Sitting of 13 April 1981

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    ALLIED IRISH BANKS BILL
    Lords amendments agreed to.

    GREATER MANCHESTER BILL [Lords]
    Order for Third Reading read.
    To be read the Third time tomorrow.

Oral Answers to Questions
  TRADE

    Hazardous Products (Labelling)
    Mr. Archie Hamiltonasked the Secretary of State for Trade whether, in view of the number of accidents involving children, he will take further steps to ensure adequate warning labelling of hazardous domestic products.
    The Minister for Consumer Affairs (Mrs. Sally Oppenheim): I am only too aware of the many tragic accidents from poisoning to children reported every year that arise from such ordinary household products as cleaning and polishing agents, disinfectants, solvents and paints. I agree that the best way to prevent such accidents is by suitable warning labels. I intend shortly to circulate safety regulations on the matter.
    Mr. Hamilton: Does my right hon. Friend agree that her reply is encouraging because of the dangers faced by children from the increasingly hazardous substances used in the house?
    Mrs. Oppenheim: My hon. Friend will be aware that this matter has concerned me since I introduced a Ten-Minute Bill in 1972. I have given instructions for the EEC legislation and the Health and Safety Executive draft regulations to be examined swiftly to see that they adequately cover potentially dangerous household products bought for use in the home. If they do not do so to my satisfaction, I shall introduce legislation urgently under the Consumer Safety Act.
    Mr. Crowther: Has the Minister received any complaints that furniture containing the highly toxic material polyurethane foam on display at a recent large exhibition was not properly ticketed with warning labels? What arrangements are made for inspection on such occasions?
    Mrs. Oppenheim: If the hon. Gentleman would like to table a question about furniture regulations I should be pleased to answer it.
    Mr. Kenneth Lewis: Is my right hon. Friend aware that it is not given to many of us to introduce a Ten-Minute Bill and a few years later as a Minister to be able to implement it? Will she there fore get on with it? Can she assure me that the regulations will apply to imports because many imports of household goods and other items are inadequately identified and that on that basis many imports could be kept out of the country?
    Mrs. Oppenheim: My hon. Friend was extremely prescient to have noted my satisfaction about that matter. He will have noted that I have had to wait since 1972 for that satisfaction but I reassure him that any regulations will apply to all goods sold in shops for use in the home.
    Mr. Greville Janner: As children, who are most affected, cannot read warning labels, would it not be better to proceed with legislation to require the provision of child-resistant containers for those hazardous products?
    Mrs. Oppenheim: The hon. and learned Gentleman raises an important point to which we have given consideration, but as he will recall—I know his memory is good—the proposals in the EEC directive are that symbols should be used which can be learned by children and which will adequately warn parents. One of the main problems with household products is that most people think that they are safe and keep them under the kitchen sink. The main objective is to warn parents. It is not thought necessary or practicable to use child-proof containers, although that applies to medicinal products.

    European Community (Veto)
    Mr. Majorasked the Secretary of State for Trade on how many occasions he has exercised his veto against draft directives at meetings of the European Economic Community Council of Ministers.
    The Secretary of State for Trade (Mr. John Biffen): Decisions in the Council of Ministers are generally taken by consensus, so that the question of a veto by the United Kingdom or by any other member State does not arise in practice.
    Mr. Major: In view of my right hon. Friend's reply, will he confirm that where draft directives ignore decisions taken by the European Parliament he will view them with an especially jaundiced eye?
    Mr. Biffen: Certainly.
    Mr. Woolmer: May I assume that the Council of Ministers will soon be considering the multi-fibre arrangement negotiations? Will the Minister confirm that a negotiating position statement has now been issued by the Commission, and will he assure the House that he will support a minimum growth rate of imports of clothing and textiles, and that he will be supporting the social clause?
    Mr. Biffen: There are a number of considerations to be balanced in the negotiation of the multi-fibre arrangement. The Prime Minister has referred to the desirability of a tough agreement, and the Government stand by those words.
    Mr. Dudley Smith: Is my right hon. Friend aware that the bureaucrats in Brussels have an obsessive interest in harmonisation? Will he do more to strengthen the hand of British industry in opposing those that are unnecessary?
    Mr. Biffen: I very much agree with the first part of my hon. Friend's question. The action that we have taken in respect of proposals on Commmunity company law is an indication of our determination to stand against unnecessary harmonisation.
    Mr. Clinton Davis: Will the Secretary of State agree that, notwithstanding efforts that his Department may have made in that respect, concepts which are unknown in our own law are being imposed upon us by means of directives, particularly in relation to insurance and company law?
    Mr. Biffen: We have a very sound record of constructive blocking in these matters.

