Sitting of 1 May 1980

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
DEATH OF A MEMBER
Mr. Speaker: I regret to have to inform the House of the death of Thomas McClellan McMillan, esquire, Member for Glasgow, Central, and I desire, on behalf of the House, to express our sense of the loss we have sustained and our sympathy with the relatives of the hon. Member.
PRIVATE BUSINESS

  LONDON TRANSPORT (No. 2) BILL (By Order)
  Order for Second Reading read.
  To be read a Second time upon Thursday 15 May.

  BANGOR MARKET BILL [Lords] (By Order)
  Order for Second Reading read.
  To be read a Second time upon Tuesday 6 May.

  GREATER LONDON COUNCIL (GENERAL POWERS) (No. 2) BILL (By Order)
  Read a Second time and committed.
TYNE AND WEAR BILL [Lords] (By Orders)
  BRITISH RAILWAYS BILL (By Order)

    SOUTH YORKSHIRE BILL [Lords] (By Orders)
    Orders for Second Reading read.
    To be read a Second time upon Thursday 8 May.

ORAL ANSWERS TO QUESTIONS
  HOME DEPARTMENT

    Mr. Jimmy Kelly
    Mr. Flanneryasked the Secretary of State for the Home Department if he intends to take any further steps arising from the inquest on Mr. Jimmy Kelly.
    The Minister of State, Home Office (Mr. Leon Brittan): My right hon. Friend the Secretary of State has asked me to apologise to the House on his behalf for his absence this afternoon. I am sure that the House will understand and appreciate the reason.
    After the most detailed examination possible of all the evidence, the inquest jury reached a unanimous verdict of death by misadventure, finding the cause of Mr. Kelly's death to be heart failure, brought on by acute alcoholic intoxication and exertion. It made no adverse comment about the police, and I understand from the chief constable that no additional evidence was revealed in the course of the inquest which in the view of the investigating officer would require him to make a further submission to the Director. In these circumstances, as my right hon. Friend has already announced, we are satisfied that no useful purpose would be served by setting up any further public inquiry or by taking any other action in the case.
    Mr. Flannery: I am grateful for that answer, but is the hon. and learned Gentleman aware that there is grave public disquiet and that many people do not accept that any trial by inquest can occur?
    Mrs. Kellett-Bowman: Rubbish.
    Mr. Flannery: Will the hon. and learned Gentleman further accept that, despite the objections from the Government Benches, what I have said is the reality? Will he therefore ask his right hon. Friend whether there can be a public inquiry, because a large amount of the evidence was not given at the inquest? Is the hon. and learned Gentleman aware that the relatives of the deceased man feel that much more needs to be examined? Does the hon. and learned

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    Gentleman agree that there is also grave disquiet because large sections of the police are in conflict with the public on many issues?
    Mr. Brittan: I do not accept the hon. Gentleman's premises or conclusions. I do not believe that there is grave public disquiet. This is a serious matter, which has been looked into carefully and thoroughly at the inquest. I do not accept for one moment that there is material evidence of a substantial character that was not before the inquest. For those reasons it would not be right for me to suggest to my right hon. Friend that -there should be an inquiry of the kind suggested.
    Mr. Chapman: In view of the serious and unfounded allegations against the police, does my hon. and learned Friend intend to take an initiative to redress the balance of fairness? Will he take this opportunity to state that the allegations are completely unsubstantiated?
    Mr. Brittan: I am happy to make it clear to the House—as the verdict of the jury itself did—that what my hon. Friend has just said is absolutely the case.
    Mr. J. Enoch Powell: Can one get justice for an individual through a public inquiry?
    Mr. Brittan: Underlying that question is the suggestion that the best way in which justice for the individual can be achieved is within the normal existing judicial procedures. I entirely agree with that and I believe that public inquiries should be reserved for the extremely rare situations in which matters of general consequence need to be examined, rather than rights between parties.

    Citizenship
    Mr. Lathamasked the Secretary of State for the Home Department what progress is being made in the review of the law of citizenship; and whether he will make a statement.
    The Minister of State, Home Office, (Mr. Timothy Raison): We hope to be ready to publish a White Paper before the Summer Recess.
    Mr. Latham: Does my hon. and learned Friend recall—because he was
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    heavily involved in helping me on this matter—the case of my constituent who came here from the Bahamas in 1938, served for five years in our Army and has now been told that he cannot have a British passport any more, but that he must have a Bahamian one? Is this not an absurd situation which should be sorted out?
    Mr. Raison: I am aware of this case. I must point out that when the Bahamas became independent, Parliament provided that people like Mr. Hanna, who had been born there, should become citizens of the Bahamas and cease to be citizens of the United Kingdom and Colonies. Parliament also provided entitlement to United Kingdom citizenship by registration, and I know of no insuperable obstacles to Mr. Hanna's being able to do that.
    Mr. Alexander W. Lyon: To what extent are the Government consulting Commonwealth countries about the position of citizens of the United Kingdom and Colonies who would not be accepted as British citizens under any proposed scheme? Can that consultation take place before the White Paper is produced so that we can have some indication of Commonwealth thinking?
    Mr. Raison: We are having a number of discussions with Commonwealth Governments on a wide variety of topics to do with nationality.
    Mr. Bruce-Gardyne: When the Home Secretary publishes his White Paper will it include provisions for withdrawal of the totally anomalous and unreciprocated right to vote given to citizens of the Irish Republic in this country? If not, why not?
    Mr. Raison: As my right hon. Friend said on 26 October, we do not think it appropriate to deal with any voting entitlement in a nationality Bill.

    Special Constables (Bounty)
    Mr. Neil Thorneasked the Secretary of State for the Home Department whether, in view of present recruitment levels into the Special Constabulary, he will consider paying a bounty to special constables who successfully fulfil their annual duty in the public service.
    Mr. Brittan: This is one of the possibilities being considered by the working party set up by the Police Advisory Board.
    Mr. Thorne: I thank my hon. and learned Friend for that encouraging answer. Does he not agree that in the 1980s an entirely different situation arises from that which existed at the time when the Special Constabulary was first established? Therefore, is it not essential to introduce some measure along these lines?
    Mr. Brittan: That proposal is being considered and I welcome the opportunity of telling the House that we are concerned to reverse the decline in the strength of the Special Constabulary. It has a valuable role to play and our concern for it is reflected in the presence of my right hon. Friend the Home Secretary at the Metropolitan Police Special Constabulary annual dinner later this month. He will show by his presence the high regard and importance that we attach to the work of the Special Constabulary.
    Mr. Aitken: Will my hon. and learned Friend accept that relations between the regular police and the Specials have improved considerably, particularly since the implementation in full of the Edmund-Davies report? As a result of some of the old tensions disappearing, will he not agree that the time is now right for an imaginative expansion of the Special Constabulary? The idea of using a Territorial Army-type bounty is worth considering urgently.
    Mr. Brittan: I certainly agree that the time has come to assist in the expansion of the Special Constabulary. That is why the working party is looking into these matters. I think that the climate is right, both for the reasons given by my hon. Friend and the more general fact that the support that the Special Constabulary can give to the regular police is increasingly recognised. I very much hope that we shall make progress in this direction.
    Sir William Clark: Does not my hon. and learned Friend agree that it is essential for the Government to encourage any sort of voluntary service? Will the working party look into the possibility of ensuring that whatever bounty is given, a certain amount each year is free from tax?
    Mr. Brittan: If the working party favours the recommendation for a bounty, it will have to consider the tax implications. I am grateful to my hon. Friend for drawing that aspect of the bounty proposal to the attention of the House.

    Race Relations
    Mr. Dubsasked the Secretary of State for the Home Department what plans he has to improve race relations.
    Mr. Raison: The Government are committed to securing equal opportunities and promoting racial harmony. Existing legislation and Government programmes are already designed to further these objectives though we are thinking carefully about developments in this field. Good race relations also require a positive effort from all of our citizens, whatever their colour.
    Mr. Dubs: Is the Minister aware that his answer sounds incredibly complacent in that he has not put forward a single positive measure to improve race relations at a time when cuts in public expenditure and increasing unemployment are making the lot of our minority community worse than ever before?
    Mr. Raison: I refute those observations. We are considering this matter very carefully and are maintaining the level of expenditure in Government programmes. We are reconsidering the exact scope of section 11 and we have the whole problem very much to the forefront of our minds at present.
    Sir Ronald Bell: Will my hon. Friend bear in mind that nothing would be more conducive to improving race relations than a reduction in the inflow of ethnic minorities to this country?
    Mr. Raison: As my hon. and learned Friend knows, the Government have introduced new measures for immigration control which will have some impact in this area. However, we must consider the interests of all sections of our country at present.
    Dr. Summerskill: In his review of the appeals system in immigration cases, will the Minister, in the interests of maintaining good race relations, recognise the importance of preserving the right of Members of Parliament to appeal directly to Home Office Ministers about individual cases when those Members feel that

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    it is appropriate to do so? Will he assure us that this right will be preserved?
    Mr. Raison: We have no plans to remove the right of hon. Members to raise questions with Ministers. There are occasions when it seems to me that that right is carried to almost excessive lengths. However I assure the hon. Member that we have no plans to remove that fundamental right.
    Mr. Hill: May I congratulate my hon. Friend on the success of the various offices that have been set up in the regions, particularly in Southampton, to deal directly with immigrants' problems? Is my hon. Friend aware that my concern at present is about the fact that the Southampton office is about to close? Could its life be extended for another six months?
    Mr. Raison: I am aware of this, but I am afraid that this has been forced upon us by lack of resources. I shall consider what my hon. Friend has said, but I cannot hold out any hope that the position will be changed.

    Police Force (Ethnic Membership)
    Mr. Leeasked the Secretary of State for the Home Department what are the latest available figures for members of the police force who originate from coloured ethnic communities; and what percentage of the total this represents.
    Mr. Raison: On 29 February 1980, 268 police officers in England and Wales—0·2 per cent. of the total police strength—were members of the ethnic minorities.
    Mr. Lee: I am sure that the majority of hon. Members will find these figures rather disappointing—
    Sir Ronald Bell: Why?
    Mr. Lee: I said the majority of hon. Members. In view of these figures has my hon. Friend any initiatives to implement with a view to increasing the size of the coloured police population?
    Mr. Raison: I accept the need to increase the number of recruits from the ethnic minorities. A special recruitment campaign, with advertisements in the appropriate languages, was conducted in the ethnic press over a three-month period in 1979, and a similar campaign will be launched later this year.
    Mr. Christopher Price: Will the hon. Gentleman agree that the National Front march through my constituency two weeks ago would have been less of an affront to both black and white citizens on the route of the march if the 5,000 policemen guarding the marchers had been less exclusively white?
    Sir Ronald Bell: Why?
    Mr. Christopher Price: What is the Minister doing to make the Metropolitan Police, in particular, more aware of its responsibilities to create racial harmony?
    Mr. Raison: I cannot comment on the policing of that particular event. But, as I have said already, we hope to see an increase in the number of members of ethnic minorities in the police forces. There is no doubt at all that the Commissioner of Police of the Metropolis is aware of the importance of good community relations and I believe that much good work is being done in that area.
    Dr. Glyn: Will my hon. Friend realise that it is not a question of ethnic minorities? We must not reduce the standards of entry into the police simply because of the colour of a person's skin.
    Mr. Raison: I am not aware that my right hon. Friend or the police forces have any plans to reduce standards.

    Interception of Communications
    Mr. Cookasked the Secretary of State for the Home Department if he will now name the senior member of the judiciary who will review the interception of communications; and when he expects to publish his first report.
    Mr. Brittan: My right hon. Friend hopes to be able to do so shortly.
    Mr. Cook: Will the Minister's right hon. Friend reconsider the proposal in the White Paper that only the initial report to the senior judge will be published and that, thereafter, there will be no annual statement? What is the merit in having an independent check on the system if the independent assessor cannot communicate to Parliament or to the public his concern for, or confidence in, the system that he is checking?
    Mr. Brittan: No, Sir. My right hon. Friend indicated in his statement to the

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    House that the initial report would indeed be published but that subsequent reports would not be published. That does not mean that Parliament would not have any knowledge of the nature of those subsequent reports. My right hon. Friend added that Parliament would be informed of any findings of a general nature and of any changes that are made in the arrangements as a result of subsequent reports. That seems to be a reasonable balance in what must, inevitably, be an extremely sensitive area.
    Mr. Race: Why is the Minister's Department refusing to say whether the criteria set out in the White Paper cover the interception of communications for those engaged in trade disputes?
    Mr. Brittan: I do not believe that the question of the appointment of a member of the judiciary to review the interception of communications is an appropriate vehicle for ventilating further the general issues of policy which were put before the House and explored in some depth when my right hon. Friend made his statement.

    Boundary Commissions
    Mr. George Cunninghamasked the Secretary of State for the Home Department if he has any plans to propose changes in legislation governing the activities of the Boundary Commissions.
    Mr. Brittan: We are considering whether any such changes are necessary or desirable.
    Mr. Cunningham: Does the Minister remember the remark that he let slip a month ago to the hon. Member for Morecambe and Lonsdale (Mr. Lennox-Boyd) suggesting that the Government had in mind the possibility of changing the law relating to Boundary Commissions in order to speed up the process? Since it is generally accepted that the next redistribution will benefit the Conservative Party, does the Minister accept that it would be a political scandal if the Government were to use their majority in the House to alter the law relating to the Boundary Commissions in a direction which benefited the Conservative Party?
    Mr. Brittan: I accept that we have a lot to learn from the Opposition about political scandals in relation to these matters. I think that it would be a politi-
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    cal scandal to hold the next General Election on the basis of the present boundaries, which are hopelessly out of date and do not reflect the quality of representation that should be paramount in our thinking. There is a strong case for thinking that it is quite unnecessary that the Boundary Commission should have to complete its consideration of the European constituencies before reporting the outcome of its consideration of the Westminster parliamentary constituencies.
    Mr. Shersby: Does my hon. and learned Friend recall the gerrymandering of the Boundary Commission's report by the Leader of the Opposition when he was Home Secretary? Does not my hon. and learned Friend agree that it is quite scandalous that some constituencies could be at a grave disadvantage compared with others? Some hon. Members represent constituencies with 100,000 electors and others represent only 40,000 electors. Will my hon. and learned Friend take urgent steps to see that that situation is remedied?
    Mr. Brittan: I think that it is quite indefensible that one should fight an election with the present disparity in the size of constituencies. I merely referred, in passing, to past experience, and I do not think that we need to look back. We should be looking to the future and to implementing the representations of the Boundary Commission in an appropriate way in order to safeguard democracy.
    Mr. Merlyn Rees: The Boundary Commission procedure to ensure that there are not over-small or over-large constituencies is right. The Minister referred to the European elections and changing procedures there and my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) was trying to find out what is in the mind of the Government. Why are the Government thinking of changing the law so that the procedures for the European elections can be carried out in a way that was not envisaged when the original legislation was carried? We do not understand what the Government have in mind in this context. The question has nothing to do with gerrymandering and the Boundary Commissions. Is the hon. and learned Gentleman aware that many of us feel strongly about the nature of the European Parliament and the way in which it is organised?
    Mr. Brittan: I do not think that anything I have said, or canvassed, relates to the organisation of the European Parliament, or its powers. What I have said relates to the fact that, at the moment, the parliamentary Boundary Commission—including the English, Scottish, Welsh and Northern Irish Commissions—cannot report until it has considered any changes that it thinks appropriate in the European Parliament boundaries. I am talking of boundaries alone. It seems to us that there is no justification for holding up the implementation of the Boundary Commission proposals concerning the Westminster constituencies because it may not be able to complete consideration of the European constituencies.
    Mr. Donald Stewart: Will the Minister remind the hon. Member for Islington, South and Finsbury (Mr. Cunningham) of the saying that people who live in glass houses should not throw stones, bearing in mind that his 40 per cent. provision gerrymandered the Scotland Act?
    Mr. Brittan: I am afraid that I cannot be drawn on that, because on that issue I believe that the hon. Gentleman showed more wisdom than in his lapse today.
    Mr. Peter Bottomley: Does my hon. and learned Friend agree that the way in which the hon. Member for Islington, South and Finsbury (Mr. Cunningham) phrased his question suggested that the way the boundaries were left at the last General Election gives great advantage to the Labour Party? Is not the important point that the boundaries should be fair? Whether that fairness removes an advantage presently enjoyed by the Labour Party is a totally separate issue.
    Mr. Brittan: I entirely agree with my hon. Friend. I ignore speculation as to the effect or otherwise of the implementation of any proposals that might or might not come. Such speculation is always extremely hazardous. What is sure and firm is that it is quite wrong that there should be constituencies with over 100,000 electors and others with under 30,000 electors.

    Hooliganism and Vandalism (London Underground)
    Mr. Shersbyasked the Secretary of State for the Home Department if he will
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    set up a working party into hooliganism and vandalism on the London underground.
    Mr. Brittan: My right hon. Friend will be holding, with my right hon. Friend the Minister of Transport, a working conference on violence on public transport next Tuesday. I am sure that hooliganism on the London underground will be among the problems discussed.
    Mr. Shersby: Is my hon. and learned Friend aware that, welcome though his announcement is, a conference is not, in the judgment of many Londoners, sufficient? Is he further aware that the acts of hooliganism and vandalism which took place at Neasden and at Finsbury Park seriously shook public confidence in the ability of people to travel safely on the London underground? Will my hon. and learned Friend address his mind specifically to the problems—first, of getting the Metropolitan Police more actively involved in policing the London underground and, secondly, of reviewing the range of penalties which are available to deal with these Tube thugs? We simply cannot go on with the present situation much longer.
    Mr. Brittan: I appreciate, understand and completely share the public anxiety articulated by my hon. Friend. Of course, the conference that is to be held next Tuesday is not enough. However, I think that it is more likely than a working party to reveal to Government and the other organisations involved—whether local authorities or transport bodies—pointers to constructive action for the future.
    The Metropolitan Police already assists the British Transport police where necessary. Any recommendations for greater co-operation may well emerge from the conference. The House will be aware that the Government are reviewing the scope and content of the criminal law to seek ways in which it can be strengthened where appropriate.
    Mr. Bagier: Does the hon. and learned Gentleman accept that the railway men are extremely concerned about what is happening? Does he accept that there should be urgent co-operation between the British Transport police and the Metropolitan Police to ensure that the known danger spots

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    are policed properly at times when vandalism and hooliganism take place? Is he aware that the fervent opinion of those who work on the system is that it is their job to work for the railways and not to fight for them and that they should be afforded protection when they are doing their jobs?
    Mr. Brittan: I do not think that I would disagree with a single word that the hon. Gentleman has uttered.
    Mr. Grieve: Will my hon. and learned Friend bear in mind that there might be long-term solutions to the problem but that short-term remedies are urgently needed? Does he agree that it is not only a question of hooliganism but that people are anxious because of the extreme violence on the underground and on public transport? Will he do his best to urge that the Metropolitan Police cooperate with the transport police to ensure that urgent measures are taken to meet the grave crisis?
    Mr. Brittan: I can assure my hon. and learned Friend that there is no need to urge the Metropolitan Police to co-operate. They are ready and anxious to do so. It is a question of the best way in which they can co-operate. I hope that the conference next week will produce constructive, short and long-term suggestions.
    Mr. Campbell-Savours: Is there not another solution? Could we not fill London Transport carriages with passengers rather than vandals if we reduced the scandalously high cost of fares?
    Mr. Brittan: I do not believe that that would help in any significant way.

    Urban Centres (Public Order)
    Mr. Lawrenceasked the Secretary of State for the Home Department what action he proposes to take to ensure that there will not be any " no-go " areas in British urban centres.
    Mr. Raison: As my right hon. Friend made clear in his statement to the House on Monday on the recent disturbances at Bristol, however quickly or fiercely public disorder may occur, we must ensure that the police are able swiftly to restore the peace and enforce the law. Such speed of response is a central issue for the re-
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    view of arrangements for handling spontaneous disorder which the Department is undertaking with chief officers of police.
    Mr. Lawrence: Is my hon. Friend aware that few people will not wholeheartedly support what the Home Secretary said about his determination that there should not be any no-go areas in Britain? Is the Minister aware that it will be possible to give effect to those fine words only if either enough police officers are recruited into potentially inflammable areas, or if enough police officers are recruited to special groups to be used in particularly inflammable areas? Is my hon. Friend satisfied with the level of police recruitment and the capacity of the police force to deal with conflagrations if, by chance, they should take place in future?
    Mr. Raison: I am grateful for my hon. Friend's comments on what my right hon. Friend said on Monday. There has been a great improvement in recruitment in recent months since the present Government came to power. On the more specific question of how to handle disorder, that is exactly what the conference, which the Home Office is setting up in conjunction with the Association of Chief Police Officers, intends to examine.
    Mr. Alexander W. Lyon: As the police were walking about the place peacefully shortly after the disturbances may we get away from the obsession about no-go areas and ask ourselves why there was so much hostility to the police in the first place when the outbreak took place? Is it not time that we began to consider community policing on a national scale rather than reactive policing, which was the cause of the riot?
    Mr. Raison: The conference to consider police operations might examine such questions. The Bristol incidents have been analysed fully. A full summary of the chief constable's report is available in the Library. Inquiries will be made by the Select Committee of which the hon. Gentleman is a member. It is well known that local authorities are examining the situation.
    Mr. Wilkinson: Since many areas of our big cities are populated by Indian, Pakistani and Bangladeshi communities,

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    does my hon. Friend agree that it would be to the advantage of effective policing if there were more police from those communities, who speak the language and understand more fully what is going on?
    Mr. Raison: We hope to have more members of the ethnic minority communities in the police force.

    Community Relations Councils
    Mr. Budgenasked the Secretary of State for the Home Department if he has any proposals for making the councils for community relations more accountable either to Parliament or to local authorities.
    Mr. Raison: Community relations councils are already answerable to the Commission for Racial Equality through the conditions imposed in connection with the grants that the Commission makes to them. I understand that the Commission is reviewing all these arrangements and that the question of accountability forms part of this review. Where grants are made by local authorities or other bodies it is for them to attach what conditions they think appropriate.
    Mr. Budgen: May I draw my hon. Friend's attention to two recent examples of behaviour by the community relations councils? Is he aware of the violent and offensive attack by the Northampton community relations council on my hon. Friend the Member for Northampton, North (Mr. Marlow)—an attack which would be proper in a political party but which was grossly improper in a non-political bureaucracy? Secondly, is my hon. Friend aware of the refusal by the Wolverhampton community relations council to accept the advice of the Commission for Racial Equality on the appointment of an official? Do not those two examples point to the proposition that the community relations councils should be directly responsible either to the Home Office or to local authorities?
    Mr. Raison: I do not believe that it is generally thought that my hon. Friend the Member for Northampton, North (Mr. Marlow) is incapable of defending himself against attack. I understand that the Commission for Racial Equality's policy is to require political representation on community relations councils to
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    be broadly balanced. Events in Wolverhampton have aroused considerable interest. I understand that the Commission for Racial Equality is reviewing its relationships with community relations councils generally and is examining carefully the position in Wolverhampton.
    Mr. Speaker: Order. I remind the House that when hon. Members are called to ask a supplementary question it is unfair if they ask two or three questions. That stops questions by other hon. Members.
    Mr. Dubs: Does the Minister agree that it would be the worst thing possible if community relations councils lost their independence in the local areas? Does he agree that they should be accountable to their local communities?
    Mr. Raison: We certainly do not want community relations councils to be puppets. They are expected to express honest opinions. To an extent, they are accountable to the people who pay for them, and that includes local authorities and the Commission for Racial Equality.
    Mr. Marlow: Is my hon. Friend aware that many community relations councils are beginning to regard themselves as pressure groups for ethnic minorities? Does my hon. Friend agree that, although it would be ideal if they had political balance, sadly, some of them have fallen into the hands of Left-wing extremists and are using Government and local authority money in a way which is damaging to racial harmony? Will the Minister examine the whole area of activity to see whether it can be brought under more effective control?
    Mr. Raison: The CRE is looking into the local community relations councils. I agree that some councils are not as politically balanced as is desirable. However, what really matters is that the councils should fulfil a constructive purpose rather than merely indulge in politics.

    Metropolitan Police
    Mr. Raceasked the Secretary of State for the Home Department whether he will introduce measures to ensure that the Metropolitan Police force is democratically accountable to the people of London through their local authorities.
    Mr. Brittan: I see no reason to change the present constitutional position, under which my right hon. Friend is answerable in Parliament for the exercise of his responsibilities as police authority for the Metropolitan Police district.
    Mr. Race: Does the Minister accept that a number of local authorities are thinking of withholding their rate precept to the Metropolitan Police unless a more substantial element of accountability is introduced? Such an element might make the Metropolitan Police more accountable to local authorities. What possible justification can there be for allowing a police force not to be accountable to the local community that it serves?
    Mr. Brittan: I am aware that one local authority has made such a threat. It is deplorable to threaten to break the law by withholding the precept. I hope that wiser counsels will prevail. It is peculiarly illogical to claim to stand for law and order by breaking the law.
    Mr. Eldon Griffiths: Does not my hon. and learned Friend agree that the task of policing London is operationally and logistically a seamless garment, that cannot be split between particular boroughs? Is it not true that certain police operations, such as the one now taking place, should not be messed about by politically-motivated local councillors?
    Mr. Brittan: I entirely agree with my hon. Friend.
    Mr. George Cunningham: Does not the Minister agree that the Metropolitan Police force is as accountable as any police force outside London, but that it is accountable in a different way—through Members of Parliament, not councillors? Does not he accept that it may be argued that Members of Parliament can do the job better? Will he accept that many local authorities in London are concerned that there is no formal means of consultation between the police and local authorities? Will he open his mind to the possibility of change?
    Mr. Brittan: I agree with the first part of the hon. Gentleman's question. However, as regards the second question, the Commissioner is anxious to encourage local police commanders to establish liaison arrangements with local authorities in
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    their districts. The Government very much support those developments. They are entirely consistent with the general position as regards responsibility. Any suggestions towards the further extension of that co-operation will be considered sympathetically.

    Cuban Refugees
    Mr. Adleyasked the Secretary of State for the Home Department if he will facilitate the granting of entry and residence facilities to a token number of Cuban refugees from the Castro dictatorship.
    Mr. Raison: We shall certainly consider sympathetically applications from Cubans who have left the Peruvian embassy for countries of first asylum and who wish to resettle in the United Kingdom, if they have ties with this country or other connections suggesting that the United Kingdom is the natural country of resettlement.
    Mr. Adley: Bearing in mind the campaign that was organised by the political Left on behalf of Chilean exiles, has the Home Office received any representations from members of the Labour Party on behalf of exiles from a Communist dictatorship? Would not the arrival of a few exiles provide a timely reminder to British people of the alternative to a free capitalist society?
    Mr. Raison: I agree with my hon. Friend's last point. As far as I can ascertain, neither we nor the Foreign Office have received any representations from right hon. or hon. Members. We have received only one representation from another source.

    Local Radio
    Mr. Beithasked the Secretary of State for the Home Department whether he will ask his Department's working party on local radio to give special consideration to the phasing of local radio development with cuts in the British Broadcasting Corporation's regional radio news bulletins.
    Mr. Brittan: The Home Office local radio working party prepares proposals for the consideration of the Secretary of State for the Home Department for the further development of local radio by stages, over the United Kingdom as a

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    whole. The working party has no responsibility for regional radio as such but is aware of the BBC's intention to withdraw its regional services in England and to extend its local radio services as resources permit, and will, therefore, obviously be working in that context.
    Mr. Beith: I thank the Minister for that reply. Will he do his best to ensure that the withdrawal of regional radio services is matched by an attempt to develop local radio not on a duplicated basis, but on one that brings local radio to as much of the country as possible? Will he facilitate the attempts made by the BBC to extend local radio into north Northumberland?
    Mr. Brittan: As regards north Northumberland, the BBC has recently put forward proposals to provide alternative arrangements for extending the VHF coverage of BBC Radio Newcastle northwards, to include the hon. Gentleman's constituency.
    Mr. Latham: Is my hon. and learned Friend aware that there is great support in Leicestershire for Radio Leicester and that it is widely listened to? Does not he accept that if cuts have to be made, many people would prefer them to be made on regional programmes, which are more widely spread and less relevant than local programmes?
    Mr. Brittan: I am aware of my hon. Friend's concern and of local support for that station. It is in accordance with the BBC's general policy to move from regional to local coverage.

    Commission for Racial Equality
    Mr. Marlowasked the Secretary of State for the Home Department if he will seek to change the constitution of the Commission for Racial Equality.
    Mr. Raison: No. The Race Relations Act 1976, which set up the Commission, has been in force for just under three years and we do not consider it necessary to consider further changes at this stage.
    Mr. Marlow: Is my hon. Friend aware that, according to one estimate by the OPCS, the current coloured population of 2,000,000, is likely to increase to 4,000,000 by the end of this century? Is he further aware that the Government
    1612
    may well find it necessary to go back on some of their commitments in order to reduce a seemingly endless flood of immigration? Will he take care that the Commission for Racial Equality is not enabled to interfere with any policies that the Government may introduce?
    Mr. Raison: My hon. Friend is aware that we have already taken steps to reduce the flow of immigrants. It is for the Government to decide their policies. The CRE has the right to give its views, but it is for hon. Members and the Government to decide such issues.
    Mr. Speaker: Order. I shall allow one minute extra for Prime Minister's Question Time, in order to call the Opposition Front Bench spokesman.
    Dr. Summerskill: Will the hon. Gentleman confirm or deny the report that the Home Office is considering combining the Commission for Racial Equality with the Equal Opportunities Commission?
    Mr. Raison: At present, we have no plans to do that.

    PRIME MINISTER (ENGAGEMENTS)
    Mr. Campbell-Savoursasked the Prime Minister what are her official engagements for 1 May.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be having further meetings with ministerial colleagues and others.
    Mr. Campbell-Savours: Will the Prime Minister take time off today to answer more fully the question put by my hon. Friend the Member for Eton and Slough (Miss Lestor), and the accusations being made to the effect that the right hon. Lady openly condoned the use of Diego Garcia by Carter's task force, as a result of his decision to intervene in Iran and secure the release of the hostages?
    The Prime Minister: I cannot get myself into a position where I have to confirm or deny movements through allied bases. There is nothing that I can usefully add to that reply.
    Mr. Campbell-Savours: On a point of order, Mr. Speaker—
    Mr. Speaker: Order. If the hon. Gentleman's point of order relates to the reply that he received, it might be better to raise it at the end of Question Time, as otherwise it will take up the time of other hon. Members.
    Mr. Kenneth Carlisle: I was encouraged to read in the press that the Government—[HON. MEMBERS: " Question."] Is the Prime Minister aware that it was stated in the press that the Government are reviewing their public sector buying policy? Will she confirm that that is true? Does she agree that the Government should positively encourage Government Departments and public sector buying bodies to buy British? That would do much to help industry at a difficult time.
    The Prime Minister: My hon. Friend is quite right. I referred to this matter in the debate on the confidence motion. Our policy is to encourage all Departments to buy British as far as possible, commensurate with getting good value for money.
    Mr. Foot: Talking of encouragement from the press has the right hon. Lady had an opportunity during her busy day to read the magnificent May Day issue of the Daily Mirror? Has she given instructions—I trust that she has—that it should be read by all members of her Cabinet, wet or dry?
    The Prime Minister: I have glanced at the Daily Mirror. I did not think that it was worth doing more than that. I noted a picture of shoes, kept for children to wear at a school in The Wirral. I made inquiries. There has been no change in practice at that school since the election.
    Mr. Renton: Now that the dust has settled after Monday night, does my right hon. Friend think that EEC Governments, and the French Government in particular, will be able to accept a far-reaching reform of the budget so that a smaller proportion of Community money would be spent on the agricultural policy and on funding agricultural products that go straight into surplus? Is not that fundamental to the whole issue?
    The Prime Minister: We require two things: a reform of the common agricultural policy, and ass change in the way in which the budget is financed. It would
    1614
    have helped if the proposed price settlement had represented a smaller proportion on agriculture. Unfortunately, it did precisely the opposite. Those two things will have to be brought about. The opportunity will be when the 1 per cent. VAT ceiling is reached, but we shall have to press for both reforms very hard.
    Mr. Cookasked the Prime Minister if she will list her official engagements for Thursday 1 May.
    The Prime Minister: I refer the hon. Gentleman to the reply which I gave earlier.
    Mr. Cook: Will the Prime Minister today find a moment to re-read the Conservative Party manifesto, particularly that section entitled " Helping the Family "? Will she compare it with the annual report of the NSPCC, published this week, which notes an increase in family tension as a result of diminished support for families from public funds? How do the conclusions of that respectable body, sponsored by Her Royal Highness the Princess Margaret, square with the Conservative commitment to support family life?
    The Prime Minister: With respect, there have been problems with which the NSPCC has been dealing splendidly over the years, and I do not believe that those problems have changed since the election. I believe that it is a disgrace that there is even need for such a society, but so long as there is cruelty—and it occurs at all levels of income throughout society—we shall need such a body. As to the more detailed reply which I could give the hon. Gentleman, since the Government have been in power, with the increases in benefit which they have already made, coupled with those which have been announced, by next November lone parents will have benefited by a 50 per cent. increase in the child benefit addition, low-wage income earners with children, including single parent earners, will have been helped by the doubling of the family income supplement, and there are many more things proposed.
    Sir Paul Bryan: While the Prime Minister, quite rightly, only glanced at the Daily Mirror, will she look rather more carefully at The Sun, which reveals that 85 per cent. of the population and 75 per cent. of trade unionists are against

    1615
    the futile strike which is due to take place on 14 May?
    The Prime Minister: I saw that article, and I think that it shows enormous common sense on the part of those who are being called upon to take part in the day of action.
    Miss Joan Lestor: While thanking the Prime Minister for the courtesy of her reply to myself and two of my hon. Friends relating to the letter we sent her about Diego Garcia, in which she reiterated what she has already said to my hon. Friend the Member for Workington (Mr. Campbell-Savours), may I ask her to confirm that if the base at Diego Garcia was used by the Americans in the rescue attempt in Iran, British permission should have been received?
    The Prime Minister: I am being asked the same question in a different guise, and there is nothing that I can usefully add to what I have already said.
    Mr. Nicholas Winterton: Will my right hon. Friend, who is giving such positive and dramatic leadership to the free Western world and to our country in a time of difficulty, take a little time out of her busy programme to study the philosophy and policies of Benjamin Disraeli, who believed in the national interest above all else and the good sense of one nation of all people, in order to sustain her in the wonderful work which she is doing?
    The Prime Minister: I shall certainly try to do so, perhaps during next Monday's bank holiday. Like my hon. Friend, I am a great admirer of Disraeli, and staunchly believe, as both of us do, in true Conservative policy.
    Mr. Skinner: As a wife and a mother—[Laughter.]
    Mr. Speaker: Order. The House ought to listen because we do not know what is coming next.
    Mr. Skinner: —who only glances at the Daily Mirror from time to time, is the Prime Minister proud of the fact that she has cheated the old-age pensioners by introducing a 54-week session, and punished schoolchildren by pushing the price of school meals through the roof? Is she proud that she is seeking revenge upon the miners by removing State liability from the pneumoconiosis scheme and the
    1616
    miners' voluntary retirement scheme? Is she really proud that, at the general election, she led a party which peddled a pack of lies?
    The Prime Minister: I rather thought that under the Tory Government it was reported that some miners now had an income of £10,000 a year. I am very proud of the Government's record during the past year. I am proud of the fact that the married pension has gone up by £12·25p a week; that by next November the disabled will have been helped by a 45 per cent. increase in mobility allowance; that by next year no fewer than 2 million needy people will receive help with their fuel bills—which in real terms means £20 million more than in the last year of the previous Government; that we have cut the standard rate of income tax by 3p in the pound; that we shall have compulsory tenants' rights to purchase council houses, and that we have managed to get the Employment Bill through this House.
    Mr. Raceasked the Prime Minister if she will list her official engagements for Thursday 1 May.
    The Prime Minister: I refer the hon. Gentleman to the reply which I gave some time ago.
    Mr. Race: As the Prime Minister is said by the press to enjoy the nickname of " the Iron Lady", can she say just how much she enjoys the prospect of cutting unemployment benefit in real terms by 5 per cent., cutting by a similar amount the benefits paid to pregnant women and cutting the benefit which is paid to invalids in real terms?
    The Prime Minister: I believe that this year it was right to cut the increase in unemployment benefit by some 5 per cent. below the level that it would otherwise have been, because I believe that it is right to have a larger difference between those in work and those out of work.
    Mr. Grylls: In her review of public sector orders, will my right hon. Friend try to ensure that a fair share goes to small firms, as that would help them very much?
    The Prime Minister: I shall endeavour to do that. As I have gone around firms in the country, I have noticed that quite a

    1617
    lot of public sector ordering is done through small firms because they are excellent with regard to delivery dates and industrial relations.
    Mr. Foot: Is the right hon. Lady so proud of the cuts in real benefits which have been carried through in the last two Budgets? Is she proud enough of that to publish the full list in the Official Report? Is she proud of the fact that she has pushed up the rate of inflation to 20 per cent., that the unemployment figures have gone up to more that 1½ million and that the mortgage rate has gone up to 15 per cent.? As the " day of action " is partly a protest against all those things, can she advise us to whom we should send our protest? Should it be sent to the Secretary of State for Industry, the Chancellor of the Exchequer or No. 10 Downing Street?
    The Prime Minister: I am proud of the Government's records as a whole, including the fact that, in spite of everything the right hon. Gentleman has said, the standard of living rose last year by 6 per cent., that we have just had a very good month for exports and the fact—which I forgot previously—that we settled the Rhodesian problem.
    Mr. Foot: In the same generous spirit as that of the right hon. Lady, may I congratulate her and the Government on the settlement of the Rhodesian problem? We were all very glad to see it, because that represented a real U-turn on their part. Will the right hon. Lady now tell us whether she is still proud of the speech which she delivered in Australia on that subject?
    The Prime Minister: Yes, because in that speech in Australia I said that the sanctions issue would be resolved by November, and it was.
    Mr. Stanbrook: Will my right hon. Friend consider this afternoon warning the TUC, in connection with the calling out of its members on 14 May, that neither the law nor the Government will protect them by one penny from action for damages which might result?
    The Prime Minister: It is my understanding—although it would need to be confirmed with my right hon. and learned Friend the Attorney-General—that the " day of action " on 14 May would not be a trade dispute of the kind which would give immunity from action in a court of law.
    Mr. Barry Jones: Is the right hon. Lady preparing any measures to help combat the serious rise in unemployment in Britain?
    The Prime Minister: I am every bit as concerned as the hon. Gentleman about rising unemployment figures. They have not yet passed the peak that was reached by the previous Government. I fear that they will rise during the coming months. We shall do everything we can, but we need help and support from the rest of the country. Unemployment will rise if some groups demand increases in pay which are too high and take away the jobs of others.
    Mr. Wilkinson: Has my right hon. Friend read the account in the press today of the preposterous resumption of surplus butter sales to the Soviet Union by the EEC? Has she also read that that butter is not being sold at subsidised prices to the Soviet housewife, but in a way which greatly profits the Soviet exchequer? Does not that constitute a subsidy from the European taxpayer to the Soviet exchequer at a time when it cannot possibly be justified?
    The Prime Minister: I read that report, and I should like to make it clear that the United Kingdom voted against that sale. However, it is not one that requires the unanimous support of each and every member of the Community. I confirm what my hon. Friend said, that the normal export refund was higher in this case than previously. I condemn this sale totally.
    Mr. Campbell-Savours: On a point of order—
    Mr. Speaker: Order. I shall take points of order after the statements.

BUSINESS OF THE HOUSE
Mr. Foot: Will the Leader of the House state the business for next week?
The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): The business for next week will be as follows:
TUESDAY 6 MAY—Consideration of a timetable motion on the Social Security (No. 2) Bill.
Mr. Race: I spy strangers. I spy strangers.

Division No. 278]

AYES

[3.30 p.m.

NIL

TELLERS FOR THE AYES:

Mr. Andrew F. Bennett and

Mr. Reg Race.

NOES

Adley, Robert

Fisher, Sir Nigel

Marlow, Tony

Aitken, Jonathan

Fletcher, Alexander (Edinburgh N)

Marshall, Michael (Arundel)

Alexander, Richard

Fletcher-Cooke, Charles

Marten, Neil (Banbury)

Ancram, Michael

Forman, Nigel

Mates, Michael

Atkins, Rt Hon H. (Spelthorne)

Fraser, Rt Hon H. (Stafford & St)

Mather, Carol

Atkinson, David (B'mouth, East)

Freud, Clement

Mawby, Ray

Baker, Kenneth (St. Marylebone)

Glyn, Dr Alan

Meyer, Sir Anthony

Baker, Nicholas (North Dorset)

Goodhew, Victor

Miller, Hal (Bromsgrove & Redditch)

Beith, A. J.

Goodlad, Alastair

Moore, John

Bell, Sir Ronald

Gow, Ian

Morrison, Hon Peter (City of Chester)

Bennett, Sir Frederic (Torbay)

Grieve, Percy

Myles, David

Biffen, Rt Hon John

Griffiths, Eldon (Bury St Edmunds)

Nelson, Anthony

Body, Richard

Griffiths, Peter (Portsmouth N)

Neubert, Michael

Bottomley, Peter (Woolwich West)

Grimond, Rt Hon J.

Newton, Tony

Bradford, Rev. R.

Grist, Ian

Page, Rt Hon Sir R. Graham

Brittan, Leon

Grylls, Michael

Penhaligon, David

Brooke, Hon Peter

Hannam, John

Percival, Sir Ian

Browne, John (Winchester)

Hawkins, Paul

Pollock, Alexander

Bruce-Gardyne, John

Hayhoe, Barney

Pym, Rt Hon Francis

Bryan, Sir Paul

Heath, Rt Hon Edward

Raison, Timothy

Buck, Antony

Heddle, John

Renton, Tim

Bulmer, Esmond

Heseltine, Rt Hon Michael

Rhys Williams, Sir Brandon

Butcher, John

Hill, James

Ross, Stephen (Isle of Wight)

Butler, Hon Adam

Holland, Philip (Carlton)

Rost, Peter

Cadbury, Jocelyn

Howell, Rt Hon David (Guildford)

Sainsbury, Hon Timothy

Carlisle, John (Luton West)

Howell, Ralph (North Norfolk)

St. John-Stevas, Rt Hon Norman

Carlisle, Kenneth (Lincoln)

Hunt, John (Ravensbourne)

Scott, Nicholas

Carlisle, Rt Hon Mark (Runcorn)

Hurd, Hon Douglas

Shaw, Michael (Scarborough)

Chalker, Mrs. Lynda

Jenkin, Rt Hon Patrick

Shepherd, Colin (Hereford)

Channon, Paul

Jessel, Toby

Shersby, Michael

Chapman, Sydney

Jopling, Rt Hon Michael

Sims, Roger

Churchill, W. S.

Joseph, Rt Hon Sir Keith

Spicer, Jim (West Dorset)

Clark, Sir William (Croydon South)

Kellett-Bowman, Mrs Elaine

Squire, Robin

Clarke, Kenneth (Rushcliffe)

Knight, Mrs Jill

Stanbrook, Ivor

Cope, John

Lamont, Norman

Stanley, John

Costain, A. P.

Lang, Ian

Steel, Rt Hon David

Cranborne, Viscount

Latham, Michael

Steen, Anthony

Dorrell, Stephen

Lawrence, Ivan

Stevens, Martin

Dunn, Robert (Dartford)

Lee, John

Stradling Thomas, J.

Dykes, Hugh

Lennox-Boyd, Hon Mark

Tapsell, Peter

Edwards, Rt Hon N. (Pembroke)

Lester, Jim (Beeston)

Taylor, Teddy (Southend East)

Eggar, Timothy

Lewis, Kenneth (Rutland)

Temple-Morris, Peter

Elliott, Sir William

Lloyd, Ian (Havant & Waterloo)

Thatcher, Rt Hon Mrs Margaret

Emery, Peter

Lloyd, Peter (Fareham)

Thorne, Neil (Ilford South)

Eyre, Reginald

Lyell, Nicholas

van Straubenzee, W. R.

Fairgrieve, Russell

McCrindle, Robert

Waddington, David

Faith, Mrs Sheila

MacGregor, John

Wakeham, John

Farr, John

MacKay, John (Argyll)

Waldegrave, Hon William

Fenner, Mrs Peggy

McNair-Wilson, Michael (Newbury)

Wall, Patrick

Finsberg, Geoffrey

McNair-Wilson, Patrick (New Forest)

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

Mr. Andrew F. Bennett: I spy strangers. I spy strangers.
Mr. Speaker: Order.
Mr. St. John-Stevas: Remaining stages of the Port of London (Financial Assistance)—
Mr. Andrew F. Bennett: I spy strangers. I spy strangers.
Notice being taken that strangers were present, Mr. SPEAKER, pursuant to Standing Order No. 115 (Withdrawal of strangers from House), put forthwith the Question, That strangers do withdraw:—
The House divided: Ayes 0, Noes 157.

Whitelaw, Rt Hon William

Wolfson, Mark

Whitney, Raymond

Young, Sir George (Acton)

TELLERS FOR THE NOES:

Wilkinson, John

Younger, Rt Hon George

Mr. Spencer Le Ma

Winterton, Nicholas

Mr. Anthony Berry.

Question accordingly negatived.
Mr. St. John-Stevas: As I was saying, Mr. Speaker—to continue with Tuesday's business: Remaining stages of the Port of London (Financial Assistance) Bill.
Motion on the Local Loans (Increase of Limit) Order.
WEDNESDAY 7 MAY—Debate on a motion to take note of the Government's expenditure plans, 1980–81 to 1983–84, (Cmnd. 7841).
Motions on the Southern Rhodesia (Sanctions) (Amnesty) Order and on the Zimbabwe (Independence and Membership of the Commonwealth) (Consequential Provisions) Order.
THURSDAY 8 MAY—Second Reading of the Finance (No. 2) Bill.
Consideration of the Instruction to Standing Committee D on the Local Government, Planning and Land (No. 2) Bill.
FRIDAY 9 MAY—Private Members' motions.
MONDAY 12 MAY—Until 7 p.m. consideration of Private Members' motions. Afterwards, Second Reading of the Gas Bill.
It may be for the convenience of the House to know that it will be proposed that the Whitsun Adjournment should be from Friday 23 May to Monday 2 June.
Mr. Foot: Leaving aside the rest of the proposed business and coming back to the timetable motion proposed by the right hon. Member for Tuseday 6 May, does he not appreciate that that proposal by the Government for dealing with the Bill is bound to give rise to extremely bitter feelings on the Opposition Benches? Does he think that there is any possible excuse for having a timetable motion on a Bill that is only in its second week, that has had two all-night sittings, that is to be discussed again at 4.30 this afternoon, and on which there has not been obstruction?
Of course, there is bound to be lengthy debate on a Bill of such importance, which cuts benefits and interferes with the rights of people throughout the
1622
country. Can the right hon. Gentleman give us any excuse whatsoever for introducing this timetable motion on this Bill in this manner?
Hon. Members: Yes.
Mr. Adley: Following the right hon. Gentleman's example.
Mr. St. John-Stevas: It hardly lies in the mouth of the right hon. Gentleman to complain about guillotines, since we recall that he set an all-time record in this matter by introducting five guillotines on one day—20 July 1976. There is a further precedent in 1966, also by the Labour Government supported by the right hon. Gentleman. The Selective Employment Payments Bill was guillotined by that Government after the Second Reading—before the Committee stage.
Unlike the right hon. Gentleman, I have had the advantage of being present at quite a number of the sittings of the Committee and I have seen the progress that has been made. After nearly 40 sitting hours the Committee is only halfway through one clause, with only nine groups of amendments tabled. There have been 15 Opposition speeches of half an hour each There have been three Opposition Front Bench speeches of over an hour each, two of which I heard, from the hon. Member for Birmingham, Perry Barr (Mr. Rooker). There were five hours on a sittings motion and one and a half hours of points of order. Surely it is clear that the Opposition have no intention of making reasonable progress on the Bill.
Mr. Foot: The right hon. Gentleman has quoted the five timetable motions that I introduced on a single occasion. Can he give me the name of any one of those Bills on which the time for debate was as short as that which he is proposing?
Mr. St. John-Stevas: It is likely that there will be up to 70 sitting hours on the Bill. So far we have had 40 sitting hours. We shall probably have another 30 hours. Seventy hours for a six-clause Bill is not unreasonable.
Sir William Clark: Will the report of the Select Committee on the Treasury and Civil Service be available to hon. Members before the public expenditure debate on Wednesday?
Mr. St. John-Stevas: As my hon. Friend knows, we arranged this debate at such a point that it would be possible for the report of the Select Committee to be available. It should be available in the Vote Office at noon tomorrow, and the evidence should be available on Tuesday.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call those hon. Members who have been rising, before we move on to the next business.
Mr. William Hamilton: On the guillotine motion, is the Leader of the House aware that the Social Security (No. 2) Bill is the first Bill in 50 years that deliberately sets out to cut national insurance benefits? Is he further aware that on the first sitting the Minister in charge of the Bill created a precedent by initially moving a sittings motion providing for three afternoon sittings—Tuesday, Wednesday and Thursday—openended from 4.30 onwards, and that on no occasion in the course of the proceedings has a closure motion been moved on a major debate?
Mr. St. John-Stevas: There are precedents for sittings motions of that character. In fact, benefits will be increased. It is the rate of increase that is reduced.
Mr. Peter Bottomley: Will my right hon. Friend arrange to have a debate next week or the week after—perhaps on 14 May—on bank holidays and other national days off? Is he aware that we need to discuss, first, whether May Day should remain the first Monday in May or should come back towards St. George's Day, or some other more suitable day? Secondly, the House should be able to discuss the " day of action" and to discover why trade union leaders suggest that their members are all in favour of such action when every piece of available evidence indicates that the vast majority of trade unionists are utterly opposed to it.
Mr. St. John-Stevas: I agree with my hon. Friend. I think that the major mistake that was made by my predecessor, the late Mr. Crossman, was the substitution of a secular bank holiday for the traditional Christian Whitsun. One option that might be investigated is a return to the old arrangements, which were much more acceptable.
Mr. Greville Janner: In view of the report of the National Society for the Prevention of Cruelty to Children and the expected increase in child abuse and child battering in the deepening recession, will there be time for a debate on these problems, especially having regard to the need of the society for funds and the need of local authorities for more resources to deal with the problems, which are getting so much worse?
Mr. St. John-Stevas: I think that my right hon. Friend the Prime Minister dealt with any connection between these two events. The House should debate social matters from time to time, and the hon. and learned Gentleman has referred to an important report. I shall consider what he suggests and whether it can be fitted into the context of a general social affairs debate.
Mr. Faulds: As Diego Garcia comes under British sovereignty, and as its use by foreign forces, for whatever purposes, must have the agreement of Her Majesty's Government, will the right hon. Gentleman arrange for somebody more responsible than me Prime Minister to make a definitive statement?
Mr. Speaker: I shall be giving a ruling on this issue at the end of the statements.
Mr. St. John-Stevas: I drink that the essence of the reply made by my right hon. Friend the Prime Minister when this issue was raised earlier was precisely to state the Government's responsibility. It is rather irresponsible of the hon. Gentleman to attempt to raise the matter again.
Mr. Race: Is the Leader of the House aware that in Standing Committee B on the Social Security (No. 2) Bill the Government have been introducing amendments to cut benefits because they forgot to put those provisions in the original Bill? Does not that make a mockery of the guillotine motion that will be put before the House next Tuesday?
Mr. St. John-Stevas: I have dealt with the point of substance on cuts. It is normal for any Bill that goes into Committee to be subject to amendment by both the Government and the Opposition.
Mr. Dubs: Is the right hon. Gentleman aware that on at least two occasions m recent weeks Ministers have refused to commit themselves on policy issues on the ground that Select Committees were considering the same issues? Will the right hon. Gentleman give the House a chance to consider the implications of Ministers taking that course? If Ministers are to refuse to answer questions because Select Committees are in existence, the position of Back Benchers who are not members of Select Committees will be considerably weakened.
Mr. St. John-Stevas: The hon. Gentleman has raised an interesting matter. Naturally a number of problems are arising from these new institutions, which on the whole have been working highly successfully. If the hon. Gentleman draws particular instances to my attention I shall investigate them and take them up with the Ministers concerned.
Mr. Soley: Is the right hon. Gentleman aware that there are many hon. Members on both sides of the Chamber who are unhappy about the statement made by the Secretary of State for the Home Department yesterday on prisons, which leaves at risk many of our prisoners and prison staff? When can we have a debate on this urgent matter?
Mr. St. John-Stevas: Some hon. Members may not have been totally satisfied, but I think that a large number were extremely pleased at the progress that my right hon. Friend was able to announce in a difficult financial and economic period. I agree with the hon. Gentleman that it is right that we should have a full debate on the vital subject of our prisons. I hope to be able to provide time for a debate. That will be not next week but after we return from the Whitsun Recess.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call the hon. Member for Rutland and Stamford (Mr. Lewis) after I have called those who had risen before I said that I was drawing the line for further questions. I
1626
shall call the hon. Gentleman at the end of questions on the business statement.
Mr. Christopher Price: May we have a debate on the Government's recently issued Green Paper on processions and the criteria under which they might be banned? Is the right hon. Gentleman aware that my constituents were subjected to great inconvenience and affront by the National Front a fortnight ago? Is he further aware that it is absurd that the taxpayers should have to pay millions of pounds on such events throughout the year? We are grateful to the Government for making various suggestions about banning processions on the grounds of inconvenience, affront and cost, but may we debate the issue as soon as possible?
Mr. St. John-Stevas: I am grateful to the hon. Gentleman for what he said. It is an issue that raises important questions of public order and important constitutional questions on freedom. My right hon. Friend the Home Secretary has asked for replies and comments on his Green Paper. I think that the time for a debate will be after the replies have been received, and when he has had time to consider them.
Mr. Skinner: Would it not be a more sensible course for the Leader of the House not to introduce a guillotine motion on the Social Security (No. 2) Bill, especially at a time when I believe that consultations are taking place between civil servants of the National Coal Board and some Ministers on the effect that the Bill will have on the miners' voluntary retirement scheme, which I assume was supported by all parties and accepted by the Government? It will also have a special effect on pneumoconiotics. Surely it would be more sensible for all the negotiations to take place—especially the ones that I have mentioned—before a guillotine is introduced on such an important and vicious Bill.
Mr. St. John-Stevas: The most desirable outcome would have been to reach an agreement with the Opposition through the usual channels to discuss the Bill in an orderly way. If we could have done that we would have avoided the need for a guillotine.
Mr. Kenneth Lewis: I am grateful to you, Mr. Speaker. I was not in my place

1627
when you made your announcement. What is happening to the Local Government, Planning and Land (No. 2) Bill, which is apparently to be separated into two Bills? Does my right hon. Friend expect to get both through the House?
Mr. St. John-Stevas: The Local Government, Planning and Land (No. 2) Bill is still in Committee. I announced today that on Thursday consideration will be given to an Instruction to the Committee to enable one of the clauses to be considered as a priority to assist with the new towns' borrowing requirement. Following that, the Bill will proceed in the normal way. It is for the convenience of the House that it is being dealt with as I have described.
Mr. Orme: I take up the question asked by my hon. Friend the Member for Bolsover (Mr. Skinner) on consultations with the National Coal Board and the National Union of Mineworkers.. Is the right hon. Gentleman aware that the manner in which the Government are conducting the Social Securtiy (No. 2) Bill removes the chance for proper consultation? Indeed, the Secretary of State for Social Services has refused to see any outside body, including the TUC, until consideration of the Bill in Committee has been completed. I think that this is unique in our parliamentary history.
Mr. St. John-Stevas: I obviously treat with great attention anything that the right hon. Gentleman says on this subject. However, I do not think that he is quite right in saying that consultations cannot take place, or that my right hon. Friend has excluded them. I was in Committee. I heard what he said. When hon. Gentlemen were not speaking I was able to listen to one or two other people. As I understood it, my right hon. Friend said that he could not see them all directly, but he did not exclude seeing them. He hoped to fit them in, as he could, in his busy schedule.

