off from the replay of the Napoleonic wars to study the French tax system and the German employment and welfare system. If we took the best elements of the French and German systems and applied them to this country and restored the will to work our economy would improve dramatically. The people of this country would then enjoy as high a standard of living as that of our neighbours on the Continent.
  6.9 pm
  Mr. Laurie Pavitt: This is a shabby Budget because it divides the nation at a time when we need a unifying process. I believe it is the most divisive Budget since the war and that the most mean and despicable item in it is the increase in prescription charges, which divides the sick from the healthy. I hope that the hon. Member for Norfolk, North (Mr. Howell) will forgive me if I concentrate all my remarks on one terrible item—the increase in prescription charges.
  One of the problems in the National Health Service is the cost of transplants. I should be pleased if the Secretary of State financed one transplant. He could remove from the Treasury Ministers the cash box and replace it with a human and compassionate heart. The prescription charge is despicable, because it reveals a lack of understanding of people in pain. The Treasury has as its first, second and third priorities the balancing of the balance sheet. The welfare of the physically and mentally ill and of the handicapped is low on the list of priorities.
  The sick have no choice. They do not want to be ill. They do not want to take medicines. The £1 charge is an insult to members of the British Medical Association. It is justified only on a market place commercialism—on the basis that demand is likely to diminish because incompetent GPs prescribe unnecessarily. I do not believe that GPs prescribe unnecessarily. The majority of our GPs and doctors prescribe only when they see the need. I am equally angry about some of the other charges, particularly the dental charge. That will put back
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  the prevention of oral diseases, which are now preventable, by at least 10 years.
  I shall concentrate on prescription charges. It is no excuse that 65 per cent. of children and the elderly are exempt. The Government are imposing a tax upon 110 million scripts for the middle-aged who need care and attention. The prescription charge is a tax that only the sick pay. The healthy are exempt. The more sick the person, the more he must pay. If one is healthy one pays nothing. The person who has a chronic illness is being asked to get the country out of its present mess. No civilised society can justify that. I wish that I had the Shakespearean eloquence of a Portia to summon the quality of mercy on the Treasury Bench.
  All doctors fact the dilemma of prescribing not only for treatment but for the alleviation of pain. Most doctors have the option of telling their middle-aged patients that their pain can be alleviated or that they must grin and bear it. If a poor patient requires three or four different medicines for which the charge is £3 or £4 each, the doctor might advise that patient to grin and bear it.
  A woman at the time of menopause is vulnerable. She is in pain but will not die from her condition. She cannot be taken to hospital for an operation, because of the waiting lists for such treatment. Such a woman must suffer, even though she may still be looking after children. The doctor must decide whether to help to alleviate her pain.
  I am not talking of the poor alone. One of my most formidable opponents in the House, with whom I crossed swords many times, was kin Macleod. He was a great House of Commons man and when he sat on the Government Bench those with health knowledge knew that he was doubled up with pain from arthritis. That man had more money than I am ever likely to see. However, I believed that if only there were something that I could do to alleviate that gallant gentleman's pain I would willingly have been prepared to increase my tax payments. That is what I mean by a compassionate society.
  The increase in the season ticket charge is unforgivable and mean. The chronic sick, who need medicine year in and year out, are being asked to pay more in order

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  to bring in less than £500,000 a year. Let the Chancellor of the Exchequer take pride in the money that he is to take from people with Parkinson's disease, arthritis, chronic bronchitis, asthma, hypertension and diabetes. Such people are being asked to pay more each year for their medicine.
  Let the Chancellor and his colleagues put themselves in the place of the unfortunate person who has cancer of the rectum or bowel. Such a person has his rectum removed and after a colostomy must be given medicine and equipment on prescription for the rest of his life. He must pay for the privilege of carrying with him a bag of excrement day in and day out. Does the Chancellor really believe that such a person should rescue the country from its economic problems? I have a list of 46 chronic diseases. Those who suffer from them are being asked to rescue the Health Service. This increase will raise less than 1 per cent. of NHS resources. These charges distort the provision of care.
  Pharmacists will be faced with problems. A patient may ask the pharmacist which of three medicines is most necessary. Such an occurrence will destroy the doctor-pharmacist-patient relationship. In the GP's surgery, the small number of hypochondriac patients will feel that they are paying for the privilege of wasting a doctor's time for which payment for medicines entitles them. The increased prescription charge is a hypochondriac's charter.
  Mr. Ennals: I apologise for breaking into my hon. Friend's moving speech. Some poor patients will decide not to pay for a prescription because they cannot afford it, and that will cost the National Health Service more, since they will not have taken the treatment prescribed for them.
  Mr. Pavitt: That is inevitable. I have a love-hate relationship with the drug industry because it saves many hospital beds by providing medicines in time. My only quarrel is that the industry charges too much. Anything that involves care in a hospital whips up the cost to the taxpayer. Problems will be caused in the rural areas where some doctors dispense for their patients. The doctor's relationship with the patient will be destroyed
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  when the patient has to hand over £1, and it will belittle the qualified practitioner.
  My right hon. Friend the Member for Norwich, North (Mr. Ennals) mentioned the battles that the Secretary of State has had behind closed doors. However, the Secretary of State always has a choice when such matters are discussed in the Cabinet. He could give the Chancellor his pound of flesh either from the patients or from the drug companies. If he wanted to do something about pharmaceuticals, he could have chosen to go for the drug companies rather than for the patients. If he wanted to be tough, he could have saved £100 million on his drug bill, running now at £740 million. I can tell him of several National Health Service big spenders. The Health Service pays £5·40 per 100 ampicillin tablets, £3·75 for 100 brocades, £17·45 for 100 flucloxacillin tablets and £9·30 for 100 talampicillin tablets. Each of those drugs does the same job.
  The classic example of "me too" drugs is the section known as B Blockers. The Minister of Health provided me with six foolscap pages listing drugs that have the same purpose. A total of 77 drugs were listed. Their prices range from the foothills to Mount Everest.
  Only one Tory Government stood up to the drug companies' excessive profiteering. Strangely enough, it was the present Chancellor of the Exchequer. That was when Roche was found to have made £11 million excessive profits between January 1970 and April 1973. After the case had been to the House of Lords, the company eventually paid back £3·75 million. Since then Roche has more than recovered its repayment sum by the massive increase in cost to the National Health Service of two products—librium and valium.
  In January 1977 100 tablets of librium cost the Health Service 75p. Two years later they cost £1·35. I have a list here that occupies two foolscap pages and shows fantastic price rises, which the tax-paper pays through the Health Service. That is not 12 per cent. or 16 per cent. inflation. Valium has risen from 82p to 101p.
  The Shenley mental hospital in my area is one of the finest in the country. In one year its drug bill rose from £65,000 to £75,000. If the Secretary of State wants to save taxpayers' money,

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  why does he not consider doing so on drugs? Beecham, who provide ampicillin, last year made a profit before tax of £144 million, compared with £62 million five years ago. Another major supplier, Glaxo, made a profit of £65 million in 1979 compared with £41 million in 1975. How much does the Conservative Central Office receive from paraplegics and epileptics? Not very much. It received £20,000 from Beecham last year. How much does it receive from other disabled people and from diabetics? Nothing. But it received £25,000 from Glaxo last year. It does not make sense to impose a £1 prescription charge on the sick while at the same time taking no action to curtail excess profits.
  The pharmaceutical industry has a profitability rate next to the top in the league table of industries. It made 28·1 per cent. last year as a return on its capital employed. At the same time, engineering achieved 18·9 per cent., motors and components 18·5 per cent. and food retailing 16·8 per cent. The only industry with a better profitability rate was the electrical industry, at 30·8 per cent.
  My right hon. Friend the Member for Cardiff, West (Mr. Thomas) was kind enough to send me a note about a speech that I made 12 years ago on this subject. The largest vote against the Labour Government was when they had the temerity to open the door on increased prescription charges—and I divided the House. I received another note—one that I treasure—from Lord Boyle. He congratulated me on the stand that I took and said that in the light of the decisions being taken he could do nothing but support me.
  I seem destined to battle on this issue time and time again, irrespective of the colour of the Government. On 1 May 1952, at column 1776, Hansard records the pledge of Prime Minister Attlee to bring all health charges to an end. That has never happened. As charges escalate over the next four years, it will become extremely difficult ever to unravel them again.
  The Treasury blackmails the National Health Service. It says to the Secretary of State "You have to have an amputation, but you can choose which limb—either a leg, an arm or a wrist." The Tory Government divide the nation and
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  set class against class. These charges divide the healthy from the sick. I hope that the nation will reject this injustice. Anybody with any civilised emotion will know that the most deserving section of our community will be hit hardest by the swingeing increase from 20p—when the Government came to power—to the £1 proposed in the Budget. Surely we can care for the sick in our community.
  6.25 pm
  Mr. Paul Dean: I am glad to follow the speech of the hon. Member for Brent, South (Mr. Pavitt). There are many occasions on which he and find ourselves in agreement, but I part company with him on many of his remarks today.
  The social security package brings us face to face with two stark realities—first, the very big increase in expenditure over the years, especially on social security cash benefits, and, secondly, the fact that expenditure has outpaced the growth in the national wealth, a point referred to by my right hon. Friend the Secretary of State.
  In those circumstances, it is totally unreasonable to expect that the largest single item in central Government expenditure, namely, social security, and the third largest item, namely, health, should remain unscathed. The right hon. Member for Salford, West (Mr. Orme) seemed completely to ignore those harsh realities.
  In the light of the need for economies, the social security package is a well-balanced one. I welcome the fact that expenditure in the National Health Service will continue to rise by about 2 per cent. a year. I am sure that that is necessary, and the public expenditure White Paper sets that target.
  I do not object to the increase in prescription charges. Against our economic background and the great need for resources in the NHS, it is a reasonable action to take. I hope that my right hon. Friend will keep a careful watch on the arrangements for season tickets for those who require regular prescriptions. That arrangement becomes important now that the charge is to rise to £1.
  I welcome the real increase in expenditure on the social security budget. If there must be priorities, I am sure that it is right to place the priority on the long-term benefits for pensioners and widows

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  —the most vulnerable groups—and on supplementary benefits. We must look to the short-term benefits for economies. Broadly speaking, it is a sensible package, although I have one or two doubts.
  I shall refer briefly to six small but significant items in the Budget. They are imaginative features. I welcome the fuel allowance because the rapidly rising cost of fuel is one of the major worries faced by the elderly. I welcome the substantial increase in the allowance for one-parent families, and also the additional mobility allowance. Those increases will substantially assist two hard-pressed groups.
  I am delighted to note the widows' bereavement allowance. Women face considerable financial and emotional problems in early widowhood.
  I am pleased to note the improvements in the retired immunity for the self-employed, and especially that the ceiling is to be abolished. Because of the nature of self-employment, it is often not possible for the self-employed to save for their old age until they are well on in life. Their resources are ploughed back into their businesses.
  Finally, I welcome the improvement for charities. During a debate on the Finance Bill last year, I pointed out that one of the disadvantages of tax reduction was that income from covenants could reduce because of the arrangements for refunds. Not only have charities lost £3 million through tax reductions, but they are also feeling squeezed because of the reduction in grants from many local authorities. That improvement, therefore, is another welcome aspect in my right hon. and learned Friend's Budget. Those six points constitute a good example of humanity and realism.
  However, I have two anxieties to express. The first concerns child benefit. I am disappointed at the size of the increase. A little more would have made so much difference. The leading article in The Times on 28 March puts that basic theme eloquently. I do not propose to quote it because I do not want to detain the House for too long. However, I hope that the Government will be able to say, if not in this debate, at any rate before too long, that they are firmly committed within a reasonably short time to restoring the value of child benefit and maintaining its level thereafter.
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  If we continue as we are at present, there are dangers that the balance between the dependency allowances in the national insurance scheme and child benefit will be lost, and equally that the relationship between child benefit and other personal income tax allowances will go out of balance too. I hope, therefore, that the Government have as a firm objective an improvement of child benefit and that they will achieve that as soon as the economy will allow.
  My second anxiety concerns the relationship under the new package that my right hon. Friend the Secretary of State for Social Services has announced between long-term and short-term benefits. Clearly, the borderline under the new arrangements will be of considerable significance. I hope that my right hon. Friend will look in particular at the needs of those who have been sick or unemployed for a long time. I am not sure, for example, whether under the new proposals it is any longer appropriate for unemployment benefit to cease after 12 months. Equally, I am not entirely convinced that it is necessarily appropriate under the new arrangements for invalidity benefit to begin after six months.
  I suggest that considerable scrutiny is needed in the relationships between benefits which will be price-protected and those that will not be, between the short-term and long-term benefits. One of the disadvantages of the package—this was referred to by the right hon. Member for Salford, West—is that almost certainly a growing number of people will be dependent upon supplementary benefit. I am anxious that we do not get into the position where a growing number of people in the community who have worked and saved hard and have some resources discover that the cutback in short-term benefits or the taxing of benefits forces them on to supplementary benefit. We must take care to avoid the position where those who have tried and worked hard, and who have saved, are put at comparative disadvantage in relation to those who are on supplementary benefit.
  I hope that in this new package my right hon. Friend the Secretary of State will look at these areas to ensure that we do not create hardship among those sections of the community that we wish to encourage and protect.

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  With those two reservations, I welcome my right hon. and learned Friend's Budget as realistic, sensible and in the best traditions of a Government who believe in restoring the economy but who also believe in care and compassion for those who most need our help.
  6.34 pm
  Mr. David Penhaligon: The criticism that I and my colleagues make of the Budget is not that contained in some of the points that have already been made, valid and fair though they are. It is that we genuinely believe that the strategy that the Chancellor has outlined will not work. If, as the right hon. and learned Gentleman claims, the package were to cure inflation, it might be worth taking a deep breath, swallowing what he has presented and putting up with it for a period. But our judgment is that it will not work. We do not believe that an economic policy based purely and simply on the control of the money supply, with the Government adamantly refusing to have anything to do with pay settlements, can lead other than to an unmitigated disaster.
  In the short term it can produce only two results. The first is a substantial adjustment in the number of unemployed, which means a vast increase. Secondly, we have already seen the astronomic adjustment in interest rates. We are genuinely concerned at just where the country is going in economic terms. At best it appears to us that we could end up with little inflation but virtually no industry. Our total survival is based upon industry. The only natural resources that we can sell abroad in any quantity are the short-term benefit of North Sea oil and the massive quantities of china clay from my constituency.
  Mr. Dennis Canavan: What about gas and coal?
  Mr. Penhaligon: I include gas with North Sea oil, and we sell very little, if any, coal abroad. Therefore, we rely for our survival upon our industrial competence. I fear that with exchange and interest rates at their present levels we are working ourselves towards oblivion.
  One point has not been mentioned in the Budget debate, and I give the highest priority to it. A major discussion should be taking place about how we transfer the great short-term wealth of North Sea
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  oil into improving and increasing our industrial competence. That must surely be our aim so that in 25 or 30 years' time, when the oil has gone, we are left with something that we do not have now. Surely, the only thing in which we can logically invest is a tremendous improvement of our industrial sector. The policies pursued today seem to us to be doing the opposite.
  It would not be that difficult to raise extra revenue in the Budget. The moneylenders could have produced more. The argument for a windfall tax on bank profits seems overwhelming. I believe that those profits are even greater than the banks' accounts suggests—that is, if the constant redecoration, removal, replacement and reconstruction of my local bank is anything to go by. That sort of activity is going on throughout the country. The banks have been spending a massive slice of their profits in a tremendous attempt to get rid of them before having to declare them. I wish that the banks would offer their customers a better service as a means of getting rid of some of their profits. However, if they cannot do that, and they seem determined not to, it seems that the Chancellor could look to them for much more help in running the economy.
  I do not exempt the building societies from this criticism of the moneylenders. The Leicester Building Society has decided to come to my constituency. I cannot see what Cornwall has to do with Leicester. There are already the offices of some 28 building societies in my tiny city of Truro. The Leicester Building Society is paying about £200,000 for a small kiosk in the centre of the town in order to trade and attract custom. The building societies are open to criticism for the amount that they spend on prestigious premises for gathering in money. They, too, could give their customers a better deal, and if they do not we could look to them for extra money.
  Drink and tobacco have been mentioned. I declare an interest. I smoke a lot. I have been described in Cornwall as the only member of the Church of England in the county who is teetotal. One elderly gentleman once told me that he could not see the point of my being a member of the Church of England, since I was a teetotaller. That says a lot about the county of Cornwall.

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  The inclusion of alcohol and tobacco in the cost of living index is ridiculous, and both have come off lightly in the Budget. If we were to chart the items that have become less expensive in real terms since the early 1950s, we would find that alcohol is nearly top of the list. That is insanity for any long-term economic policy, and it has happened because Governments are constantly terrified of the cost of living index. Could not there be an across-the-Floor agreement to stop that sort of nonsense?
  There is an 11 per cent. rate of unemployment in my constituency. Before I became a Member of Parliament I worked in industry, and I despair of the knowledge of Conservative Members of what it is like to be unemployed. I have never been unemployed, despite predictions at the last general election. I recollect the tin mines in my constituency being closed down and 700 men being made redundant. It was not their fault. They had a good record for doing a good day's work. It was the judgment of Consolidated Gold Fields, which owned the tin mine at that time, that it was not viable. That was contradicted by Rio Tinto-Zinc, which, fortunately, has reopened the mine.
  I have always been prepared to justify a substantial expenditure by the State to make the adjustment from employment to unemployment as reasonable as possible. It must be despairing for a man to realise at the age of 50—having spent his entire life working in an enterprise—that he faces a period of major readjustment and that the skills in which he has taken great pride are no longer required. I am, of course, talking about ending the miserable 26-weeks' earnings-related supplement. I find that incredible, and I find it difficult to believe that there is a majority for the suggestion. I look to Conservative Members, many of whom are more humanitarian than some Labour Members believe them to be, to vote against that measure.
  The increase in child benefit from £4 to £4·75 is not sufficient. The House constantly pays lipservice to wanting to change the "Won't work"—or "Why work?" as I choose to call it—attitude. If that is to be dealt with sensibly we
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  should increase child benefit in real terms, and I am disappointed that the Government have not even kept it in line with the rate of inflation.
  Prescription charges are to be raised to £1. It is time that politicians were honest about prescription charges. They do not increase the charges because of the money that will be raised. They increase them—there has been evidence of it in the past—because they hope that there will be a substantial reduction in the demand for prescriptions. The policy of the Liberal Party is that there should be no prescription charges, but I suspect that if we came to power prescription charges would remain, but not at the rate of £1. That charge cannot be justified on any basis. I can do no better than echo the words of the hon. Member for Brent, South (Mr. Pavitt), who outlined the arguments against a prescription charge of £1.
  A small point that has not been mentioned before but which will be mentioned by many employers of one or two people—small businesses are common in my area—is the scheme whereby the Government will make the employer responsible for the first eight weeks of sickness pay. I have not been able to confirm that the period is eight weeks; the Chancellor said that it would be several weeks. That can only be viewed as a fine on employers of one or two people. A company of the size of ICI will not suffer, but the genuine small employer will suffer the loss of a valuable employee—a third of his work force —he will have to pay the sickness benefit of that employee and he will also have to pay a short-term replacement. Yet the Government have the audacity to tell the House that they support the self-employed and the small business man. The irony will not be lost on small employers in my constituency.
  The Government have increased income tax in real terms by the miserable reduction of £61 in personal allowances for a married couple.
  If some attention had been paid to the moneylenders, the banks, and the duty on tobacco and alcohol, enough money could have been raised to do better.
  I plead with the Government not to continue their policy of an ever-increasing

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  tax on petrol. The argument for increasing indirect taxes each year is that we must keep them constant in real terms and that we must not let the cost of the article fall in real terms. I generally favour that argument. But no one can say that petrol has decreased in price during the last 12 months. The Government increased tax on petrol last year, there was a massive increase in oil prices from the oil-producing countries in the Middle East, and the Government are now increasing the tax on petrol yet again. If we wanted to design a tax as a penalty for rural areas, I cannot think of anything more clever and more efficient than to increase the tax on petrol.
  If an ordinary working person in my constituency buys a gallon of petrol to drive his car to work, he pays £1·40. If a self-employed person in my constituency buys a gallon of petrol, he can claim back 21p VAT, and he can reclaim the remainder against the standard rate of tax. Therefore, the cost to him of a gallon of petrol is 84p. If a person works for ICI or the china clay group in my constituency, he can reclaim the 21p VAT and the company can charge the remainder against corporation tax, thereby receiving 61p in tax rebate. The cost of a gallon of petrol to an ordinary working person is £1·40, the cost to a self-employed person is 84p, and the cost to a person working for ICI or another large group is 58p a gallon.
  If the Government are increasing the tax on petrol purely as a conservation measure, I humbly suggest that they look also to the broad issue of taxation on petrol and the marginal cost of buying a gallon of petrol. There can be no logic in two people buying a gallon of petrol and driving the same distance having to pay such incredibly different prices. That is what is happening at present, and as the years go on the position will become worse.
  My party's main criticism of the Budget is not so much of the items in it, some of which are miserably mean, as I have already outlined. Our main objection is that we do not believe that the Government's overall declared strategy for overcoming inflation will work. It will not even begin to work until the Government face up to the main issue of having a pay policy.
  6.50 pm
  Mr. Chris Patten: I should like to comment on and follow a little later in my remarks what the hon. Member for Truro (Mr. Penhaligon) said about child benefit. Having listened to some of the speeches in the debate since last Wednesday, it would seem, from hearing Opposition Members, that the Chancellor has in his Budget perpetrated the greatest atrocity since the slaughter of the innocents. However, for most of the time since last Wednesday afternoon there have been more adjectives than hon. Members on the Opposition Benches. It would seem that most of them have been content to express their outrage by proxy.
  I do not want to appear at the outset to be too sycophantic, but I should like to give an unreserved welcome to four of the proposals in my right hon. and learned Friend's Budget and then to say one or two things that may be taken as being slightly less sycophantic.
  I welcome in particular what my right hon. and learned Friend had to say about profit sharing, and I join my hon. Friend the Member for Somerset, North (Mr. Dean) in giving a particular and unreserved welcome to what my right hon. and learned Friend had to say about the tax treatment of widows, about help over fuel costs and about charitable giving. I should like to commend the part that I am sure my hon. and learned Friend the Member for Dover and Deal (Mr. Rees)—who has just come into the Chamber—played in that decision.
  I wrote to the Chancellor before the Budget asking him to do two things. He did three. I am reminded of the words "Ask and it shall be given you". I hope that that is a precedent for any future dealings that I have with the Treasury.
  The overall thrust and approach of the Budget is towards the objectives set out in the manifesto on which we were elected, namely, to halt and reverse the decline in the British economy by reducing inflation, by shifting resources from the consumption of wealth to its creation, and by establishing a fairer balance between the trade unions and the rest of society.
  I do not happen to be a great fan of the mandate theory of politics. Looking back over the last few years, it would appear that almost as many mistakes have

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  been made as a result of following manifesto commitments as have been made by breaking them. Nevertheless, I wholly endorse the objectives that we set out in our manifesto, while having one or two anxieties about tactics and methods. I am not sure exactly what is the moisture content of those reservations, but I am somewhat reassured by the fact that most of them have been expressed, even fairly recently, by some people who would not he considered merely as dry but as positively bone dry.
  In the run-up to the Budget, week by week the forecast for the public sector borrowing requirement fell steadily. There was a point at which I thought that if the Chancellor would put off the Budget until June he would be running a surplus. He was not quite able to do that, but he announced in his Budget that the PSBR, as a proportion of gross domestic product, would be falling.
  I have in the past expressed some doubts about the emphasis that we place on the PSBR as the hallmark of virtue. There are obviously doubts about the intimacy of the relationship between a given level of the PSBR and interest rates on the one hand and the control of money supply on the other. My right hon. and learned Friend the Chancellor seemed to be toying with this argument, and my spirits soared during his Budget Statement, when he said:
  "Some increase in the ratio of PSBR to the national income may be consistent with the maintenance of a given monetary target and without itself requiring increases in interest rates."—[Official Report, 26 March 1980; Vol. 981, cc. 1446–7.]
  Quite so. I imagine that that was the reasoning that led the Financial Secretary to the Treasury, in a speech in January, reported in The Financial Times and, I think, elsewhere, to argue that after taking together cyclical influences and the medium-term objective it might be sensible to favour what he called a stepped profile, in which the proportion of the GDP taken in borrowing remained broadly unchanged in recession years but fell sharply in other years.
  There is one of my reservations, expressed by somebody who is very dry. That was the voice—I imagine the authentic voice—of the London Business School and of the Chancellor's new economic adviser, but, having appointed
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  Professor Burns, it appears that the Government have listened to Professor Minford. We understand from The Observer that the main reason for the switch from January to March was that the Government now believe that the corollary of the argument in 1973—that as an oil importer we could afford to run a higher public sector deficit in order to offset the deflationary impact of higher oil costs, is—to quote from what was clearly a very influential economic paper produced early this month by Morgan Grenfell, that
  "as an oil producer, the UK should run a smaller deficit and even a public sector surplus in order to preserve the industrial structure of the economy and encourage the growth of the non-oil sector."
  As I understand the argument, it is that industry would be helped by a very much lower PSBR, and the lower interest rates consequential on it, by giving firms an opening in the capital markets and by making them more competitive and profitable through a capital account deficit and a lower exchange rate.
  I hope that Ministers are right about that, because one could presumably accomplish the switch from a current account to a capital account deficit either by devaluation or by a long recession. If it were the latter—and given what is still likely to happen in the future to world oil costs and so on it might well be—we could finish up with a very large quantity of foreign assets but with very little industry to speak of here at home.
  I hope that my right hon. Friends will be reasonably flexible about this strategy. I hope that they will consider helping industry through tax cuts, even at the expense of slightly increasing the PSBR. I hope, in particular, that they will consider a cut in the employer's national insurance surcharge, which stands for us as a reminder of how much the right hon. Member for Leeds, East (Mr. Healey) did to help industry—German industry, French industry, Japanese industry but not, alas, British industry. He was boasting last week about how quickly he had been able to impose the national insurance surcharge. I hope that, if necessary, my right hon. and learned Friend will be able to act as quickly to cut it. That would seem to me to be one very good way of using any Brussels rebate that we get in the next few months.

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  Some people have argued that the Chancellor should not do that, because we can keep pay settlements down only by keeping the company sector weak. A previous Chancellor had a word or two to say about that:
  "They say that we should depress demand to a point at which employers cannot afford to pay and workers are in no position to ask for higher wages. If this be the only way in which to contain the wages/prices spiral, it is indeed a sorry reflection upon our modern society."—[Official Report, 9 April 1957; Vol. 568, c. 969–70.]
  That was in Lord Thorneycroft's Budget Statement. We have been searching for the Holy Grail—or, as some people would have it, hunting the Snark—ever since.
  I thought that in many ways the least satisfying part of the Chief Secretary's speech last week—it was otherwise an excellent and customarily intelligent and charming speech—was what he had to say about pay. Perhaps I may say, as he is now present on the Treasury Bench, that his reassurance about the CBI data bank figures, showing that 52 per cent. of pay deals since last August had been under 15 per cent., was a trifle "underwhelming". If my arithmetic is right, it means that 48 per cent. of those settlements have been over 15 per cent.
  The problem is that with a pretty tight cash position for companies we still have a pay round that is running at about 20 per cent., and it would be extremely worrying if, with an even tighter pay position for companies next year, we were to have—as some people are suggesting may happen—a pay round running at any thing like that figure.
  That is why I was encouraged by what my right hon. and learned Friend the Chancellor had to say about pay talks in the NEDC forum. In Opposition we talked quite a lot about moving towards the sort of concerted action procedures that the Germans favour. I notice that last Thursday the Chief Secretary said that that was nothing to do with an incomes policy. I hope that that can be regarded as a useful step forward and that those of us who press for the Government to be a little more imaginative on this, whatever the difficulties, will not be accused of the ultimate sin of suggesting that they should intervene in something which it still somewhat erroneously described as "free collective bargaining".
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  I should like to express one final reservation, following the speeches of the hon. Member for Truro and my hon. Friend the Member for Somerset, North in regard to child benefit. I do not want to crawl over the details of the argument that has raged or pattered about for the last few weeks. As he has just entered the Chamber, I might add that the admirable speech of my right hon. Friend the Secretary of State for Social Services on the subject a few years ago is now almost as famous as those which were made at Tilbury and Gettysburg. However, it bears repetition.
  Without seeming to be too destructively critical, perhaps I can point out that whatever else is said about the benefit increase announced in the Budget, and whatever the justifications for the Government's decision—and they seem a little thin—the Chancellor's decision clearly fell a long way short of what we hoped to do when we were in Opposition, I think that that goes without saying.
  In justifying what he did, my right hon. and learned Friend said that he had treated child benefit in exactly the same way as tax allowances in the future and annualised basis. I hope that we can take it from that—perhaps this can be confirmed later—that the Chancellor intends to treat child benefit in exactly the same way as tax allowances in the future, and to all intents and purposes to index them, which has been suggested by Mr. Sam Brittan, who, I suggest, is not widely regarded as "wet". Unless the Government are prepared to take that sort of decision, and unless they are prepared to rescue child benefit from the list of also-rans, it will become increasingly difficult to see what stands at the centre of their social policy.
  I am totally committed to the Government's objectives. More than that, I believe that the great majority of people, even some of those who do not care for us, want to see our strategy work. After all, what is the alternative? However, as my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) said on Thursday, to make it work we need as much understanding and support as possible from the public. Last week, the Chief Secretary mentioned Philip Snowden. In Robert Skidelsky's book on the slump, I think he said that Snowden was never able to reconcile the laws of sound public finance with the rhetoric

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  of Socialism. I think that that is still the problem that the Labour Party faces today.
  Our challenge in the Conservative Party is to reconcile economic realism with consent. It will be easier to do that, and to ensure that our policies not only work but last, if we pay proper attention to the problems of the family and of industry as we lead Britain through the difficult months of austerity that lie ahead.
  7.3 pm
  Mr. Andrew F. Bennett: I welcome the remarks of the hon. Member for Bath (Mr. Pattern), particularly about child benefit. It seems rather unfortunate that, although there have been many words on child benefit from Conservative Members, they did not produce any real action in the Budget, and it does not look as if they will produce any real action at all in the Finance Bill. I think that it is time that one or two Conservative Members starting voting according to the way in which they have argued in the Chamber.
  In my criticism of the Budget, I start with two fairly small points. The first relates to the date of the uprating. In my constituency, and I am pretty certain that the same applies throughout the country, most pensioners bitterly resent the fact that they must wait for six months after the announcement to get their money. This year, they will particularly resent the fact that the uprating has been put back from 10 November to 24 November. So far, there has been no Government explanation of why they are doing that. We can only assume that it is just another public expenditure saving and that in putting back the date of the up-rating they have saved about £35 million. But to most pensioners it means that half their Christmas bonus has been saved this year by putting back the date of the uprating for 12 days or so. Certainly, a large number of my constituents will judge the Budget in those terms and will think that it is a pretty mean deal.
  Secondly, there is the choice of 16½ per cent. for the uprating. At present, estimates of what the inflation rate will turn out to be are mere speculation. Therefore, in order to judge the Government's intentions in the Budget, we must ask what will happen if inflation turns
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  out to be higher. Will they make it up to the pensioners, or will the pensioners lose out? Certainly, a lot of pensioners in my constituency believe that the inflation rate this year will be more than 16½ per cent. They want to know what will happen if the Government have got their figures wrong and have picked a figure which is too low. Again, we have had no commitment from the Government that they will make up any deficit. As with last year's estimate, which proved to be wrong, one can only assume that the Government will pocket the difference and will not make it up to the pensioners.
  According to the opinion polls published in the Sunday newspapers, the Budget is supposed to have been popular. That is completely different from my experience when talking to my constituents. Very few have had a good word for the Budget. However, in compiling the opinion polls I suspect that a lot of people thought that the Budget would be worse, and when it turned out not to be as bad as they were expecting they decided that it was not too bad. I also suspect that a lot of the Budget's worst aspects are contained in the small print of the White Paper, and it will take a long time for people to realise just what is happening.
  I do not really believe that the test of the Budget is whether it is popular or unpopular with the majority of the electorate. The real test is more serious. What does it do for the small minority? Does it remove all their hopes? That is the real problem with the Budget.
  We live in a democracy which depends on two major elements—first, gaining approval from the majority of people to govern, and, secondly, getting the consent of the minority. To get that consent, one must convince that minority that there is a real chance of their getting some change and that there is a real hope for their future as well as for the future of the majority. I believe that the Budget takes away the hope from a large number of people who are already in poverty. In so far as it destroys their hopes and aspirations, the Government ought to start to worry. It is when people lose hope and their belief that through the democratic society they can improve their lot that they start to turn to anti-social means, such as breaking the law and inflicting injuries on others. The Government ought to be