    Competition Act
    Mr. Campbell-Savoursasked the Secretary of State for Trade if he is satisfied with the workings of the Competition Act.
    Mr. Biffen: Yes, Sir.
    Mr. Campbell-Savours: Is it true that representations are being made about the level of imports of some products from Eastern Europe—certainly electrical products—by manufacturers who themselves are the subject of complaints and referrals to the Director General of Fair Trading for refusal to supply? Is that not an inconsistency? Will the Secretary of State put it to the Director General of Fair Trading that he should publish the names of those companies?
    Mr. Biffen: If the hon. Gentleman would like to correspond with me on the point that he has outlined, I shall consider whether it would be appropriate for me to put the matter to the Director General of Fair Trading.
    Mr. McCrindle: Is the Secretary of State satisfied with the operation of the Competition Act in regard to petrol at the pump?
    Mr. Biffen: As far as I can judge, the succinct reply to that succinct question is "Yes, Sir".
    Mr. Gordon Wilson: Is the Secretary of State aware that there is concern that competition in banking services in Scotland may be affected by the proposed takeover of the Royal Bank of Scotland? In those circumstances, will he tell the House when he hopes to refer this matter to the Monopolies and Mergers Commission?.
    Mr. Biffen: I am sure that the hon. Gentleman will appreciate that the merger to which he refers does not come under any of the provisions of the Competition Act.
    Mr. Nelson: Will my right hon. Friend recognise that, since the passage of the Competition Act, there have been several major bids within the banking sector, and that the latest one, to which the hon. Member for Dundee, East (Mr. Wilson) referred, will create the second biggest banking group in this country? Does my right hon. Friend believe that the big banks should get bigger and that the current degree of competition within the joint stock banking system is sufficient?
    Mr. Biffen: My hon. Friend makes an important comment about a highly topical matter, but it relates to the fair trading legislation and not to the Competition Act.
    Mr. John Fraser: Does the right hon. Gentleman know that, when the Competition Act was going through Parliament, his Minister of State said that there would be about 40 anti-competitive practice investigations a year, but that so far only five have been started? Why is that? Can the right hon. Gentleman point to any single tangible benefit that has arisen from the Government's competition policy over the last two years?
    Mr. Biffen: The law has only recently been put into effect. We are seeing the development of a very important body of case experience in this matter. I cite as evidence of that the investigation of the practices of T. I. Raleigh.

    European Community (Shipping)
    Mr. James Johnsonasked the Secretary of State for Trade if he will make a statement upon the recent meeting of the European Economic Community Council of Ministers of Transport on shipping issues.
    The Under-Secretary of State for Trade (Mr. Reginald Eyre): The Council adopted a programme of

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    work for 1981 to 1983, including shipping. It also agreed a procedure for monitoring cargo liner traffic between the Community and the Far East.
    Mr. Johnson: Will the Minister confirm or deny that the highly contentious issue of flags of convenience arose at the meeting? If so, will he kindly tell the House whether Her Majesty's Government have any views or any definite starts on this matter?
    Mr. Eyre: The matter of registers of origin, or flags of convenience, is being discussed in the Council, but it is better that it should be considered also on a wider international basis.
    Mr. Adley: What steps are Ministers taking to ensure that the principle that the polluter pays is made harmonised Community policy in regard to oil pollution at sea?
    Mr. Eyre: The Council is considering measures which increase efficiency in dealing with pollution problems, but the details of such matters are decided in the main by environmental Ministers.
    Mr. Clinton Davis: If the Minister says that the issue of flags of convenience ought to be considered on a wider international basis, is he aware that it is to be considered at UNCTAD? What is the Government's view to be then? Do they consider that the issue of flags of convenience raises questions of unfair competition which they seem studiously to have ignored in the past—aspects which are just as injurious to British shipping as the unfair competition practised by the Soviet Union?
    Mr. Eyre: The hon. Gentleman knows that consideration of this question is a very complex matter, but he is perfectly right in saying that flags of convenience—the open register system—will come under further discussion at UNCTAD on 1 May, when further consideration will be given to all these aspects.