IRANIAN EMBASSY, LONDON
The Secretary of State for the Home Department (Mr. William Whitelaw): Mr. Speaker, I will, with permission, make a further statement about the events at the Iranian embassy. I undertook yesterday to keep the House informed of developments and it may be convenient if I summarise what has happened so far.
As right hon. and hon. Members will know, yesterday morning at about 11.30 three armed men forced their way into the Iranian embassy at Princes Gate, Knightsbridge. A police constable who was on duty at the embassy was forced inside at gunpoint as a hostage. Two people who work for the BBC were in the embassy at the time and they, too, were taken hostage, together with a locally engaged member of staff and some of the Iranians who work there. In all about 20 people are being held. One woman hostage, an Iranian, was released yesterday and one British hostage was released this morning. Despite reports of injuries to the hostages, I understand that no one has been seriously injured. The terrorists said this morning that the British hostages would not be harmed.
Since the incident first occurred the building has been surrounded by the police, who have cordoned off the area. They have maintained communication with the terrorists and their aim, as in all such cases, is, if it all possible, to bring this incident to a peaceful conclusion without loss of life.
The terrorists have identified themselves as Iranians. They claim to belong to a dissident organisation calling itself " The Group of the Martyr ". They have addressed certain demands to the Government of Iran, including the freeing of 91 people currently imprisoned there. They have also asked the Iranian Government to recognise the rights of the Iranian peoples.
I am naturally keeping in continuous contact with the direction of events by the police. I had a discussion a short time ago with the Commissioner of Police of the Metropolis. I will continue to keep the House informed of developments.
Mr. Merlyn Rees: Is the Home Secretary aware that we understand that for

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24 hours he will have been in constant involvement in this incident through his overall operational control, that we understand his absence from Question Time, and that we appreciate his statement, limited as it has to be, today? Hon. Members on both sides of the House wish him and the Commissioner well in this difficult, developing situation.
In view of the discussions that are taking place within the embassy—we all realise the difficulties of that—the less said the better at this stage. However, in view of what the media reported about a direct contact from the Iranian Government, I wonder what that is. May not it be salutary for the Iranian Government to realise that we take seriously the need to protect those in diplomatic missions?
There are a number of questions on the law and other matters that I feel inclined to ask, but I shall not do so. I believe that it is best to leave the questioning until later on.
Mr. Whitelaw: I am naturally grateful to the right hon. Gentleman for what he said. I apologise to the House for not having been here at Question Time, but I thought that my duty lay elsewhere at that time. I hope that the House appreciates it.
On the problem of saying very little at this stage, again I am grateful to the right hon. Gentleman. It is so easy for anyone to say something which could make the task of the police, in their negotiations, more difficult. I am sure that everyone in the House appreciates that point.
As to the messages to the Iranian Government, our ambassador in Tehran has been in touch with the Foreign Minister of the Iranian Government, who is out of Iran at the moment. My right hon. Friend the Prime Minister sent a message to the President of Iran, making clear our determination to deal with this matter and to bring the trouble to an end without loss of life.
Several Hon. Members rose—
Mr. Speaker: Order. It may be the will of the House that we move on at this stage.

BRITISH STEEL CORPORATION (CHAIRMAN)
The Secretary of State for Industry (Sir Keith Joseph): Sir Charles Villiers, whose term of office ends in September, has tackled the difficult task of adapting the BSC to changing market conditions with energy and dedication. I am glad to pay tribute to his work and to express our appreciation of it. As his successor I have appointed Mr. Ian MacGregor. He will tomorrow join the BSC board as a part-time deputy chairman. Sir Charles Villiers and I are agreed that, now that a successor has been appointed, it would be best if he were to take on the job as chairman with the minimum of delay. Mr. MacGregor will therefore become chairman on a full-time basis on 1 July.
Mr. MacGregor was born in Scotland but has spent most of his working life in America, where he has had an outstandingly successful business career. He was chief executive of AMAX, the metals and natural resources company, from 1966 to 1977, and remains on that board. He has many other appointments, including deputy chairman of BL, director of the LTV Corporation, a large steel producer, and a partnership in Lazard Freres and Co., a New York-based investment bank.
In Mr. MacGregor I believe that we have found a man with the qualities needed to lead the BSC out of its present difficulties. Mr. MacGregor's personal salary will be paid by the BSC at the appropriate rate, based on the recommendations of the Review Body on Top Salaries—currently £48,500 a year.
Mr. MacGregor has commitments as a senior partner in Lazard Freres, but his partners have agreed to release him in return for certain financial conditions. These conditions comprise two elements: the first is a payment to Lazard Freres of £675,000—[Interruption.]—for the three years of the appointment, two-thirds of which will be returnable pro rata if he completes less than three years; the second involves payments, again to Lazard Freres in the range of nil to £1,150,000, linked to the performance of the BSC under Mr. MacGregor's chairmanship. [Interruption.]
Mr. Speaker: Order.
Sir K. Joseph: These performance payments would be made in 1984 and 1985.
Mr. Barry Jones: Is the right hon. Gentleman well?
Mr. Speaker: Order. I suggest that the House now listens to the statement from the Minister.
Sir K. Joseph: These performance payments would be made in 1984 and 1985 and would be related to certain performance criteria to be agreed between the Department of Industry and Lazards. The level of the performance payments will be assessed by a performance review committee, comprising two persons nominated by me—[Interruption.]
Mr. Speaker: Order. Opportunities for questioning will follow. We must hear the statement.
Sir K. Joseph: The level of the performance payments will be assessed by a performance review committee, comprising two persons nominated by me and two persons by Lazards, with an independent chairman acceptable to both.
During the period of his appointment, Mr. MacGregor will cease to be an active partner in Lazard Freres—[Interruption.]
Mr. Speaker: Order. Hon. Members must be fair. I think that the Minister should be heard out, and then we can have some questions.
Sir K. Joseph: He will cease to be an active partner in Lazard Freres but will become a limited partner with a reduced interest in the firm. On taking the post of chairman of the BSC he will relinquish most of his current directorships, including that of BL, but I have agreed that he should continue his longstanding links with AMAX.
I should make it clear that the payments to Lazard Freres that I have described are not for payment in whole or in part to Mr. MacGregor, except in so far as they contribute to Lazard Freres' profits, in which he retains a small share. Their purpose is to compensate Lazard Freres for losing the business services of Mr. MacGregor. I should also emphasise that they are substantially conditional on his serving for the full three years and achieving results.
We have been prepared to secure the release of Mr. MacGregor because the
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willingness of a man of his calibre to be chairman of the BSC reflects our belief that the current problems can be solved and that the corporation can be restored to profitability as an efficient producer of steel and become a secure employer. For the Government to set financial targets is not enough; we must also seek to appoint people capable of achieving those targets. In appointing Mr. MacGregor, that is what I believe that I have done, and I am sure that the whole House will wish him success in his difficult task at the BSC.
Mr. John Silkin: Regardless of the suitability of Mr. Ian MacGregor for this post—on that, no doubt, we shall suspend judgment until the time comes—is this not the most staggering statement that this House has heard in a long time? What the Secretary of State is talking about is a transfer fee, which, when we work out the reward that goes to Mr. MacGregor himself, comes to very nearly £2 million. Does the Secretary of State envisage a signing ceremony? If so, on which pitch will it be—Shotton, Corby or half of Llanwern?
Is it not a fact that Mr. MacGregor will be serving—the Secretary of State hopes—until his seventieth birthday; which is five years after the age at which all steel workers finish their term of contract; and that he will be offered this sum of money, as will Lazard Freres, at a time when the steel workers still remember the offer of 2 per cent. because, according to the Secretary of State, the industry could not afford more?
First, can the Secretary of State tell us on what authority this payment is to be made and on what Vote it is to come? Second, can he tell us in general terms—since I gather they have to be worked out—what are the performance criteria on which so large a sum is to be given to these American bankers at the Secretary of State's behest? Is the sum to be given, for example, for improving industrial relations? If so, the statement of Mr. MacGregor, reported in a newspaper this morning, that he reckons that he can take on Mr. Bill Sirs, is not the most promising way of establishing industrial relations. Is it for the improved production of steel? If so, when we are told that steel production is going down—perhaps to 12 million or 13 million tonnes—the loss of steel may be the criterion. Is it for

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our export markets in steel, at a time when imports are coming in at an alarming rate?
Finally, does the Secretary of State understand that this is so important a matter, not only for the Opposition but for the whole House, that we shall expect an early debate on it, in which the Secretary of State will make the matter clear?
Sir K. Joseph: I should have thought that it was common ground that the chairmanship of the BSC is an extremely important and responsible job. If the new chairman succeeds, with the help of all those concerned, in converting the present situation into a successful one, any payment that is made on his account—not necessarily to him—will be very good value for the country and for all those who work in the steel industry or use its products.
Mr. MacGregor is a man of proven performance. He is subject to a partnership agreement and it was up to his partners to decide whether they would release him. They have released him on the conditions that I have explained. It is, as the right hon. Gentleman said in the only valid comment that he made, a transfer fee, and perhaps the bigger the transfer fee the better the player. The bulk of the money to be paid will be paid depending upon performance. It will not, except for the salary that I have announced, go to Mr. MacGregor himself, except for his share as a limited partner in the profits of the partnership. The cost of the transfer payment will not fall on the BSC; it will fall on my Department, or on the Exchequer.
Mr. Skinner: It will fall on the British taxpayer. The Government do not have any money.
Sir K. Joseph: It will certainly fall on the taxpayer, but the transfer fee is paid only—[Interruption.]
Mr. Speaker: I remind the House about interruptions from a sedentary position. It is a long time since I said it, but it remains valid. They are grossly unparliamentary when they are persisted in—[Interruption.] The hon. Member for Bolsover (Mr. Skinner) really must harken to what I say.
Mr. Skinner: I am doing so.
Mr. Speaker: I have no wish to quarrel with the hon. Gentleman, but he must behave himself.
Sir K. Joseph: I repeat to the House that the bulk of the transfer package—that is, all except the £225,000—will be paid by the taxpayer only according to performance.
I was asked finally what will be the ingredients of the performance criteria. [Interruption.] The workers in the industry stand to benefit enormously by having an effective and successful chairman.
The performance criteria still have to be defined. They will include not only the financial performance but such other matters as the strength of management, the stability of industrial relations, success in the export market, and productivity.
Mr. John Silkin: The Secretary of State did not answer a number of questions that I asked him. First, what is his authority for payment; secondly, are we to have a debate; and thirdly, does he really believe that industrial relations are going to be improved by a man whose first statement is that he is going to take on the trade union leader with whom he will have to work?
Sir K. Joseph: The authority is the agreement of my colleagues, within action that is within our power; a debate is up to the usual channels; the man about whom we are talking was appointed by the previous Government as deputy chairman of British Leyland, and I am sure that the remark that the right hon. Gentleman quoted is taken totally out of context of Mr. MacGregor's character or views.
Mr. David Steel: Is it not a thousand pities that the appointment of a man of Mr. MacGregor's abilities should be clouded by the farcical nature of the arrangements surrounding it, including the setting up of a mini-committee to decide precisely what those arrangements are? Has the right hon. Gentleman stopped to think what will be the effect of arrangements of this kind on the climate of pay negotiations?
Sir K. Joseph: I should have thought that the House would appreciate the importance of getting the best man for

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this job. All that has not been agreed is the criteria by which any payment by the taxpayer for performance will be judged. The taxpayer's money is not to be used except to the limited extent that I have stated—as justified by performance.
Mr. Aitken: Is my right hon. Friend aware that, however excellent may be the qualities of Mr. MacGregor, the Gilbert and Sullivan complexity of the deal with Lazard is so open to misunderstanding and ridicule that many of us on the Government Benches will have the greatest possible difficulty in supporting him?
Sir K. Joseph: I am disappointed that my hon. Friend should take that view. He cannot doubt that, where there is an obligation by the man concerned—as there is in this case because he is subject to a partnership agreement—if he wants to leave, his partners can impose conditions. I have judged that this is the best man available for a vital national task and the transfer fee seems to me to be totally justifiable.
Mr. Jay: Is there any precedent for this extraordinary arrangement, and was it approved by the Cabinet and the Prime Minister as well as by the right hon. Gentleman?
Sir K. Joseph: There is no precedent to my knowledge in this country, but it is normal in America for rewards according to performance to be paid to executives. In America they have option shares. There is no need for a committee to judge performance, because performance is judged by the level of the shares on the market, according to which the executive concerned will, if it seems justified, gain an advantage.
Sir Anthony Meyer: My right hon. Friend will know—and his right hon. Friend the Prime Minister will know still better—that I am no uncritical supporter of his. Does my right hon. Friend accept that if Mr. MacGregor can achieve the kind of results for British Steel that Mr. Edwardes has achieved for British Leyland he will be cheap at the price—indeed, cheaper at a much higher price, and that the price in any case by comparison with what is paid in football transfer fees is not excessive? Will my right hon. Friend
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also confirm that when Mr. MacGregor takes office he will be at liberty to put forward plans for a reduction in the rate of the phasing out of the capacity of British Steel, provided that those plans in the long term result in no greater cost to the taxpayer?
Sir K. Joseph: My hon. Friend has made extremely sensible and justifiable comments. As for his last question, it will be for Mr. MacGregor to form his own judgment and make proposals, and I shall hope to hear from him in due course.
Mr. John Silkin: The right hon. Gentleman did not answer the question put by my right hon. Friend the Member for Battersea, North (Mr. Jay). In view of the totally unprecedented nature of this transaction, did it have the knowledge and support of the Cabinet and the Prime Minister personally?
Sir K. Joseph: The right hon. Gentleman knows very well that details of such matters are not revealed in the House. This is the Government's policy, and I am announcing it.
Mr. Emery: Will my right hon. Friend assure the House that no British-oriented senior executive manager could be attracted to undertake this task who would be willing to do so as a service to the country? Is not the problem that so much abuse is poured on the chairmen of nationalised industries by the press and the public, and the chairmen of nationalised industries are so concerned about Government interference, that many senior executives feel that they cannot undertake this task? How can that underlying problem be corrected?
Sir K. Joseph: My hon. Friend has put his finger on a real problem. The salaries recommended by the Review Body on Top Salaries bear very little relation to some salaries in the world market. I repeat that Mr. MacGregor is taking on this job at the salary which his predecessor, the present chairman, gets. The only additional benefit is a share as a limited partner in the profit of the partnership, which is hypothetical and cannot be known by us or predicted. I have been involved in the search for a new chairman for the BSC when Sir Charles Villiers should come to the end of his tenure for

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nine or 10 months. A couple of score of names have been considered, several of them very seriously. One or two people active in British industry who would have been highly suitable in the event found it impossible or wrong in their judgment to extricate themselves from their present responsibilities. In the event, this is the best man available, and I judge it to be greatly in the interests of the BSC and all those concerned with it that he has accepted this responsible task.
Mr. Barry Jones: Does the right hon. Gentleman realise that it appears to Members on the Labour Benches that the Prime Minister has heard this statement for the first time now?
Sir K. Joseph: I must leave such guesses made by hon. Members to themselves. It is not for me to discuss the processes by which a decision like this is reached.
Mr. Eggar: Is my right hon. Friend aware that we are fortunate in getting the services of Mr. MacGregor, as under his chairmanship AMAX grew faster than any other American metals corporation? Will he comment on whether it was open to Mr. MacGregor to retire from his partnership with Lazard Freres and, if so, whether Mr. MacGregor was willing to retire?
Sir K. Joseph: I acknowledge the validity of my hon. Friend's first comment. The question about Mr. MacGregor's freedom, subject to the partnership agreement, is for him. All I know is that the decision by him involved the agreement of Lazard Freres.
Mr. Grimond: Is the Minister aware that this extraordinary arrangement will have a devastating effect on what is supposed to be the Government's policy of restraining wage demands? It is one rule for the rich and one for the poor. Why should Lazard Freres be rewarded to the tune of £1,150,000 if Mr. MacGregor does well for the Steel Corporation? What object is there in that? If he does badly, will Lazard Freres pay up? Is a man who is almost as old as I am likely to make a success of the Steel Corporation, which is an unmanageable business? Will he remain a paid director of Lazard?
Sir K. Joseph: I forget the first point—I remember it now—a bad example for the pay of other people. Surely the right hon. Gentleman understands that unless the management is the best available, the interests of the workers are sacrificed. In allowing Mr. MacGregor to leave in breach of his partnership agreement, Lazard is sacrificing the earnings that this highly active man has been bringing to the company since he has been with it. He has been a prolific profit earner for the company. That is why the figures have been set as they have. However, the bulk is payable only according to performance. As to AMAX, yes. I have agreed that Mr. MacGregor may keep a fee from AMAX.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call three hon. Members from each side.
Mr. Eldon Griffiths: As the British Steel Corporation has to operate in an international environment, will my right hon. Friend accept that many of us understand the need to offer internationally competitive remuneration to anyone who takes on a job of that size?
Lest I have misunderstood one point, I wonder whether my right hon. Friend could say whether Lazard Freres, in the course of the performance review, is to participate in profits made by the British Steel Corporation.
Sir K. Joseph: No participation is envisaged for Lazard Freres in the profits that we hope will be made by the British Steel Corporation.
Mr. David Watkins: May I press the right hon. Gentleman on the point raised by the hon. Member for Flint, West (Sir A. Meyer)? Will the criteria of performance of this immensely expensive new chairman, appointed in this Gilbertian situation, include his willingness to reconsider the proposals to shut down one-third of the steel industry, including highly profitable and viable plants like that at Consett?
Sir K. Joseph: He will make his own assessment of the situation, but in the meanwhile the plans that have been proposed by the BSC, to the extent that they are ready for fulfilment, will go ahead.
Mr. Adley: I recognise the right of companies in the private sector to do

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what they feel is right, but does my right hon. Friend agree that in the public sector, and particularly in a company such as the British Steel Corporation, which has been subjected to almost intolerable strains, one of the criteria in appointing a new chairman should be that he is a man whose appointment, both in its circumstances and in his person, can heal the harm done to that corporation? Does my right hon. Friend feel that the arrangement with Lazards can possibly be beneficial in bringing about a harmonious relationship? Would it not, in fact, have been better if the NEB had bought Lazard Freres and Mr. MacGregor with it?
Sir K. Joseph: What matters is that British Steel should get the best chairman that we can find. I believe that that has been achieved.
Mr. Homewood: Is the Minister aware that, following the 13-week strike and in view of the closures affected and projected, industrial relations in the steel industry are at an all-time low and that his monstrous announcement this afternoon will make matters much worse? If the Government intend to steamroller this appointment through the House, will he at least give us an undertaking—to give Mr. MacGregor a chance—that he will institute an inquiry into the BSC before this gentleman takes over?
Sir K. Joseph: I do not at all have the impression that moral in the BSC is at its lowest. I believe that many steel workers will welcome the importance that the Government attach to getting the best man available in the world to carry out the vital task of putting the industry back on its feet.
Mr. Kenneth Lewis: If my right hon. Friend believes, as I am sure he does, that Mr. MacGregor is twice as good as anyone else available and that therefore the British Steel Corporation needs him and the Government need him to run the corporation, would it really not have been better if he had taken on Mr. MacGregor on a half-time basis? In that way, he would still have got a good man and this would have allowed him to keep his other appointments. Are we not reaching a position in which we do not appoint people to run nationalised industries in conjunction with other appointments, simply because it is customary not to do
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so? Is it not time we looked at this? There are plenty of people in the free enterprise sector who have more than one half-time appointment.
Sir K. Joseph: I repeat that Mr. MacGregor is taking on this responsibility for the salary that the present chairman is getting. I do not think that it would have been better to try to get him on a half-time basis.
Mr. Maclennan: Does the Secretary of State recall that when a distinguished Conservative predecessor—Disraeli— sought to acquire an expensive foreign asset for this country—the Suez Canal—he went to the merchant bankers—the Rothschilds—to raise the money, and did not seek to pay them for this help? Does he recognise that despite the farcical nature of his announcement today, the judgment that will be made must depend on the track record of that distinguished international business man, who has proved so successful in all that he has turned his hand to and whose success was recognised by the previous Labour Government in appointing him to the post that he held at British Leyland? Does he recognise that by the manner of his announcement today he has made the task of the new chairman very much more difficult?
Sir K. Joseph: I welcome the tribute of the hon. Gentleman to the performance of this remarkably effective business man, Mr. MacGregor. I do not accept his appraisal of what I have done. I think the House would have been critical if I had gone to the private sector and, by some means of persuasion, obtained the money from it.
Mr. Foot: Turning to the question already put by my right hon. Friend about the possibility of a debate, will the right hon. Gentleman urge upon his right hon. Friend the Leader of the House that he should make a statement to the House tomorrow about the possibility of a rearrangement of business next week, so that the opinion that has been expressed by all sides of the House on this matter can be debated at a very early stage?
Sir K. Joseph: I think that my right hon. Friend the Leader of the House will have heard what the right hon. Gentleman said. The right hon. Gentleman, I believe, is not considering adequately the interests of the steel workers.

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It is not sensible to chew over this decision of the Government. Let Mr. MacGregor go into action and have his opportunity.
Mr. Foot: When the right hon. Gentleman says that he does not think that I am considering the interests of the steel workers, will he bear in mind that I am considering not only their interests but those of the management and people who work in that industry, and that I and many of my people who have been associated with the steel industry regard both the manner of his announcement and the way in which he has acted as an insult not only to the people who work in the industry but to all the management in the industry. There are plenty of people in the industry who could have done this job without all the farcical bribery that the right hon. Gentleman has introduced.
Sir K. Joseph: The efforts made by the previous Government to find chairmen of nationalised industries are not within my knowledge—
Mr. Skinner: He would have got a Labour Member.
Sir K. Joseph: Yes, he might have got a Labour Member. We are seeking a chairman who will rescue this industry and those who depend on it, and I do not think it makes sense to forget the reality that the better the chairman, the better the management, the men and the users of the British steel industry will be served.

STANDING ORDER No. 9
Mr. Campbell-Savours: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, in order to—
Mr. Speaker: Order. I thought that the hon. Gentleman was going to raise the point of order about the Prime Minister's question. I want to explain to him—and I might as well explain to the House—that I cannot take an application under Standing Order No. 9 because the Prime Minister's answer, as the House knows, was a blocking answer, inasmuch as it prevents further questions being tabled on this subject for at least three months. I have already ruled privately to one hon. Member who wrote to me on this matter.
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It will, therefore, be out of order for supplementary questions that would not be in order for the Order Paper to be put on this question to the Prime Minister or, indeed, to any other Minister concerning movements in such bases.
Mr. Campbell-Savours: Inasmuch as the right hon. Lady took the opportunity to reply to my question, despite the nature of the reply, surely that in itself, as it came after noon today, would give me the right to raise this application under Standing Order No. 9?
Mr. Speaker: I am afraid that nothing new came up from the exchange of questions. The blocking therefore stands for three months, and I shall have to rule out of order even supplementary questions on that issue which would otherwise be in order within the rules of the House, which the House expects me to safeguard.
Mr. Campbell-Savours: It seems to me, Mr. Speaker, that for an item of national importance to be removed from the Chamber by a deliberate blocking mechanism used by the Secretary of State and the Prime Minister is clearly against the national interest. I believe that the Government should make a statement about what happened in respect of the use of the facilities at Diego Garcia.
Mr. Speaker: I understand the hon. Gentleman's feelings, but I am here to see that our rules are adhered to.

SECRETARY OF STATE FOR INDUSTRY (STATEMENT)
Mr. English: I must apologise, Mr. Speaker, for not giving you notice of this point of order. I think you will understand why when I mention what it is.
I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
" the statement made by the Secretary of State for Industry ".
The particular point that must be brought to the attention of the public is that, in answer to a question from my right. hon. Friend, the Member for Deptford (Mr. Silkin) about his authority, he replied, in effect, that he had no legal authority; he said that he had the authority of himself

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and of his fellow Ministers. That is not legal authority. Legal authority to pay money must be by statute, by warrant of two Treasury Ministers and by the approval of the Comptroller and Auditor General.
No legal authority was quoted in answer to my right hon. Friend's question. The Secretary of State used the words " authority " to mean " executive will" which is not the same thing. Many cases in English constitutional law prove that.
I think, therefore, that there is a matter of far greater importance than the particular issue, and that, in all conscience, is sufficient. But if the proposal to spend public money is unlawful the law must be changed. There is no proposal to introduce a Bill to do so. If it is lawful, the Secretary of State clearly does not know what law empowers him to do it.
The particular point, Mr. Speaker, not to mention the other issues involved, which have already been gone into, must be discussed as soon as possible by the House. I therefore seek your authority for that to happen. However, since I have not given you notice of my application I do not suggest that you will wish to answer it at once.
Mr. Speaker: The hon. Member asks 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,
" the statement made by the Secretary of State for Industry this afternoon ".
I listened with care to the exchanges and to the references to conversations between the usual channels on this question. Without giving my reasons to the House I must rule that the hon. Gentleman's submission does not come within the provisions of the Standing Order and that I therefore cannot submit his application to the House. I have noted the reference to conversations that have been held.

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

  PUBLIC ACCOUNTS
  Mr. Andrew Faulds: Further to the point of order, Mr. Speaker—
  Mr. Speaker: Order. I will call the hon. Gentleman to make his point of order, but that will be a little untidy because I had already called the Clerk to read the Orders of the Day. I did not notice the hon. Gentleman rising to speak. I shall, as an exception, take the point of order so that the hon. Gentleman should not feel any sense of lack of fair play.
  Mr. Faulds: Since I can pursue the matter with you privately, Mr. Speaker, I will hold my peace on this occasion because, as you said, I rose after the Clerk had read the Orders of the Day.
  Mr. Speaker: I am much obliged to the hon. Gentleman.
  4.41 pm
  Mr. Joel Barnett: I beg to move
  " That this House takes note of the First, Second, Third, Fourth, Fifth and Sixth Reports, and the First and Second Special Reports from the Committee of Public Accounts in the last Session of Parliament, and of the First, Second, Third and Fourth Reports from the Committee of Public Accounts in this Session of Parliament, and of the Treasury Minutes, and the Northern Ireland Department of Finance Memorandum on those Reports [Com-ands. 7631, 7788, 7787, 7824 and 7882], and of the Fifth, Sixth, Seventh and Tenth Reports from the Committee of Public Accounts in this Session of Parliament."
  I begin by expressing my appreciation of the great honour that was done to me in my election as Chairman of the Public Accounts Committee. I am most conscious of the influential position of the Committee and its Chairman. It has always had a very influential position under a whole series of distinguished Chairmen over more than 100 years. I therefore greatly appreciate the honour that has been done to me in my election to the post.
  As a former Chief Secretary to the Treasury, I know that it might have been

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  thought that there would be some conflict between the position of Chairman of the PAC and that of Chief Secretary—a sort of gamekeeper turned poacher. In practice, I see nothing of the sort. That thought could be anything but the truth, because I see both tasks as being similar. Both are concerned with ensuring that we get value for money and effective spending of public funds. I certainly therefore see no conflict between the two posts. Indeed, I hope and believe that my experience as Chief Secretary will not be unhelpful to me in my post as Chairman of the PAC.
  I have a feeling that when the witnesses have come before the Committee and have been subject to my questioning, they have been not unaware of my former position or of a little of the knowledge that I have had in putting those questions to them.
  The chairmanship is a demanding task, and I can promise only to do my best and to follow the excellent example of my predecessors. At this stage, I should like to pay tributes, and I start with one to my immediate predecessor, the right hon. Member for Taunton (Mr. du Cann), who did a first class job, as everyone who knows anything about the matter will be aware. He will be a very difficult Chairman to follow. I hope that it will be understood if I do not attempt to emulate his style—I shall have to follow my own inimitable style in these matters—but I should like to try to emulate his success in the manner in which he chaired the Committee. I know that all members of the Committee appreciated the excellent job that he did.
  I also pay tribute to the Committee members on both sides who equally do an excellent job in coping with the Committee's work. I thank them publicly for their help and support, particularly in the early period of my chairmanship, and I know from my experience of them that that will continue. I take this opportunity also of paying a personal tribute to the work of the Comptroller and Auditor General, Sir Douglas Henley, and the Northern Ireland Comptroller and Auditor General, Mr. Sythes, and their staffs. They do a first class job throughout the year, and have done for many years. They greatly deserve any tribute that I can pay to them.
  That applies, too—and I am sure that my predecessor will agree—in respect of
  1646
  my Clerk, Mrs. Irwin, and her very small staff. The manner in which she serves the Committee and the public at large is one for which we on the Committee are very grateful. I pay a final tribute to the witnesses, who do not have an easy task in coming before the Committee. I include among them Mr. Carey from the Treasury, who is always there as a witness. He has equally been excellent in his service to the Committee.
  The main work of the PAC and of the Comptroller and Auditor General who reports to it is set out in the new document issued recently by the Government on " The role of the Comptroller and Auditor General", Cmnd. 7845. On page 7 we are told that their work covers a financial and regulatory audit, a value for money audit and an effectiveness audit.
  Mr. Michael English: My right hon. Friend will of course be aware that that Green Paper is inaccurate in that it mentions the audit functions of the Comptroller and Auditor General but omits his functions as comptroller. For example, he is the person who has to authorise the expenditure of Government money such as we were discussing a moment ago.
  Mr. Barnett: I am happy to say that I am not responsible for that document. I look forward with great interest to the reply of the Financial Secretary on the point in question. As far as I am concerned, it is a Green Paper—a consultative document—on which my hon. Friend the Member for Nottingham, West (Mr. English) will have the opportunity to comment. If an occasional dot and comma in it are incorrect, I would personally not take too much objection to that.
  Mr. English: It is more than a dot and comma.
  Mr. Barnett: Well, I do not object even if it goes a little further. I do not wish to pursue the matter with my hon. Friend because, although this is a fairly quiet debate, it is an important one and we have large numbers of reports to comment upon. I shall make one or two comments later on the document to which my hon. Friend referred.
  May I comment at this point on the general control by the House of Commons

  1647
  of the very large sums of public expenditure with which we have to deal? I have never doubted, whether I have been in Government or out, that control of public expenditure by the House of Commons is wholly inadequate. I doubt whether any hon. Member would argue that the way in which we control these huge sums of money is adequate. We all know that Estimates for billions of pounds still go through on the nod, in spite of the many excellent reforms we have had. The control will therefore remain inadequate for as long as that situation applies.
  I had the privilege, as Chief Secretary, of introducing the assimilation of cash limits and Estimates. That was a useful move.
  On 9 January 1978, the hon. Gentleman who is now Financial Secretary said:
  " There is little point in implementing this great merger only to allow the new-style Estimates through on the nod just like the old ones."
  I agree entirely. The PAC recognised the problem that exists where there is no rigid or formal incomes policy. The hon. Gentleman went on to say:
  " The Expenditure Committee was absolutely right to say in its recent report on the Civil Service that ' effective cash limits should be fixed before pay negotiations are entered into.' I stress the word ' before'."—[Official Report, 9 January 1978; Vol. 91, c. 1342–5.]
  The PAC had a further look at the problem this Session, which is dealt with in the fourth report on Civil Service pay estimates. The Treasury and the Civil Service Department claimed that they could not provide, in the 1980–81 main Estimates for each Government Department, any provision for pay increases for non-industrial civil servants which could be negotiated in February-March 1980 to take effect from 1 April. They sought the views of the PAC, the Treasury and the Civil Service Committee on a proposal to provide one lump-sum Estimate for those pay increases and for increases for industrial civil servants, which could be assessed in February 1980 when the results of the Pay Research Unit investigation were known. That lump sum would be redistributed to individual Departments' Votes by means of revised Estimates before the Appropriation Act was passed,
  1648
  when the new pay scales had been determined after negotiation with the unions.
  The PAC recognised the practical difficulties, but considered that parliamentary control had overriding importance. I hope that the hon. Gentleman agrees. In future years, if not for 1980–81, full provision should be made in each Department's main Estimate on the basis of the Government's considered judgment of the amount available. My Committee felt that it would be a retrograde step to revert to the earlier arrangement of making no Estimate provision for expected price and pay increases. That appears to be in line with the hon. Gentleman's remarks, which I quoted. I hope that he can therefore assure us on the matter.
  I turn briefly to comment on some of the other reports, although I cannot comment on everything contained in them. The programme of the 1978–79 Public Accounts Committee was cut short by the Dissolution. That Committee submitted eight reports to the House which have not been debated. In the motion, they are referred to as the first to the sixth reports and two special reports. The right hon. Member for Taunton hopes to participate in the debate, so I shall refrain from commenting on those reports and leave it to the right hon. Gentleman.
  Our 1979–80 Committee only started in July 1979. We have already published seven reports, plus one on excess Votes, and five more have been approved and are at the printers. I hope that we shall have them before too long. I shall comment briefly on a few items in the first seven reports. I wish to relate my comments to the wider issue of the role of the Comptroller and Auditor General and the Public Accounts Committee and the political and policy conflicts that may arise from the work of a Committee which is essentially a non-Party Committee—a necessary requirement if its work is to be effective.
  The right hon. Member for Taunton once said that if the Government decide to build greenhouses on the moon, they are entitled to do so. The PAC can only ensure that the Government build them effectively and get value for money. That is an amusing way to define the issue, but I do not entirely agree with the definition. The work of the Public

  1649
  Accounts Committee and the Comptroller and Auditor General is bound to impinge on policy. That cannot be avoided, especially if the PAC goes into the whole question of control of public expenditure. The PAC may come to the conclusion that it would be preferable to build those greenhouses either in Taunton or in Heywood and Royton, which would be an essential difference in policy. There are other issues where the Committee is bound to become involved in policy if it is concerned, as it should be, with value for money and the use of public money.
  In our first report this year we deal with EEC agricultural problems. Whatever one's views about EEC agricultural policy, while it exists we have what is referred to in paragraph 8 as the EEC farm and horticultural development scheme. The PAC wishes to prevent large numbers of farmers from being wrongly admitted to the scheme. That is an example of a matter on which there is no party-political conflict. It is straightforward. The PAC wants to ensure that such expenditure is properly administered and that those who are not eligible under the scheme are not admitted.
  That same report deals with the Polish shipbuilding order, where clearly there are major political differences of opinion, as illustrated by a Conservative Member during Question Time the other day. However, we are an all-party Committee, and we should remain as non-party political as we can. In paragraph 84, we state that we accept that the Government needed to take the circumstances of the United Kingdom industry in 1977 into account in accepting the first Polish shipbuilding order. They rejected the second. Some people believe that even that first order should not have been taken because it was not cost-effective. The PAC was pleased that the Government did not proceed to a second order. Another view is taken by those representing shipbuilding areas or who are concerned about unemployment in their constituencies. They would be willing to take even the second order, regardless of price. The Public Accounts Committee has to try to avoid the most direct forms of party-political intervention in order to make the Committee more effective.
  1650
  The matter would have become highly controversial had the Government decided to take the second order, despite the high cost. What should the PAC have done? It would have commented only on the narrow value for money issue and the effectiveness with which the order was carried out. The PAC is bound to consider that in the wider context. I do not see how it can avoid doing so. It must consider that question and many others and ask whether the cost will be £20,000 a job or £40,000 a job. For example, in some recent evidence in a Northern Ireland case we found that there was substantial cost in a shipbuilding order. In such cases not only is there a high cost per job, but the jobs are temporary, anyway. Clearly, that is a factor that the PAC must look at, particularly if it gets involved in a wider context. It will have to examine closely the cost-effectiveness of public spending.
  The work of the PAC is very difficult and delicate. Inevitably, it impinges on social and political policies and the consequences of a particular piece of expenditure. In an all-party Committee where members will have widely-differing views on these and other issues, it is clearly very difficult to get a balance. I shall certainly try to ensure that we negotiate that path without becoming too overtly party political. However, this is a tricky problem and, when we consider the Green Paper, we shall have to bear in mind the whole question of widening the scope of the work of the PAC and the Comptroller and Auditor General.
  I turn now to the second report, in which there are five matters relating to Northern Ireland. In the past there has been a sort of tradition that such matters are left to Northern Ireland Members to comment on. I hope that I shall be forgiven if I follow that tradition, although I make it quite clear that there are many very important issues raised there with implications stretching far wider than Northern Ireland. But, given the pressure of time, and the fact that we are considering 14 reports, I hope that I shall be forgiven for not commenting on all these matters.
  The third report exposes a different type of conflict. It concerns the off-shore supplies interest relief grants. Again, there are no political differences on this

  1651
  occasion. The grants were introduced under an Act of one Government in 1973, and continued by another Government. There was little disagreement between the two major political parties about the fact that the grants helped to obtain a considerable number of orders in the United Kingdom which might not otherwise have been obtained. On this occasion, the criticism was different. It was a question of what might be called a PAC-type issue of poor administration. The issue was overshadowed by unfortunate errors by the accounting officer who, throughout a long and distinguished career, has otherwise given fine service, not least to the PAC over many years.
  Nevertheless, I hope that the experience with the evidence given by that accounting officer on that occasion will not be lost on others who give evidence to the PAC. In fact, I would be very surprised if it was lost. I note that a Treasury minute assures us that every effort is being made to see that officials are fully briefed. I shall be interested to hear whether anything new has emanated from the Treasury to other accounting officers in this respect.
  The real conflict in this case was different. It exposed the importance, on the one hand, of keeping the rules laid down by the Treasury for the disbursement of large sums of public money and, on the other hand, of not totally destroying the initiative of civil servants. That is a very difficult balance. In this case, comparatively junior officials saw that the guidelines had to be exceeded on a time basis. Had they decided immediately to get authority to extend the time from three months to six months, there would have been no problem and they would not have been subjected to criticism. Instead, they decided on their own initiative to breach the guidelines. They thought that that was the sensible course. Perhaps it was, but there is still a very important issue at stake. On this occasion, it cost the public no money, but there could be other occasions on which such a breach could cost money. If those guidelines were not necessary, they would not have been laid down. If guidelines are laid down in conjunction with the Treasury and they are ignored by officials, clearly it is an important issue, but I would not want to see it resolved in such a way as to deaden the initiative of civil servants.
  1652
  A further serious concern that arose from that occasion was the question of internal audit. We found that the internal audit concerned in this case did not throw up what the Comptroller and Auditor General himself found later. Questions of internal audit are of paramount importance, not only in that Department but in many others. We recommend that there should be a review. We have had a note from the Treasury that the Department of Energy is considering again the resources that should be available for internal audit. I hope that the Financial Secretary will tell us more about that because I consider it to be a most important matter. Internal auditing should not be weakened by rightful concern about an excessive growth in staff. This is not an area which should be reduced in size because of the general need to curtail expenditure on the staff side. It is important that any Department should have the necessary resources to ensure a full and adequate internal audit system.
  Mr. John Bruce-Gardyne: I am very interested in what the right hon. Member says about the affair of the interest relief grants. He has conceded that the stretching of the guidelines was perfectly justified in this case. It worries me that the way in which this issue was treated and the publicity that it received will result in precisely what the right hon. Member expressed an anxiety about—a feeling throughout the administration that any degree of individual initiative is dangerous. I believe that the PAC should bear that consequence in mind.
  Mr. Barnett: With respect to the hon. Member, who is a distinguished journalist on a Sunday newspaper, I am not responsible for the way in which the press treats a piece of evidence. I regret anything that harms the desire of civil servants to take initiative in a proper way. But that does not mean that I can condone the breaching of properly laid down guidelines. That could well result in serious breaches occurring involving the unintended expenditure of substantial sums of money. That was not the case here. But it could happen on another occasion. Therefore, I do not think that the matter should be treated as such a minor issue as the hon. Member suggests. It is not a minor issue.
  Of necessity, I have to deal very briefly with many of the important matters raised

  1653
  in the various reports. Some matters I have not been able to deal with at all, but I know that a number of hon. Members will want to comment on them. The real trouble stems from the limited opportunities that we have in this House to debate reports from the PAC. The last debate that we had was in December 1978. We now have these 14 reports. If any hon. Member wished to speak on all of them—which he would be perfectly entitled to do—the Government would have to apply a guillotine. Otherwise, we would never reach other business.
  There is a serious problem, and I recognise that no Government could find enough time for us to debate all the reports of the Select Committees. Now that we have a considerable increase by the addition of the new Select Committees, the position will, inevitably, get worse. If it has taken as long as this to debate the reports of the most important Select Committee of the House, when on earth will we get round to debating the equally important reports from the other Select Committees? I do not blame the Government in this matter. Any Government would find it impossible to allocate enough time to debate Select Committee reports.
  I suggested in the Liaison Committee that a possible reform would be to have debates on Select Committee reports in the style of a Grand Committee debate. Not everyone will like that proposal. Many would prefer that the reports be debated on the Floor of the House. However, that choice may not be left to us. It will not be a choice between whether we debate the reports on the Floor of the House or in Grand Committee. It will be whether we debate them in Grand Committee or not at all.
  We all know that the likelihood is that report after report will come from the various Select Committees and will not be debated, or, if they are debated, it will be in a year or two. That is wholly unsatisfactory, and we must do something about it. I hope that serious consideration will be given to the issue. I do not suggest that my idea is necessarily the best; there may be better ones. I want to make it quite clear that I welcome reforms by way of new Select Committees. I am not sure that all present Ministers
  1654
  and their officials welcome them, and I can understand why they might not.
  The reforms which I hope will come as a result of the Government's Green Paper on the role of the Comptroller and Auditor General, and the possible reforms of the PAC, mean that there will be an increasing demand for time on the Floor of the House. I have thought about the matter, and I cannot see how as a House we shall find the time for such debates.
  It would be foolish of the Chairman of the Public Accounts Committee—and certainly for a former Chief Secretary to the Treasury—to say that he was satisfied with the control being exercised now through the PAC and the Comptroller and Auditor General. I am certainly not satisfied. Nobody can doubt that it would be possible to do better, though I imagine that Departments already feel that the PAC investigations are tough enough. In fairness to the Departments concerned, if any organisation, public or private, large or small, were to be subjected to a PAC-type investigation, there is no doubt that waste would probably be exposed to an even greater extent than is discovered during our investigation of Government Departments.
  When huge sums of money are spent, it is inevitable that there will be waste. Indeed, there is often waste when small sums of money are spent. There was waste in the public sector before Sir Derek Rayner appeared on the scene. There is waste now that he is on the scene, and there will be waste when he has left the scene. I do not say that cynically or to criticise his work. As far as I can see, he is doing a first-class job.
  Our problem as a House—certainly the problem we face as a Public Accounts Committee—is that cutting waste can sometimes have political connotations. Indeed, the Government found that with sub-postmasters, where, in order to eliminate or change a method of administering something in order to save money, there were party political or apolitical repercussions. In other words, we have learned—if we did not know it before—that one man's waste is another man's living.
  There is a problem in eliminating waste and making more cost-effective the spending of large sums of money. The

  1655
  problem arises when one attempts to do the job without incurring opposition on the grounds that decisions are party political.
  I have sympathy with anyone seeking to make savings in the administration of a particular scheme. If one can save £20 million, that money can then be made available for more important use. I am not opposed, therefore, to saving money on administration. The task of the PAC has always been to eliminate waste and to do so, as far as it can, without being party political. Wherever possible, we wish to see public expenditure made more cost-effective and efficient. We wish to get the best value for money.
  I know that there are some hon. Members—my hon. Friends among them—who think that cutting out waste and getting value for money is synonymous with cutting public expenditure. I had some experience of that activity, and I know that that was the way it was seen. That view, however, is wrong. It does not follow that cutting out waste and ensuring efficient administration of public expenditure inevitably means that public expenditure is cut.
  On the contrary, it can mean that money saved is spent more cost effectively in order to maintain a particular level of public expenditure. I therefore hope that those of my hon. Friends who from time to time expressed a modicum of disagreement with me when I was Chief Secretary to the Treasury will at least agree with me in recognising the need to eliminate waste and achieve the most efficient system of public administration.
  My hon. Friend the Member for Norwich, South (Mr. Garrett), who takes a great interest in these matters, cannot be here today, and he has asked me to apologise on his behalf. He is in his constituency at the local elections. I should like to have been at the elections in my own constituency. I know that my hon. Friend wishes the work of the Exchequer and Audit Department to go much wider than it does now. Let me make it clear that I agree with him.
  In the debate on 9 January 1978, my hon. Friend, talking about widening the scheme, said that he would like to have
  " professionally qualified as economists, accountants, analysts and engineers who evaluate and report on the objectives of expenditure
  1656
  programmes, the costs and benefits of programmes, the quality of management of programmes and possible alternatives."—[Official Report, 9 January 1978; Vol. 941, c. 1369.]
  That is a sizeable proposition, and we should not underestimate what it means. My hon. Friend was, of course, referring in this context to the work of the GAO in the United States, which is a wholly different organisation from our Exchequer and Audit Department. My hon. Friend usually combines his constructive views—whatever we feel about them, they are certainly expressed constructively—with a criticism of the Exchequer and Audit Department which I feel is unjustified. I agree with his desire to widen the scope of the work, but that desire for a new and extended role—if it was eventually provided for—is not a reason for critcising the valuable work being done by the Exchequer and Audit Department as currently devised.
  Misunderstanding of the Exchequer and Audit Department arises among many people when they compare the number of qualified accountants in the Department with the number of qualified accountants in a private firm. What is not generally understood is that in many of the large firms of accountants the people doing the nitty gritty work of detailed audit are not accountants at all. That work is the last thing in the world that qualified accountants would be doing. The people who do that work are usually articled clerks or unqualified audit clerks.
  In practice the work done by the Exchequer and Audit Department with—I am happy to say—a growing number of qualified staff can be done equally well by people without a specific qualification other than the qualification of a vast amount of experience on the job. Often it is not possible to do better than to have somebody with experience doing a job.
  Mr. English: I do not wish to enter into an argument about accountants, since my right hon. Friend is an accountant. However, he is a little unfair. My hon. Friend the Member for Norwich, South (Mr. Garrett) and I criticised the Comptroller and Auditor General's intake of staff before the present Comptroller and Auditor General was in post—before 1975—basically because we were making comparisons with the Civil Service which his staff audits. The Civil Service is headed by first-class or high second-class honours graduates. Before 1975, the Comptroller

  1657
  and Auditor General was not allowed to employ graduates or professionally qualified people. That was rather odd when their job was to audit the work of people more highly educated than they were.
  Mr. Barnett: I hope that I shall not offend too many fellow accountants if I say that the audit work done by the Comptroller and Auditor General's department and by private firms is frequently done just as well by people without first-class honours degrees as it is by those with them. The sooner we stop thinking that the job of an audit clerk, or any other job, depends upon a degree, the better. We should not regard the problem in that way. More and more, my profession is becoming a graduate's profession. I do not object to that and I do not object to graduates. However, the idea that a non-graduate is somehow inferior is unacceptable.
  I take the point made by my hon. Friend the Member for Nottingham, West (Mr. English). He implied that he is now much happier with the staffing of the Exchequer and Audit Department. I am sure that the Comptroller and Auditor General, Sir Douglas Henley, wants a steady improvement in the quality and quantity of his staff. There must be an improvement over the wole range if the scope of the Department is to be widened, as my hon. Friend the Member for Norwich, South suggests. I am sorry that he sometimes includes in his justifiable and constructive comments on the need for reform a blanket criticism of the work done by the Exchequer and Audit Department and its staff who, in my experience, do a first-class job.
  Nobody, least of all myself, pretends that the present position is even remotely perfect. I look forward to a substantial improvement in the roles of the Exchequer and Audit Department and of the Public Accounts Committee. I accept that we have an inadequate system of control over public funds, but I believe that the work of the PAC, under many distinguished predecessors, has given great service to the House. I shall try to continue that service. I hope that we shall produce a report on the Green Paper fairly quickly. However, I read in a newspaper recently—and I know that I should not believe all that I read in newspapers—that the Government
  1658
  plan in their next legislative programme a Bill to reform the old Acts. It would be surprising if they did that in advance of receiving our report. I am sure that the Financial Secretary will be able to tell us what they have in mind—or what he has in mind, which is not necessarily the same.
  Whatever we do about the Green Paper, I am sure that the objectives of the Government and the PAC are the same. We all want to ensure that we get value for money and achieve the most efficient and effective method of conducting public expenditure. In the interests of that, I ask the House to note the vast number of reports before it.