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  thinking pretty carefully about the effect which their policies are having on the long-term unemployed and sick as well as on the working poor.
  Those groups have received from the Budget another kick in the teeth. Has the Chancellor checked with them to discover whether they meekly prefer to put up with being put upon again and again? If he has not, he may well find that some of them will start to hit back, not in the democratic way in which we would like them to hit back but in other ways. Having failed to early those people with the Budget, he may find that he is producing far more problems for the country than he is hoping to solve with his economic strategy.
  I met quite a few people at my advice bureau on Saturday morning, and I was surprise at the number who increasingly felt that they had little hope. One example concerns a man with three children who lives in a council house in Stockport. He does not like the house. He believes that it is badly maintained by the local authority, and I think that he is right. He feels that the surrounding environment is pretty run down. He believes that his heating system is costly and ineffective. More than anythilng else, he would like to move to a more attractive council estate. He has little chance of doing so within the present housing policy in Stockport. The next approach is to ask "What is the alternative? If you are not likely to get a move, what chance do you have of trying to buy a house of your own?" On his income of £60 a week, he has little chance of obtaining a mortgage. He is pretty well trapped in his present accommodation.
  Of course, he receives some benefits from the State. However, his income is slightly above FIS rates. In future he may come just within FIS rates, but if he receives a small increase in his income, if he works a little overtime or if his wife goes to work, he will lose his FIS and other related benefits.
  As I have said, he is pretty well trapped in what he considers to be inadequate accommodation. There is little prospect of his improving his lot for a long time to come. He feels increasingly bitter. He reads of the Budget and he asks "What about housing? How much money is available for a major overhaul of my council house so that it may be improved
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  and brought up to the standard in which I should like to live? How much money is available for the local authority to improve the environment in which I live?
  The answer to all these questions is that there is no money available. The Budget means that the prospects of the man to whom I have referred become worse and worse. He has seen school meal charges increase as well as fuel bills. In neither of those areas is there any help for him in the Budget. He feels trapped. He is a hard-working man with simple aspirations for his family, yet he sees them all being denied in the Budget.
  My hon. Friend the Member for Brent, South (Mr. Pavitt) spoke about prescription charges. On two occasions since Christmas I have been into a chemist's shop for prescriptions. I am not suggesting that this happens every time one visits the chemist, but I have seen people waiting to hand the chemist their prescriptions who have asked which of the two prescriptions they should have because they did not want to pay for both. It seems wrong that chemists should have to make decisions of that sort.
  The Government say that they are exempting various groups. That does not ease the burden that is put on a family's income. If a child is sick, it will be exempted from charges, but that system does not help the mother or father who is sick. That will involve family income and family hardship. Many of my constituents do not have a spare pound in their pockets on certain days of the week. That is because their budgeting is tight. When the mother or father is sick, they do not go to the doctor. If they do go, they want treatment that does not involve paying out £1.
  Many people tend to continue to go to work when they are sick. They spread germs to others. They try hard not to have time off work. They try hard not to get prescriptions. The social cost may be far greater if 'flu spreads around the works and there is a consequent loss of productivity. It is one of the charges that cannot be justified. Although the charge is to be £1, there will still be a great deal of administration involved—for example, checking the exemptions.
  The Government argue that the £12 season ticket is available to those who need a great many prescriptions. However, some people find that £12 takes

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  quite a bit of saving. The Government could say "Keep a part of your prescription forms and when you have 12 you may have the rest for the year free." Unfortunately, the Government are saying that they want the money in advance. They are making it difficult and discouraging those who are most in need on low incomes from availing themselves of season tickets.
  The Government propose to remove the earnings-related supplement. Conservatives are saying that there should be confiscation of all sorts of insurance benefit for which people have contributed. Surely, most Conservative Members do not believe in that approach.
  I move on to consider the plight of the longer-term unemployed. It is interesting that none of the Department of Health and Social Security Ministers is in the Chamber.
  Mr. Canavan: Where are they?
  Mr. Bennett: In Committee we heard great words from the Under-Secretary of State for Health and Social Security, the hon. Member for Wallasey (Mrs. Chalker), and the Minister for Social Security, the right hon. Member for Daventry (Mr. Prentice). They told us of their concern for the long-term unemployed. They told us that they believed that there was poverty among those who had been in receipt of unemployment benefit for 18 months to two years.
  I know that my constituents who have been out of work for a long time but who do not receive long-term rates of benefit are in the most difficulty. Some of them have every intention of getting a job. They go after jobs week after week and they do not get them. Employers take the attitude that if there are two persons applying for one job it is best to choose the person who has had the shortest period of unemployment. These people get a double kick in the teeth. The Government now propose to cut back the benefit that they receive. There is no provision in the Budget that will give them the prospect of a job.
  Mention was made in the Budget of enterprise zones. It would have been far better if the Government had said to employers "If you take on those who hake been unemployed for more than 18 months, we shall make some contribution
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  to their wages for the first few weeks." That would have provided a positive incentive to employers to take on those who had been out of work for a long time. Everybody agrees that those who live year in and year out without work suffer serious social disadvantages.
  There are many other provisions in the Budget that will make people think twice about keeping the laws of the land. I suggest that the Government's proposals for strikers is a clear illustration. It seems that few of those on the Government Benches have spoken to strikers or considered their situation.
  It is my experience that if a dispute lasts a long time there is formed a group who might well be described as the wild boys. Very often these people have engaged in little or no political activity. They have often participated to only a small extent in the affairs of their union. However, some of them get wild ideas. They become extremely bitter. They talk about sabotaging the factory. They are quite happy to become involved in violence. It takes a great deal of hard work by those with cooler heads—very often full-time trade union officials—to persuade them that they must organise the strike in a peaceful way and that they have to be sure that when they return to work the factory is there and they can work in it.
  There are many who are already pressed hard by financial pressures. The theory is that strikers have made provision for strikes. My experience is that many of them do not intend to get into strikes. Many of them are faced with difficulties before the strike takes place. They may be in financial difficulties long before the strike. They may have matrimonial problems or other family problems. Many of these people are of the sort who do not look from one day to the next. It is difficult to restrain some of those I call the wild boys within industrial disputes. If the Government produce measures of the sort that are set out in the Budget, we encourage the wild boys to take the law into their own hands. If the Government find that over the next few years industrial disputes become increasingly bitter, that will be of their making.
  It seems from some of the speeches that we have heard from Conservative Members that Conservatives are encouraging workers to submit more wage

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  demands. What is the logic of the Tories' position? They argue that provision should be made by trade unions to ensure that they can afford a strike. That means that it becomes necessary to pay higher union dues. The logical means of obtaining the money to pay those dues is to pursue a claim for a higher wage increase next year. In that sense Tories are fuelling pressure for more money from employers.
  We know that many industrial disputes end with an agreement with the employer that an additional sum will be paid as "clear-up" money. More often than not it is an agreement to make a great deal of overtime available. It is an arrangement that will permit the strikers to catch up with much of the money that they have lost during the industrial dispute. Sometimes it means that the employer may catch up with lost production, but often it does not.
  The £12 will become an element in "clear-up" money. The strong unions, the ones that are likely to win disputes, will ask for the £12 element to be included in the "clear-up". There will be no penalty for those in the strong unions. The penalty will be paid by the groups that are less well organised and weaker.
  From the Bill as drafted, it is clear that the Government intend to penalise not only people who strike but also those who are locked out. There are occasions when employers behave badly in industrial disputes. What penalties will the Government impose on bad employers, particularly those who unfairly lock out groups of workers? Alternatively, is the provision there because the Government realise that trade unionists may be much more selective in those they bring out on strike? They may try to penalise industries and plants by bringing a few people out on strike rather than large numbers.
  The final problem that the Government should consider is disputes within families during industrial disputes. From press reports it is clear that the wife who has to cope with budgeting often puts pressure on her husband to return to work. The husband is keen to stay out in support of the dispute and realises what a defeat is. From my experience, families can be divided through an industrial dispute.
  Under the Bill, if the husband leaves home, the wife does not lose the benefit
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  that she receives. If the husband stays, she loses the £12. That is a direct encouragement to families to split up during industrial disputes. There will be confusion between a genuine split in a family and one that is merely contrived to get round the law. I suggest that the Government have sufficient problems in deciding between non-genuine and genuine cases in need of social security without creating a new problem.
  Whatever the majority may have said in the opinion poll this weekend, the real test of the Budget will he how far it grind: down the minority this time round and how soon they will hit back, one hopes by democratic means. The Government should not be surprised if some of these people hit back in undemocratic ways.
  7.21 pm
  Mr. Charles Fletcher-Cooke: Yesterday, members of the viewing public were treated to an interview between the Leader of the Opposition and Mr. Brian Walden. Many hon. Members may have heard Mr. Walden ask the Leader of the Opposition how he would have financed his Budget. The staggering reply was that he would have increased the public sector borrowing requirement by £2,000 million. When I heard that, I thought that the old boy had gone mad. On reflection, I believe that he is intending to retire soon, because a more irresponsible suggestion would be hard to consider.
  I do not want to get into theological debate with my hon. Friend the Member for Bath (Mr. Patten) about the exact effect and web of connection between the public sector borrowing requirement and inflation. That there is a strong connection no one will deny. How it works, those who carry around with them their little Red Books without which no go-ahead young budgeteer can hope to compete in these debates, will answer better than I. Even if there is no connection, to load a further £2 billion on the taxpayer at current interest rates is incredible, yet that was the suggestion of the Leader of the Opposition. The more widely that is known in the country, the better.
  The question is whether the public sector borrowing requirement has not already been fixed rather too high. Contrary again to my hon. Friend the Member

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  for Bath, whom no one could possibly accuse of being wet despite the name of his constituency, I question whether any Brussels dividend—I believe that it was my hon. Friend who made the suggestion—should go to the reduction of direct taxation. To my mind, it should go to a reduction in the PSBR.
  Mr. Chris Patten: I suggested that it should go to cuts in the employer's national insurance surcharge and not to taxation on the individual.
  Mr. Fletcher-Cooke: I did my hon. Friend an injustice. I believe that the latter is preferable to the former but that my suggested destination is better than either.
  What is the effect of the Budget on unemployment? Everyone, including the Government, appears to assume that unemployment will rise. I am alone in this Chamber in believing that the overall effect of the Budget will not be so. I ask hon. Members to bear with me while I put forward this eccentric view.
  I am more and more impressed, from visits to my constituency, which is industrial and which I know pretty well after 30 years, with the increasing unreality of unemployment figures. That they are numerically correct and that those numbers are drawing unemployment benefit I do not doubt, but whether they represent in totality those who are not working I very much doubt.
  Since I am increasingly suspicious and doubtful about the present figures, it is not surprising that I do not follow the figures in the little Red Book that forecast these matters year and year ahead. The forecasts are now called medium-term rather than long-term, in the hope that that sounds more practical and less visionary, but the effect is much the same. From personal experience and from talking to people, I consider that present position is different.
  May I give one or two examples? People talk on these matters without examples, and two examples are better than any amount of expatiation at large. Situated near my constituency is a large office-cleaning firm. That is a growing sector of British industry, which is not glamorous but nevertheless important. It is efficient, and it has a great deal of machinery that is difficult to work. It
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  needs skilled people to use that machinery if full advantage is to be taken of its efficiency. The industry employs a large number of people.
  Those concerned in the business all over the country are anxious to increase the status of the industry, as are all businesses, particularly new ones. Part of the increase in status was to have been a system of apprenticeships. Last year, throughout the country 3,000 apprenticeships were offered for school leavers. That scheme was published, and leaflets were distributed to schools and career offices. The terms appeared favourable. As an example, apprentices were to be given a car in their second year. How many replies were received? Not one single school leaver applied.
  That is a most extraordinary thing, in those circumstances, when we are told—
  Mr. Canavan: Will the lion and learned Gentleman give the name of this firm, so that we can check this information?
  Mr. Fletcher-Cooke: Certainly. The firm is called Lester's Office Cleaners. The hon. Gentleman will find that it has offices in London and Lancashire. I am afraid that I cannot give him the telephone numbers, but he can look them up in the directory. The gentleman who is the chairman of the firm, Mr. Barry Lester, is also the president of the Institute of Office Cleaners. If the hon. Gentleman wants any further information, he can get it from Mr. Barry Lester. I do not blame the hon. Gentleman for being suspicious. Opposition Members are always suspicious when these examples are produced. I thought that I would be asked for further and better particulars, so I furnished myself with one or two.
  All the time one gets these stories. Again, for example, NORWEB, the electricity distribution concern in my part of the world, cannot get apprentices, drivers or unskilled labourers who are prepared to dig the road and to lay or mend cables. If it gets them, they leave pretty soon. This is a nationalised industry with very good terms of employment. It simply cannot get the people.
  I am sure that that is not true of the majority of the unemployed, but it is true of quite a section, a hard core—that there are jobs available and people simply will not take them. Why is this? First, it is

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  because there is the black economy. A number of people will not get into the machine because it means paying a high rate of tax, and it is better not to pay tax if one can avoid it. Secondly, it is, of course, because of the poverty trap, the matter about which my hon. Friend the Member for Norfolk, North (Mr. Howell) tells us all the time.
  There is undoubtedly a "Why work?" syndrome when the margin between the benefits to be gained from working and those to be gained from not working is too narrow. It is well known that that is so. Anything that can be done to cure the problem should be done. Although I am not a great one for family and child allowances, and although I do not think that they are as popular in the country as some of my hon. Friends do, nevertheless I think that they have a good case on the ground that an increase in the child allowance is apparently one way of decreasing the poverty trap and of going a little way to curing the "Why work?" syndrome.
  But there are other things in this Budget which do that, some of them appearing severe—the taxation, or at any rate the notional taxation, of unemployment benefit, the raising of tax thresholds and all the other financial indications in the Budget which are designed to work on that margin to make it better to work than not to work. Although they will not cure the unemployment problem, I think that they will be enough to compensate, and even more than compensate, for the increase in the global figures which my right hon. and learned Friend the Chancellor of the Exchequer, in his indispensable little Red Book, says will increase absolutely. I think that they will not do that because, although more could be done at this point of application, enough has been done to see that more people will be tempted back into open work rather than working in the black economy and more people will be keener to get a job than they are now, and for that I am very grateful.
  7.34 pm
  Mrs. Renee Short: It is interesting how people who deny that they are "wets", whatever the real definition of a "wet" is, will produce, before sitting down, a number of criticisms of what their own Government are doing. The hon. and learned Mem-
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  ber for Darwen (Mr. Fletcher-Cooke) is no exception.
  The majority of people in this country are aware of what happened in the previous Budget and of what has happened in this Budget and in the public expenditure White Paper, and they know that these events, taken together, spell disaster for the British economy unless the Government are willing to change course. The damage that the Government are doing to the economy now is quite breath-taking.
  Reference has been made to the meanness of the death grant. It is mean. I remind the Secretary of State about the meanness of the maternity grant. One way in which we could help some of the unsupported mothers and low-paid families is by improving the maternity grant.
  During the general election campaign, we knew that what the right hon. Lady the Prime Minister was saying about cutting back on income tax—this was her main ticket during the campaign—would inevitably mean disaster for the country. We were right when we explained what the consequences of that policy would be. The trouble is that we did not say it loud enough or long enough, and we did not impress the electorate as to the consequences of the right hon. Lady's policies. But those consequences are now clear for everyone to see.
  It is clear that the right hon. Lady is now set on a course which is systematic and determined and is an onslaught on every scrap of social and economic advance that previous Labour Governments have introduced. The two Budgets that they have introduced show clearly the political and economic bias of the present Government.
  The right hon. Lady's policies suit the well-off very well indeed. Not only do the well-off make money but they can offset many of their living expenses against tax and they do very well out of wage and salary earners, who are seeing their cost of living, by contrast, rocketing sky high and their standard of living being eroded. Not for them the possibility of reducing their cost of living through the tax system.
  We have only to look at what was given out in the previous Budget. A director or chairman of a firm on, say, a "modest" remuneration of £40,000 got

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  no less than £7,000 back in income tax reduction. That sum is more than a large number of families in this country live on during the whole year. I have the figures from The Economist—and who would suggest that The Economist produces figures that are not correct?
  Low-paid workers are being ground down in a way unprecedented since the war. Indeed, while the right hon. Lady and the Government inveigh against "scroungers" and those who "will not work"—and we have heard a good deal about the "won't work" syndrome this evening—she is systematically removing the incentive to work from the low-paid by her taxation policies, by her assault on the social wage, by her attack on what we provided for their children at school and by the soaring cost of living, including food, fares and fuel. These are parts of the general family budget that loom very large.
  By the Education (No. 2) Bill alone, the right hon. Lady is putting thousands of low-paid families in crisis. I do not want to say anything about prescription charges because my hon. Friend the Member for Brent, South (Mr. Pavitt) dealt with those very effectively. They affect not the families who are able to get a season ticket for their prescriptions without charge or with very low charge, or whatever the Secretary of State decides. It is those who are just above that level who are hit so badly.
  Mr. Patrick Jenkin: The hon. Lady is confusing two things. One is the exemption—two-thirds of prescriptions go to those who are exempt—and the other is the season ticket for the one-third who have to pay. There is no income limit on that. Anyone may apply for a season ticket, at £12 for a year or £4.50 for four months.
  Mrs. Short: Nevertheless, charges for prescriptions fall very heavily on families who do not qualify for either of the benefits to which the Secretary of State has referred. The level of the charge is hound to be a barrier between the medical care that doctors feel that those people need and their ability to take advantage of it.
  The Prime Minister and the Government are obsessed by the monetarist men-
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  tors Friedman, Joseph and Howe. The countries that have taken Milton Fried-man's advice are facing severe economic crises. While presiding over a decline such as has never been seen before, and throwing thousands of people out of work every week, the Prime Minister is creating jobs in one direction—by taking on people to chase those whom she calls social security scroungers—instead of boosting industry by providing new jobs and creating new jobs by investing in new industries. I wish that the right hon. Lady showed equal enthusiasm for chasing tax dodgers, because she would then be able to recoup some of the revenue that is escaping.
  Unlike the hon. and learned Member for Darwen, I have no reason to believe that the unemployment figures are incorrect. The West Midlands has seen the biggest regional increase in unemployment since September. The increase has been 15 per cent. compared with the United Kingdom figure of 9·4 per cent. and the increase in the South-East of 7·5 per cent. That is a serious increase in unemployment and the contraction of job opportunities in the West Midlands.
  The number of registered unemployed in Wolverhampton last month was 7·3 per cent. of the number of working people. The figures include 1,550 young people aged between 16 and 18. Another 800 in the same age group were participating in various youth opportunities schemes. That means that 2,350 young people aged between 16 and 18 were either out of work or seeking work in Wolverhampton.
  A total of 12 per cent. of 18-year-olds are seeking work, and if the 18-year-olds on youth opportunity programmes are added to that number the unemployment rate of 18-year-olds becomes 15·5 per cent. Of course, a number of young people will be leaving school in the summer and we shall probably then have as many young people again added to the unemployment register. Their prospects are grim. Throughout the area a large number of firms that were household names have disappeared from the industrial scene. Bilston steel is one of the later casualties. Ever Ready batteries, which employed hundreds of women in my constituency, has closed, and we all know the sad story of the motor cycle industry and many other firms where job opportunities have disappeared.

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  Some West Midlands housing authorities are among the worst hit by council house spending cuts. Coventry and Walsall have had their spending cut by half and Birmingham has had a 30 per cent. cut. The outlook for the construction industry is grim. Only today I visited one of the country's major construction firms which has its Midlands headquarters in Wolverhampton. Its position is dire. It is depressed about the outlook. We all know that the building industry has been depressed for a long time and that there is much unemployment in that industry.
  The Secretary of State for the Environment has been waffling about the need for local authorities to build low-cost houses and to make a few pounds by selling some of their council houses, but he is condemning millions to go on living for the foreseeable future in rotten, damp, insanitary little houses.
  Local authorities have no money to modernise such properties. The local authority in my area has had to postpone a comprehensive modernisation scheme of houses in a densely populated ward in my constituency that were built after the First World War. It is scandalous that those houses will have to be left for goodness knows how long before the families can have decent heating, kitchens and bathrooms.
  With £957 million cut from local authority housing investment and £25 million from the Housing Corporation budget, the future is grim for the house-building and house renovation industry. And who can afford to borrow to build at the present rate of inflation and interest rates? Local authority building may fall to 30,000 next year—one-fifth of the level under a Labour Government a few years ago. What a record that would be for the Government to achieve! Wherever one looks, the outlook and the prospects are appalling.
  A few weeks ago the Chancellor of the Exchequer addressed the engineering employers at their annual dinner and said that it might be 10 years before we saw any signs of recovery.
  Mr. Lawson: No. He did not say that.
  Mrs. Short: It is no use the Financial Secretary shaking his head. He should
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  check with his boss to find out what he said.
  We cannot suffer 10 more years of the decline and failure that we have witnessed in the nine months since the election. Think what sort of wasteland the Government could create in 10 years.
  Mr. Nick Budgen: Would the hon. Lady like to say a word or two about the Chancellor of the Exchequer's proposals for an enterprise zone at Bilston? Does she welcome that?
  Mrs. Short: There is nothing new about that. It is just following on from some of the things done by the previous Government.
  Mr. Budgen: Does the hon. Lady welcome it?
  Mrs. Short: We shall have to see how successful it is. The Government did not provide the resources for which the Bilston steel workers asked time and again.
  The situation is difficult. We have high interest rates, record inflation and low borrowing targets. I wonder why the Chancellor does not change his policies in order to help the Secretary of State for the Environment to get on with what he is supposed to do.
  In the Chancellor's speech to the engineering employers he blamed the very policies for which the Government have been responsible—high inflation, low borrowing targets and high interest rates. Those policies are putting a brake on the development of new industries, whether in Bilston or anywhere else. The Chancellor chose an extraordinary venue at which to make that speech, because the engineering industry has had a tough time over the past few months. Imports have been eroding the home market and exports have been declining.
  When I visit factories in Wolverhampton and ask why some firms have bought new automated machinery from America, Sweden or Germany, the reply is always the same: that British firms do not make what managements need and are not interested in trying to meet the design requirements of firms, delivery dates are too long, or there is just no interest in adapting to new technological needs.
  We cannot go on like that. We should have led the world in new technology,

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  but there is no drive in education to familiarise and educate the young in order to produce the designers, technicians and makers of new technology and no drive to retrain unemployed men and women in new technology. There is no help for industry to re-equip, and many firms that should be profitable and viable are struggling to stay alive. So where is all the enterprise? Where is all the help that the Government are giving to industry?
  Added to this are the continuing cuts in public expenditure, the effect of the Budget and the decline and fall in economic activity this year. Next year there could be a further decline of as much as 4 per cent.: there have been estimates to that effect. Even more firms and more jobs will collapse, poverty will hit many thousands of families and more people will be unemployed.
  All the Government's forecasts on the level of inflation were way out. The White Paper published last November forecast an inflation rate of 13 per cent. That has long been proved to be incorrect.
  The proposals by Sir Derek Rayner, reported in today's edition of The Times, include the abolition of unemployment benefit and a return to the means test. I take Sir Derek's proposals with a good deal of salt. The Select Committee has already had experience of looking at one of his projects—the change in the method of payment of pensions and the effect that that would have on sub-post offices. We found that the vaunted savings were not as much as were forecast.
  Sir Derek's present suggestions would be widely resisted by the trade unions if they were put into effect, because they would breach the principle of benefits in return for contributions and would put the unemployed back on the means test, which all of us thought had long ago disappeared from our economic and industrial life.
  It is no wonder that the trade unions are fighting for their members, no wonder that the miners and the steel workers and the engineering workers are desperate. They see that Britain is sliding to chaos and misery under this Government, divided as the Government are. During every economic debate there are instances of division on the Conservative Benches. The Government are bent on
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  outmoded and failed economic dogma. The best thing that they could do would be to change course or get out. Unless they do, we should make sure that there is complete opposition to every aspect of the Budget.
  I hope that those on the Opposition Front Bench will pull their socks up and make sure that we provide tough, prolonged and concentrated opposition to the Government. We should have learnt the lesson of what happened during the election campaign, when we did not put over to the people what the effect of a change of Government would be and what the effect of their economic policies, based on cutting income tax, would be. We have seen it now. During the nine months since the election, people have been able to see the fruits of that policy.
  I hope that the Opposition Front Bench will understand that it must fight hard against this Government. If the organised working class sees that the Labour Party is not fighting for it—it understands that the Government and the Prime Minister are not fighting for working people—there is the danger of the kind of industrial unrest that would cause great strife across the whole of our society. We have seen it in Germany. It is how Fascism arises. I hope that my right hon. and hon. Friends will take warning and understand that we must fight this Government all the way.
  7.54 pm
  Sir Brandon Rhys Williams: My right hon. and learned Friend the Chancellor of the Exchequer has evidently won general public support for his Budget, and it is easy to see why. It is not only brilliantly balanced and comprehensive but plainly comes from a man who is entirely dedicated to sound economic and monetary principles. He is making no concessions to vote catching, and he is introducing multi-annual planning in earnest. That is long overdue. However, there are some important points about the Budget that need to be watched, and possibly adjusted, as time goes by. One matter in particular should be adjusted right away.
  When I spoke last June I praised my right hon. and learned Friend for increasing value added tax and expressed the view that it might well have gone higher. This year my right hon. and learned Friend was right to raise the duties on

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  beer and tobacco, but again he should have gone further, for two reasons.
  First, I entirely endorse the policy of swinging the burden of taxation away from the direct to the indirect. Secondly, indirect taxation, especially on such items as beer and tobacco, constitutes a tax particularly on men, which then helps to finance the things that we want to do for the family. I so regret that my right hon. and learned Friend did not go somewhat further in that direction this year.
  Mr. Garel-Jones rose—
  Sir B. Rhys Williams: As we are all trying to keep our speeches as brief as possible. I hope that my hon. Friend will not press to intervene.
  I think that the reason why my right hon. and learned Friend did not go further was that he was concerned about the effect on the cost of living index. I can understand that, but I think that it has become an obsession with him. Of course he is right to fight inflation, but the health of the economy cannot be deduced from appearances, and the cost of living index from month to month is not everything.
  I think that it is better to meet changes in the retail price index selectively, through child benefit, rather than by blanket increases in wages. I therefore regret that my right hon. and learned Friend did not do more to increase family support. The rate of wage settlements is not governed primarily by the cost of living index, although it is always used in the arguments. What really decides the rate is the balance of forces between the parties concerned within industry. Legislation is no doubt necessary, and in the course of the coming year it will have an impact. But the big change that is coming in attitudes to pay claims is now the reappearance of serious concern about job security. That will have more effect than movements from month to month in the cost of living index. But a bigger rise in child support would have helped and could have been paid for by a rise in tobacco and beer prices.
  I should like to say a brief word about interest rates. I criticised my right hon. and learned Friend last year for his sudden and unexpected raising of the minimum lending rate. However, I recognise that interest rates must be high when the currency is depreciating as fast as it is.
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  We cannot return to a negative rate of interest. But we should look at the long-term rate of depreciation of sterling rather than at the position that has been created in the money market simply by the exigencies of the public sector borrowing requirement.
  The long-term rate of interest should have a clear relationship to the long-term rate of depreciation of the currency. On that basis, one could reasonably hope for quite a sharp decline in interest rates over the next few months. I hope that we shall see that, but I am not asking my right hon. and learned Friend to press interest rates down artificially. That would be a mistake.
  On the other hand, we must look at the whole business of the control of credit. Obviously, my right hon. and learned Friend is right to put emphasis on the total supply of money in our inflationary economy. But I am concerned about the effect of the Government's policy on the volume of business borrowing, because to a great extent the implementation of the Government's policies at local level will fall on High Street bank managers and others who may be forced to take extremely painful decisions, sometimes even to pull out the life support mechanism of firms that are basically sound.
  In the coming year this will present many people all over the country with agonisingly difficult economic and personal decisions. If a bank manager must make a decision about the possibility of extending a firm's credit, he must make assessments of that firm's potential—and for export in particular. I concentrate on the export potential of British firms, because clearly the home market will not be too lively. The best opportunities for a firm to expand will lie overseas.
  That brings me to my special concern, which I have tried to voice in the House over the last few days on a number of occasions. That is the rate of exchange. I know that many people regret that the exchange rate for the pound is as high as it is because of the embarrassing effect on our manufacturing industry, but they feel that the matter is somehow out of our hands because it is dictated by market forces. That is true. But those forces are decided by policy options that we ourselves have taken, such as the rate at which we are exploiting our North Sea oil asset.

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  The situation in which we find ourselves is one in which it is extremely easy for importers to come into the British market and become established on a basis that is likely to give them a permanent foothold here. At the same time, it is hard for our exporters even to retain the export connections that they have built up, sometimes over tens or scores of years.
  I realise that in my right hon. Friends' minds there is once again the effect on the retail price index of bringing about an adjustment in the exchange rate—that it would result in a rise in the price of imports—but I feel that they are pursuing short-term benefits at the risk of long-term damage by allowing imports to Coma into the country at artificially low prices. It may be attractive for retailers to be able to offer cheap and excellent goods with easy delivery dates all over the United Kingdom, and it may be a stimulus to drowsy and obsolete British firms, but there is a danger in continuing this policy. I believe that the Government should do something about it.
  There is a risk that firms will have to postpone investment, or that improvements in productivity will be discouraged, in the economic climate created by the artificially high exchange rate. This is an aspect of the Government's economic policy that can be overdone. We should seek actively to bring down the exchange rate by the export of capital as a deliberate policy and by the acquisition of foreign currencies in the same way as the Bundesbank, over many years, followed a policy of acquisition of foreign reserves to keep the deutschemark as low as possible and protect the profitability of German exports. And we ought to look again at the rate of depletion of our oil reserves. There are many other ways in which the Government, if they had the will, could find the way to bring down the exchange rate, including closer association with the European monetary system.
  I should like to say a few words about the personal sector. Everyone appreciates the Chancellor's courage and determination in pressing ahead with significant cuts in personal taxation and giving away some £1,500 million in the uprating of personal allowances. He is taking a courageous step in following on the
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  policies that have already become established. At the same time, he is making changes in social security, some welcome and others controversial.
  I should like to say a few words about the earnings-related element in unemployment pay. No one has made a close study of the philosophy of the structure of benefits in national insurance, but an inevitable reform was introduced a few years ago when we put the finance of national insurance on to earnings-related contributions. The old flat-rate contribution to national insurance was plainly insufficient, so national insurance is now paid for by earnings-related contributions. For the most part, the money received by the fund goes out in flat-rate benefits. At a time of inflation the Treasury does well out of national insurance contributions that rise in relation to earnings while the outgoings, for the most part, remain in the form of flat-rate benefits.
  It seems to me that the Treasury is on delicate ground in attacking the earnings-related element that has become built in to the national insurance system. I am not necessarily resisting the reform either of this or of the large payments made in cases of redundancy. But my right hon. Friends must show that their policy is part of a full-scale reform to deal with redundancy and obsolescence of personal skills. They should make a full review of redundancy payments as well as the support that the Government provide for retraining, resettlement and rehabilitation. We shall need an ambitious scheme from the Government to meet the need for the retraining of the work force to catch up with changes in technology. If the Government are touching the earnings-related benefit in unemployment pay, they must also show the positive side of their policy. I hope that they soon will.
  I should like, finally, to say a few words about child benefit. As the House knows, I believe that we should increase child benefit, for many good reasons—economic, social and out of humanity. Every Chancellor includes in his Budget one particular proposal on which he intends later to give way in response to pressure. I hope that I have diagnosed that my right hon. and learned Friend has chosen child benefit as the point on which he will soon give a concession to the feeling in the country and in the House.

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  In effect, my right hon. and learned Friend is raising child benefit, I understand, by 19 per cent. while prices since the last increase will have gone up by 30 per cent. before the new child benefit rate is implemented. I do not think that either he or my right hon. Friend the Secretary of State, who opened today's debate, can say that the Government are implementing the promises they gave to keep the rate of child benefit up to date with inflation. Their approach to child benefit is part of the whole pattern of the tax reductions that have been incorporated in this year's Budget. It seems to me controversial and precisely the type of subject on which the House of Commons should be able to express a view.
  Without necessarily upsetting the overall balance of the Budget judgment, we ought to be able to look in detail at the particular tax concessions that my right hon. and learned Friend has chosen to make and the particular ways in which social security is affected by the Budget. We should be able to weigh up these changes and possibly to recommend that the Budget might be adjusted this way or that to take account of the feelings of the House. But, as it turns out, it seems virtually impossible for us now, for procedural reasons, to enter into a full discussion on this point, partly because of the narrow drafting of the long title of the Social Security (No. 2) Bill, which was presented to the House at the end of last week.
  I understand that the change proposed in child benefit is likely to be implemented by an order and that the House will simply have the opportunity of voting against it if it does not like the figure included in the order. We shall not have an opportunity to debate it. This seems a disadvantage. I hope, therefore, that my right hon. Friends will look at ways in which these matters can be discussed by the House in the coming weeks. We have a duty to look into these issues. We have a right. There may also be occasions when we should insist upon a vote. I hope that we shall have the opportunity.
  8.8 pm
  Mr. Dennis Canavan: Last Wednesday, during his Budget Statement, the Chancellor of the Exchequer said:
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  "This Government, no less than their predecessors, are committed to maintaining a social security structure that protects the weakest and most vulnerable in our society."— [Official Report, 26 March 1980; Vol. 981, c. 1454.]
  This afternoon the Secretary of State for Social Services appeared at the Dispatch Box claiming that he was a member of a Government who care. I do not know, frankly, how these people have the brass neck to stand at the Dispatch Box and put forward claims that they are protecting the weakest and most vulnerable members of society and then turn round and deliver them a hefty kick in the teeth. That is what the Budget is. It is an attack on the living standards of some of the weakest and most vulnerable members of society, including the poor, the sick, the unemployed, and families with young children.
  When I hear Conservative Members complimenting the Chancellor of the Exchequer on his courage in producing such a Budget, it occurs to me that the Tory definition of "courage" must be very strange. I believe that people who can produce such a Budget are stooping lower than the most cowardly "bovver boy." They are putting the boot into the sick.
  The sick are taking a clobbering, not just once, not just twice, not just thrice, but four times. First, their earnings-related supplement is to be abolished. Secondly, the real value of their basic benefit is to be cut. Thirdly, whatever benefit is left will be subject to tax. Fourthly, they will have to pay £1 for a prescription. What kind of caring attitude is behind that policy? It is almost criminal.
  But perhaps we should not be too surprised. The morality of the Tory Party is not that high, anyway. We all remember how that party cheated and lied its way into office. We all remember, for example—hon. Members who have forgotten may care to he reminded—the Daily Mail of 26 April last year, during the general election. It produced a propaganda sheet on its front page which could have been, and might have been, written by Tory Central Office, in which it listed 12 so-called "lies" that the Labour Party was telling during the campaign. Many, if not all, of those statements have turned out to be truths—bitter truths for many people.

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  Alleged lie No. 9 was a quotation from the Labour Party manifesto:
  "There are Tory proposals for higher prescription charges and charges for seeing a doctor or being in hospital."
  The Daily Mail went on:
  "TRUTH: 'We have no intention of increasing or introducing such charges,' says Mrs. Thatcher."
  I understand that according to the rules of the House I am not allowed to call the Prime Minister a liar, but perhaps the Daily Mail could climb out of the gutter and at least perform some public service by undoing some of the damage that it did in that article. It could publicly state the truth about this matter by exposing the Prime Minister and her people on the Front Bench.
  Mr. William Waldegrave: The Daily Mail, of course, can write what it likes, but the Prime Minister's words were in answer to a question about the introduction of so-called hotel charges in hospitals—
  Mr. Cook: And prescription charges.
  Mr. Waldegrave: No, they were not. Her words were directed to charges for staying in hospital.
  Mr. Canavan: I think that the hon. Member should take up his point with the Tory journal, the Daily Mail. No leading Tory disclaimed that article during the general election. That is why I say that they and the Daily Mail collaborated in the cheating and lying that put the Government where they are.
  A prescription charge of £1 represents a fivefold increase since this Government came to power—and they have been in power for less than a year. Even many people who voted for them would say that that is far too long already.
  The Budget attacks the family by reducing the real value of child benefit. Speeches today show that even many Tory Members are themselves ashamed of such a proposal.
  The Government are also attacking the families of people involved in industrial disputes. Whatever we think of the merits or demerits of a certain industrial dispute, what possible justification is there for using wives and children as political pawns in a dispute?
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  The thinking behind this proposal seems to be that the Government can solve industrial disputes and get the men back to work by starving the women and children. They are treating the families of strikers worse than the families of convicted prisoners. Even the wife and family of a criminal who has been found guilty and sentenced to imprisonment are not deprived of full social security benefits, yet the Government will deprive the families of strikers of that right. When I hear Tories claim that they are the guardians of the family and of family life, the sheer cant and hypocrisy makes me shudder.
  Then there is the Government's attack on the unemployed, which in many respects is one of the worst and most damaging long-term features of this bad Budget. The Budget represents a major change. The Government have abandoned even the pretence of fighting unemployment. Indeed, they are deliberately creating unemployment as an economic weapon and then attacking its victims by cutting the real value of their unemployment benefits.
  At a time when 1½ million people are already unemployed, the Chancellor last Wednesday virtually instructed local authorities and other public bodies to sack more workers. The cuts in public expenditure will have a devastating effect on employment prospects, particularly in places such as Scotland, where many employment opportunities depend on public investment, either directly in the public sector or in the propped-up part of the private sector.
  I can think of a couple of examples affecting my constituents. At the Glynwed Company foundries in Falkirk and Larbert, where many of my constituents work, several hundred jobs are at risk. Part of the reason given by the company is that the cuts in public expenditure have meant less demand by the public sector for its products. At the Cape Insulation factory in Stirling, 90 jobs are at risk because the Government have cut, and intend to cut further, public expenditure on such things as domestic and industrial insulation.
  The only hope, or so-called hope, that the Chancellor offers us is the possibility here and there of some enterprise zones. I have my doubts about the success of this proposal. I fear that it will turn back

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  the clock to set up colonies in the de prived areas, for example, of Clydeside, where any old spiv or racketeer would be given carte blanche to exploit a large pool of unemployed people without regard to planning, environmental control, job security or standards of health and safety at work—things for which the Labour and trade union movement have been fighting for years.
  When the Tories talk about their employment strategy, I suspect their motives. They always want to attack working people, and one of the surest ways of delivering an attack on working people is by reducing the numbers of working people. That is what this divisive Budget will do. It will divide those who are in work from those who are not.
  One of the most frightening statistics that I have come across recently is one that I received in a parliamentary answer on 18 March from the Secretary of State for Employment, who told me that, of the total unemployed, 538,574 were under 25. I should like all hon. Members to think of the social implications of that statistic—more than one-third of the total unemployed, more than half a million, are under 25.
  That number will increase. Imagine that number of young people roaming the streets. I could not think of a surer recipe for social chaos. There may be some significance in the fact that the only parts of the public sector that will get more money from the Budget are the Army and the so-called law and order forces. The Government may need more than an Army to protect them if they continue with these policies. People who are genuinely concerned about law and order should urge the Government to change course now, before it is too late.
  Mr. Tom Benyon: Will the hon. Member expand on what he means by the "so-called" forces of law and order? What does he mean by "so-called" law and order forces?
  Mr. Canavan: It is clear that the Government plan to build up the forces of law and order because they have no solution to the economic and social implications of even their own policies. I believe that that would be a wrong use of the forces of law and order. That
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  would be to use the police and possibly the Army to do jobs that, hitherto, they have never been required to do. There are grave social implications there. Those who are genuinely interested in establishing and preserving law and order should be urging the Government to change course before it is too late.
  When I say "change course" I mean do a complete U-turn. Instead of cuts in public expenditure there should be more public investment in industry in order to create more wealth and more money for the social services in order to distribute more wealth. Of course, the Government will ask where that money is to come from.
  It is interesting that the Chancellor, who was not slow to put the boot into the sick and the unemployed, chickened out of putting the boot into the banks by taxing their windfall profits at a time when the Midland Bank announced profits of over £315 million, representing an increase of 36 per cent. on the previous year, and Barclays announced a profit of over £529 million, which was 42 per cent. higher than the previous year.
  We also note the extra £1,017 million extra expenditure on defence between the current financial year and the financial year ending in 1984. It appears that the priority of the Government is to manufacture weapons of mass destruction rather than to care for the sick or provide jobs for the unemployed.
  On the same day as the Budget, it was announced that an additional £19,600—a 30 per cent. wage increase if we can call it a wage—was to be awarded to a certain member of the Royal Family. As a remarkable reward for overspending on her £65,400 pocket money for the previous year, she was given £85,000 for the coming year. There are many people who suspect that her horses are better fed than many of the old people and schoolchildren who are being starved by this Government.
  The Government should try to recoup some of the tax handouts that they gave to the rich last year. Of the £3½ billion tax cuts, 40 per cent. went to the richest 5½ per cent. of the population. People earning £30,000 a year received a £4,000 per year tax handout and those on £20,000 a year got £2,000. When the

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  Chancellor speaks of his Budget as a consolidating Budget, we all know whose interest it consolidates. It consolidates the interest of the rich.
  The whole Budget is designed to make the rich richer and the poor poorer. It divides the healthy from the sick and it divides those in work from those who have no work. It is meant to take away wealth, power and opportunity from the people most in need in order to give it to the rich and privileged.
  The Budget turns the clock back to the 1930s. I do not believe that to be an exaggeration. This is the most malicious Budget since the establishment of the Welfare State. The thinking behind it will produce a rat-race type of society, where only the strongest will survive and where the weakest will go to the wall. That is why I hope that as many hon. Members as possible will vote against it.
  8.24 pm
  Mr. Stephen Dorrell: For one thing at least I respect the hon. Member for West Stirlingshire (Mr. Canavan), and that is the unquestioning certainty with which he advances his views. I could not help reflecting as he spoke on whether he was one of the people whom my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) had in mind when he spoke of go-ahead young budgeteers with their Red Books. Had he meant the hon. Gentleman, it would have been an apt description.
  For most of us who are not blessed with that degree of certainty, any Budget, no matter by whom it is presented, is more like the curate's egg than it is like the class enemy as described by the hon. Member for West Stirlingshire. There are parts of any Budget of which people approve and parts which make some people less happy.
  I begin on the positive side by strongly welcoming the commitment by the Government to bringing public expenditure under control. I welcome the fact that the public expenditure White Paper was introduced on the same day as the Budget, and I believe that the Government have made clear their serious determination to exert a proper and responsible control over the future levels of public expenditure.
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  I do not believe that the Conservative Party has any deep-seated hostility to public expenditure as such. There is merely a determination that it should more properly reflect the ability of the economy to provide the necessary resources. Most of us would like to see one step back in public expenditure so that we might take two steps forward on a more secure and realistic footing.
  In the past we have seen Governments issue public expenditure White Papers based on unrealistic growth targets. That has meant—particularly when introduced by the Labour Party—that White Papers have included for the third or fourth year of the programme a commitment which for political reasons had to be included in order to ensure that hon. Members like the hon. Member for West Stirlingshire voted in the Labour lobby at the end of Budget debates.
  Where there has been a specific commitment that the Labour Government knew they could not undertake, they introduced a public expenditure White Paper including a 2 or 3 per cent. growth factor. That factor was put in at the end of the period with the result that, long before they reached the point of being able to undertake such expenditure, the need for that expenditure had been removed from the plans because of serious under-performance by the economy. We have, therefore, not been able to generate the necessary funds to pay for particular items in the programme.
  There can be no clearer illustration of that principle than the factor in the public expenditure White Paper relating to 1982–83. Because of the determination of my right hon. and learned Friend not to get into that ball game—that of spending funds before they have been generated and without any realistic prospects of their being generated—he has imposed a £9 billion cut on the public expenditure programmes that he inherited from the previous Administration when they left office in May 1979.
  That does not merely demonstrate a difference of view about whether we should be running an extra £2 billion on the public sector borrowing requirement. The Labour Party knows that a £9 billion gap cannot be bridged. There is no way that either borrowing or taxation can be rigged in order to bridge the £9 billion gap that my right hon. and

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  learned Friend found in the spending programmes that he inherited for 1982–83. To express the situation in a crude figure, if the Chancellor proposed to bridge that gap it would necessitate an increase of 16p on income tax at current rates of yield.
  That is not the sort of thing that any senior member of the Labour Party has ever supported on a public platform. Unless they are prepared to do that, they must concede that the public expenditure programme inherited by the Government was quite clearly unrealistic.
  The argument about the level of the public sector borrowing requirement is irrelevant. One can argue that we should have a higher PSBR than my right hon. and learned Friend plans, but that is a separate argument. Whether or not one believes in Keynesian deficit financing, we are committed to providing resources, either in the relatively short term or in the present, to fund the spending programmes. There was never a prospect of being able to self-finance many of the spending plans which we inherited now or in the immediate short term. Therefore, the programmes that we inherited were irresponsible. My right hon. and learned Friend deserves the support of the House in pointing that out to the electorate, bringing them back under control and in touch with reality.
  I have little sympathy for the indignation whipped up by Opposition Members about the supposed swingeing cuts that we are imposing on public expenditure this year and next year. It is hard to bring such accusations into line with the facts in the White Paper. The Opposition must recognise that the highest-ever level of public expenditure is undertaken in the year which is just coming to an end, the second highest is that which is planned for next year and the third highest is planned for the third year of office of the Government. Only in the fourth and fifth years will the public expenditure planned by the Government come below the levels that the Opposition achieved in their highest year, 1975–76—and none of my hon. Friends would like to see that year repeated.
  The Opposition whip up an enormous rage about the cuts that we are imposing on public expenditure. They should restore the balance and recognise that the public expenditure plans in the White
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  Paper are higher than the average achieved when the Labour Party was in office.
  I turn to another part of the curate's egg which is less to my liking—the Government's stance on monetary policy. I hope that one aspect at least might begin to move into history. I am talking of the attitude by many Opposition Members in suggesting that monetary policy was invented by my right hon. Friend the Secretary of State for Industry and that no Government until five years ago had heard of it. Clearly, that is not true. I do not regard myself as a Friedmanite. I watched one or two of the programmes on television in which Friedman expressed his proposals. I found them no more instructive or enjoyable than the party political broadcasts made by the right hon. Member for Leeds, East (Mr. Healey).
  Governments of all parties have to adopt a clear stance on monetary policy. Monetary policy is not a term of abuse but a rational definition. Everybody knows this Government's monetary policy. It is to control the growth of sterling M3 according to strictly defined targets. Why we have adopted that policy is not so clearly understood. That question has troubled many people. I shall try to answer the question, although the Financial Secretary might say that I misinterpret his views.
  In a letter to the Treasury and Civil Service Select Committee, the Chancellor of the Exchequer stated:
  "The ways in which control of money supply affect the growth of…prices are complex. Lower monetary growth may be expected to result in a lower growth of money incomes…because of its effects on the exchange rate and asset prices and the fiscal changes required to achieve lower monetary growth."
  In other words, the Government's vision of the way in which the system works is that control of money supply affects three intermediate channels through which the effect is felt on the economy as a whole. The first channel is asset prices, the second the public sector borrowing requirement and the third the exchange rate.
  In deference to the expertise of my hon. Friend the Member for Kensington (Sir B. Rhys Williams), I should like to deal with the exchange rate. I believe that the Government's view on the exchange rate is precisely that of the London

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  Business School, namely, that a high exchange rate leads to price pressures, both domestically and overseas, which in turn bring inflation under control. Recent debates about the exchange rate have centred around two points. The first is whether the Government can control the exchange rate. In view of the letter from my right hon. and learned Friend the Chancellor, I suggest that the answer is "Yes".
  The Government's policy is to tighten money supply so as to push up the exchange rate. That policy is favoured by both my right hon. and learned Friend and by the London Business School. That mechanism will bring downward pressure to bear upon inflation. The Government's case rests on money supply having a direct effect on the exchange rate. I accept that argument.
  It is difficult to argue that the Government cannot control the exchange rate and fix it at a level of their choice. Because of our history during the 1950s and 1960s, it could be argued that that is undesirable. However, it could not be argued that we were unsuccessful in maintaining the exchange rate over most of that period.
  The second point relates to the exchange rate policy of the Federal Republic of Germany. Its consistent policy has been to create capital outflows to balance trade surpluses and by that means to hold down the exchange rate.
  It is untrue to say that the Government cannot control the exchange rate. However, to argue that the Government can control it is not to argue that they should control it. They would be well advised to moderate their monetary stance—not to desert it totally—to reduce the exchange rate to a more competitive level in the world economy.
  My first argument to support that statement deals with the economic cost involved in maintaining our present stance. The present exchange rate is about 10 per cent. above its level before devaluation in 1967 and 20 per cent. above its level in the mid-1970s. The effect of that on our external trade was clearly shown in the balance of trade figures published last year. They showed a saving of £3 billion in our fuel account and a deterioration of £3 billion in our manufactured
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  surplus. The revenue from North Sea oil has been used to pay for higher manufactured imports or lower manufactured exports. That is a clear economic danger which is occurring. The oil revenues that should have been such a great opportunity for the long-term future if they had been properly managed, although not doing irreparable damage as some Opposition Members have suggested, are doing visible damage to some of our manufacturing industry. We ignore that at our peril.
  My second argument has nothing to do with short-term economics; it is a political argument. One of the most worrying trends in debate—we saw it today during questions to the Secretary of State for Trade—is that the deterioration of our manufacturing trade balance has brought into question more important principles that the Government and I have in common—which we do not share with many Opposition Members—namely, a commitment to free and open liberal trading, a commitment to avoid the apparent attractions and advantages of protectionism, and a commitment to maintaining an open economy.
  The danger is that the present high rate of the pound and the damage that that is undoubtedly causing to manufacturing industry will break the intensified pressures for some protectionist response. We can see that beginning to develop. I am deeply worried that if that gets out of control the combined effect of North Sea oil and a tight monetary policy could undermine the commitment to the liberal trading economy which my right hon. Friends on the Front Bench and I have in common.
  I conclude by referring to a pamphlet written some time ago by my hon. Friend the Financial Secretary to the Treasury. I hope that he will not think that I am trying to embarrass him, because that is definitely not the case. He said in 1966. during the lead-up to the 1967 devaluation, that if the British economy were to continue to grow, and if we were to build our policies on the assumption of future growth, there was a clear choice between the protectionist Leo Amery approach and the devaluation approach which I am suggesting. I hope that my hon. Friend will read that pamphlet again and take note of the arguments that he then advanced.
  8.40 pm
  Mr. Alfred Dubs: As one listens to the debate and the discussion of the PSBR one feels that we have elevated it to a theological status, and the more we have done so the more we have made our discussions incomprehensible to people outside and certainly to quite a number of hon. Members. Perhaps I may voice a few thoughts about the PSBR to see whether it is possible to clarify the issue on a model concept.
  We have heard on countless occasions from the Government Front Bench that this country must live within its means. That implies that somehow we have become profligate in terms of public expenditure and that we are not meeting our expenses.
  The PSBR has a number of elements. They include current and capital expenditure by the Government and by the public corporations. One or two people may therefore be surprised to realise that the Government's current receipts exceed their current expenditure, so that in that sense there is a surplus. However, capital expenditure by the Government and by the public corporations is the main element in the creation of the PSBR.
  Let us draw an analogy here with the person who is buying a house on a mortgage. No one suggests that he should not buy a house on a mortgage or that he should cover the cost of the house out of income in the first year. In spite of having listened carefully to speeches over many months, I cannot understand why the public sector should be expected to avoid running up a PSBR, or should operate as small a one as possible, when the main element in it is capital expenditure, particularly capital expenditure by the public corporations. If those public corporations were to be translated into private corporations—I hope that that will not happen, but it is what the Conservatives sometimes wish—clearly their capital expenditure would not become a part of the PSBR. Therefore, the obsession with reducing the PSBR is based upon a false premise.
  Having listened to many speeches on both sides of the House, I realise that whereas there is agreement that there is a relationship between the PSBR, inflation and interest rates, it is hard to define with any precision. There are differing
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  views about how close that relationship is.
  Under the Labour Government it was possible to have a relatively high PSBR and lower interest rates, as happened in certain periods in recent years. I have yet to hear a Conservative Minister analyse that and relate it to the Government's policy on the PSBR.
  The sale of assets by the Government has been a way of reducing the value of the PSBR for the year during which the assets were sold. I refer to publicly owned assets, such as BP shares. Am I right in thinking that there is a similarity between the effect of the selling of assets and the effect of the selling of gilts? They have opposite effects on the level of the PSBR. I appreciate that there are complexities and that it will depend on who buys public sector assets before we can say with confidence that we should treat sales of assets as we treat sales of gilts. However, I cannot understand why they should be treated as opposites.
  The Government have expanded inflationary expectations. Those inflationary expectations are making inflation more difficult to contain. If we accept what the Government have been saying about the need to finance capital expenditure in the year in question in order the keep the PSBR down, that will add to inflationary expectations, because the more that one finances capital expenditure, the more one has to put up prices by public corporations, which in turn will feed the inflationary process.
  I turn to the question of oil income As I understand it, the oil income—PRT, corporation tax and royalties from North Sea oil—stands at approximately £4 billion for this financial year. I have examined the Red Book carefully, and it appears to me that there is an expectation that that may increase by a further £2½ billion by the end of the period covered by the Red Book, making a total of £6½ billion. Is that not a gross underestimate? All outside estimates suggest that income to the Government from oil from the three different sources is likely to be between £7 billion and £11 billion by the end of the period covered by the Red Book. Are the Government underestimating that because of natural caution, or is there some other motive? A more explicit statement from them on the income from North Sea Oil would be helpful.

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  The Red Book does not make clear, and the Chancellor of the Exchequer did not make clear, what the Government will do with this money. If the figure is larger than the Red Book suggests, there may be a pre-election bonanza in 1983 and 1984, which may have damaging effects on our balance of payments because of the tendency to suck in imports.
  If the Government were to use the extra money in different ways, there would be a golden opportunity ahead of us. Is it necessary to make such savage cuts in public expenditure if, in a few years, there will be a large increase in money to the Exchequer?
  The question of duties, particularly on cigarettes but also on alcohol, has been raised by many hon. Members. We understand the dilemma of the Government in not wishing to increase the RPI, having had their fingers burnt through the VAT increases last year. However, there is a good case for saying that cigarettes—the consumption of which should be discouraged on health grounds—should be taken out of the RPI in order to give Governments the freedom of manoeuvre that they need drastically to increase the duty on cigarettes, which might in the short term increase Government income and in the long term would have a beneficial effect on health.
  I share the regret expressed by other Labour Members that the windfall profits earned by banks are not to be subject to taxation. The banks did not do anything to earn the extra profits, which are now reaching astronomic proportions. One would have thought that in all equity a Government who are seeking extra sources of income would use the windfall profits of the banks, at least in this year, as a way of easing their financial position.
  I appreciate that many Conservative Members, as well as Labour Members, have regretted the Government's failure to keep child benefits at least in line with inflation. In looking at the public expenditure White Paper, I have sought to discover what are the Government's longer-term intentions about child benefit. It is not clear from the White Paper, although if we look at the appropriate table it would seem that further relative reductions in child benefit are more likely to be in the Government's mind than any increases in child benefit.
  Mr. Patrick Jenkin: Perhaps I may relieve the hon. Gentleman of that anxiety. The convention that applies to benefit, such as child benefit, in the public expenditure White Paper is that if there is no obligation to uprate it it is simply put in at its current price, and therefore shows a reducing figure of constant price, and no deductions whatever can be drawn from that fact. The Government remain entirely free to deal with it as they consider appropriate at the time.
  Mr. Dubs: I thank the Minister for what is a very small crumb of comfort, but I hope that he will be more positive in saying that the Government do not wish child benefit to do other than keep up with inflation in future years.
  I turn briefly to the public expenditure White Paper, and in particular to the section dealing with housing. Of all the alarming sections in that document, the section on housing seems to me to be the one that will cause most concern when its effects work their way through. As I understand the position, there is to be a 48 per cent. cut in real terms in housing expenditure over the period covered by the White Paper. I cannot escape the conclusion that this will mean the virtual cessation of building by local authorities, that council rents will be increased significantly above the rate of inflation over the next five years or so and that absolute havoc will be created in the construction industry.
  I can only assume that these expenditure estimates have been prepared by the Government because they feel that we have no longer a housing problem in this country. I only wish that something positive had been said by the Government about their intentions on housing. Whatever may be the position in some parts of the country, in inner city areas—and in particular in inner London, in the borough of Wandsworth, in which my constituency is located—there is enormous housing pressure. There are thousands of people in desperate housing need.
  The Government's public expenditure proposals spell absolute disaster to the housing hopes of many people. I can only ask the Government to think again because of the socially damaging effects that the cessation of all efforts to improve the housing position will have upon many people in our inner city areas.

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  The Government have put forward a Budget that is highly ideological in content and is based upon a number of acts of faith that cannot be justified in terms of any logical argument. Certainly we have heard no argument explaining why the Government think that their deliberate attempt to cut public expenditure and their views on the PSBR and M3 will have a direct bearing on the rate of inflation over the coming years.
  More than that, the Government, in their package of measures, have gone beyond the permissible limits of any Government in recent years in attacking the weaker members of our society. They are going beyond the permissible limits in initiating policies that will greatly increase the rate of unemployment. They ought to be asked to explain—if their present policies continue unabated—what is to happen when North Sea Oil runs out. On present policies, there will be virtually no industry left to sustain us when our natural fuel in the North Sea is no longer there.
  8.54 pm
  Mr. William Waldegrave: My right hon. Friend the Chief Secretary asked the House for its opinion on whether the public expenditure White Paper, which in a characteristic British way is blue, and the Red Book, which, of course, is a very thin pamphlet, should in future be presented together. I hope that the accidental coincidence of those two papers this year will become regular and that they will become amalgamated and simply called "The United Kingdom Budget". Then, at last, we shall have arrived at a more or less rational position with regard to our debates on these matters.
  Some of my hon. Friends, including my right hon. Friend the Chief Whip, will know that I have had some doubts about what we have done on child benefit. There is only one thing that my right hon. Friend the Secretary of State, or his colleague who will reply to the debate, can do to make me a little happier, and that follows what has just been said by the hon. Member for Battersea, South (Mr. Dubs). Does the coincidence of the rise in child benefit on an annualised basis, with the slightly tricky arithmetic by which the allowances are said to have risen by the same amount—11 per cent.
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  on an annualised basis—mean that it is the intention in the future to raise benefits in line with allowances? If that is so I should be a little squeamish, but I should stomach it. if it is just an accident, and if the Chancellor's words in his Budget Statement do not imply an intention for the future but merely an indication of an accidental coincidence, I shall remain very unhappy.
  I shall not vote against the Budget because of child benefit, nor is the reason for voting for it that it contains various good things, such as the heating scheme or help for charities. The reasons why I urge my hon. Friends to vote for it are a little more profound. There are many alternative economic policies. It is not that there is no alternative. I think that I am the only hon. Member present who has sat through both days of the Budget debate. I have listened to many interesting alternatives which have been put forward.
  The hon. Member for Blackburn (Mr. Straw) said that he preferred protectionism, like my hon. Friend the Member for Plymouth, Sutton (Mr. Clark). My hon. Friend the Member for Loughborough (Mr. Dorrell) and the hon. Member for Gateshead, West (Mr. Horam) are really in the same Keynesian corner. The right hon. Member for Leeds, East (Mr. Healey), like a great rhinoceros, has his tusk still stuck in a form of monetarism which is similar to that pursued by my right hon. Friend the Chief Secretary.
  There are plenty of alternatives, but I would simplify and group them into two and argue that both are more risky than the strategy which the Government are pursuing. There is one group which, in one way or another, wants to expand demand and—let us not hide behind the elision of "reflation"—to reinflate out of the recession. Whether it wants to do so by means of managed devaluation and increased home demand or whether it wants to do it by increased home demand behind protection—which more or less amounts to the same thing—it is asking us to take the grave risk of re-inflating an economy which is already bumping around an inflation rate of 20 per cent, as a way out of recession. I believe that that is much too great a risk to ask the country to undergo.

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  The other coherent group, represented by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) and others, is what may be called the "big bang" theory, or, perhaps more suitable to my hon. Friend, who is a well-known steeplechaser, the "cavalry charge" approach. This course is urged upon us by Professor Minford and by Professor Hayek. Their hero is Schacht. They want to stop everything overnight. I believe that that is also far too risky in terms of damage to the social structure and damage to institutions which for too many years have learnt to live with inflation. If the cavalry charge were to be launched it would be magnificent, but it would not be economic policy.
  According to The Guardian, which has been much quoted today, I am a notorious wet, but in my own terminology I believe that I am a Tory. I am one of those who believe that a legitimate and overriding objective of Government policy is the maintenance of social cohesion and national unity. I believe that both those wide groupings of policy alternatives, which in the few minutes available to me I have grossly oversimplified, offer greater risks to social cohesion than does the Government's policy. It is right to make control of inflation the prime objective if national unity is the aim.
  In that respect I agree with my right hon. and learned Friend the Chancellor of the Exchequer, who in his Budget Statement said:
  "Nothing, in the long run, could contribute more to the disintegration of society and…any sense of national unity than continuing inflation."—[Official Report, 26 March 1980: Vol. 981, c. 1443.]
  So I believe that the basic strategy is not only right but formulated in the right terms. Here at last are a Government talking in terms of growth rates that are realistic and not hopeful. Here at last are a Government talking about spending resources that are relatively firmly predictably available rather than spending resources that are pie in the sky.
  I think that my right hon. Friend the Chief Secretary was rather harshly treated by my right hon. Friend the Member for Worthing (Mr. Higgins), who talked about the Red Book as a medium-term plan. It is not. It is a collection of sensible, pessimistic working assumptions which, if we
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  follow them, we may find ourselves able to better. It is not a plan. It is a collection of assumptions that we hope will be bettered.
  There are some doubtful elements and gaps in the policy. In particular—this was highlighted by my hon. Friend the Member for Bath (Mr. Patten)—there is the relationship between the public sector borrowing requirement and monetary control that is not argued clearly by my right hon. and hon. Friends on the Government Front Bench. It is crucial, because my hon. Friend the Member for Bath and others have advanced an attractive siren song, namely, that there is a respectable form of monetarism that allows us to increase expenditure.
  It is like one of the free offers that drop through the door—"Win £2,000. All that you have to do is send away for a book". One receives a guide to motorway cafes in the East Midlands but never sees the £2,000. My hon. Friend is offering us £2 billion. It is an offer that warrants a little more examination. I am afraid that my right hon. and learned Friend the Chancellor of the Exchequer did not offer us much argumentation about the PSBR. He just said that there was a certain amount to be learnt from experience. So I turned to the Red Book for enlightenment. That seemed to cast a flood of darkness on the subject. I found the following sentence:
  "The consequence of the high level of public sector borrowing has been high nominal interest rates and even greater financing problems for the private sector."
  I cannot believe that that is right. The implication of that sentence is that if we had had less public borrowing we would have had negative real interest rates, which cannot be quite right. Alternatively, if interest rates were not to be negatived, it must mean that the inflation rate was to be lowered, in which case public sector borrowing acts directly on inflation. Something seems to have gone slightly awry. I hope that my hon. Friend the Financial Secretary, with his customary clarity, will be able to explain it to me more clearly.
  A major gap in the Government's armoury is public sector pay. There is only one element of policy that can drive a coach and horses through the whole strategy, and that is if the Government turn out to be a feebler employer than anybody else. If the private sector, which

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  will be under tremendous pressure, watches the public sector giving pay rises that subvert the whole system, we shall have high unemployment in the private sector, which will be caused by the Government's weakness. It is necessary for the Government to stand firm. That may mean talking about norms and targets in the public sector. We should not be too squeamish about that.
  Industrial firms in the private sector will go through a hard time in the next 18 months or two years. The so-called "fiscal adjustment" in paragraph 12 of the Red Book means tax cuts. I hope that we shall start talking well in advance to industry about how the resources, when available, are to be channelled into industry. To some extent lay-offs and bankruptcies may be prevented if those in industry can see some real light at the end of the tunnel and if they are already in discussion with Ministers about it. The discussion should include dramatic cuts in employers' contributions and major cuts in corporation tax.
  I end with a few sentences on what I believe should be the attitude of those of us who worked for a different economic policy in the past. If the Government are seriously wrong in what they are doing, they are very seriously wrong. It is not very honourable for those who disagree with their policy merely to distance themselves from it. One should come to a conclusion about whether the strategy is right or wrong. I have attempted to the best of my ability to reach a judgment, and I believe the strategy to be right. Those who doubt that judgment, as it is their perfect right to do, should openly oppose the strategy. If they do so, I hope that we shall have a more useful and open atmosphere. It is not satisfactory simply to distance oneself from it in the hope that it will fail.
  With an eye on the clock, and having passed over many other points that I wished to make, I give way to the hon. Member for Norwich, South (Mr. Garrett).
  9.5 pm
  Mr. John Garrett: Uniquely this year we can examine the provisions of the Budget, the medium-term economic assessment and public expenditure plans for the coming five years at the same time—and a unique
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  record of Government-induced collapse they reveal. The full weight of that economic collapse falls on poor families and the sick. I hope that Government Ministers listened to the most moving speech by my hon. Friend the Member for Brent, South (Mr. Pavitt) about the direct suffering likely to be caused to the sick who happen to be poor as a result of the increased prescription charges.
  The Budget is an outright attack on the personal and living standards of the working class, which is hardly surprising. The Government are led by a Prime Minister whose only memorable executive achievement before becoming Prime Minister was to take milk off school-children.
  Looking back on last year's opportunity Budget, the Financial Times on 26 November came to the conclusion, which we clearly forecast, that there would be no significant net gain from that Budget for anyone earning less than £15,000 a year. The result of this year's consolidation Budget is that only those earning £15,000 a year and over—some say £30,000 a year—will benefit. It seems that £15,000 a year is the entry qualification for membership of the Tory beneficiaries' club It is therefore natural to conclude that it is a class-motivated Budget. The working class will suffer greatly and those earning £15,000 a year or more will gain much.
  I have spoken in every public expenditure debate for the past six years. On every occasion I have tried to draw the attention of the House to the inadequacies of the public expenditure White Paper as the basis of information for parliamentary scrutiny. It is a matter of as great importance to Conservative Back Benchers as to the Labour Party. This public expenditure White Paper is the worst of the lot. Most programmes after 1981 are simply shown as empty boxes. We have no idea of the decisions and priorities that the Government attach to individual programmes.
  I and Select Committees have argued in the past for the presentation of spending and revenue together, but on a comparable basis and in a form that allowed the House to examine the objectives of spending programmes and the way in