  ROYAL ASSENT
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): 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. Companies Act 1980.

  2. Consular Fees Act 1980.

  3. Limitation Amendment Act 1980.

  4. Insurance Companies Act 1980.

  5. British Aerospace Act 1980.

  6. West Yorkshire Act 1980.

  PUBLIC ACCOUNTS
  5.26 pm
  Mr. Michael Shersby: I am grateful for being called so early in the debate.
  Mr. English: On a point of order, Mr. Deputy Speaker. We are all in your hands, of course, but the hon. Gentleman did not even have the courtesy to stand up to indicate that he wished to speak.
  Mr. Shersby: I was on my way up. No doubt, Mr. Deputy Speaker, your acute eye detected that.
  This is the first such debate to which I have contributed. I wish to refer to the first report from the PAC in Session 1978–79 dealing with housing associations and the Housing Corporation. My interest is in the efficiency of the Housing Corporation and of the many associations which receive grants from it. I was particularly interested to note

  1659
  in the Committee's report that the 1977–78 accounts show a deficit for the year of £6 million, and an accumulated deficit of £7·7 million.
  The Committee's conclusions are set out in paragraph 21, part of which is of particular interest. The final sentence of that paragraph states that the contribution made by the Housing Corporation
  " has resulted in the rapid growth of new housing associations run by voluntary committees with varying degrees of competence and financial expertise."
  I wish to speak about the competence and financial expertise of housing associations. I make it clear that I make my remarks on the basis of information provided by a number of sources which I believe to be substantially correct.
  My interest is in the allocation of funds to housing associations, which appear to have been made by the Housing Corporation without regard to the record or financial performance of the associations. For example, I am told that grants were made to the Utopian housing association, which is referred to in the Housing Corporation's recent report. That association had a negligible performance record when it was given funds by the corporation to build 334 houses in Farnborough, Kent, 700 units in Southend and 340 units on the Bayswater Road cemetery site.
  If my information is correct, as I believe it to be, that seems a somewhat remarkable decision. One cannot help but wonder what information was available to the Housing Corporation which led it to conclude that the association had the necessary degree of competence and financial expertise for such large projects. Perhaps my hon. Friend the Financial Secretary will give some indication of the criteria that are adopted by the Housing Corporation when considering suitability for grant-aid. I should also like to know whether the Public Accounts Committee considered that aspect during its investigations.
  Another example that has been drawn to my attention concerns the Community housing association. Apparently it was given a large allocation, out of proportion to its previous limited experience. The allocation included funds for a block of 120 flats in Candover Street, London,
  1660
  W.1. The association had not previously operated in that area. Tenants were not notified of the purchase, and no discussion took place. I understand that only one flat was vacant.
  As hon. Members know, the Housing Corporation has a policy that no more than 50 per cent. of acquisitions should be tenanted. Obviously, that policy is based on the necessity to rehouse tenants in available rehabilitated units. Inevitably, the Community housing association could not make proper progress, as it had not had adequate consultations with the tenants beforehand and as the units were not available. For each day that the scheme is delayed, the taxpayer will be saddled with added expense, in addition to interest charges. The chairman of the Public Accounts Committee and his colleagues will naturally be concerned about such activities.
  Some highly undesirable rumours are circulating, which I shall mention as discreetly as possible. It is said that grants are sometimes given to housing associations as a result of a close relationship with an official or other person within the Housing Corporation. I hope that that is not so. I hope also that the Public Accounts Committee will always satisfy itself that there are adequate safeguards and that public money is being spent properly.
  The Auriol housing foundation operates very satisfactorily in my constituency. It has a long and satisfactory performance record. I am happy to say that as a result of its splendid work many of my constituents—who would not have been housed by the local authority, for one reason or another—have been housed quickly and decently. They now have good accommodation in which they live as happy families. The foundation has made a significant and important contribution to the housing needs of the London borough of Hillingdon and elsewhere.
  The foundation operated at over 300 units a year in 1975–76. In 1976–77 the corporation reduced its allocation to 155 units a year. That figure was subsequently reduced to 108 units a year. Finally, it was reduced to 80 units. The Auriol housing foundation had planned to convert 300 or more units, but it found that it had been allocated funds for only 80 units. That is a sad contrast to the two

  1661
  previous examples. I began to question the way in which the Housing Corporation operated. I wrote to my hon. Friend the Minister for Housing and Construction, and he knows my views.
  As Member of Parliament for Uxbridge, I am deeply concerned that the Housing Corporation may be holding up the Auriol housing foundation's excellent work. It may be depriving my constituents of good homes. The House cannot fail to be uneasy. My representations to the Minister on behalf of the Auriol housing foundation, and other questions put directly to the corporation, apparently remain unanswered. It seems that there has been a substantial deterioration in the relationship between the corporation and this association.
  In pursuit of its aims, the corporation apparently made an inter-association comparison. It considered the many different indices of performance. I am told that the comparison was done properly. It was also written up well. However, I am dissatisfied, because nothing has happened as a result of that study. I believe that a committee should have been appointed to recommend future dealings with housing associations on the basis of the evidence. Although this action was agreed at the outset, no committee has been appointed. Not only has no action been taken as a result of the study, but the decisions that have been made fly in the face of the corporation's evidence.
  Only three associations have been run effectively enough to fulfil their commitments and operate with a surplus. All the other associations have shown a deficit. However, greater funds have been allocated to one of the less efficient associations. That should be of concern not only to the House and those interested in housing but to the Public Accounts Committee.
  As a result of reading the report of the Public Accounts Committee, I am concerned, first, that funds appear to have been allocated without proper regard to the track record or financial performance of individual associations. Secondly, funds appear to be inadequately monitored. I am not aware that the Housing Corporation keeps a record of the number of unconverted properties owned by each association. If such information is not available, it should be. Thirdly, I
  1662
  am worried because the corporation uses funds to enable an association to contract to purchase large property holdings and to turn the contracts at a higher figure to other associations. Fourthly, the Housing Corporation has apparently failed to act on its 1977 inter-association comparison. That comparison revealed that some associations lost hundreds of thousands of pounds annually, while others, carrying out a similar activity, made surpluses.
  The study highlighted enormous differences in productivity. There is a certain degree of dissatisfaction among those in the housing association movement about the way in which the corporation operates. It is slow and perhaps administratively inefficient when required to deal rapidly with correspondence.
  Although the level of scheme approvals has been reduced, I am advised that the number of staff at the Housing Corporation has almost doubled in the past two years. If that is correct, it should be a cause for concern. I understand that in June 1978 the Public Accounts Committee received an assurance that the Housing Corporation had adequate numbers of staff.
  The Public Accounts Committee has done a great service by reporting on the many matters that it has investigated. However, I should be interested to know whether the points that I have mentioned have been considered in any detail.
  I personally wish the Housing Corporation success. I want to see it operate efficiently, and I want to see the associations which work with it operating well, because that is essential if we are to make a substantial contribution towards solving London's housing problems. I thought it right to mention that there is considerable uneasiness among the housing associations about some of the problems to which I have referred. I hope that the PAC will bear those in mind when it looks at the work of the corporation on the next occasion.
  5.40 pm
  Mr. Robert J. Bradford: It is always interesting and enlightening to listen to the contributions of the right hon. Member for Heywood and Royton (Mr. Barnett) in these debates. He was somewhat over-modest in denying himself the right to s somewhat over-modest in denying himself the right to

  1663
  make observations on the situation in Northern Ireland. Indeed, on any future occasion, we would welcome his observations on public expenditure in Northern Ireland.
  It will be noted that these debates are in a sense out of phase, because the three documents which are relevant to Northern Ireland relate to 1977–78, and are derived from the Comptroller and Auditor General's report of that year. One accepts that we had the slightly important matter of the intervening general election. Therefore, one is not being over-critical of the PAC. Far from it. I should simply like to make two brief points at this stage. First, the ideal situation would be to look at the PAC report in the financial year following the year with which the Committee dealt. Secondly, it would also be helpful to Northern Ireland Members if the PAC's report was based upon the 1978–79 Comptroller and Auditor General's report, perhaps in time for the appropriation order debate in July.
  However, I should like to concentrate on matters relating to the Northern Ireland Housing Executive. Of course, other matters arise in the report, but I want to limit myself to this aspect, which is of grave importance. Perhaps we can leave the other matters to another time.
  On page 29 of the second report, there is an examination of the accounts of the Northern Ireland Housing Executive for 1976–77. There, Mr. Bloomfield and Mr. Brett—Mr. Brett is chairman of the Northern Ireland Housing Executive—accepted that serious criticisms were made two years previously. When they appeared before the PAC, they said that they took those cricitisms very seriously. One of those criticisms related to the appalling extent or rent arrears in respect of the Housing Executive. That concern was expressed in the answer to question 1699 on page 31 of the report. The question was:
  " That is good news, but at the same time, the actual rent arrears are going up by 20 per cent. They have gone up from £5·5 million to £6·5 million. Can you tell me, as you have already mentioned that the current year's figures for income and expenditure are known to you, how that figure has moved during the year?"
  1664
  Mr. Brett replied:
  " I can tell you that the rent arrears figure, expressed as an absolute, has continued to rise, but I am happy to be able to tell you that the rent arrears figure, expressed as a percentage of the sums recoverable, has been falling steadily."
  In order to put that complaint about rent arrears into perspective, I should like to take the House through the relevant figures. In 1975–76, rent arrears amounted to £5½ million, as can be discovered from the report. In 1976–77, they reached £6½ million. In 1977–78, they amounted to £8½ million. In 1978–79, the figure was £9½ million, and in 1979–80, it reached a record of £10½ million. That is a deplorable record, and the House should be concerned to examine it carefully.
  That increase to £10½ million has occurred in spite of the fact that there are rent and rate rebates, which to an extent have been publicised, and in spite of the fact that action is now being taken through what are locally called " benefit allocation branch orders" to reap in some of those arrears. Yet the present level of arrears is £10½ million. It is quite unacceptable for Mr. Brett to say that the percentage of recoverable money is falling.
  That is to be expected, because all the time the Housing Executive is embracing more and more houses. Each year, it assumes responsibility for more and more homes, which it rehabilitates and rents out. It also builds more homes each year. Therefore, the percentage figure is bound to fall in terms of the overall recoverable sum. Yet these statistics speak for themselves. Total arrears have increased from £5½ million in 1975–76 to £10½ million now.
  There are three concerns which my constitutents and many people in Northern Ireland entertain. First, in view of those figures, they wonder whether the loyal rent and ratepayers, if I can so term them, are in a sense paying for the debtors. Are they being penalised because they are prepared to abide by the law? I hope that we can be assured that that is not the case. If it is, there will be a greater incentive to those who are paying their lawful debts to discontinue doing so. I hope that we can be reassured on that point.

  1665
  The second concern is whether the recovery process is being fully utilised. I accept that the Secretary of State for Northern Ireland said recently—we welcomed the statement greatly—that there were now the possibility and facility of deducting up to 95p for each area of debt owed in Northern Ireland from all kinds of longer-term benefits. I hope that there will also be the possibility of arranging for the supplementary benefits branch to pay, indirectly, current rent amounts in respect of those who are in arrears, because that is not the situation at present. While we welcome that, we still have to ask whether the recovery process is being fully utilised.
  We must make it clear to the Housing Executive that even if good tenants are not being penalised in respect of the debts, and even if recovery takes place over a long period, at the end of the day the United Kingdom must meet the bill for the interest charges on this rent arrears amount of £10½ million. It is unfair that the taxpayers in the whole of the United Kingdom—not simply Northern Ireland—should be levied with this sort of interest charge.
  Lest some people feel that I am indulging in my pet pursuit of knocking the Housing Executive, I shall give a comparison. In the Birmingham area, for instance, which has control of about 155,000 dwellings, rent arrears for the year 1977–78 amounted to £2¾ million, compared with £8½ million in Northern Ireland. In the year 1978–79, rent arrears in Birmingham amounted to £1½ million, compared with £9½ million in Northern Ireland. In 1979–80, rent arrears amounted to £1 million in Birmingham, compared with £10½ million in Northern Ireland. Surely there is a lesson to be learnt somewhere.
  We urge seriously that the Northern Ireland Housing Executive should be taken to task for allowing this situation to develop and for allowing this sort of liability to devolve on the people of the whole of the United Kingdom.
  This is not a wholesale indictment of tenants in the public sector in Northern Ireland. Happily, there are many thousands of public sector tenants who meet their commitments without delay, and without hesitation. We are dealing with a legacy of the rent and rates strike initi-
  1666
  ated by the Social and Democratic Labour Party in Northern Ireland. At the beginning of the decade, Mr Austin Currie said in the then Northern Ireland Parliament " The Revolution is on." All his friends joined him to state clearly to the people whom they purported to represent that no rents and rates should be paid. As is the case in most revolutions, the last date is much worse than the first. The SDLP, through its irresponsibility, has left a dreadful legacy of misery, uncertainty, and in some cases guilt—because there are some good tenants amongst the minority community. That party has been responsible for much of the debt.
  In the Divis Street flats area—a complex of about 400 homes—the current debt is £338,000. I am sure that the reason for that debt is that many of the people concerned listened to the irresponsible words of members of the SDLP when they told them not to pay rent and rates. That is the way in which to perpetuate civil disorder. I repeat that this is not an indictment of the majority of tenants in Northern Ireland.
  Bearing in mind that only a small section of the community owes money, we have to ask whether the recovery process is as successful and speedy as it might be. At present, the law is such that payments cannot be made direct from supplementary benefit to a housing authority. I ask the Minister of State for Northern Ireland—who has kindly joined us for the debate at short notice, for which we are grateful to him—to convey to the Secretary of State for Northern Ireland that it is the official Unionist Party's view that we need to be able to pay supplementary benefits for housing direct into a housing authority such as the Northern Ireland Housing Executive. That is essential, and the facility should be introduced in the near future.
  I turn to another facet of the poor stewardship of the Northern Ireland Housing Executive. There is an acute problem of overstaffing—mainly in central administration. I shall illustrate that again by a comparison with the Birmingham housing authority. The Birmingham housing authority has responsibility for administering 155,000 dwellings, and it has non-manual staff of 1,622. The Northern Ireland Housing Executive has

  1667
  responsibility for 194,000 dwellings and has staff of 2,500. If a comparison were made on a pro-rata basis in respect of the number of homes for which each administration had responsibility, it would show that the Northern Ireland Housing Executive should have 2,000 staff, rather than 2,500. Most of the excess number of 500 can be traced to the central hierarchy. The Northern Ireland Housing Executive should be brought into line with the Birmingham housing authority in terms of staff numbers. That would save £2½ million a year.
  Those 500 people could quickly be reemployed to look after the administration of homes that could be built with the £2½ million saved. However, I do not believe that the Government will immediately order the sacking of those 500 people, so I shall make a suggestion to the House about how we should use them. Northern Ireland has a rent arrears level of £10½ million. Why do we not use some of the excess staff to recover that amount? All that has been recovered so far is £300,000—a paltry sum in comparison to the total. If we used some of the 500 excess staff to recover the debt, it would justify their existence and enable the Northern Ireland Housing Executive to build more homes.
  If other housing authorities throughout the United Kingdom realised the seriousness of the problem, there would be much disconcertment. Therefore, we should be careful not to allow the Housing Executive to permit this arrears debt of £10½ million to increase still further. It is incumbent upon this House to undertake, if possible, a sort of censure action against the Housing Executive, stating that it has broken the commitments that it gave at hearings two years ago. No commitment that was made then has been honoured, and that is deplorable. I suggest that an investigation be initiated immediately to ensure that the Housing Executive does not add to this deplorable level of rent arrears.
  6 pm
  The Minister of State, Northern Ireland Office (Mr. Hugh Rossi): I am grateful to you, Mr. Speaker, for allowing me to intervene briefly to try to respond to some of the important points made by the hon. Member for Belfast, South (Mr. Bradford)
  1668
  about the arrears of rents owed to the Housing Executive in Northern Ireland.
  This is a matter of grave concern to the Government, not only in so far as it relates to rent arrears, but because the entire area of public debt in Northern Ireland has reached unacceptable proportions. As the hon. Gentleman indicated, there is a political history to this matter. No doubt part of the large amounts now owing are due to the politically motivated strike, when people were urged not to pay their public debts. But that block of money has been owing for some considerable time. It has not been written off. Measures are taken constantly to seek to recover those moneys wherever possible.
  The information that I have on the present figures is slightly at variance with the figures given by the hon. Gentleman. At 31 March this year, the gross arrears for rents amounted to £9·9 million, compared with £8·7 million at 31 March 1979. Those figures vary slightly from those mentioned by the hon. Gentleman, who referred to a current figure of about £10½ million. That is not the figure that I have.
  Mr. Bradford: There is what is known as a technical arrears figure of more than £500,000, which is separate from the £9·9 million mentioned by the Minister. Therefore, the total figure is about £10½ million.
  Mr. Rossi: I take the hon. Gentleman's point. I was referring to the gross arrears, with which we are principally concerned.
  The hon. Gentleman talked about the growth of the rent arrears and criticised the suggestion that the percentage of arrears had not gone up, whereas the totality had. He must bear in mind that the collectable rental income has grown much faster in recent years than the arrears in comparative terms. For example, the average number of weeks' arrears has fallen from 6·8 in 1978 to 5·5 in 1980. That indicates that an effort—albeit perhaps in the hon. Gentleman's eyes too modest an effort—is being made to keep down the rate of arrears and to keep control of this difficult situation.
  The hon. Gentleman mentioned the deployment of staff to try to tackle this problem. The executive has recently been reorganised, and a regional controller has been appointed and made directly responsible for making sure that

  1669
  the level of arrears is reduced. All district staff of the executive are being set targets for reduction of their arrears figures. The computerisation of rental records will assist the effort by releasing staff to make further visits to debtors to try to persuade them to enter into arrangements whereby they can reduce their debts. Whether it will be exactly 500 staff, to which the hon. Gentleman referred, I do not know, but certainly staff are being redeployed for this purpose.
  As the hon. Gentleman knows, it is better, wherever possible, to make a personal visit to a debtor to seek to collect a debt than to send letters. Letters get put on one side, whereas a visit can be a matter of embarrassment, and frequently it produces the money. Constant visits and reminders have that effect. But the hon. Gentleman will appreciate that there are difficulties in some parts of Northern Ireland, even for people who seek to make visits for these purposes.
  Mr. Bradford: Especially for these purposes.
  Mr. Rossi: Indeed. I need not underline that problem, which is unique to Northern Ireland.
  My right hon. Friend the Secretary of State has recently announced that the recipients of supplementary benefit who are persistently in default of payment of their rent will have their rent allowances paid direct to the executive. I shall certainly convey to my right hon. Friend the further suggestion made by the hon. Gentleman to see what can be done.
  It may be of interest to the hon. Gentleman to know that the whole question of public debt—including rent arrears—was the subject of a review by Sir Derek Rayner. Sir Derek Rayner's recommendations are now before my right hon. Friend, who is considering them to see how they can best be introduced to deal with this difficult problem.
  I hope that those remarks answer some of the matters raised by the hon. Gentleman. If I have not covered all of them. I shall speak to my right hon. Friend and to my hon. Friend the Under-Secretary who has direct responsibility for the Housing Executive, and if the hon. Gentleman feels that it would be of value we can arrange a meeting to discuss these matters further.
  6.7 pm
  Mr. Barry Jones: I shall not follow the Minister of State and the hon. Member for Belfast, South (Mr. Bradford) into the details of the situation in Northern Ireland. I should like to refer to the shrewd and statesmanlike remarks of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), who referred to the other and new departmental Select Committees.
  I notice that some commentators are now writing off the Public Accounts Commmittee as no longer being Parliament's most prestigious and powerful Select Committee. Yesterday, the meetings of 11 Select Committees were notified on the Order Paper, most of them the new departmental Committees. Before Christmas the proceedings of the Public Accounts Committee were frequently broadcast, but since the setting up of the new departmental Committees there have not been any indications of interest in our proceedings. I understand that when the Treasury departmental Committee met less than a fortnight ago and had before it as a witness the Chancellor of the Exchequer. there was not even standing room.
  The Public Accounts Committee does not send for Ministers as witnesses. It has to make do with the so-called mandarins. Those who watched the recent television series " Yes, Minister " may say " Yes, but perhaps the mandarins are the real masters" and that the PAC is interrogating those who really count, but I do not agree with that statement. I believe that it would be most unwise to write off the Public Accounts Committee. It is back by 700 professionals, and it is always well equipped for members of the Committee to be given the in-depth reports that they require.
  Currently, there is considerable discussion about the role of the Comptroller and Auditor General. He has great integrity, and I should like his independence to be preserved. To that end, we should ensure the removal of certain of the Treasury's powers of direction. The Comptroller and Auditor General should have his own exchequer and audit department. He should take over the local government district audit. It is arguable that in local government expenditure some of the more flagrant and widespread wastes of money are occurring.

  1671
  The audit service of central Government should have access to the books of our State industries. I refer especially to the British Steel Corporation. There was recently a crisis of confidence in the board and an unprecedented, lengthy and bitter strike. That was partly because, over a period, leaders of the steel workers, and later some of the middle management, were saying that the corporation's financial calculations were, to say the least, faulty. As tens of thousands of jobs were at stake, the subjection of the board to a public audit was an important request by the leaders of the steel workers. The charge was made in the recent dispute that value for money had not been obtained over the past decade. Investment in the industry had been about £3 billion.
  It is true that in the sixth report there are examples of where the Committee has probed to ensure value for money. I have been able to see how important the Government's cash grants have been to attempts to regenerate Britain's industrial structure. I have in mind the examination of witnesses from the National Enterprise Board. I cite as an important example our deliberations over the two new Rolls-Royce engines that we debated, probed and examined. I believe that about £400 million of State money is currently programmed for the two engines. That is vital for the survival of the British aerospace industry. It was in the Public Accounts Committee that we were able to establish that we would be into the 1990s before that vast sum invested in the aerospace industry, especially in the engines division of Rolls-Royce, turned to profits. That was the view of the Department of Industry and the National Enterprise Board. We learnt in that same Session that it was vital speedily to build a new titanium smelter in the United Kingdom before the end of 1982, or else the mineral required in the new engines would have to be imported from abroad, thus putting us at a considerable disadvantage.
  As a result of the probing questions of Committee members, we learnt that if the 1990s profits were to be realised we would have to hope—perhaps that is the operative word—that the pound would be reasonably strong in relation to the dollar. I think that $1·80 was mentioned. In that
  1672
  one Session, it was the Public Accounts Committee that was able to bring into prominence important facts and pieces of information such as the £400 million investment, the industrial base of Great Britain and the hopes of exports and prosperity.
  I shall conclude by trying to assess briefly the work of the Committee. I get the impression that the mandarins of the Whitehall complex do not take lightly any appearance that they make before my right hon. Friend the Member for Hey-wood and Royton and the Committee. I judge by observation that it must be a considerable ordeal to be examined by my right hon. Friend and the Committee for more than two hours and to be called to account before Members of Parliament for actions and policy. It is clear that some of the witnesses occasionally play for time. I have seen some of them rendered literally speechless by some of the techniques employed and questions asked by my right hon. Friend and other members of the Committee.
  I have formed some overall impressions. Accounting officers take the Committee with deadly seriousness. Audit staff have considerable professional expertise. The contribution of Members of Parliament as watchdogs makes for a successful operation, and there are the contributions of the various witnesses. Every one of them, whatever the nature of his remarks and contributions, oversees the massive expenditure of his Department—literally hundreds of millions of pounds of taxpayers' money.
  Members of the Committee are faced with frequent and lengthy meetings. They receive many detailed reports and other papers. It is becoming harder to keep up to date with the papers that we receive. The work of the Committee takes up a great deal of a Member's time. Finally, my right hon. Friend said that his predecessor was a very good Chairman. There is no doubt that he was, but I think that my right hon. Friend is a good Chairman.
  6.16 pm
  Mr. Peter Hordern: The hon. Member for Flint, East (Mr. Jones) referred to the work of the new Select Committees and contrasted them with the work of the Public Accounts Committee. The new Select

  1673
  Committees have a good deal of glamour attached to them and much interest, but for my part I think that the PAC will be around long after the new Select Committees have been left foundering in its wake.
  Select Committees that do not have the staffing which is available to the PAC will find themselves altogether too easily upset by a flood of documents and contrasting opinions. The Select Committee that is examining the Government's economic policy has attached to it no fewer than three economists, all of whom have contrasting opinions.
  The Financial Secretary to the Treasury (Mr. Nigel Lawson): There are five.
  Mr. Hordern: My hon. Friend corrects me and tells me that there are five economists. No doubt they all have contrasting opinions. As my hon. Friend and my right hon. and learned Friend the Chancellor of the Exchequer think little of forecasts and assumptions anyway, it does not seem that that Committee will get very far in elucidating the truth or in enlightening the general public.
  I do not wish to be diverted from the work of the PAC, which is what the debate is all about. The Committee starts with a considerable advantage, as it deals mostly with facts. It deals with what has already happened and facts which are agreed by all the Departments concerned. When the Departments come to us, they know that they have something to answer for. I should like to think that under the chairmanship of the right hon. Member for Heywood and Royton (Mr. Barnett) they have some penetrating questions to answer. Indeed, I know that that is so.
  I shall not waste the time of the right hon. Gentleman by paying him a glowing tribute, although I know that it is the custom of the House to do so in these debates. I know him well enough merely to say that I knew that he would make a good chairman, and he has. He follows a long tradition of good chairmen. I shall have something more to say later about his speech and the work of the Comptroller and Auditor General.
  One of the features that strike me about the work of the Committee over the years is the repetitiveness of some of the incidents that we are invited to examine year after year. Broadly speaking,
  1674
  the work of the Committee can be divided into two main sectors. One sector involves the accident-prone Departments which provide examples of waste or over-expenditure that occur from time to time. These are not necessarily repetitive in nature. The other sector, which is much more important, involves successive Governments making fundamental decisions, usually the same ones, in carrying forward large and expensive projects which the Committee finds itself examining year after year.
  A good example used to be Concorde. It is now too late to examine Concorde any further. Happily, it is at least flying. For many years, when we were examining it, it was not even doing that. I regret to say that it has been swiftly replaced by several other candidates that are long-term losers.
  The hon. Member for Flint, East mentioned Rolls-Royce. I can think of two examples. Rolls-Royce is certainly one, and British Leyland is the other. Until very recently, both of those were under the purview of the National Enterprise Board. Rolls-Royce was taken out of it for what appeared to me to be very good reasons, namely, the fact that the chairman of Rolls-Royce did not get on at all with the chairman of the NEB, and one had to go. One has gone. In my humble opinion, the right one has gone.
  It has never seemed to me to be a good aspect of management policy to have, as it were, an intermediate manager in a company as large and complex as Rolls-Royce. It is important that the chairman and managing director of Rolls-Royce should have immediate access to the Department of Industry, which is its sponsoring Department.
  Mr. English: The Department of Industry has very few people who have ever run an industry. The chief executive referred to by the hon. Gentleman was inefficient enough not to insure against a possible change in the exchange rate and so totally ruined whatever else he had done in at least one year's accounts. Does not the hon. Gentleman think that such a person needs a little advice, possibly from the Treasury, if not the Department of Industry?
  Mr. Hordern: The hon. Gentleman anticipated my remarks. I was not about

  1675
  to pay a glowing tribute to Rolls-Royce. That was the last thing that I proposed to do. I was coming to the meat of the matter. The hon. Gentleman is wrong in saying that the Department of Industry has few people who know about Rolls-Royce. It has more than a few. The NEB had only two people to look after Rolls-Royce. The Department of Industry, which has been much more closely involved, has greater expertise in the matter. However, whether or not the Department has expertise, Rolls-Royce landed a number of orders that have proved to be disastrously expensive for the country so far, and I do not think that there is any question that they will prove to be extremely expensive in years to come. One of the reasons for this is the fact that the contracts were placed—the hon. Member for Flint, East said at $1·80 to the pound—at $2 to the pound. Whatever the figure was, Rolls-Royce got it wrong. The contract is bound to continue to be very expensive.
  The hon. Gentleman will know that the Export Credits Guarantee Department had a big and expensive hand to play in all this. It guaranteed not just the Rolls-Royce engines but those of Lockheed and Boeing. This is the first time, as far as I know, that the Export Credits Guarantee Department has guaranteed not just British products but American products, over which we have no control. We have something to say about that in our most recent report. I am sure that we shall return to the matter. At any rate, it was a departure that I did not like and that I hope and trust will not recur.
  Nor is that all. In considering Rolls-Royce, we discovered that far from being one of the most efficient companies in the country in terms of productivity, there appeared to be twice as many people employed in Rolls-Royce as there were in General Electric and Pratt and Whitney for the same operation. Therefore, there is a good deal of improvement yet to come.
  Mr. Barry Jones: Does the hon. Gentleman agree that, if it were not for the National Enterprise Board and the enterprise that it is showing, we might not have had an aerospace industry, and certainly Rolls-Royce would not have been
  1676
  in production, supplying many thousands of jobs?
  Mr. Hordern: I do not believe that the National Enterprise Board had anything to contribute in that way. The decision was made originally by the Department of Industry and should always have been monitored by it. I do not think that the NEB had anything to contribute.
  The other company to which I wish to refer is British Leyland. I do not wish to talk about the troubles of the motor industry or the particular problems in which British Leyland has found itself. If the case for Rolls-Royce being managed and run by the Department of Industry more directly is strong, the same applies to British Leyland. I do not think that the intervention or interposition of the NEB does anything to help the position of British Leyland. It would be very much better, given my right hon. Friend's policy towards the NEB, to hive off the British Leyland responsibility more directly to the Department of Industry.
  The National Enterprise Board is now happily changing direction rapidly. I cannot help but say that I have a passing regret for the brave old days when Lord Ryder was chairman and launched such products and projects as Thwaites and Reed, and presided over the continuing losses of Alfred Herbert, Cambridge Instruments and British Tanners Products. My right hon. Friend's policy will mean fewer losses for us to inquire about and to enjoy watching the prognostications of those involved, simply because, with any luck, those concerns will be wound up quite soon.
  The NEB received a great deal of money from the taxpayer. I know that the hon. Gentleman is keen on some of the activities of the NEB. It is true that it has a marginal regional role still left to it, in the North-West, at any rate. However, £78 million has been invested not in British Leyland or Rolls-Royce but in activities of its own. The record of the NEB has gone from bad to worse in this respect.
  The original target set for the NEB was that it should make between 15 per cent. and 20 per cent. on its assets in

  1677
  1981. So far from reaching that target, it achieved 11 per cent. by the middle of last year. But the position is a good deal worse than that. The NEB was given a considerable amount of equity capital directly by the Government. This means that the taxpayer is having to pay for the difference between what the Government have to pay to borrow money from the market, which nowadays is about 18 per cent., and the money that they advanced to the NEB at no rate of interest at all. From the taxpayer's point of view, the return has not been 11 per cent. or anything like it. There has scarcely been a profit.
  It is worth saying this if only to strengthen the ambition of my right hon. Friend the Secretary of State for Industry to run down the NEB. I view its activities as those of liquidator and receiver. I hope that it will get on with that.
  I do not think that the chairman of the NEB, in his role as receiver, should be renting a flat in Grosvenor House at £36,000 a year. He should be found more modest accommodation.
  I leave the subject of the NEB and turn to the question of the Polish shipbuilding order. To my great regret, last year the Committee said that it accepted the inevitability of seeking that order. We published that in July 1979. At that time, the loss in respect of the order was thought to be about £28 million. We discovered only recently that the loss was really much greater than that. It was £40 million. In addition, British Shipbuilders borrowed $65 million with which to buy the ships that it was to hand over to the joint Anglo-Polish company.
  When we asked the civil servant who was giving evidence to us at the time what the Poles had advanced towards this company, we were told that they had advanced the sum of £50,000, for which they had the right to buy the ships that the taxpayer was providing for the Polish marine to sail in, from which only half of the profits, if any, would come to the taxpayer.
  I ask the House to consider what a crazy proposal this is. I know that it is easy to argue this in retrospect. I cannot think how I ever got myself to put my name to the original report, but it is there. Seen in retrospect, of course, it is a disastrous position. Not even on the most
  1678
  sanctimonious and regional grounds could such an order ever have been justified. If it was right that a ship-owning company should be advanced money by the taxpayer in this way, it surely should have been a British ship-owning company and not a foreign one providing competition for our own companies. A more ludicrous position it would be difficult to imagine. I hope that that lesson has been well and truly learnt.
  I have taken the examples of the National Enterprise Board, Rolls-Royce, British Leyland and, now, the Polish shipbuilding deal, all of which happen to be examples of profligacy by the Department of Industry. I want to say something about that. It is very noticeable how the Department of Industry has grown in recent years. When I first came to this place, there was no Department of Industry. Very soon after I came, the first Ministry of Technology was formed. If the performance of the Department of Industry is to be judged by results, I regret to say that the aim established for it—that is, to provide industrial regeneration—has resulted in higher unemployment and lower production. Yet all this has been met with increasing numbers of civil servants. There are more than 9,000 now in the Department of Industry, and many more in the Welsh and Scottish Development Agencies, but their results have not yet been shown to be at all good, so far as one can observe.
  In West Germany, there is no Department of Industry. The House really has to consider what is the point of some of the aspects of the Department. Of course, it has a major function to perform in relation to companies such as Rolls-Royce and British Leyland, but in terms of industrial regeneration it is becoming increasingly clear that other much more direct regional incentives, notably a differential tax regime, would be much more effective than the subjective judgment that the Department displays in putting forward its grants.
  The Department itself and the whole question of industrial grants—a very complicated question—are a relic of what one might call Keynesian intervention, which was popular with both parties for many years after the war. I am glad to say that my right hon. Friends have departed from this policy, and I think that they need to look very seriously at the whole

  1679
  question of industrial intervention and whether or not the regional regeneration that all of us want to see could not better be achieved by a much simpler and more direct tax incentive system.
  I come finally to the role of the Comptroller and Auditor General. The right hon. Member for Heywood and Royton—I regret to say that I missed his earlier remarks—referred, I understand, to the new direction in which the Comptroller and Auditor General appears to be moving—that is to say, in the direction of examining policy alternatives. This is a major departure, and I think that we ought to consider it very carefully before endorsing it fully.
  I do not say that it is right or wrong; I merely think that we ought to consider it fully, because it seems to me that it is most important—I know that the right hon. Gentleman agrees with this—that the Comptroller and Auditor General, with the Exchequer and Audit Department, should continue with its main function, which is to audit every Department of State and make sure that its operations are carried out properly and efficiently, and are properly accounted for.
  I have in the past thought that the Comptroller should have a role closer to that of the post in the United States, which is a much wider role in terms of examining the functions of different departments and how they can best order their affairs. On the whole, I am inclined to think that it is right that the Comptroller should have responsibility for looking into policy matters, but the whole matter needs to be carefully thought about and debated.
  I say that in passing, because it seems to me that the Comptroller has another role plainly open to him. It is one that involves a managerial revolution in Government expenditure and, in particular, in local government expenditure and expenditure in the Health Service.
  Enough time has passed for me at any rate to be able to say, with some of my right hon. and hon. Friends, that the reorganisation of the Health Service and of the local authorities in 1973 and 1974 was a disaster. I think that those most closely involved in those reforms now admit that. It was disastrous because it
  1680
  was thought at the time that a managerial revolution in the sense of making those bodies separately accountable would increase their efficiency. I do not think that there is any evidence to show that. What has been shown is a huge increase in the number of people employed by the local authorities and the Health Service, both of which increases far exceed the increase in the number of civil servants.
  In 1949 local authorities employed 1·6 million people. Last year they employed 2·9 million. That is three times more than the whole of the Civil Service itself. Of course, much of it is accounted for by the growth in the number of teachers and lecturers. That number increased from 456,000 in 1965 to 693,000 last year. But what was much more striking was the enormous increase in the number of those employed in the education service who neither lectured nor taught. In 1965, there were about 500,000 people who neither lectured nor taught. Last year, there were 717,000. It might well be asked what all these people are doing, but there is no one whom we can ask why so many people are employed in the education service.
  I regret to say that the same is true of the Health Service. In the Health Service in 1961, 575,000 people were employed. In 1978, which is the latest year for which we have figures, there were 1·175 million. Of course, the Health Service comes under the jurisdiction of my right hon. Friend the Secretary of State for Health and Social Security, but for practical purposes it has been very difficult to stop the recruitment of extra people by the area health authorities, even after the reorganisation.
  Mr. English indicated dissent.
  Mr. Hordern: If the hon. Member for Nottingham, West (Mr. English) doubts that statement, let me quote an example. I asked my right hon. Friend to let me have examples of the amount of outside consultants' advice that the Department had asked for over the years. I have one example of office work measurement on which an outside consultant was called in, and under " description of job" it says that the job was aborted owing to staff side opposition. So the question could not even be looked at.
  Mr. English: The reason why I was shaking my head was that the Secretary of State for the Environment and the Secretary of State for Social Services both

  1681
  have sections of auditors under their immediate command, as civil servants, to deal with the responsibilities that the hon. Gentleman is talking about. They really are the only two departmental Secretaries of State who have no excuse. They have people of whom to ask the questions that the hon. Gentleman poses. The Secretaries of State have auditors of their own quite different from the Comptroller and Auditor General. If they are not asking the questions and publishing the answers, that is their fault.
  Mr. Hordern: The hon. Gentleman really mistakes the position. There was a major reorganisation of both services in 1973 and 1974 and, of course, technically speaking the Secretaries of State are responsible for those Departments. But, as the hon. Gentleman knows, the point of that reorganisation was to separate those authorities—both the local authorities and the health authorities—in a management sense. I am quite sure that it was never intended that they should go in for an orgy of recruitment, as they in fact did. The fact of the matter is that our education service and our Health Service are grossly overmanned, both for the jobs that they do and in terms of any international comparison that can be made.
  The country cannot afford to have so many people employed in the public service. It is enormously difficult to control public expenditure, in any case. The Government are doing their best to reduce the number employed in the Civil Service, but that number does not begin to compare with the number employed in the Health Service and the education service, which greatly exceeds the number employed in the Civil Service and over which there is little effective control.
  There is an important additional role for the Comptroller and Auditor General to pursue. It is to examine the operations of the Health Service and the education service to establish what all these people are doing. I over-simplify the matter, I know, but we are grossly overmanned by any standards. This is a major matter into which the Comptroller and Auditor General should be able to inquire, and he should have the power to do so. I would much prefer him to get on with that aspect than to examine other aspects of Government policy over which there
  1682
  can be continuous and considerable political disagreement.
  Several Hon. Members rose—
  Mr. Speaker: I hope that the hon. Member for Nottingham, West (Mr. English) will understand if I call next the hon. Member for Folkestone and Hythe (Mr. Costain), who has been present throughout the debate. He docs not usually speak for very long.
  6.41 pm
  Mr. A. P. Costain: I promise, Mr. Speaker, that my average time of six minutes will barely be exceeded on this occasion. Earlier this afternoon, an hon. Member spied strangers. When you look round the Chamber now, Mr. Speaker, you might say that you spy a Member of Parliament or two.
  I have attended every Public Accounts Committee debate for 21 years, ever since I came to the House. It always astounds me that these debates should be so poorly attended. Today, on the Government Front Bench there is the biggest attendance that I have ever seen in such a debate, and I am grateful to the Government for that.
  This debate has a special significance for me. The Committee has a new Chairman, who has batted in very well. He gave me the impression today that the Committee had something to do with policy. I have always understood that the Public Accounts Committee was an auditing Committee, which looked into what had happened. I hope that it wilt remain so.
  Mr. Joel Barnett: I am sorry if I misled the hon. Gentleman. The point that I sought to make was that the Committee's proceedings were bound to impinge on policies when the Committee looked at the effective use of money. I gave as an example the greenhouses-on-the-moon syndrome. When looking at the effectiveness of greenhouses, should we consider whether they should be built on the moon, or somewhere else? I gave the example of the Polish shipbuilding order, and one or two other matters.
  Mr. Costain: I thank the right hon. Gentleman for clarifying the position. What he said confirms what I understood him to say. Once the Committee gets on to policy, it cannot avoid party politics.
  On 10 December, I was lucky enough to draw a place in the ballot for Private

  1683
  Members' motions. I made a speech on that occasion. I had a stinking cold, and the press said of my speech that I sounded like a worn-out concrete mixer; I certainly felt like one. I said that it was most important that the new Committee should have terms of reference and the right to call whom it wished. The hon. Member for Nottingham, West (Mr. English) intervened. A characteristic of all debates on the Public Accounts Committee is that the hon. Member for Nottingham, West always intervenes in every speech. He has such great knowledge of the subjects. I do not remember any member of the Liberal Party taking part in the debates, although they pop in from time to time. I rather expected the Leader of the Liberal Party to turn up when he saw my name on the television annunciators.
  I have said on many occasions that the Public Accounts Committee is a mirror that enables Departments to look at themselves and judge their own performances. It is the only Committee that does not interview Ministers. It interviews civil servants and accounting officers because it deals with accounts. It should take evidence from people who have a direct relationship with the Departments. The Committee normally relies on the statements made by the accounting officers. Accounting officers have enormous responsibilities, and it is impossible for them always to be up to date. Certain accusations are made against people and firms who deal with the Departments, and we should have the right to interview them. We have the right to call for persons and papers, but we should also interview the people who are directly concerned. That would stop the passing of the buck.
  The Public Accounts Committee has now admitted the public. I and one other member of the Committee voted against going public. I think that I was wrong. I thought that, if we went public, people would play to the galleries and even members of the Committee would act as if they were on the television screen. I am glad to say that that has not happened.
  There has been another innovation in recent years. We visited Chatham dockyard. I am delighted to see that the First Lord of the Admiralty is here today. We had a very good reception, and learnt a
  1684
  lot. If we made more visits, we could become more kindly disposed to the people whom we go to criticise. That is probably why they entertain us so well. We also visited a teaching hospital. That taught us a lot, too, and I hope that it taught the teaching hospital a lot.
  Over the years, the Public Accounts Committee has drawn attention to certain failures—certain matters that cost enormous sums of money. I wonder whether the Departments have learnt from our example. Time and again, when we are on an economy drive, we cut off Supply and cut off expenditure, yet time and again, as elections get near, politicians decide to start projects. I refer particularly to building projects, which, naturally, I know something about.
  We have found with a number of construction jobs that the work has been started before the plans have been properly prepared. We can quote job after job—£14 million in Liverpool, £15 million somewhere else, £40 million for a power station—where the money is wasted because it has not been realised that to spend half a million pounds in preparing plans for a £14 million contract will save an enormous amount of money. When the job is properly prepared, not only is money saved but labour relations are improved. Nothing upsets men on a building site more, when, for the good of the contract, they have worked very hard to erect a wall, to be told three weeks later that they must pull it down because it should not have been there in the first place. It is our fault, as politicians, for starting work before the plans are prepared, and it is the Government's fault for not realising that a little money spent in the early stages will save an enormous amount of money later.
  My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) has gone into detail about some of the points that we have disclosed, and I do not wish to waste the time of the House by repeating them. Everybody in the Committee has read the report, and Ministers are aware of its contents. What we look forward to is the Financial Secretary's telling us, at the end of this debate, that he has studied these figures, that mistakes have been made, and that he will be a very good boy and put them right. In the last debate he spoke from the Opposition side of the

  1685
  House. I shall be fascinated to know what he says from the Government side.
  He promised that during the first Session of this Parliament he would reorganise the whole system of Committees, and I am very grateful to him for doing so. Now he has the opportunity of ensuring that everything is properly organised so that the Committees themselves can do the work and not duplicate the work of the Public Accounts Committee.
  6.51 pm
  Mr. Michael English: It is always a pleasure to follow the hon. Member for Folkestone and Hythe (Mr. Costain), because he can almost be described as " Mr. Public Accounts". He has, by his assiduity, put other members of the Committee to shame. He must admit that I have not interrupted him on this occasion. That is partly because I gathered from your remarks in relation to him, Mr. Speaker, that you might be kind enough to call me to speak in this debate. In previous debates, I have sometimes not been called.
  As my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) said, we cannot in this debate discuss 14 reports. We must be selective. Two to which I should like to refer briefly are the fourth report of 1979–80 on provision for Civil Service pay and the second report of the same Session on matters relating to Northern Ireland. That on Civil Service pay illustrates the much better relations that now prevail between the Public Accounts Committee and the successor to the Expenditure Committee, the Treasury and Civil Service Committee, than has been the case upon occasions in the past. I do not mean the immediate past. I am not casting reflections upon the right hon. Member for Taunton (Mr. du Cann).
  There was a time when, to put it bluntly, the Clerks of the two Committees did not even speak to each other and one was capable of writing a report which did not refer to three reports written by the other. That is no longer the case, and, as the Chairman during the last Parliament of the General Sub-Committee of the Expenditure Committee, I pay tribute to all the Officers of the House
  1686
  who are concerned in this. They are now co-operating with each other. The two Committees provide each other with evidence, and of course this is the sensible way to proceed. The results are shown in the fact that, although we may have different aspects of matters to examine, one being the past, the audit, and one being future expenditure, nevertheless we are working in tandem. I think that my right hon. Friend the Member for Heywood and Royton and the right hon. Member for Taunton should both take part of the credit for this.
  Turning to Northern Ireland, I have done a modest amount of research into the whole question of the audit, and indeed the Public Accounts Committee has been kind enough to request me to give some evidence to it on the Green Paper. I am still a little puzzled about Northern Ireland. There is a separate Civil Service, called the Northern Ireland Civil Service, which is roughly 4 per cent. of the total of the two Civil Services of the United Kingdom and Northern Ireland. I presume that in the days of Stormont there was a separate individual called the Comptroller and Auditor General for Northern Ireland. I am fishing for information here, and I hope that when the Financial Secretary returns he will give us it.
  I presume that this Northern Ireland Comptroller and Auditor General reported to Stormont. I regard that as a bad principle. I must be careful in what I say, because in this Parliament I normally chair the Northern Ireland Standing Committees, and the question whether functions should be uniform throughout the United Kingdom, or should be autonomous in Northern Ireland, is, of course, a sensitive political issue into which I do not wish to enter.
  If I might remove it from the context of Northern Ireland, one of the things that I thought ridiculous about the devolution Bills for Scotland and Wales was the fact that they devolved the audit. I say this as one who was basically in favour of devolution. A reference was made earlier to the Comptroller General of the United States and the General Accounting Office which he controls. In a federal state, where the constitution specifically protects the legal sovereignty of each one of the 50 States, the auditor

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  is allowed to chase federal money wherever it goes. That means that he can chase it if it is given as a grant to one of the States, if it is given as a grant to a local authority subordinate to one of the States or if it is given to a private company or person. If he has reason to believe that there is some audit reason, he can follow the money.
  It is not possible to devolve the audit of the taxpayer's money. It is possible to do so if it is some other taxpayer's money. If it is a question of rates raised by a local authority, the authority might have the power to audit it itself, but if it is out of income tax, or value added tax, or whatever it may be, that is national taxpayer's money, and surely the national taxpayer's agent, the Comptroller and Auditor General, has a right to audit how that money is spent.
  With the greatest respect to the hon. Member for Horsham and Crawley (Mr. Hordern), who spoke about auditors investigating policy, it is rather a side issue. My right hon. Friend the Member for Heywood and Royton raised it, but this question of policy is something of a side issue. Incidentally, I hope that he realises that the moon would be an excellent place on which to put a greenhouse, since it is a place without an atmosphere to interfere with the rays of the sun. I agree that it might be a little costly in capital terms, but in terms of running costs it would be extremely efficient because there would be no atmosphere to cause erosion.
  One cannot " second guess ". At least, one can, but it is an enormous waste of resources to do so. What one can do is to decide whether a person who has made a decision has carried it out efficiently—whether, for example, as the hon. Member for Folkestone and Hythe said, a person has made detailed plans for building a hospital before the building work has been started. That is a sensible thing to audit and investigate, and it is a bit more than just auditing whether someone has pinched the cash, or committed fraud, or something of that nature.
  However, I am intrigued by the scope of the audit. Apparently, the PAC receives reports from the Comptroller and Auditor General of Northern
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  Ireland. I am all in favour of widening the scope of the audit in that sense—not in the sense of introducing policy into it, but in the sense that public money can be followed everywhere.
  In this context, one is bound to be concerned with two reports of the Committee in the last Parliament. The second special report on the work of the Committee of Public Accounts and the status and functions of the Comptroller and Auditor General partly relates to, and in this case mentions, reports of the former Expenditure Committee. That Committee and, subsequently, the Procedure Committee were both extremely critical of the present position of the auditor. I stress that I do not mean Sir Douglas Henley himself or any member of his staff. I am talking of the organisation, and I hope that it will be recognised that I am not referring to people personally in any way.
  We must all be concerned about what Dr. Normanton said in the standard work on the subject. These were not my words or those of my hon. Friend the hon. Member for Norwich, South (Mr. Garrett). Dr. Normanton who is now, I believe, an auditor with NATO, described our system of public audit—and he is the world's expert on it—as the worst in the Western world. Surely we must be concerned about that and about why he said it in a book which is now a textbook used by students. He may not be right, but, since he has said it, we should investigate his reasons.
  The Expenditure and Procedure Committees found, on investigating this, that our auditor was one of the least independent in the world. Let me explain. It is commonly said that the Comptroller and Auditor General is independent because he can be removed from office, like a judge, only by the Crown upon an Address by both Houses of Parliament. That, of course, secures him against dismissal.
  However, the person appointed has traditionally been a former high Treasury civil servant—in this century, at least. He has usually been a second permanent secretary in the Treasury, or someone of that character. The poacher is turned into a gamekeeper. I mean no criticism when I say that perhaps one of the reasons for that is to exclude any other possible

  1689
  poacher. He is not a professional accountant or anything of the kind. He is not someone with audit experience but a civil servant who has risen in the Service in the usual way. More than being a case of poacher turned gamekeeper, it is a case of the gamekeeper being made into a registered poacher by the authority of the squire in order, as I have said, to exclude any other possible poacher. The system is obviously not independent.
  The second aspect of the non-independence of the auditor is in section 3 of the Exchequer and Audit Departments Act 1921. That says that, in the event of any dispute between the auditor and the Department, the decision of the Treasury shall be final. I can think of some dubious company chairmen who would be extremely pleased if they thought that, in the event of any dispute between their accountant and their auditor or any of their executives and the auditor, their decision should be final. It seems an odd provision to put in an Act of Parliament.
  A third aspect is that the Comptroller and Auditor General is not allowed to control his own staff. Whether they fall within the highly technical description of civil servant, which is an unofficial definition coined in 1931 and not the one in the Act of Parliament that governs Civil Service pensions, I should hate to try to find out. However, it is certain that their pay, grading and numbers have been controlled for more than a century by the Civil Service Department. Again, the very people who are being audited say who is to be their auditor in terms of pay. This is highly important, because I would have thought that any one of the senior partners of the big six accountancy firms in this country receive more money than does our Comptroller and Audit General. I shall not stress that point further.
  My right hon Friend the Member for Heywood and Royton said that I was wrong to assume that because someone was a graduate he would be a better auditor. The Civil Service makes that assumption about civil servants. France is supposedly a highly elitist country, but, if one can get into the Ecole Nationale d'Administration, one can become a top civil servant without even a baccalaureat. The only institute of higher education in France that admits anyone who it believes
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  will be a capable and competent civil servant is the Ecole Nationale d'Administration. It is the Civil Service in this country that says that the Civil Service Commission shall recruit into the First Division Association only graduates who are either first-class honours graduates or II. 1 honour graduates. However, it said something quite different in relation to the Exchequer and Audit Department. It said, until 1975, that the Department could not recruit graduates and professional people.
  I pay full tribute to the present Comptroller and Auditor General. He is now recruiting graduates, and they are being trained and qualified as accountants in one particular institute—not in all six. That is excellent, but for more than a century they were prohibited from this by the very executive that the Department was supposed to be auditing. The Department was prohibited from exercising a free choice in respect of personnel. No choice was allowed and the matter was determined by the executive that was being audited.
  The last of the reports to which I want to refer is the Third Report of Session 1978–79 concerning the parliamentary control of public expenditure, and it is there that we see part of the results of this process. The Comptroller and Audit General, who is described in the earliest of the Acts—the first was in the 1860s—is described as acting on behalf of the House. He is not allowed a lawyer. Yet one of his functions is not just as an auditor of past events but as a comptroller, an English word that descends from the Latin contra rotulator, meaning the person who keeps the counter roll, the person who approves expenditure because he has the legal check upon it. He authorises the expenditure in the sense of authorising payment out of the Exchequer Account at the Bank of England to Departments of State on the ground that they have the authority of Parliament and of the Treasury by warrant signed by two Treasury Ministers and all the other legal processes that have to be followed.
  What mention is there of that in the Green Paper? It says that there are certain other aspects of the Exchequer and Audit Department Acts that may have to be looked at. On this whole question of the pre-audit of the public

  1691
  expenditure of the United Kingdom, that is all it says. I begin to wonder whether the person who wrote the Green Paper has ever read those Acts. It mentions in great detail past event auditing, but the pre-event auditing of the Comptroller and Auditor General is not mentioned. That is very puzzling. Even more puzzling is that that is exactly where the matter has fallen down. I am sure that because of the sub judice rule you would rule me out of order, Mr. Deputy Speaker, if I referred to the aspects of the Crown Agents case, which are currently under investigation by a tribunal. However, there is one matter that has been remedied by an Act of Parliament in relation to the Crown Agents to which IS can refer, because it is not the same issue. We had to pass a brief Act of Parliament indemnifying every Comptroller and Auditor General from the unification of the office until the present day from not carrying out effectively his duties as Comptroller General. They had authorised expenditure of moneys from the Exchequer Account to the Crown Agents illegally under a statute passed, admittedly, before the Comptroller and Auditor General's two offices were united in one person.
  I shall say one final thing to prove where control over the audit lies. The hon. Member for Horsham and Crawley mentioned local authorities and the Health Service. Both those Departments of State have civil servants who audit those bodies for them. In the case of local government, district auditors audit their accounts. They are civil servants directly responsible to the Secretary of State. I do not believe that they should be. The audit of local authorities should be independent.
  The hon. Gentleman said that certain things had not been done because of staff pressure in Ministries. That may be right, but there will always be staff pressure in Ministries. A Cabinet Minister who is in charge of a Department for, on average, two or three years will not necessarily resist that pressure. I have nothing against the Secretary of State. It is a secondary issue in terms of politics. However, a Minister will not put punch into the audit if there is staff pressure in his Department and he wants to make his name before, say, a Conservative or Labour Party conference.
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  No Minister should be in charge of the audit. Ministers should be in charge of current events. The body that should be in charge of the audit, as the Procedure and Expenditure Committees have said, is the House of Commons Commission, which is the most impartial body that we have. It consists of Mr. Speaker, only one Minister, one Front Bench Opposition Member and three Back Benchers, drawn from three parties. In this political world, that is as near to impartiality as one will get. They should be the employers of the Auditor General, the district auditors in the Department of the Environment, and so on. I shall go into further detail with my right hon. Friend's Committee.
  We must first make sure that the control of the audit is responsible ultimately to hon. Members of all parties, and not only those who happen to be in government. To do that, we need agents in their hundreds, who are professionally qualified and able people. We could call them the Exchequer and Audit Department, but I should prefer even to change the name. The Exchequer has always been associated with the Executive since it was founded in the eleventh century. Let us have auditors on behalf of the people, run ultimately by the House of Commons. Let them be truly independent of the Executive that is spending the people's money. They may then be able to resist staff pressures inside the Executive. Civil servants are part of the Executive, as well as Ministers. They may even be able to take a slightly more long-term attitude than Ministers, who may feel that they will not be in their Departments next year or that their party will not be in office in five years' time.
  May I add one further point to prove where control over the Exchequer and Audit Department lies? Who audits the Comptroller and Auditor General? It is the Permanent Secretary to the Treasury in his capacity as auditor of the Civil List, which is almost certainly a breach of the law. The Exchequer and Audit Department Acts lay down that all Appropriation Accounts, without exception, shall be signed by the Comptroller and Auditor General. They were signed by him, even in his own case, until changes took place, partly as a result of the 1921 Act. He then stopped doing that.