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  which they are intended to meet the needs of the people at whom they are aimed. The response of the Treasury has been to display with the spending programmes a few statistical tables that cannot be related to individual programmes in any way, and it has kindly supplied us with a reading list at the back of each section.
  It is a pity that the Treasury has not displayed measures of need—and measures of need can be constructed and many are available—for social services or housing, for example. To do so would have indicated how little these programmes meet the needs in our community, particularly of the poorest.
  I hope that the new Select Committees will take the White Paper as the basis for their future investigations and call Ministers to account for the decisions that they represent and officials to account for the way in which these programmes are managed. I hope that they will ask Ministers precisely what the policy objective is behind each spending programme and programme category and what is the justification for the decision which has been made.
  This approach has always seemed to me—it is basically a non-party-political question—to be much more sensible behaviour on the part of a Select Committee than the single-issue studies which Select Committees in the past have carried out on issues of the day. Departmental Select Committees represent an excellent opportunity to comb through the spending programmes of individual Departments and ask Ministers and officials to justify them, and I hope that that is what they will do.
  A most interesting feature of the Budget and the public expenditure White Paper taken together is that they amount to a national plan for the next four years. This plan goes much further than the modest attempt at indicative planning attempted by my party in the 1960s. This is not an indicative plan. This is a centralised or dirigiste plan, with specific targets for economic indicators to which members of the Treasury Bench have nailed themselves. These targets are, of course, the totems of monetarism—money supply and the public sector borrowing requirement, to which everything else—output, employment, living standards, the
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  quality of life—is made subservient.
  So what does this Tory Gosplan reveal? It shows an unprecedented downward spiral, followed by years of relative decline, followed by an unprecedented cash offer of North Sea oil revenues in the form of tax reliefs at the time of the next election. It is an exercise in political cynicism.
  The present Government must be the only Government in the world who have presented to their people a national plan for inflation at 14 per cent. to 20 per cent., over 2 million unemployed—some say 2½ million or more—the destruction of housing and social services programmes, and a reduction in education standards—in other words, the dismantling of the Welfare State.
  Some of my friends and some journals say that there must be a U-turn—"Sooner or later the Government must describe a U-turn." I do not believe that at all. The Prime Minister is far too inflexible for that. I believe that the whole structure will eventually collapse from wet rot. Those hon. Members—and we had a very good example from the speech of the hon. Member for Bristol, West (Mr. Waldegrave)—in what is really the main stream of one-nation welfare Toryism, which has carried the Tory Party through the greater part of this century, are now described as "wets"—vilified as "wets". But I think that wet rot from them will eventually undermine the Tory Party and that the Labour movement will push the whole rotten structure over.
  The recession and the slump that we are about to see will be worse in Britain next year than anywhere else in Europe. That is what the OECD has said. As Dr. Budd of the London Business School has said,
  "there is no call to add to the world recession a self-imposed constraint to reduce the PSBR year by year regardless of the state of the cycle."
  The fact is that every 100,000 extra people unemployed cost £110 million in benefits. So high unemployment causes a high borrowing requirement, which in turn is given as a reason for tightening monetary policy still further, and so creating more unemployment. Therefore, we gradually wind ourselves further and further down into a pit of unemployment. The resulting strategy for prosperity will

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  cripple manufacturing industry. As the Financial Times observed,
  "the big unknown factor is how industry is going to survive the period of transition."
  I cannot imagine the Financial Times describing an industrial collapse as a "period of transition" if a Labour Government were in power.
  Cuts in the public sector will give rise to the most acute social tensions. In social provision and benefit, some of my hon. Friends have said that with this Budget and the White Paper we have returned to the 1930s. But it is much worse than that. In the 1930s the Government cut benefits by 10 per cent. between 1928 and 1934, and the social tensions were acute, yet in that time prices fell by 14 per cent. Today's cuts are an absolute reduction in the standards of living of the poor. The Government are actually making a deduction in lieu of tax from thousands of people on the poverty line who are too poor to pay tax.
  The previous White Paper began by saying:
  "The Government believes that public expenditure is at the heart of Britain's difficulties."
  This belief is based on several myths about public expenditure in Britain. The first is that it is exceptionally high, but, as my right hon. Friend the Member for Leeds, East (Mr. Healey) pointed out on Thursday, general Government expenditure, on the EEC definition, at 42·7 per cent. of gross domestic product is well below the EEC average of 46·8 per cent. and substantially below that of West Germany and France.
  Social expenditure in Britain is planned to fall to less than 20 per cent. of GDP in the planning period, whereas in seven of the other eight countries in the EEC it is planned to rise to between 24 and 31 per cent. of GDP. The rest of Europe reacts to a coming recession by increasing social expenditure, but we cut ours still further.
  Total tax revenue as a percentage of GDP, at 35 per cent., is lower in Britain than in Holland, France or Belgium—countries that have a far higher economic growth rate, year in and year out, than we do. Britain's public sector deficit is also lower than the EEC average.
  There is also the myth of crowding out—that public expenditure prevents
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  growth in the private sector. That is not true either. In the past, cuts in public sector investment have been accompanied by increases in private investment of only one-third as great as the cuts. In other words, if we cut by £4,500 million we see an increase in private investment of £1,500 million. In addition, with 1½ million unemployed it is clear that there is no case for saying that the public sector is soaking up scarce manpower.
  The Tory Party assiduously cultivates the idea that much of public expenditure is dispensed by parasitic bureaucrats to parasitic scroungers. In fact, public expenditure underpins our economy and has funded the great social, cultural and scientific achievements of our society for which Britain is held in the highest regard abroad.
  The BBC has had its outstanding achievements—and anyone who goes abroad will know how highly the BBC is thought of—rewarded by a cut of £132 million. Our subsidised theatre, a glory of our national life, is being murdered by VAT and by local authority cuts. Our universities, internationally recognised for excellence and with spectacular achievements in, for example, biochemistry and astrophysics, are rewarded by a 2 per cent. cut in equipment allowances, a 3 per cent. cut in general spending and a level of student grants which is 5 per cent. below the level needed to maintain their value.
  Mr. Grieve: The hon. Gentleman has listed a number of cuts of which he plainly disapproves. Does he think that no cuts should be made? If he thinks that any should be made, where should they be made?
  Mr. Garrett: At this stage in the economic cycle there is no need for any cuts in public expenditure. My right hon. Friend the Member for Leeds, East left behind a programme of steady growth in public expenditure, and that seems to me well justified.
  The social effects of the White Paper fall primarily on the services to our local communities provided by local government spending. Local government spending is being reduced 10 times more than central Government spending. We can now foresee the ending of local authority housing altogether, yet all of us every week meet people who are desperate for

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  council houses. What will young couples who want to rent a house do in future? The answer is clear. They will be lodgers for years—with their in-laws, with friends or with strangers—with all the problems and difficulties that that implies.
  There will be 40,000 fewer children in nursery schools as a result of the cuts. Hitherto it has been a common policy between the two sides of the House that nursery expenditure should be increased. The capital investment of local authorities—roads, schools and social services—is hacked, hacked and hacked again—5 per cent. down in 1981–82, 6 per cent. down in 1982–83, 3 per cent. down in 1983–84. Think of the damage to social services provision. Cuts in this area fall directly on the most vulnerable members of our society, with cuts in residential care, sheltered housing, day care, meals services, holiday facilities and aids and adaptations.
  The directors of social services departments have said that those mindless cuts will fall most heavily on the elderly, the physically handicapped and children. Next year, 28,000 fewer old and handicapped people will receive home helps, 1½ million fewer will receive meals on wheels, ½million children will no longer receive free school dinners—for many the only square meals they get in a day—and many parents barely above the supplementary benefit level will have to pay £5 a week for dinners for two children, to which the Government will contribute £1·50 in increased child benefit.
  In East Anglia, the area of my constituency, where average income per head is the lowest in England, public expenditure—the social wage—is what keeps real poverty from the door. In Norfolk, home helps have already been reduced to two hours a week. The provision of places in old people's homes is already 700 short of the DHSS guideline. Day care for the mentally ill is only 10 per cent. of the DHSS guideline. Day nursery places are one-sixth of the DHSS guideline. Yet hospital places for geriatric and psychiatric beds are based on the assumption that local authorities meet the guidelines. We shall see more and more elderly in particular pushed into hospitals because the community cannot care for them.
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  A recent Child Poverty Action Group pamphlet sums up the case on these cuts in social provision. It says:
  "The current policy of cutting social expenditure is based on a total misunderstanding of the role and value of such expenditure in modern societies. Much of the spending on social services should be seen positively, as essential maintenance of the human factor of production, as investment in sickness prevention and cure, as investment in families and in the future generation, in social integration and in those such as the unemployed and elderly who bear the costs of economic policies and development."
  I turn to the industrial effects of public expenditure cuts. The reductions in spending by over £1 billion in four years on industry and employment programmes will undermine the prospect for economic growth that the Government affect to foresee in the mid-1980s. What could be a better investment for growth than training? Yet the increase in the youth opportunities programme is used to conceal a cut of 10,000 in the training opportunities programme, the closure of 20 skillcentres and the ending of the small firms employment subsidy. There will be a drop of one-third in the numbers trained in three years.
  Britain clearly needs to train its young people in vocational subjects, in modern management and technology. In my constituency we have the largest college in East Anglia doing just that. I refer to Norwich city college, which is acknowledged to be highly efficient and successful. Even before the latest cuts, the lack of growth in its staff and equipment budgets—thanks to the Neanderthal Tories on the Norfolk county council—was severely hindering its effectiveness.
  There have been reductions in courses, class sizes have been reaching 40, and there has been a lack of technicians, hindering the teaching of technology. The college now has an equipment allowance of £40,000 a year, for an investment in plant and equipment of £4 million. That means that it is allowed to replace its equipment every 100 years. What basis is that for equipping young people with the skills needed to cope with the microprocessor revolution?
  Cuts in public expenditure will not allow us to maintain and modernise the transport system and the public works needed to sustain a modern and efficient economy. Our economy is falling into

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  disrepair. At the same time, the effect on the construction industry is devastating. The fall in local authority and central Government building mean that next year the output of the construction and civil engineering industry will fall to the lowest level since 1963. A major industry, of enormous importance to the local economy, an industry with a low import content, an industry building the structure and sinews of a modern economy, will go the way of our manufacturing industry.
  These public expenditure cuts will be followed by others. I believe that the Chancellor spoke of £700 million—I cannot work it out, but it seems to me that the figure is much closer to £1 billion—to hold cash limits at 14 per cent. when inflation is rising by 20 per cent.
  Those are the hidden cuts that the Government will try to fudge. Perhaps the Financial Secretary will comment on them. It must be common ground between us and at least the "wets" on the Conservative Benches that what the Financial Times has called "surprisingly big cuts" in overseas aid are cruel, stupid and selfish. Their stupidity is illustrated by the fact that they fall primarily on bilateral aid—that is, orders for British goods. As the Financial Times said,
  "the cuts are attacked as being shortsighted in unnecessarily damaging Britain's image abroad as well as its trade links",
  since the aid was mostly fed back in capital goods orders. The Government have contrived to damage the developing world and our own capital goods industry simultaneously.
  All in all, as the TUC has said, we shall lose 200,000 jobs in the public sector and as many again in private industry. We are sure to have 2 million unemployed, and probably more.
  Public spending not only creates jobs but saves the Exchequer unemployment pay and provides it with taxation and national insurance revenue. The Exchequer cost is much less than the public spending cost. It has been calculated that Labour's temporary employment subsidy actually had a negative Exchequer cost, which is why the EEC made us withdraw it. The small firms employment subsidy, which is to end, kept 60,000 people in work in January this year and helped the small firms sector that the
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  Chancellor is always telling us he is so keen to assist.
  What will be the effect on regional inequalities of chopping regional investment aid? In the real world of the regions, manufacturing industry is in collapse. One has only to look at the jobs lost in engineering in major closures and redundancies in January and February this year. At Mullard, 850 jobs were lost in television tubes, at British Leyland, 750 jobs in vehicles, at Borg-Warner, 700 jobs in automatic transmissions at Alfred Herbert, 700 jobs in machine tools, at Delta Metal, 850 jobs in copper and brass fabrication, at the Weir Group, 850 jobs in casting, at Massey-Ferguson, 1,500 jobs in tractors and harvesters, and at Stone Platt, 850 textile machinery jobs.
  Our manufacturing base is collapsing after one year of incentive Government. The Government are calmly asking the management and workers to sit by while the great deflationary purge works its way through the economy. What will be left when the upturn comes, if it ever comes? I referred at the beginning of my remarks to a Government-induced economic collapse. It is worse than that. The public spending cuts will make it even more difficult for Britain to climb out of the hole that the Government have dug.
  We shall not have the trained manpower we need to survive. We shall not have the infrastructure of service and transport systems. There will have grown a generation without work. I am sure that, before long, the Prime Minister and Treasury Ministers will be appealing to us all to pull together, to work for Britain and to behave as a whole community. But the bitterness and disillusion shown by this attack on the structure of the Welfare State will poison our community for a generation.
  We are embarked on a great, mad experiment in which monetarism is used to teach the Labour movement a lesson. It will fail. Behind monetarism we can see the great horsemen of the Tory apocalypse—greed, indifference, selfishness and squalor. The people who have approved the Budget simply have no idea yet of the true effect of these public expenditure cuts. When they find out, they will realise how they have been cheated.
  9.27 pm
  The Financial Secretary to the Treasury (Mr. Nigel Lawson): We have been treated, if that is the word, by the hon. Member for Norwich, South (Mr. Garrett) to all the usual shopworn clichés of the class war. It was an essay in hyperbole that beggars description. The Budget that the hon. Gentleman attacked bore no relation to the Budget presented by my right hon. and learned Friend last Wednesday. The burden of the hon. Gentleman's serious content, if, indeed, there was any serious content, was that higher public expenditure was the solution to all our problems and that we should have stuck to plans published in the last public expenditure White Paper of the previous Government.
  Before the hon. Gentleman develops this line further, he might have a quiet word with his right hon. Friend the Member for Heywood and Royton, (Mr. Barnett), who, as Chief Secretary in the previous Government, knows perhaps more about public expenditure than the hon. Gentleman. The right hon. Gentleman has already gone into print with the fact, manifest to pretty well everyone else in the Chamber, certainly on the Government side, that those plans were utterly unrealistic. An attempt to achieve them would have led straight to disaster. What agony the right hon. Gentleman must have suffered with his conscience when his right hon. Friend the Member for Leeds, East (Mr. Healey) was cutting public expenditure during his tenure as Chancellor. He should be thankful that there is no single year in the forthcoming years covered by this public expenditure White Paper in which we propose a 6 percent. cut, to compare with what was achieved by the right hon. Gentleman in 1977–78.
  A number of valuable contributions have been made in the debate by various of my right hon. and hon. Friends. My right hon. Friend the Member for Worthing (Mr. Higgins) told me that he would be unable to be present for the concluding speeches. I should perhaps reply personally in writing to him about the points that he made with his characteristically informed comment and search for the truth. I shall, however, refer to one matter that he raised, because it was commented upon by other hon. Members during the debate. That was the proposal
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  that cigarettes and tobacco generally should be abstracted from the retail price index. [HON MEMBERS: "Hear hear."] I see that there is fair support for that. There was support on the Opposition Benches as well. The hon. Member for Battersea, South (Mr. Dubs) nodded assent to that proposal. Other hon. Members have suggested that on much the same argument alcohol should be extracted from the RPI.
  We may have views on this matter on health grounds, but the purpose of the RPI is to measure what happens to the retail prices of the things that people buy. Some people might bitterly regret the fact—I am a non-smoker myself—but people do buy cigarettes, tobacco and alcohol, so an index that excluded them would not be regarded as properly measuring retail prices.
  However, we have introduced the tax and price index, which gives a better perspective to these matters by taking into account other things that people have to pay for, such as income tax and national insurance contributions. In relative terms, the weight of tobacco and alcohol is less in the TPI, although it is there. [Interruption.] That is wrong, but everything that the right hon. Member for Leeds, East says is wrong.
  Therefore, those who support the abstraction of alcohol and tobacco from the RPI will at least accept the modification inherent in the tax and price index.
  My hon. Friend the Member for Norfolk, North (Mr. Howell) asked why it will take two years to tax short-term benefits. I am grateful to him for his support for the move in principle. The reason is that it has to await the computerisation of the unemployment benefits system. That will not be in place to enable us to make the move before 1982.
  My hon. Friend also asked whether we intended to tax supplementary benefit. The answer is that we do not intend to tax supplementary benefit as such. But, consistent with our other proposals, supplementary benefit to the unemployed and to strikers will be liable to tax in the same way as is the case with unemployment benefit.
  Mr. Denzil Davies: While on the subject of supplementary benefit, and unemployment benefit in particular, will the hon. Gentleman now confirm that there is

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  no intention to place cash limits on unemployment benefit or to cut other public expenditure further if unemployment increases faster than the forecast and more benefit has to be paid out?
  Mr. Lawson: Of course there is no question of cash-limiting unemployment benefit. No one has ever suggested that there was. What I said was that our public expenditure proposals as a whole are reviewed each year and that, as a consequence, if the total public expenditure on unemployment benefit increased above that which was projected, that element would be taken into account in the review of public expenditure as a whole.
  Mr. Davies: Does that mean, in effect, that if the expenditure on unemployment benefit is greater than the Government are forecasting, other public expenditure will have to be cut to pay for it?
  Mr. Lawson: Not necessarily. As I said, the matter will have to be considered and taken into account in the review of public expenditure. The plans that we have put forward are the best projections that we can make in the circumstances.
  Mr. Healey: The Minister has given an estimate for the increase in unemployment in the next 12 months, which is only half that of the lowest given by any independent institute—in other words, 300,000 against the 600,000 expected. He must come clean with the House. Is he really saying that if there is double the increase in unemployment the additional cost will be offset by further cuts in public expenditure? If not, what the hell is he saying?
  Mr. Lawson: I am saying, if there is any increase—the right hon. Gentleman's record of forecasting unemployment was notoriously bad when he was in office. I do not blame him for that, because it is an extraordinarily difficult thing to forecast—
  Mr. Healey: Would the hon. Gentleman mind answering the question?
  Mr. Lawson: If, as I said, public expenditure on unemployment benefit exceeds what is expected, that will have to be taken into account in she totality of public expenditure, including the contingency reserve.
  Mr. Healey: What does that mean?
  Mr. Lawson: It means what it says. I am now moving on to the next point. I cannot spend all night giving a tutorial for the sole benefit of the right hon. Gentleman.
  My hon. Friend the Member for Norfolk, North also asked about the "Why work?" problem, particularly in the context of child benefit. This was raised by others of my hon. Friends and I think also by the right hon. Member for Salford, West (Mr. Orme).
  As from November, the problem will be mitigated—not enormously, but to a significant extent—by the very fact that child benefit will go up then by 18¾ per cent. whereas the child addition for supplementary benefit purposes will go up by about 16½ per cent. Thus, the percentage increase in child benefit, which people in work get as well, will be a little more. In addition, there will he an increase in the real value of family income supplement, which is of particular value to low-paid people in work.
  Mr. Ralph Howell: Surely, my hon. Friend realises that child benefit to those in work is spread over 18 months and that those on social security receive 16 per cent. in a year. The "Why work?" problem has increased already and will increase further in November, when child support to those in work will be increased by 75p and to those out of work by 1·55p at least and £3·20p at most.
  Mr. Lawson: My hon. Friend is slightly mistaken. Starting from present levels, in November child benefit goes up by 18·75 per cent., whereas the child addition for supplementary benefit goes up by 16·5 per cent. That is a fact. I ask my hon. Friend to reflect on that. He and I have plenty of time to discuss these matters on other occasions.
  My hon. Friend the Member for Bath (Mr. Patten) made a number of points. He suggested that the public sector borrowing requirement perhaps should be larger than we have decided is appropriate. He thought that that might enable us to help industry through a reduction in the national insurance surcharge. We considered that seriously. The Chancellor concluded that the best way to help industry was to concentrate on getting the public sector borrowing requirement down

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  and thus exerting a downward pressure on interest rates. Industry agrees with that approach.
  My hon. Friends the Members for Bath and for Bristol, West (Mr. Waldegrave), in their West Country alliance, said that child benefit should have treatment parallel to that of personal allowances. I am sure there will he plenty of opportunity to debate that matter. It deserves the fullest debate.
  Child benefit is not simply a replacement for child tax allowances; it is a replacement also for the family allowance, which was never indexed. If my hon. Friends examine the level of child tax allowances as they last existed in their full form and index that to November, they will find that the real amount of child support is not as great as that which is given as a result of the £4·75 level of child benefit.
  My hon. Friend the Member for Bath further said that the problem for the Tories was to recognise economic realism while securing consent. He is absolutely right. The degree of consent from the people as a whole to this Budget is striking. The poll in The Sunday Times, which I am sure Labour Members will have seen, shows that no fewer than 57 per cent. of those who expressed a view believed that the Budget—it is a tough Budget, and we made it clear that it would be—was good for the country as a whole. Hon. Members from either side of the House who were in their constituencies over the weekend will have found that feeling among the people. According to the poll, the measure that received the greatest degree of consent was that which concerned changes in the social security system.
  My hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) spoke of the fallibility of unemployment predictions. He is right about that. I believe the likelihood to be that unemployment will rise in the short term. My hon. and learned Friend was right to point this out—although I say this with no pleasure. But he was right to say that unemployment forecasts are particularly fallible. No one can say dogmatically what will happen.
  Mr. Healey: The hon. Gentleman expressed the view that unemployment
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  will rise. He made a speech the other day which, if not wet, was distinctly moist, in which he suggested that if there was a cyclical depression the public sector borrowing requirement should not be reduced so much. That idea seems to have been thrown out of the window by the Budget. Could the hon. Gentleman say why he said, a moment ago, against that background, that if unemployment rose other areas of public expenditure should then be cut? How is that consistent with the speech that he made—perhaps it was written for him by someone else—in favour of a stepped profile for the PSBR?
  Mr. Lawson: What I said on that occasion was that a reduction in the public sector borrowing requirement during a recession should be relatively small. That was on the assumption that it was 4½ per cent. of GDP at the time. I had envisaged its going down to about 4 per cent. It has turned out to be 4¾ per cent. for the year just ended, and the Chancellor has decided that it should go down not to 4 per cent. but to 3¾ per cent. That is consistent with the fact that since I spoke on 21 January there has been a sea change in the level of interest rates overseas. So the level of borrowing requirement necessary in order to get a downward pressure on interest rates is that much greater. The difference between 4 per cent. and 3¾ per cent. of GDP for the borrowing requirement is nothing compared with what the right hon. Gentleman has been advocating.
  My hon. Friend the Member for Kensington (Sir B. Rhys Williams) was concerned, as was my hon. Friend the Member for Loughborough (Mr. Dorrell), about the level of the exchange rate. Both seemed to think that the level of the exchange rate should be brought down. My hon. Friend the Member for Kensington mentioned three ways in which that could be done, including the export of capital.
  My hon. Friend will be aware that we have completely abolished exchange controls, so allowing the free export of capital. He also suggested buying foreign currency, but that would inflate the money supply and thus be highly inflationary. He suggested a slowing down of oil production. I do not think that would be a sensible course at present.
  My hon. Friend the Member for Loughborough twitted me about that, suggesting

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  that since I had argued for devaluation in 1966, logically I ought to argue for devaluation now. I must remind him that conditions then were different. In 1966 the exchange rate was artificially propped up. Now, like others, we have allowed it to find its own level, as a result of market forces. And in 1966 the public sector borrowing requirement was about 2½, per cent. of GDP—very much lower than it is now. During the 1960s the level of inflation averaged 3 per cent. and public expenditure was a smaller proportion of GDP. There is no way in which I would advocate propping up the exchange rate by artificial exchange controls. That is not our policy.
  Mr. Dorrell: Does my hon. Friend accept that in real terms the exchange rate is 10 per cent. above its level in the 1960s and that it is being propped up by the new factor of oil, introduced in the past three years? Does he accept that the Government could begin a capital outflow by early repayment of the £21 billion outstanding in official overseas debt?
  Mr. Lawson: Early repayment which involved the purchase of foreign currency in the market would add to the money supply, be highly inflationary and prove more harsh for industry than the current level of the exchange rate.
  Mr. Healey: When I repaid foreign debt early, I used the reserves. Why does not the Minister do the same, or does he not yet understand that that is possible?
  Mr. Lawson: We are repaying foreign debt out of the reserves. That was a clearly stated policy in the 1979 Budget Statement of my right hon and learned Friend the Chancellor of the Exchequer. There is a limit beyond which it would not be prudent to repay debt out of the reserves.
  I turn to the right hon. Member for Salford, West, who made a number of statements and asked a number of questions. I shall not have time to answer all his questions, most of which were the province of my right hon. Friend the Secretary of State for Social Services. The right hon. Gentleman said that the increase in our social security programme was due to increased unemployment. He poured cold water on the increase in
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  spending on social security in the years ahead for that reason. But it is not true. The whole of the increase in the social security programme is accounted for by the increased expenditure on pensions.
  The right hon. Gentleman was further concerned about the withdrawal of the earnings-related supplement. Its abolition does not come into effect until 1982. The 1981–82 contributions on which it is based have not yet been set. When they are set, they will take into account the fact that there will be no earnings-related supplement paid.
  However, the supplement is only about 1 per cent. of the total amount of national insurance benefits paid. So it will make an insignificant difference to the level of contributions into the national insurance fund on which the Government settle. That will be determined by the larger benefits, such as pensions. Because of the rising number of pensioners relative to the working population, the likelihood is that contributions will rise. It is a much larger factor in the equation than the relatively small effect of the abolition of the earnings-related supplement.
  Mr. Orme: Is it not a fact that in the last year of that proposal people will contribute to a benefit that they will not receive?
  Mr. Lawson: They will contribute to benefits as a whole. There will be no breaking of any contractual obligation. Title to earnings-related supplement is determined by the benefits paid in the previous year. It is a pay-as-you-go system rather than an insurance system. The right hon. Gentleman is aware of that. There will be no contributions for earnings-related supplement paid in the preceding year. So, there will be no legal entitlement the year following this.
  I must be fair to the Liberal Party. I understand that the hon. Member for Truro (Mr. Penhaligon) asked about the arrangements for the employers' payment of employees' sickness benefit. I can tell him that a consultative document on this will be coming out in a few days' time.
  The striking aspect of contributions from the Opposition, starting with that of the right hon. Member for Salford, West, is that they are wholly out of touch with the people of this country. They have

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  made it absolutely clear that they support what my right hon. and learned Friend has done in his Budget.
  The Opposition are also out of touch with the economic imperatives described by my right hon. Friend the Secretary of State for Social Services. They are out of touch, too, with what is happening in the world. The problem of inflation is a worldwide problem. Throughout the world over the past 12 months inflation has increased sharply and is now well into double figures. The whole Western world has concluded that the only effective way of meeting the problem of curbing, curing and mastering inflation is through monetary policy. That is why, again throughout the world, interest rates have risen sharply over the past 12 months. In fact, pretty well throughout the world, interest rates have risen by the same amount as they have in this country—by about 6 per cent. The fact that there is this worldwide rise in interest rates makes it that much harder for us to get our interest rates down.
  Mr. Healey: Why?
  Mr. Lawson: Because there is a world market in money about which the right hon. Gentleman should know. Hence my right hon. and learned Friend's determination to make a major cut in the public sector borrowing requirement this year.
  Mr. John Garrett: Will the Financial Secretary give way?
  Mr. Lawson: No; I have very little time left.
  Mr. Garrettrose—
  Mr. Lawson: Very well, I give way, but this is for the last time.
  Mr. Garrett: Will the hon. Gentleman reply to the question asked by my hon. Friend the Member for Stockport, North (Mr. Bennett)? I think that it was important. I know that the hon. Gentleman intends to slide out of answering these questions. Why has the due date for up-rating pensions been moved from 10 November to 26 November? How much public expenditure does that save?
  Mr. Lawson: That is a question that my right hon. Friend the Secretary of State for Social Services will be able to
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  answer. To quibble over a couple of weeks is absurd.
  Throughout the world we have seen interest rates rise, and there is some argument whether our methods of monetary control are the best or the right ones. That is somehting to which we have addressed ourselves in our Green Paper on monetary control. However, there is no way in which the quantity of money and the price can be controlled. If there is any effective control of the quantity of money, whether that is done by controlling the supply or controlling the demand, the effect must from time to time be to make interest rates rise.
  It is in the world context that my right hon. and learned Friend's first two Budgets must be seen. The two have frequently been contrasted, yet there is a single strategy running through them. That strategy is to cut public expenditure in order to achieve the cut in the public sector borrowing requirement that is so crucially necessary. Of course, there have been changes within the tax system. In last year's Budget there was a fairly dramatic switch from direct taxation—income tax—to indirect taxation—taxes on spending. This year there was the enterprise package.
  Since the Opposition are in the mood for good news, I have a further bit of good news to give them. We shall be legislating this year to deal with a longstanding and, in our view, justifiable complaint by the managers of authorised unit trusts that the tax regime that applies to them discourages them from investing in gilts and debentures.
  In order to remove what is in practice a restriction on the range of unit trusts that management companies can launch, we shall be providing in the Finance Bill for income tax—instead of corporation tax—treatment to be applied to the income of authorised unit trusts which under the terms of their deeds may invest only in United Kingdom interest-bearing sources and have only individual unit holders. For this purpose they will be treated as trusts. Like other authorised unit trusts, they will also, of course, enjoy the new exemption from capital gains tax on their chargeable gains.
  Overall, in the two Budget Statements there has been no significant change in the total burden of taxation. Last year

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  there was a switch in taxation rather than a change. We have concentrated instead on getting the public sector borrowing requirement down, from 5½ per cent. in 1978–79—the last year in which the right hon. Member for Leeds, East was Chancellor—to 4¾ per cent. of GDP in the year now ending, and 3¾ per cent. of GDP for 1980–81.
  Some people say that we do not have a fiscal policy, but we do. Had we kept the PSBR at the level of 5½ per cent. there would have been a PSBR for 1980–81 of £12½ billion instead of £8½ billion. In other words, we have cut the PSBR by £4 billion—one-third.
  What would the Opposition have done? They cannot say that the public sector borrowing requirement does not matter. The right hon. Member for Leeds, East described it as the Chancellor's biggest error. What the Opposition think it should be is somewhat obscure, but the right hon. Gentleman has never admitted that the 1978–79 PSBR was too high. He says again that it was not. He has also held that it should rise in a recession.
  Mr. Pavitt: On a point of order, Mr. Speaker. Is it not in the tradition and courtesy of the House that when a Minister replies, he replies to all hon. Members? The Financial Secretary has not dealt with any of the points raised by Labour Members.
  Mr. Speaker: Order. The Minister must make his speech in his own way. It is not for me to tell him how to make it.
  Mr. Lawson: I have done my best to treat the contributions on their merits. The right hon. Member for Leeds, East said, and he agrees now, that the public sector borrowing requirement should rise in a recession—so presumably it should be more than £12½ billion. Perhaps it should be £13 billion, £14 billion or £15 billion. The right hon. Member cannot answer that. He and the Opposition Front Bench—whatever the interesting policies on the Back Bench—have no policy except one of "leave it to Denis". The trouble with "leaving it to Denis" is not only that it is lacking in intellectual rigour but also that, unfortunately, people can remember what happened when they
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  "left it to Denis". That is why they voted the Labour Government out of office at the last general election.
  The most important aspect of the Budget is not next year's PSBR—important though that is—but the mediumterm financial strategy. For the first time a Government have published a financial strategy to master inflation and to restore the economy to health in four years. It sets out a coherent policy that is confined to what the Government can control. That is in contrast to a national plan. It is based on prudence and caution.
  Mr. Healey: The Chancellor has proved in the last year that he has failed to control the money supply, which has run well above the rate that he has set for the 12 months. How can he say that he can control the money supply when he has failed to do so, and why should anyone believe his projections for the future when his record in the past is so bad?
  Mr. Lawson: We inherited an appalling acceleration in monetary growth from the right hon. Gentleman, but it is now under control. During the last four months the annual rate of growth of sterling M3 has been 10 per cent.—well within our monetary guidelines. Our strategy is to get monetary growth down to 6 per cent.—and, contrary to the right hon. Gentleman's assertion, the new target represents no relaxation. We envisage getting the PSBR down to 1½ per cent. of GDP while maintaining our existing public expenditure plans. North Sea oil revenues will thus be used largely for the benefit of industry—through lower interest rates. At the end of the day we envisage a fiscal adjustment in the form of scope for the relaxation of taxation in 1982–83 of about £3½ billion at 1980–81 prices and a further £1½ billion in 1983–84.
  This is not just a Budget for the coming year; it is a Budget for the 1980s. As such, I have no doubt whatever that it deserves—and, indeed, that it will command—the confidence of the whole House.
  Debate adjourned.—[Mr. Cope.]
  Debate to be resumed tomorrow.

HOUSE OF COMMONS MEMBERS' FUND
Resolved,
That one-tenth of the sums deducted or set aside in the current year from the salaries of Members of Parliament under section 1 of the House of Commons Members' Fund Act 1939, and one-tenth of the contribution determined by the Treasury for the current year under section 1 of the House of Commons Members' Fund Act 1957, be appropriated for the purposes of section 4 of the House of Commons Members' Fund Act 1948.—[Mr. Parker.]

HOSTELS AND LODGING HOUSES (FIRE PRECAUTIONS)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Cope.]
10 pm
Mr. A. W. Stallard: It is with no relish that I raise tonight the question of risk of injury or death as a result of fire which faces too many vulnerable people in hostels and lodging houses in this country.
Four months ago, in a debate initiated by my hon. Friend the Member for Leeds, West (Mr. Dean), I drew the attention of the House and the Minister to the confusion that exists in all too many cases about who is responsible for ensuring that hostel premises have effective fire precautions. As I asked then, is there any wonder that there is confusion and urgent need to tidy up this matter before there are further disasters?
Two weeks ago tonight, a fire gutted a hostel in North London run by a religious charity. Nine homeless women lost their lives. The very next night, fire severely damaged an East London hostel for men recovering from tuberculosis. Thankfully, there were no casualties arising from that incident.
I am sure that the Minister was as shocked as the whole House by the tragic events, and I know that he would join with us in sending our sympathy to any relatives of those victims—and, indeed, to the voluntary organisations which suffered a great deal as a result of those tragic incidents.
I do not intend to discuss the causes of those fires. I believe that the London borough involved has launched a full inquiry into the circumstances, and we
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must await its outcome. It is inevitable, however, that I mention these fires in the context of the dangers facing vulnerable people in such hostels nationally.
Two facts emerge from the media coverage of the North London fire. First, the London fire brigade was quoted in the Daily Mirror as saying that there was no alarm system and no fire escape. No other reports have so far refuted that statement. The Daily Telegraph quoted a council spokesman as saying:
"There is a point of dispute about who is responsible for enforcing the regulations. We say the premises are not a common lodging house and therefore responsibility rested with the London Fire Brigade, and they say the opposite. So there is confusion."
According to The Times, the hostel was overcrowded. It stated that 21 homeless women were staying there on the night of the fire, when the council had given approval for only 10.
These two facts argue strongly in my opinion for the responsibility for enforcing fire precautions to be clarified and for Government action on the housing and public health standards in such places, along the lines outlined by my hon. Friend the Member for Leeds, West last year.
It would be only too easy to blame the voluntary organisations for these tragic events. I hope that we shall not do that, because this week we are debating a wide range of cuts in public expenditure affecting local authority services, throwing even more pressure on voluntary organisations, which are themselves facing cuts in resources and grants and rapidly increasing costs. Yet they are very often the only refuge available to people in serious and urgent need.
The voluntary organisations are in a "Catch 22" situation when faced with a desperate referral. Do they turn people away, to face perhaps worse conditions, or do they take them in—even with the sparse accommodation available? I do not think that we ought to put these dedicated people in such a position.
The fire in East London on 19 March proves my point to a certain extent, because there were no casualties there. There were adequate fire alarms and fire precaution systems and the hostel was not overcrowded.

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These fires are but a sad further example of a series of fires which, to the knowledge of the all-party parliamentary committee, CHAR—Campaign for the Homeless and Rootless—have claimed 27 lives in Birmingham, Leeds, Clacton, Manchester and London since early 1978. The Government's own report in 1976 warned that the risk of fire involving serious loss of life was great. We are debating the issue tonight—and I know that other hon. Members wish to intervene—because we cannot sit around having further reports, further tragedies, more reports, more tragedies and so on.
In his reply to the debate on 29 November, the Minister showed concern and sympathy with the issues which my hon. Friend and I raised. He made two proposals which I now want to take up. He announced that he would extend the special grant to cover improvements to houses in multiple occupation in order to provide assistance to their owners towards the cost of installing fire precautions. I know that my hon. Friend the Member for Leeds, West wishes to refer to that matter specifically. I simply ask the Minister to reconsider seriously the proposals in the Housing Bill to set a £500 ceiling as the maximum eligible amount of that grant. For a hostel such as the one in North London, let alone many larger premises, such a ceiling is totally inadequate and ought to be revised immediately.
Secondly, the Minister directed the housing services advisory unit to visit substandard premises and to talk to local authorities about the present framework for enforcing standards in hostels and lodging houses. I subsequently wrote to him offering the support of the all-party group and that of the voluntary organisations concerned with CHAR. I know that the unit has made a number of visits. It has sent a very good questionnaire to local authorities. I know that local authorities have been helpful to the Minister. However, I was concerned to discover that the unit had been asked to recommend action which would be at nil cost. In my view, that is impossible.
Has the unit yet reported to the Minister? Has it advised him that the law covering fire safety standards is effective and is not confusing the authorities or the owners of the premises? Is he satisfied with the present situation? Will the Minis-
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ter assure me that he will allow me and my fellow members of the all-party group to see that report, if it is not to be made public, because that would help us to be as constructive as we would like to be on a matter which is of concern to all parties?
I also remain concerned that the present responsibilities are confusing. For example, there are local authority responsibilities under section 60 or part IX of the Public Health Act 1936 or section 16 of the Housing Act 1961. There are also fire authority responsibilities under the Fire Precautions Act 1971 and the various other Acts covering fire prevention and precautions. I also want much more evidence from the Government to convince me that the measure put forward by my hon. Friend the Member for Leeds, West is not needed.
Most local authorities do not know how many houses in multiple occupation—in fact, how many death-trap houses—are situated in their areas. Last November, the Minister promised to consider how he might remedy that lack of information. I hope that he will announce some steps tonight.
Last week, the Bishop of Stepney and the Auxiliary Bishop of Westminster pointed out in a letter to The Times that fires such as the tragic one at North Kilburn showed how exposed single homeless people are and how the voluntary organisations which seek to assist them lack resources.
The Budget proposals announced last week make it all the more likely that that situation will continue. Single homeless people deserve to be granted access to decent housing, just like other groups in our community. So long as they have to live in hostels, they deserve safe and decent conditions. What financial assistance will the Minister give to the agencies to provide accommodation in which those men and women who so lack protection no longer run such risks as the recent tragedy has exposed?
10.10 pm
Mr. Charles Irving: I support all the comments of the hon. Member for St. Pancras, North (Mr. Stallard) on what can only be called one of the most horrific tragedies of the era. I refer to the continuing plight of single homeless people. We have had many

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debates in the House on this problem, but some of us perhaps fail to realise that in general we are talking about the most vulnerable section of the community, mostly men and women who are dependent in the main upon many charitable organisations.
Registered housing associations are able to bring their properties within the high standard that is required of them and to meet the fire precaution regulations by the grants that are made available to them. A large number of voluntary organisations throughout the nation are giving shelter, care and affection to the down-and-out, the alcoholic, the drug addict and the mentally disturbed. Christian people who do not want them in their street are always glad to see them somewhere else. I remind my hon. Friend the Under-Secretary of State, who I know to be a compassionate and caring Minister, that even in the survey conducted by the Government in 1976 there were about 30,000 recognised as sleeping in the care of voluntary organisations.
An enormous amount of publicity has been given to disasters that have occurred recently in London hostels. These disasters are not happening in London hostels alone. They have happened elsewhere, but they have not caught the eye of the press. On many occasions people stay in hostels that are a fire risk. They are a danger not only to those who live in them but to those who run them.
I plead with my hon. Friend to take action in two respects. First, I ask him to examine the appalling record of many local authorities that have the power to make grants. In my constituency we had a lodging house, a Rowton house, before the registered housing associations came into operation. At that time 52 men a night were given shelter in those premises. The local authority was good enough to make a grant. It provided a loan that enabled us to ensure that these men could go to bed in comparative safety at night.
There are at least 60,000 single homeless throughout the country who go to bed each night of the week in peril because there are not only no proper fire precautions but not even a fire extinguisher. There is nothing whatsoever. I am sorry to say that the sum that is suggested as a ceiling is totally inadequate.
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The Providence Row night refuge in Whitechapel is a hostel which is well thought of and which has a high reputation. It is run by the Sisters of Mercy. I am sure that my hon. Friend knows as well as I do that they wanted to put their house in order. They have spent £34,000 on providing merely a fire alarm system. If they had met the standards that are required in other institutions—for instance, a fire detection system and emergency lighting—that would have cost another £100,000.
There is a small home for youngsters in Gloucestershire that can accommodate six people. It came within the fire precautions legislation. It would have cost £20,000 to comply with the requirements set out in that legislation.
I do not believe that on either side of the House we are suggesting that people should go to those extremes. Our complaint is about the dismal lack of protection for single homeless people, who in many cases are totally unable to protect themselves. They are put into unregistered accommodation without thought of the risk that they run.
I support the all-party group CHAR. It has fought unceasingly to try to alleviate the sorrow and sadness of the multitude of people who are a scar on our society. Surely in the 1980s we can do something better for them.
I hope that the Minister will say not only that he will ensure that local authorities are reminded of their responsibilities but that he considers that the £500 limit is woefully inadequate and should be raised.
10.15 pm
Mr. Joseph Dean: I support my hon. Friend the Member for St. Pancras, North (Mr. Stallard) and the hon. Member for Cheltenham (Mr. Irving). This is a matter that has had all-party support.
I had the good fortune to be able to introduce a Private Member's Bill on this subject. Unfortunately, the Government could not find time to allow it to proceed. I also had the good fortune to have an Adjournment debate on the subject last November. It would be churlish if I did not acknowledge that I was grateful for the Government's response on that occasion. I prised open a door. However, subsequent events have shown that the

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immediate offer made by the Minister for Housing and Construction was not adequate.
The problem is overshadowed by the recent horrific tragedy in London. There is no point in debating the cause of that fire, which is not relevant to our debate. I wish to give the Minister ample time to reply, so I shall deal briefly with the general problems of fire. On 29 November I said that unless a start was made immediately to eradicate the problems at some time in the future yet more tragedies would be reported in the press. I do not criticise this Government particularly, because previous Governments are also guilty, but unless a start is made immediately tragedies will occur again.
The offer of £500 was generous at the time, but it should be placed on a sliding scale, because all building construction requirements differ. I hope that the Minister will keep an open mind. The Minister and I are on the Committee for the Housing Bill and will debate other issues there.
I also said in November that if implemented the Bill would clearly save lives. That cannot be challenged. What I find sad is that the House itself, over the last few months since I made that speech, thought fit to devote the whole of private Members' time to a Private Member's Bill on abortion that had no such guarantees. It is a sad fact that here we have the other end of the scale, whom no one will protect unless the House gives mandatory protection. It was not thought important enough.
As I say, I do not particularly accuse the Government. The House itself must bear some responsibility in this matter. At the time, I received almost 150 signatures, from Members of all parties, asking for the Bill to proceed.
Will the Government look at this situation? I am not speaking of the Government in a critical sense, but unless they start now the Kilburn disaster and the tragic loss of life that occurred there will be repeated over and over again. One cannot guarantee the intervals at which it will happen, but it will surely happen unless we start taking action now.
10.19 pm
The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg): The hon. Member for St. Pancras, North
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(Mr. Stallard) has given us another chance to debate the subject of hostels and lodging houses, which we last discussed in November. I have learnt a lot about hostels since then, particularly from my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke), who has a substantial number of hostels in his constituency.
I welcome the chance of responding to this debate. I also share the very deep regret of hon. Members who have spoken that we are holding this debate in the shadow of the recent fires at Tower Hamlets and Kilburn. I should like to express my deepest sympathy with those who were injured or bereaved as a result of those two fires. It is especially poignant that a young woman who had given up her career to help the homeless and disadvantaged should lose her life.
We shall, of course, have to await the facts before we can establish whether any weakness in existing arrangements contributed to these two disasters. I cannot comment on these specific cases until the inquest has been held. I understand that my right hon. Friend the Home Secretary told the House the other day that he will be receiving a report from the London Fire Brigade which he will copy to all his ministerial colleagues who have an interest in the subject. In the light of the inquest, this report and other information, the Government will consider what lessons can be learnt from the two fires.
But, as my hon. Friend the Minister for Housing and Construction said on the earlier occasion, the concern that all reasonable precautions should be taken against fire in lodging houses and hostels is one shared throughout the House. For that reason, as the House knows we have incorporated provisions in the Housing Bill which will enable housing authorities to pay grant towards the cost of providing means of escape from fire in houses in multiple occupation—or HMO.
I recognise that there is a difference of opinion at present over the figures. All that I will say to the hon. Member, for St. Pancras, North and the hon. Member for Leeds, West (Mr. Dean), and to my hon. Friend the Member for Cheltenham (Mr. Irving), is that I hear them.
Indeed, where such work is required to be done, the payment of the grant will be mandatory. I hope that the House will

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continue to agree that this is a useful and helpful initiative.
It was also explained in the earlier debate that local authorities had a wide range of powers covering almost every physical or structural aspect of the occupation and management of houses in multiple occupation. They are empowered by the Housing Act 1961 to serve a notice on the proprietor specifying and requiring works to provide means of escape from fire. The local authorities must consult the relevant fire authority before taking any action under the section.
If a local authority thinks that a house in multiple occupation cannot be provided with the necessary means of escape from fire at reasonable expense, it may ensure that a part of the house—for instance, the top floor—is not used. It does this either by accepting an undertaking from the owner or mortgagee or by making a closing order on that part of the house.
There are penalties—up to £500 for the first offence—for failure to carry out works, and local authorities have powers to carry out the necessary works themselves and to recoup the costs.
These measures seem to me to reflect a very useful range of provisions which, if properly applied, offer a considerable assurance of protection.
As the hon. Member for St. Pancras, North pointed out, there is complementary legislation in the Fire Precautions Act 1971.
I remind the House that the 1971 Act enables a fire authority to apply to a court for a prohibition or restriction order in circumstances where it is satisfied that, in the event of fire, there would be excessive risk to persons in the premises concerned. But, in order to avoid any potential conflict with Housing Act controls, my right hon. Friend has advised fire authorities to make use of the power in respect of HMO only in cases where there would be a serious danger to life and the local authority is unable to take suitable action by other means.
I turn to the visits by my Department's housing services advisory unit. What evidence is there to support the case for making changes? In the previous debate we discussed briefly some cases in which my hon. Friend pointed
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out that failure to comply with existing fire precautions or interference with means of escape, rather than deficiencies in the legislation, seemed to have been important factors. But we must not try to reach general conclusions on the basis of a few cases.
It was for that reason that my Department's housing services advisory unit was asked to visit a number of local authorities. I can tell the House that during January and February this year my Department's advisers visited 35 local authorities and two housing associations. Full co-operation by the local authorities that were approached enabled them to have access to a wide range of HMOs, hostels and common lodging houses. Among these were examples of the worst in each area.
In all, visits to 74 hostels and numerous small HMOs were undertaken. They included night shelters in redundant educational and commercial buildings, a converted railway arch shelter, Salvation Army and Church Army hostels, refuges and a reception centre. Some were purpose-built, others were conversions. As a result of these visits, the information available to my Department has obviously been greatly improved.
The results of the visits are still being analysed and I shall not prejudge any conclusions that we might reach on the issues identified. However, it is clear that performance varies. The enthusiasm of particular officers and members of local authorities is a vital ingredient to success. I should like to see the example of the best being the target for the worst.
Many of the people who inhabit these places are inevitably among the most vulnerable. They include many "castaways"—some have cast themselves away from what is seen by most of us as normal family life or society; others have been cast away by family and society. They ought to have a decent place to live in, but their problems go deeper than housing, and other bodies and agencies—statutory and voluntary—have a part to play. There is no basis for the hon. Member for St. Pancras, North saying that the unit entered on its visits with a precondition of "no-cost".
I can confirm that overcrowding was one of the aspects covered by the programme of visits. Again, without prejudging, I think I may say that we

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have gained the impression that while overcrowding exists it is not a universal problem.
The strongest evidence of overcrowding seemed to emerge from night shelters and was quite often explained by the keepers as being a result of a particular period of the year—that is, in winter time and at public holidays there was a tendency for more people to turn up at the shelter—and it was admitted to my Department's officers that on such occasions it was difficult to turn people away. Indeed, it would appear that one or two organisations operated a policy of never refusing admission, even though it did produce temporary overcrowding. But there are also examples of hostels and lodging houses which are commonly only two-thirds full.
Let me re-emphasise two points and make one new one. First, we must await the results of the inquiries now being made and take them into account, together with the findings of my Department's housing services advisory unit, in deciding whether any changes are needed.
Secondly, we must be careful to guard against creating new problems in attempting to solve the one causing immediate concern; and I again commend to the House the provisions in the Housing Bill designed to ease the burden on those providing HMOs, arising from compliance with fire precaution measures required by housing authorities.
Thirdly, I remind the House that during the debate on 29 November my hon. Friend the Minister for Housing and Construction undertook to consider with my right hon. Friend the Home Secretary the adequacy of the penalties pre-
178
sently set out in the Housing Acts relating to HMOs.
We have concluded those considerations and I can inform the House that an amendment to the Housing Bill, providing for appropriate increases, will be tabled at a suitable opportunity.
I hope that what I have said in the all-too-short time available to me shows the House that the Government are fully aware of the problem and understand the deep-seated anxieties of hon. Members across the party spectrum. We also understand that in trying to help the unfortunate people who, for a variety of reasons, find themselves in the circumstances that have been described in the debate we have to act in a way that will assist them and not in a way that will make it more difficult for them to find accommodation.
It follows that the Housing Bill and the existing powers for local authorities in fire precaution legislation and HMO legislation ought to be able, between them, to make a significant contribution to solving the problem.
It cannot be done quickly, but I assure the House that the Government are sympathetic to what is being asked for and, within the limitations that I have described, we will do our best to make certain that these unfortunate people are not exposed to the risk that has been so tragically brought to our attention in the past few weeks.
The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at half-past Ten o'clock.

  EDUCATION AND SCIENCE
    Hester Adrian Research Centre
    Hester Adrian Research Centre
    Ethnic Minority Children
    Ethnic Minority Children
    Academically-able Children
    Academically-able Children
  EMPLOYMENT
    Manpower Services Commission (Job Creation)
    Manpower Services Commission (Job Creation)
    Grunwick Strike Fund
    Grunwick Strike Fund
    Employment Transfer and Job Search Schemes
    Employment Transfer and Job Search Schemes
    Youth Employment (Wythenshawe)
    Youth Employment (Wythenshawe)
    Training Opportunities Scheme (Hammersmith and Fulham)
    Training Opportunities Scheme (Hammersmith and Fulham)
    Liquefied Natural Gas Tankers (Safety Measures)
    Liquefied Natural Gas Tankers (Safety Measures)
    Community Industry Programme (Manchester)
    Community Industry Programme (Manchester)
    Skillcentre (Manchester)
    Skillcentre (Manchester)
    Permaflex Limited (Fire and Explosions)
    Permaflex Limited (Fire and Explosions)
    Medical Profession (Hay Report)
    Medical Profession (Hay Report)
    South Crofty Tin Mine (Radon Gas)
    South Crofty Tin Mine (Radon Gas)
  OVERSEAS DEVELOPMENT
    Developing World (Private Sector Investment)
    Developing World (Private Sector Investment)
    Brandt Commission Report
    Brandt Commission Report
    Multilateral Agencies
    Multilateral Agencies
    Kwa Zulu
    Kwa Zulu
    University of Juba
    University of Juba
    Zambia
    Zambia
    Christian Aid
    Christian Aid
    Turkey
    Turkey
    SMALL CLAIMS COURTS
    SMALL CLAIMS COURTS
    LAW OF CONTEMPT
    LAW OF CONTEMPT
  TRADE
    Footwear Industry
    Footwear Industry
    Car Tyres (Dumping)
    Car Tyres (Dumping)
    European Community (Trade Commissioner)
    European Community (Trade Commissioner)
    Raw Material Imports
    Raw Material Imports
    Manufactured Goods
    Manufactured Goods
    Carpets (Imports)
    Carpets (Imports)
    Metrication
    Metrication
    European Community
    European Community
    Tariff Barriers
    Tariff Barriers
    Export Credit (Interest Rates)
    Export Credit (Interest Rates)
    Manufacturing Competition
    Manufacturing Competition
    Insurance Companies
    Insurance Companies
    Price Inflation
    Price Inflation
    European Commission (Anti-dumping Measures)
    European Commission (Anti-dumping Measures)
    Vehicles (Imports)
    Vehicles (Imports)
    Municipal Airports
    Municipal Airports
    Man-made Fibres and Carpets
    Man-made Fibres and Carpets
    Sperm Whale Oil
    Sperm Whale Oil
    Petrol Stations (Tenancies)
    Petrol Stations (Tenancies)
    Seal Skins
    Seal Skins
    Building Societies (Price Fixing)
    Building Societies (Price Fixing)
    Seal Skins
    Seal Skins
    Anti-pollution Measures
    Anti-pollution Measures
    Aircraft Noise (Heathrow)
    Aircraft Noise (Heathrow)
    Hotel and Catering Industry
    Hotel and Catering Industry
    Romanian Suits
    Romanian Suits
    USSR
    USSR
    Textile Imports
    Textile Imports
    Manufactured Goods
    Manufactured Goods
    Multi-fibre Arrangement
    Multi-fibre Arrangement
    Current Cost Accounting
    Current Cost Accounting
    Feedstock Equalisation Tariff
    Feedstock Equalisation Tariff
  SCOTLAND
    Munn and Dunning Committees
    Munn and Dunning Committees
    Rate Support Grant (Revenue Expenditure)
    Rate Support Grant (Revenue Expenditure)
    Building (Prescribed Fees) Regulations
    Building (Prescribed Fees) Regulations
    Art Teachers
    Art Teachers
  CIVIL SERVICE
    Senior Civil Servants (Industrial Appointments)
    Senior Civil Servants (Industrial Appointments)
    Computers
    Computers
  HOME DEPARTMENT
    Prisoners (Compassionate Leave and Release)
    Prisoners (Compassionate Leave and Release)
    Embassies and Consulates (Security)
    Embassies and Consulates (Security)
    Seamen
    Seamen
    Prison System
    Prison System
    Suspected Persons (Arrests)
    Suspected Persons (Arrests)
    Republic of Ireland Citizens
    Republic of Ireland Citizens
    Voluntary Services Unit (Grants)
    Voluntary Services Unit (Grants)
    EUROPEAN COMMUNITY BUDGET
    EUROPEAN COMMUNITY BUDGET
    HEREDITARY PEERAGES AND BARONETCIES
    HEREDITARY PEERAGES AND BARONETCIES
  INDUSTRY
    Concorde
    Concorde
    Microprocessor Projects
    Microprocessor Projects
    Mr. J. Lippitt
    Mr. J. Lippitt
    Disused Premises
    Disused Premises
    Innovation
    Innovation
    Competition
    Competition
  FOREIGN & COMMONWEALTH AFFAIRS
    Rhodesia House (Oustanding Rates)
    Rhodesia House (Oustanding Rates)
    South African and Chilean Consulates
    South African and Chilean Consulates
    Consulates (Dundee)
    Consulates (Dundee)
    Uranium Supplies
    Uranium Supplies
    Somalia
    Somalia
    Council of Ministers
    Council of Ministers
    EUROPEAN ASSEMBLIES (DELEGATION COSTS)
    EUROPEAN ASSEMBLIES (DELEGATION COSTS)
  AGRICULTURE, FISHERIES AND FOOD
    Tomatoes
    Tomatoes
    Council of Agricultural Ministers
    Council of Agricultural Ministers
    Badgers
    Badgers
  SOCIAL SERVICES
    Health Authorities (Extension of Medical Procedures)
    Health Authorities (Extension of Medical Procedures)
    Medicover
    Medicover
    Hyper-ventilation and Hypnosis
    Hyper-ventilation and Hypnosis
    Visits to Doctors (Charges)
    Visits to Doctors (Charges)
    Kidney Machines
    Kidney Machines
    Chiropodists
    Chiropodists
    State Retirement Pensions
    State Retirement Pensions
    Steel Industry Dispute
    Steel Industry Dispute
    Doctors (Warning Notices)
    Doctors (Warning Notices)
    Heart Operations
    Heart Operations
    Sickness Benefit
    Sickness Benefit
    Prescription Charges
    Prescription Charges
    Chronically Sick and Disabled Persons Act
    Chronically Sick and Disabled Persons Act
    Drug Reactions (Chemists' Reports)
    Drug Reactions (Chemists' Reports)
    Supplementary Benefit Recipients (Home Helps)
    Supplementary Benefit Recipients (Home Helps)
    Alcoholics (Treatment Costs)
    Alcoholics (Treatment Costs)
    Coventry Family Practitioner Committee
    Coventry Family Practitioner Committee
    Spina Bifida
    Spina Bifida
    Pensions (Payment Abroad)
    Pensions (Payment Abroad)
    Appeal Tribunals
    Appeal Tribunals
    Psychiatric, Surgical and Medical Facilities (Nuneaton)
    Psychiatric, Surgical and Medical Facilities (Nuneaton)
    Medical Consultants
    Medical Consultants
    Child Benefit
    Child Benefit
  ENERGY
    Uranium Supplies
    Uranium Supplies
    Gas Flaring
    Gas Flaring
    "Save-it" Campaign
    "Save-it" Campaign
    Dispersions of Coal and Oil (Use as Fuel)
    Dispersions of Coal and Oil (Use as Fuel)
    Coal-oil Price Ratios
    Coal-oil Price Ratios
    Civil Uranium Procurement Directorate
    Civil Uranium Procurement Directorate
    Gas Demand
    Gas Demand
    Tomato Growers (Energy Costs)
    Tomato Growers (Energy Costs)
  DEFENCE
    China (Arms Sales)
    China (Arms Sales)
    Civil Servants (Business Appointments Rules)
    Civil Servants (Business Appointments Rules)
    Departmental Civil Servants
    Departmental Civil Servants
    Royal Air Force (Fast Jet Pilots)
    Royal Air Force (Fast Jet Pilots)
    Training Exercises (Fatalities)
    Training Exercises (Fatalities)
    Davra Textiles Limited
    Davra Textiles Limited
  TRANSPORT
    Road Construction Units
    Road Construction Units
    Dangerous Substances (Carriage by Road)
    Dangerous Substances (Carriage by Road)
    North-West Region (Rail Closures)
    North-West Region (Rail Closures)
    "Don't Drink and Drive" Campaign
    "Don't Drink and Drive" Campaign
    Seat Belt Campaign
    Seat Belt Campaign
  ENVIRONMENT
    Housing Repairs (Hillingdon)
    Housing Repairs (Hillingdon)
    Rate Rebates
    Rate Rebates
    Anti-litter Campaign
    Anti-litter Campaign
    Council Rents (Proportion of Income)
    Council Rents (Proportion of Income)
    NALGO
    NALGO
    Planning and Building Regulations (Fees)
    Planning and Building Regulations (Fees)
    Enterprise Zone (Wandsworth)
    Enterprise Zone (Wandsworth)
    Coast Protection (South Shields)
    Coast Protection (South Shields)
  NATIONAL FINANCE
    Mortgage Interest (Tax Relief)
    Mortgage Interest (Tax Relief)
    Miners (Pay and Taxation)
    Miners (Pay and Taxation)
    Private School Fees Covenants (Taxation)
    Private School Fees Covenants (Taxation)
    Steel Industry Dispute (Workers Benefits)
    Steel Industry Dispute (Workers Benefits)
    Value Added Tax
    Value Added Tax
    Building Societies
    Building Societies
    Steel Industry (Suppliers and Hauliers)
    Steel Industry (Suppliers and Hauliers)
    Travel Concessions
    Travel Concessions
    Inflation
    Inflation
    Appointment Notes
    Appointment Notes
    Customs and Excise
    Customs and Excise
    Enterprise Zones
    Enterprise Zones
    Personal Taxation
    Personal Taxation
    Public Expenditure
    Public Expenditure
    Civil List
    Civil List
    Income Tax
    Income Tax
    National Insurance Contributions
    National Insurance Contributions
    Sterling M3
    Sterling M3
    Coal Miners (Free Coal)
    Coal Miners (Free Coal)
    Personal Tax Allowances
    Personal Tax Allowances
    Fraud Investigators
    Fraud Investigators
  NORTHERN IRELAND
    Attacks on Prison Officers
    Attacks on Prison Officers
    Prisons
    Prisons
    Borstal Institutions
    Borstal Institutions
    Constitutional Conference
    Constitutional Conference
    Handicapped Persons (Services)
    Handicapped Persons (Services)
    Gaelic Athletic Association
    Gaelic Athletic Association
  WALES
    Welsh Development Agency
    Welsh Development Agency
    Public Expenditure
    Public Expenditure
    Enterprise Zones
    Enterprise Zones
    Physically and Mentally Handicapped Children (Education)
    Physically and Mentally Handicapped Children (Education)
    Bernard Wardle Factory, Caernarfon
    Bernard Wardle Factory, Caernarfon

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

ETHIOPIA: HUMANITARIAN FOOD SUPPLIES
Lord AVEBURY: 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 are taking to check alleged diversions of humanitarian food supplies made available by Britain or the EEC for the people of Ethiopia.
Lord TREFGARNE: My Lords, our information is that the food aid supplied by the United Kingdom for humanitarian purposes has benefited the intended recipients in Ethiopia. I understand that the European Commission take a similar view on Community aid.
Lord AVEBURY: My Lords, is the Minister aware that I hold in my hand a photograph showing a sack labelled, "Wheat: Gift of the European Economic Communities for free distribution", and another one showing a sack labelled, "Given by the Italian People", which was captured on the battlefield of Nacfa by the Eritrean People's Liberation Forces from the Ethiopian Armed Forces? Did not the noble Lord the Minister say to me that it would be naive to assume that no diversion of humanitarian assistance occurred in Ethiopia, and that he did not know how much had taken place? In view of these facts, should not the EEC and the British donors, in particular, carry out a thorough investigation to discover the extent of illegal diversion of humanitarian supplies, and decide whether or not they should continue?
Lord TREFGARNE: Yes indeed, my Lords, but we have to make our judgment on the basis of the evidence available to us.
1184
The present evidence available to us is that no substantial diversion of this aid occurs. If the noble Lord had evidence to the contrary, I would gladly look at it.
Lord AVEBURY: My Lords, did not the noble Lord say that this evidence had come from higher up the chain? Is it not intrinsically unlikely that such evidence, which would have to emanate from within the rehabilitation agency of the Ethiopian Government, would become known to us or to anybody in the outside world? Therefore, is it not possible for the noble Lord to suggest to the EEC that a representative be sent to check thoroughly on the spot all allegations of illegal diversion and, in particular, to look at what has happened on the battlefields of Eritrea?
Lord TREFGARNE: My Lords, we have our own representative in Ethiopia in the form of our ambassador, who has made a special point of looking into this matter, and, as I said earlier, we have no evidence of substantial diversion.

DISTRICT HEATING
2.40 p.m.
Baroness VICKERS: 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 state what progress is being made in regard to district heating for factories, houses and flats.
The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie): My Lords, the Government's policy on combined district heating and power generation is under consideration in the light of the Marshall Report (Energy Paper No. 35). We shall be making an announcement very shortly on this important issue.
Baroness VICKERS: My Lords, I thank the noble Lord the Minister for that fascinating reply, but will he tell me whether this report includes the action being taken by the power stations?
The Earl of GOWRIE: Yes, my Lords, my understanding is that it would.

LICENSING COMPENSATION FUND: DISPOSAL OF MONIES
2.42 p.m.
Lord JANNER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what progress has been made with the funds from the Licensing Compensation for charitable purposes.
The PARLIAMENTARY UNDERSECRETARY of STATE, HOME OFFICE (Lord Belstead): My Lords, my honourable friend the Minister of State has had discussions with the trade and other interests and good progress is being made in reaching decisions on how the funds might be wound up and the proceeds disposed of.
Lord JANNER: My Lords, is the noble Lord aware that that is the kind of answer that has been given for the last 20 to 30 years, and that charities are being deprived of the benefit of these funds? What on earth is causing the delay? Is it not really time that the funds were used for charitable purposes, instead of lying idle for all that period?
Lord BELSTEAD: My Lords, there is nothing between the noble Lord and the Government in the desire to see that these funds are used instead of lying idle as they are at the moment. We have made an advance, in that the brewers have put forward a scheme which is being studied jointly by the Brewers' Society and the Government in consultation with other representatives of the trade and other Government departments. The scheme has to be studied and in addition to that it has also to be decided how a trust should be administered.
Lord WELLS-PESTELL: My Lords, may I ask the noble Lord the Minister this—I do not want to ask an embarrassing question and I shall understand if the noble Lord feels that he cannot answer it: Is the delay in any way due to difficulties existing because of differences between the viewpoints of the various bodies concerned?
Lord BELSTEAD: My Lords, I am sure I can answer that question, and the answer is, no.
Lord JANNER: My Lords, can the noble Lord tell me when the brewers first put forward the proposal which the Government are now considering—not only this Government but the previous Government, too?
Lord BELSTEAD: My Lords, I reported to your Lordships' House last July that the brewers had just put forward their proposals.

CRIMINAL APPEAL (NORTHERN IRELAND) BILL [H.L.]
The LORD CHANCELLOR (Lord Hailsham of Saint Marylebone): My Lords, I beg to introduce a Bill to consolidate the Criminal Appeal (Northern Ireland) Act 1968 and related enactments. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read la.—(The Lord Chancellor.)
On Question, Bill read la, and to be printed.