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  The first change was that he felt, naturally enough, that he needed an assistant. He recruited the auditor of the Civil List, which was fair enough. It was not a breach of law. In 1921, the post of Deputy Auditor General, who had the job of auditing the Civil List, disappeared. The permanent secretary to the Treasury became the auditor of the Civil List. That is in bare outline.
  At that time, the Comptroller and Auditor General ceased to sign the accounts. There was no change in the law, but from then on the sole auditor of the Auditor General was the permanent secretary to the Treasury. I do not believe that that is right. The average firm of accountants in this country which audited, say, ICI would not accept that its own auditor ought to be the principal accountant of the firm that it was auditing. That is absolute nonsense. A firm of accountants would not allow the pay and grading of its staff to be determined by the people it was auditing. However, that is the nature of the audit at present.
  Something must be done. I am sure that my right hon. Friend will be doing something about it in the inquiry that his Committee is undertaking. The right hon. Member for Taunton, in the Treasury and Civil Service Committee, which he chairs and on which I serve, is also likely to suggest something. We need an independant professional system of audit. We cannot have total confidence in a system of audit controlled by the Executive that is supposed to be the subject of the audit.
  7.16 pm
  Mr. Edward du Cann: I am pleased to follow the hon. Member for Nottingham, West (Mr. English). He has his admirers in this House and, like us all, his detractors. I am one of his admirers. We are all indebted to the hon. Gentleman for his consistent and competent work on behalf of the House as a whole. The hon. Gentleman's speech was important and well-informed. I hope that my hon. Friend the Financial Secretary will be good enough in due course to comment on his suggestions. I find myself in agreement with many of them.
  As former Chairman of the Public Accounts Committee, I had the honour on five occasions to move motions similar to that which was so agreeably moved by the right hon. Member for Heywood and Royton (Mr. Barnett). All hon. Members
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  and many people outside would agree that that important Committee has served the House well in the past. I hope that it will continue to do so under the chairmanship of the right hon. Gentleman. I wish him and the Committee well in their future deliberations.
  I was grateful to the right hon. Gentleman for the kindly personal comments that he made about me, and I was grateful also to the House for the way that they were received. I enjoyed my time as Chairman of the Committee. I hope that it was a constructive time. During that period, we published no fewer than 250 reports.
  I hope that the innovations to which my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) referred, which we introduced carefully and slowly, will become permanent features of the scene. I took the view that it was right and appropriate to endeavour to associate the public more with the work of the Public Accounts Committee. It was the determination of that representative body of the House of Commons to endeavour to obtain value for the taxpayer—and promote better administration in terms of method especially. As my hon. Friend said, we therefore embarked on visits outside the House to see the work of Government Departments and its effects. We opened our proceedings to the public. I was pleased to hear my hon. Friend say that he thought that on the whole those experiments had been a success.
  If the Committee is successful, it is successful because of the devoted service of its members and those who assist them. I join the hon. Member for Nottingham, West in paying tribute to a very remarkable member of the Clerk's Department who has worked hard on that Committee for some time, also to the Comptrollers and Auditors General for the United Kingdom and Northern Ireland and to my fellow Committee members—who are present in the chamber—my hon. Friend the Member for Folkestone and Hythe who is a devoted and conscientious member, and my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). Perhaps I may also refer particularly to four people who were members of the Committee in my time but who are no longer Members of the House. We very quickly forget those

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  who have given service here and have left. I mention particularly Mr. Hugh Jenkins, Mr. John Ovenden, Mr. John Watkinson and the late Mr. Maurice Orbach.
  I was only concerned with the Committee's work in the 1978–79 Session which was curtailed by the dissolution of Parliament in April last year. The Committee of that period issued eight reports covering 13 main subjects. It took evidence on a further 13 subjects, and the Committee under the right hon. Member for Heywood and Royton was good enough to publish those.
  I wish to refer to one of the particularly important points that the right hon. Member for Heywood and Royton raised. As in former years, the Committee continued to carry out its work in an entirely non-party spirit. Whatever differences of opinion hon. Members may have on the Floor of the House—and there certainly are differences which show very clearly all the time—in the Committee we were united in our aim of contributing to the better management of the country's resources. That was the practical ideal that united us. Therefore, we had no difficulty in agreeing the terms of all of our reports without any formal division in the Committee. Further, we made factual reports to the House of Commons which was then free to take whatever partisan view it wished. I agree very much with my hon. Friend the Member for Folkestone and Hythe that it is important to preserve, wherever possible, that bipartisan approach.
  I turn now to some examples of the work of the PAC. We covered a whole range of subjects, just as the right hon. Gentleman is doing today. How wise he was to talk about the continuity of the PAC's work. We inquired into excess Votes, the underspending of cash limits, the Contingency Fund, in which the hon. Member for Nottingham, West has a great interest, the meteorological services, for which I have great admiration, the cost of Harrier aircraft, contract incentives and four other matters which I would like to mention in detail.
  The first, which was referred to by my hon. Friend the Member for Uxbridge (Mr. Shersby)—and I apologise to him for the fact that I was unable to hear his speech—concerns the Housing Cor-
  1696
  poration. The Committee was shocked to find a number of serious items for criticism in this area—the overpayment of grants, the inadequacy of initial vetting and subsequent monitoring of housing associations, weakness over accounts and so on. The Housing Corporation is now disbursing more than £400 million of public money each year. It was amazing to discover that these slacknesses had gone on undetected for such a long time. I am glad that legislation is now being brought in by the Minister for Housing and Construction and his colleagues. I am glad that the Comptroller and Auditor General now has access to the books and records of the Housing Corporation, and I hope that that, too, will help to improve control.
  Second, I turn to defence matters. Our inquiries ranged over several diverse aspects of the Ministry of Defence's vast responsibilities. One of these was the operation of arrangements for the placing and pricing of non-competitive contracts. Where one has monopoly suppliers and monopoly buyers, it is important to keep what is done under close surveillance all the time. If the spur of competition is absent, one cannot be sure that the prices being quoted and those at which orders are executed are the right prices. This is a necessary and continuing subject for the PAC to examine.
  Third, another defence subject inquired into is the declining productivity in the naval ship building industry, which continues to receive substantial subsidies from public funds. We are talking about large sums of money, often hundreds of millions of pounds. My hon. Friend the Member for Folkestone and Hythe and the right hon. Member for Llanelli (Mr. Davies) will remember that in the past we have looked at the work done in Naval dockyards. A continuing impression that I have about defence matters is worrying. Defence is enormously expensive. It is very important to ensure that an increasing proportion of our gross domestic product is spent on defence. I support the Government's efforts in this regard. Yet, on the other hand, all the time that I spent in the PAC indicated to me that defence spending Departments are also extravagent Departments. I am quite convinced that the scope for savings in the defence Department is immense.

  1697
  The fourth matter that I wish to mention is the inquiry that we made into the operation of the exchange equalisation account. Obviously this is a matter which requires examination with discretion and privacy. I take the view that the Government by and large are obsessive about secrecy. They do too much in private. Here we have the Public Accounts Committee looking at a matter which is commercially sensitive. It was proper for the PAC to study how the exchange equalisation account had been operating over a period, and I am happy that we were able to make one or two minor constructive suggestions which I hope will be of use in the future operation of that account.
  These are the bread and butter issues. They were all in the form of an inquest, but I hope that they were, in their way, a stimulus and a spur to financial effectiveness and efficiency.
  I wish to turn now to the more general matters that were mentioned by the hon. Member for Nottingham, West. Our second special report to which he referred was particularly significant because it considered certain recommendations made by the Procedure Committee and the Expenditure Committee—of both of which the hon. Member was a distinguished member—affecting the work of the PAC and the role and functions of the Comptroller and Auditor General and his staff in the Exchequer and Audit Department. As the PAC was the Committee directly affected by these recommendations, we thought it right to record our views on some of the issues raised before decisions were taken by the House or the Government.
  We particularly welcomed the Procedure Committee recommendation that the PAC should be excluded from the restructuring of Select Committees and left to continue its indispensable, specialised role. However, we were less happy about the recommendation that the new Departmental Select Committees should examine and comment on all the PAC reports before they were debated in the House, and that the PAC should be invited to take part in the examination of Departmental witnesses. Those two recommendations surprised me greatly. I took the view that such procedures would doubtless lead to unacceptable delays in
  1698
  the PAC's proceedings, and that they certainly could jeopardise the completely non-partisan nature of the Committee's work. Our view was that the differing objectives of the departmental Committees should be pursued separately. As Chairman, now, of the Treasury and Civil Service Select Committee and as Chairman of the Liaison Committee I confirm that view.
  The Procedure Committee's recommendations on the role and functions of the Comptroller and Auditor General and the Exchequer and Audit Department were overtaken by the Government study to which the hon. Gentleman referred and which has now taken the form of this Green Paper. I was pleased—and I dare say that my hon. Friend the Member for Folkestone and Hythe and the right hon. Member for Llanelli will confirm it—that it was perhaps because of some of the proposals made by the PAC that that study was launched. We now have it, and it is a matter that needs to be discussed at an early date. I am glad to know that the right hon. Gentleman's Committee is doing exactly that.
  I spoke earlier of the outside visits made by the old PAC. As my hon. Friend will remember, we not only took evidence from the Comptroller and Auditor General about his function. We also visited the headquarters of the Exchequer and Audit Department and met and talked with all the senior staff. I was astonished to learn that ours was the first visit to the Department by a PAC since the Department was established in 1867. It seemed to me extraordinary, when the insight that we derived from its work was so useful to us, that no one had thought of paying a visit to the Department before then, but there it is.
  What I wish to say clearly to the House on this subject can be said under two headings. My first point is that, over the years, the work of the PAC and the Exchequer and Audit Department has developed through mutual support and with, I may say, much help from the Treasury into a powerful combination for monitoring and improving Government administration. It may well be that there is room for further development and improvement, but I believe that it is most important that, whatever changes may eventually result from the present review, those changes should not in any way

  1699
  jeopardise the substantial benefits derived from the existing arrangements.
  In particular, I stress the risks to the independence of the Comptroller and Auditor General, and the audit-based nature of his inquiries, if he were subject to more direct parliamentary control and was required to undertake investigations at the request of the House or of one of its Committees. That was the view taken by the old PAC.
  I began by paying a tribute to, and associating myself with, the speech of the hon. Member for Nottingham, West. I shall not rehearse his arguments, but I agree with him that perhaps it is wrong that the Exchequer and Audit Department should be to such a degree subject to the general control of the Civil Service. I think that that Department and the Comptroller and Auditor General should be more independent of the Treasury than they are today.
  I do not believe that the appointment of the Comptroller and Auditor General should always be made from the Civil Service, and I do not believe that the pay of the staff of the Exchequer and Audit Department and of the Comptroller and Auditor General should be on all fours with that of the Civil Service. I do believe, however, that the Comptroller and Auditor General should have a wider remit and, to use a phrase which is not original, that he should have a wider duty to follow public money wherever it is spent.
  I can now make some common cause with the right hon. Member for Heywood and Royton, particularly in relation to his analogy about greenhouses on the moon. I do not believe that the responsibility of the Comptroller and Auditor General should be financial only. I believe it is right that he should move, increasingly, into the orbit of managerial efficiency.
  The right hon. Gentleman was correct to point out that risks are involved in this context. We were able in the last PAC, as my hon. Friend will remember, to get into this area a good deal, particularly in looking at some of the larger Government projects by deliberately choosing those which were probably—in party political terms—non-controversial. I see no reason why that work should not continue and be extended. However, one must recognise that there are certain risks.
  1700
  Perhaps the best testimonial to the Comptroller and Auditor General and the Exchequer and Audit Department is demonstrated by the increasing volume of the work of the Public Accounts Committee. When I was first elected to the House 24 years ago, the reports of the PAC consisted of 36 pages and 136 paragraphs. In the last full year when I was Chairman—1977–78—the reports consisted of 152 pages and 491 paragraphs. That was a four-fold increase.
  The right hon. Gentleman gave us a snapshot of the volume of the work with which he is currently dealing. There is no question but that if there were not a Public Accounts Committee, a Comptroller and Auditor General and an Exchequer and Audit Department, it would be necessary to invent them. When I say that I wish them well, it is not out of parliamentary politeness. Their work is essential in the national interest.
  In its third report of 1978–79, the PAC also reviewed various aspects of parliamentary control of public expenditure arising from previous recommendations of the Committee and from the fourteenth report of the Expenditure Committee with which, again, the hon. Member for Nottingham, West is connected. The most important of these—and one which the PAC strongly supported in paragraph 4 of the report—was the assimilation of cash limits and Votes which had been largely completed in the financial year 1979–80 and for which the right hon. Gentleman and his colleague the hon. Member for Llanelli deserve considerable commendation.
  This assimilation seeks to achieve the objective that the cash provision which Parliament is asked to authorise in the original departmental Estimate will now be expected, except in exceptional cases, to cover the whole expenditure for the year. That means the House will no longer be faced with voluminous Supplementary Estimates for pay and price increases which it cannot effectively scrutinise and control. In this way, I hope that there will be a new and significant opportunity to improve Parliament's control of public expenditure, provided only that the House can devise an effective means of scrutinising those Supplementary Estimates presented by the Government.

  1701
  The Treasury and Civil Service Select Committee, of which the hon. Member for Nottingham, West is a member, has reported on this matter. He and I are associated with the report made to this House. We have just received the Treasury's reply, and perhaps I may say to my hon. Friend the Minister of State and the Financial Secretary to the Treasury that we shall be studying what the Treasury says.
  Howsoever the matter is eventually decided does not, perhaps, matter too much, provided that the House has an effective means of scrutinising those Supplementary Estimates presented by the Government. Upon that, I think it would be right for right hon. and hon. Gentlemen on both sides of the House to insist.
  Increasingly, as time goes on, we provide better, more effective methods of parliamentary control over the Executive. There is no better way of achieving that than by controlling the way in which taxpayers' money is spent. We are trustees for the taxpayers. They trust us, particularly on the Back Benches, to ensure that by and large they get value for money. I hope that the new Select Committees will have an important part to play in that process and increasingly associate Parliament with the policy-making process.
  Increasingly, I come to the conclusion that it is necessary for Parliament, by whatever method it may devise, to review organisations and systems just as much as transactions. All the reports are on cash, not activities. The PAC, crucial though its work is, is in a sense a forerunner only of other systems of parliamentary scrutiny and control that perhaps we have yet to devise.
  I should like to see us evolve methods and systems towards a form of departmental reporting which identifies clearly to the House, and through the House to the nation, policy objectives, what the measurable progress is towards obtaining policy objectives, an assessment of the resources devoted to achieving planned levels, even if they are intermediate, and, last but by no means least, some measure of achievement. We have done no work of any kind to establish performance indicators. There is an urgent need to do that. What I am trying to say, in a sentence, is that it is crucial to look at more than just the figures.
  1702
  The Public Accounts Committee will be needed for ever. There is perhaps even more virtue in adopting the systems approach to auditing. If there is an area for examination and work in the future, it is that. Our controls over expenditure, as the right hon. Member for Heywood and Royton wisely said, remain inadequate. They need strengthening urgently.
  The present Lord Chancellor was right when he complained that our democratic system provided an elected dictatorship. It is essential that we on the Back Benches—the people's representatives—should be more closely associated with the business of policy-making, comparing results with forecasts and outturn with proposals, and examining policy alternatives. To devise a new system of auditing is the first essential. Through that method, my burning ambition remains—it is in no way mitigated now that I have left the Public Accounts Committee—to ensure that it really is Parliament that rules.
  7.44 pm
  Mr. Denzil Davies: I congratulate my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and pay tribute to him for presenting his first report as Chairman of the Public Accounts Committee. I have no doubt that he brings, and will bring, to his task the diligence, skill and good humour that he displayed when he was Chief Secretary to the Treasury. I also pay tribute to the previous Chairman, the right hon. Member for Taunton (Mr. du Cann). I was privileged to serve under him for a few years. He displayed skill as Chairman of the PAC, and I learnt a great deal from him. I appreciate the experience.
  This is the first time that we have debated PAC reports since the new departmental Committees were established. The new Committees, at least initially, cast a certain shadow over the PAC, because they seem more glamorous. They examine the broad sweep and do not have to deal with specific factors or actions. Perhaps that is their attraction.
  As the right hon. Member for Taunton said, there will always be a PAC and a Comptroller and Auditor General. The work of the Committee is unique. It examines transactions and tries to chase

  1703
  and trace money paid out by the Government. This afternoon, we heard an extraordinary statement by the Secretary of State for Industry, who said that the Government were arranging to pay moneys to a foreign partnership. The PAC is the best body to investigate such transactions. I do not know whether it will wish to do that, but it is for such situations that the PAC exists. I am sure that it will continue to do its job diligently.
  I have no doubt that the Financial Secretary will deal with all the issues in detail. The fourth report from the 1979–80 Session deals with Civil Service pay. A few weeks ago, we discovered through questioning in the new Treasury and Civil Service Committee that Civil Service pay might go up by 25 per cent this year. That was an important fact for the Committee to elicit. I hope that the Financial Secretary will tell us whether the Treasury accepts the recommendations in paragraph 15 of the fourth report, which deals with the way in which the main Civil Service Estimates are to be brought to the House.
  A report in a Sunday newspaper said that in the next Session the Government intended to legislate on the structure of the PAC and on the Comptroller and Auditor General. I appreciate that the Government might not wish to go into much detail, but I hope that the Financial Secretary will say something about it, because the PAC is examining the matter and there is a Green Paper.
  Much of the debate has involved the role of the PAC. If legislation is passed eventually, I hope that it will provide for an extension in the PAC's role, so that it can cover matters that have been mentioned in the debate. I hope that the Government will not be too timid in their proposals. I hope that they will not pay too much attention to Treasury suspicions. The Treasury is naturally suspicious of other organisations that appear to poach on its territory.
  My hon. Friend the Member for Nottingham, West (Mr. English) made an interesting speech, but he did not use the correct analogy. He said that Comptrollers and Auditors General tended to be former Treasury second permanent
  1704
  secretaries and that they were gamekeepers turned poachers. I think that they are gamekeepers in both cases. They are doing a different job.
  The Treasury should not be suspicious. The Public Accounts Committee and the Comptroller and Auditor General can do work for which the Treasury is not equipped. That is no criticism of the Treasury. It does not and cannot pursue such payments and transactions. Once the Treasury has agreed levels of expenditure with Departments, it is ill-equipped to carry out such a role. I had expected it to welcome the strengthening of the roles of the Public Accounts Committee and of the Comptroller and Auditor General. Indeed, I would have thought that that might help the Treasury.
  Reference has been made to the Acts governing the work of the Comptroller and Auditor General and the Public Accounts Committee. Perhaps those Acts should be reconsidered. Perhaps the institution should be more independent. This is a difficult area. I believe that the Acts should be reconsidered. This may appear to be a reactionary note from a reactionary lawyer, but we should not talk too much of the Executive and the legislature. There is a tendency to look at the British constitution as though it contained a separation of powers. At the end of the day, the Executive sits in this House. If the two are divorced, it may create edifices that do not serve us well. However, we must consider the independence of these bodies in relation to the Government.
  I should like to see the role of the Public Accounts Committee extended to cover local authorities. Perhaps the Comptroller and Auditor General's office could be merged with that of the district auditor. I do not know the answer.
  There has been a vast increase in the amount of money spent by local authorities. A case can therefore be made for amalgamation or extension of the Comptroller and Auditor General's office. I should also like to see its role extended to cover " value for money " or " efficiency " audits. The right hon. Member for Taunton mentioned the Ministry of Defence. I make no criticism, but I do not think that the Comptroller's office and the Public Accounts Committee are equipped to pursue waste in the Ministry of Defence.

  1705
  I remember those Committees and the difficulty of understanding and discovering what was happening when technical matters were involved. Considerable waste probably occurs, particularly in the Ministry of Defence. However, neither the Treasury nor the Public Accounts Committee is equipped to go into intricate areas of waste. I therefore hope that the role of the Committee will be extended into areas of " efficiency " and " value for money ".
  The Committee has, and will continue to have, a unique role. I hope that we shall witness a development of that role. Criticisms have been made. Dr. Norman ton's book has been mentioned. I am not qualified to say whether the criticisms that have been made are valid However, criticism is understandable, because little change has been made during the past 100 years. The amount of money spent by the Government has grown enormously. I hope for a change, but it should not detract from the role of the Public Accounts Committee as the guardian and watchdog of public expenditure.
  I hope that the Government will tell us something of their thoughts. If they bring forward legislation, we shall consider it with an open mind. We hope that any such legislation will be of a fairly radical nature.
  7.53.
  The Financial Secretary to the Treasury (Mr. Nigel Lawson): I shall begin my remarks in a special way. I wish to pay tribute not merely to the present Chairman of the Public Accounts Committee—as is customary—but, on the rare occasion of a debate on reports of the Public Accounts Committee, I pay tribute also to his predecessor, my right hon. Friend the Member for Taunton (Mr. du Cann). I pay tribute to them for the achievements of their Committees. One is in his maiden year and the other is in his valedictory year. They both made excellent speeches today.
  I do not wish to be invidious, but it is right to pay special tribute to my right hon. Friend the Member for Taunton. He has steered the Public Accounts Committee for many years with great skill and to great effect. I am sure that his successor, the right hon. Member for Heywood and Royton (Mr. Barnett), will make an equally illustrious Chairman.
  1706
  He will have noted that his predecessor gave one or two tips in his speech. There are few matters about which all parties agree. However, it is widely agreed that the work of the Public Accounts Committee is an effective vehicle for enforcing the accountability of Ministers.
  Since the last debate, in which I had the honour to take part as an Opposition Member, the House has opted for a major enhancement of the accounability to Parliament of Ministers and Departments. We now have a new departmental Committee system. My right hon. Friend the Member for Taunton is playing an important part in that development. Various hon. Members have touched on this subject. There seems to be general agreement that the new Committees do not diminish the relevance and importance of the Public Accounts Committee. In some quarters, it was felt that the new Committees might be something of a nine-day wonder. My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) said that the Public Accounts Committee would still be forging ahead while the new Select Committees wallowed in the mire.
  I do not believe that the departmental Committees will be a nine-day wonder. They are much more important than that. However, they have yet to find clear terms of reference and a clear role. The Public Accounts Committee has established its role over the decades. In addition to their being new, the work of the Select Committees is less clearly defined.
  During the last Parliament, the recommendations of the Select Committee on Procedure gave rise to these new Committees. As my right hon. Friend the Member for Taunton said, the Committee on Procedure concluded that the Public Accounts Committee had an indispensable, specialised role quite distinct from the general scrutiny of administration. The Government agree with that judgment. I also pay tribute, along with the right hon. Member for Heywood and Royton, to the Comptroller and Auditor General and his staff.
  I should like to confine my remarks—to a greater extent than usual—to answering the points that have been raised during the debate. I do not wish to make general observations on the

  1707
  role of the Comptroller and Auditor General and the Exchequer and Audit Department. The Government have published a Green Paper. We have set out our views and the areas in. which we have an open mind or have reached a provisional view. It is a discussion document. We look forward to hearing the views of the House and of the Public Accounts Committee.
  Mr. English: I welcome the presence of the Financial Secretary, as he was a member of the former Expenditure Committee. However, I hope that he will answer a point that I raised while he was momentarily out of the Chamber. Perhaps he can explain why the Green Paper does not mention the pre-audit functions of the Comptroller and Auditor General.
  Mr. Lawson: I shall come to that point, if the House is patient. Having made a few preliminary remarks, I should like to consider in order the points raised by various hon. Members. The last speaker that I could forget is the hon. Member for Nottingham, West (Mr. English). Who could forget him, particularly in the context of a debate on the reports of the Public Accounts Committee? I was fortunate in that my hon. and learned Friend the Minister of State took a note of what the hon. Gentleman said while I was momentarily out of the Chamber.
  There is one point in the Green Paper which I should like to underline. It is the Government's view that the effect of the working relationship between the Comptroller and Auditor General and the PAC should be preserved. That very special working relationship has a great deal to do with the unique character of the PAC's work and its unique effectiveness. The Committee's reports are based on work by the Comptroller and Auditor General, which in turn is based on facts which have been researched by the staff of the Exchequer and Audit Department in the various Government Departments. The audit-based character of the Committee's reports explains why no Government of any kind can afford to ignore a recommendation of the PAC. Certainly, this Government do not. I hope that answers one of the questions put to me by my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), who admonished me not to ignore anything
  1708
  which the PAC was to recommend or to state. I assure him on behalf of the Government that I shall not and that we do not.
  The right hon. Member for Heywood and Royton raised a number of points. He referred among other things to the inter-relationship between cash limits and public sector pay. That was also touched on by my right hon. Friend the Member for Taunton. Indeed, the right hon. Member for Heywood and Royton referred to the remarks that I made on this subject during a debate some years ago on the PAC's reports. I think he suggested—certainly, the PAC suggested in its report on this matter—that provision for Civil Service pay increases should have been made in the Votes of the individual Departments and not in a single Vote. But, as I think he knows—and it is important to understand this—there were two reasons why we did not follow that procedure for 1980–81. First, the Civil Service pay award differs between grades. Therefore, the cost varies from Department to Department, depending on the mix of grades. Again, many of the departmental Votes, relatively speaking, contain very little but pay, as a result of which they lack the flexibility to meet variations of this kind. The idea of the central Vote was partly to provide for that necessary flexibility.
  Secondly, work on the single Vote could be delayed until a much later date than work on the many departmental Votes. That enabled the Government to consider the pay research review before providing for Civil Service pay. That was in line with our manifesto commitment, which was that we would reconcile the system of pay research in the Civil Service with the system of cash limits to which we are committed. In my judgment, those arrangements in no way detract from parliamentary control, which I think was the main point made by the right hon. Gentleman.
  A revised Estimate will be presented before the House votes on the Estimates. It will allocate provision to the individual departmental Votes. Making provision in departmental Votes from the outset would have resulted only in Supplementary Estimates reallocating provision among the various Departments. These Supplementary Estimates, which would

  1709
  have been the real outcome, would have occurred no earlier than the revised Estimates on which the House will now have the opportunity to vote. Therefore, the House would have been no better off and there would have been no greater parliamentary control.
  I should like to emphasise—and this relates to another point which the right hon. Gentleman made—that the central Vote was set before the pay settlement. It was the framework for the negotiation. That is precisely in line with the comments I made in our debate in January 1978, to which the right hon. Gentleman referred.
  Mr. Joel Barnett: I do not wish to be difficult about this, but that is not precisely what the Minister said in January 1978. He quoted the Expenditure Committee as saying:
  " effective cash limits should be fixed before pay negotiations are entered into".—[Official Report, 9 January 1978; Vol. 941, c. 1345.]
  He stressed the word " before ".
  I recognise the difficulties in the current year. Is he saying that, for the future, he will abide by what he said then and also that he accepts what we said in paragraph 15 of our report, that whatever else he did, we would be strongly opposed to reverting to the previous arrangements whereby provision for pay in the main Estimates reflected only pay settlements already made or whose lines had already been settled with sufficient precision?
  Mr. Lawson: We are thinking of the best way of treating future years in the light of our experience this year and in the light of the remarks made by the PAC and the report to which the right hon. Gentleman has just referred. But the main point I was making, which preserves the essence of what I said in 1978, was that the overall limit was set before the pay settlement. That provided the framework within which the pay settlement took place.
  There is obviously a difficulty in reconciling the system of pay research with the cash limit system. I think that we have achieved a method of doing that which makes sense. We shall have to see how we get on in the light of experience.
  Mr. Joel Barnett: I take it from that—obviously, many people would be ex-
  1710
  tremely interested in this matter—that pay research will continue and that the new system will be devised in line with that.
  Mr. Lawson: Certainly, pay research is in operation at the present time.
  My right hon. Friend the Member for Taunton—although he spoke at the end of the debate, it is relevant to bring him in at this point—also referred to Civil Service pay, as did the right hon. Member for Llanelli (Mr. Davies), who praised the Treasury and Civil Service Committee for unearthing the fact that in this coming year Civil Service pay is expected to be 25 per cent. above what it was last year. Of course, those are not new figures. They are published figures. But all credit to the Committee for having noted that they existed. However, it would be a great pity—and I counsel the House to take heed of this—if it were thought that that meant that Civil Service pay settlements this year have been of the order of 25 per cent. That is very much not the case.
  The right hon. Member for Llanelli looks surprised. I do not want to read the letter which my right hon. and learned Friend the Chancellor sent to my right hon. Friend the Member for Taunton, which clearly set out the position. That letter is available for all who wish to see it. Roughly speaking, the 14 per cent. cash limit has been adhered to for the total pay increase this year. But the total pay bill is very much more than last year as a result of the staging of pay settlements which was introduced by the previous Administration, which meant that there was a delay in the coming into effect of the previous year's pay increase.
  Mr. Hordern: Am I right in thinking that the 25 per cent. is made up of 14 per cent., representing the cash limits for this year, plus 11 per cent. for last year? What will be the position in regard to next year? Can my hon. Friend say that no part of any phased settlement will run into next year as well?
  Mr. Lawson: A very small part of a phased settlement will run into next year, but the amount next year will be much smaller, because the 14 per cent. has been met largely by the fining down of the amount of the pay bill by a reduction in Civil Service numbers. There is some element of staging, but it is very small.
  Mr. Denzil Davies: In order to clarify the matter, is the Minister saying that the total pay for Civil Service staff for the year 1980–81 will be 25 per cent. higher than in 1979–80?
  Mr. Lawson: That is precisely the position—a position that I find most unsatisfactory. But it is not a position for which we are responsible. The figures were published, and the letter from the Chancellor to my right hon. Friend the Member for Taunton explained precisely how it came about.
  The right hon. Member for Heywood and Royton made some specific points with which I shall deal before turning to the more general matters. He spoke about the Department of Energy and the offshore interest relief scheme—which no longer exists. He gave a fair account of what was wrong, and he put it in perspective. I have only one quarrel with what he said. When he was challenged by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) about why this matter had been put totally out of perspective in the press, he said that he was not responsible for what the press reported. However, he chaired the press conference that led to those reports. He must regret that he allowed this matter to be raised prematurely, before the Public Accounts Committee had reported. That is totally contrary to all custom, but it is the right hon. Gentleman's first year as Chairman of the Public Accounts Committee, and I am sure he will not do that again.
  Mr. Joel Barnett: I am sure the hon. Gentleman will wish to be fair, in his customary manner—if I may put it so inaccurately. He will know that, if the press had been present while the evidence was being taken—it was not—everything that was said at a later stage would have appeared in the press two months later, whoever had been in the Chair. The information given to the press on that occasion was given after I had closed the meeting, so I did not say that as chairman of a press conference. I am not responsible for remarks of members of my Committee. The hon. Gentleman must understand the facts of the case.
  Mr. Lawson: I think that enough has been said about that. I was dealing with what happened, rather than with hypotheticals.
  1712
  The right hon. Member for Heywood and Royton asked specifically about the improvement of the internal audit, which is an important matter. The Department of Energy has noted the suggestion of the Public Accounts Committee. An early review of the resources needed by the Department for internal audit has been launched, and is still in progress. The Civil Service Department, the Exchequer and Audit Department, the Treasury and the Government accountancy service have all been consulted, and any conclusions of general interest to those departments will be widely disseminated. We take this matter extremely seriously.
  The right hon. Member for Heywood and Royton asked about early legislation during the next Session—a point that was picked up by the right hon. Member for Llanelli. I have not read the report, but I can give both right hon. Gentlemen the assurance that there is no question of the Government introducing new legislation to amend the Exchequer and Audit Acts in advance of receiving and considering the report of the Public Accounts Committee. I say that without hesitation or qualification.
  The right hon. Member for Heywood and Royton discussed in delicate terms—but nevertheless he was weighing his words, and he attached great importance to them—the new development of the Public Accounts Committee which he wished to see under his chairmanship. He said that the dividing line between administration and policy was somewhat tenuous, and that attempts to examine one in isolation from the other were likely to be sterile. That is very much the approach that the Government have adopted in the Green Paper. I began to have doubts—I sensed that hon. Members from all parties had doubts—when he made a virtue of the Public Accounts Committee delving into and assessing the merits of different policy objectives. Generalisations in this sphere are dangerous.
  Mr. Joel Barnett: I spoke about how to achieve a policy objective. A policy objective cannot be achieved without questioning a Government's right to have a policy objective, but it may be able to be achieved in different ways. If one looks at it in cost-effective terms, I think that the Green Paper recognises that point.
  Mr. Lawson: The Green Paper recognises precisely that the right hon. Gentleman gave as an example the case of shipbuilding, where he said that on the one hand there was apparent waste of money, and that on the other hand there were constituency interests to be taken into account. This takes us not beyond the ambit of Parliament, but beyond the proper ambit of the Public Accounts Committee, and it could weaken the position of the Public Accounts Committee in our system. The great value of the audit-based Public Accounts Committee is its non-partisan character, which it has always had, and still has. The audit-based nature of both the work of the Comptroller and Auditor-General and the Public Accounts Committee is something that we should never lose.
  My hon. Friend the Member for Ux-bridge (Mr. Shersby) made a number of remarks about the Housing Corporation. In general, his words were not so much addressed to me as to the Public Accounts Committee, urging it to look into the matter. It has access to the books of the Housing Corporation, and I am sure that the Chairman of the Public Accounts Committee and others who were present today will have taken note of what my hon. Friend said.
  With regard to the inter-association study, I am advised that this has not turned out to be of such great value as my hon. Friend had imagined. The criteria used by the Housing Corporation in advancing money to the housing associations include all the proper criteria which he mentioned. If there are any matters which disturb him, I suggest that he writes to my hon. Friend the Minister for Housing and Construction and asks him to look into the matter. The Department of the Environment has a responsibility in this respect, of which he will be very conscious.
  My hon. Friend the Member for Horsham and Crawley referred to the longtime losers—as he called them—Rolls-Royce and British Leyland. He commended the decision of the Government to transfer Rolls-Royce from the National Enterprise Board to the Department of Industry, and I am grateful to him for that. He suggested that British Leyland should be similiarly transferred. I am sure that my right hon. Friend the Secre-
  1714
  tary of State for Industry will consider the matter.
  At this point, it is right to pay tribute to what Sir Michael Edwardes has done for British Leyland within the existing framework, which my hon. Friend feels is unsatisfactory.
  The other specific point to which my hon. Friend referred was the Polish shipbuilding order. I agree entirely with him and with my right hon. Friend the Prime Minister that that was a classic case of a waste of public money and a bad bargain for this country.
  My hon. Friend also dealt with the role of the Comptroller and Auditor General. We have put forward our views in the Green Paper. But my hon. Friend was concerned specifically with the vast increase in the numbers employed by health authorities and local authorites, and he suggested that the Comptroller and Auditor General ought to be allowed to look at this area.
  The Comptroller and Auditor General is responsible for the audit of the National Health Service. In recent years, the Public Accounts Committee has examined and reported on the numbers of administrative staff in the NHS. It is a matter for the Public Accounts Committee whether it considers that it is time for a further inquiry into that question.
  The Comptroller and Auditor General has no standing with local authorities. Our constitutional position is such that a system of district audit has grown up separately from the work of the Exchequer and Audit Department. One of the issues in the Green Paper is whether the Comptroller and Auditor General and the Exchequer and Audit Department should be involved or whether it might be better to seek other ways of improving the local government audit on its own merits.
  Mr. Hordern: On the question of the Comptroller and Auditor General's right to oversee various accounts, my hon. Friend is right about the powers concerning local authorities. But one aspect of the local authorities which concerns the Government deeply is the provision of education services. That is a national service and forms the largest part of local authority expenditure. Docs my hon. Friend feel that here is a case for the Comptroller and Auditor General to

  1715
  have particular powers and rights of examination, considering that these are national, not local authority, powers of expenditure?
  Mr. Lawson: I take my hon. Friend's point. No one who has seen how local government numbers have increased over the years could in any way be complacent about the position. I am certainly not complacent. However, my hon. Friend will know, from some of the discussions which have taken place outside the House in the context of the Local Government, Planning and Land (No. 2) Bill which is going through the House at the moment, how delicate and highly charged is the relationship between local and central government. This matter requires a great deal of thought, but there are paragraphs on this subject in the Green Paper. I look forward to hearing what the Public Accounts Committee, of which my hon. Friend is such a distinguished member, recommends in this regard and to hearing its reasons.
  If I am taking time in answering the debate, it is because I wish to respond to the occasion and to the special plea by the right hon. Member for Llanelli that I should reply to every point made in the debate.
  My hon. Friend the Member for Folkestone and Hythe, from his special experience as, I think, the longest serving member of the Public Accounts Committee present, made some wise observations on the way that the PAC should operate. He expressed some of the concern that I have about the dangers of a change in the nature of the Public Accounts Committee. He also had some stern words for the Government. He asked whether Departments had learned the lessons of the costly failures unearthed by the Public Accounts Committee. I hope that they have. I am in no doubt that the situation would be much worse if it were not for the efforts and successes of the Public Accounts Committee.
  I come now to my colleague on the old General Sub-Committee of the Expenditure Committee, the hon. Member for Nottingham, West. He made a number of points. He was concerned about the power of the Treasury over the Comptroller and Auditor General.
  1716
  The Green Paper admits that certain provisions of the Exchequer and Audit Acts, which reflect an outmoded concept of the role of the Treasury, could be removed or recast in any fresh legislation. We shall be happy to see that. However, we argue that, as operated at present, the relevant Treasury powers have had no material impact on the independence of the Comptroller and Auditor General. Incidentally, the Consultative Committee of Accountancy Bodies, an outside impartial witness, when it appeared before the Treasury and Civil Service Committee on 5 March, testified that the Treasury had not used these powers and that the Comptroller and Auditor General had had total independence. I think that is correct.
  The Green Paper also indicates that the Government are ready to consider dispensing with CSD control of the staffing and grading of the Exchequer and Audit Department's staff in favour of control by the House of Commons Commission. I hope that that goes some way towards meeting the points made by the hon. Gentleman on that matter.
  The hon. Gentleman also asked, and intervened a little while ago to remind me that he had asked, about the comptroller function. This has come to be a trivial function in the way that our systems work. I know that it appeals to his tidy legal mind, but the fact that it is a comptroller function means that it is a sort of pre-audit by which the Comptroller and Auditor General examines control over the vires from the Consolidated Fund to the National Loans Fund. It is important, but chiefly in a formal sense. It is largely automatic. That is why it was not mentioned in the Green Paper.
  Mr. English: I am grateful for that startling piece of information. Every textbook on constitutional law points out that the sole safeguard of the House of Commons in its control of the Executive is the Comptroller and Auditor General's certification that money may properly be paid out of the Exchequer account of the Bank of England to Departments of State under the authority of Parliament. This is now described as trivial.
  The point that I was making earlier, when the hon. Gentleman was momentarily out of the Chamber, was that the Comptroller and Auditor General, who has no lawyers to help him to determine

  1717
  whether the expenditure is legal, had to have an Act of Parliament passed to rectify the errors of every Comptroller and Auditor General in allowing money to be paid to the Crown Agents illegally.
  Mr. Lawson: Reality sometimes transcends the descriptions in the textbooks. I am concerned, as the whole House must be, about the dangers of public expenditure getting out of control. There are many reasons why public expenditure can get out of control. However, the one reason why it can get out of control is not the defect in the technical comptroller aspect of the Comptroller and Auditor General's work.
  If the hon. Gentleman has some suggestions to make, we shall be more than happy to receive them. The fact that there is no mention of this issue in the Green Paper does not mean that we shall reject the suggestions that he has to make. I am sure that the Public Accounts Committee, too, would be more than happy to accept his suggestions on this front and weave them into its report on the Green Paper.
  The hon. Gentleman referred to the position of the Northern Ireland Comptroller and Auditor General. The basic reason why he remains separate is a technical one. I am sure that this will appeal to the hon. Gentleman's tidy legal mind. The reason is that the Stormont Parliament has been not abolished but suspended.
  I have already referred to part of the speech of my right hon. Friend the Member for Taunton. He, too, said that he would like to see the Comptroller and Auditor General more independent of the Treasury. I have already referred to that issue in my answer to the remarks made by the hon. Member for Nottingham, West.
  Mr. English: The Minister has not answered the other part of my question about the Comptroller and Auditor General for Northern Ireland. I am aware that he is a separate person and that Stormont has been suspended and not abolished. However, how did he come to be reporting to a Committee of this House?
  Mr. Lawson: There was no other Committee to whom he could report. I thought that was fairly clear. I am glad to say that hon. Members who repre-
  1718
  sent Northern Ireland constituencies seem well content with the arrangement. My hon. Friend the Minister of State, Northern Ireland Office intervened specifically to deal with Northern Ireland matters.
  My right hon. Friend the Member for Taunton spoke about the importance of the merger of the cash limits with the Estimates. This may mean that Supplementary Estimates will take on a new meaning. It is a thoroughly good development, and it is now up to the House to find some means of taking advantage of the opportunity to exercise surveillance over public expenditure in a way that it has not found possible hitherto.
  I have great sympathy with the argument that parliamentary surveillance is inadequate. However, that is a matter not for me but for those who are responsible for the procedures of the House. As the hon. Member for Heywood and Royton implied when he advanced his suggestion of a Grand Committee system, it is a matter that concerns the procedures of the House and one that should be discussed in those channels that are responsible for arranging our procedures.
  My right hon. Friend the Member for Taunton gave us something of a curtain raiser for what I assume he wants his Committee, the Treasury Committee, to do in future. He said that the Public Accounts Committee was in some sense an hors d'oeuvre to a somewhat wider investigation into Government policy and expenditure. I wish him every success in the development and evolution of his wider inquiry.
  The right hon. Member for Llanelli spoke from the Opposition Front Bench. I have already dealt with the issues of Civil Service pay this year, and legislation on the Green Paper. The right hon. Member said that the Treasury should not be suspicious of the Comptroller and Auditor General and the Public Accounts Committee. We are not suspicious of them. I am sure that the right hon. Gentleman must know, as a former Treasury Minister, that we regard the Comptroller and Auditor General and the Public Accounts Committee especially as among the few allies that the Treasury has in the House. We cherish that relationship.
  The right hon. Gentleman said that he would like to see the Comptroller

  1719
  and Auditor General's remit extended to local government. I have already dealt with that issue. He also said—I did not quite understand this—that he would like it extended to cover efficiency and value for money. That is precisely what the Comptroller and Auditor General and the Public Accounts Committee examine now.

  Division No. 279]

  AYES

  [8.35 p.m.

  Barnett, Rt Hon Joel (Heywood)

  Hordern, Peter

  Ross, Stephen (Isle of Wight)

  Bonsor, Sir Nicholas

  Hunt, David (Wirral)

  Shaw, Michael (Scarborough)

  Boscawen, Hon Robert

  Jenkin, Rt Hon Patrick

  Shersby, Michael

  Bottomley, Peter (Woolwich West)

  Joseph, Rt Hon Sir Keith

  Squire, Robin

  Carlisle, Kenneth (Lincoln)

  Kilfedder, James A.

  Stevens, Martin

  Chalker, Mrs. Lynda

  Lawson, Nigel

  Stewart, Rt Hon Donald (W Isles)

  Chapman, Sydney

  Lester, Jim (Beeston)

  Stradling Thomas, J.

  Cope, John

  MacKay, John (Argyll)

  Townsend, Cyril D. (Bexleyheath)

  Costain, A. P.

  Major, John

  Waddington, David

  Davies, Rt Hon Denzil (Llanelli)

  Maude, Rt Hon Angus

  Walker, Bill (Perth & E Perthshire)

  Dean, Paul (North Somerset)

  Moore, John

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

  du Cann, Rt Hon Edward

  Myles, David

  Wheeler, John

  Finsberg, Geoffrey

  Newton, Tony

  Whitney, Raymond

  Fletcher, Alexander (Edinburgh N)

  Page, Rt Hon Sir R. Graham

  Wilkinson, John

  Gow, Ian

  Powell, Rt Hon J. Enoch (S Down)

  Wolfson, Mark

  Griffiths, Peter (Portsmouth N)

  Prior, Rt Hon James

  Grimond, Rt Hon J.

  Pym, Rt Hon Francis

  TELLERS FOR THE AYES:

  Gummer, John Selwyn

  Rees, Peter (Dover and Deal)

  Mr. Spencer Le Marchant and

  Hamilton, W. W. (Central Fife)

  Rhodes James, Robert

  Mr. John MacGregor.

  NOES

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

  Richardson, Jo

  TELLERS FOR THE NOES:

  Ellis, Raymond (NE Derbyshire)

  Soley, Clive

  Mr. Jim Marshall and

  Haynes, Frank

  Stallard, A. W.

  Mr. Andrew F. Bennett.

  Orme, Rt Hon Stanley

  Question accordingly agreed to.
  Resolved,
  That this House takes note of the First, Second, Third, Fourth, Fifth and Sixth Reports, and the First and Second Special Reports from the Committee of Public Accounts in the last Session of Parliament, and of the First, Second. Third and Fourth Reports from the Committtee of Public Accounts in this Session of Parliament, and of the Treasury Minutes, and the Northern Ireland Department of Finance Memorandum on those Reports [Cmnds. 7631, 7788, 7787, 7824 and 7882], and of the Fifth, Sixth, Seventh and Tenth Reports from the Committee of Public Accounts in this Session of Parliament.