HOUSE OF LORDS OFFICES
The CHAIRMAN of COMMITTEES (Lord Aberdare): My Lords, I beg to move that the House of Lords Offices Committee Report be agreed to. I think that I should draw your Lordships' attention to two items in the report. The first is Item 2 dealing with the Refreshment Department, and the second is Item 3 dealing with Facilities for Members of the European Parliament.
So far as the Refreshment Department is concerned, the transfer of staff to the House of Lords Vote became essential once a similar decision had been taken in another place. I think that your Lordships will be pleased to hear that the result of this transfer will be wholly to the advantage of the staff of the Refreshment Department who are very loyal and hard working. I think it is a very good

1187
thing that they should now be properly remunerated and their pensions considerably improved.
So far as Facilities for Members of the European Parliament are concerned, as your Lordships know we have debated this matter before and the general decision taken has been to keep in step with another place. Now the position is that the Services Committee in another place has taken a decision and recommended limited access for Members of the European Parliament to areas of the House of Commons. Therefore, the Offices Committee in your Lordships' House thought it appropriate to make a recommendation to this House for limited facilities here. The recommended access that is in the report has been suggested as that which is most likely to facilitate working between the Members of the European Parliament and our own European Communities Committee. I beg to move.
Moved, That the Fifth Report from the Select Committee be agreed to.—(Lord Aberdare.)
The Report 'my as follows:
1. LIBRARY
The report from the Library Sub-Committee for the year 1979 was laid before the Committee and approved.
2. REREESHMENT DEPARTMENT
The Committee were informed that the Treasury had agreed, in principle, to the transfer of the Refreshment Department's employees to the Parliament Office with effect front 1st April, 1980, and to the staff costs, including provision for superannuation, being borne on the House of Lords Vote from that date.
The Committee agreed, subject to a review of the arrangements at the end of 1980, that the extra staff costs falling on the Vote should be met from the receipts of the Rreshment Department that will be surrendered as Appropriations-in-Aid.
The Committee agreed rates of pay for the staff and authorised provision for their payment from 1st April, 1980.
3. FACILITIES FOR MEMBERS OF THE EUROPEAN PARLIAMENT
The Committee recommend that, on a trial basis, United Kingdom Members of the European Parliament be granted access to the Peers' Lobby, the Galleries of the House, the Committee Corridor and to the offices of the European Communities Committee.
4. INSURANCE FOR LORDS
The Committee recommend, in principle, that provision for accident insurance cover should be made for Lords whilst engaged on Parliamentary duty in the United Kingdom.
5. PARLIAMENT OFFICE
The Committee were informed of the secondment of Mr. M. G. Pownall as Secretary to the Leader of the House and Government Chief Whip, in the place of Mr. C. H. Cumming-Bruce who is resigning.
6. HANSARD REPORTING STAFF
The Committee were informed of the arrangements made for the temporary secondment of reporting staff from the Northern Ireland Assembly and authorised provision for the payment to them of travelling expenses and subsistence, etc.
7. HOUSE. OF LORDS FEES
The Committee approved proposals for charging for the cost of supplying certain information or records.
8. PARLIAMENTARY DELEGATIONS TO INTERNATIONAL ASSEMBLIES
The Committee authorised provision for the payment of travelling expenses and subsistence to staff who provide secretarial services to Parliamentary Delegates when abroad.
9. NEWS SERVICE
The Committee approved payment of a share of an increased subscription for the Teleprinter News Service.
10. SUPERANNUATION
The Committee were notified of the following awards:—

(a) Revised pension and lump sum to Mr. F. J. Dine. Attendant, who finally retired on 6th March, 1980.

(b) Short Service payment to Lt. Commander D. E. Brock, Staff Superintendent, who resigned on 12th March, 1980.

Lord ELWYN-JONES: My Lords, what is the nature of the facilities that are being granted in this House and in the environs of the House to these distinguished visitors?
Lord ABERDARE: My Lords, if the noble and learned Lord had actually read the report which we are now discussing he would have seen that it is to grant them access to the Peers' Lobby, the Galleries of the House, the Committee Corridor and to the offices of the European Communities Committee.
Lord LEATHERLAND: My Lords, can the noble Lord tell us what will happen if these gentlemen find themselves thirsty and want to buy a bottle of lemonade?
Lord ABERDARE: My Lords, I am glad to say that the Services Committee in another place has recommended that they should have access to the Strangers' Cafeteria.
On Question, Motion agreed to.

NATIONAL HERITAGE BILL
2.48 p.m.
Lord MOWBRAY and STOURTON: My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Mowbray and Stourton.)
On Question, Motion agreed to.
COMMONS AMENDMENT TO ONE OF TILE LORDS AMENDMENTS
[References are to Bill (159) as first printed for the Lords. Commons Amendments are printed in italics.]
LORDS AMENDMENT
1 Page 2, line 2, leave out from "appointed" to end of line 4 and insert"by the Crown on the advice of the Prime Minister."
The Commons agreed to this Amendment hut make the following Amendment thereto:
2 Line 2, leave out "the Crown on the advice of".
Lord MOWBRAY and STOURTON: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 2 to the Lords Amendment No. 1. When we debated this matter on Report and in Committee, the view was put very forcefully by a number of speakers here that the prestige and independence of the trustees and the integrity of the resources of the fund should be safeguarded by the appointment of the trustees lying not with the Ministers, within whose policy area the fund will actually operate, but with the Crown or the Prime Minister. Although there are precedents for appointment of a whole body by the Crown, they relate to bodies set up in the form of Royal Commissions and to bodies of considerable constitutional importance—such as the Bank of England. It is, however, the case that the Prime Minister appoints the trustees of a number of national museums and galleries. That, in fact, dates back to the time when the Treasury had departmental responsibility for the arts and it was in the capacity of First Lord of the Treasury that the Prime Minister originally made these appointments.
None the less, in view of the strong feeling expressed on the need to assure the independence and standing of the trustees, the Government suggest that it would be appropriate to follow this precedent, and propose instead that appointments should
1190
be made by the Prime Minister. Amendments to that effect were passed in another place and they deal with the question of appointment in Clause 1 and with the termination of appointment in Schedule 1.
I have, however, to add that one result of the amendments to Clause 2 agreed here and in another place is that it has not yet been possible to proceed with the appointment of the chairman and trustees of the fund, now the responsibility of the Prime Minister. Unfortunately, until these appointments have been made it will not be possible to open any account to receive the capital sums from the National Land Fund, and therefore my comments to your Lordships on Report about interest payable on the capital are invalidated, as we then expected that the chairman and trustees would be appointed by 1st April. However, I can give noble Lords the assurance that the Government will now proceed as quickly as is practicable with the necessary appointments, which we expect to be made very shortly. I beg to move.
Moved, That this House doth agree with the Commons in their Amendment No. 2 to the Lords Amendment No.1.—(Lord Mowbray and Stourton.)
2.50 p.m.
Baroness BIRK: My Lords, although we are pleased that the amendments passed by this House have been accepted by another place, a point has been raised which gives rise to some concern. Just now the noble Lord said that the monies cannot he paid into the fund until the chairman and the trustees have been appointed, and that that matter has been delayed.
I would refer the noble Lord to column 825 of the Official Report of 11th March when we took the Committee stage of the Bill. I specifically put to him:
"If by any unhappy. unlikely and unfortunate chance … there is any delay, do I assume that the interest on the capital will be paid? This amounts to about £100,000 a month, and it would be disastrous if the fund did not get this right from the beginning".
There were a number of other interventions and then the noble Lord said:
"A little angel has just wafted me information. I can tell the House that interest will be paid on the capital. I take that to mean that it Will be paid as front 1st April, whether it is paid in or not."

1191
I quite appreciate that the amendment may have caused some days' delay in the appointments, but I am concerned that the fund should not lose this interest which, according to what the noble Lord has just said, appears will be the case. Surely as it accumulates the interest can be retained for the fund and paid in directly the chairman and the quorum of trustees have been appointed so that they can sign for it? It would seem to me to be not only entirely unfair, but quite contrary to what the noble Lord said on 11th March if, in fact, this money is lost. As I think we are all agreed—both in this House and in another place—that due to the economic circumstances the fund will not be over-endowed when it starts, these thousands of pounds—and it could be a minimum of £25,000—are quite substantial.
Lord REIGATE: My Lords, your Lordships may recall that on the Report stage I tabled two amendments. One concerned whether the appointment of the trustees should be in the hands of the Crown, as advised by the Prime Minister; or, alternatively, made by the Prime Minister. When faced with the generous capitulation of my noble friend Lord Mowbray and Stourton, I had to choose between one of those two, and I apparently chose the wrong one; namely, the first one. However, I must say at once that I am perfectly happy to agree with what the Commons have chosen to do, and I am grateful to my noble friend for his explanation of the reasons for so doing—reasons which, having studied Hansard of another place, I could not find mentioned by anybody,
On the matter of finance, which has been sprung on us at the last minute, I am very surprised. The original Clause 18 was removed from the Bill at Report stage at the request of the Government, and I cannot but feel that they should have made it clear to the House at that stage what the result would be. The amount involved is fairly considerable in the terms of the trust, but presumably the interest is now accruing to the National Land Fund, is it not? Can we have an answer to that and know why the interest cannot be transferred with the other funds to the Heritage Fund in due course? Apart from that, I hope that we shall agree with the Commons in what they have done.
Lord DONALDSON of KINGS-BRIDGE: My Lords, if I may follow the noble Lord, Lord Reigate, we on this side are content with the appointment arrangements, but we are thoroughly upset by the assurance which was given to a most specific question by my noble friend Lady Birk, who said:
"If by any unhappy, unlikely and unfortunate chance-not to do with your Lordships' House-there is any delay …".
We were given a positive assurance that this would be dealt with.
I can quite see that if there is no chairman and, therefore, there is no existing body by which the interest accruing on the large number of millions, which we are looking for to be transferred from the National Land Fund, can be received, there may have to be a delay in paying it; and, as the noble Lord, Lord Reigate, suggests, this money will accumulate where it normally would if there had been no change, and can then be transferred. Anything less than an assurance on those lines seems to me to be a breach of the Government's promise to the House, given by their Minister in this House, in answer to an absolutely specific question. I do not think that the House should accept it. However, I feel sure that the noble Lord will be able to say something reassuring before we finish.
Lord MOWBRAY and STOURTON: My Lords, I can only come to the Box and say that I apologise; there was a misunderstanding. The legal position is that the fund can be administered only by the trustees, and only they can put it in an interest-bearing deposit. In answer to the noble Baroness, Lady Birk, had we kept Clause 18, I am advised that it would not have helped. It is only a matter of a few days. I do not anticipate that it will be long before the trustees are appointed.
Baroness BIRK: My Lords, with the leave of the House, may I ask the noble Lord whether he would, perhaps, add to what he said? He said that the money cannot be received until there is someone who can legally receive it. I accept that. But I am concerned about the situation as it accumulates, which it would, and this has been explained by the noble Lord, Lord Reigate, and by my noble friend Lord Donaldson. Can we be assured

1193
that eventually, after the appointment of the chairman and trustees, that money will be paid into the fund? That is what we want to know. I am very concerned that it should not be lost or retained by the Treasury, or that it will I not reach the fund at some point.
Lord MOWBRAY and STOURTON: My Lords, with the leave of the House, my understanding is that as soon as the trustees and chairman have been appointed the money can and will be paid.
Lord ELWYN-JONES: My Lords, surely that is not the question which has been put. In the meantime interest is accumulating on this sum. Can the Government undertake that when ultimately it is paid over, that interest which has accumulated will be transferred to the Heritage Fund?
Lord MOWBRAY and STOURTON: My Lords, I am not in a position to give a guarantee of that sort at this moment.
On Question, Motion agreed to.
2.58 p.m.
Lord MOWBRAY and STOURTON Lord MOWBRAY and STOURTON moved Amendments Nos. 3 to 7:
COMMONS CONSEQUENTIAL
AMENDMENTS TO LORDS AMENDMENT
3 Page 12, line 23, leave out "either of the Ministers" and insert "the Prime Minister"
4 line 25, leave out "Ministers" and insert "Prime Minister"
5 line 26, leave out "they are" and insert he is"
6 line 37, leave out "Ministers" and insert "Prime Minister's"
7 Page 13, line 5, leave out "either of the Ministers" and insert "the Prime Minister"
The noble Lord said: My Lords, with the leave of the House, I beg to move these Amendments en bloc.
Moved, That this House doth agree with the Commons in their consequential Amendments Nos. 3 to 7 inclusive.—(Lord Mowbray and Stourton.)
On Question, Motion agreed to.

EDUCATION (No. 2) BILL
2.59 p.m.
Bill read 3a (with the amendments).
The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Baroness Young)The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Baroness Young) moved Amendments Nos. 1 and 2:
Clause 8, page 8, leave out lines 20 to 22.
Page 9, line 12, at end insert—
("(5A) The local education authority by whom an aided or special agreement school is maintained may, with the agreement of the governors of the school, publish on their behalf the particulars or information relating to the school referred to in subsection (2) or (5) above.").
The noble Baroness said: My Lords, I beg to move these two amendments. They are technical, consequential amendments upon the agreement by the House on Report to Amendment No. 22. At present Clause 8(2) provides for the publication by a local education authority of information relating to admissions and appeals arrangements for an aided school where this is done with the agreement of and on behalf of the governors of that school. Before we passed Amendment No. 22, on Report, Clause 8(5) referred back to Clause 8(2) and so extended this provision to the publication of information required by regulations made under Clause 8(5). However, Amendment No. 22, which we proposed at Report stage in the course of fulfilling our undertaking about the publication of information relating to special education, did not repeat the link with Clause 8(2). These amendments merely restore the position concerning publication to what it had been hitherto. I beg to move.
On Question, amendments agreed to.
3.1 p.m.
Baroness YOUNG: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Baroness Young.)
Baroness DAVID: My Lords, I wish to make just a few comments about this Bill, which I think has been a rushed Bill. It has been rushed in two ways: It has been hurried through to get it on the statute book by the beginning of April and, as a result, a number of important matters which need to be legislated for have been left out of the Bill. The noble Baroness, Lady Masham, mentioned Warnock last week when we were at Report stage. The anxiety that many noble Lords on all sides of the House

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felt about provisions for the handicapped was obvious from the amendments put down.
The education of the 16 to 19 year-olds is another area where we are awaiting a report from the Macfarlane Committee, and where legislation and action is urgently needed. There is nothing for that age group in this Bill. A large number of regulations are still to be drafted—regulations of great importance in clarifying the intentions of the Government. We have seen none of these. I also consider that the Bill has been rushed through your Lordships' House. We have been pressed for time both at Committee and Report stages and this is most certainly not because we on these Benches, or indeed others on other Benches, have made long speeches and held up business. I have myself asked my noble friends on these Benches to exercise restraint, and either not to speak or to speak briefly to enable us to get on. I hope that those who organise the timetable for future Bills will take note of this.
However, the 1980 Education (No. 2) Bill will probably be remembered for that remarkable debate and vote on the transport clauses in which one of the authors of the 1944 Education Act, the noble Lord, Lord Butler of Saffron Walden, made such a skilful and influential speech. That debate may well go down in history as the time when the House of Lords really made itself felt. There was no doubt that on that occasion at least this House had very full coverage in the Press. We can claim to have made some improvement to the Bill.
As for the Bill, it makes a number of promises which I, for one, shall he surprised to see fulfilled. Parental choice is supposed to be on offer. How real that will be remains to be seen. I suspect that it is a "con". The LEAs too are supposed to be given greater freedom. Here and there maybe, but in other places burdens are put on them and they have no choice in the matter. They may well have difficulty, as a result of certain clauses in the Bill, in keeping up the standards of their comprehensive schools. The Bill is hard on those who are just above the supplementary benefit and family income supplement level, and I
1196
think that those who drafted the Bill have not shown a great deal of imagination about how these people are going to suffer.
Then there is the introduction of the assisted places scheme. That is a slap in the face for those who run, and teach in, the maintained sector. I was reading early in the New Year some paper where a journalist was giving prizes for boobs of the previous year. He gave first prize to Mr. Mark Carlisle for giving a subsidy to the private education industry while pleading poverty to the service which, as Secretary of State. he is charged to uphold. I think that that will be my final comment on this miserable Bill.
3.5 p.m.
Viscount SIMON: My Lords, at the Second Reading of this Bill, I ventured to describe it from the point of view of my noble friends on these Benches as a deplorable Bill. Now we come to say farewell to it it is less deplorable, thanks to the decision of the Committee to throw out the transport charges, to which the noble Baroness, Lady David, has already referred. The noble Baroness in charge of the Bill was rather insistent after that had happened in warning us of the dire consequences that this might have on other parts of the education budget. In fact, I thought she was rather unduly pessimistic in some of her comments, and I hope and believe that it will not be so bad as she painted.
On the third day of the Committee stage, on 13th March, at column 1300, she actually said—and I may say that I was a little surprised—
"as a result of the activities of this House today there is likely to be less nursery provision than there was".
I recognise that the noble Baroness was upset by the decision of the Committee and perhaps rather shocked at the size of the majority, but I wonder whether I can ask her whether there is any evidence that there is likely to be less nursery provision than there was. It seemed to me to be a slight overstatement of the risk.
Then I looked at the Statement made by the Secretary of State, which the noble Baroness repeated in this House, some days later. It seemed to me, reading that Statement, and reading the discussion that took place upon it in another place, that there was some doubt whether in

1197
fact the recoupment—I am sorry, I must not use that word because it has a technical meaning—or rather the recovery of the amount of the savings lost by the deletion of transport really has to come out of the education budget at all. The Secretary of State began by making out on 18th March that the rate support grant had already been settled, and at column 209 went on to say:
"But this is no way removes the obligation on local authorities to achieve the needed reductions in expenditure in some other way".
He referred these to the local authorities. Having spoken of the rate support grant, it seemed to me that he was referring to the local authority budgets as a whole and not merely to the budget of the education authorities. I agree that it is a little confusing because the word "authority" is used several times, and of course the authority may be the local authority or the local education authority.
I suggest to the noble Baroness—and perhaps she could clear up this point when she replies—that it is quite open to local authorities to find the comparatively small savings required in some other field altogether than education. I say "the comparatively small amount" since it is known that a large number of local education authorities were not proposing to charge for transport anyway, and I feel that the total amount is probably less than the figures being talked about when were discussing the Bill.
As the noble Baroness, Lady David, has said, even with the transport charges removed, we have disagreement on a number of important issues, but I do not think I would wish to say anything more about them today except this: when we discussed the nursery schools my noble friend Lady Seear made the point strongly that it would be so much better if the obligation to provide nursery education was left on the statute book and could then be suspended. I made the suggestion that by using what is Clause 37(1) of the Bill, the Secretary of State could bring different parts of the Bill into operation on different dates. The aim is agreed on both sides of the House. The noble Baroness is quite clear that the aim is to restore, and indeed to improve, the position regarding nursery education as soon as financial circumstances permit. So would it riot be much better to have the
1198
provision on the statute book, and then the Secretary of State could bring it into operation by bringing an order before Parliament when circumstances allowed?
When that was suggested, the noble Baroness made great play of the fact that it would lead to pressure in that and other instances where the same procedure was suggested. But surely a Secretary of State could always resist pressure if there was good reason for resisting it? I ask your Lordships to consider what happens under the arrangements we have now. The obligation to provide nursery education has been removed. When the financial situation is better—as we all hope it will be before long—and we are able to return to the position in which we want to make this a duty instead of a power, what will happen? The Secretary of State will be asked, and he will reply, "I quite agree, but the legislative programme is so great that I cannot bring a Bill in". That is the great trap we will fall into unless we are careful.
It would have been so much easier if the Government had thought fit to accept the idea that it should be legislated for at this stage and then the operation of the clause postponed for as long as necessary. I make this point rather strongly now, because I am sure these things will arise with other Bills which the Government will bring forward during this period of financial stringency. If there is some issue in those Bills on which we are all agreed but we cannot deal with them only because we do not have the money, would it not be a good idea to put them into the relevant Bills with a suspending clause, such as we have in this one?
3.12 p.m.
Lord SHINWELL: My Lords, this seems a suitable opportunity to make a few comments about the Bill from, as it were, an unofficial source. We have heard from the Front Bench spokesmen of the Labour and Liberal Parties. What are their complaints about? My noble friend Lady David described it as a "rushed" Bill. If by "rushed", she meant sitting up all night listening to noble Lords in Committee moving innumerable amendments and then withdrawing them, then "rushed" would be appropriate. Indeed, I would go so far as to comment that more amendments were moved and

1199
withdrawn than were voted upon. What does that indicate? It indicates that the procedural basis of the Bill both in Committee and on Report was, to put it bluntly, absurd, ridiculous, ludicrous and completely unnecessary!
During the procedure to which I refer, I could not understand why we had to stay up all night. What did we accomplish during that period? No doubt it presented a favourable opportunity, intermittantly and perfunctorily and very often deliberately, for Members of your Lordships' House to disappear for the purpose of having a few winks in the Library or perhaps a visit to the Guest Room or Bishops' Bar. Indeed, visits to the Guest Room and Bishops' Bar in certain aspects provided compensation for what we suffered. In my view, the whole procedure was wrong. Before the amendments were tabled they should have been thought out very carefully, which obviously they could not have been because within my hearing, and that of many noble Lords here today, amendments were proposed and after a short, often very short, statement from the Minister, they were withdrawn.
I congratulate the noble Baroness, Lady Young, on her conduct throughout the debates on the Bill. It was far from superficial and she used understanding. Of course, she never gave anything away. The noble Baroness is one of the best goalkeepers I have ever met in Parliament. The ball could never pass her and every amendment was turned down. Indeed, we knew before we began that we were defeated. If one wanted to be on the winning side for a change, one had to go into the Conservative Lobby, which I did on one occasion, and I am still awaiting the repercussions.
Should we not adopt a new procedure when debating a Bill of this character, a momentous measure? Perhaps I should qualify the use of the word "momentous", because although I intervened a few times expectantly hoping we would discuss education, the curricula, that did not happen. I thought we should be discussing what education was all about; what was happening to our teachers, whether those teachers would be unemployed, why village schools were to be closed down and so on all—important and pertinent questions—but they were never discussed
1200
at all. Hardly was a word said about the basis of education. It was all about managers and governors, the mechanics of the thing, and about education proper hardly a word was uttered. What we were debating seemed to be not an Education Bill but a technological attempt at predicting the kind of machinery that was envisaged by the Government a long time ahead, a time we may never reach for all we know, or some of us may never reach, and therefore we shall not suffer accordingly.
What the Government and Opposition should consider is a better method of procedure when dealing with matters of this sort, and not to ask Members to sit all night to talk and talk without anything being implemented, knowing the Government were going to turn down every amendment anyway. Indeed, that was the assumption of some of my noble friends who, when moving amendments, practically apologised for doing so. It was an astonishing affair. But it is all finished now, at least for the time being, and perhaps one of these days in your Lordships' House we will discuss the philosophy and basis of education, what it is all about and what its purpose is. I hope that will happen, and then our famous educationists, of whom I understand we have many in this House, will come to the fore. I believe that among us there are 13 associates who can add after their names "FRS", Fellows of the Royal Society, one of the most intellectual chambers in the universe.
I do not suppose that there is any other Chamber anywhere—in the United States, or in any other country—in which there are so many Fellows of the Royal Society. In those circumstances, we can discuss education, and what it is all about; and we need to discuss it. I say this because it seems that sometimes we take the wrong direction when we are discussing education. Sometimes I wonder—based partly on my own experience—whether education is really necessary. Some people get on very well without it. Take my case, my Lords. I do not say that I have been a complete success; you might say a qualified success. But obviously it is possible, with a certain measure of native shrewdness, intelligence, and the kind of experience that you pick up on the way, almost to compete with those people who know all about governors and managers,

1201
and about how to deal with the local authorities and all those other questions that were discussed in the course of our proceedings. It was all wrong.
I have congratulated the noble Baroness, Lady Young—and she deserves it—but at the same time I must congratulate my noble friend Lady David, who showed tremendous courage and sometimes remarkable vigour, which interested me; I am always interested in vigour, particularly on the female side. She did a first-class job, supported by some other members of the party who sit on this side of the House.
I hope that I may be forgiven for these comments, but really, sitting up all night was unnecessary. I do not say that I have suffered from it—not in the least. The only reason I decided to participate in the all-night sitting is that I sleep so badly. Last night I hardly slept at all. This is very often the case, and I will not take narcotics. I am very obstinate and obtuse about matters of that sort. I felt that I should not be interested in the managerial and governing aspects of the Bill, and so I thought that I could slip away. I went into the Library often, only to discover that I could not sleep at all. So I came back again; it was easier to sleep in the Chamber.
I beg to be excused. I am speaking now to the noble and learned Lord on the Woolsack. He must be getting a little tired of me by this time; I know that he has been tired of me for years, but I shall not say the same about him. However, I have probably said enough to indicate that I was completely dissatisfied. I do not think that we gained a great deal. It is very interesting, but the procedure was all wrong, and I hope that nothing so improper will occur again.
3.23 p.m.
Viscount ECCLES: My Lords, I shall leave it to your Lordships to judge whether the speech that we have just heard—of course the noble Lord is always amusing—has anything to do with either education or the Bill. Education is, as a matter of fact, a very large subject. This is a miscellaneous provisions Bill, which means that there are a number of very different questions raised by it, and to which considerable study must be applied in order to discuss thoroughly whether the
1202
text is right. In my opinion the conduct of the passage of the Bill has been very good. I do not regret any of the amendments that were put down. It is your Lordships' right to put down amendments, and I consider that the debates on the amendments have not wasted time. If the credit is due to any single one of your Lordships—and the noble Lord, Lord Shinwell, pointed this out—it is due to my noble friend Lady Young. I have taken one or two Education Bills through another place, and I know that they are very difficult. Never previously have I heard from the Front Bench such consistent mastery of the subject, and the same praise is due, too, to the noble Baroness, Lady David. We have been very fortunate in the way in which the passage of what has been a difficult Bill has been conducted.
I support the Bill, and in particular the assisted places scheme. This scheme gives to a small number of able children the right to an education that at the present time they would not receive in any other way; and that is putting children in front of political theory. Since so many of the sixth forms in our secondary schools are of, well, fairly low standard, while in some schools there are no sixth forms at all, then of course it makes sense to help those children who otherwise would not receive the education they need.
Having said that, I found myself in agreement with the noble Baroness, Lady David. I must say I regret that the Government did not have time to deal with other major weaknesses in the 1944 Act. During our debates I gained the impression that in some eminent quarters this famous Act is regarded with a somewhat uncritical reverence. On the other hand, the amendments which were proposed from all sides of the House clearly showed dissatisfaction with the way in which the education service—mainly over the last 10 years—has developed within the framework of that Act. We know, for example, that the noble Lord, Lord Alexander of Potterhill, with his eye on the 16-year-olds, would like to have an entirely new Act. So would I, but there is one feature of the 1944 Act which we really should try to keep forever: that is the political consensus without which that Act would never have reached the statute book. From the end of the war to the early 1960s we normally worked together, but after that the

1203
consensus was abandoned, and today it would take a blind canary not to see the damage that has been done to our secondary schools by the infiltration of party politics.
The spirit of the 1944 Act will never be forgotten. The provisions, some of which we are amending today, are a different matter. There is nothing sacred about them. It would be a surprise if many of them are not now more or less out of date. Think, my Lords, of the moral, social and economic upheavals of the last 35 or 40 years. Parents and children, students and teachers are very different from what they were at the end of the war. They think, talk and act differently from their grandmothers and grandfathers. The point is that their claims and society's claims on the system of education have very greatly changed since the Act was passed.
We know why the Government could not in this Bill deal with all those great changes. Finance dictated their timetable. They were looking for savings on school meals, to which the House gave approval, as part of the attack on overspending. It beats me how intelligent men such as Mr. Denis Healey and Mr. Len Murray can tell the public that we can spend our way out of inflation. Anyone who believes that ought, I think, to go and see a doctor. However, whatever may he the financial situation, it is time to give more thought to the central problem in British education. It is this: the present allocation of resources—that is teachers, administrators, buildings and money—no longer reflects the relative importance of the various branches of the service. Some sections are getting too much: others too little.
The public wants a better balanced system of education, extended over the whole span of life. There are practical reasons why we should think about this now. The number of children of school age is falling and therefore the restructuring of primary and secondary schools offers us a chance to change direction. The Government have set severe limits on expenditure that we must accept, but it follows that the priorities which now require such urgent attention can only be satisfied by readjustment within the system itself. Even if extra money were available, the choices would be very difficult;
1204
now money is tight and, as usual, Government and local authorities are looking for economies at the growth points in the social services. There are signs of that in the Bill. What it means is that a larger proportion of smaller resources is likely to be concentrated on the compulsory period between the ages of 5 and 16 years.
Not so long ago we might have thought that no bad thing. There were many eminent educationists who believed that almost every child in the maintained system could learn all that he or she ever needed to know while in full-time schooling. That doctrine is no longer tenable. Since my noble friend Lord Butler of Saffron Walden, George Tomlinson, Florence Horshrugh and myself were at the Ministry, the claims of education before and after the compulsory period have increased enormously. Today we know much more about how important it is to start learning before the age of five. We know much more about the education of handicapped children, for whom the two noble Baronesses, Lady Masham and Lady Darcy de Knayth are such formidable and popular champions. We see all too clearly—as I think the noble Baroness said from the Benches opposite—that we are not doing nearly enough for the young people between the ages of 16 and 19. Also, more leisure and a longer expectation of life call for more help with hobbies and with cultural interests of all kinds. Television was unknown in 1944. Now it both stimulates the demands for adult education and can satisfy some of them, as we see from the Open University.
All these multiplying factors compel us to rethink the whole range of educational priorities. We are bound now to regard education as a process continuing from birth to death. That is why we need a new Education Act; it is not that the 1944 Act said nothing, about education before and after the compulsory period, but what it said is now either out of date or has been disregarded and requires substantial revision.
Let us suppose we could start afresh, with a clean slate. How should we replan education over the whole span of life? In Cmnd. No. 7841, the Government propose to curtail expenditure on this service by some 6 per cent. That, of course, is less than the fall in the school rolls, but it is a sombre outlook for the sections of the

1205
service before and after the compulsory period. Therefore, there is all the more reason to think carefully how every available pound should be allocated, right from the under five-year-olds to the old age pensioners.
This is a great and urgent question. I leave it with your Lordships, and simply say that, whatever resources are available, the time has come to devote a larger proportion to education before and after the compulsory period. The major changes which are now of great urgency in the national interest could not be carried through without broad agreement between the political parties and with goodwill from the local authorities and the teachers. That, of course, is what the noble Lord, Lord Butler, had and what we have not got today.
In conclusion, may I say that until inflation is defeated the pace of reform will be in the hands of those employed in the education service. They can choose: by showing restraint in their demands they would help to defeat inflation so that rapid progress could be made in many directions. If they prefer not to exercise restraint, then progress will cease. Nursery schools and adult education, for example, would have to mark time, or even be curtailed. This is the problem raised by the Bill, by our financial situation and the new demands for different kinds of education.
I end, therefore, by asking whether it is possible for this House, in which so many noble Lords and right reverend Prelates are very interested in education, to give a lead in trying to remake the political consensus that we have lost. If we could do that, we would render great service to the British people.
Baroness GAITSKELL: My Lords, the noble Viscount said that we could not do anything but simply fight our way in dealing with inflation. Before he sits down, may I ask him whether he can tell me how we can cut our way in order to improve and expand the quality of our education at this particular time, when we have only to improve and expand it?
Viscount ECCLES: My Lords, with the leave of the House, if I may answer the noble Baroness, Lady Gaitskell, in some other debate in the course of the passage of this Bill I suggested a large saving
1206
should be made by reducing the total number of teachers and then spending a good deal of that money on doing the one thing that is wanted; that is to say, to recruit and train a number of teachers of higher quality.
Lord BOOTHBY: My Lords, if the noble Viscount will forgive me, and before he sits down would he mind answering one question that I think is important? Is there really any answer to the problem of the 16 to 20-year-old other than some form of compulsory national service? I do not see it. Does he?
Viscount ECCLES: My Lords, again with the leave of the House, I think that there is. There is a possibility that some special arrangement should be made for those of 16 to 19 years of age. They are very much in the mind of Lord Alexander of Potterhill and, if he means to speak, he will no doubt tell us about it.
Lord ALEXANDER of POTTER-HILL: My Lords, that is an invitation that I could not possibly refuse. As I indicated on the Second Reading of this Bill, I found myself almost totally opposed to almost all of its provisions, and I still find myself greatly regretting that the Bill is to find its way on to the statute book. Having said that, however, may I join the the noble Lord, Lord Shinwell, and the noble Viscount, Lord Eccles, in congratulating the noble Baroness, Lady Young, on her wonderful performance in negotiating a Bill with so much opposition and so much criticism, so successfully?
As to the future, I so much share the view of the noble Viscount, Lord Eccles. The last time I spoke before this Bill was introduced into your Lordships' House was on this subject. When we had political consensus for a substantial period of from 1945 until, certainly, something like the middle 1960s, we made more progress in education than at any time in the history of this country. But then we ran into this problem of party political differences—due essentially, in my judgment, to a mistake made by local authorities in expanding the provision of grammar school places until it could no longer be defended, either educationally or on any other ground. When it was a limited percentage admission it could reasonably