  ELECTRICITY SURCHARGE (SCOTTISH ISLANDS)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Cope]
  8.45 p.m.
  Mr. Donald Stewart: The need for the debate arises from the decision of the North of Scotland
  1720
  We have had a very wide-ranging debate. It has been a very worthwhile debate, as these debates always are. I have done my best to answer all the points that were put to me. If there are any that I have omitted, I apologise to the hon. Members concerned.
  Question put:—
  The House divided: Ayes 52, Noes 7.
  Hydro-Electric Board to increase tariffs in the Scottish Islands by a surchange where the supply is generated by diesel stations. The proposals mean that consumers in these areas have faced an increase in their bills of more than 28 per cent. from 1 April. The rise for the rest of the country is 17·2 per cent. It also means that the tariffs in the islands have risen by more than 37 per cent. in one year.
  When the North of Scotland Hydro-Electric Board was set up, Tom Johnston took great pride in the social clause that was written into the board's constitution. The clause took into account the longstanding deprivation of the Highlands and islands. The electricity board has almost completely ignored that remit. It has taken the line that the social clause became redundant as a result of the setting up of the Highlands and Islands Development Board, although that board states that at no time has it been called on, or offered, to relieve the electricity board of this obligation.
  The board has also failed to carry out the duty laid upon it by section 6 of the

  1721
  Electricity (Scotland) Act 1979, which states:
  "The North Board shall, so far as their powers and duties permit, collaborate in the carrying out of any measures for the economic development and social improvement of the whole or any part of their district."
  In 1965, the electricity consultative council for the North district persuaded the board that island consumers should be treated in the same way as those on the mainland. It is the desertion of that principal that is the issue here.
  There are also certain anomalies that call in question the justice of this additional tariff. There are, for instance, two hydro schemes in Lewis and Harris, and an oil-fired station at Peterhead, so that no area can be classified as totally deisel or totally hydro. It would be interesting to know what adjustments the hydro board intends to make in its accounts in respect of that factor.
  There is another aspect of the board's operations that I challenge. According to The Scotsman of 20 March, the British Aluminium Company has refused to pay a bill due to the board of about £19 million. The aluminium smelter is at Invergordon in the area of the North board, and the North board has been saddled with the cost of repair and meeting lost production from the accident at Hunterston in the area of the South board.
  The surcharge at issue is opposed by bodies such as the Highlands and Islands Development Board, the electricity consultative council for the area, the Highland Area committee of the Scottish Council (Development and Industry), the Crofters Commission and the local authorities. Mr. Ian MacAskill, the secretary of the Highlands and Islands Development Board, said:
  " We would expect that economic development on the islands would lead to a higher demand for electricity. To attempt to contain demand is positively to discriminate against development in these areas ".
  Already several firms in my area such as Alginate Industries, which provides a lot of employment, with three seaweed-processing factories in the Western Isles—many crofters make a reasonable income from cutting seaweed—have suffered from the reduction by the board of a tariff which they previously enjoyed. They are now affected by this new surcharge and are experiencing severe competition from
  1722
  imports. This surcharge may be the straw that breaks the camel's back.
  I have had long experience of the hydro board, in business, in local government and as a Member of Parliament, and the experience has not been happy. I have always found the board to be totally inflexible. As a Member of Parliament, I have written scores of letters to the board on general and specific constituency affairs, and I cannot recall a single occasion on which the board agreed that I had a case and changed its attitude accordingly. I have never experienced that with Government Departments, private firms or any other organisation.
  I draw the attention of the Minister to an allocation of EEC funds to
  " extend electricity supplies in the Western Isles."
  I asked the board to let me know which areas that were still without a supply of electricity would benefit from this grant by an acceleration in the programme. To my astonishment, the board says that this grant will make no difference. Here is an organisation receiving a handout specifically earmarked for the extension of electricity supplies in the Western Isles, and the only result for the isles is an unfair increase in prices.
  Diesel generation is the result of a board decision that was taken when oil was cheap. It is a sick joke to tell the consumers in the area of the right hon. Member for Orkney and Shetland (Mr. Grimond) that oil prices have pushed up their electricity costs when they are up to their necks in oil.
  The hydro board appears to have slept in when it came to considering alternative energy sources—something that it ought to be doing as an energy producing body. Nothing has been done, for instance, to utilise the enormous peat resources of Lewis, although Bord Na Mona, the peat board in Eire, has several peat-fired stations. The current experiments in the Western Isles with wave power are apparently being funded by the Highlands and Island Development Board, without the involvement of the North of Scotland Hydro-Electric Board. The Highlands and Islands Development Board concludes that the Western Isles could be lit by wave energy at a cheaper cost than that of the diesel-fired generators on which they now depend.
  In my view, the hydro board is a callous, tyrannical, stick-in-the-mud body. Its only reaction to the increased oil price is the wooden and unimaginative expedient of slapping on increased tariffs. I ask the Government, on the grounds of fairness, and in the interests of the Islands, to reject this imposition by the board.
  8.54 pm
  Mr. John MacKay: I am very sorry to have to take part in this debate tonight. I do so because my constituents in Tiree and Coll have been affected in exactly the same way as the constituents of the right hon. Member for Western Isles (Mr. Stewart).
  I say that I am sorry because, unlike the right hon. Gentleman, until last month my experiences of the North of Scotland Hydro-Electric Board in my year in this House had been very favourable. The board had been most helpful in a few constituency cases involving electricity problems. It is a great disappointment to me that the board has increased prices in this way.
  The right hon. Gentleman did not mention the time scale within which this was sprung on us. I see from my records that it was in mid-March that we had the first public indication that the board intended to do this, and that the date for its implementation was to be 1 April. The board therefore did not give any time at all for my constituents or those of the right hon. Member for Western Isles and the right hon. Member for Orkney and Shetland (Mr. Grimond) to make a proper protest. It all had to be done in a most hurried way.
  It is worth saying that the electricity consultative council for the North of Scotland board area, which represents, by and large, the consumers most affected, is utterly against this decision by the board. It is unanimous in its objections. I back it in this, and I am prepared to defend that support, even though the majority of my constituents might be asked to pay a little more. I am sure that the consumers on the mainland in the hydro-electric board's area would have been quite prepared to have an extra decimal point inserted in the second place of their unit cost in order to help the people in the more remote islands,
  1724
  who have enough difficulties. I have found that everybody outside the Islands has great sympathy with the islanders. For example, on Tiree, which has a population of 800, the one and only baker calculates that he will face a surcharge of £160. That could easily make the difference between his staying and going.
  What annoys me—I am sure that it annoys my hon. Friend the Under-Secretary—is that the Government have made some sensible and reasonable decisions about the Islands in the last two or three months. They gave an extra £1 million to the airports authority, putting up the grant to £2·5 million. They gave Caledonian MacBrayne an extra £1·3 million and produced a discussion document on the road equivalent tariff. Then, just to hit us all over the head, the board took this action, which runs counter to the aims in the charter under which it was established, which are to generate and distribute electricity in the Highlands area and have some regard to the social consequences.
  I know that Government policy is that nationalised industries should run their own affairs, but, when a nationalised industry makes a mistake such as this, the Government ought perhaps at least to tell it to think again and consider the alternatives.
  My constituents on Tiree, led by the community council, are threatening, with almost universal support on the island, to deduct the surcharge from their July bills and to pay only a charge based on the mainland tariff. I have absolute sympathy with them in this regard.
  I hope that my hon. Friend the Under-Secretary will indicate ways in which the board will consider alternative courses of action. The right hon. Member for Western Isles was quite right. This is the easy way out for the board. It will not examine other ways of saving money or of generating power, such as by harnessing the wind. The one resource that Tiree has in abundance, like all the Western Isles, is wind, which goes whistling past everyone's ears. An experiment could be conducted, and people would put up with some inconvenience if they could see some long-term benefit for themselves.
  I ask my hon. Friend the Under-Secretary to have a discussion with the

  1725
  board and to put to it the point that I, as a mainland consumer who is probably consuming rather cheap hydro-generated electricity, may be looking, as some of my friends have suggested, for a reduction in my charges if the hydro board is to be true to its principles. Most of the electricity in my part of Argyll is hydro-generated. Perhaps we should get it more cheaply than anyone else. The board has opened a Pandora's box which could prove embarrassing for it in the future.
  I speak for my constituents when I say that the people in the North of Scotland would far rather carry a tiny bit more of the burden if it meant helping the people of the islands and avoiding their carrying the extra charge that the board intends to place upon them.
  8.58 pm
  Mr. J. Grimond: I begin by emphasising what has already been pointed out by the right hon. Member for Western Isles (Mr. Stewart) and the hon. Member for Argyll (Mr. MacKay). namely, that our constituents in the islands have been singled out for an increase in electricity charges of 37 per cent. this year. They are paying up to 28 per cent. extra, where others are paying 17 per cent. extra. That is far outside Government policy.
  The Government are on record as saying that they want to help the islands, and I agree with the hon. Member for Argyll that in certain directions they have done so. I support the right hon. Member for Western Isles when he says that everybody who is concerned with the welfare of the islands has protested against the charge. This includes the consumer council, the consultative council, the Highlands and Islands Development Board and the Crofters Commission. If the imposition were not made, the impact on electricity bills in the rest of the area would be very small. However, if it is made, the increase in the islands will be devastating to individuals and to industry.
  Why does the hydro board complain of more demand? Why does an increase in demand apparently put it into difficulty? I fail to understand how it has made the losses that it claims. If it has, the Government should look into the way that it is run. Most industries—for instance, oil—would rejoice at an increase in demand.
  1726
  That brings me to the subject of oil. In many parts of the country, it is believed that oil is of enormous benefit to the islands. I have pointed out again and again in this House that that is not so. It is of benefit to Britain, to those working on the oil construction side and to the oil companies. To the crofter, fisherman and ordinary person in Shetland, it means higher prices, high rates and disruption of local industries.
  We are deeply concerned that, when the oil construction period is over and eventually oil runs out, we shall be left with no fishing industry, crofting in a poor state and no industries to take up the slack. In four or five years, we shall face a serious problem of depopulation. I agree with everything that the right hon. Member for Western Isles says about the effects of the increase. His example is all too true. All these little industries will be put out of business if it goes on.
  As has also been said, the hydro board chose to make electricity by diesel. I impress on the Government that in the days of the Orkney county council the convener went again and again to the public authorities and beseeched them to get in touch with the oil companies in order to make use of some of the flared-off gas. They would not do so, and nor would they allow anyone else to make electricity on the islands. They sat on their monopolies and insisted on diesel generation. As far as I know, they did not even make use of the huge resources afforded by the oil companies in Shetland. That is an abuse of a monopoly, which should not be tolerated.
  The right hon. Gentleman drew attention to section 6 of the Electricity (Scotland) Act 1979. I draw the Minister's attention to section 4, which reads:
  " In exercising and performing their functions the Boards "—
  that is the North and the South boards—
  " shall, subject to and in accordance with any directions given by the Secretary of State under section 33—(a) promote the use of all economical methods of generating, transmitting and distributing electricity ".
  That is a duty laid upon them, but, apart from a very small experiment years ago, they have done absolutely nothing about it. They have carried out no experiments with wind or waves. They have not approached the oil companies to see

  1727
  whether they could come in on their generation or make use of the gas.
  The section continues:
  " (b) secure so far as practicable, the development, extension to rural areas and cheapening of supplies of electricity "—
  the Board's action contradicts that; it is hardly cheapening supplies of electricity—
  " (c) avoid undue preference in the provision of such supplies ".
  When the South board was arguing in Orkney about uranium, it laid stress on the fact that it was its statutory duty not to discriminate between different parts of its area. That is exactly what the North board is doing, to the detriment of the poorer parts of its area. It is doing it in areas that particularly need heat. We have long winters and an extremely cold and damp climate. Local authorities and the welfare services generally have been putting up houses heated entirely by electricity. Many people in my constituency will either have to refuse to pay their bills or suffer from cold.
  I do not believe that it is the business of the hydro board to rely on the local authorities or the social services to make good its own inaction. It is the board's fault, and the blame lies fairly and squarely on it. Therefore, like others who have spoken in this debate, I ask the Government to exercise their powers under the Act and revoke this charge. It is contrary to Government policy; it is contrary to the 1979 Act; and it is an extremely serious blow to the Islands. Far from it being possible to make good the effects of this out of oil revenues, it will add to the high rates and all sorts of other charges that the Islands will suffer as a result of increased oil prices. The surcharge is to be levied to save the population of the rest of that area from an increase of about 2p a head on their bills. The charge is indefensible, and I ask the Government to use their powers to negative it.
  9.6 pm
  The Under-Secretary of State for Scotland (Mr. Alexander Fletcher): The right hon. Member for Western Isles (Mr. Stewart) has taken the opportunity of this Adjournment debate to raise a matter which is of great concern to his constituents and to electricity consumers on the islands of Orkney, Shetland, Coll and Tiree, where, as in the Western Isles, elec-
  1728
  tricity supply is provided mainly from diesel generating stations.
  I have listened most carefully to the comments that the right hon. Member for Western Isles, the right hon. Member for Orkney and Shetland (Mr. Grimond) and my hon. Friend the Member for Argyll (Mr. MacKay) have made in pressing the case for some action under the statute. They have all pressed their points most fairly.
  The decision by the North of Scotland Hydro-Electric Board to reintroduce a diesel surcharge has provoked, as we are aware, a very strong reaction from representatives of the communities affected. It is, therefore, appropriate that the matter should be aired in this House, although, for reasons which I shall explain later, I am not at present in a position to say a great deal in reply to the points which have been raised.
  It might be helpful if I began by describing the background, as I understand it, to the hydro board's decision. The first notice of charges published by the board after its creation in 1943 made provision for a separate tariff to be applied to the diesel areas to reflect the higher costs of generation on the islands, and this arrangement continued until 1965. By that time, the introduction of larger and more efficient diesel generators had led to the elimination of much of the disparity between island and mainland generating costs. The board therefore decided in 1965 to introduce uniform tariffs to apply throughout the whole of its district.
  Following the oil crisis in 1973, diesel prices rose steeply and the board began to incur losses on its diesel generation. Those losses have increased significantly in recent years as the price of diesel fuel has continued to rise. In an effort to contain the problem, the board first introduced in 1975 a fuel clause surcharge on all electricity users in the diesel areas with an annual consumption in execess of 1 million units and then reduced the level at which this surcharge came into operation to half a million units in September 1979. These measures were not, however, sufficient to eliminate the losses on diesel generation. The board has estimated that these amounted in 1979–80 to £5 million and could rise to some £8 million in the current financial year.

  1729
  Against the background of losses of this order, the board concluded that it should reintroduce a differential tariff for the diesel areas. It therefore announced on 14 March its intention to apply from 1 April a surcharge of 0·3p per unit to all the diesel area unit rates, with the exception of the charges relating to consumption in excess of half a million units. Thus charges to consumers in the diesel areas have on average been increased from 1 April by some 28 per cent., whereas mainland consumers in the hydro board's district have had their charges increased;on average by only 17·2 per cent. I apologise for saying " only " because 17·2 per cent. is a sizeable increase. The board estimates that the surcharge will enable it to recover only about one-tenth of the expected diesel losses in the current financial year. One of the objects of the diesel surcharge has been presented by the hydro board as being to conserve a scarce and expensive fuel. Starting this month, the board is to mount a campaign to encourage energy conservation in the diesel areas in an attempt to hold back the growth of demand for electricity which in recent years has been very much higher than on the mainland.
  The right hon. Member for Western Isles suggested that this was interfering with natural economic growth of activity on the islands. With respect, I think that, allowing for the natural increase and, hopefully, the natural expansion of economic activities, there was always a case—bearing in mind the cost of energy today—for carrying out conservation policies to the full. That, I think, is what the board has in mind.
  Mr. Grimond: But does not the Under-Secretary remember that the board carried on an advertising campaign to encourage people to use electricity when gas was closed down in Orkney? A great campaign was mounted saying how splendid electricity was. We were encouraged to put in more and more electrical apparatus. The board now has the effrontery to say that that was all wrong and that electricity must now be conserved by doubling the price.
  Mr. Fletcher: I cannot argue with the right hon. Gentleman's logic because I agree with him. One of the aspects of State-owned monopolies which fascinate
  1730
  me is that, having no competition, they decide to compete with companies in a related field which are not making quite the same product.
  I have never understood the urge of the nationalised industries to sell their products in the way suggested by the right hon. Gentleman. Perhaps it is because they feel they would be deprived if they were not employing the same PR and advertising consultants as other companies. I hope that the board will pay attention to the right hon. Gentleman's remarks, because he is perfectly right.
  There has, however, been this attempt at energy conservation because electricity usage in the islands has been greater than that on the mainland. Perhaps that is the point that the board has been trying to-put across. The board is also investigating means of reducing its dependence on diesel generation, including the possible use of wind power and the sale of waste heat from its power stations.
  My hon. Friend the Member for Argyll raised the question of wind power, as did the right hon. Gentleman. The hydro board has indicated that it intends to undertake experiments in its diesel areas to establish whether the costs of generation might be reduced by the introduction of a measure of wind generation. That is part of the board's programme.
  As the House will be aware, the board's decision to reintroduce a diesel surcharge has given rise to a great deal of criticism and concern about the adverse effects which this additional imposition could have on the island communities. Representations have been received from a large number of sources seeking action by the Government to prevent the board from implementing its decision.
  I should make it clear that the determination of tariffs is a matter for the electricity boards, and my right hon. Friend's powers to intervene in this area are strictly limited. If, however, on consideration of representations from an electricity consultative council, it appears to him that there is a defect in an electricity board's general plans and arrangements for the exercise and performance of its statutory functions, he may give a direction to the board to remedy that defect.
  The electricity consultative council for the North of Scotland district has

  1731
  submitted formal representations to my right hon. Friend to the effect that the diesel surcharge constitutes such a defect. In putting forward these representations, the council has indicated that it has the support of all of its area committees, including those which represent the interests of consumers in the mainland areas of the hydro board's district.
  The statutory provisions relating to representations of this nature, which are contained in schedule 7 of the Electricity (Scotland) Act 1979, require my right hon. Friend to consult the electricity board and the consultative council before forming a view whether a defect has been disclosed which would make it appropriate for him to give a direction to the board. The consultations are in hand and are being pursued urgently. My right hon. Friend's decision will be announced as soon as possible. For reasons which will be understood, I am not able to go any further in this debate on that important aspect.
  The right hon. Member for Orkney and Shetland pursued the question of undue discrimination, which was also mentioned by my hon. Friend the Member for Argyll. The consultative council referred
  1732
  in its representations to the possibility that, in introducing the diesel surcharge, the board would be exercising undue discrimination. That would be contrary to the duty imposed on the board by section 22(5) of the Electricity (Scotland) Act 1979. I am unable to comment on that at present because of the legal aspects of the matter.
  I appreciate the anxiety of the right hon. Member for Orkney and Shetland and that of my hon. Friend for Argyll, who paid tribute to the Government's policies generally towards the islands communities and to the help that has been given in a number of places in the last year. I appreciate the concern expressed by the right hon. Member for Western Isles on behalf of his constituents. However, we must await the outcome of my right hon. Friend's consideration of representations by the consultative council.
  I hope that the matter will be concluded in the shortest possible time so that the right hon. Gentleman and others who are deeply concerned will be able to assess whatever action my right hon. Friend decides to take.
  Question put and agreed to.
  Adjourned accordingly at seventeen minutes past Nine o'clock.

EMPLOYMENT
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Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Truro):
The LORD CHANCELLOR on the Woolsack.

UN DEVELOPMENT CONFERENCE
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what has been their response to the proposal of Group 77 (now composed of 117 non-aligned nations) that a United Nations conference on global negotiations for international co-operation for development should meet from 5th January to 11th September next year to break the deadlock in the North-South dialogue.
Lord TREFGARNE: My Lords, Her Majesty's Government participated in the consensus in the United Nations General Assembly which called for global negotiations. We are joining actively in preparatory work for the negotiations, now under way in New York.
Lord BROCKWAY: My Lords, I thank the Minister for that reply. Would he not agree that, in view of the fact that, over 10 years, successive United Nations agency conferences—Paris, North-South dialogue—have led only to limited success, a supreme and sustained effort must now be made to reach an agreement? Would the Government support the proposals made by the Willi Brandt Commission, endorsed this week by the French Government, that there should be a summit meeting of Heads of State in January, followed by a sustained conference next year, on the very big agenda, if a package agreement is to be reached?
Lord TREFGARNE: My Lords, we are not yet in a position to give our
1386
considered views on the many proposals contained in the Brandt Commission's Report; but the details which the Committee of the Whole (as it is called) are now considering, the details of the conference to which the noble Lord has referred, will have to be confirmed by the General Assembly this autumn.
Lord BROCKWAY: My Lords, may I ask the Minister this question: Is not an agreement just as necessary for the Western nations as it is for the Third World? Would not the lifting of standards of millions of people in the world mean a demand for goods and less unemployment in our countries in the West? Could the noble Lord confirm two points? He informed me last week—and I was very glad to hear it—that the Government have agreed to make a donation to the main fund of around £5 million, and even a contribution to the secondary fund. Is he aware that these proposals have now been supplemented by the United Nations World Food Council, which has increased its food reserves to the Third World? Would he confirm these two points?
Lord TREFGARNE: My Lords, I cannot confirm the last point which the noble Lord has raised because I do not have the information in front of me, but I have no reason to believe that what the noble Lord says is not correct. As for the general assertion which he made at the outset of his supplementary question, that aid is beneficial to the donors as well as to the recipients because of the increased markets which are thereby generated, while that certainly is a consideration there are others as well, including our ability to find the money.
Lord HARMAR-NICHOLLS: My Lords, is my noble friend aware that, while the generalities contained in the Brandt Report may be impeccable in theory, many details will need to be filled in before it is put to a summit, where a disagreement on details would give an impression which would be even more dangerous than beginning to talk about it?
Lord TREFGARNE: My Lords, the Brandt Commission Report, which your Lordships discussed some weeks ago, is certainly a very important and weighty

1387
document, and we would want to give it very full consideration before reaching final conclusions on it.
Lord GLADWYN: My Lords, even before they have made up their minds on the individual proposals made in the Brandt Report, why cannot the Government say that they favour in principle a meeting of Heads of State or Government in January, as proposed by the French?
Lord TREFGARNE: My Lords, I think we want to be careful before making statements of that nature, which might raise expectations which could not in the event be realised.
Lord HATCH of LUSBY: My Lords, as the Minister has agreed that the implementation of the Brandt Report has an advantage to the industrialised nations as well as to the developing nations, would he answer the point raised by the noble Lord behind him, as to whether the British Government are now working on filling in these details which are so necessary to apply the Brandt Commission Report in practice?
Lord TREFGARNE: My Lords, I must repeat that we are not yet in a position to announce our conclusions on the Brandt Commission Report, but the considerations certainly go wider than the simple one which the noble Lord has often put; that it promotes the interests of our own industries here at home.
Lord GISBOROUGH: My Lords, could my noble friend bear in mind, before any further progress is made, that the Third World already owes 384 billion dollars and in 1981 will owe us 440 billion dollars, and that the only way in which this can be repaid is either by printing money or by bankrupting the banks?
Lord TREFGARNE: My Lords, I think my noble friend over-simplifies the position.
Lord ORAM: My Lords, is the noble Lord aware that his answers this afternoon are in great contrast to the note of urgency that was struck by the Brandt Report; and, while we can accept that deep consideration has to be given to the issues
1388
in the Brandt Report, is it not equally necessary that they should be given urgent consideration? Will the noble Lord urge upon those responsible for these matters that that urgency should be appreciated? In reference to the last supplementary question from the noble Lord opposite, was not the question of the indebtedness of the Third World to the developed world the very critical issue which was raised by the Brandt Report? Far from being a reason for doing little, it is a reason for doing a lot, and quickly.
Lord TREFGARNE: My Lords, the question of indebtedness to the Third World was only one of the matters raised in the Brandt Commission Report, which, as your Lordships know, is a very comprehensive and lengthy document. But the Government will certainly reach their conclusions on this matter as soon as they reasonably can.
Lord PARGITER: My Lords, would the world be materially worse off if the debts were written off?
Lord TREFGARNE: I have a feeling that is a catch question, my Lords.
Lord TANLAW: My Lords, will Her Majesty's Government take into consideration some of the omissions of the Brandt Commission Report—in particular, rural electrification of the developing world—and will this appear on the agenda which the noble Lord has discussed?
Lord TREFGARNE: My Lords, energy is one of the matters which will be considered by the conference which was the subject of the original Question.
Lord BROCKWAY: My Lords, the Minister spoke of the difficulty of financial aid from this country. Is he aware that the proposed agenda for this conference is much more than aid? Is he aware that the agenda covers raw materials, energy, trade, development and finance, and that it is a matter of mutual trade rather than aid from the Western countries?
Lord TREFGARNE: My Lords, the agenda for this conference has not yet been agreed. I think the noble Lord is ahead of himself.

RHODESIA: ELECTION OBSERVERS' REPORT
3.8 p.m.
Lord HATCH of LUSBY: 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 publish the report of the Commonwealth observers on the Rhodesian elections.
Lord TREFGARNE: No, my Lords. The report is available from the Commonwealth Secretariat.
Lord HATCH of LUSBY: My Lords, would the noble Lord the Minister agree that the work of the Commonwealth observers in Rhodesia during the election was of crucial importance? Would he further agree that their report is an historical document which should be as widely available as possible, and has been sadly neglected by the media of this country? Will he reconsider his Answer and put the force of the British Government behind the publication of this report so that it can be widely read?
Lord TREFGARNE: No, my Lords.
Lord GORONWY-ROBERTS: My Lords, is the noble Lord aware that there would be very considerable support in more than one party and section in this country for what my noble friend Lord Hatch has suggested? Is he aware that we would welcome a somewhat more forthcoming indication of the Government's thoughts for the widest possible dissemination and public study of this very valuable report, particularly in view of the fact that the experience of Rhodesia, of leading a dependency peacefully into effective independence, may serve us well when we tackle the more difficult problem of Namibia?
Lord TREFGARNE: My Lords, that may be so, but the Question I was asked was whether we would publish the report. The answer is, No, we will not, because, as I said originally, it is available from the Commonwealth Secretariat. Why, therefore, the Government should publish it I am not certain.
Baroness GAITSKELL: My Lords, may I ask the noble Lord why he is so unforthcoming about welcoming and trying to spread this report?—because it adds to our prestige throughout the whole world and there is no reason why the Government should hold back on it.
Lord TREFGARNE: My Lords, we are not holding back on it. If the noble Baroness wants a copy she can get it from the Commonwealth Secretariat.
Lord HATCH of LUSBY: My Lords, is the noble Lord aware that, while he is correct in saying that the report can be obtained from the Commonwealth Secretariat, I understand that the Commonwealth Secretariat is having difficulty in publishing it as opposed to simply having it duplicated and available to the public? If the noble Lord is not prepared to commit the Government to publish the report, will he assure us that the British Government will play their part as a member of the Commonwealth in ensuring that this report is published and widely disseminated—including the lodging of a copy in the Printed Paper Office of this House?
Lord TREFGARNE: My Lords, as the noble Lord knows, the report is a lengthy document. I cannot give the undertaking that he asks for. The noble Lord referred to the fact that the report had not been widely referred to in the newspapers. We have no more ability to push things into newspapers than we have to get them out.
Lord CAMPBELL of CROY: My Lords, is my noble friend aware that if as suggested this report were to be printed it might be a very long time before it was published, given what is happening to our Hansards at the moment?
Lord TREFGARNE: My Lords, my noble friend is quite right.
Lord GLADWYN: My Lords, is not this paper available in the Library, anyway?
Lord TREFGARNE: No, my Lords, I understand that it is not available there at present.
Several noble Lords: Why not?
Lord BROCKWAY: My Lords, the Minister did not answer the question whether the report will be placed in the Printed Paper Office in this House.
Lord TREFGARNE: My Lords, I have not given an undertaking that this report will be put in the Printed Paper Office.
Lord PEART: My Lords, surely the noble Lord will be aware that certainly the view that we have always taken over a document of this kind is: why not put it in the Library?
Lord TREFGARNE: My Lords, I will undertake to put a copy in the Library if that is your Lordships' wish.
Lord PAGET of NORTHAMPTON: My Lords, since we must accept that the Government of Zimbabwe is the best Government we have got, is there very much point in drawing additional attention to an election which, admittedly, was rife with fraud and intimidation?
Lord TREFGARNE: My Lords, I must reject that. The elections in Rhodesia were not rife with fraud and intimidation.

LONG-TERM INTEREST RATES AND INFLATION
3.15 p.m.
Lord BESWICK: 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 assumption is made about the rate of inflation in the year 2000 when deciding interest rates on Government stock repayable in the next century.
The MINISTER of STATE, TREASURY (Lord Cockfield): My Lords, the Government have made no assumption about the rate of inflation in the year 2000.
Lord BESWICK: My Lords, can the noble Lord recall that on Tuesday, with a degree of emphasis, he said that the rate of interest would not come down unless and until the rate of inflation comes down? Are we to assume, because there
1392
have been two recent Treasury issues repayable in the next century, that they are assuming that the rate of inflation will not come down until the next century? May I ask the noble Lord whether he would not agree that it is something about which we should all be concerned that on these two recent long-term issues alone, raising between them something less than £2 billion, no less than £7,000 million will be disbursed in interest; and that £7,000 million in purchasing power with no extra production must mean a force towards inflation?
Lord COCKFIELD: My Lords, the noble Lord is not entitled to make any such assumption as is contained in the first part of his supplementary question. The terms of issue of a particular stock depend upon the Government's need to sell sufficient stock to fund the borrowing requirement and the acceptability of the terms to the people who are going to purchase those stocks. There is a substantial demand for long-term stock from the institutions and the Government need to take advantage of this demand.
So far as the noble Lord's second point is concerned, the best way of keeping down the burden of interest on future generations is to reduce the public sector borrowing requirement; and that is at the centre of the Government's policy. I am glad to hear that we have the noble Lord's wholehearted support of our policy in that direction.
Baroness WOOTTON of ABINGER: My Lords, would not the Minister agree that the acceptability of stock to the public very largely depends on the terms, and that the terms carry implications (because of the very high rates of interest that they now carry) about what the value of that interest will be in the next century?
Lord COCKFIELD: No, my Lords, they do not carry any such implications.
Baroness WOOTTON of ABINGER: My Lords, why, then, do the public buy them?
Lord COCKFIELD: My Lords, the public buy them because they think that in relation to the current rates of interest the stock represents a good buy. Perhaps I might remind the noble Baroness that

1393
the Government issue short-term stocks as well as long-term stocks and that the tap which ran out immediately before the tap to which the noble Lord, Lord Beswick, referred was the 1983 stock—and you cannot get much shorter than that.
Lord KALDOR: My Lords, is the noble Lord aware that in the London Stock Exchange we possess a very efficient secondary market in gilt-edged securities and it is perfectly possible for the Government to fund the public sector borrowing requirement by issuing reasonably short-term or medium-term securities and leave the secondary market to satisfy the need of the insurance companies for long-dated maturities? My second question in this connection is that, since the noble Lord and his colleagues in the Treasury regard the role of inflationary expectations as so important in the process of inflation itself, how can he think there is no link between inflationary expectations and the maturing dates of the wholly artificial coupon stocks which are issued? They are bound to be counter-productive from the point of view of inflationary expectations.
Lord COCKFIELD: No, my Lords, the Government do not accept the noble Lord's analysis of the correct basis of management of new issues. If the Government were to attempt to raise all of their requirements by short-dated issues it would merely have the effect of driving up the rate of interest on the short-term bonds even further than the present level.
Lord AVEBURY: My Lords, if the contemplated yield is much lower than the rate of inflation indicates and the institutional investors' market is expecting the rate of inflation to come down within the period of the stocks, then, if their expectations are not realised, is it not incorrect to say that the burden of interest on future generations will be as substantial as has been maintained, because the Government will have perpetrated a fraud on these investors by paying them back in depreciated pounds?
Lord COCKFIELD: My Lords, the first part of the noble Lord's supplementary question is of course the complete answer to the noble Lord, Lord Kaldor. The coupon on the stock to which the noble Lord, Lord Beswick, refers was 13½ per cent., which is less than the current rate
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of inflation. This indicates that the markets have confidence in the Government's ability to bring the rate of inflation down, and I am glad to see that confidence shared by noble Lords opposite.
Lord SHINWELL: My Lords, could we have an assurance from the noble Lord that he is really interested in what is going to happen in the year 2000, or is he not feeling very well?
Lord COCKFIELD: My Lords, I would never attempt to emulate the noble Lord, Lord Shinwell, who is as fit and active today as when I first saw him cross the political spectrum when he won the election at Seaham Harbour. Nevertheless, I look forward to seeing the year 2000 and to see who is right about the rate of inflation.
Lord BESWICK: My Lords, the noble Lord has been insistent on disagreeing with a good deal that has been asked this afternoon. May we see whether there are some issues upon which we can agree? Do I gather that now, as on Tuesday, the noble Lord agrees that the whole of the borrowing requirement is required to pay interest on money that has already been borrowed? Secondly, does he agree with my arithmetic that £7,000 million will he dispersed in purchasing power on these two recent longterm issues? Thirdly, will he agree that as far as productive industry is concerned in this country, these rates of interest penalise them as far as on-costs are concerned, and make it almost impossible for them to export by creating an artificial exchange rate?
Lord COCKFIELD: My Lords, there is an arithmetical equality between the amount of public sector borrowing requirement and the amount of interest which is being paid. It does not necessarily follow that one is the consequence of the other, because it is equally arguable that the size of the public sector borrowing requirement is a reflection of the high level of Government expenditure generally. The noble Lord is trying to hypothecate particular items against other items. This is not really an acceptable approach. So far as the rate of interest generally is concerned, we recognise the burden that it imposes upon industry. We shall be only too glad to see when the rates of

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interest come down. The Government's policies are directed to this end and we are confident of success.
The MINISTER of STATE, MINISTRY of AGRICULTURE, FISHERIES and FOOD (Earl Ferrers): My Lords, we may not have exhausted this Question; but if we continue for another 10 minutes I doubt whether we will do so. Your Lordships may feel that we have given this Question a good run for its money, and perhaps it would be proper to move on to the next one.

LAND USE AND FUTURE WATER NEEDS
3.22 p.m.
The Earl of ONSLOW: 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 it is in line with their policy for land use to allow the Severn-Trent Water Authority to flood 700 acres of farm land at Carsington at the same time as the Anglian Water Authority is lowering the levels at Empingham reservoir 50 miles away thus creating up to 1,600 acres of mud flats.
Lord MOWBRAY and STOURTON: My Lords, this is not a matter of policy. The Severn-Trent Water Authority were authorised to build Carsington reservoir by the Secretary of State for the Environment in the previous Administration. The reservoir is required to meet the estimated future needs for water in the Leicester and Nottingham areas. My right honourable friend the Secretary of State for the Environment confirmed the previous decision. The decision by the Anglian Water Authority to stop pumping water into the Empingham reservoir which, I understand, is nearly full, is for the authority to take. They will be saving a considerable sum of money by doing so. However, the authority will review the situation again over the next few months.
The Earl of ONSLOW: My Lords, is my noble friend aware that the Central
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Water Planning Unit advocated in 1976 at the public inquiry that water from Empingham, where the Anglian Water Authority have overestimated their demand by something like 30 per cent., should be made available to the Leicester area, and that regarding the reservoir at Carsington, the river Dove should take its place? This suggestion fell through because the Anglian Water Authority insisted on a capital charge for their reservoir as opposed to straightforward extraction costs.
Lord MOWBRAY and STOURTON: My Lords, I am not sure whether the noble Lord is making statements to me or asking questions. If he is making statements, I do not agree with them. What I can tell the House is that although there is a surplus of water at the moment at Empingham, there need not be a surplus if the Anglian Water Authority do not pump all the time. They can save £300,000 in one year.
As to the prospect of whether they should pump water to the Nottingham-Leicester area, where there is going to be a grave shortage of water in the future, to do so would take over two years, getting the wayleaves and the pipes put in, and would cost about £10 million. By five or six years on it would still not be giving enough water, because Empingham could not do that even if fully pumped up. The Carsington reservoir is a long-term necessity. When I say "long-term", I mean within this decade.
The Earl of ONSLOW: My Lords, could the noble Lord give us the water forecast needs for the Severn-Trent Water Authority as produced by Carsington and the equivalent pump down at Empingham? Can he also show how much water could or could not be saved by metering?
Lord MOWBRAY and STOURTON: My Lords, the cost of the temporary job will be about £10 million. The cost of the permanent one will be about £30 million. As the £10 million will be wasted in a few years' time because it will not do the job anyhow, surely it is better to do the long-term project.
Lord LEATHERLAND: My Lords, I did not hear the Minister comment on

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that part of the Question which talks about the creation of 1,600 acres of mudflats. Perhaps the noble Lord will enlighten us on this matter. What do the Government intend to do with the flats? Will the Government bear in mind that such mudflats are admirable for the growing of rice?
Lord MOWBRAY and STOURTON: My Lords, the noble Lord, Lord Leatherland, slightly followed my noble friend's original Question. The fact is that Empingham reservoir is very big, about 3,100 acres. If the Anglian Water Authority did not pump for one year, it is estimated that the acreage which would become dry might be some 600 acres round the circumference of that area of 3,100 acres. That could be topped up. There is no reason for it to have mud-flats. Water in reservoirs goes up and down, and reservoirs do not become mudflats.
Baroness STEDMAN: My Lords, is the noble Lord aware that when this reservoir was first contemplated there was considerable local opposition to the size of the reservoir and the fact that round its edges it was so shallow that there was likely to be a considerable loss from evaporation? Is he aware that the same opposition is now being aroused locally at the thought of having the mudflats referred to by his noble friend?
Lord MOWBRAY and STOURTON: My Lords, I am reassuring the noble Baroness that there will not be the mud-flats. The water will not go down at once. It will be a steady going down while the sun is out and the banks dry.
Lord BALFOUR of INCHRYE: My Lords, if the arguments that the Minister puts forward are so powerful and confound Lord Onslow's Question, what is the review which he has said is still to take place going to cover?
Lord MOWBRAY and STOURTON: My Lords, the Anglian Water Authority are an independent water authority. They have not been pumping since the beginning of this financial year. However, they could decide in July, when they have their next meeting to discuss this matter, to start pumping again for one or two
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months. They are their own authority. There is a saving if they do not pump and there is a surplus of water at Empingham at the moment, but, I repeat, not enough to fill the long-term needs of the Severn-Trent.

THE IRANIAN EMBASSY INCIDENT
Lord SANDYS: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m., my noble friend Lord Belstead will repeat a Statement being made in another place on the Iranian Embassy in London.

MAGISTRATES' COURTS BILL [H.L.]
The LORD CHANCELLOR (Lord Hailsham of Saint Marylebone): My Lords, I beg to introduce a Bill to consolidate certain enactments relating to the jurisdiction of, and the practice and procedure before, magistrates' courts and the functions of justices' clerks, and to matters connected therewith, with amendments to give effect to recommendations of the Law Commission. 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.

OVERSEAS DEVELOPMENT BILL [H.L.]
The LORD CHANCELLOR: My Lords, I beg to introduce a Bill to consolidate certain enactments relating to overseas development and co-operation and to repeal, as unnecessary, Section 60(1) and (2) of the West Indies Act 1967. 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 1a, and to be printed.

STREET OFFENCES BILL [H.L.]
Lord AVEBURY: My Lords, I beg to introduce a Bill to amend Section 1(2) of the Street Offences Act 1959. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read la.—(Lord Arebury.)
On Question, Bill read 1a, and to be printed.

ECC REPORT: TRADE POLICY
3.31 p.m.
Lord DRUMALBYN Lord DRUMALBYN rose to move, That this House takes note of the report of the European Communities Committee on Trade Policy: the Tokyo Round (41st Report, H.L. 204). The noble Lord said: My Lords, I beg leave to move the Motion standing in my name, which draws attention to the European Communities Committee Report on Trade Policy: the Tokyo Round. Noble Lords will find, if they have not already done so, that the report contains a valuable paper from the Department of Trade in which written replies are given to preliminary questions put to them on behalf of Sub-Committee B, as well as the oral evidence from the department complementing the written evidence, and further oral evidence at a later stage from the Department of Trade after the agreements were open for signature. We also received oral evidence from the CBI. The TUC chose not to give oral evidence.
I would draw particular attention to the conclusions of the report. However, in order that your Lordships may judge the validity of these conclusions, it seems to me that my first task in opening this debate should be to give some account of the facts and circumstances on which these conclusions are based.
The first question obviously is: why was the conference called? It was primarily because there appeared to be a serious risk that, as a result of the deterioration of economic prospects in the early 1970s, individual countries might resort more and more to protectionist measures of one sort or another, and that in con-
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sequence the objectives of the General Agreement on Tariffs and Trade would be undermined and its very existence imperilled. The energy crisis, which began almost immediately after the conference, made that risk even greater. The negotiations stemmed from the conference held in Tokyo in September 1973, which was attended by representatives from about 100 nations. They were the seventh negotiations in a series of multinational negotiations since the GATT organisation—I will, with permission, use that term throughout—was brought into existence shortly after the Second World War, with the object of liberalising trade and so avoiding the disturbed conditions of the 1930s following the economic crisis in the United States of America, which had widespread repercussions.
The Tokyo Round also gave the opportunity for some bilateral negotiations to take place between participants. The participants included not only the original members of the General Agreement on Tariffs and Trade and countries which subsequently joined, but others as well. Members included East European countries other than the Soviet Union and East Germany. The list of participants is given in Annex I to the report. For the European Community, the Round was of particular significance as it was the first major occasion on which the Commission negotiated on behalf of all Nine of the Members, in accordance with a mandate approved by the Council of Ministers.
The immediate outcome of the Tokyo Conference was a declaration of the objectives to be aimed at the negotiations. These are summarised in paragraphs 4 and 5 of the White Paper (Cmnd. 7724), which was published in October last, in the following terms:
"The objectives of the negotiations were set out in the declaration agreed at the Ministerial meeting in Tokyo. They were, first, to achieve the expansion and further liberalization of world trade through the progressive dismantling of obstacles to trade on a reciprocal basis, and the improvement of the international framework for its conduct. Secondly, the negotiations aimed to secure additional benefits for the international trade of developing countries. It was envisaged that special and more favourable treatment would be accorded to them in areas of the negotiations where this was feasible and appropriate".
Within this framework the Community wished to achieve a greater harmonisa-

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tion of tariffs. Some developed countries, notably the United States of America, had a number of high tariffs and others had a significant number of tariffs which were not "bound". The Communities regarded it as even more important to get rid of discriminatory practices which were detrimental to international trade—the so-called "non-tariff barriers to trade".
Thirdly, the Communities wanted to extend the protection afforded under GATT against disruption of trade by enabling countries to take selective action against any particular country or countries in relation to a particular product. In the first two objectives the Community largely succeeded. In the third it failed to obtain agreement, at least for the time being.
The White Paper has summarised the results of the negotiations succinctly as follows, in pargraph 8:
"Agreements have been negotiated on tariff reductions; on the reduction of tariff and other barriers to trade in agriculture; on trade in beef and dairy products; on the reduction of barriers to trade in aircraft; on subsidies and countervailing duties; on customs valuation methods; on technical barriers to trade; on government purchasing; on import licensing procedures; on the updating of the existing anti-dumping code and on the framework for international trade. An agreement on discouraging trade in counterfeit goods is in draft".
That is a very considerable scope—no wonder the negotiations took five years! So far, of the 99 participants in the negotiations, some participating more intensively than others, relatively few have signed the various agreements, as paragraph 14 of the committee's report indicates. Here, Annex II shows in tabular form the state of play at the time the report was completed, namely March. However, there is no closing date for signatures and some countries have indicated their intention to sign at least some of the agreements. All the developed countries have ratified the tariff agreement, except Japan, which has signed but not, so far as I know, ratified as yet. Perhaps my noble friend will be able to give us further information.
Turning to the tariff protocol, the negotiations took place on a basis of unilateral offers. Final agreement was reached multilaterally on the concessions to he exchanged, the resulting new tariffs being available to all on a most-favoured-
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nation basis. This contractual agreement forms the Geneva Protocol of 1979 to the General Agreement on Tariffs and Trade. To quote the Commission's report—I am doing this to save time:
"Taken together with the elimination of all tariffs on imports of commercial aircraft, aero-engines and other commercial aircraft equipment, a tariff cut of about one-third has been negotiated, covering over 100 billion US dollars of trade".
To even out the peaks and troughs of individual tariffs of countries, a formula proposed by the Swiss was adopted. This resulted in cuts in the higher tariffs being proportionately greater than those on the remainder. Not all tariffs were cut; nor were all which were reduced cut by the standard formula. Even some higher tariffs were excluded from cuts where countries regarded the items as particularly sensitive. Even so, only 1½ per cent. of dutiable imports in the United States will be subject to duties over 30 per cent., as compared with only one item in the United Kingdom remaining subject to a duty of over 20 per cent. However, nearly two-thirds of all dutiable imports will be subject to duties of less than 5 per cent. in the United States. The United States' concessions, which are of interest to this country, were mainly in the chemicals, non-ferrous metals, machinery, textiles and paper sections.
In brief, both the United States and the Community have cut their tariffs by an average of 30 per cent. on a trade-weighted basis vis-à-vis each other, and Canada by about the same. The reduction in Japanese tariffs on EEC exports is about 25 per cent., but that is on their effective rates, which are rather lower than the formal list rates. All this sounds as if it were a strong shot in the arm for exporters and a depressant for those threatened by imports. But the cuts are, in general, to be implemented over a period of eight years by equal annual instalments, starting from 1st January this year, so they are hardly likely to cause sudden or violent disturbances. A few cuts made by the Community are not to come into operation until 1st January 1982, and those on kraft paper and board begin in 1983. I shall not give many details, but I thought that it might be of interest to mention those.
One important outcome of the negotiations is the USA's abandonment of the

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American selling price system, under which duty is charged in the case of benzenoid chemicals and their derivatives not on the invoiced price but on the price at which like goods are sold in the United States of America. This, of course, greatly enhances the duty. This change is to take place on 1st July 1980. Your Lordships will be glad to hear that they have also given up the wine gallon assessment system, which made bottled whisky subject to discriminatory tax.
The Community refrained from making cuts on certain sensitive items, and on others made cuts much less than the formula reduction. I do not think I need give your Lordships the details, but I have them here. The general effect of all Community cuts is to reduce the Community's tariff from a trade-weighted average of 9·8 per cent. to 7·5 per cent.
Not all industries are happy with the outcome as it affects them. In particular, the CBI felt that while the agreement offered opportunities for some improvement in exports, some industries—notably, the textile industry—were far from satisfied. Written evidence to that effect was received from the British Textile Confederation. Moreover, there are strong complaints that British producers have been grievously harmed as a result of the artificially low prices of United States producers of synthetic fibres and tufted carpets, because of the energy and feedstock which is made available to them at less than world prices.
No doubt my noble friend Lady Hornsby-Smith, who I see here, and other speakers, will have a good deal to say about this. I hope that my noble friend who is to wind up the debate will be able to tell us what further steps, over and above those recently announced by my noble friend Lord Trenchard, the Community is taking to eliminate this damaging piece of discrimination.
So much for the general tariff negotiations, and now a word about agriculture. Sub-Committee B did not take evidence on agricultural products, partly because agriculture is not within its remit, partly because the Common Agricultural Policy precluded the Community from dealing with agricultural products in the same way as industrial products in the negotia-
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tions. One can hardly negotiate for tariffs to be reduced, and bound, when an essential element in one's policy consists of variable levies. The Community had, therefore, to resort to bilateral negotiations, though no doubt the bilateral concessions had some effect on the willingness of other participants to make concessions on industrial as well as agricultural products. This was called the sectoral approach, as distinct from the global approach.
However, the Community was anxious to pave the way for greater co-operation in the future, at least by way of consultation. In the event, an International Meat Council and an International Dairy Council were set up, together with a number of rules to be observed on minimum prices. But an attempt to establish an agricultural consultative committee has not so far succeeded, though discussions are to continue. On the other hand, as I have already indicated, there was some success on alcoholic beverages, in persuading the Americans and the Canadians to abandon their present discriminatory practice.
Personally, I am particularly pleased that some useful concessions were made in favour of products from Australia, New Zealand and Canada. A quota of cheese from New Zealand has been arranged, and also some modest exchanges of cheese with Canada and Australia, as well as some access for Community cheese into the United States of America; some on quota and some without restrictions.
There is to be "improved access" for frozen meat into the Community, and a modest annual quota for high quality cuts of beef from the United States of America, Australia, Argentina and Uruguay. The United States of America is to accept from the Community what it describes as a resumption of "traditional exports" of beef and veal. Lastly, Poland, Hungary and Romania are to be allowed to send the Community young beef stock for fattening and veal for processing. But it was not possible to reach any agreement on cereals, nor does it appear that any agreement on sugar was even attempted, though the Commission did manage to avert a confrontation over export subsidies.
So much for the Geneva Protocol and the sectoral approach. The most pro-

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mising aspect of the negotiations lay in the non-tariff barriers to trade. Some were designed to clarify existing provisions of the GATT; others broke new ground. What is sad is that, so far, they have not received the widespread support that they deserve. I hope that my noble friend will be able to tell your Lordships that, at any rate, they have the support of Japan.
The agreement on import licensing is designed to ensure that neither automatic licensing nor licensing for the purposes of quantitative restrictions is operated in such a way as, in itself, to restrict trade. The agreement on international trade in civil aircraft not only reduces tariffs to zero on civil aircraft, aero engines and some aircraft equipment, but confers freedom on airlines to buy whatever aircraft, et cetera, they please, with as little Government interference as possible. This came into operation on 1st January this year. I believe—but, again, the noble Lord can tell us—that in Japan it came into operation on 1st April.
The agreement on customs valuations seemed to the committee the most valuable of the agreements to traders in general, and to the Community in particular. It provides that, normally, customs authorities will base their valuations of imports on what is known as "transaction value"—namely, the c.i.f. price—and will depart from that only after consultation with importers. The United States abandonment of the American selling price is a case in point. A special protocol has been drafted in favour of developing countries, which I need not go into.
The agreement on Government procurement virtually extends to all signatories much the same provisions as have operated within the Community since mid-1978. The purpose is to abolish the practice of Governments and Government-controlled bodies, of reserving public contracts to their own nations or giving them price preference. The agreement includes an appendix listing the bodies which the signatories have agreed will be covered. It comes into force on 1st January 1981. Under the agreement invitations to tender have to be published and information has to be provided on request about the subject of the tender and, after the contract is placed, to the unsuccessful tenderers about the reasons for non-acceptance, if they want them.
There is provision for the settlement of disputes to be assisted by a committee of signatories. Obviously the agreement will only work on the basis of manifest reciprocity and, as the report puts it, of goodwill and honesty. The working of the agreement is to be reviewed after three years.
There are four agreements covering matters which can broadly be described as involving fair trade. These are on subsidies, anti-dumping, technical barriers to trade, and counterfeit goods. The agreement on subsidies establishes the principle that countervailing duties may be imposed only if an investigation has first demonstrated that a domestic industry has been materially injured by subsidised imports and that the cause of the material injury lies in an identified subsidy. The United States of America has now passed legislation to this effect. It was the United States that was rather out of step with the rest of the developed countries, although it is fair to add that some ambiguities remain to be tested in the American courts. A committee of signatories is to be set up to help to settle disputes.
A new anti-dumping code has been negotiated and that is more or less in line with the agreement on subsidies. Again there is the requirement that before provisional duties are imposed there must be proof of the dumping and of the injury caused by the dumping. Retroactive dumping duties are not to be permitted. Instead of imposing duties, an importing country may accept price undertakings from the exporter. The agreement on counterfeit goods is still in draft. It is an interesting one and certainly breaks new ground. There again a committee of signatories is envisaged to supervise the working of agreements and to resolve disputes. It is also envisaged that signatory authorities will agree to seize counterfeit goods and detain them on importation when alerted by the owner of a trade mark.
I come now to the Agreement on Technical Barriers to Trade. The object of the agreement is to place signatory Governments under an obligation to ensure that, whether the standards are prescribed by the Governments or issued by standards institutes, there is no discrimination against foreign manufacturers

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or traders. The agreement aims at achieving as far as possible conformity with international standards. That agreement is to come into force on 1st January 1981.
Noble Lords will have noticed how often I have mentioned committees of signatories in connection with the agreements. It is hoped that these committees will not only help in resolving disputes but will play a large part in maintaining uniformity of interpretation and implementation of the agreements. So long as the membership of the signatories is small, as it is at the moment, the system should work well. It is not so clear how they will work once the membership has grown. It is hoped that it will grow, but it seems that individual representatives of the Nine will be able to attend meetings of the committees, although in general each of the Nine is represented by the Community. Perhaps my noble friend could say a little more about this when he comes to speak, because so much depends not only on the acceptance of the terms of the agreement but on their implementation.
I turn for a moment to developing countries. There is the question of the exemption of developing countries from the full rigors of the non-discrimination clauses of the General Agreement on Tariffs and Trade. One of the two objectives of the Tokyo Round was to secure additional benefits for the international trade of developing countries over and above those which they would automatically receive from the multilateral negotiations by way of reductions in tariff on a "most favoured nation" basis. The Tokyo Declaration made at the conclusion of the Tokyo Conference stated that developed countries would not expect the developing countries in the course of the trade negotiations to make contributions which were inconsistent with their individual development, finnancial and trade needs. Most developing countries interpreted that to mean that their offers need to be no more than minimal.
Tropical products were to be treated as a special priority section. That objective was fulfilled earlier in the negotiating period when the Community made an offer on tropical products. The offer
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covered reductions in the customs duties on 22 products, such as tea, green coffee, cocoa, and so on, as well as the addition of new items to the generalised system of preferences and other improvements in existing arrangements. Developed countries also undertook not to increase domestic taxes on coffee, tea, cocoa and spices. This unilateral offer was implemented on 1st January 1977; other developed countries did likewise, except that the United States sought contributions. Further, most agricultural imports from the least developed countries were granted duty-free admission last year.
Draft framework texts have been prepared formally recognising that, notwithstanding the GATT principle of nondiscrimination, contracting parties may accord differential and more favourable treatment to developing countries and territories, without according such treatment to contracting parties. The texts specifically legalise the generalised system of preference in tariffs for developing countries. They also legalise mutual concessions between less developed countries, and that is going to be of growing importance, forming regional groups such as the Andean and Asean groups and the Central American Common Market. That is always subject to the proviso that any differential or more favourable treatment is designed to facilitate and promote the trade of developing countries, and not to create undue difficulties for the trade of other contracting parties.
The text envisages that the capacity of less developed countries to make contributions or negotiated concessions will improve with the progressive development of their economies and trade situation. That is called the graduation clause. Unfortunately, not all developing countries are willing to commit themselves to this understanding at the present time.
There are really three classes of developing countries: the least developed, listed as such by the United Nations, the newly-industrialising countries, and the remainder which fall between. All claim developing status and expect privileges and exemptions accordingly. Each country selects itself for that status. The committee has felt that some way acceptable to both developing and developed countries has to be found to determine when a developing country has matured to the point when

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it is no longer appropriate or fair for it to be treated as such and to make appropriate adjustment.
In some cases the agreements specifically exempt developing countries wholly or partially from the provisions of the non-tariff agreement, for example, that on subsidy on countervailing duties: the Customs Valuation Agreement exempts them for five years from 1st January 1981 and there can be individual extensions. Under the Technical Barriers to Trade Agreement the committee of signatories can grant to any of them specific exemptions for a specified time.
Nevertheless, the developing countries have expressed disappointment, and one cannot disguise this, at the outcome of the Tokyo Round for them. Considering their demands, including duty-free entry and the removal of all quantitative restrictions on their exports, regardless of the effects, that is hardly surprising. In particular, they have opposed the kind of safeguards proposed by the developed countries. The object of safeguards has been to enable importing countries to take emergency action to restrict imports of particular goods when they increase to such an extent as to disrupt an industry or threaten its survival. At present, such action can be taken only on a nondiscriminatory basis.
The Community wanted action to be taken selectively when necessary—that is, against one, or more, particular country. It was also prepared to support the setting up of a safeguards committee to monitor and review such measures. But the developing countries, on the other hand, insisted that if there were to be safeguards they should be applied only after they were authorised by an international committee. The inability to agree on safeguards was the greatest single failure of the Tokyo Round.
Informal discussions are to continue, but without such an agreement the danger of a relapse into protection is greatly enhanced. No country can allow its industries one by one to be crippled or killed by sudden massive surges of imports, far in excess of expectations, from foreign countries. On the other hand, and equally, countries must beware of allowing their own industries to be ruined from within. If excessive wage demands
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or inefficiency lead to an industry ceasing to be competitive in world trade, resort to a policy of protection is no answer. All it does is to fuel inflation, to increase inefficiency and even to make it difficult to compete in foreign markets. Safeguard action is all very well for a limited time. That is one thing. Protectionism as such is quite another.
In conclusion, the committee considers that the Tokyo Round achieved a remarkable degree of success, although of course it has not solved all the problems. The report says in paragraph 40 that
"the conclusion of the agreements has at least preserved reasonably intact the essential institutional and legal structure of the world trade system, and has created new, and potentially stronger, mechanisms for international cooperation. It has, therefore, at least for the time being made it possible for governments to save themselves from the excesses of competitive protectionist action into which it is virtually certain that the world would have been plunged if agreement had not been achieved".
The outcome has also vindicated the EEC Commission as a powerful and skilful negotiating body. Most of its objectives were achieved. It remains to be seen whether it will be given sufficient resources and will show the necessary perseverance and determination to make the system work.
Much was accomplished. Much remains to be done. Above all, as the report says, in bringing developing countries more within the General Agreement on Tariffs and Trade framework, a major task of the Community's policy should be to work out a constructive policy towards developing countries which respects the needs of both sides. My Lords, I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on Trade Policy: the Tokyo Round (41st Report, H.L. 204).—(Lord Drumalbyn.)

THE IRANIAN EMBASSY INCIDENT
4.3 p.m.
The PARLIAMENTARY UNDER-SECRETARY of STATE, HOME OFFICE (Lord Belstead): My Lords, with the leave of the House, I will now repeat a Statement being made in another

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place by my right honourable friend the Home Secretary. The Statement is as follows:
"Mr. Speaker, I will with permission make a further statement about the events at the Iranian Embassy. I undertook yesterday to keep the House informed of developments and it may be convenient if I summarise what has happened so far.
"As honourable Members will know, yesterday morning at about 11.30 a.m. three armed men forced their way into the Iranian Embassy at Princes Gate, Knightsbridge. A police constable who was on duty at the embassy was forced inside at gunpoint as a hostage. Two people who work for the BBC were in the embassy at the time and they, too, were taken hostage together with a locally engaged member of staff and some of the Iranians who work there. In all about 20 people are being held. One woman hostage, an Iranian, was released yesterday and one British hostage was released this morning. Despite reports of injuries to the hostages, I understand that no one has been seriously hurt. The terrorists said this morning that the British hostages would not be harmed.
"Since the incident first occurred the building has been surrounded by the police, who have cordoned off the area. They have maintained communication with the terrorists and their aim, as in all such cases is, if at all possible, to bring this incident to a peaceful conclusion without loss of life.
"The terrorists have identified themselves as Iranians. They claim to belong to a dissident organisation calling itself 'The Group of the Martyr'. They have addressed certain demands to the Government of Iran, including the freeing of 91 people currently imprisoned there. They have also asked the Iranian Government to recognise the rights of the Iranian peoples.
"I am naturally keeping in continuous contact with the direction of events by the police. I have had a discussion, a short time ago, with the Commissioner of the Metropolitan Police. I will continue to keep the House informed of developments."
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That, my Lords, is the Statement of my right honourable friend the Home Secretary.
Lord BOSTON of FAVERSHAM: My Lords, I should like to thank the noble Lord the Minister for repeating the Statement and for continuing to keep the House informed. We fully understand the Government's position in this matter and that they are in touch with the situation on a minute-to-minute basis. May I take this opportunity to commend the patience and courage shown by the police and the other services in the way they deal with situations of this kind. Clearly, we all join in hoping that this incident will end speedily and without bloodshed and further injury. I do not feel that it would be appropriate either to put any questions to the noble Lord, Lord Belstead, or indeed to say anything more.
Lord WIGODER: My Lords, it is apparent that any comment made either in Parliament or in the media might well find its way into the Iranian Embassy. That could not conceivably promote the prospects of a peaceful outcome and might well prejudice it. In those circumstances, my noble friends on these Benches feel also that it is best at this stage to say nothing.
Lord BELSTEAD: My Lords, I am most grateful for the understanding and support of both noble Lords.

BRITISH AEROSPACE BILL
Returned from the Commons with the amendments agreed to.

ROYAL ASSENT
The LORD CHANCELLOR: My Lords, 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:

Companies Act,

Consular Fees Act,

Limitation Amendment Act,

Insurance Companies Act,

British Aerospace Act,

West Yorkshire Act.

ECC REPORT: TRADE POLICY
4.8 p.m.
Debate resumed.
Lord BANKS: My Lords, we return now to the subject of the Tokyo Round. This is a subject which we debated in this House on 31st January when we discussed the order ratifying nine of the agreements associated with the Tokyo Round and when we discussed also the White Paper on the negotiations. But the House is indebted to the European Committee for the report which they have produced, and also to the European Communities Committee and the noble Lord, Lord Drumalbyn, for his very comprehensive explanation of the details of the agreement and the conclusions put forward in the report. We now have much additional background information and some very valuable comment.
The conclusions of the report are very interesting but I do not think that they invalidate any of the conclusions we came to on 31st January. The successful conclusion at last of these negotiations is to be welcomed and the report describes it as a formidable achievement. It is encouraging to have an agreement on liberalising trade at a time of trade recession, and we on these Benches welcome the tariff reduction which has been achieved. As the report says, it demonstrates the continuing commitment of the major trading nations to the progressive reduction of tariff protection.
As the noble Lord, Lord Drumalbyn, explained, a new framework—which also is very welcome—has been established to deal with non-tariff barriers. The noble Lord described that as perhaps the most promising part of the agreements. GATT has been overhauled for the 'eighties, so there is much to be welcomed and much that is encouraging in these negotiations which have been successfully concluded, but the report contains warnings. It warns of the possibility of troublesome conflicts among the major trading nations in spite of the Tokyo Round and it instances the recent difficulties between the United States and the European Community on synthetic fibres. The report underlines the reservations of the Third World, and the noble Lord emphasised that point
1414
himself. As he pointed out, selective safeguards have not been agreed, and the report describes that as a major piece of unfinished business. There is also the problem, which the noble Lord instanced, of the decision as to when a developing country ceases to be a developing country and becomes a developed country; at what time, at what rate and in what way any advantages properly granted to a developing country should be withdrawn. The relations between the Third World and the developed world, between the North and the South, as they are described, have not yet been solved and incidentally, of course, the generalised scheme of tariff preferences and the concessions under the Lomé Convention tend to have less effect when a successful round of tariff negotiations has been completed. There is unhappiness, too, in the Third World about the length of time which it is taking to establish the common fund for commodities.
It seems to me that what the report is saying is that the agreement is welcome; it has helped to stern the protectionist tendencies which are likely to flourish in a time of recession, but it may not be able to contain those tendencies permanently—the pressures may prove too strong. The trouble is that the Third World is not fully integrated into the GATT system. Since those negotiations were completed and since, no doubt, this report was prepared, another report has been published—that is, the Brandt Report. I think the Brandt Report has a great deal of relevance for this discussion. It is of course a programme for survival, a programme for reconciliation between the North and the South. One of the suggestions contained in that report is that the GATT organisation and the UNCTAD organistion—the latter perhaps being looked on with more favour by the Third World—should be merged; that there should be one organisation dealing with questions of world trade.
The Brandt Report also underlines the danger of protectionism. It rejects it as a solution and, as I said when we discussed this matter previously, I am quite sure that a relapse into protection in any general sense by the European Community or by the United Kingdom would lose more jobs than it would save. The Brandt Commission speaks of a transfer of resources—a large-scale trans-

1415
fer of resources—from the North to the South and argues that this could lead to increased exports and to a degree of expansion in the developed world.
In fact the Brandt Commission is making an appeal for a worldwide policy based on expansion and free trade and the great danger is that the world will lapse into contraction and protection. That is what we have to avoid, and of course the adjustment which is so essential in the older developed countries is much easier in times of expansion, and I think that is a point for noble Lords on the Government Front Bench to bear in mind when they are thinking in terms of their domestic economic policy. What we need at the present time, on a world basis, is a worldwide Beveridge plan.
When I use the phrase "Beveridge plan", I am thinking not so much of the social security plan for which Lord Beveridge was famous but of the other plan which he produced, which was designed to secure full employment in a free society. It was based on the idea that private and public spending should be sufficient to call out all the resources of the national economy, but now something more than that is necessary. We know that trying to do that on a national basis on its own presents many problems. It cannot be done adequately on a national basis. Now we need that sort of approach on a world basis. Free trade is only likely to be sustained and the difficulties between GATT and the Third World are only likely to be resolved when the imagination of the Third World—and indeed the imagination of the whole world—is caught by a bold initiative of the kind that the Brandt Commission has advocated.
4.16 p.m.
Lord RHODES: My Lords, I used to say that a man only became mature after he had fought a parliamentary election. I have an addendum to that: a man only becomes mature in this sort of thing after he has served for several months investigating the pros and cons of something like the Tokyo Round.
It came into existence because somebody thought that the world was going to be divided into three: USA, Latin America; Japan, South-East Asia; Europe and Africa.
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It is called the Tokyo Round because it was convened in Tokyo in 1973 and it was triggered off in the way I have just mentioned. But coupled with that was the decline of the United States of America as a world leader. No conclusions were reached until 1979, and then relatively few, at that. But it is as well to remember that the 1973 conference was the first major international agreement which the newly constituted Community of Nine had attempted. That needs to be borne in mind when we are making judgments on it. In my opinion, 1973 will go down in history as the year which began a series of disasters for the West which seemed to be driving us relentlessly towards protection. Personally I believe that we cannot evade import controls. We may talk fancy about how to get by, but in my opinion the pressure is inexorable—and I shall have something to say on that in a moment.
One hundred nations joined in this, most of them having nothing to do with the membership of GATT. All the COME-CON countries were asked to join and they did, with the exception of Russia and East Germany. The terms of reference were optimistic and flowery. If your Lordships' have the book have a look at No. 9, because there it says:
"The progressive dismantling of obstacles to trade and the improvement of the international framework".
These highfaluting ideas were put over so well by the organisers of the conference. These remarks were made in September. They would not have been made if the conference had been convened for October, because OPEC that year increased the price of oil by five times.
There have been six GATT conferences before this one. The Kennedy Round was the last one before this, and it lasted from 1964 to 1967. All the conferences before this one have been to do with tariffs. I suggest to your Lordships' that this is the last conference that will ever be held in the history of the world—that is going some—with tariffs as the sole topic. Those were the days of mild inflation; a little touch on the pedal for a credit squeeze and a bit of additional productivity worked wonders in those days. But this is a different world, a more dangerous world, and no longer will conferences which have tariffs as the sole subject suffice any more. Indeed,

1417
the Tokyo Round itself was a different conference to anything the world had ever seen before. A look at paragraph 11 will give you the answer to it, so it is no use my talking about it, because I want to sit down. Large numbers of subjects were included in the agenda.
Critics said: what did it do? Let us see what it did not do for a start. There was no impact whatever on the agricultural policy of the Common Market, the biggest protectionist racket that we have got. Not a single conclusion came out of that conference. Lord Drumalbyn has drawn attention to the fact that few developing countries either signed or even went to the trouble to have any reservations about it. One reason was the preponderance of the United States-European dialogue. The second reason was that the developing countries could not swallow the idea of selective safeguards which the Community insisted on.
Critics might draw attention to this; little progress was made with COMECON countries due to GATT having a totally different system of economics to the countries in COMECON. GATT depends entirely on an open market; the COME-CON countries have a closed market. They are very difficult to bring together. This should be realised. Other critics have complained that the negotiators for the Community were not tough enough. They were not. They are learning the art of negotiation. We had stronger negotiating teams when we had the old Board of Trade than ever we have had in the Common Market up to now. They have a lot to learn and this wants to be thoroughly understood in Brussels. In any case, they have not got enough staff to do it.
The next thing is, why did not the Japanese confirm it? They signed it. The Japanese are in a class by themselves. The Japanese are paternal. They depend entirely on making an increase of gross national product of a minimum of 7 per cent. per year or else the system would collapse. I have not time to elaborate on that, but I will do sometime if anybody wants to know. There was nothing done about the capital intensive equipment combined with low wages in the newly-developing countries. There are no rules about when a developing country qualifies as a developed country; it is about time there were.
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Having said that, make no mistake about it, solid achievements were made. Progress has been made on most of the items that were mentioned by the noble Lord, Lord Drumalbyn—tariff barriers, import licensing, technical standards, safeguards; above all, communications are still intact. We have a chance to go forward from where we are. May I suggest how we should do it. The Government have to start now, if they have not already done so, making arrangements for the best type of import controls that will be selective. If you are not prepared for this situation when public outcry and demand says that import controls are necessary, you will be at disadvantage. There is now a real chance for this Government to do something about it. Why do not we have a London Round? Think, use your studying caps. Why do not we take the initiative? We can, you know. It would be on a scale totally different to what has gone before.
Lord Banks made reference to a type of new role for a conference of this description. That is admirable. It will be in the form of a body regulating international trade, and if such a body can he used to stem the headlong rush to protection so much the better. I am of the opinion that we really have not yet seen the worst in terms of international competition. My last visit to China underlined that point. I was informed that 350,000 establishments were being brought up to date and made efficient. Most of them were going to produce consumer goods. I ask those of your Lordships who are listening to me this afternoon to remember in two years' time what I have said.
If the British Government took the initiative and had a London Round—I would not even mind if it were called the "Thatcher" Round, so long as we had one—we could not possibly leave out the greatest nation, numerically, in the world. Russia and East Germany refused to cooperate in the Tokyo Round. If the initiative were taken now to invite the Chinese to participate in the Thatcher Round or the London Round, let us consider the wide repercussions for good that that would have. Do not condemn the Tokyo Round; do not let us think that we are so superior. It was a really good effort to do something about the archaic conditions in much of our world

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economics. Let us try to have one of our own which will set something going in the years to come.
4.32 p.m.
Lord THORNEYCROFT: My Lords, it is always refreshing to listen to the noble Lord, Lord Rhodes. I have had the privilege of listening to him over quite a number of years in another place as well as this House and it is a delight to hear him speaking with the vigour, imagination and originality of thought that I have always associated with him after every speech he has made.
We are grateful to my noble friend Lord Drumalbyn for introducing this debate on an important subject. Indeed, it is a little nostalgic for me. They say that old men forget. I think that we remember perhaps rather too much and we watch that we limit our remarks to a few matters. However, this debate carries me back to the days when I was President of the Board of Trade and the General Agreement on Tariffs and Trade was a major issue in this country, and at that time particularly a major issue in the Conservative Party. The Conservatives at that time did not believe in wider trade and payments very much: they believed in imperial preference. That was the sort of Clause 4, if your Lordships know what I mean, of the Conservative Party. I remember that in 1954, just before the Blackpool conference, the old guard of the Party, Mr. Amery and Sir Victor Raikes, had put down an amendment attacking me on the General Agreement on Tariffs and Trade, and I told the Cabinet that I wished to contest the amendment. The Cabinet were satisfied that I would lose at the conference—
Viscount AMORY: My Lords, my noble friend said "Mr. Amery". Will he make it clear that it was not me, but a much more distinguished gentleman, Mr. L. S. Amery?
Lord THORNEYCROFT: My Lords, my noble friend was too young to be a member of the Cabinet at that time! At any rate the Cabinet thought that I would lose and I was advised that I should not contest it. I remember the words of Mr. Churchill, the Prime
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Minister. He said, "Let him try". That was a very good answer for a young member of the Cabinet. We went to Blackpool and we contested the view of the old guard of the Tory Party. May I say that I had some notable friends, among them the right honourable Walter Elliot, who made a brilliant and powerful speech from the floor. We carried the day against the old guard of the Tory Party and in a way I think it was at that moment, as the Tories abandoned imperial preference, that they started to jerk slowly forward into the second half of the 20th century, and wider trade and payments and the rules of international trade which are really a necessity for a great nation such as ours.
I mention that story only to remind noble Lords what this matter is all about. It is about having rules in international trade. There have been debates about the details of them and Heaven knows! they have been debating that subject for seven years in the Tokyo Round. There is a much better way of doing it. In my day it was done much more quickly. The way that we did it was to have the discussions not in Tokyo but in Geneva two months before the tourist season started. The hotels threw them out and thus a decision had to be reached in those days. It was tremendous. I remember the Foreign Office sending me a message saying that the Japanese had the rooms in the floor above us and it was believed that they had bugged our discussions. I remember sending back a message saying that if they could understand what we were talking about they were entitled to any benefit that they could get. I assure your Lordships that we had a more direct and, I think, much easier way of carrying forward trade negotiations, but I shall not dwell or expand on that at the moment.
I merely say that it is necessary to have rules. A nation like ours, which exports about a third of everything it makes, cannot live in a protectionist world. Other countries can do so because it really does not matter so much to a country that exports an eighth of what it produces. However, time and again as one has to meet these arguments—and we have all had to meet them—one recognises that the population of this country could not be sustained unless we can maintain an export

1421
rate amounting to about one-third of the gross domestic product. That wonderfully concentrates the mind of economic Ministers when they have to make decisions about international trade and international rules. So, for us, wider trade and payments, and clear rules as to how they should be conducted, are an absolute necessity.
I point out to the noble Lord, Lord Rhodes, that I am not a dyed-in-the-wool free trader. At the time I was President of the Board of Trade I had what might be called my ministerial training in the 1950s in Lancashire and Yorkshire. I was educated by the noble Lord and his friends in, if I may say so, a most primitive manner. I was fairly hammered at the time. I learnt a great deal about what the arguments and the complexities of protection and free trade really meant. I am not an amateur in this matter: I am a hard-bitten professional. I have been subjected to as much attack on this issue as I should think has any noble Lord in this House.
At present I am president of the British Radio and Electronics Manufacturers' Association, and do not tell me that I do not hear about protection. I lead what is called a "brown goods" industry with direct conversation with the Japanese. Indeed, now not only with the Japanese but with Taiwan, Korea and Singapore— an ever widening list of countries, but I shall deal with that matter in a moment because it is relevant to the GATT as well. So, I know that there are powerful arguments for protection at times. I know the importance of trying these industry to industry talks. But I do know that at the back of it all we must have some ground rules. If it were a free-for-all—and I see that the noble Lord, Lord Rhodes, is nodding his head—believe me there would be chaos in the international trading world.
I also agree with the noble Lord in what he said about agriculture. There is little that affects agriculture in all these matters. Happily the Common Agricultural Policy probably carries the seeds of its own decline. I think that on all sides of the House we can hope that we can move forward to some system—which I am sure if we had moved into earlier we might have negotiated—which will make a little more sense in the wider Europe for which we all hope.
1422
I want to talk for just a few more minutes about the GATT in the context of exports. It is obviously a necessity for the United Kingdom to have the General Agreement on Tariffs and Trade, but it is also a necessity for the developing world. In the developing world they have far greater hope from trade than they do from aid. These developing countries are struggling forward; it is true that they are assisted—I would not decry the need for or propriety of giving assistance from the developed world. But they derive their real strength from their trading positions.
The Brandt Report is certainly a fascinating study, but I am not sure that I would not have wished it to go in rather greater depth into the incredible achievements of parts of the developing world in their super-competitive role. Many parts of the developing world, including Korea and Taiwan, have built up a competitive position of enormous strength. They have gone all out for export-led growth on a free-enterprise basis. Others have been left behind. Unless one studies and in some way identifies how it is that some have surged forward where others have been left behind, I do not know that one has a very clear view about what is happening in the Third World. Therefore, whether you look at us or whether you look at them, ground rules are undoubtedly a first necessity for all of us as we move forward.
There are other matters, apart from ground rules, that affect our exports. One is our currency, the pound sterling. I do not know whether we applaud the fact that it is strong or whether we deplore it. I do not ask Her Majesty's Government to reply to all these points this afternoon, but I remember that only a relatively short time age we would not possibly enter the Snake because the currency was so weak. Now we cannot possibly go in because it is much too strong. It is bewildering for the amateur, like myself, who struggles along on the fringes, trying to understand the position. For my part, I believe that, if we could get inflation more closely under control and find ourselves in a more ordered position with other European currencies, it would be of some considerable advantage to this country.
But in part the strength of sterling is a problem. We can buy goods with great

1423
facility from abroad, but it is harder to sell our goods. That is not an easy thing for exporters. Productive efficiency goes to the root of this problem. In an article published in today's Telegraph I saw that the National Executive of the Labour Party has called for urgent action to restrict the import of foreign cars. That is what the GATT is about, because the National Executive of the Labour Party will always go on asking—and it will not be the only body—for an immediate restriction on the import of some commodity or another.
Policy must be decided by parties here. In the main, the Conservative Party has for the last 15 or 20 years stood for a policy of wider trade and payments; has supported the General Agreement on Tariffs and Trade; has entered the great free-trading establishment of Europe, and believes that, with perhaps some trimming at the edges here or there, we can conduct our affairs so as to be at least sufficiently effective in our production to live in that kind of world. I am not absolutely sure where the noble Lords opposite stand, and I shall listen to anything that is said on that.
The Cambridge School of Economists believes in another world. It believes in import restriction. It wants a 30 per cent. flat rate. We should have to leave the General Agreement on Tariffs and Trade to do that. I do not imagine for one moment that noble Lords opposite share that view. Mr. Wedgwood Benn and some of his friends clearly believe in import restrictions, but I think that they are dealing with the symptoms and not the causes of our trouble.
The reason for imports is that we do not produce sufficiently effectively either to sell abroad or to fill the market which is available here. We import because inflation has risen, because we have spent more money than we have and because we have paid ourselves more money than we have earned. Those are the causes which drag imports into a country. I believe that, if we are to tackle these problems, we must tackle those basic causes and not rely on artificial barriers to keep them out.
As an example, let me take the situation of cars at the moment. I do not want to
1424
say harsh things about people who are struggling on, but it is a sort of geriatric industry. We have seen what has been happening in British Leyland and we know the arguments that have been advanced—the strange world of mutuality, as it is called, in which these desperate arguments range between Red Robbo, as he was—and thank goodness he is not there now—and his friends on the one hand, and a management struggling to get production off the floor, on the other hand. And then one asks for import control! The answer is to make some cars. Make good quality cars so that they are available to the people of this country and available in markets overseas. That is the answer. Import control is a very uncertain secondary, deplorable substitute for facing the realities of what it is necessary to do in one's own economy.
I accept that there may be exceptions. I know that the textile industry is in great difficulties, but there are great dangers in protection. Even in the last few months, as we have tried to give some protection to the textile industry against American imports, we have immediately been met with retaliation, or the threats of retaliation, in America. They have said "Look here, you are producing your steel at a loss; we can protect against that". This battle of import restrictions is very dangerous.
Therefore, I believe in international ground rules. I believe that they are necessary for this country and that the policies of the Government are right in supporting those matters. I think that we would want to ensure that others, as well as ourselves, stick to them. We must guard very carefully against non-tariff barriers, which are used in many countries against us; we want to be slow to use non-tariff barriers ourselves. I am not saying that we never protect, that we never have industry-to-industry talks; I am not saying that we should not talk, as we are now, with Europe, because already in this complicated world protection must be on a Continental rather than a national scale. I think that we are right in those things, but basically our policies must be to put our house in order and live within the rules which we support.
4.48 p.m.
Lord GREENHILL of HARROW: My Lords. I am sure you will agree that

1425
the committee's report gives a full picture of our losses and our gains from that marathon negotiation known as the Tokyo Round. But the very expert speech of the noble Lord, Lord Drumalbyn, and the pungent comments of the noble Lord, Lord Rhodes, have greatly helped us in understanding the report. I agree with the noble Lord, Lord Rhodes, that we might have expected more from the negotiations, given the time and effort put into them. But they dealt with most controversial matters of direct, political and economic importance to the lives of ordinary people in the many countries concerned, and these matters are very hard of compromise and agreement, as they affect people's livelihoods and the continuation of long-established industries.
However, in these days of controversy about membership of the EEC it is perhaps worth reiterating that the Committee says in its report that it believes that we have in this country got a better deal as a member of the Community than we would have done negotiating on our own. In this field membership of the Community is likely to be an appreciating asset in the years to come, and properly used—and the noble Lord, Lord Rhodes, suggested that perhaps we did not get the best out of it—it could become, in this type of negotiation, what someone has described as a civilian super-power.
To participate in this debate one needs a great deal of expert and technical knowledge and in addition, like the noble Lord, Lord Thorneycroft, a long and entertaining experience of these affairs. These qualifications I do not have in anything like the same measure as the majority of speakers this afternoon, but I wanted to intervene briefly to draw attention to one point in the Committee's report dealing with developments in the future.
The report says that it is probably unlikely that another round of multilateral trade negotiations will take place again in the foreseeable future. Indeed, the noble Lord, Lord Rhodes, said that it would never take place again. That is probably true. International circumstances are changing so rapidly that that is likely to be the future. Again the report says:
"The future relationship between GATT and UNCTAD will increasingly demand attention".
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This is indeed true. There is no doubt that the Tokyo Round results are more acceptable to the developed than to the developing countries, and there is a good deal of dissatisfaction among the latter about this. That does not necessarily mean that the demands of the developing countries are always reasonable and ought to be satisfied, but it does mean that there is a continuing, and indeed growing, political and economic split among the trading nations of the world. If this split is to be diminished, there must be some drawing together of GATT and UNCTAD. Both organisations have obvious shortcomings, and the more politicised the split becomes the more difficult will be the solution.
One of the questions we must ask ourselves is whether some new institutional machinery is required. I think that question was implicit in what the noble Lords, Lord Banks and Lord Rhodes, said. It is a matter of history that an international trade organisation was nearly set up at the time of Bretton Woods at the end of the war. If it had been some of our present difficulties might have been averted. Maybe some greater thought should now be given to whether new machinery could assist us at this stage. Of course, if the political will is lacking, no sort of machinery, however ingenious or elaborate, will produce solutions.
Many will say that it is much better—and many of the experts say it is much better—to go on as we are, making modest, largely technical advances in international agreement and building up case law. I myself am not optimistic about new institutions, especially in the present economic climate, but I think that Her Majesty's Government should give thought to this point, and I would ask whether they are doing so.
4.55 p.m.
Lord HALE: My Lords, all of us are anxious to pay tribute to the noble Lord, Lord Drumalbyn, for the compendious way in which he opened this debate, and for endeavouring to review the validity of a vast number of subjects. I personally in particular should like to thank him for the fact that I could hear every word he said, an opportunity which I rarely get nowadays anywhere. The noble Lord spoke almost with parental affection of

1427
this agreement, which of course has many doubtful and controversial points which can hardly be dealt with in a short debate.
I think that the noble Lord, Lord Thorneycroft, really omitted one vital matter in what he said. I enjoyed his speech. I have often paid tribute to his own personal gallantry, and there is no question about his personal correctitude in his economic propositions involved in his resignation. I told him myself in a personal talk the other day that his recent forthright speeches have to my mind cast rather a new light on some of the problems of that day. But I think he overlooks that what we are discussing today is this agreement, for good or bad. In this agreement we are talking as members of the EEC, and about the effect of GATT on the EEC. The EEC is only a collective representation at Tokyo, and it is in relation to the EEC law that we are now making reference. The EEC has its own constitution and its own views on protective tariffs, their reduction, adjustment and what should be done.
I ventured, very hesitantly and nervously in a previous extremely poor speech on these matters, to express some doubts as to whether trade associations with the USA were, generally speaking, associations which had not proved greatly to our benefit. The noble Lord referred to the difficulties about the "snake in the tunnel". There were difficulties about a European currency. I should have thought that this Government's plans, accepting that the Government have decided to remain in the EEC, depend largely on the attempt to get an effective European currency. It does not seem to be a popular subject in these days.
Of course in a situation in which all the pundits seem to think that the pound is definitely undervalued and the dollar overvalued, the terms of trade become almost impracticable, as is evidenced in this document. Is it Government policy? I listened to the noble Viscount, Lord Trenchard, in a recent debate when the "big guns" of the Labour Front Bench were volleying and thundering, and when he received their economic arguments apparently undismayed and undeterred. So far as I know he said that the Government were relying on market forces. He did not explain what market forces
1428
were, any more than did the noble Lord, Lord Cockfield, who I believe is to be the great potential pundit, and who speaks in terms of, "I am Sir Oracle, and when I open my mouth let no dog bark." He does not explain anything at all. He tells us he knows it all, and he thoroughly understands it all and has a complete comprehension of the effects of international economics, and that we can leave it to him.
I do not think the noble Lord, Lord Thorneycroft, in a pleasant and entertaining speech with which I did not violently disagree, wants to tell us—nor do the Government want to tell us—one thing. Do they want a textile industry? Do they think we need a textile industry? Do they think we can ever have a balance of trade without a textile industry? Do they know that even now, with all its deficiencies, this industry has a £7,000 million output? There are historical and geographical reasons, which are vital to this country, why we should have a textile industry and why, if it is to be dismantled over the years, we should have something adequate to replace it.
On present plans, which involve vast expenditure on armaments, which keep people employed—some may think usefully employed, but certainly not profitably employed—and which involve huge purchases from America, I cannot see from where the additional output is coming. We are told it is all to be based on the silicon chip, and the BBC has been running television programmes to show how. But as so often happens, and has happened in the past under Labour and Conservative Governments—it makes no difference in this context—we have fallen behind in management. I was going to use the word "conservatism", but that may be political. Is it a conservative attitude of mind that keeps them from using the benefit of this advanced and, we are told, fairly simple technology? We are told that a vast number of organisations could be built up and that a variety of small industries could be created. The creation and help of small industries has often figured in political programmes, but I think there are fewer of them today than ever there were.
The noble Lord, Lord Thorneycroft, as usual, put his argument very well on the question of free trade, but if we are to

1429
maintain an industry like textiles, then the EEC rules impose something in the nature of protection and bar anything in the nature of subsidies. I was brought up as a Liberal, so much so that when I put my foot out of bed I stubbed my toe on a plaster bust of Mr. Gladstone. My father thought him a great politician with inordinate gifts. Those were the days when the cotton industry of Oldham was still at its zenith; one of the great industries of the world and one of the great contributors to the nation. And the EEC say they very much want a textile industry.
The noble Lord referred to Korea as an example of a country where they are developing textile factories by the score, attempting to flood the world; but they belong to that section, not of undeveloped countries but more or less of developing countries which have special privileges, and they exercise them to the full. I think they have a tariff of something like 85 per cent. on any import into South Korea, yet they are asking for preference here. This is crazy trade. It is no use saying South Korea is a long way away and does not much matter; in all my political life the words "Hong Kong" have been written on my heart.
I wish to say something in particular to the noble Lord, Lord Trefgarne, who has so far not spoken. If he speaks with his customary ability and command I shall listen to him with pleasure, whatever he says. The cotton industry has been peculiarly the victim of the political parties, who come in with rather half-digested idealistic ideas. As I have said, inflation is the enormous menace. It is an economic plutonium bomb. We are told that the multi-fibre agreement, which expires next year, has much more hope of being renewed for a considerable period. We need it, because what does one see if one looks at the modern-minded manufacturer in Oldham? He usually goes there because he knows he has the most industrious, uncomplaining and decent working population to be found on the face of the earth. These people have endured recession, restriction and transfers of population in wartime and at other times with good humour— surely that merits some consideration!——and they have worked in the "dark satanic mills" for a very long time.
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I have here a paper which bears the mark of Carrington-Viyella, who are planning the production of a new modern factory in Lancashire to be designed by Britons and built by British engineers. It is hoped to introduce an increase of production which seems almost terrifyingly enormous, with five, six and, in some cases, seven times as much production from the same area and population as is the case today. The thought that went into the project—planning for the workforce, provision for redundancy, and so on—was the kind of thing that in years gone by one dreamed of.
I have spoken for too long, and I apologise. I shall leave the matter at that, except to make one more comment, regarding Brazil. Brazil, very naturally, is running its own economy, and no doubt running it with considerable knowledge. We are told that the destruction of the Brazilian forests, which is taking, place at an appalling rate, will be a major ecological disaster to the world. There will be deprivation of essential supplies of wood, which is being burnt away to provide profitable crops. If one eliminates vast areas of unplanned territory, Brazil has a very high production unit, and could quite fairly have been regarded today as a rich country; but the vastness of the undeveloped areas of the country means that it is not in that category at the moment, though it seems certain that at some future time it will be. There is evidence in the report about restrictions on the imports of hide: 185 per cent. general tariff, and 100 per cent. tax on imports. That country is going to be self-supporting, perhaps rather like the Marxist model.
In the light of that situation I see very little in the report that gives much manifest help to the textile industry—rather the reverse. Of course the Common Market is to receive new accessions from Portugal and Spain, which are producers of textiles and which have already had the benefit in regard to imports. The textile industry asks that at least we should not make any faulty mathematical computations in assessing the share of Portugal and Spain when they enter, when compared with the very large figure that they have now. The arithmetic should be got right on this occasion, unlike the previous occasion, when it was not.
5.13 p.m.
Baroness HORNSBY-SMITH: My Lords, I, too, should like to join in the congratulations extended to my noble friend Lord Drumalbyn and his colleagues on the Select Committee for the very comprehensive report that they have produced. In my view to have condensed such a complicated and diverse series of negotiations into so brief and factual a whole is a masterly achievement, and my noble friend and his colleagues deserve our gratitude and congratulations.
The Tokyo Round was a very courageous venture in an effort to maintain and extend a more liberal world trade system. The noble Lord, Lord Rhodes, pointed out that the negotiations started six long, weary years ago, when Western economies were more buoyant, and in the years that have ensued the negotiations have been bedevilled by the recession, the oil crisis, and the insistence of Third World countries—way outnumbering the other industrialised nations negotiating—upon the continuation of their very high protective tariffs.
That any results were achieved at all is I believe entirely due to the dogged persistence of the industrialised nations, notably the European Community as a whole, working together, and the United States. We should I believe pay tribute to the way in which they soldiered on through these long years, despite a marked reluctance by a majority of the nations who participated in the negotiations to contribute anything at all towards freer trade. I believe that failure to have reached any agreement would have meant the return to excessive protection and would have set back world trade for very many years.
Although 100 countries participated—and we should remember this fact when we look at the results—as my noble friend Lord Drumalbyn pointed out, paragraph 14 of the report gives the numbers of countries that agreed to each of the various sectional agreements, and it is very sad to think how limited was the co-operation of 80 of the 100 nations. We therefore face the problem of those who have signed and who made concessions, and those who, while benefiting from those concessions, are free to play their own game without any reciprocal responsibility.
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Without question the European Community is making the greatest contribution to liberalising world trade and helping the Third World. As your Lordships know, I have an interest in textiles, and indeed I feel somewhat intimidated this afternoon at speaking in the presence of my former boss, the noble Lord, Lord Kearton, who has forgotten more about textiles than I shall ever know. I hope that at some time we shall hear from him on this subject in your Lordships' House.
To many people in the textile trade the agreement has come as a very bitter disappointment. Outside the EEC, tariff barriers remain a substantial hindrance to world textile trade. From the textile point of view the achievements of the Tokyo Round were very limited indeed. Only the United States and the EEC offered significant reductions in tariffs at all. Despite last-minute United States reductions, I am afraid that United States tariffs will remain on average 28 per cent. higher than our own. So it is that much more difficult for us to export to them, than it is for them to export to us.
This situation is particularly significant against the background of President Carter's very adamant and far-reaching assurances to the United States textile industry, which were made during the progress of the Tokyo Round, that he would take prompt measures to protect the industry as required, with or without international agreement. My noble friend Lord Drumalbyn has already mentioned the disruptive effects on textile exports to the EEC which result from United States dual pricing. Reassurances from President Carter to his own industry also included a "snapback" provision which will allow withdrawal of all tariff concessions if the MFA is not satisfactorily renewed in 1981.
Other countries made no significant reductions at all in tariffs. Japan, for instance, merely consolidated its "temporary" tariff reductions made a few years ago, instead of making further substantive concessions during the Tokyo Round.
It is all too little recognised that developing countries, whether or not they are doing extraordinarily well in the textile field, continue to maintain a very high level of protection for their domestic industries. Kenya, Morocco, and other

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African countries effectively totally ban the import of most textiles. Egypt and Taiwan prevent access to their markets with tariffs of 60 to 100 per cent. Brazil charges 205 per cent. on man-made fibre fabrics, while Egypt imposes a duty of 250 per cent. on such fabrics. None of these countries conceded an inch. You need a commando force, not a sales force, to penetrate tariff barriers at that level, and the next person (generally a retailer) who tells me that textile manufacturers should get off their backsides and export will get a double-barrelled blast back.
Undoubtedly, led by the European Community, as the report records, great efforts have been made throughout the years to provide special arrangements for the developing countries under all the agreed codes. But, as Lord Thorneycroft pointed out, there is no doubt that a time must come, and should come soon, when we analyse the criteria of the so-called "developing country". When does a developing country cease to be one? Twenty years ago South Korea was not a significant exporter. Twelve years ago, 61 million dollars-worth was exported. Ten years later, in 1977, she had 1,093 million dollars-worth of exports. Her exports to the United Kingdom over the same 10 years increased fifteenfold, and have increased still further since. At the moment she is the sixth largest exporter, and she has announced her goal of having the world lead in textile exports by 1991. Will she still be regarded as a developing country?
Going to the other extreme, is little Mauritius, exporting annually over 4 million sweaters, most of which she calls "Shetland", still in need of protection for her textile industry? Is she still to be treated, as are other Far Eastern countries who are doing very well indeed out of our markets, as a developing country? My Lords, the Tokyo Round, despite the strenuous efforts of the industrialised nations, failed utterly to get any agreement from Third World countries on fair and reasonable reciprocity. The textile industry does not want high tariffs and protection, but it does ask that there shall be a far greater measure of reciprocity in our dealings with other nations. So far as these negotiations are concerned, the textile industry feels very strongly that in many areas it was "sold down the river".
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The Select Committee recognised this and recorded that not all so-called developing countries warrant the continuing privileges afforded by such status. Extensive barriers to trade by developing countries were in the past justified by their early and immature development needs, but in the future, if they maintain these high tariffs, they are likely to hinder the development of international trade, not only in textiles but in other items, too. By continuing to be excessively protectionist, the better-organised industrial (mainly Asian) countries will strengthen their dominant position at the expense of the weaker economies, and in particular I would say the Lomé countries. While the Far Eastern developing countries have roared ahead—and one can only describe as a mushroom growth that of their textile industries—the Lomé countries have lagged very seriously behind.
I believe we can no longer consider all these nations under one umbrella as developing; and we need very desperately, as Lord Thorneycroft pointed out, a new appraisal analysis of what is and what is not a developing country before we give them the free markets, or the near free markets, into which they are pouring their goods today, to the detriment of those of us who still want to see a real textile industry in this country. The massive advantages, which some of those countries exploit, should be concentrated on the truly underdeveloped territories. Indeed, the Brandt Commission, which Lord Banks referred to, has emphasised the role of the developing countries in this process and their share of the responsibility for creating greater freedom in trading opportunities and opening new fields of trade, which calls for a much greater sense of participation and responsibility than they have so far shown.
I also wonder, in the field of social welfare: Are we not failing in our duty, where Third World industries are mature, flourishing and profitable, when we so readily accept goods from countries which employ 10- and 12-year-olds working 10 hours a day, six days a week, for anything from a sixth to a twentieth of the rates paid in the European Community? For too long the now highly developed Asian and Latin American countries have pursued a policy of, "You give and we take". Their excessive demands in these negotia-

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tions for almost free entry, and that any disruption of our markets must be adjudicated by an international committee, are as arrogant as they are farcical. All that this would mean is that the 80 would permanently outvote the industrialised 12.
In so far as the Tokyo Round broke new ground in trying to improve some of the provisions of GATT, which had not proved all that effective, we certainly welcome the arrangements to strengthen control measures and systems to ensure that agreements entered into are honoured and to restore confidence among those who have suffered in the past from the devious methods of State pricing, hidden subsidies and quota avoidance. No one has borne the brunt of those infringements more than has the United Kingdom. We earnestly hope that the new agreements on import licensing, on Customs valuation and on technical standards will be truly effective. In particular, we welcome the ending of the "American selling price" method of valuation, operated in the United States. Lord Drumalbyn described how it works, so I will not enlarge upon that. Equally, we are glad that the rules against discrimination in the purchasing procedures of goods for Government procurement are to be widened. Of course, in theory the EEC already has regulations binding it in relation to public contracts throughout the Community. In practice, if you analyse the advertisements of public contracts you will find that those published by Great Britain outnumber by about 10 to 1 those by anybody else in the Community; and certainly three countries seem to ignore the regulation altogether. Now that it is part of the Tokyo Round agreements, we hope it will be more universally honoured.
As the report reveals, the Tokyo Round, because of the absence of the Soviet and East Germany, failed to find a solution to the problems of State trading country exports. Nor were they able to institute any means of price checks at EEC Customs points to ensure that goods are not dumped abroad at totally uneconomic prices, well below their manufacturing cost. Equally—and I believe Her Majesty's Government are considering this issue—we might eliminate the labelling frauds by insisting that items are labelled with the country of origin, thus preventing,
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for example, EEC or minor foreign countries acting as agents for foreign exporters, and using their privilege to channel goods through the freer Community Market, thus avoiding the high tariffs which would be paid by the country making the goods were they exporting them directly to this or other countries.
One thing stands out very clearly; the European Community has shown the greatest solidarity in seeking to form a common commercial policy. I am sure that the case for the individual Member States would have been considerably weaker (as the noble Lord, Lord Greenhill, pointed out) had they negotiated as separate entities and not worked together as one, as near as they were able, and provided a solid front capable of holding its own in the power and strength of their joint market against the United States, Japan and the other regional blocks.
I pay tribute to the patience of the men (and possibly a few women) who slogged through these negotiations over the years and to their genuine efforts, even if they achieved far less than we had hoped. All that one can say is that the Tokyo Round was a brave effort and a vital one. Such advantages as were gained in aircraft and steel are mainly helpful in the limited sphere of trade within the industrialised countries. In assessing this very important report of Lord Drumalbyn's committee, we would do well to remember that the Tokyo Round was negotiated with 100 nations, 80 of them determined to keep their highly-protected trade fortress and a dozen who gallantly strove to free and liberalise world trade. As the Commission pointed out in 1978:
"where reducing barriers to world trade is concerned, true reciprocity is essential".
Sadly, lack of reciprocity was the greatest failure of the Tokyo Round.
5.32 p.m.
Lord ARDWICK: My Lords, like the noble Baroness, not for the first time I rise in this Chamber intimidated by what has gone before. In my case it was not the noble Lord, Lord Kearton, who was responsible for it but my noble friend Lord Rhodes and the noble Lord, Lord Thorneycroft. I thought that they spoke with the voices of prophetic authority; but at times when they thundered across the Chamber at one another, I felt that I

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was living a Book of the Old Testament. Although it may have sounded as if they were in disagreement, I think there is fundamental agreement between them and among many of us. These are days when, as the noble Lord, Lord Thorneycroft, said, nobody believes any longer in an absolute "free for all" and complete laissez-faire, when nobody believes in 100 per cent. protection; but there is a concept called managed trade and certain areas of our trade and commerce have to be managed. But I will say more about that in a moment.
I should like to say a general word about the reports of the Select Committee They have a reputation for fairness as well as for clarity. They are not "pro" or "anti" Community. The subcommittee takes each proposal as it comes and examines it scrupulously. If a proposal or an activity is inimical to the United Kingdom's interests, although it may be in the general interest of the Community, then the committee does not hesitate to say so. Thus, when the Select Committee says that something done by the Community is of value to Britain, it should command general respect if it does not command general assent.
I was pleased to see in this final report on the Tokyo Round that was so beautifully presented by the noble Lord, Lord Drumalbyn, today that the committee had no hesitation in saying that it had proved to be:
"a successful exercise by the Community in the formulation of a common commercial policy and in the delicate task of keeping the Member States combined in the pursuit of agreed objectives through long and difficult negotiations".
So let us for once, hail a European success, even if it has not been as great a success as we might have hoped. There is little doubt, the Committee says:
"that the existence of a common Community position brought benefit to Member States".
The report recognises the most eminent position which the Community occupies now in the world of commerce, a position which it did not occupy at the beginning of the Tokyo Round. They say:
"The Nine constituted one of the two major negotiators along with the United States".
That leads to a conclusion which is perhaps the main point of my remarks: the value, that is, of this joint action to the Community and to Britain. As the report says:
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"The outcome would have been different and almost certainly less advantageous to European countries if each Member State had negotiated separately.
"In this sense, the Community's common commercial policy can be seen to have brought a benefit to the United Kingdom as well as to the other Member States, albeit one which it is difficult to quantify".
It is comforting to deal with a report, particularly this week, which speaks of a substantial Community achievement and one which has brought benefit, probably considerable benefit, to this country. I was one of those who were amazed and saddened by the failure of the Luxembourg Summit. I am one of those (and I do not want to introduce a partisan atmosphere but I am in one of the minorities on both sides) who feel that the Prime Minister's rejection of the compromise was—and I am going to repeat the fashionable and prudent phrase—"almost certainly mistaken". I had hoped that this week the European Council would have settled its financial problems and that at this time of developing world crisis would, from a newly-solidified financial base, have gone into confident political action with confident political co-operation joining the wisdom of Europe to the power of the United States.
I hope and pray that Britain's voice in the current political work of the Community will not be weakened by the failure to reach an agreement at the Summit. We have a Foreign Secretary whose actions have won acclaim from all sides of the House. It is a common view that he combines vision with firmness of character and he seems also able to command good luck. May it continue throughout the present crisis! But this is not the day to debate the Summit or wider European affairs. To return to this document, it is realistic in its recognition that this generally depressed economic state of the world generally continues, alas!, to encourage the strengthening of natural protection.
The pressures of sectional interests are very strong and the local problems that nations face are often very real, particularly at a time of growing unemployment and excess capacity, as the noble Baroness has eloquently told us. So, of course, there has to be some provision for industries which are threatened not with mere competition but with most aggressive attempts at disruption. There must be a distinction

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drawn, as I think we have all agreed, between poor, developing countries and the newly-developed countries equipped with the latest machinery for formidable productive capacity and, moreover, unencumbered by social obligations and social conscience. We must also draw a distinction between those people who need support—who are special cases and perhaps need temporary shelter and the use of certain kinds of minimum import restrictions or controls (call them what we may) for specific, limited, temporary purposes—and those who want to build a new Utopia behind the old fortress walls of tariffs and quotas and are careless of the dangers which this kind of nationalism would bring: dangers which those of us who lived through that kind of period in the 'thirties will not forget.
This return to the idea of protection is not confined to one party. The devil of protection has not finally been exorcised from the party opposite. One hears some of the young bloods, the old Etonian "young turks", are themselves thinking in terms of protection. That is what the newspapers say. It may be true; it may be false. I am glad that the noble Lord, Lord Thorneycroft, occupies the position that he does because we can trust him to give them severe discouragement from this kind of philosophy.
5.41 p.m.
Lord SELSDON: My Lords, like my noble friends and noble Lords opposite, I too am grateful to my noble friend Lord Drumalbyn for introducing this debate and also to the Select Committee for their report. I find the comments in the report and the Tokyo Round as a whole quite encouraging. I will try and explain why. We had some 99 countries present there. I do not know how many countries there are in the world—perhaps the noble Lord, Lord Greenhill, will remind us—but it is something of the order of 150, thus two-thirds of the countries attended. Something like 37 actually signed something; and therefore roughly 25 per cent. of the countries in the world signed something.
What they signed may not be as relevant as all that because it is by no means perfect. But I would interpret that as the willingness of many nations to accept the
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need for the ground rules, to use my noble friend Lord Thorneycroft's phrase. The need for those ground rules is more apparent among those nations who rely upon foreign trade for a large part of the economy than among those who do not. I am concerned about some of the emphasis given in the report because it gives a warning.
I begin on the question of protectionism. Perhaps more than other noble Lords, I have a feeling that we are moving far more rapidly towards protectionism in this country at this time than many of us would believe, perhaps for politically expedient reasons. The idea of keeping out the foreigner or helping the British—whether it is called patriotism or nationalism—is growing. There is general welcome when we stand up to someone else, the feeling that the United Kingdom is strong again and thus it must demonstrate its strength by showing strength in terms of tariff barriers, import controls, and so on.
This may not be wrong. Our trade pattern and picture has changed. I would not dispute the figures with my noble friend Lord Thorneycroft, but currently I understand that approximately 25 per cent. of United Kingdom GDP depends upon foreign trade. Thus, by his standards we are already bankrupt and out of it. This is above the world average. The average for the EEC is something like 24 per cent.; and for France it is 18 per cent. But for the United Kingdom to be an economic nation of any significance again in the world we need to depend upon over 30 per cent. If therefore we are to introduce protectionism in one form or another, we are automatically cutting off our own noses.
The argument about protectionism and import controls has another factor: we have a higher rate of inflation than most industrialised countries. Any import control is in itself inflationary. It fuels inflation and creates further employment. If I may refer the noble Lord, Lord Banks, to an eminent Liberal, he drew attention to the fact that if we had had nationalisation of the stage coach industry, it would be alive but not necessarily well. If we had import controls, the stage coach industry could well recover, aided by certain royal

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sponsorship and initiative by the private sector.
There is no doubt that import controls will tend to reduce economic growth and perhaps eliminate it. That is an overall argument and within that one can understand the desire of people to introduce them. One can understand the desire of industrial sectors who object to the textile situation in the Third World. But equally one must understand the industrial problems of many Third World countries who, unlike the developed world, have relatively small industrial sectors. Often their total economy may depend upon one or two. Often it is textiles. If I could go back to the situation with Mauritius, with them it was sugar. Inflation led to an increase in wages and they became slightly uncompetitive. They started looking for other industrial sectors. To some extent the same is true with Egypt whose exports are dependent almost entirely upon textiles and agricultural products, on which there are quotas at certain times of the year.
That is one point I am making. I am concerned about our world trading position. I am concerned too that as this position becomes more apparent to us then we can move in the wrong direction entirely. By this I mean, to take the EEC itself, 40 per cent. of United Kingdom exports and roughly 40 per cent. of trade is with the Common Market countries. Our balance of payments with the EEC this year will, to put it mildly, be disastrous if presented in the true light of exports and imports. We do not depend quite as much upon the EEC for overall trade as countries like Belgium, where 80 per cent. of Belgian exports go to EEC countries. But we have moved that way and that movement is not necessarily anything to do with our joining the Common Market but more for geographical and other reasons over which we have no control.
The real growth area of trade for the United Kingdom and for the developed countries has to be the Third World or the developing nations. It is only by increasing the size of the developed world that it can expand and grow. What is the division between the developing world and the developed world which my noble friends have raised in this debate? It is regularly defined. The World Bank
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usually define it but often it does not come across. It is the developed country with an income of over so much per capita. The LDC with a lower income and then the LLDC—or the least developed country—which when I last remember the figures was an income per capita of something like 200 or 250 dollars per head.
If we look at the income per capita we find to our surprise that there are many countries which claim to be part of the developing world but which are actually at the top of the poll. Many of these countries are the ones that impose tariff barriers or sometimes non-tariff barriers, quotas and things of this sort, whereas their economy, in comparison with the economies of other countries of the world, does not justify or deserve this protection.
If we look at Community trade as a whole, it is moving towards the Third World or towards the developing countries. Something like 40 per cent. of all Community imports come from the developing countries. I concentrate on imports first in order that we should not forget that balance of payments is not the only measure of economic growth, and industrialised nations cannot grow without the raw materials necessary for production. Some 38 per cent. of Community exports go towards the Third World, and this figure is rising. I submit that this is to some extent the justification for the growing expenditure under the Lomé Convention and under EDF5, which takes over from EDF4, for the Third World, which is based upon a self-interest in raw materials—and something well over 50 per cent. of raw materials that the Community imports comes from countries of Africa. In many of these countries we have political considerations where other outside interests could destroy relations between these countries and ourselves. These too would be harmful for trade.
The United Kingdom has this special position of probably relying more upon international trade than most of our Community partners. Ireland is of course one of the exceptions. Our position is distorted yet further by North Sea oil. We should not fail to recognise that if the Government and also the previous Government has the courage to remove the significance of North Sea oil from the trade figures, our industrial manufacturing capacity, our visible trade and exports of

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manufactures, would be in a disastrous state.
This is not due to the inability of management to manage or of British engineers or of labour to work, for indeed if they can go to Korea and, from scratch, in sub-zero temperatures produce a motor car which they can then sell back at a competitive price to Europe, there is nothing wrong with that. It is perhaps more the environment in which they work or the support which they may have, from whom I know not. But if we look at the comparisons of our industrial production with those of other nations, we have archaic and outdated industries, with such old equipment that a team of Italians who were over here last week, including several Ministers, wanted to buy some of the machines they saw in the North of England so that they could put them in the front of their factories to explain to their labour force how things used to be done. They said to me when they were up there: "The British are working very well and very hard but often the machinery and plant which they have is so outdated". Therefore we come back to the historic problem of investment.
Where do we go if protectionism is to come?—and I genuinely fear that there will be considerable attempts to introduce it from all sides of the political spectrum: it is not extremists of one view or another but often rational people who may not understand the effect it can have on the potential of the United Kingdom trade and the United Kingdom economy as a whole. It is all right for countries who are not so dependent on trade to become protectionist. It is, of course, against the whole spirit of the Tokyo Round, but one can understand that. Perhaps it is even all right (though possibly immoral) for certain countries to try to introduce strange sorts of non-tariff barriers which are in their national interests.
I will give a few examples. It may be a question of the safety regulations applying to motor mowers, which means that foreign competition somehow cannot conform to them without restructuring their industry. It may mean sending out your tenders to certain countries or certain friends by express post and sending them to others by second-class post. Often things are announced in the newspapers
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but they may be newspapers which British companies do not read.
When we come to the support that is given for trade with the Third World, and the importance of it, I will refer briefly once more to the Lomé Convention. It is a source of sadness to me that in the last EDF4 British manufacturers only won something like 3·4 per cent. for the country and the French won something like 40 per cent. It is also sad that British companies bid for less than 20 per cent. of the contracts that were announced. That includes, among others, the consulting field, where we are pre-eminent in the world.
I therefore wonder whether, when looking at trade, we are not ourselves thinking too much about the "do not" and not concentrating on the "do". By that I mean that perhaps we are not making as great an effort as we should. I do not necessarily include the textile industry because it cannot sell; but many companies from other countries are now recognising that a large proportion of exports have historically gone to subsidiaries of companies or trade partners which are established abroad.
There is a strong case for re-examining the whole question of overseas investment, which is why I welcome the abolishing of exchange controls and even the encouragement and the enthusiasm of Government for investment in the Third World, because those investments lead to increased exports and there is no doubt about that. It is a myth that some people will advance that if you do invest in a country or set up industrial plants you are killing your own export potential. I would refer again to Korea. All the figures show that, despite the development of South Korea, British exports of plant, machinery and other services which go with them have far more than offset any possible repercussion the other way round in terms of imports of cheap materials. We must recognise, too, that we do not control the price at which a man sells his labour, worldwide. It has always been and, despite industrialisation, I submit it always will be, those countries who can co-ordinate initially a cheap labour force which will effectively be the threat to many of the countries which have preceded them in industrialisation.