1207
be defended: when it went to 20, 25 or 30 per cent. it could not possibly be defended on any grounds. Therefore, the emergence of the pressure for comprehensive schools was in my judgment inevitable; and I think it still is inevitable, in the long run. It is now 11 years since I wrote a little booklet, Toward the new New Education Act, in the faith which Lord Eccles expressed.
The 1944 Act has lasted longer than any Education Act in the history of this country, and I think it is time to look at the position again rather carefully, and very much along the lines which Lord Eccles indicated. In the 1944 Act our whole concern was secondary education for all, and we really did not worry unduly about the after-provision. It is true that certain sections provided for it, but it was not a major concern. Now the whole pattern has altered. I do not believe that the unemployment of 16 year-olds leaving school is transient or temporary. I think it is permanent, as it is all over Europe and in America. I believe we must face the fact that full-time education and training—and I emphasise "and training"; I am not talking about raising the school-leaving age to 18—up to 18 will become essential.
For myself, because of the need for schools of limited size and because also of the fact that sixth forms in comprehensive schools will be neither educationally nor economically viable, I think the removal of sixth forms from the schools is inevitable. Therefore, recognising the importance of combining academic education, technical education and commercial education, I would be concerned to see an Act which provided for tertiary colleges and provided a new stage in the educational process from 16 to 19. That is perhaps the answer to the problems posed by the noble Lord, Lord Boothby. If you would like to call it national service, fair enough; but it would be national service undertaking training and education, so that these young people of 18 could enter the world, which demands higher standards of education and training, in a technological society which is very different from the society of which we were thinking in 1944.
My Lords, if this House could give a lead, which I very much hope it will,
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it would be a very wonderful thing. It would be a wonderful thing if this House could find political consensus on what the future required of the education service, from the age of two or three to very much later in life—65 or beyond—recognising the relative importance of its different stages. Let us make no mistake about it, adult education has been grossly neglected in this country, and we cannot afford to continue to neglect it. I do not know enough about the procedures, but perhaps this House could set up a committee, or do something to bring the political parties together, calmly and sensibly, to sit down and examine the problems, recognising the contribution which education could make to the settlement, the resolution, of these problems, and perhaps produce some document which would be a lead to the other place in the promotion of an Education Act which would provide for the next 40 years as effectively as the 1944 Act has provided for the last.
3.45 p.m.
Lord STEWART of FULHAM: My Lords, it had occurred to me that we had already spoken so much on this Bill that possibly this stage might be comparatively brief; but, as one who has always had an interest in education, it is gratifying to find how much new thought has been injected into the debate. I am tempted, first, to make a brief comment on what was said by my noble friend Lord Shinwell. It is not for me to say what the procedures of this House ought to be—I have not been here long enough to know that—but I think it is true of procedure generally in any legislature that an Opposition is entitled, if it is deeply suspicious of a Bill and dislikes its whole nature, to press and harass the Bill at almost every point, and to move a great many amendments in the hope that some, at least, will be successful; and we have had some little success.
It is true, as my noble friend Lord Shinwell pointed out, that, sometimes, amendments we had planned to move were withdrawn; but perhaps I may draw his attention to the fact that we knew that only a certain amount of time in all could be devoted to the Bill, and that when, as sometimes happens, noble Lords come in and make long speeches that no one expected them to make, not always germane to the subject under discussion, you have to decide that so

1209
much time has been used up in that way that you will have to sacrifice certain other amendments. I am very ready to believe that my noble friend's contributions during the debates were a good deal more interesting than what we might have said on the amendments, but it does explain why we had to withdraw some of the amendments. He, if I may say so, had eaten up the time that might have gone to them.
I noticed also his criticism that we were engaged in the mechanics of education. But may I with respect remind him of the time when he and I had to answer for the War Office in another place? Very few of our speeches dealt with discussion of the actual nature of warfare, or the glories of war, or even the horrors of war: we were of necessity concerned with the mechanics of it—with recruitment, with weapons and with all the nuts and bolts. That, after all, is the essence of a legislature, as distinct from a philosophic assembly. Of course, this House can sometimes put on the philosopher's gown rather than the legislator's, and I would certainly welcome a debate on the general philosophy of education and what the contents of education ought to be. But we cannot wear the philosopher's gown all the time. We are a legislature also, and we were engaged in these debates, inescapably, on the mechanics of education; and I do not think we can be criticised for that.
My noble friend Lord Shinwell took up the phrase which my noble friend Lady David used, that this was a rushed Bill. So it is, but I do not think that my noble friend Lord Shinwell had quite paid attention to what my noble friend Lady David had said about its being a rushed Bill. It was rushed in its preparation. The Government could have stopped and thought. I think it was the noble Lord, Lord Alexander of Potterhill, who began by telling the Government to go away and think again, and then amended that to say that they should go away and think. I quite accept that. If they had thought a bit more, they might have delayed any Bill of this kind until they were prepared to act on the Warnock Report. I wonder, for example, what my noble friend Lord Shinwell feels about that—a discussion on how to adapt the process of education to children with the terrible misfortune of being handicapped. Is that a discussion on the philosophy of education, or on the
1210
mechanics? Whatever it is, it is a discussion which ought to be undertaken, and we were not able to undertake it because this Bill had been bustled on in order to save a certain amount of money on milk, meals, buses and the rest.
The other deficiency in the Bill that my noble friend Lady David mentioned is that it does not really approach the problem of the 16 to 19-year age group. She herself moved an amendment to that effect, which, as always, the Government would not accept. May I turn in that connection to what was said by the noble Viscount, Lord Eccles? He argued, if it understood him aright, that we ought to be considering now how to allocate the total resources that we devote to education among the various stages of the educational process. He was broadly arguing that, at present, less is needed on the staturory period and more on the period before and after. As things now stand, I think I would agree with him. This allocation of priorities is something which must be continuously done all the time in education and, for that matter, when dealing with any spending department. It so happens at the present time that probably the right emphasis is that we should be spending a larger proportion of the total on the period before and after the statutory school age.
It is particularly depressing to find that this Bill is going to cut down on the nursery stage before the statutory age and is offering no encouragement for the 16 to 19-year-olds. The very points to which the noble Viscount, Lord Eccles, wanted greater attention to be paid are the points which are either injured or cold-shouldered by this Bill. That is why I could not fully understand his support of the Bill as a whole.
On the subject of nursery education, I welcome what was said by the noble Viscount, Lord Simon: that if we cannot afford to do all that we want to do now, the Bill at least ought to be framed to enable expansion to come when we can afford it. That is very true. It applies also to an amendment which we moved over school milk and meals. If it is really true that we can afford free milk and meals for only a limited number of children now, could we not have given at least the Secretary of State a power in the Bill to widen the range of children for whom free

1211
meals and milk would become available as the country's economy improved? But the Government would not even do that. Similarly, with regard to nursery education, the provisions in the Bill which discourage nursery education do not contain any provision that would enable them to be quickly lifted as the economy improved.
On the whole, the Bill does not seem to commend itself with great enthusiasm to anybody. It is true that we have effected one considerable improvement to it in the process of our debates. It reminded me of the phrase used by a famous diarist who said of a lady at the court of King George III that he believed that, after a number of years, the first bloom of her ugliness was wearing off. I wondered whether we could say that of this Bill in view of the disappearance of the transport clauses. I suppose that possibly we could go as far as that; but certainly not any further.
Let us look at one theme which runs all through the Bill. At the begininng, there were the elaborate arrangements for the appointment of governors, for parental preference, for appeals and there was on it that stamp of excessive bureaucracy which, rather surprisingly, seems to be the hallmark of Conservative legislation as witnessed by what they did to the health service and to the reform of local government. The effect of so over-formalising parental preference and the appeals procedure is to make it very much easier for parents to get what they want if they are the kind of parents who are themselves well-educated, articulate and with ready access to legal advice. The general trend of that clause of the Bill, to put it bluntly, is in favour of middle-class parents and weighing against the children of parents with fewer advantages. It is, in that sense a divisive Bill.
That is true also of those parts of the Bill which strike at comprehensive secondary education. But, before developing that, I should like to take up a point raised by both the noble Viscount, Lord Eccles, and the noble Lord, Lord Alexander of Potterhill, about what is said to have been a period of consensus in educational policy from 1945 to (they say) the 1960s. To be plain about this, you could speak
1212
of a period of consensus from 1945 to 1951 on one of the points which has become a great matter of dispute: how could secondary education best be organised? The Butler Act deliberately left that to the choice of local authorities; and they were beginning to exercise the choice—one, one way; one, another. From 1951 onwards, from the tenure of the office by Florence Horshrugh onwards, the central Government, in Conservative hands, waged war against those local authorities that were trying to develop comprehensive secondary education.
Viscount ECCLES: My Lords, I wonder whether the noble Lord realises that I, myself, gave authority for 161 comprehensive schools and wished them every success.
Lord STEWART of FULHAM: Yes, my Lords, I remember that; but I also remember the noble Viscount speaking to a conference of the National Union of Teachers at which he expounded the view that the basic philosophy of comprehensive secondary education was un-Christian. The fact is that he could not in all cases refuse to let comprehensive secondary education be established, for even Conservative Ministers could not always find a plausible reason if the local authorities wanted it. But, wherever there was a plausible reason, it was used. Conservative Ministers encouraged people to draft and prepare petitions so that they could have the chance of turning down proposals for comprehensive secondary education. Even the noble Lord, Lord Alexander of Potterhill, caused great agony to the people in Leicestershire by telling them that abolishing the 11-plus was illegal—a proposition that I do not think can be properly defended.
This period from 1951 to 1964 could be described as a consensus if you mean by "consensus" what people usually mean by it: a state of affairs in which the Conservative Party has nine-tenths of its own way. That is what "consensus" has usually meant. I say seriously in reply to the appeal of the noble Viscount. Lord Eccles, that if we are seriously to think of consensus, then the party opposite will have to drop its hostility to comprehensive secondary education because,

1213
despite all the discouragement it has received from central Government, despite the hostility of the Press and the media, it has steadily made way. If we are to have consensus this time, it has really got to be consensus and not an acceptance of nine-tenths of the ideas of the Conservative Party. I think it is just possible that one might attain such a consensus; but that cannot be attained on the basis put forward by the noble Viscount, Lord Eccles.
My Lords, I return now to the contents of the Bill itself. I do not think that what I have been saying has been more irrelevant to what we are discussing than have several of the previous speeches. And I must say that I think they were all the better for that. One need not be too pernickety of what is immediately relevant. The Bill damages the development of comprehensive secondary education, first, by deliberately giving the separatist system of education priority over parental choice. It is laid down quite clearly, and we argued it several times, that, whether the parents like it or not, if you have got a separatist system of education the child will not go to a grammar school unless it satisfies the mumbo-jumbo of the 11-plus examination.
There again, we all know that, in fact, the separatist device at what is called the 11-plus but is really about the age of ten and a half, is inescapably and inevitably tilted in favour of the middle-class parents and their children. That is basically what they intended to do. It hits also at the comprehensive school in the clause dealing with the information that schools have to provide. We were told quite unashamedly,"Yes, they will certainly be told to publish their examination results, but they certainly will not be obliged to tell the public whether they spend more on one kind of school than another ". So the way is made easy for the kind of local authority—and, unfortunately, there are still some—who will practise a deliberately twisted and biased system of separate schools, and favour, in allocations of money, the favoured grammar school to which again it is mainly children of middle-class origins who will attend.
Finally, it injures not only the development of comprehensive secondary education, but the development of the State system of education itself in the
1214
assisted places scheme. The purpose of this is to make sure that no school in the State system will be able to show outstanding academic achievements. If there is a sign of children likely to bring real distinction on a school, they are to be shifted out if it can possibly be done. We say that if we talk in that language we are not talking about consensus. There ought to be a consensus to build up the nation's own schools and to be proud of them. So long as we have this assisted places system, we cannot seriously say that there is consensus of any kind on education policy.
Lord FERRIER: My Lords, where is the money?
Lord STEWART of FULHAM: My Lords, that is what we are wondering. We are told that £55 million is to be spent on the assisted places scheme. We can start by using the money there. I am not quite sure that the noble Lord has grasped what is happening. It is his spendthrift Government that are proposing to spend £55 million on educational snobbery. If he is asking, "Where is the money coming from?" let him talk to them.
I do not think that it is necessary to deal further with the other evils of the Bill. I have mentioned the discouragement of nursery education and the meanness of the milk and meals provision. There again, whatever view one may take about how much the country can afford, one of the great evils of these arrangements is that they are going to increase the number of people who are exposed to what is called the poverty trap. The very poorest will be protected because they come within the definition of receiving social security benefit or family income supplement. It will be the people just above that level who will be hardest hit by these provisions. The Conservative Party used to say that a situation has been created in which it pays people to live on benefit rather than to work. That was never true in any but a very few cases. The effect of the milk and meals clause—as the transport clause if it had gone through—will be to increase the number of people of whom that might be said to be true.
Therefore it has been an ugly, nasty, Bill. The noble Baroness, Lady Young, was congratulated by my noble friend,

1215
Lord Shinwell, as being a skilled goalkeeper. She was indeed. My noble friend Lady David was also a skilled goalkeeper—particularly necessary when some noble Lords kick into their own goal. At the end of the day it is a rather squalid story. There is precious little here that will genuinely improve the quality of the educational system as a whole. There is a great deal to make it meaner and more divisive.
4.4 p.m.
Baroness MASHAM of ILTON: My Lords, I was going to say a few brief words and they have already almost all been said. I was going to talk about the handicapped children, and the noble Baroness, Lady David, has said that we are waiting for Warnock. It is a pity that they have been segregated and not integrated in this Bill. I should like to second Lord Stewart's remarks about school meals. It is a pity that our children have no safeguard that they can have a hot meal or a hot drink. The workmen of this country would not work if they could not have their mid-day cup of tea. The children just above social security level will miss out. There will be trade in the free 50p dinner tickets which are going to be given by local authorities. I was at a school on Friday and the headmaster said that he was having problems regarding where the children who were going to eat their sandwiches would sit because there were no chairs.
We in Britain have a reputation for looking after our animals better than our children and this Bill illustrates this point in relation to food and milk. I hope that local authorities will take up the point stressed by the noble Baroness, Lady Elliot of Harwood, about Common Market milk. When children have pains in their stomachs because they are hungry it is very useful if teachers can give them a cup of milk. It is a safeguard. Therefore, I should like to end by saying that maybe the Government will be saving on education but certainly they will be increasing the bill on the Health Service.
Viscount INGLEBY: My Lords, I should like to ask two questions in connection with our amendment which, noble Lords may remember, was concerned with the right of parents to know
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what kind of sex education was being given, or was being proposed to be given, to their children and, as a last resort, the right to withdraw their children. I should like to say how much I appreciate the concern that the noble Baroness, who is going to reply, has shown in this field and the undertakings that she gave at Report stage.
The two questions that I should like to ask are as follows. Surely it must be wrong for anybody engaged in sex education to profit—even indirectly—from the provision of contraceptives. Surely the objectives of education and commerce are incompatible in this field, and should be kept entirely separate. The second question I should like to ask is this: I know this cannot be answered this afternoon, but I should like to know how far bodies engaged in this field are supported by public funds. This is a very controversial matter, and it is important to know the answers to that question.
The final part of our amendment concerned the right of parents, as a very last resort, to withdraw their child from sex education classes if they felt so strongly that these would be harmful to their child. It may interest the House to know that this question was debated on Granada Television on Thursday last. Living in the North of England, I could not see it, and I do not know whether the noble Baroness or any other Members of the House were able to do so. They take two votes on these occasions: one before the debate, and one afterwards. The vote before the debate was that 48 people—48 per cent.—felt that parents should have the right to withdraw their children; 38 were against and there were 14 abstentions. At the end of the debate, the figures were as follows: 70 per cent.—70 people—were in favour of parents having the right to withdraw and 30 were against, with no abstentions. Two of those who had been speaking against the right to withdraw were teachers engaged in the sex education aspect in schools. It transpired after the debate that they were using the book, Make it Happy and felt there was no harm in it. I hope that the noble Baroness will be able to assist me in finding the answer to the questions that I have asked.
4.10 p.m.
Baroness YOUNG: My Lords, we have had a short and useful debate this after-

1217
noon. I should like to thank all those noble Lords who have made kind references to me. Also, my noble friend Lord Butler of Saffron Walden has told me that he much regrets he is unable to be in his place this afternoon.
I believe that this is likely to be the last occasion on which your Lordships will discuss this Bill. I will not detain the House for long, but I should like to say a few words about what I consider to be the Bill's positive achievements and also to say a brief word about the transport clauses. As the House will be aware, my right honourable friend the Secretary of State has made it clear that the Government will not seek to reinstate in this Bill the clauses relating to school transport which your Lordships, against the advice of the Government, decided to delete. I should, however, like to take the opportunity to correct what I said at Committee state on what was then Clause 23. I should like to make it clear that the representatives of the Anglican Churches wrote to the Department in July and in November expressing their concern at the transport proposals. I think we can hope that Members of another place will not wish to disagree to the other amendments made by your Lordships, as these are mainly clarifications and improvements, and I hope they are of a non-controversial nature.
Turning now to the Bill itself, first the Bill advances the Government's policy of involving parents more closely in the choice of school their children will attend and in the running of those schools. The clauses on school government (1–5) provide in particular, for the election of parent and teacher governors. This is a major extension of local democracy and parental involvement, made in the belief that decisions should be taken as nearly as possible to the people they most affect, and that the links between home and school should be strengthened. These clauses will also allow the Secretary of State to require the eventual introduction of a single governing body for almost all primary and secondary schools. This was clearly intended by the spirit, if not the letter, of the 1944 Act and is something to which I attach great importance as a means of fostering a community of interest among all those concerned with the life of each school.
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The school admissions clauses of the Bill (6–11) give parents important new statutory rights in relation to decisions about the schools their children should attend. The 1944 Act laid down the general principle that children should be educated in accordance with the wishes of their parents, but it also recognised that the interest of the individual parents had to be set against the interests of parents collectively and those of the taxpayers and ratepayers. What was lacking, because everyone recognised the inherent difficulty of providing it, was an administrative framework which tried to provide how the conflict of interest to which this would give rise should be resolved; and the result has been that in many areas parents have had little or no real say in the education of their children. This was a problem which we felt needed to be tackled and it is something which today's parents expect, and a step which they welcome. I believe that we have gone some way towards meeting those wishes.
During our discussions of these clauses of the Bill, much regret has been expressed that they do not extend to children in need of special educational treatment. I have explained to your Lordships the very real difficulties about this and given firm assurances, which I repeat today, about the Government's intention to introduce its promised legislation to create a new statutory framework for the education of the handicapped following their consideration of the Warnock Report. In the meantime, however, the Bill has been amended in your Lordships' House to extend its information provisions to special schools and children in need of special educational treatment, so that authorities can be required by regulations made under Clause 8 to publish information about their policy and arrangements in respect of such matters. This I regard as a significant improvement to the Bill in a sensitive area, and I should like to pay tribute to my noble friend Lord Renton and to the noble Baroness, Lady Masham and Lady Darcy de Knayth, and their noble friends for what I may perhaps call their understanding persistence.
Baroness MASHAM of ILTON: My Lords, may I just for one moment, on behalf of my two colleagues, thank the noble Baroness, Lady Young, for what she has said: I forgot to so do earlier.
Baroness YOUNG: My Lords, I thank the noble Baroness for those words. The clauses in the Bill relating to the establishment, closure and alteration of schools (12–16) will, I think, both clarify the procedures which schools and authorities have to go through in these matters, while reducing the degree of detailed control exercised by the Secretary of State. Clause 15 establishes a new procedure designed to provide for public consultation where authorities wish to reduce admissions to schools as part of their planning for the fall in the school population. These clauses have, I think, been usefully clarified and amended by your Lordships and I hope that the amendment first proposed by my noble friend Lord Ridley taking very smal schools out of Clause 15, will have the effect of further reducing the administrative burden on authorities.
Regarding the clauses relating to the assisted places scheme (17 and 18), all I shall say at this stage is that we on this side of the House continue to believe that it is right to try to restore in a modified form the extra dimension of opportunity that was available to parents and children through the direct grant scheme. We very much hope that, as the scheme gets under way, even those who now criticise it will realise that it is capable of making a positive contribution to the education of our children. I was very pleased to hear what my noble friend Lord Eccles said on this matter and perhaps I might say to the noble Baroness, Lady David, that the Secretary of State is charged with promoting the education of the people of England and Wales, and not just the maintained sector. The 1944 Act extends his duties beyond the maintained sector.
Turning now to Clauses 22 and 23 relating to school milk and meals, the more I reflect on our debates of last week the more I am convinced that the time is long overdue for us to get away from the attitudes developed during the war (and rightly so at that time) which led to the development of such a heavily subsidised school meal service. It seems to me inconceivable that, if we were starting from scratch today, we should not accept that democratically accountable local authorities ought to be able to take responsible decisions about the kind of school meals service needed in their area,
1220
and indeed to provide one that caters for the tastes of a far more sophisticated school population of today. There has been some discussion on the economic background surrounding our proposals for the savings to be made on school meals and on milk. I think it is important to reiterate once again that the Government hope that major savings will come from these non-educational areas within the education budget, allowing what money there is to be spent on the fabric of the education service itself.
I should also like to reiterate that the clauses in the Bill relating to nursery education (24 and 25) are not expected or intended to bring about any diminution in such provision, but merely to bring the law into line with what has in fact been the policy of successive Ministers since 1944.
At the same time I should like to draw attention to the fact that, as well as the provisions of Clauses 24 and 25, Clause 12 makes the closure of nursery schools subject for the first time to the approval of the Secretary of State. I should also like to draw attention to the fact that the Government's expenditure plans for the next three years include provisions for a small nursery building programme. I must also make it clear that as regards the closure of nursery schools in Scotland, it would be inappropriate to apply Clause 12 to Scotland since Scottish legislation already requires authorities to seek the consent of the Secretary of State for Scotland to any such closures.
The noble Viscount, Lord Simon, asked two questions on nursery education. The first was whether I thought there would be a diminution of nursery education because of the decisions on transport clauses within the Bill. The result of that decision is that the £20 million saving that we expected local authorities to be able to make in the current financial year (1980–81) will not be able to be made in that particular area. Savings inevitably will have to be made somewhere else. We know now that 20 authorities were proposing to make some charge for school transport, and inevitably they will have to find those savings elsewhere. I would ask your Lordships to remember that it is not just £20 million for one year: it goes on year after year. What I said—and I

1221
stand by my remarks—is that £20 million would buy quite a lot in the education service; not only would it represent the salaries of 4,000 to 5,000 teachers but it is part of the nursery programme and part also of all the other programmes that schools have to consider. One reason why I regret the decision is that I fear savings may come in other areas which we may all dislike very much indeed.
The second question put forward by the noble Viscount was: why not keep it as a duty? Why not leave it as it is so that when the economy picks up there can be an expansion in the programme'? When, as we confidently hope, the economy does pick up, there is nothing to prevent there being an expansion of the nursery school building programme when it is within the power of local authorities. I would remind the House that even though it has always been a duty to provide nursery education ever since 1944, and we have lived through much more prosperous economic times than we have today, local authorities did not provide the schools—not, I think, because they were unwilling but because even then there were not the resources to do so. I believe that once the resources increase and the economy improves, so there will be more nursery schools in the country
I believe that the Government have had the courage to tackle many important reforms at the same time—to bring to a conclusion, for example, the long debate on school government, in which we have been greatly helped by the noble Lord, Lord Taylor, and his committee; to provide the means of resolving locally, where it should be resolved, the conflict between parental preference and the availability of schools; to end the longstanding confusion over nursery provision while offering protection to what we have; to recognise that, while our first commitment must be to the public sector of education, effective choice of school in the private sector ought not to depend on the size of one's purse; and to give local authorities increased discretion in a number of areas, but principally over the provision of school meals.
To my noble friend Lord Ingleby, who asked me a question at the end on the amendment that he moved, may I say that I will write to him on the two points
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that he raised about the profits from certain organisations being spent on contraceptives; and I will, of course, take note of his point about the Granada Television programme, which I regret to say I did not myself see.
At the conclusion of this stage of the Bill, I should like to thank particularly my noble friends Lord Belstead, Lord Mansfield and Lord Bellwin, who have helped me. I should also like to thank particularly my noble friend Lord Eccles and the noble Lord, Lord James of Rusholme. Despite what may have been said in the course of our debates, and indeed again this afternoon, I should like as well to thank those Members of the Opposition who have worked so hard on this Bill, particularly the noble Baroness, Lady David, the noble Lord, Lord Stewart, and the noble Viscount, Lord Simon. We may not always have agreed—indeed, on most occasions we have not agreed—but I welcome very much the spirit in which the whole debate has been conducted. I should also like to pay my tribute to the very many Cross-Benchers, not least the noble Lord, Lord Alexander, who have played such a major part in this debate, particularly during the very tiring and lengthy Committee stage and the all-night Sitting.
This is the longest amending Bill that there has been since the 1944 Education Act. That does not mean—nor have we ever claimed—that it is in any sense an attempt to rewrite the settlement of 1944, or to revise in any substantial way the main framework of our public education system as it was then established. But I believe that in the years to come the Bill will be recognised as having made a substantial and positive contribution to the continued process of organic change that must be part of any living system, particularly the education system.
On Question, Bill passed, and returned to the Commons.

BETTING, GAMING AND LOTTERIES (AMENDMENT) BILL [H.L.]
Returned from the Commons agreed to.

ROYAL ASSENT
The LORD CHANCELLOR: My Lords, I have to acquaint the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:
National Heritage Act,
Betting, Gaming, and Lotteries (Amendment) Act,
Cane Hill Cemetery Act.

IMPORT OF LIVE FISH (ENGLAND AND WALES) BILL
4.24 p.m.
The Earl of KINNOULL: My Lords, I beg to move that this Bill be now read a second time. The Title of this small Bill may have a certain familiar ring to the House, as in 1977 and 1978 an almost identical Bill was twice piloted through the House with typical zeal, skill and tenacity by the noble Viscount, Lord Thurso. I know that he is sorry not to be present today. The Bill reached the statute book on its second attempt, but it covered only Scotland. This Bill, if accepted by the House, would bring England and Wales into line with that legislation, and would thus fill a gap in the present powers of protection of our native fish stock and their ecology against the possible harmful competition of imported species.
The Bill is basically a conservation measure. It was sponsored in another place by my honourable friend the Member for Woking, who sailed it through with the support of the honourable Member for Newcastle-under-Lyme and an encouraging smile from the Ministry of my noble friend Lord Ferrers. It went through on that attractive nodding procedure, which indicated its total uncontentiousness. However, it both denied my honourable friend the chance of displaying his considerable knowledge of fish ecology and aqua-culture, and myself a helpful glance at his Second Reading speech. I should add at this stage that this small measure is supported by the fishing associations, notably the Salmon and Trout Association, which has been a prime mover in seeking this legislation.
The Bill has one main objective. It is to give the Minister a reserve power
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to prohibit or control the import or release of foreign fish or their eggs into our waters. It is perhaps a surprising gap in our protective legislation, when one considers the examples of damage caused by the zander in East Anglia, the mink and the coypu. But at present the Minister can ban or restrict the import of foreign species only on the relatively narrow grounds of disease under the 1937 Act. He has no mandate to consider the wider grounds of protection of our native fish, of their ecology, their habitat, competition for food and even protection against predators.
The Scottish Bill was introduced principally because a particular issue blew up which caused considerable anxiety about the need for protection of our native fish. It was, of course, the import of an experimental batch of Pacific salmon known as the coho salmon. The House will recall the strong feelings aroused over the coho salmon and the possible damage it might cause to our native North Atlantic salmon if it was released or, indeed, escaped into our rivers. The Secretary of State for Scotland now has powers to control of this species, if necessary, which his opposite number in Whitehall does not at present have.
Turning briefly to the Bill, Clause I would allow the Minister, after due and proper consultation, to lay an order either forbidding entirely or controlling by licence the import of foreign fish or their eggs. The test applied for that order is that a foreign fish might compete with, displace, prey on or damage the habitat of a native freshwater fish, shellfish or salmon. Every order would have to be ratified by each House of Parliament and could be annulled by resolution. It is, therefore, hardly a draconian power, but a permissive reserve power exercised only after proper consultation and the approval of Parliament.
Representations have been made as to which bodies should be consulted and who should be named in this Bill. I hope that my noble friend will have something to say on this. The Bill particularly mentions the Nature Conservancy, as indeed did the Scottish Act. The water authorities of England and Wales have, of course, a statutory duty for inland fisheries as laid down in the 1973 Act and the 1975 Salmon and Freshwater

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Fisheries Act. If not mandatory, it is, I feel, inconceivable, that the Minister would not consult them or the fish farmers and angling associations. I hope that my noble friend can allay any fears on this point, but clearly the Bill cannot name specifically every body who should be consulted.
Clause 2 authorises certain named persons to inspect property when an order is in force, and when it is believed that live fish or their eggs specified in that order are being kept. The clause specifically excludes a dwelling-house. Clause 3 deals with the penalties imposed for the contravening of an order. There is a maximum penalty of up to £500, with the stock being destroyed. It specifically excludes, the House will note, scientific or research programmes which have received consent from the Minister.
I should add that representations have been made by the National Farmers' Union on behalf of commercial fish farmers. Such queries were raised as to when a fish becomes native. Is the rainbow trout in danger? Are the Channel Islands and the Isle of Man covered by the Bill? On the latter point, I understand that they are not. As to any harmful effect that this small Bill would have on commercial fish farmers or, indeed on tropical fish imports, it is not designed to do so. It is of course designed to meet new dangers to our native stocks and to give the power of protection, if need be, but not to harm traditional safe trades. I commend this small measure to the House. I beg to move.
Moved, That the Bill be now read 2a.—(The Earl of Kinnoull.)
4.31 p.m.
Lord NUGENT of GUILDFORD: My Lords, it is my pleasure to support my noble friend in his moving the Second Reading of this small Bill, which he has done so persuasively and lucidly. When describing the powers of the Minister, my noble friend mentioned that the Minister has an obligation to consult the Nature Conservancy. That, I am sure, is a very wise and proper provision, but I do not doubt that I was not the only noble Lord to be surprised that the 10 regional water authorities and the National Water Council were not also mentioned.
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The regional water authorities are the bodies with statutory responsibility for the maintenance, improvement and development of salmon fisheries, trout fisheries, freshwater fisheries and eel fisheries in our rivers. I quote from the 1973 Water Act. So the strange position could arise that a Minister might authorise the import of exotic fish and a regional water authority would prohibit if from going into the river, and it would have every statutory right to do so. So my noble friend will not be surprised if at the Committee stage I move a small amendment to include in Clause 1(2) a requirement that the Minister shall consult the National Water Council and the 10 regional water authorities at the same time as he consults the Nature Conservancy.
I am entirely in favour of the measure. Like my noble friend, I shared the anxieties of many when the Coho salmon were first imported experimentally into Scotland. There is always the danger with exotic fish that they may drive out indigenous fish. Therefore, they should be very carefully controlled.
May I say one word about what the regional water authorities have done, because they seem to have passed out of the mind of the Ministry of Agriculture. In the last six years, since they came into existence, the regional water authorities have done a good deal in developing the fisheries of this country. They are very conscious that there are some 3 million anglers and hundreds of thousands of game fishermen, salmon and trout fishermen, and that it is their duty to see that the fisheries of our rivers are in good shape—and, indeed, developing and improving—in order to meet this very popular sport which gives such immense pleasure to so many people.
In 1979–80, over half a million pounds-worth of fish was produced by the regional water authorities; and more than half of this quantity was grown from stock in their own hatcheries. The fact is that most of the regional water authorities now have their own fish hatcheries where they breed trout principally, of course. They stock, in a very large measure, the reservoirs which are under their control and which are so tremendously popular with trout fishermen. They also use them for stocking rivers, where necessary. Coarse fish are much more difficult to breed in

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captivity, but two or three of the hatcheries are developing techniques to breed coarse fish. Something is being achieved there in order to build up the coarse fisheries in our rivers.
Salmon and sea trout have been restocked only to a limited extent. Last year there were about £100,000 worth of them from the regional water authorities. We in this country are lucky that there is still a number of excellent, naturally stocked salmon rivers around our coast. Two of the most spectacular salmon runs in the future will be, first, the River Thames, about which we all hear a great deal. The Thames estuary is now clean enough for salmon to swim up it. Now it only remains for the parr to be started in the freshwater river; then they will migrate into the ocean. After a year or two, they will come back and the salmon run will then start. How exciting that will be because, apart from anything else, nobody knows to whom the fish belongs. Other preparations are being made for the fish. Fish passes are being built on the first locks so that the salmon can get up the big weirs to their spawning grounds higher up the river.
The second one is the River Tyne. As many noble Lords will know, at the present time the River Tyne is really an open sewer; it is a terribly dirty river. But it is about to be cleaned. The large, splendid, new modern treatment works at the end of the estuary are to be commissioned shortly, I think in the next 12 months. All the intercepters are connected up; then the whole of the sewage from that vast industrial complex on the North and South of the river will be treated, and the beautiful River Tyne will become clean. Salmon will undoubtedly run up again. In the building of the great Kielder Reservoir they have made sure that when the fish are going up to spawn they will be able to get to the tributaries which best suit them for the purpose.
I mention these points because, although I am sure that noble Lords are well aware of what the regional water authorities have done and are doing, I feel that perhaps it needs to be put on the record that they exist and that they are doing a very good job not only to maintain our fisheries but to improve them. Thus it is, I feel, that when I come to move my little amendment
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my noble friend will be only too ready to accept it.
With those few words, may I say that I very much welcome a measure which will help the regional water authorities in England and Wales to continue the very good work that they are carrying on at the present time in maintaining and developing our fisheries.
Lord FERRIER: My Lords, I should like to support my noble friend's Motion that this Bill should receive a Second Reading. I believe it is only proper that somebody from Scotland should support the point he has made that, without this Bill, in a measure Scotland is out on a limb. For that reason, it is only right that I should urge the House to give the Bill a Second Reading.
4.38 p.m.
Lord PEART: My Lords, I am so pleased that the Minister of State for Agriculture is to speak, in view of what was said by the noble Lord, Lord Nugent of Guildford, who was a distinguished Minister in the Ministry and who has played a major part in regional activities. I remember that he took me on the Thames to look at that part of the river which is covered by the Thames Conservancy. I was so glad to hear the good news about my native North-East. The Tyne Valley is wonderful, but, because of industrial pollution, inevitably the river needs to be cleaned up if it is to support fish. Linked with the Kielder, which I know very well, it will be a great achievement and will be very good for all sportsmen. We have been reminded by the noble Lord, Lord Nugent of Guildford, of the great number of people who are anglers and who wish to fish in water which is not poisoned. So that is a great step forward.
I am glad that the noble Earl, Lord Kinnoull, in presenting the Bill, pointed out that different authorities were consulted and mentioned the question of fines. I think that the figure of £500 is right. No doubt this will be looked at. We are putting our system on a par with what the Scots have already done in their Bill and that is right, so I very much welcome the Bill. Indeed, only the other day I obtained from the Ministry of Agriculture their announcement identifying research priorities in freshwater fisheries.