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I am encouraged by this report and by the conclusions; but, above all, I fear that the reactions of those who do not understand it may be so serious that it could harm the United Kingdom for all time.
5.55 p.m.
Lord GORONWY-ROBERTS: My Lords, we are all very grateful to the noble Lord, Lord Drumalbyn, for the way he introduced this important report. We are also grateful for the very useful and balanced report which the subcommittee produced under his chairmanship. The Tokyo Declaration of 1973 invited all countries to consider a very wide-ranging series of policies designed to liberalise world trade and to improve the economic prospects of the underdeveloped countries. This report helps us to assess the results of those negotiations to liberalise world trade and to improve the lot of underdeveloped countries—negotiations which lasted for six years.
In making this assessment, I think we should remember that these complex negotiations took place during the period of deepening political crisis and mounting economic recession. A few weeks after the Tokyo Declaration was made a new Arab/Isreali conflict broke out in the Middle East leading to the worst oil crisis in history—one we are still struggling with—involving staggering price increases and also uncertainty about supply. That affected both developed and developing countries. The United States—a major factor in any discussions of this kind, the major trading country in the world, after all—was, until the presidential election in November 1976, preoccupied with a very serious constitutional crisis, which effectively took it out of "decisionary" activity in this field. That had its effect on the progress of the negotiations, I have no doubt. Then again, the world-wide trade recession deepened as exchange rates became ever more volatile, affecting in particular negotiations on the important question of tariff reductions; and unemployment mounted in practically every country.
In these circumstances, I think it was wholly understandable that the Governments of developed and developing countries, of industrial and industrialising countries, should come to the negotiations with a mixture of liberalism and con-
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servatism—I mean both terms, of course, in a non-party sense—with a consciousness of the need to liberalise world trade and yet a compulsion to conserve home industries and employment opportunities at home. Against that background, I think it is remarkable that so much agreement was achieved.
The noble Baroness, Lady Hornsby-Smith, if I may say so, assessed the probable proportion of success as about 20 per cent. Statistically, looking at Annex II and the analysis in the body of the report itself, this may well be a useful assessment of how far these protracted negotiations succeeded. If so, against the background of the mounting difficulties I have mentioned, I think that was quite an achievement. From the perspective of 1973, not knowing what was going to happen, first, in the oil countries and generally throughout the world for other reasons in regard to the flow of trade and the availability of employment, the results are disappointing. But from the vantage point of 1979 and 1980, I would agree they are encouraging and I was much impressed by the speech made by the noble Lord, Lord Selsdon, where, in a very balanced way, he pointed to continuing difficulties and gave one or two warnings with which I agree. At the same time, he made the point that we need not be discouraged by what has been achieved in these circumstances in this direction.
Ninety-nine countries took part. That is a very substantial majority of those who were invited—numbering about 140, I imagine. Although there were one or two notable absentees, such as the Soviet Union and China, not to mention East Germany, nevertheless, a number of East European countries, Communist countries, joined in the discussions. We see from that very useful tabular presentation of the agreements, Annex II, what categories of agreements reached what stage of acceptance.
If I may generalise, I would say that there has been some advance in tariff reductions, though there are one or two qualifications which one needs to make about that area of agreement. But there has been quite substantial agreement and advance on non-tariff harriers, on what the noble Lord, Lord Thorneycroft, called the reinforcement and the redefinition of the essential ground rules. I think that

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we should lay very great emphasis on the need to watch these, to reinforce them and redefine them, as negotiations of this kind proceed.
The non-tariff barriers can be even more effective forms of disguised protectionism than the straight quota or the tariff imposed on imports. There is a wide range of them. I had to consider quite a number of these when I was at the Foreign Office. There is the straight subsidy, countervailing duties, Customs valuation methods, import licensing procedures—or, if you like techniques, and that is a study in itself—and the whole question of Government intervention, especially in procurement and Government purchases. There has been a substantial advance in putting these matters on an improved basis as a result of these negotiations, and I join with the noble Lord, Lord Thorneycroft, in welcoming this, because it is absolutely fundamental to the future of world trade. Anything else would mean anarchy, far beyond the dislocation of the 'thirties that some of us remember.
Having said that, the report is, on balance, encouraging. That is not to say that all countries have, by any means, acceded to all the agreements. The annex makes this absolutely clear. There is a kind of 20 per cent. advance, which I welcome. But we must look squarely in the face the fact that a number of countries—the majority, in fact—range from the negative to the reserved, and very few have gone as far as the final signature. Still, the follow-up may improve that performance. It is, of course, particularly disappointing, though understandable, that so few developing countries have so far acceded to by far the most of these agreements.
I shall not detain the House with the paragraphs which impressed me about the concrete results of the negotiations on tariff reductions, except to say this. The agreement to cut USA tariffs against Common Market exports by 30 per cent., and to cut Japanese tariffs against Community exports by 25 per cent., must surely benefit the Community substantially and, therefore, benefit this country. Of course, the common Customs tariff will be reduced from an average, as we heard, of 9·8 per cent. to 7·5 per cent. It may
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look, on the face of it, as if our friends in America and Japan are reducing their tariffs far more than is the Community. But that, of course, is wholly relative. They started from a much higher threshold of restrictions than the Community did.
There is one criticism which the report makes, and which I want to echo, about the attitude of the Community, which otherwise has been most constructive and most effective as I hope to show. The annual reduction rate which I have quoted will extend over eight years and will be very small indeed, year by year; less than 1 per cent.—I think, perhaps, half of that. In addition, there are partial or total exceptions in the case of particularly sensitive industries.
Here I should like to join my noble friend Lord Ardwick in asking the House to agree—we can all agree on this, without distinction of party, as my noble friend emphasised—that there is a difference between going for a general system of protectionism, which is designed in an illusory way to achieve national solvency, and the use of properly agreed, selective and temporary protective measures in order to safeguard security (some industries are in that category), in order to safeguard ailing industries which, given a little time to recover and a little support in this way, may, without assistance, become effective and contributory in the normal way to the national economy.
I would say, without indulging in any kind of argument of a party character, that while the noble Lord, Lord Thorneycroft, enjoyed himself—and I enjoyed him very much—in referring to certain varieties of emphasis within the Labour Party, other parties have been known, or are known, to indulge in the same kind of variety of emphasis and of opinion. That is all right. I should not be at all surprised if the sea green incorruptibles of free trade in the Liberal Party may individually, from time to time, have a look at the seductive benefits of occasional protectionism. They have in the past, and they may in the future.
But I leave that as a party point. It is not a party point. I think we can all agree that general protectionism is a menace, but that selective temporary expedients, similar to that already approved and agreed in the Treaty of Rome,

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certainly in the GATT, and mentioned in this report as being inevitable and acceptable, are something that we can all live with, and indeed use properly, in order to tide over very difficult situations which affect certain industries in practically every country.
Our own Department of Trade—and the White Paper is very good on this—finds the tariff agreements, and certainly the non-tariff agreements, to this country's advantage, as well as to that of our partners in the Community. All this was negotiated for us by the Community. But we must remind ourselves that, while we derive advantage from concessions which flow in our direction, this works both ways and we shall certainly suffer some increased competition from imports as a result of these mutual reductions. Some British industries will certainly continue to resent import competition which they feel is unfair—the textile industry in particular and a very strong case has been made this afternoon, as it has been made before, for particular attention to our textile industry. Now, with the agreement of the Community, we are negotiating with the United States of America, I think under Article 23 of GATT, to reach a partial solution of this matter. But I agree with one or two noble Lords who say that it is improbable that we shall get from the Americans, who have their own preoccupations in this matter, all that we want. We shall see.
I shall not go through the various items of non-tariff agreements in the Round, except to say that there are one or two which should benefit us markedly in the United Kingdom—the agreement on import licensing procedure, for instance, should benefit British exporters for the reason that virtue in this case is not its own reward. We have always played fair on this. Therefore, if others now begin to play as fair as we always have done, then that will be of benefit to us. It is a kind of reverse tariff that will assist us. There are other examples of advantage to us. What will probably be particularly helpful is the group of agreements on Customs valuation. It will be a help to traders to have greater uniformity and precision in the assessment of ad valorem duty, but it will be necessary to examine the application of United
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States legislation, which is coming up at this time on this point.
The agreement on civil aircraft looks as if it is a sweeping agreement in favour of general free trade in this area. However, a closer look will show us that while there has been a substantial advance here in that industry, nevertheless there are reasonable qualifications about the pace of the liberalisation in this industry.
The agreement seeking to limit discrimination through Government procurement practices depends for its effectiveness on proper supervision and verification. One is inevitably reminded of one's experience in disarmament talks; so often one gets as far as verification, and it is there, on the question of confidence, that the other fellow will do it if you do it, that very often these sensitive negotiations break down. But it cannot be beyond the wit of the participants to put together what the report describes as a supervisory committee composed of representative members to apply the proper supervision and verification to these practices.
I join with the noble Lord who said that it was particularly disappointing that the safeguards code on emergency protective action had not been agreed between the developed and the developing countries. The developing countries, understandably, are nervous. If the developed industrial countries are reasonably cautious about liberalising in such a way that they may imperil weak industries, or indeed the future of potentially strong industries, how much more must there be nervousness among the leaders of young countries which have only lately achieved independence and responsibility, and older countries in the Third World that have had very little industry and now have some industry, and are naturally cautious about placing them in competitive jeopardy?
At this point I agree very much with what was said by the noble Lord, Lord Thorneycroft. The main way to help developing countries is through trade. Trade, properly channelled and deliberately tailored to the potential and the need of the developing countries, is a form of aid. But it is a proper kind of aid and not just an unrequited dole. We need to think very hard about how far we can develop trade arrangements with developing countries which in fact are

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preferential. The whole of aid can be preferential, but not the whole of trade must be preferential. It is like the distinction between paying a man a dole and paying him an assisted wage. There is an element of subsidy or preference in both, but it is far greater in the outright dole.
I think it is fair to say that although these protracted negotiations did not yield the results that we had hoped for when they were initiated, nevertheless substantial gains have been made. There is first of all participation by a very large majority of the countries of the world, developed and undeveloped, industrial and not yet fully industrialised. There have been some specific advances in reducing tariffs, less so in improving the prospects of developing countries, but the will has been shown to be there.
Thirdly, the Round demonstrates the capacity of the Community to achieve a cohesion of method and purpose, and when that is aligned with the growing sense of political co-operation in the Community it is to be welcomed, even though there may not be very substantial results. But there have been substantial results. This is a great gain, politically as well as economically. It has brought the Community together in one sense of purpose. It has also lessened the danger of consolidating the world into some three regional trading groups—Europe and Africa, North and South America, and Japan and Asia—drifting, not into the old style nationalistic competition, but a kind of regional free-for-all. That has been avoided.
However, having said that these are gains, I echo a warning given by the noble Lord, Lord Banks, and add another that I have tried to give in this House before now. The first is that we must resist short-term inducements and sectional pressures to resort to general protectionism, bearing in mind that the ground rules can quite properly include provision for emergency safeguard action in regard to specific interest industries, and even specific national communities. There is a distinction between the two, as my noble friend made clear.
The second warning is that the communist countries, which cover huge parts
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of the world's territory and include a very large percentage of its population and resources, did not participate in this Round, neither did they in the Brandt Commission. That is a deficiency in any international negotiation that we must somehow put right. I think it is essential that we redouble our efforts to identify a community of interests, both politically and certainly economically, not only between North and South but between East and West. Systems may vary, but the needs of peoples of all countries are very much the same. If all Governments, communist, capitalist or mixed economy, as most of us are in the West, were to identify this community of interest and let all systems go, then the great boons of security, which all countries need, certainly in this nuclear age, and prosperity, which all peoples need in a world of rapidly rising population and, possibly, a proportionate diminution of essential resources, may well be the wave of the future, if I may uncharacteristically borrow a Marxist phrase. We should tolerate systems, political and economic, without undue recrimination, but insist upon the larger community of political and economic interests to serve the whole of mankind.
6.21 p.m.
Lord TREFGARNE: My Lords, as so often in the past, your Lordships will be grateful both to the ECC Select Committee for preparing this valuable and thoughtful report and to my noble friend Lord Drumalbyn for bringing it to your Lordships' attention today. The care and moderation shown by the authors of the report are very clear, and the Government can agree with many of its judgments.
The Tokyo Round agreements, the subject of this report, were agreed towards the end of last year and the United Kingdom ratification followed in February of this year. Your Lordships may remember that we discussed the agreements in a debate on the order on 31st January last, so I do not need to go into detail on them now. They provide for further tariff reductions, continuing the process of reciprocal tariff liberalisation which has been under way in a number of negotiating rounds since the war. At the same time, the participants have negotiated a series of agreements about measures other than

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tariffs which restrict or distort international trade. This attack on non-tariff trade barriers is a new departure and has provided the first major elaboration of the principles governing the conduct of international trade since the General Agreement on Tariffs and Trade—or GATT, as it is called—was signed 30 years ago.
This outcome is important to us in a number of ways. I need hardly remind your Lordships that we live at a time of unsettled economic conditions. When industry is working below full capacity, there is inevitably an increase in the pressure on Governments to protect their home markets. In such circumstances, the fear was a real one that, if these negotiations had failed, the door would have been opened to a general increase in protectionist measures. I am here echoing the views of several noble Lords who have spoken this afternoon. If a positive outcome had not been possible, we could easily have found ourselves going backwards.
Beyond this essentially defensive achievement, the agreements provide the framework for a gradual reduction in the obstacles to international trade. Tariffs levied by the developed countries on imports are to be reduced by an average of about one-third over an eight-year period. This phasing deliberately avoids any rapid changes in tariff levels so as to give firms time to adjust to increased competition at home while taking advantage of improved export opportunities. Thus by 1987, at the end of the tariff-cutting process, trade will be quite significantly freer from tariff barriers than it is today.
The attack on non-tariff barriers to trade is a less automatic process. Barriers such as the traditional purchasing practices of Government authorities and the technical standards imposed on domestically produced and imported goods are matters which cannot be changed overnight. The agreements which have been negotiated provide a basis, but the flesh has still to be put on the bones. So the detailed work of implementation and interpretation will be of crucial importance. We shall be taking an active role within the Community to ensure that signatories do not slide away from their obligations and that the potential of the agreements is realised.
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At the same time as implementing the agreements properly ourselves, we shall need to watch closely that our international trading partners do the same. Each of the agreements on non-tariff barriers contains arrangements for settling disputes and this should provide the means with which to ensure that our exporters receive reciprocity for the access which the Community grants to its markets. I will have more to say about that later on. It will take time to build up case law for the interpretation of the agreements. In some cases, we shall have to accept that it is more important to get the solutions to the problems right than to get them quickly.
In assessing the potential of these agreements, it is worth recalling that the success of the GATT in the post-war period was not assured from the outset by the legal form of its principles. Much depended also on the spirit in which they were applied. The success of the newly-negotiated agreements is similarly not guaranteed by their legal form. But the Government hope and expect that as in the case of the GATT itself, the signatories will have the political will to make the Tokyo Round agreements effective instruments for the liberalisation of international trade.
This will be no easy task. International trade touches major economic interests in exporting and importing countries, and clearly cannot be free of problems. Differences will continue to arise for resolution in the future as they have in the past. What we can expect is that the agreements negotiated in the Tokyo Round will help to provide a more up-to-date and secure framework within which the problems can be resolved.
The Select Committee has noted, for example, that important issues are raised by the Government's support for industry, which is now internationally widespread, and its relationship to the GATT principles on subsidies and countervailing duties. The agreement on subsidies and countervailing duties reached in the Tokyo Round has developed the GATT provisions by recognising more fully than previously that Government support can serve important economic and social objectives while at the same time it elaborates on the principles in the GATT aimed at discouraging subsidies which

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have adverse effects on the trade of other countries. As part of the agreement, the United States has at last accepted for the first time the material injury criterion for the imposition of countervailing duties. It is to be hoped that this agreement will help engender a climate in which any problems posed by subsidies can be tackled in a realistic spirit.
As it happens, we in the United Kingdom were faced shortly after the end of the negotiations by a major problem arising from a particularly sharp increase in imports of certain synthetic textile products from the United States. This increase has been encouraged by cheap United States feedstock prices and by the change which has occurred in the parities between the dollar and the pound. The Government have had to secure the imposition of quotas to protect the United Kingdom market under the relevant Community mechanisms.
Paragraph 33 of the report refers rather gloomily to these events, but no set of rules for international trade could have prevented the occurrence of this problem or the need for the Government to take protective measures, faced by a problem of this severity. What can we expect in the post-Tokyo Round atmosphere is that disputes about our action should be handled in a way which contains any disagreements and avoids escalating tit-for-tat measures.
It is a matter of considerable regret that, as the committee notes and as several noble Lords have mentioned, only a few developing countries have so far signed any of the agreements on non-tariff barriers to trade. Representatives of developing countries played an active part in the negotiations on these agreements and developed countries went to considerable lengths in agreeing to less onerous provisions for developing countries, tailored to their needs. Despite the granting of these special arrangements for the developing world, only some South American countries have to date signed agreements on non-tariff barriers, though others we understand are considering doing so.
This hesitancy on the part of the developing world can in part be put down to their conclusion that the outcome of the Tokyo
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Round did not fully live up to the high expectations they had placed upon it. Naturally a developing country may feel a need to consider carefully such a very complex package as the Tokyo Round agreements to assess its compatibility with existing legislation, its effect on different industries, and the overall balance of advantages it offers. Indeed, some administrations simply do not have the resources to deal with such questions speedily and in any case they may wish to see how the agreements are working out in practice before making a permanent commitment.
We and the other developed countries are continuing to try to make this process as easy as possible. Provision has been made that any developing country interested in an agreement can attend the meetings of its supervisory committee as an observer before making a decision about joining. At the same time increased efforts are being made by developed countries within GATT to encourage a constructive dialogue with the developing countries, for example, in the informal group of developed and developing countries known as the Consultative Group of 18.
An increased emphasis is being put on topics of interest to developing countries in the GATT work programme. So we are trying to bring developing countries more fully within the GATT orbit. We shall continue to urge on these countries that it is in their interests to adhere to the Tokyo Round agreements early on and to play a formative part in how they develop.
We are naturally disappointed that it did not prove possible to agree a code on safeguards as part of the MTN settlement. I should like first to rebut the myth that the reason for the failure was entirely due to disagreements between the European Community and the developing countries on the subject of selectivity. There were, of course, serious differences with them on the conditions which should be attached to selective action, but there were other weighty matters still outstanding among all the participants on the various criteria and coverage which the code should apply generally. I am confident that the developing countries have weighed this particular aspect in its proper perspective, though we recognise that the outstanding negotiations add to

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the uncertainties for them, as indeed they do for all of us.
All countries have demonstrated their political will in this area by agreeing to continue the negotiations. These are now continuing on an informal basis and I hope that a solution can be found. I think it would not be appropriate for me to divulge too many details in a negotiating situation, but I can say that we shall be prepared to consider all ideas with an open mind. At the moment we are hoping that attention focused on some of the less contentious areas, such as the more routine conditions, will defuse passions and assist in agreement. At the same time I must say that the Government are not abandoning their search for recognition of selectivity. There is really no basis for the fear held by some developing countries that underlying the Community policies on safeguard action is a plan for an increase in protective measures taken against them. The same stringent criteria would apply to selective as to general safeguard action. But we continue to regard a recognition of selectivity as the only sensible outcome for protecting the legitimate interests of British industry in a way that minimises disruption of the international trading system.
It might now be helpful if I were to deal with some of the points that have been raised this evening. I am not sure that I can manage to cope with all of them because time is getting on, but any points of significance to your Lordships which I fail to deal with I shall be happy to deal with by correspondence afterwards. First I should like to deal with some of the points made by my noble friend Lady Hornsby-Smith, which were echoed indeed to some extent by the noble Lord, Lord Hale, and others. Of course, my noble friend's concern is with the textile industry, the problems of which she has raised several times in your Lordships' House. There are now no less than 27 bilateral arrangements under the multi-fibre arrangement with low cost suppliers. And with those countries with whom the Community has guaranteed under preferential trading agreements free access to the Community for industrial goods, we have in almost all cases where trade is significant negotiated voluntary restraint arrangements. The result is that 93 per cent. of low cost imports are now subject
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to actual or potential restraint. Quotas under the MFA cannot be exceeded but VRAs—that is voluntary restraint arrangements—depend for their success on the willingness of the exporting countries to operate them, and occasionally the Community has had to take up excesses with these countries in negotiation. But VRAs have nevertheless had a major effect in restraining these countries' exports to the United Kingdom. After Community enlargement, a wide-ranging safeguard clause will be available to protect the Community's markets against Greek, Spanish and Portuguese imports during the transitional period and we are now negotiating with our Community colleagues for specific transitional arrangements for Portugal and intend to do the same for Spain.
So far as trade in textiles with the developed countries is concerned, we believe that this should be free but fair. We are prepared to give the industry full advice and assistance, for example, in preparing anti-dumping cases. The Department of Trade and Her Majesty's Customs will certainly investigate any allegations of origin fraud, for example, which are not merely rumours but are backed up by the basic minimum of evidence. I want to say that much of the information brought to our attention is just that—namely, rumours—and so often do we find that the real evidence that we need in these cases is missing. As for subsidies, we will do whatever is possible under the new GATT agreement.
My noble friend Lady Hornsby-Smith also referred to the need to ensure continued reciprocity of access to developing countries. The Government attach particular importance to gaining better access for United Kingdom exports to the markets of the so-called newly industrialised countries who export manufactured products to our markets on an appreciable scale. We shall inevitably suffer substantial problems if these countries are not prepared to open their markets to a wide range of exports from us as we accept a wide range of exports from them. As we make plain in bilateral contacts with the countries concerned, our home industries affected by import competition cannot be expected to accept the situation unless trade is two-way in this sense.
As for the matter of textile tariffs, which my noble friend also raised, both

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the Community and the United States, for example, are to cut their textile tariffs by less than the amount required by the standard tariff-cutting formula, and the cuts will reduce many of the differences between the Community's and the generally higher United States' textile tariffs. The United States has offered worthwhile reductions in its very high tariffs on woollen goods, such as the tariffs on woven woollen cloth and on woollen sweaters. In return, the Community has offered concessions in the tariffs on synthetic textiles, which I recognise have caused some concern. To help allay the fears of United Kingdom and European producers about possible competition in this sector, the Council of Foreign Ministers has declared that it will have recourse without delay to the appropriate safeguarding provisions of the GATT if foreign producers of synthetic textiles try to take advantage of their artificially cheap supplies of energy and feedstock to threaten disruption of the Community market. This commitment is being acted upon in appropriate cases.
My noble friend referred to the "snapback" provisions in the event of the MFA not being renewed. I should perhaps tell her that they, of course, apply not only in respect of the United States but in respect of the Community as well.
If I interpreted him aright the noble Lord, Lord Greenhill of Harrow, asked whether we should aim in the long run to merge the GATT and UNCTAD into a single new and comprehensive international trade organisation covering broadly the same ground as the ITO envisaged in the Havana Charter of 1948. He has raised an interesting and important point. It is certainly true that historically the division of responsibility between GATT and UNCTAD has emerged somewhat by chance. Nonetheless there is much to be said in favour of the present arrangements. The GATT deals largely with an area of trade policy in which precise and binding rights and obligations are both desirable and practicable. UNCTAD, by contrast, deals mainly with commitments which necessarily have to be cast in a more general and nonbinding form. Each has developed different techniques of consultation and negotiation. It would not be in anyone's
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interests to try to force these two rather different types of organisation into a single framework.
It is, of course, important for GATT and UNCTAD to maintain, as they do, close and effective working relations. The issues they deal with are interrelated, and there is a case for periodic discussion of the whole complex of trade and trade-related issues within a single worldwide organisation. UNCTAD already provides the forum for this and should, I think, continue to do so.
My noble friend Lord Thorneycroft and the noble Lord, Lord Rhodes (who has had to leave to catch his train), and others, referred to the general issue of import controls. In the Government's view, general import controls would be contrary to our international trading obligations and to our domestic interests. They would put up prices, reduce freedom of choice for the consumer and act as a disincentive to British industry to adjust. They would also lead to retaliation against our vital exports, and this is not a path we would wish to tread. Exceptionally, we are prepared to consider the case for import restrictions in a particular sector where the industry concerned feels these to be essential. Of course, any such proposals have to be acceptable to our Community partners, and must, of course, be considered against general United Kingdom interests, and, as I said, the dangers of retaliation against vital exports. I must confess that my noble friend Lord Thorneycroft put the case against import controls a good deal more eloquently than I can, and I agree with every word that he said.
My noble friend Lord Drumalbyn in opening this debate asked me particularly about the general position of signature to these agreements. I can say that the Community plus all of the member States signed the civil aircraft agreement, the Agreement on Technical Barriers to Trade, the Standards Code and the Tariff Protocol in respect of European Coal and Steel Community products, but all the other agreements were signed on behalf of the Community alone. The formal position within the Community on who should sign agreements was not clear and the agreement on signature which was finally agreed preserves the right of member States to speak in the committees of

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signatories established under the various agreements. In practice, however, the best results are normally achieved by the Commission speaking on behalf of the Community in the formal GATT committee meetings with the member States active in the margins.
My noble friend also asked me specifically about the position of Japan. The Japanese Diet has now approved the MTNs and the Japanese Government has accordingly just lifted its reservations in Geneva and fully ratified all of the agreements and protocols making up the MTN package including the civil aircraft agreement to which my noble friend referred, and of course this is a most welcome development.
My Lords, we in the United Kingdom are heavily dependent upon international trade. Our exports amount to almost a third of our gross domestic product, compared with 20 per cent. only 15 years ago. Quite apart from the general economic arguments in favour of free trade, which the Select Committee and many of your Lordships rightly endorse, we are in practical terms simply not in a position to forgo the benefit which trading with other countries brings to us. The outcome of the Tokyo Round offers the means by which a further liberalisation of trade can be achieved, not a sweeping one but one appropriate for the times, and it strengthens the GATT principles within which problems affecting international trade are resolved. It is on this basis that we welcome the constructive approach of the Select Committee's report.
6.44 p.m.
Lord DRUMALBYN: My Lords, I should like to start by thanking my noble friend for answering so fully the points that have been raised. He has done it with his usual care and vigour, and he does it at a fairly breakneck speed, which is commendable because we have to get home. It will repay re-reading in Hansard when we get it (I was looking for neutral wording). I should also like to thank the House as a whole for the way in which the report was received. In particular I should like to thank all noble Lords who have spoken and also those few noble Lords who are still here—those who have listened and those who have spoken and
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listened. I am very grateful to them all. Finally, I should like to thank very much our advisers for the unstinted help they have given us. The whole exercise has been a very useful one, certainly for the committee itself, and I hope that as a result of this debate it will prove of wide usefulness to the House, and beyond. I do not know whether I am supposed to withdraw this Motion. I do not see why I should because the House has obviously taken note of what we have been doing. Therefore, I should just like to say thank you very much indeed.
On Question, Motion agreed to.

ECC REPORT: ENERGY OBJECTIVES FOR 1990
6.47 p.m.
Lord SHERFIELD Lord SHERFIELD rose to move, That this House takes note of the report of the European Communities Committee on energy objectives for 1990 and convergence of the policies of Member States (35th Report, H.L. 166). The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. In July last year your Select Committee reported on an earlier version of the EEC communication, Energy Objectives for 1990. At that time we were anxious to get an important document on to the Floor of the House before the Recess and we took relatively little evidence, but we did have a well-attended and interesting debate on 23rd July. By then the Commission had already published a second and more comprehensive communication, with the same title but with the addition of the significant words "and the Convergence of Policies of Member States", plus a draft resolution.
This time your committee decided to make a report in some depth, and, since previous reports on this subject had been rather critical of the Commission, to endeavour to make a constructive contribution to the problem of energy policy in Europe. The result is before your Lordships. Here I want to express my thanks to my colleagues on the subcommittee which drew up the report, to our two specialist advisers and to our clerk. All of them worked very hard and gave me invaluable support.
Your committee took evidence from the Department of Energy, from the nationalised industries concerned with energy, from the European Environmental Bureau, which submitted a very well argued and informative paper, and from the United Kingdom members of the European Parliament. We were assisted informally by an official of the European Commission, and we had a wealth of written evidence from the major oil companies and others. For all these contributions I express my gratitude.
Your committee set out to establish, on the basis of the Commission's communication, what the European Economic Community is, could or should be doing about energy policy. Some time back the Commission tried to promote a common energy policy for Europe. But the present communication recognises in effect that this is not at present politically feasible, since each Government is determined to be master of its own house. The Commission now lays emphasis on aiming at the highest possible degree of convergence of policies, and the resolution sets out five objectives at which to aim. They are listed in paragraph 2 of the report and are subject to two overriding considerations: first, to reduce the energy coefficient—that is the ratio between the growth of energy consumption and economic growth—to below 0.7, since, I believe, revised to 0.8; and secondly, to restrict the level of net oil imports to a named figure. The five objectives are: to promote energy savings; to step up coal production; to restore the nuclear programmes to their original level; to increase indigenous hydrocarbon production to the maximum extent; and to ensure that pricing policies reflect rising supply costs.
In such a fast-moving and vital area of policy a report such as this can do no more than fix the situation at a given point in time, in the knowledge that it will be subject to change before it is published. In one sense that is true of this report. For example, the forecasts for energy production in Europe have been twice revised in a downward direction, and only yesterday the Commission produced a revised resolution, a much shorter draft, which concentrates on two what are now called "priority areas"—that is, energy saving and the rational use of energy, and the reduction of oil consump-
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tion and oil imports. In this resolution the Member States are requested to submit their energy policy programmes up to 1990 annually to the Commission, who will then make a critical examination of them. But, in another sense, the situation has been slow moving, for the communication before the House, which was published in June 1979, has still not been considered by the Energy Council. I shall return to that point later.
Your Lordships' committee concluded that the scope for Community action could broadly be classified under three headings. First, matters requiring negotiation in international institutions in which the Community is represented. Secondly, matters benefiting from convergence of national policies pursued through the negotiation and the adoption of agreed objectives. Thirdly, matters appropriate to a common policy.
The first function is obvious, and has been successfully performed at summit meetings and in the International Energy Agency. As regards the second—convergence—your Lordships' committee considered three ways of promoting it—namely, to set joint targets; to align pricing policies; and to implement and monitor national conservation programmes in order to ensure the highest standard of energy saving and efficient use.
As regards the setting of joint targets, there was some difference of view among our witnesses as to whether that was a helpful practice. The Department of Energy was inclined to throw some doubt on this, but most of our other witnesses thought that they were useful. There was, however, a good deal of criticism of the practice of the Commission in predicting the achievement of targets by simply adding up the figures received from member countries instead of applying a critical faculty and producing their own estimates. Your Lordships' committee agrees with that criticism. The current practice leads to chronic undershooting of the real figures, especially in the nuclear field, and therefore to self-deception.
Finally, our witnesses were almost unanimous in thinking that the Commission was not looking far enough ahead and the European Environmental Bureau was particularly emphatic on this point.

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The Commission should produce estimates at least up to the year 2000. Perhaps the noble Earl who is to reply would like to make some comment both on the question of targets, and on that of the time-scale?
As regards the third point—the scope for common action—a common energy policy is distinguished from convergence of policies by the application of Community resources or the acceptance of Community legislation, with or without budgetary support. One class of project falling under this head includes developments involving a long timescale, high cost and high risk. The classic example is nuclear fusion, where there is already a well-developed Community research programme whose realisation, however, falls outside the timescales under consideration. Other cases are the fast reactor, nuclear waste disposal, and reprocessing, which are appropriate for Community collaboration, if not for a joint programme. Your committee urges in particular that there should be collaboration on fast reactor development. Can the noble Earl say anything more about this tonight?
Another subject is energy distribution and the possible strengthening of the European energy infrastructure, but here the scope for savings seems to be limited. Energy conservation is another matter on which your Lordships' committee thinks the Commission could do more by financing research, development and demonstration projects, and by encouraging national programmes. Your Lordships had a well-attended debate on energy conservation on 19th March, introduced by the noble Earl, Lord Lauderdale. That debate dealt mainly with domestic policy, but nevertheless I need not pursue this subject tonight, except perhaps to say that the Commission, after a shaky start, seems now to be getting a better grip on the subject and that the emphasis laid on the rational use of energy in the new Commission Resolution, to which I have just referred, is, I hope, an encouraging sign.
Perhaps the most urgent need in Europe is to improve the security of supplies, and that means the development of indigenous resources, especially coal, as the British and German coal industries have great potential for increased production. Your
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Lordships' committee considers that there is a strong case for additional Community aid to the coal industry by way of subsidies, control of imports, and, more particularly, of aid for additional investment. In this connection they strongly support the recent proposal of the Secretary of State for Energy for investment grants. I should like to ask the noble Earl what, if any, progress has been made on this matter.
The committee also feel that the Commission might do more to gain public acceptance of the need for increased energy production. They have taken some steps in this direction already in the nuclear field and they might, we think, do more and extend the action to include coal production and use.
Lastly, there are the oil and gas resources of the North Sea, which are of immediate interest to other member States. It is recognised that this is a British responsibility, subject to the schemes of the International Energy Agency and the EEC for the disposal of oil in an emergency. However, the benefits already accruing to the member States under our present management policies are insufficiently recognised. The committee doubt whether Her Majesty's Government would undertake further commitments to their partners in the prevailing uncertainty. Nevertheless, the committee recommend that the Government should take Community needs and policies into account when planning their depletion policy and they comment that aid in the development of the British coal industry would be of assistance in this connection.
There is one further point. We were informed towards the end of our inquiry that consideration was being given in the Commission to a possible Community tax on oil imports. The Commissioner for Energy, Dr. Brunner, made a statement about this and it was favourably received in the European Parliament. I understand that variants of this proposal are still floating about. I ask the Minister whether he thinks that there is anything in this approach and whether he has any comment on it.
What of the immediate future? Your Lordships' committee observes that six years after the 1973–74 oil crisis only 1·5 per cent. of the Community budget

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was being devoted to energy, though I think that this may now have risen to 2 per cent. It further observes that the energy Ministers have still not considered the 1990 objectives communication although it was published in June of last year, which really does not indicate any great sense of urgency.
Therefore, in conclusion, let me quote some sentences from two important paragraphs in our report which look forward. The first is from paragraph 35:
"The Committee recognise that … there has recently been some modest increase in Community expenditure on energy R & D",
which may be reflected in the small increase in the percentage of the Community budget devoted to that purpose. I continue:
"Nevertheless they strongly support the Commission's desire to allocate more of the Community's budget to energy and they hope that the U.K. will in future benefit from Community support for coal production investments. The structure of the Community Budget is ill suited to contemporary European problems and a large increase in the resources allocated to energy is justified. It is essential that funds made available should not simply finance developments that would have occurred in any case; they must be used to create new opportunities".
Then I quote from paragraph 44:
"Since 1973, the Community has made some progress in defining the areas of potential Community effort but has not shown itself capable of action … It is clear to the Committee that the principal responsibility for this lies with the Council of Ministers, the members of which are responsible to national parliaments and are not judged for their positive contributions to Community politics; minor … national interests are often put before major, tangible Community interests. There has therefore been no institution with political authority which can view matters in a European perspective ".
I ask the Minister in his reply to comment on these two statements. Further, I ask him to enlarge, if he can, on the outcome of the discussion on energy at the Council's recent meeting in Luxembourg. It was reassuring to hear that the Ministers had found time to deal with this question, for it is only from the Council that the main and much-needed political impetus can come. Certain matters seem to have been referred to the energy Ministers who are, I think, meeting on 13th May. Can the Minister tell us anything about the agenda and prospects for that meeting, with particular reference to the revised draft resolution to
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which I have referred? Is there a new initiative, and has he hopes that after a year of inaction progress can now be expected? My Lords, I beg to move.
Moved, That this House takes note of the report of the European Communities Committee on energy objectives for 1990 and coverage of the policies of Member States (35th Report, H.L. 166).—(Lord Sherfield.)
7.3 p.m.
Lord STRABOLGI: My Lords, from this side of the House I should like to say how grateful we are to the noble Lord, Lord Sherfield, for moving that the House takes note of this report. I had the privilege of serving on the sub-committee under, if I may say so, the noble Lord's able and distinguished chairmanship, and, as the noble Lord has said, we were well served by our technical advisers and our clerk. I should also like to add my thanks to his to all those who gave evidence either written or oral.
The present Commission document sets out proposals only to 1990, and I must add my regrets to those of the noble Lord, Lord Sherfield, that the period was not extended to at least the year 2000, which would have meant a more realistic time-span. There can be no dispute about the general policy objectives, particularly those to step up energy saving measures, to increase coal output, and to develop the nuclear programme, although—as the committee has pointed out on previous occasions—the Commission should not rely too much on the present achievements of the nuclear construction programme.
It is also to be regretted that the Community has made so little progress in agreeing an energy policy, beyond a few comparatively minor proposals. We must surely add our support to the EEC Economic and Social Committee which last November called for greater convergence on nuclear policies, regretted that the Community measures to promote the production of coal had still not been approved, and emphasised the need for better public education on the instability of the oil market.
The underlying instability of oil supplies from the Middle East has been brought home with a vengeance by the troubles in Iran and the current dispute with Saudi

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Arabia. But even if, happily, we achieve some stability in that area, as the Commission points out, we are still faced with the fact that by 1985—which is just five years away—world demand for OPEC oil could be in excess of OPEC production by 150 million tonnes to 200 million tonnes a year.
From the Community viewpoint the crisis caused by an energy shortage will be further deepened because Greece, Portugal and Spain—three countries that are likely to join the Community before 1990—are all energy importers. I note from the recent Government Statement following the Luxembourg meeting of the European Council of Ministers, which was mentioned by the noble Lord, Lord Sherfield, that at its next meeting in Venice the Energy Council intends to review the current policies of Member States on the replacement of oil by other fuels; on the development of nuclear power, and on conservation. I should also like to support the noble Lord, Lord Sherfield, in asking the Government whether they can elaborate on that.
With regard to nuclear power, within a few decades there is the prospect of a world uranium shortage. I am glad to note that the Commission is encouraging uranium exploration within the Community. We welcome the present Government's decision to go ahead with the Labour Government's plan for two AGRs, but has not the time come when we should be thinking urgently about the fast breeder? Can we afford to wait much longer before a decision is made? Already, as the Secretary of State for Energy admitted recently in another place, Britain is in the position where the amount of electricity generated from the nuclear power available to her by the year 2000 will be less than that available to the French and to the Germans in 1985. I understand that the Government are considering whether there should be international collaboration over the fast breeder; and in its report the committee suggests—as the noble Lord, Lord Sherfield, has pointed out—that this could be beneficial.
I believe that the United Kingdom Atomic Energy Authority, in conjunction with the nuclear and electricity supply industries, is examining possible ways for collaboration with our European partners
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on the fast breeder. Perhaps when the noble Earl, Lord Gowrie, comes to reply he could let the House know the present position.
I should like to support most strongly what the noble Lord, Lord Sherfield, has said with regard to coal. The report points out the importance of our coal industry to the whole Community and suggests that it seems reasonable for the Community to give some aid to the industry. The committee particularly favour aid to investment in coal-burning plant and in electricity generation, as well as aid to new mining capacity. Perhaps the noble Earl, Lord Gowrie, will comment on this aspect of the report.
I hope that the House is not going to be told by the noble Earl that this is not for the Government but is a matter for the NCB, because I believe that this is an area where the Government need to play their part in conjuction with the board and with our European partners. Certainly the considerable recent investment in our collieries of £600 million a year is beginning to bring its reward, and the output in Britain's coal mines continues to rise, with both productivity and output records being achieved in February. Judging by the coal industry's provisional results for 1979–80, this has been a most impressive year altogether of resurgence for coal, and it is an achievement that brings much credit on the 300,000 people—miners and surface workers alike—who work in this great national industry.
I want finally to turn again to the question of producing SNG and oil from coal by the particular extracting processes that are not new—the Germans were able to do this to an extent during the last war, and the South Africans have been doing it for some years—but which have been developed to an advanced level at the National Coal Board's coal research station at Stoke Orchard, near Cheltenham, which I had the pleasure of visiting last year. Perhaps I may say en passant that in the days before coal nationalisation none of the privately owned collieries did any research of this kind. This vital research work, on which our future depends, by the NCB is surely an added justification, if justification were needed, for the nationalisation of our coal industry.

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I hope that we are not going to be told that coal liquefaction is a matter for the board and not for the Government, because the Government should have a part to play in this vital development. The last Government granted a large proportion of the cost for the design and feasibility studies. Can the present Government tell the House when they think that the liquefaction process will be sufficiently advanced to be used on a national scale? Will this be early enough to fill the breach when the oil begins to run out? What are the environmental and planning considerations involved? How many conversion stations will be needed throughout the United Kingdom? And is it envisaged that these will be sufficient for our requirements only, or is it the intention to export oil from coal to our partners in the Community?
I know that the Government are apt to shy away from central planning, but here surely is a case where we need a national plan now for producing petrol, diesel, and aircraft fuel from coal. On the question of cost, it has been estimated that with rising oil prices the project should be economically feasible on a national scale by about 1995, which is just about when we shall need to start replacing North Sea oil with other fuels. Therefore, we have not got very long before the oil runs out and we shall need this alternative form of fuel if this country, and indeed most of the EEC, is not to grind to a halt. I think the Government—and I hope that the noble Earl will be able to do this—should give the House a report on the current position.
7.15 p.m.
Lord TANLAW: My Lords, we, too, from these Benches are most grateful to the noble Lord, Lord Sherfield, for bringing this report before your Lordships' House. I agree with his comments and what he said in view of his disappointment about the apparent lack of urgency that has been shown by the Commission in bringing this report further forward. A time-lag of a year is one which in our view cannot be overlooked, because it is the lack of the sense of urgency which is the main point of the intervention I make today.
The short-fall in Europe which has been expected to occur in the late 1980s could
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happen tomorrow. The political events, as has been said by the noble Lord, Lord Strabolgi, in the past week in Iran, and their repercussions in the neighbouring countries and now London, do not bode well for continuity of supply to the oil-importing nations of Western Europe. Therefore, the title of the report which we are debating should perhaps be altered to allow for these latest developments, and should read the "Commission Communication on Energy Objectives for the 1980s" rather than for the 1990s. I say this because the underlying assumptions that have been made on all the future energy predictions have been that there will be a gradual slowing down of oil supply to the Community, with perhaps only minor interruptions, but with no major stoppages for political or military reasons.
Unfortunately, it would appear that unless the present situation in the Gulf region returns to normal very shortly, which I believe to be most unlikely, then future energy predictions must assume as from today that there could be total stoppages in supply of fuel oil to all Western nations from time to time. Therefore, some of the actions recommended in this report for the late 1980s or early 1990s in anticipation of predicted oil shortages should now be brought forward and implemented as soon as possible if there are not to be very serious effects on both industry and society in the Free World.
The noble Lord, Lord Sherfield, referred to the evidence submitted by the European Environmental Bureau on Conservation. We, too, take up the point that the projection for this report was too short and should have gone on into the next century. Their recommendations in the areas of conservation are ones that should be implemented not in the 1990s but right now, in the 1980s. The other important area which, in my view, was not fully covered in the report is that of substitution. May I say a word about this because there has been a false assumption, which was repeated in his report by one of its witnesses, that electricity cannot make a very large contribution to substituting for imported oil. I disagree with this view, in that it is even now technically possible by using electrical furnaces to produce steel. It is also possible to replace space heating by electrical means.