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This is the first report of the Joint Freshwater Fisheries Research Advisory Committee. I will not repeat it, but I hope that noble Lords who have taken an interest in this today will read it carefully, because, linked with this Bill, which I hope we are now approving unanimously, there is good advice and a better understanding of the freshwater flow requirements of migratory salmon and sea trout, especially in estuaries, which will enable them to find their home rivers on return from the sea and ascend to spawn. This has been examined very carefully by the body that I have mentioned and I hope all noble Lords will read that report. In brief, perhaps I may say to the Minister that I hope he will have an easy passage for this Bill.
4.41 p.m.
The MINISTER of STATE, MINISTRY of AGRICULTURE, FISHERIES and FOOD (Earl Ferrers): My Lords, your Lordships have been commendably brief on this Bill and I will endeavour to do the same, because fish and the hazards to which fish are subjected and fishing and the hazards—and indeed the pleasure—to which fishermen are subjected are always a matter of keen interest. In seeking to demonstrate the value of the principle on which this Bill is based, I need not detain your Lordships too long because, as my noble friend said, it is only two years since your Lordships approved a similar Bill which was enacted for Scotland. With the benefit of hindsight, I suppose one might regret that that Bill had not been drafted so as to cover the whole of Great Britain, because fish, like other animals, are no respecters of boundaries. But the present Bill is closely modelled on the Scottish Act and, in effect, as my noble friend has said, it does no more than extend its provisions to England and Wales.
The Bill provides separate powers for the Minister of Agriculture, Fisheries and Food in England and the Secretary of State for Wales in Wales and this accords with the modern trend towards decentralisation. But, of course, I can assure the noble Lord that, given the untidy habits of fish to which I have already referred, it is not surprising that my right honourable friend the Secretary of State for Wales and my right honourable friend the Minister of Agriculture, Fisheries and Food will to in close contact over all these
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matters, as indeed they will be with the Secretary of State for Scotland.
My noble friend Lord Kinnoull and my noble friend Lord Nugent of Guildford expressed some concern about the provisions on consultation before an order was made. I think it right to point out that the Minister must consult the Nature Conservancy Council, and any other person with whom he considers that consultation is appropriate. That phrase is broad even if it is not specific, and I can assure your Lordships that the Government would seek advice from the widest possible range of interests, including fishing and fish farming interests. It almost goes without saying—but because it does I shall nevertheless say it—that the National Water Council, to which my noble friend Lord Nugent referred, and the appropriate water authorities, would of course be consulted in view of the statutory responsibilities in relation to fisheries and their substantial fund of scientific knowledge and experience in this field. I can assure my noble friend that they will be consulted and he has said that he will move just a tiny amendment at Committee stage. My noble friend is an old parliamentary hand and he will know better than I do the hazards to which Private Members' Bills are subjected when they get into another place littered with amendments, even if they are only small ones; and I have no doubt that my noble friend will weigh up that possibility and the difficulty that it might involve, with the assurance which I have given him about consultation.
I hope that the Bill will not be seen in any way as a possible brake on the development of fish farming. It need not be and it would certainly not he the Government's intention that it should be used in that way. There may well be species which would be usefully introduced for the cultivation of food but which we would not necessarily wish to have in our rivers and lakes. The licensing system envisaged in the Bill could easily deal with that situation. Like other noble Lords, I commend this Bill and I hope that it will have a happy passage through this House and through Parliament.
The Earl of KINNOULL: My Lords, I should like to say how grateful I am to all the noble Lords who have supported

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this Bill, and particularly my noble friend Lord Ferrier. It is rather a pleasant thing to find two past Ministers of Agriculture and the present Minister of Agriculture taking part on this small fish Bill. My noble friend Lord Nugent has indicated his intention of tabling an amendment at the Committee stage, but I hope he will take account of what my noble friend Lord Ferrers has said and the assurance that he has given—and indeed the hazards of a Private Member's Bill in another place. Without wishing to anticipate any further arguments, I will conclude my remarks there.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

THE HARRIER PROGRAMME
4.46 p.m.
The Earl of KINNOULL The Earl of KINNOULL rose to ask Her Majesty's Government whether they will make a statement on the Harrier programme. The noble Earl said: My Lords, I feel I must almost apologise to the House for coming on again so soon, but I am glad that the time is very early, and I should like to say to my noble friend the Minister that I do not intend to make a long speech in opening this short debate on the Harrier. Besides the very valuable contribution that other noble Lords will be making—and I should like to thank them in advance as I shall not have an opportunity to do so later—it is of course the information that my noble friend can give us which will be of most value. I am glad to learn that the noble Lord, Lord Peart, should have been on the list of speakers and that he will indeed be taking part. I well recall his remarks which added colour and punch to the short debate that we had some months ago on the Tornado, even if he did suggest, after briefing himself with an article from the Financial Times, that we were wasting our time as everything in the programme was splendid. I hope the noble Lord will have an equally cheerful message this evening.
I suspect that I shall not be alone tonight in believing that the Harrier has proved itself over the last two decades as the most remarkable of all British military aircraft designs, and that it now
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stands on the threshold of an enormous potential export market. It has taken a long time since the first conception of the Harrier was led by the late Sidney Camm from Hawker Siddeley, indicating his unique versatility, and indeed it has taken a long time for the Harrier to be recognised in a strategic role. Experience has been gained from the service with the Royal Air Force over the last 10 years, and indeed inter-service with the United States Marine Corps over the past 5 years. Experience has been gained in the licence agreement with McDonnell Douglas in 1973 to develop the advanced Harrier. But perhaps the most encouraging factor has been the recognition today of its qualities and of defining its role for strategic purposes.
This has perhaps been made easier by the military strategists who now favour the rapid deployment concept, the mobile strike force, the modern through deck cruiser, such as the Invincible class and so on. All these are designed to deal with the all too frequent flash points around the world; and on top of that, of course, one has to think of the experience of Afghanistan. I believe all these points concentrate the mind wonderfully on the value of the Harrier.
That brings me to the first point which I wish to put to my noble friend, concerning the progress of the Sea Harrier. The Sea Harrier is being delivered at the present time to the Navy and indeed to the Spanish Navy. One sees almost continuous articles about the United States Navy's great interest in it as well. Perhaps my noble friend can deal with the potential of the Sea Harrier, how it is performing and whether NATO countries are likely to find a need for it as well.
While I am on the subject of potential orders for the Harrier, perhaps my noble friend could confirm the state of play over the Chinese Harrier order. What has my right honourable friend returned with from his visit to Peking and Shanghai; and what is the next stage of these somewhat protracted negotiations?
My Lords, perhaps the most controversial decision in the development life of the Harrier, and yet the most far-reaching, was the agreement with McDonnell Douglas to develop under licence the advanced type of Harrier. No one

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quite knew then whether this unique British concept was being simply handed over on a plate to that company or whether its further development was being secured, with not unlucrative future for the home industry, notably, of course, Rolls-Royce. Today that licence agreement looks to be growing more and more healthy, with a potential order from the US Marines, I understand, of 350 aircraft, and l am told funding approved by Congress and the House Armed Services Committee for the long lead materials.
If my information is correct on this and Her Majesty's Government are as optimistic of success as McDonnell Douglas appear to be, I hope they will examine a new framework for a long-term future partnership with McDonnell Douglas, which will give fair terms, which will give fair small print to the contract, and see that the British industry really share the view that they have a fair deal. It is in the interests of all parties to build on this partnership, to build on the orders, to develop together the future of the Harrier, improved Harrier, supersonic Harrier, and so forge for the first time a successful commercial link with a US military aerospace company. There are, I believe, reservations in our industry about this, which I believe are misplaced. I hope that tonight my noble friend can dispel some of those misgivings, so long as the framework is fair, as I say.
Turning briefly to the engine of the Harrier, the Pegasus, it would be helpful if my noble friend could say something about present development updating of the Pegasus, its increased thrust and whether it has now met the requirements of the improved version of the Harrier; that is, the British Harrier and the advanced American-type Harrier.
My final question to my noble friend concerns the Royal Air Force order now being evaluated between the British version and the American version. I hope that the RAF will be left to decide on its own without pressure for either version. If an order of, I understand, some 60 aircraft should go to the British version, may I ask whether a further order for the AVA8 will be out of the question? In conclusion, I hope my noble friend will take this opportunity to reiterate the Government's faith in the Harrier for the RAF and confirm their determination to
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see that future sales abroad are grasped and strengthened and leave us in no doubt of the importance of supporting our industry and staying with the development of this fine aircraft.
4.54 p.m.
The Earl of KIMBERLEY: My Lords, your Lordships' House, as usual, should be very grateful indeed to my noble friend Lord Kinnoull, who has put his finger on a very important topic tonight—perhaps I should say on two, because he seems to be an equal expert on live fish and mechanical birds. There is one point which he raised about which I would like to ask my noble friend straight away: it is whether he could give us some information as to when the licensing deal with McDonnell Douglas ceases.
It was quite interesting that in The Times this morning the defence correspondent, Henry Stanhope, said practically what I am going to say to your Lordships this evening. I can only conclude that lie or I must have ESP, because I must have composed my speech at the same time as he was writing his article.
If the RAF is to maintain its effectiveness with the Harrier into the 'nineties, I believe it needs Air Staff Requirement 409, known as ASR. But it also, due to collaboration with other countries, supposedly needs the air staff target, AST 403, which is a so-called Harrier-Jaguar replacement. However, unfortunately, the V-stol capability of AST 403 has been shelved, and I believe this has been because of the possible benefit of collaboration between us and France and Germany. So, my Lords, we have the problem; the RAF has two requirements. It wants the ASR 409 and the AST 403. But it only has, I understand, limited cash and at present it looks as if the bulk of this money will go to the AST 403, the Jaguar replacement.
If we are going to maintain the RAF's V-stol force, there are two types for consideration, the British Harrier, the ground attack reconnaisance, GR 5, and the American AV8B. I understand that 60 of these aircraft are required initially by the RAF, with a possible further 40 to follow on. However, one of the main considerations of the RAF is that the aircraft must have self-defence with V-Stol capability—that is, better aerodynamic

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air combat performance, heat seeking air-to-air missiles, and electronic counter-measures. Should there by chance be an improved payload or range performance, that would be a bonus.
So, my Lords, we have some pros and some cons. The AV8B is further along the production line, although it will not be in service until 1985 or 1986. It is cheaper, as research and development and production are spaced over 400 aircraft, as my noble friend said—340 to the American Marine Corps and 60 to the Royal Air Force. British Aerospace will get about 30 per cent. of the work; Rolls-Royce would build the engine; and other British component manufacturers would bring the work total up to nearly 50 per cent. Furthermore, the aircraft contains large sections of carbon fibre, and British Aerospace would, I believe, dearly like to be associated with this.
Turning to the British area of the GR5, ground attack and reconnaisance, this will provide much needed design work by British Aerospace. The aircraft would probably be better suited to RAF requirements, with particular emphasis on their requirement for air combat performance. However, it may well prove more expensive. Of course, it is slightly heavier because of its metal wing, but it does appear to be more suitable to look after itself. The RAF are evaluating the AV8B prototype at this moment, but that may take some time as there is only one aircraft; the other one crashed. Pressure is also being put on the RAF over the AV8B, because its production would then be much more assured. As my noble friend said, the US Marine Corps seem to have a perennial problem with their Department of Defence as to whether the US Navy can afford the AV8B. At the same time Congress is convinced that it is the right aircraft for the Marines and keeps restoring the money which is deleted by the Department of Defence. So although it has been left out of the American defence budget of 1980–81, they are confident that it will be replaced. Paradoxically, the US Nay has just completed a sea-based feasibility air study and its conclusions are that smaller V-Stol carriers with AV8B's are the right answer, so that it will be prepared for going all V-Stol in the 21st century.
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I should like to digress here for a moment. In spite of our three Invincible type through-deck cruisers, perhaps their Lordships in the Admiralty should rethink their policy on Vosper's mini-Harrier carrier, small and cheap and with a great export potential.
Going back to the United States Navy feasibility study, it will, paradoxically, take some pressure off the RAF over the AV8B, which, although a superb aircraft in its own right, is not necessarily the right one for the RAF. So there are two questions. One is how much cash the RAF can spend on the ASR9, and the other is whether it can afford to develop the GR5 or will be compelled to buy the AV8B through lack of funds. We must also remember that the GR5 and the AV8B are both competitors in the V-Stol market for sales to other countries.
At the same time, the right aeroplane for the RAF may not appeal to a world market. However, we do have the multi-role Sea Harrier available now. I think that we really must give it our maximum sales effort in the same way as the French would do if it were their aircraft. They would send President Giscard D'Estaing in one if they wanted to sell it. We have deals with Australia, probably Brazil, Spain and Italy. I have not mentioned China—my noble friend did so—because I do not know the outcome of the Secretary of State's visit there. However, perhaps my noble friend will be able to give us some information when he answers.
So what of the future? British Aerospace would like to build a supersonic V-stol aircraft using plenum chamber burning, which is known as PCB and which, explained simply, means re-heat in the front nozzles. There are theoretical problems with this, but the only way to see that it will work—and British Aerospace say that it will—is to build and fly a full-scale prototype. It should be not just a test bed, but a representative fighter design.
The United States will certainly build and fly one or more V-Stol aircraft as they realise that V-Stol is the future key to survival. However, we, as has been so usual in the past, have the lead in vectored thrust, which is the only method of going

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vertical successfully. Some 30 or 40 other configurations have been tried throughout the world, but they have all had problems or failed. I agree that it will obviously need finance and time to design, develop and fly such an aircraft, so we should start now so that the technology is "mature" as the Americans say, by the 1990s when it will be needed.
I believe that British Aerospace at Warton is considering an aircraft, but of of a different type from the one at Kingston. Therefore, my last two questions to my noble friend are as follows. Do Her Majesty's Government intend to fund a supersonic V-Stol demonstrator programme either alone or in conjunction with the United States? Secondly, what are the RAF's plans for the year 2000 when anti-runway missiles will make present runways untenable and V-Stol imperative for our survival?
5.3 p.m.
Lord ORR-EWING: My Lords, as the noble Lord, Lord Mottistone, is not here at present, I hope that it will be agreeable if I carry on in the hope that he may arrive before the wind-up. I am most grateful to my noble friend Lord Kinnoull for introducing another Unstarred Question debate. I think that he does a great service to the House because the complexity of defence is now so varied and so great that, in many ways, it is better to have a series of smaller debates concentrating on different aspects of defence. Indeed, if we were not discussing the Harrier today I suspect that we would have all been discussing it in the forthcoming defence debate after the Defence White Paper is published later this week. Therefore, I think that my noble friend has done the House a service in raising this matter on this occasion.
I have just returned from my annual visit to the United States to study the problems and to further various industrial interests that I have over there. I always try to return via Washington because this is the time of year then one wants to update one's knowledge of the defence picture and what we are selling to them and what they are selling to us. First and foremost, it is a sad fact that, in spite of the memorandum of understanding, we are buying four times as much from
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the United States as they are buying from us. Therefore, if they decide to go ahead with the Harrier, which will not now have a Pratt & Whitney engine as was thought a year ago but an improved Pegasus Rolls-Royce engine—that will be for the AV8B—it will do something to set the imbalance rather better than it is at present.
I believe that the Harrier has come at a very appropriate time, as my noble friend Lord Kimberley has said. The fixed runway is becoming operationally impractical. Bombs are becoming smarter and missiles cleverer and it is not too difficult to find a strip of concrete three miles long. In fact, so often they form sore thumb targets which one could hardly miss, and with clever delayed action bombs and multi-heads which are now used, I think that the fixed runways will become untenable.
A year ago I was told that Dr. Perry, who was in charge of research and development in the Pentagon, had set up a committee to examine the vulnerability in the longer term of fixed runways. I know nothing of whether he has yet reported, and perhaps my noble friend, when he winds up, will be able to tell me or let me know later by letter what has happened to that report on vulnerability. But, whatever comes out—if it does come out—I think that we can be certain that there will be an increasing demand for the V-Stol type of aircraft.
Unfortunately, as both my noble friends have said, there is a divergence between what is ideally suited to the Royal Air Force for the Western European and British scene and weather and what the US Marines may want for deployment in an amphibious operation, or in support of an amphibious operation, and perhaps for the SWAT team which they are now thinking about, so that they can carry out an Entebbe-type of operation, quickly and effectively.
During my visit to Washington last week I heard a nice story which I believe to be absolutely true. A United State's pilot recently tested the latest version of the Harrier. When he landed he spoke to other test pilots and was prepared to bet them 100 dollars that if they were to get into their F.14s, 15s, or even 18s and have a dogfight with him below 15,000

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feet, on every single occasion he would win with the Harrier. That means that, of course, we want an air superiority fighter of some sort for the very high levels, but perhaps below that height the Harrier is very effective in the battlefield in support of our troops and in carrying out reconnaissance and other roles.
As I have said, the difficulty is that there is a slightly different operational requirement. We in Europe—the RAF—want a particular type, and at present we are working towards the improved wing with a slightly lower payload because of the greater weight of the wing and the fact that it is metal rather than carbon fibre. But the Americans are going ahead with the AV8B. The US Marine Corps has always wanted this and has been loyal to it throughout. As my noble friend has pointed out, it is said now that it is contemplating 110 straight away, with a follow-on of another 250 later. The US Navy are also looking at the possibility because, like us, they are now discovering that aircraft carriers of the size of the Forestal class are becoming so expensive, not only as regards building but as regards manning, that they are now coming up against the limitations which we met some 15 years ago when we abandoned the CB01.
I wonder whether we cannot find a compromise. It seems to me that we both want something of the Harrier type. It seems ridiculous that we should be thinking of building 60 and spreading our R and D and continuing our R and D over such a small number, whereas they are thinking in terms of a further 350 and spreading their R and D much thinner over that number. Also, my noble friend has said that it appears that for this reason theirs is marginally cheaper.
So I would ask my noble friend to look at the matter and see whether he cannot pressure the Royal Air Force to narrow the gap between their operational requirement and the operational requirement of the US Marine Corps. I would ask my noble friend not to be discouraged if he reads, as I read, that the AV8B is not included in next year's defence budget. That happened last year and the year before. In both instances it was written back into the budget and I am sure that it
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will be written back again. I was told last week that they are contemplating now writing back this operational requirement for V-Stol and setting aside 243 million dollars of funds for continuing research and development in engineering, and a further 90 million dollars for long lead items. If that is undertaken, as everyone forecasts it will be, it will be a useful and helpful sign for the future.
Finally—and my noble friend Lord Kimberley has made this point—when my noble friend Lord Strathcona and Mount Royal replies, can he tell us whether we are going ahead with the research, development and studies into a supersonic V-Stol aircraft? I always felt that it was deeply unfortunate when the Labour Government cancelled the 1154, which was a supersonic version of the Harrier. It is tempting to cancel aircraft; they cancelled the TSR-2, the 1154 and the HS 681 and bought American aircraft as a stopgap: the Hercules, the F1-11 and a helicopter. Then we were prepared to spend £1,000 million on those alternatives.
In the light of the experience and the success of the Harrier, I very much hope that we shall now look ahead and see whether we cannot set some money aside—and in the initial years it is not a great amount of money—to have a supersonic version of that. If that is undertaken, I feel sure that we should be wise to co-operate with the United States in this project. Between us I believe that we would sell very large numbers of this aircraft to all free countries in the world.
5.12 p.m.
Lord PEART: My Lords, I thank the noble Lord, Lord Orr-Ewing, for his contribution. He and I do not always agree on defence but basically we agree with defence in a strong way. However, in debates that we have had on previous occasions we have been slightly at logger-heads. He made a very valid point, that it is good to have these short debates. I congratulate the noble Earl, Lord Kinnoull. He and I have just been debating fish, quite a different subject. He has quite rightly raised this matter. Indeed, he mentioned the future of the Harrier in a debate that we had some time ago, on 29th November. We then had quite a

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long debate on the Tornado, and naturally and quite rightly he spoke about the Harrier as well.
The noble Lord, Lord Orr-Ewing, posed some important questions, as indeed did the noble Earl, Lord Kimberley, who with his committee, does so much for defence. I hope that the Government will take careful note. I was intrigued by the figures given by the noble Lord, Lord Orr-Ewing, that we were buying four times as much from the United States. Does the noble Lord mean defence equipment, or equipment on aerodromes, et cetera?
Lord ORR-EWING: My Lords, I should have made it clear that the memorandum of understanding covers defence only; it is sometimes called the "two-way street"; that was defence equipment only.
Lord PEART: My Lords, I am grateful for that information. I would not want to distort or decry what the noble Lord said. He made a very valid point. I am glad that our friends in the United States look to our aircraft and our technology in many respects—sometimes far ahead—in this area. I noted very carefully his remarks about the supersonic aircraft and the failure of a Labour Government to develop it. I was a member of that Government, so I suppose that I must take part of the blame. Probably there would be a different story today if that aircraft had been allowed. But who knows? Inevitably, all Governments have to consider costs.
Other points were made about the Harrier. The noble Earl, Lord Kinnoull, who opened this little discussion, asked about export markets. I hope that any information can be given to the House, but if it is not possible to do so for other reasons, I shall understand. There has been much controversy about whether or not we shall have a Chinese Harrier. The Chinese have been extremely interested in our Harrier development. Again, its potential from the point of view of NATO is obvious. Again, the question is cost; if only we had, and had had, the money.
I believe that this is probably one of the most important developments in the field of aircraft. I am an ex-gunner. When the noble Lord, Lord Orr-Ewing, spoke
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about the bet which an American airman had with a colleague that he would win a combat at 15,000 feet, I immediately started to think what I would have done as a 3·7 gunner. I think that we might have reached that height, but planes travel too fast these days. Technology has moved so fast that many of our reasons for adopting a certain stance are completely out of date.
However, I believe that this is a good aircraft. It is accepted as such. We must capitalise on it, and I hope that the Minister of Defence will be able to give us good information which shows that, from the point of view of research in particular, we lead the world in this particular department.
5.15 p.m.
The MINISTER of STATE, MINISTRY of DEFENCE (Lord Strathcona and Mount Royal): My Lords, I agree with other noble Lords that we must be grateful to the noble Earl, Lord Kinnoull, for initiating this small debate. It is very much easier to handle these matters in a more or less single-issue debate, because defence debates tend to be very rambling. I can assure the noble Earl that, as one who has to try to wind them up, it is very welcome if we can slough off a few specific points earlier on.
One must always remember that debates of this kind are almost embarrassingly well-informed in this House. Anyone answering has to make sure that he is properly briefed. I shall do my best to answer some of the questions which the noble Earl has posed. Of course, the unique capabilities of the Harrier arose out of the original P-1127 Kestrel series of aircraft in the 1960s. Currently the Harrier forms a very important part of the RAF's front line. As a number of noble Lords have said, its ability to operate from small, natural clearings near the battle area makes it capable of a more rapid, close-support response than is possible from any other aircraft type. In addition, it has the unique capacity not to need an aerodrome at all.
Increasingly, aerodrome denial weapons are considered a serious threat by a number of nations in NATO, and, for all I know, in the Warsaw Pact as well. Of

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course, in passing it is worth saying that the Warsaw Pact short take-off aeroplane is not so comparable with the Harrier as it looks from the outside, for the specific reason that it does not have vectored-thrust engines; it has two separate lift engines and a propulsion engine. For that reason, it is not a very comparable aeroplane.
The Harrier entered RAF service in April 1969, and we have three squadrons of them at present. A number of improvements have been made to the aeroplane since it was introduced, as might have been expected. The engine performance has been improved—and I shall return to that point again in a moment—and it now has a radar warning receiver, a laser ranger and a marked target seeker. The current version of the Harrier in service with the RAF is known as the GR-3 and is the single-seat version. Then there is the two-seater, the T4 trainer, in which—and I tell this to the Leader of the Opposition—I was taken up and given a ride when I was in Opposition; so I offer the noble Lord that as a possible hint. But one has to be feeling pretty strong.
The role of the aeroplane in RAF service is to render close support to the Army, and that is a point that has already been made. But, of course, the fact that the aeroplane can be dispersed and deployed from so many unbuilt take-off areas makes it very much more difficult for the enemy to seek out and destroy the opposing, aeroplanes. The operational flexibility and the effectiveness of the Harrier is constantly proving itself in exercises. The very high sortie rates which follow from the close deployment of the aeroplane are a feature which is frequently remarked upon. Here I must say to my noble friend Lord Orr-Ewing that I shall have to write to him about Dr. Perry's vulnerability report. I am not sure what the status of that is at the present time.
This has proved a flexible design. A number of noble Lords have referred to the Sea Harrier, the variant which the Navy is going to use for its anti-submarine carriers such as HMS "Invincible", which has just been accepted into service by the Navy. That aeroplane is effective in a number of roles, including air defence,
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attack, and reconnaissance. Noble Lords may remember that the first Sea Harrier was handed over to the Navy in August last year. The introduction of these aircraft into the Navy is progressing well. The current plan is to have two front-line squadrons fully operational by mid-1981, with a third shore-based training squadron capable of embarkation when required.
Noble Lords asked about interest being expressed in this area by others. They may have noticed that the French Minister of Defence went to look at HMS "Invincible". It was slightly embarrassing to discover that she got her name from a ship captured many years ago from the French. We hope that that is not going to put them off. I think that they are interested not only in the concept of these relatively small aircraft carriers but also in the concept of vectored thrust and short take-off and landing.
Of course the Harrier has also proved attractive to a number of other countries, and, as noble Lords have said, it is in service with the United States Marines. I was told some years ago by an American that there came an occasion when they wanted to fly some American aeroplanes over Kenya in order to demonstrate their support for the Kenyans. The only aeroplanes they could produce were the British designed Harriers being flown by the United States Marine Corps, so that was the American presence that appeared over Kenya.
The Marines have demonstrated—which I do not think was ever envisaged—the ability to do this alarming act when they stick the nose up and vector the thrust and the thing stops dead, and attacking aircraft and missiles go sailing by. As the noble Lord said, it is a remarkably effective vehicle for dogfighting. The Spaniards of course also have this aeroplane. I do not think I should pursue too far the various inquiries that have been made by a number of nations, but there is a good deal of interest now being expressed in the Harrier by a number of countries. In particular, there is this aspect of course, that it enables you to have a relatively small ship to carry and operate the aircraft.
So far the RAF has ordered 133 Harriers, of which 20 are trainers, and the Navy has ordered 34 and 3 trainers. The RAF is about to start taking delivery of

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24 Harriers to maintain front-line strength. It is also worth pointing out that the versatility of the Harrier has been demonstrated by the Harriers we maintain in Belize. There they give a small British presence which is capable of operating in those fairly demanding conditions to put off any possibility of aggressive intentions on the part of Guatemala towards Belize.
This has been a successful aeroplane so far. Noble Lords have referred to the debate we had on 29th November. I pointed out then that the RAF was very conscious of the potential importance of the Harriers in the future, particularly in the light of this question of airfield denial weapons. The question now is how to extend the value of the aeroplane to the end of this century, because we are quite confident that we need such an aeroplane to continue to play its part in the front line.
Perhaps I can pursue AST 403, to which my noble friend referred, for a moment or two. This provisionally started by being a design to replace both the Harrier and the Jaguar, but quite early on it became clear that the two aircraft could not be replaced in a single aircraft. Therefore, part of the decision now is to pursue an improvement of the Harrier to deal with the Harrier replacement, and deal with the Jaguar replacement as a separate issue. As noble Lords have said, we are currently pursuing two possible ways of meeting the requirement for an improved Harrier. There is the MKS, which is the British so-called "tin-wing" version of the Harrier. As my noble friend Lord Kimberley pointed out, this aeroplane has been particularly optimised for the RAF requirement of improved range and payload but, above all, improved manoeuvrability and agility. This aims at overcoming some of the relative shortcomings of the existing V-Stol design owing to its small wing and lack of defensive capability.
The alternative, as again noble Lords have said, is the McDonnell Douglas development of the Harrier known as the AV8B. This aeroplane uses the advanced construction technology of carbon composites which, I may say, is a technology with which British Aerospace, for example, is perfectly familiar already. But this aeroplane is being built to a slightly
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different specification and for a slightly different requirement on the part of the United States Marine Corps, who are principally interested in having increased range and payload and not so concerned with this question of agility to give survivability in the battlefield environment when in the close support role.
These technical and operational issues will have to be examined. Of course there will also be the industrial factors, to which a number of noble Lords have referred. It has also been said, quite correctly, that whichever way the decision goes there will be a substantial amount of work for British industry, because even the AV8B would have a very large part of its components made in this country; in particular, obviously British Aerospace and Rolls-Royce, but there are in fact 16 other United Kingdom companies associated with the AV8B project.
It has been said, quite rightly, that the whole issue turns on whether the United States Marine Corps are allowed to have this Harrier variant. From time to time we are told that it would encourage them if we were to order it. There is no doubt at all that we would wish to have a collaborative venture with the United States if we could find the right terms on which to have it, but there are difficulties about entering into collaboration with the United States on projects of this kind. One of the great dangers that we have to guard against is the possibility of committing ourselves to a collaborative venture of that kind only to find that the Americans, for whatever reason, have had to withdraw, leaving us without any project at all. That kind of experience we have had before.
It is difficult to say when we shall be in a positon to reach a final decision on this matter. Unfortuntely, the prototype which represented the nearest to what the AV8B will look like crashed in the United States last year and that has put back the possibility of evaluation by the British of this aeroplane. However, a second aircraft is currently being modified for flight tests and a team of British pilots is to fly it towards the end of April to assess its characteristics. I should perhaps stress that it was not a British pilot who was trying out the last one when it crashed in the United States, I am happy

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to say. We would hope that before too many months have gone by we shall be able to decide whether or not we will join a collaborative programme with McDonnell Douglas. It was my noble friend Lord Kimberley who asked me what the status of the licensing agreement was with McDonnell Douglas. That was a private licensing agreement as between British Aerospace and McDonnell Douglas; it was not a government-to-government arrangement.
We intend to buy 60 improved Harriers as against, as has been said, the United States Marine Corps need for 350, but we must not overlook the existing fleet of GR3s and T4s. They have quite a lot of service life in them yet and we intend to keep on improving and uprating them to ensure they maintain their capability in the face of the increasing threat from the Warsaw Pact. We have in mind the fitting of self-protection missiles, active electronic counter-measures and improved navigation systems, for example. However, I think we cannot incorporate the larger wing into the existing aircraft on acceptable terms, so the larger wing would be unlikely to be any part of an improvements programme of the GR3. We intend, however, to keep ourselves in the forefront of this important air power capability and we are in the longer-term studying the possible development of a supersonic variant of the Harrier which would replace both the RAF's Harriers and the RN's Harriers, and in all probability, as the noble Lord said, that would need to incorporate plenum chamber burning, which is a fairly difficult, although there is no reason to believe impossible, technology.
A number of noble Lords asked about sales. As we emphasise its importance for ourselves, so we are very conscious of its sales potential. Among other countries, interest has been expressed in China. Negotiations are continuing between British Aerospace and the Chinese, and noble Lords will be aware that my right honourable friend the Secretary of State returned last week after visiting China in connection with the Society of British Aerospace Companies Equipment Exhibition. Besides reaffirming the importance which we attach to our relations with China, defence sales in general were one of
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the issues he discussed. I do not think this is any longer a contentious issue, so far as the politics of it are concerned, and there is no doubt that the Chinese are looking to the United Kingdom as a major equipment supplier in future. But it will be some time before they can determine their priorities in considering their needs and there is no doubt they are very careful about where they put their money.
I hope I have said enough to make it clear that the Government continue to believe in this aeroplane and in the unique operational benefits it confers. We see a need for the aircraft for many years to come and I know that noble Lords will share my support for this vital machine, which is a great symbol of British inventive success.
The Earl of KIMBERLEY: My Lords, may I ask my noble friend a question before he sits down? Does he have any news about their Lordships at the Admiralty considering the building of mini-Harrier carriers, a subject which has been discussed in this House on numerous occasions?
Lord STRATHCONA and MOUNT ROYAL: I do not think I have any news for my noble friend, my Lords, and if I do have any news, I am certainly not in a position to give him any.

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