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I fully accept that electricity is not the most efficient use of energy conversion through the heat and transmission losses involved, and I have said this from these Benches on other occasions. However, in the context of the new circumstances in which I believe we find ourselves today, it is not so much a question of whether the source of energy is efficient but whether it will be available at all. In which case I would ask Her Majesty's Government's view as to what changes in energy policy are being considered to implement wherever possible the substitution of electric power for fuel oil.
Such a policy would of course require in the United Kingdom the CEGB to re-estimate yet again their future consumption loads for the next 20 years, and by implementing such a policy they would have to be greatly revised upwards. I accept the evidence given by the oil companies in the appendices attached to the report that oil should be considered the balancing fuel; but what if the oil is not allowed to leave the ground for the political and military reasons that f have mentioned? Then the whole delicate structure of the Free World economy is thrown off balance unless there is an adequate conservation and substitution policy already in operation throughout the whole Community.
Noble Lords will appreciate that these are general comments and might appear even controversial, which they are not intended to be but merely cautious. The one question that has not been raised or already asked, except in the vaguest terms within the report, is, what kind of society will exist in Western Europe by the year 2000 on the basis of the current energy policies? It is my view that it should be stated quite clearly that there will be be no alternative to an all-electric society for the first part of the next century. There are just no other sources of energy available to maintain existing living standards in the West, or to uplift the very low standards of the Third World.
It may be of interest to noble Lords to know that if the people of the developing world are to have parity in electrical consumption with us—that is, half a kilowatt capacity per head—they will require a total supply of at least twice that which is available in the whole Western world today. Even when alter-
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native energy strategies begin to make their contribution to the energy equation 20 years from now, they will do so mainly by contributing electricity. I am asking the Government today to say quite openly that a world without oil and gas will mainly be one which is powered by electricity in the 21st century. It would be most helpful if they were prepared to say so now, or alternatively explain what other source of power is going to provide the needs of life, public transport and industrial energy during this period.
The particular aspect of the report which is relevant to these remarks is that the time has come for the Community, including the United Kingdom, to cut down the spending of money on academic papers on energy conservation from universities, consultants and the like and to divert these funds instead into the production of workable prototypes which can be properly evaluated. There is no more time for theoretical work, certainly in the public transport field, if a substitution policy of using electrical power is to be of any use. We must have some prototypes, and if I give an example in an area with which I am familiar—that is, the electric traction field, in which I have an interest—perhaps the Government will see what I mean.
The technology of electric traction is well known, as—and this is mentioned in the report—that of windmills, and there is little more to be gained by pure academic research into these areas. What is missing is the hardware for evaluation when the time comes and there is no more fuel oil for transport. The Commission has the power and funds to execute such a policy with known technology. There can be no merit in delaying decisions to go ahead on a whole range of projects concerned with conservation and substitution. They have already been put before them. Postponing these decisions could put the whole future way of life of the Community in jeopardy.
Closer to home—this may sound almost parochial in the wide terms in which I and noble Lords have been speaking tonight—I wish to make a suggestion to the Government which need not involve the expenditure of extra funds in this area. If they divert some of the sums already committed for academic research and use them for the production of prototypes

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rather than paper in this country, they too could be making a contribution to the Community. There is another area in which Her Majesty's Government could be of assistance in preparing for disruptions in public transport due to the possible interruptions, to which I have referred, in oil supply in the future. This would be by advancing special sums or grants to local authorities for the creation of trolleybus, tramcar and other similar means of public transport in both urban and rural areas which could be used for evaluation purposes and at the same time provide a public service.
To give an example of this, I think Blackpool has the only existing tramway system in this country, but it is in urgent need of repair and maintenance if it is to continue to provide any form of public service. The Government cuts in local government expenditure will almost certainly mean that this service will be suspended and the vehicles sold as scrap. However, by the injection of a special grant of about only £50,000 I understand that it would be quite feasible to update this system of transport and at the same time use it as a test track for evaluation purposes. It this tramway is allowed to fall into disrepair, the Government may be forced within a few years to build and establish, at far greater cost, their own test track to evaluate the practicability of the reintroduction of tramcar, trolleybus and other electric vehicle systems throughout the country.
I hope the Minister will answer that when he replies, because he must be aware that in the Community there are modern and extremely efficient tramcar and trolleybus systems already in operation, and therefore if we have to use them in this country it would be a tragedy if we have to use European technology and European vehicles when we could be using our own. Unfortunately, the British Airports Authority is not using electric vehicles built in this country but is having to use expertise from the United States, simply because there are no prototypes for evaluation for their services. There is almost a surfeit of British technology amassed over the years which, without further research, could be used for this purpose, provided there was some incentive for a local authority to construct an economical
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electrical transport system. Already we hear that London Transport wishes to extend the electric trains system from Aldersgate into the new development area of Dockland. Their concern is to how to do it. This would be an excellent area in which perhaps the Government, in conjucntion with London Transport, could use this as an experimental service for the future, for the 1990s and beyond with which the report is concerned.
There is a minor point which I find almost incredible; the difficulties passengers can experience in transferring from British Rail to the public bus services. Why is it that bus stations appear to be situated so far away from railway stations? And why is there such an infrequency of bus routes that travel past a railway station? This aspect was touched on in another report, The Social Consequences of Rail Closures. If we are to work towards a policy of conservation or integration of transport systems for the future, why is it, for instance, that at Preston the only means of getting to the bus station from the railway station is to take a taxi at a minimum fare of £1·50? It seems to me that this is an area where the Government could look to the local authorities for assistance in a policy of energy conservation for the future, simply by establishing public transport stations that are close to one another so that transfers can be made for an integrated transport policy. The motorcar has made the economics of providing such a service today totally unreal; but many people believe, as I do, that the high cost or the intermittent availability of motor fuel in the Community will necessitate people using public transport as a main means of getting from one place to another.
The Select Committee went on to some details of the arguments covered by Gerald Leach and the need for a low energy strategy, which implies that there is little requirement or place for nuclear power stations. Surely there is now an even greater need for a nuclear element as part of the Community's energy policy. Indeed, some countries have no alternative but to go along this route. We in the United Kingdom are committed to building nuclear power stations, subject to the safety provisions which the Government have undertaken to satisfy through a public inquiry. In view of the present urgency of the implementation of a

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substitution policy, may I ask Her Majesty's Government to bring forward the date of these public inquiries so that the nuclear programme can be commenced at an earlier date than is apparent at the moment? Further, will Her Majesty's Government consider at the same time instigating the public inquiry regarding the safety of the fast reactor, so that promising developments in this field may not be held up due to hesitation from the general public about the safety aspects involved in this process of electricity generation?
However one looks at it, I see no advantage in delaying these public inquiries, even if it is only to satisfy the current disquiet that many people feel—that many Liberals have—about the future of the nuclear industry. I am sure it will be satisfied by public inquiry. It is interesting to note that the report touches on this and says that some countries within the Community wish that they had used this method of public inquiry before going ahead with the construction of their nuclear programmes because of the doubts it left with the general public most affected by these programmes. These doubts must be resolved, and the sooner they are, the better it will be for the establishment of a workable energy policy for the United Kingdom and the European Community as a whole.
7.28 p.m.
The Earl of BESSBOROUGH: My Lords, we must be grateful to the noble Lord, Lord Sherfield, for presenting this report so clearly and concisely, and I wish to say as a member of the committee that the noble Lord is a most effective chairman and that we are very fortunate to have him as our leader. I need hardly say that I have no reservations whatever about the report and agree fully with its contents and conclusions, especially, as the noble Lord, Lord Strabolgi, said, that the Community should publish objectives for the year 2000 as soon as possible and, above all—the third main recommendation—that much greater resources should be allocated to energy policy, including conservation, the development of indigenous coal, its liquefaction and, perhaps most important of all, as Lord Sherfield said, the fast breeder reactor.
In regard to increasing the amount of
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funds available for energy research of various kinds on various projects, what I most regret is that, although the Commission and the European Parliament take, I think, a similar view, there seems in recent months to have been no political will in the Energy Council to achieve these ends. I think that the noble Lord, Lord Sherfield, made that point.
I should like to pay tribute to the work of the Energy Director-General in the Commission and to my old colleagues in the European Parliament, who gave evidence to us, for the important work that they have done in striving to achieve an energy policy. But unfortunately—as I think we now all know—the Council does not seem to go along with them in their views. Indeed, my impression is that recent Energy Council meetings, in the last three or four years, have been very ineffective. Some people have said that they are almost going backwards, that each meeting is almost worse than the last. I regret having heard this. At all events little progress has been made in developing an energy policy.
In regard to allocating much greater resources, I have been contemplating how best this could be done, since the publication of the report, and I have read with great interest two recent communications from the Commission to the Council on energy policy and fiscal instruments for raising Community revenues from energy. These communications were published on 20th March, a month after our committee's report was ordered to be published. They are Com80/150/final, and 153/final. They are most interesting and illuminating documents. They are public documents, but I stress that they are of course only communications, and not even definite proposals by the Commission. However, I believe that they are most useful papers for the purposes of discussion, and that is why I raise them.
As the first document says, the case for common Community policies is strong. When the Coal and Steel Community, and later the European Economic Community and Euratom were set up, the need for energy policy as such was not clearly foreseen. At that time coal occupied a more important place than it now does, and nuclear energy seemed to be the main energy source for the future. Thus although powers in respect of coal and

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nuclear energy were attributed to the Community, no specific power was attributed in respect of energy as a whole. Nevertheless, as the Commission says, achievement of the political, economic, and social objectives of the Community as defined in the Treaties are increasingly conditioned by the supply of energy; and I agree with the Commission that there can hardly be a true common market without common policies in that field.
I know that some progress has been made following acceptance of the Commission's proposals on reprocessing of nuclear waste, nuclear waste disposal, and indeed fast breeder technology. But more work is necessary to establish consistent environmental and security standards for nuclear power stations within the Community.
There are, as the Commission adds, two particular areas in which action might now be considered: an energy price and tax policy, and increased energy investment, as the noble Lord, Lord Sherfield, has said. We all know that the Community's paramount need is to become less dependent on external supplies of oil. But at present the different fiscal policies followed by member Governments scarcely promote the greater independence which the Community needs. Indeed, part of recent oil price increases have in effect been carried on national budgets. This may have helped to hold inflation in the short term, but it has had unhappy consequences, including a reduction of the investment to save energy and develop new sources.
The different ways in which prices are fixed in each member State, the different systems of taxation, the different weighting given to energy in such features as the cost of living indices, have created trade distortions between member States and indeed distorted consumption within them. I agree very much with the Commission that progressive harmonisation of energy prices and taxes within the Community is essential. In so far as investment is concerned, this differs greatly among member States in the various forms of energy, according to the circumstances.
We might bear in mind that during the period 1980 to 1990 (the period we are
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thinking about) member States plan—these are the estimates—to spend in total over 400 billion European currency units on energy, or up to two per cent. of the Community's gross domestic product (the GDP). Although about 40 per cent. of all Community financing goes into the energy sector through the European investment bank, Euratom and the European Coal and Steel Community, this amounts to only about 4 per cent.—as opposed to 40 per cent. of all energy finance. This must be markedly insufficient in the long term, and in my view an expanded Community programme of investment support is absolutely essential—as I think the noble Lord, Lord Sherfield, agrees—and above all, it is essential in promoting coal and nuclear power, the exploitation of which is vital to meet our future needs.
As well as the development of synthetic fuels and other renewable resources, there should be increased investment in proven technologies and in more advanced technologies; for example, in deeper sea oil drilling. Many of your Lordships may have seen that interesting and most effective BBC documentary on Tuesday night, about life in the North Sea. I know—and I think the point came through in that programme—that some large oil companies have come to welcome EEC assistance in this respect.
The Commission seems to consider that the additional investment required in the 1980s to hold down oil imports to their present level could be in the order of 50 to 100 billion European currency units, or between a quarter and a half per cent. of the Community GDP.
I recognise that in general terms the energy industry is capable of financing itself, but with the growing importance of research in advanced technology, the long lead times, and long pay-back periods, there is a substantial need for such additional finance; and here the Commission paper—there is more than one paper, I need hardly add—has some interesting suggestions to make regarding the form of such support primarily to supplement national programmes. Maybe a mixture of grants and subsidies for loans would be appropriate. But how would these be financed?
Revenue under the Community's existing system of own resources would

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certainly have to be increased. This might be done by introducing, as the noble Lord, Lord Sherfield, suggested, a specific Community energy tax. It might be a tax on consumption of energy, either in all its forms or on oil, or on specific oil products. Or it might be a tax on production of energy in general, or oil in particular. Or, perhaps—I put this last—it might be a duty or levy on oil imports. If substantial funds—funds which would be part of the Community's own resources—could be raised by taxes of this kind, this would make contributions to the Common Agricultural Policy appear much less inflated, and display, perhaps, a slightly more balanced Community budget. Member States might also, in those circumstances, receive Community-produced oil—that is to say, from the North Sea—at preferential rates. A Community initiative of this kind would also be designed to help further policies already publicly advocated by the OPEC countries to reduce consumption of oil and extend the life of the world's oil resources.
I should be most interested to hear the Government's comments on these ideas, if they are ready to give them, which have been produced by the Commission, as well as on the precise fiscal instruments which might be used. We know that three types of tax do at present apply to energy. First, of course, on consumption—that is to say, VAT—second, special excises on consumption; and, thirdly, Customs duties. I should be particularly interested to know whether the Treasury and the Energy Department have any preliminary views on extending levies or taxes of these kinds, and/or whether, for example, a hybrid formula combining a Community Customs duty on imported crude with identical but nationally-imposed levies on internal crude oil production would be appropriate.
Coming to the end of my remarks, I am sorry that I have perhaps broken somewhat new ground here, but I thought these points were worth discussing. I should like to say how important I consider it to be to revive the dialogue between the European Community and the OPEC countries. The official Euro-Arab dialogue does not seem to have been operating very effectively in recent years, and that is why I have been happy to keep contacts alive as a co-chairman of the
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informal Euro-Arab Dialogue. I hope that Sir Donald Maitland, the newly-appointed Permanent Secretary to the Department of Energy, with his unrivalled experience of the Arab world as well as a permanent head of our delegation in Brussels, will be able to play a part in revivifying that dialogue. I think this is the most remarkable and imaginative appointment of one of Lord Sherfield's former colleagues, and it is an appointment on which I consider the Government, and indeed Sir Donald Maitland himself, should be warmly congratulated.
I also wanted to ask about what happened in Luxembourg. I read the Financial Times today where it was said that the Prime Minister made certain concessions to other Member States on the energy front. I do not know whether or not the noble Earl, Lord Gowrie, can say anything on this; but, in conclusion, my main message has been that we must increase the Community's own resources for these purposes, and I hope that this Select Committee report is approved by your Lordships, because that is one of its main recommendations. I hope the report may have some effect, not only on any future proposals which may be made by the Commission, perhaps in agreement with the European Parliament, but above all on the Ministers representing their Governments on the Energy Council.
7.45 p.m.
Lord FLOWERS: My Lords, I have few points to make, so I shall be brief. First, however, I, too, should like to say how enjoyable it is to serve on Sub-Committee F under the vigorous chairmanship of the noble Lord, Lord Sherfield, and to thank him for initiating this debate on our report. The report itself, and several noble Lords, have stressed that in matters of energy policy the Community has too close a time horizon. Its vision extends no further than 1990, only 10 years away. To be sure, there are very serious short-term problems, as the noble Lord, Lord Tanlaw, has said, but we must not be entirely mesmerised by that. Allowing for all the normal planning procedures, as well as the construction and commissioning phases, it takes about 10 years, with a bit of luck, to build a major power station, whether fossil- or nuclear-fuelled. It takes 10 years to open up a new colliery. It would prob-

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ably take 10 years to provide for a major district heating scheme in present-day London.
On the other side of the coin, it takes about 10 years to rehabilitate a site used for colliery waste. It will take much longer than 10 years to prove, let alone to develop on any significant scale, the so-called renewable sources of energy, such as wind or wave power, which might be applicable in this country. Fusion, which many of us hope may prove to be the ultimate energy source, is several decades away. As for conventional nuclear power, the extent of its contribution and the major technological directions it should take depend, as the noble Lord, Lord Strabolgi, has implied, upon the uranium supply position around the turn of the century—20 years away—and upon whether fast breeder reactors can be shown by then to be acceptable.
My Lords, if the Community fixes its eyes on 1990, only 10 years away, there is really little more it can do than tot up and report upon the decisions that have already been taken by the Member States, and wring its hands about the present instabilities of the oil-producing world. It can hardly contribute to new policy directions, or offer leadership. It seems to me that energy questions should be central to the European Community for political, as much as for economic, reasons, and that the Community should back a vigorous energy policy with funds, as the noble Earl, Lord Bessborough, has argued so eloquently. If so, it is essential that the Community should extend its concern as soon as possible to the end of the century, and beyond. Twenty years is the minimum; 10 years is so short that it can even mislead. I should have thought that this was made abundantly clear by the report of the World Energy Conference, as well as by the evidence submitted to us.
I have mentioned the important contribution to energy supply that may be made by nuclear energy. Indeed, the draft Council Resolution annexed to our report envisages that an increase in the use of solid fuels and of nuclear energy should together cover 70 to 75 per cent. of electricity production. However, this same resolution specifically urges in paragraph 2.d.—and I quote—the
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"restoration of nuclear energy programmes as far as possible in fully satisfactory conditions of safety".
I am somewhat disturbed to find in the revised draft resolution since transmitted to us by the Secretary of State for Energy on 28th April, to which the noble Lord, Lord Sherfield, has already referred, that this important phrase has been omitted. I should have thought it still important to emphasise that nuclear programmes should proceed only under conditions of adequate safety. In this connection I should like to draw to your Lordships' attention the very important article by Sir Alan Cottrell which appeared in the Financial Times on 15th April. In it, Sir Alan, who is a world authority on the strength of materials, makes very clear his view that much remains to be done before we should accept the safety case for that most favoured nuclear system, the pressurised water reactor.
But Sir Alan makes another point, too—and I quote—asking:
"With the commercial fast breeder reactor (FBR) quite properly claiming its place as yet another project ready for launching, would we have the scientific and engineering manpower to handle four different commercial reactor systems—Magnox, AGR, PWR, FBR—with full mastery in all cases?"
I have to declare that I am a part-time member of the Atomic Energy Authority, although not one who has always spoken as my fellow members might have wished. But I do not think I shall cause much additional offence if I now say that I agree with Sir Alan that four systems are a bit too much for us to be handling simultaneously, especially if safety is to be given proper attention, as it must. I also believe that we should do our best to demonstrate the safe operation and economic performance of the FBR system by the year 2000 in case we should need it beyond that.
I have personally been greatly impressed by the progress made at Dounreay and elsewhere in recent years, but even so I doubt whether we can really commercialise this system on our own. It seems to me that it is foolish for us to be in competition with our European partners in something so complex and so expensive, intended for so small a market for many years to come, although, of course, with great potential in the long term. I therefore hope that full co-operation on the development of a common FBR system can soon

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be an accepted part of European energy policy. There is much that British engineers can contribute, and much for us all to gain by sharing the burden. After all, we have successfully developed the Urenco centrifuge plant in that fashion; we are working together on the JET fusion project. We must try to develop FBRs that way, too.
My Lords, nuclear power has seemed so unacceptable in many quarters that the Commission of the European Communities has rightly seen fit to devote considerable attention to trying to improve its image. It has held discussion meetings; hut, more important, it has organised collaborative programmes on reactor safety and on nuclear waste disposal. As we say in paragraph 41 of our report:
"An important aspect of energy policy is to gain public acceptance for its implementation".
It is not enough just to rely upon the great public inquiries like Windscale and the Vale of Belvoir.
I must be careful what I say now, because I am chairman of the Standing Commission on Energy and the Environment and we are deeply engaged in a study of the future of the coal industry in this country. But the draft resolution before us today urges Europe to increase its production and use of coal. Due to inadequate environmental policies the results of doing that in the past are only too evident in many parts of this country and abroad, in the form of derelict land, decaying buildings and the residues of subsidence. Of course, the modern coal industry has no intention of repeating those mistakes, but ordinary people must be forgiven for thinking that more of the past is what they are in for as long as those relics remain so vividly before us. Like the noble Lord, Lord Sherfield, I would hope that the Community, in urging us to use more coal, would recognise just as with nuclear power the need to make it acceptable. They could help to remove past dereliction by recognising the problem, by proposing concerted actions and by financial assistance to the regions most affected.
My last point concerns the third leg of the "coconuke policy", conservation. I fear we are much too complacent about conservation in this country especially if we wish to reduce the energy coefficient. By way of contrast the noble Lord, Lord
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Sherfield, and I were privileged to be guests of the Danish Ambassador earlier this week when we heard about the development of district heating schemes in Denmark from their Minister of Energy and from the chairman of their Board of District Heating. It seems that the Danes now have about 380 district heating schemes supplying 35 per cent. of their dwellings (about 700,000 dwellings) and that 70 per cent. of their electricity is now derived from combined heat and power stations, half of it provided during the last 10 years.
At the risk of contradicting something I said at the beginning of my remarks, it does seem that the Danes are able to get on with the job faster than we seem to think that we can here, and without enormous disruption. Of course, climatic conditions are not the same in our two countries, nor does Denmark have indigenous natural gas as an alternative form of space heating. But if energy conservation is as important as we say it is, and as the Community says it is, we should not be using gas for heating when reject heat can be used instead at a reasonable price; and in Denmark they say that it can. I therefore hope that the Minister may be able to say something encouraging about whether the Government have plans to introduce an experimental district heating scheme dependent upon combined heat and power generation.
7.56 p.m.
The Earl of LAUDERDALE: My Lords, I too, should like to join with other noble Lords in saying how much we are in debt to the noble Lord, Lord Sherfield, for his urbane and discriminating leadership of this committee which is now operating at higher gear and to better purpose than it has ever done. On the subject matter of our debate, I must confess to getting a certain feeling of déjà vu. I am reminded of a lady of 95 in Caithness who once said, "All these long years I have heard the wind blow and never seen it yet". We are going over familiar ground and the context of this debate has inevitably become the meeting at Luxembourg. So much so, that one wonders whether perhaps they may not have had a "peek", as we say in Scotland, at the galley proofs of our report. They have focused on energy saving; so have we. They have focused on coal; so have we. They have

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referred obliquely to North Sea output; and so have we. It looks from the Luxembourg communiqué as if our country has moved (at any rate, a little) on the North Sea oil front towards the wishes of our Continental partners. If that be so, God be praised!
If the Summit did try to inject some energy into the Energy Council in order to accelerate the long majestic march of energy divine, better still! Here it would be churlish not to follow my noble friend Lord Bessborough in saluting the imaginative appointment to the Department of Energy of my kinsman, Sir Donald Maitland, who is quite the most distinguished member of the clan of which I am proud to be Chief. His gift for the Arabic tongue has a very obvious relevance to the political context of his appointment.
If the Energy Ministers do meet and do get down to business and if they pass the current draft resolution which is under discussion, modified (as Lord Sherfield has said) from the text originally presented to us, then it will be the Commission's job to report on members' progress towards convergence. If so, our country can find itself "in the dog-house" on the matter of energy savings. It is far too soon for this Government to boast that last autumn's rise in petrol prices has "caused"—as one ministerial statement tried to suggest—petrol savings on the road. One quarter's figures after a very mild winter—figures which were trotted out in our last debate—tell us nothing. In any case, it is costs in real terms that matter. Therefore, the tendency for the present Administration to hide behind the argument that rising prices will accomplish energy savings as well as, or better than, any administrative or legal measures is, I believe, gravely mistaken. To argue that we have no money is to miss the point. Financial stringency means little in the abstract. The question is not about volumes of investment but about its cost-effectiveness. Nor will intelligent people readily believe if they are told not only that the famous leaked memorandum, Minutes of the Ministers on Energy Conservation Committee of 6th and 14th February, about the cost of conservation policy, is a fake, but that nothing remotely like it is in the record. That will be very difficult for intelligent people to believe. On the face of it, the 11 Ministers involved
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treat conservation as a relatively minor political side show. Someone seems to have suggested that this Ministers on Energy Conservation Group would remain useless until there was a political will fully in evidence from the Prime Minister's office.
Until there are convincing statistical trends to show the reverse, we have only figures up until 1978 or mid-1979 to go on, and they show a very serious rise in energy consumption over recent years, despite an almost stagnant economy. These figures have been quoted before. There is no point in repeating them. But when we debated this matter on 19th March, they were listed and at least 10 different areas for energy saving action were suggested. They were ignored. As somebody once said, it is not the ape nor the tiger in man that I fear, it is the donkey. How we could expect results from a mish-mash of 11 Ministers with the Treasury taking a keen interest passes my comprehension. The set-up is something like a quintet for eight instruments.
Unless the management of energy saving is made over to a high powered task group with direct access to the Prime Minister it is difficult to see serious progress being made. Since the Prime Minister put her name to the communiqué in Luxembourg, and since she had already declared herself forcefully on energy conservation in her speech to the Foreign Policy Association in York before Christmas, we can reasonably hope that this matter will come to her attention.
On the subject of coal, to which there has been some reference in this debate already, evidence before us showed that it would certainly be technically possible to raise United Kingdom output well beyond the target of 135 million tonnes per annum looked for in the mid-1980s—subject to investment. It is relevant to quote our committee's report on Coal, the First Report of the Session 1978–79, paragraphs 25 and 26. The committee said:
Given a stronger lead, the NCB, as the executive organ in the United Kingdom, and the Council, in respect of the Community, may take coal more seriously, and the many undoubted problems are more likely to be solved. Acceptance that only a less ambitious target is practicable may, the Committee feel, be self-fulfilling. Greater drive, enthusiasm and optimism in the attitude

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of the Government, and of the governments of other Member States, might inspire better results."
Then it goes on:
"But our problem in 2010 may not be to cover our total energy needs at the lowest cost, but to cover them at all."
My Lords, there are now new mining technologies available—in particular the development of new oil drilling techniques for use both on land and below the sea. They promise to make the possibility of underground gasification a more attractive subject for study and consideration than as recently as five or even four years ago. If major United States' companies like Atlantic Richfield and Gulf find it worth buying Soviet technology in underground gasification there must be much more in it than has hitherto been admitted by the National Coal Board. Pending this Government's Coal Industry Bill, there is little more that one can do than leave the matter there. We are still waiting to see what the Government's policy is.
We suggested in our report that it would be well if the Commission could look ahead to some such target year as A.D. 2000, and would do so without simply totting up the results of national intentions. Noble Lords may not be aware that on 17th April the London office of the European Communities Commission published a background report based on the new Commission document about coal (COM(80) 117 Final), and looking forward to the year 2000. I can only tell your Lordships that that document, for what it is worth, managed to raise the figure of European coal output as between 1990 and the year 2000 by a factor of two. It did the same with nuclear power, the same with hydro and the same with solid fuel imports. It did so on the basis of a forecast annual growth rate of between 2 per cent. and 3 per cent., which is nothing if not optimistic.
We have said in our report, in the nicest possible way, that it would be well if the Commission could do more than just tot up the national figures, but could give us a serious, independent critique. This latest case, a purported picture of the coal situation at the end of the century, underlines our case.
There are other areas in the energy field on which one could well look forward to some indication of the Govern-
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ment's policy. But since the Luxembourg communiqué, in almost direct alignment with our own report, is focused so sharply on energy saving I believe that tonight we are entitled to something more satisfactory than the information that we were given in reply to the debate of 19th March. If we are not, I suspect others as well as myself will be fortified in a growing belief that even the most serious debates on substantial matters in your Lordships' House resemble nothing so much as a barrage of marshmallow against ramparts of cotton wool.
8.9 p.m.
Lord IRONSIDE: My Lords, I should also like to thank the noble Lord, Lord Sherfield, for introducing this Motion. The new Commission document tries to identify the very important objective issues in energy, but regrettably they are conceived from a rather subjective and fragmented base, over which there is no proper Community control mechanism in the form of some intervention machinery which could be used to steer the Community rapidly in the right direction. The European Coal and Steel Community and the Euratom machinery have not, over the years, achieved any lasting impression on Europe, but they show a form of intervention which could provide a useful function in the energy field. However, I imagine it is too late to remould these two treaties, but they obviously have some further uses.
On the question of treaties, we have similar problems in the NATO alliance where the overall picture has been based on the same diversity of building bricks. If all the building bricks were standard types and the same choice was available to all members, we might probably have more effective defences. As an example, all States have their own air forces but some import their own aircraft, some design and export them and others get together to design and use them on a common basis. The object is defence in Western Europe.
In energy defence, all Member States have their own energy industries; most import primary fuels. Here in the United Kingdom we are nearly self-sufficient and we export them, and a few States trade in energy and energy equipment. But, for example, we have not yet seen the birth

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of a European electricity super grid. Oil and gas gathering grids are appearing in places and actions of these kinds must add to security in energy defence. I think it is regrettable that so little progress has been made in formulating energy policy to present a united front in Europe to the rest of the world. We now see the Commission edging towards convergence as being the next best method of achieving objectives. There is a policy of convergence in NATO and this is now being proposed in the EEC for energy, but basically there is no difference in principle.
Our recent debates have shown the difficulties that the Government encounter with weapons standardisation in Europe, and there will be just as many stumbling blocks in energy. Good intentions, I think, will be found everywhere along the road—not to hell but to the heaven of fusion, where the heat in the chamber is certainly no less fierce. In NATO, if Big Brother is the USA, then in EEC energy Big Brother is the United Kingdom for the time being: and I think we have to exercise our role in a careful and considered way so that we serve our own distinctive interests within the framework of the Treaty of Rome.
The convergence policy which is now proposed by the Commission in the energy field makes some sense in the circumstances, just so long as the Commission bring greater pressure to bear in making it work and the Council of Ministers are also prepared to adopt the resolution on energy objectives. On previous occasions, many of the action programmes have been based on Council resolutions, which I think have been useful launching pads.
However, within this resolution, the philosophy of energy dissociation is carried forward as one of the objectives, and the energy coefficient of 0·7 is proposed. Compared with 0·8 last time, I think there is some danger that, on the one hand, if there is a crusade of energy dissociation it could have a counterproductive effect on making the energy convergence policy work which is aimed at linking energy issues with the increase of industrial prosperity and the GNP. I think there is a real danger of advancing the dissociation arguments too strongly in the face of trying to achieve convergence
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objectives. As we have seen, there are many factors other than straightforward efficiency in energy which have a direct bearing on economic growth and future prosperity. That point was the subject of one of our recent debates on deciding about energy policy, which was introduced by the right reverend Prelate the Bishop of Durham.
If one compares the convergent actions now proposed following the energy policy guidelines which have already been put forward in the last Commission proposal on 1990 objectives, we still find that the emphasis on energy conservation and the better mix of primary energy sources to reduce oil imports is still paramount, but the new convergence proposal also has other useful pointers, including the development of Community trade in energy products and to organise all energy developments in an orderly fashion, working towards a 50 per cent. self-sufficiency and restricting oil imports to the 1978 level of 470 million tonnes.
This raises the question of targets and in the evidence taken by the committee it was shown very clearly that, on the one hand, the Commission was not looking far enough ahead and, on the other hand, the targets proposed were ill defined. The point here is that if you try to generalise when so much control in the energy industry rests with Member States you risk not producing any effective programmes which are likely to be successful. The efforts required from each country are different and, in my opinion, this is a critical factor which the Commission should take account of if they are to make any progress in the energy field.
If we look at the way that motor manufacturers have agreed to improve performance voluntarily by 1985, we can see that this is happening in spite of anything that takes place in the Commission's decision-making machinery. The Commission must use some finesse in developing its role in the energy field. If we look at the large electricity producers who are prime energy users of coal, nuclear and oil. we find that equipment suppliers are in fact planning for improved power station performance and thermal efficiency. For example, fluidised bed combustion techniques are coming forward and hybrid power stations are being produced.

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It is clear that further carefully planned intervention in these areas by the Commission would be very helpful. The supra-national intervention which has come out of the Tokyo Summit is an important factor for justifying any Community initiative, but I think that very large sums of money need to be injected through the Community instruments into selected areas such as combustion, liquefaction and gasification. There are long lead-times, as has already been said; and the Commission is well placed to give major hacking. The European Coal and Steel Community coal members have requested aid for some large new projects and I think that is good, but very much more is needed.
The committee has supported the Commission's proposal to increase research and development and also demonstration—and I think that demonstration is needed in the energy field more than in any other, because you have to prove to potential users that the system you have developed is economically viable. I think the noble Lord, Lord Tanlaw, said that there is a real need now for more prototypes and more hardware around the place. I was fascinated by what he had to say about tramways and that we should look further into their use—but how can we, when we have to comply with the Tramways Act of 1876, which was drawn up for horse-drawn traffic? Perhaps might ask my noble friend Lord Gowrie whether he has any plans for repealing this Act. In any case he may be able to say whether the Government are genuinely going to look at tramways and at public transport in these areas, because they are used on the Continent with great effect. The argument is that they are capital intensive and therefore you need to have considerable investment resources in order to get such projects under way. However, I hope he will be able to say something about that.
It is all very well designing a fluidised bed combustion system for power stations, but you have to be able to demonstrate to potential customers in many other countries that you have a workable and economic system to offer. The only way to show this is to demonstrate the product in a power station, and that means Governments taking a risk too. The Commission has shown that it is ready
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to support demonstration projects in the energy field and it is well placed to support the very large projects.
I now come back to targets. We find that the heavy electrical industries in all the Member States are geared to their home markets. There is virtually no Community internal market operating in the heavy electrical equipment. The heavy electrical industries are fighting to survive, and I am very much encouraged by the statement of the Secretary of State for Energy about the power station ordering programme over the next 10 years, which will allow the United Kingdom heavy electrical industry to plan ahead.
The United Kingdom Government have therefore given targets to industry and, despite the evidence we received that fixed numerical targets are not favoured, here we have an example of the Government setting positive targets for a 10-year period. I can fully understand why some witnesses do not wish to set fixed targets, because experience has shown that one needs to keep one's options open and to exercise some flexibility in planning. In fact, it is obviously very desirable to up-date any targets every year, but the fact is that targets provide a very great incentive for us all to work to.
I think that we welcome the Commission's renewed attempt to define energy policy, but there is a need for action programmes in all Member States, as well as action by the Commission. The lead times are long in all cases and I think we have as much to learn here from the Commission's deliberations as any other Member State. I hope that we can implement our own energy programme in such a way that there is continuity of thought, policy and action, which is not put at risk by successive Governments. Energy is not a party political issue. It concerns all of us in the same way, from the day we are born to the day we die, and our successors afterwards.
8.21 p.m.
Lord SWINFEN: My Lords, I must apologise to the House for not putting my name down for this debate, but originally I had not intended to speak. I was for a time a co-opted member of Sub-Committee F, under the chairmanship of the noble Lord, Lord Sherfield, and grew extremely concerned at the very obvious shortage

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of energy towards the end of this century, and also the very considerable length of time that it takes to bring in new energy sources. I wonder whether it would be possible for a committee to be set up of members of all parties, to advise not only the present Government but successive Governments on energy policy, so that there will be a continuous policy from one Administration to another.
8.22 p.m.
The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie): My Lords, all the Members of your Lordships' House who served on the committee have paid tribute to the chairmanship of the noble Lord, Lord Sherfield. I did not, of course, have the privilege of serving on the committee, but I should like to pay tribute to him for the way in which he introduced the admirable report and today's debate. I should like to say how greatly the Government appreciate the committee's work and how much we expect to learn from it. I am particularly glad that the committee did not confine themselves to a narrow examination of the particular Commission document, but rather used that document to take a more wide-ranging look at the development of energy policy in the Community into the 1990s.
As discussions proceed between Member States, and as events themselves move on, precise judgments, and even the nature of the questions we ask and the way we identify the problems, inevitably change. We have only to think of developments in the world oil market since the Commission first published their report in June last year. We have only to think of the renewed uncertainties, which many noble Lords have mentioned in this evening's debate, in the Middle East today—in Iran or elsewhere. We have only to think of these things to realise that too much precision is not the right approach when talking not only about these uncertainties, but also about a wide range of time and about the future. So it is to the broad spectrum of development and intention that we have to look when we consider these issues; but I acknowledge that they are of great importance not only to our own country but to the whole Community.
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I want, therefore, to speak in terms of the broad issues and not confine my remarks solely to the Community, because, of course, the Community's energy problem is part of the world's energy problem, and to solve it requires solutions within the Community and decisions which also have to be taken in other international fora, and which will, of course, effectively influence anything going on within the Community itself.
For instance, the decisions taken on energy at the Tokyo Summit meeting followed, as your committee's report recognises and welcomes, the ground work which was prepared at the meeting of the European Council in Strasbourg just a week before the Tokyo meeting. Then, again, the Tokyo Summit decisions have much in common with the ground covered in the new proposed Resolution on 1990 Objectives, where progress within the Community continues to be closely aligned with progress on the international front, as the Tokyo decisions are followed up in parallel in both the Community and the IEA. Community energy objectives, therefore, and Community energy policy cannot realistically be determined, except in this context of wider international co-operation.
We must recognise, too, that all Member States already have in being their own substantial energy programmes. In the United Kingdom the Government, together with the nationalised industries and the private sector, are undertaking immense investment in coal, oil and gas, nuclear power and energy conservation, all of which are essential if we are to secure a better energy future. The Government's appointment last week of Mr. Rooney, as director of the National Nuclear Corporation, has given new impetus to the development of our nuclear power policy. Together with our announcement last December of a programme of nuclear power station orders for the years from 1982, and the CEGB's issue last week of a letter of intent concerning the pressurised water reactor, we believe that our nuclear industry is well placed to make a full contribution to future energy supplies.
As noble Lords have already recognised, we have just introduced the Coal Industry Bill and I shall have a word or two to say about coal in a minute. The Bill

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embodies the Government's strategy for the coal industry of reducing dependence on Government support, and turning it into a viable, efficient and competitive industry which will make a vital contribution to our future energy needs. To this end, it is intended to raise the limits on the National Coal Board's borrowing powers from the current level of £2,200 million to £3,400 million, with the option of increasing that already large sum to £4,200 million, enabling the board to continue its investment programme under the Plan for Coal. Noble Lords will be aware that only this afternoon the Government announced our decisions on the seventh round of offshore licensing. This will provide new opportunities for companies to extend the search for oil and gas resources, and contribute to our aim of increasing exploration activity on the United Kingdom Continental Shelf.
So these national efforts play a vital part in the achievement of the Community's energy objectives, as they are inevitably affected by them. I welcome the recognition in the committee's report that other Member States derive substantial benefit from our growing oil production, and from the important part which our coal production plays in reducing the Community's dependence on imported energy. I also welcome the committee's recognition that the main lines of the Community's energy policy must inevitably remain within the control of national Governments and Parliaments.
Although the main thrust of Community energy developments has, as I said, to lie with Member States' national programmes, these can, of course, be complemented usefully by Community-level action where that can make its own distinct contribution. Existing examples are the research and development programme for energy savings and alternative energies, and, of course, the major Joint European Torus project for fusion development. Community-level action may also be appropriate for problems which, because of their nature, require co-ordinated action; for instance, the Community's arrangements to complement the IEA's crisis oil-sharing plans. Community action can also be valuable in areas where energy policy impetus is needed, but where action by individual Member States might create distortions of competition within the Community, or where health
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and safety is concerned. The recent Directives on energy labelling and gas appliances come into this category.
Lastly, and also of great importance, is the Community's role in facilitating in-depth discussion and agreement on areas of mutual interest. This concerns not only the major international issues, but also the exchange of ideas and experience at a practical level. The setting of Community objectives is an integral part and expression of this process.
Such statements of agreed objectives play a useful part, as I have said, in reinforcing common resolve and impetus to save energy and to reduce our dependence on imported energy and on oil. These broad objectives and guidelines are a useful framework for the valuable continuing examination and discussion of Member States' individual energy programmes to which I have referred. But these objectives must be realistic.
The noble Lord, Lord Sherfield, asked what our view was on setting precise targets, and other noble Lords have echoed his question. We believe that the important thing is to concentrate on and to achieve the central policy aims, that is, saving energy and reducing oil consumption and oil imports. We think that is rather more important than trying to fix over-precise quantified sectoral targets. That is particularly true when we are dealing with a date so far ahead and hedged about with so many political and other uncertainties as the year 1990. The forecasts on which the analysis in the Commission paper is based were produced before last year's oil supply difficulties and price rises, and they are now considerably out of date. The unreliability of forecasts does not invalidate the need for a long-term assessment of the choices available to us, but it means that we must not place a great weight on them which they cannot and will not bear. As my right honourable friend the Secretary of State for Energy said when the Commission document was debated in another place last October, rather than trying to arrive at precise, quantified targets for 10 years ahead, we should concentrate on pursuing policies that are fully adequate to the needs of the situation.
That is the approach that the Government have urged in discussion of the

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proposed draft resolution on 1990 Energy Objectives. The Energy Council meeting planned for 13th May will be Ministers' first opportunity to address this question. I am glad to tell the House that the current basis of discussion in Brussels is a much shorter and simpler draft resolution. This draft concentrates on the two broad objectives of saving energy and reducing oil consumption and oil imports. But it still contains some attempt to define in figures where we should be trying to get to in 1990. It will be for the Energy Council to consider whether this is sensible and, if they decide that it is, how firm any such guidelines should be. A copy of this text, which was suggested by the Italian Presidency, has been laid before Parliament, together with an updating explanatory memorandum by my right honourable friend, the Secretary of State for Energy.
May I come now to some of the individual points made in the debate? As I said in my opening remarks, the Government believe that British nuclear industries, particularly with the PWR and the AGR, are well placed at present to make a full contribution to future energy supplies. Both the noble Lord, Lord Sherfield, and the noble Lord, Lord Strabolgi, asked me about the fast reactor and they mentioned very properly the uncertainty of uranium supplies that may obtain by the end of the century. I have made it quite clear in this House in many debates that I am a strong pro fast reactor man. That is why it is a constant sadness to me that I cannot give the House more information at this point than to say that we are still taking advice from the Atomic Energy Authority and others concerned. There is a natural impatience, shared by all of us who are fast breeder men—if that is not a somewhat tactless term, as my noble friend, Lord Mowbray's chortle reminds me—and it is a natural sadness to us that we cannot make an announcement at the moment. But, as I made clear in February, these are complex and highly sensitive issues and we have to reach any decisions most carefully.
Meanwhile I have been asked, on the specific issue of collaboration within the Community, what the prospects are for Community collaboration on the fast reactor. The most important existing
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collaboration on the Continental mainland is based on an organisation called SERENA, which owns the technology of the full-scale fast reactor, known also as the "Super Phénix", now under construction in France. France and Germany have been the leading interests in this body, but other European countries are also involved. Clearly, the possibility of collaboration with SERENA is one of the options for fast reactor policy that the Government are considering at present.
The noble Lord, Lord Sherfield, asked me whether the Government agreed with the committee's view—and I refer to paragraph 35 of its report—that a large increase in the resources of the Community budget allocated to energy would be justified, and I think that point was also taken up in the last intervention by my noble friend on the Back-Bench.
I think that the strength of Community energy policy cannot be measured solely, or even primarily, by the amount of Community finance. The main thrust comes, as I think the committee recognised, and will continue to come, through the national programmes of Member States. Nevertheless we have some encouraging instances of co-operation. JET has been mentioned, and there is the case of the nuclear industries and collaboration in programmes there: for instance, the URENCO, which is the nuclear fuel enrichment project existing between the United Kingdom, Holland and Germany, and also the United Reprocessing Company formed by France, Germany and the United Kingdom for reprocessing nuclear fuel. I take Lord Flowers's point, that this is an indication that we may have examples pointing the way to fast breeder reactor co-operation.
Both the noble Lord, Lord Sherfield, and the noble Lord, Lord Strabolgi, asked me about coal, and investment in the United Kingdom coal industry. The National Coal Board alone in the Western European countries is undertaking a massive 10-year programme of investment. The programme is aimed at creating a new industry out of an old through modernisation and the provision of efficient, highly productive capacity. This has indeed reversed the decline which the British coal industry saw during the 1960s and early 1970s, and I think it provides a sound base for expansion. I believe that, as the

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noble Lord, Lord Strabolgi, recognised, it is a tribute to the National Coal Board that in the financial year just ended deep-mined output at 109 million tons was for the first time since 1963 higher than in the previous year. The noble Lord, Lord Strabolgi, said that it was a most impressive year altogether for resurgence in coal. I am quoting his words.
I have paid tribute to the National Coal Board, but I think I must also pay some tribute to my right honourable friend the Chancellor of the Exchequer; and if anyone hesitates to think that direct tax cuts have not had an effect in this economy, they should go and talk to miners, as I have done. The board has now approved or is committed to, virtually all of the projects which form its programme; its capital expenditure is now running at more than £600 million a year and it is directed towards that objective.
The noble Lord, Lord Strabolgi, asked me whether coal liquefaction was sufficiently advanced to be used on a national scale. Technology being developed by the NCB is approaching the point now where a decision to build pilot plants of 25 tonnes per day capacity will soon have to be taken. If this work goes ahead progressive development should have the technology ready for commercial use at about the turn of the century. Present views of the North Sea oil production profile suggests that this coal development falls within the general time-scale to meet our needs. If the need to apply oil from coal technology arose earlier we would probably turn to one of the United States' processes, which is now in the large pilot development stage, involving coal throughputs of hundreds of tonnes per day.
I was asked what the environmental and planning implications of coal liquefaction plants were. A commercial scale oil-from-coal plant would need to combine the coal and solid residue handling operations of a modern power station with the processing units similar to those in a large oil refinery or a petro-chemical plant and the liquid effluent treatment of a modern coke oven battery. The environmental and planning requirements for these kinds of undertakings are well known, so they would not be very different. Sulphur in the coal will be largely recovered as elemental sulphur, or sulphuric acid, depending on the process used. As
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coal liquefaction processes operate at high-pressure and elevated temperature, there will need to be a high integrity of containment. Leakage of inflammable substances or compounds associated with known health hazards will not, in our view, be significant.
The noble Lord, Lord Sherfield, asked me what progress there was on the proposal by the Secretary of State for Energy for Community support for coal production. It is a matter of regret to the Government that so far there has been no progress in the consideration of these proposals from which, as your committee recognise in paragraph 40 of their report, the whole Community would derive a benefit, because the United Kingdom's coal production, and its use by us, reduces in toto Community demand for oil.
Both the noble Lord, Lord Tanlaw, and my noble friend Lord Ironside were, if I may say so, a little bullish about Community funds. The noble Lord, Lord Tanlaw, said that the Commission has the power and the funds to go ahead with electricity traction prototypes. As we all know, the position on the Community budget, the position on VAT revenues, is difficult at the moment; but I take the point that we need prototypes rather than paper. I hope that the local council in Blackpool, if it is still tomorrow in Tory hands, will listen to what the noble Lord has said about the tramways.
The noble Lord, Lord Tanlaw, raised, as he has done in previous debates, the issue of electric vehicles. I was particularly interested in this because I made a ministerial visit the other day to the firm of Lucas. I was collected, with quite a large and weighty staff, at the station and driven for some miles in Lucas's admirable prototype electrical vehicle, so I am glad to see that a major private company is moving in there. Due to the weight and efficiency of the batteries available, at present electric vehicles are generally inferior, if not in performance in range a least, to cars. But it is becoming generally accepted that in the long term, as world oil reserves decline, a major portion of surface transport will have to be powered by electricity. We are therefore anxious to encourage the development of electrical transport, and several programmes have received Government funding. These include development of sodium sulphur and

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nickels in batteries, development on the one ton van, traction motors, to which the noble Lord referred, and controller and drive system optimisation. And the fund testing of vehicles by the Greater London Council continues.
My noble friend Lord Bessborough kindly gave me notice that he had to leave, but I thought it might interest your Lordships if I answered his question about the Financial Times report, as various noble Lords have made reference to the Luxembourg summit. We have made no firm commitments, but we recognise that it is quite understandable that other Community countries are anxious about their oil supplies. I have explained earlier the important contribution that we are already making, and will continue to make there.
My noble friend Lord Bessborough also asked me about the Commission's energy initiative. The European Council had little discussion of the Commission's paper on Community energy policy at Luxembourg, although I acknowledge that the paper is an interesting contribution to thinking on the development of energy co-operation in the Community. But the matter wes remitted to the Energy Council of Ministers and we are ready constructively to examine in that Council all practical proposals for co-operation in the longer term. I am sure that in. those deliberations not only the committee's report but tonight's debate will prove to be most valuable.
The noble Lord, Lord Flowers, asked me about district heating, a subject upon which I gave an answer to a Starred Question from the noble Viscount, Lord Hanworth, about a week ago. As I said then, we have considered carefully the issues raised in the Marshall report on CHP and we are adopting a programme to establish what specific locations are suitable for the development of CHP. In the industrial field, where CHP is already established, the Government will, as the Marshall Report recommends, encourage the development of schemes, but we believe that the main impetus at the moment will come from industry for the implementation of economically attractive industrial combined heating and power schemes. There are of course some in existence, and I quite agree with
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noble Lords who think that we should move as fast as possible here.
I was castigated, as usual, by my noble friend Lord Lauderdale who shares some of my own impatience with the inevitable caution with which Governments move in a field which changes, if not day by day, sometimes month by month and certainly year by year. I am glad to echo his and others' tribute to Sir Donald Maitland and the pleasure that the House felt in his appointment. I have the pleasure of knowing and having stayed with Sir Donald Maitland. I am afraid that there is going to be a considerable problem for me, with Donald in the department and Patrick on the Back-Benches. I shall be a pig in the middle in the formidable doctrinal clashes in the Clan Maitland, but I certainly look forward to it.
My noble friend raised, as he has done before, questions on energy pricing. We believe in a policy of economic energy pricing under which prices recover their full resource costs. I think that we have put other people's money where our mouth is in respect of the gas and electricity industries at that level. I take the point that the real costs of gasoline may not have risen to the same degree, but we must also recognise the immense debt to Western economies which the OPEC price rises and the new terms of trade for energy have taken. We must adapt them, surely, bit by bit in that regard.
Finally, Lord Ironside's knowledge and experience of the Community's energy research programme underwrote his valuable contribution to the debate. I will draw the points he made on defence issues to my defence colleagues. On the question of the repeal of the Tramways Act, I am not going to look a gift-horse in the mouth, though I rather suspect that it may be of the Trojan variety and I am going to be non-committal about it this evening.
Perhaps I may close by giving an indication of the Government's positive response to a subject which the Committee has dealt with so positively. I think I can do no better than to quote the words of the Secretary of State for Energy last autumn in another place. My right honourable friend said:
"The likelihood—clearly there are no certainties in this area—is that by the year 2000 oil will be confined to its premium uses, which are mainly

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transport and feedstock for the petrochemical industry. A smaller proportion of our overall energy needs at the turn of the century will have to be supplied by oil, and a growing proportion of our economic development will be fuelled by coal and nuclear power.
We face a formidable task: how best to ensure the transition from a largely oil-based economy to a broadly energy-based economy. That is the immediate task. That is why the nine Member States at Strasbourg and the seven summit countries at Tokyo in June established agreement—and they were right to do so on certain priorities. Notable amongst them were the need to restrain demand for oil in the medium term and to press ahead with investment in the production and use of alternatives to oil, principally coal and nuclear power and renewable sources, to develop their longer term potential".
I hope that my right honourable friend's words are an earnest that the Government's thinking is very much in line with the valuable work of the committee.
8.50 p.m.
Lord SHERFIELD: My Lords, in concluding this debate I should like, first, to thank noble Lords for the kind words that they have used about myself, and to reciprocate by thanking them for making the effort to take part in a debate in that most unattractive hour—the dinner hour.
I think there has been a considerable consensus among those of us who have taken part and some interesting specific suggestions have been put forward.
I should like to thank the noble Earl, Lord Gowrie, for the trouble he has taken in giving us such a full and wide-ranging reply to the debate. I feel that there may now be a prospect of some advance in European energy policy at the next meeting of the Energy Council. I am sure that my committee will follow the developments with interest and will, if occasion demands, possibly bring some further matters before the House. But at the moment all I need to do is to beg leave to withdraw my Motion.
On Question, Motion, by leave, withdrawn.

  THE JUBILEE HALL SITE
  THE JUBILEE HALL SITE
  CONTROL OF IMMIGRATION: STATISTICS 1979
  CONTROL OF IMMIGRATION: STATISTICS 1979
  REPATRIATION OF THE MENTALLY ILL
  REPATRIATION OF THE MENTALLY ILL
  SATELLITE MONITORING AGENCY: COST ESTIMATE
  SATELLITE MONITORING AGENCY: COST ESTIMATE
  THE KHAN AFFAIR: NETHERLANDS REPORT
  THE KHAN AFFAIR: NETHERLANDS REPORT
  US AIR FORCE BASES DEFENCE SYSTEM
  US AIR FORCE BASES DEFENCE SYSTEM
  EIRE RESIDENTS AND UK DIVORCE STATISTICS
  EIRE RESIDENTS AND UK DIVORCE STATISTICS
  BRITISH ARMY EQUIPMENT EXHIBITION
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