    British Standards
    Mr. Moateasked the Secretary of State for Trade what discussions he has held with the British Standards Institution to align British standards more closely with those prevailing in other countries.
    Mrs. Sally Oppenheim: My Department maintains regular close contact with the British Standards institution on all aspects of standards making. We and the Institution are fully aware of the importance of international harmonisation of standards and actively support appropriate measures promoting this.
    Mr. Moate: May I refer my right hon. Friend to correspondence that I have had from a local industrial manufacturer of automotive products, who believes that we are lagging behind West Germany in this respect? I understand that the CBI also echoes the view that we could do a great deal to promote national and international trade if there were a greater application of British standards. Does my right hon. Friend feel that there could be a more active role for the Government in encouraging the voluntary extension of the application of British Standards?
    Mrs. Oppenheim: I can reassure my hon. Friend that the BSI and DIN—the West Germany equivalent—are strong supporters of international standards work. We and the institution believe that the best way to achieve
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    harmonisation between British and German standards and others throughout the world is through adopting agreed international standards, thus offering the benefits of even wider markets to everyone. I know of the particular concern that my hon. Friend has expressed to me, but my answer covers that point.
    Mr. Dykes: Although trade marks are standards of a slightly different kind, will my right hon. Friend say what is happening to the plan for a European trade mark office? Will she undertake to pursue that objective with all due speed and energy?
    Mrs. Oppenheim: We are doing what my hon. Friend has asked, but it would be over-optimistic to expect any early results from it. I shall, however, pay particular attention to what he has said, and see that careful note is taken of it in any negotiations that may yet ensue.
    Mr. John Evans: Is there any evidence of members of the EEC refusing to accept British goods which meet British standards on the basis that they do not qualify for the national standards within Europe, say, French or German standards? Is there any evidence that the United Kingdom refuses to accept goods from our EEC partners because they do not match British standards?
    Mrs. Oppenheim: I am not sure what the hon. Gentleman means by "evidence". National standards pertain in each case. In other words, goods sold in this country must comply with British standards. Similarly, in Germany, DIN standards apply. Standards apply individually. The whole benefit of international standards is to permit freer trade and a wider choice for consumers.

    European Community (Trade Policy)
    Mr. Hal Millerasked the Secretary of State for Trade what progress is being made with the formulation of a European Economic Community trade policy with Japan.
    Mr. Biffen: The Foreign Affairs Council, in November 1980 and February 1981, expressed the serious concern of member States at the growing imbalance of trade between Japan and the Community. It furthermore called upon Japan to moderate her exports to the Community and to make her market more open to imports. Japan is being pressed in discussions with the Commission to give practical effect to these proposals.
    Mr. Miller: What effective measures have my right hon. Friend and his colleagues in mind to give effect to the declaration of policy that there should be effective moderation of Japanese exports and a clear commitment to a substantial and early increase of Japanese imports of EEC products?
    Mr. Biffen: As my hon. Friend may know, the European Community has established a system of surveillance over cars, colour television sets and tubes, and machine tools. There is scope for possible extension of the list. That is the prelude. The negotiations now proceeding between the Commission and the Japanese have as their objective an influence upon trade.
    Mr. Jay: What is the point of our excluding imports from Japan if they are simply replaced by imports from the Continent?
    Mr. Biffen: I think that the matter that has caused acute concern in this country and a number of other countries has been the speed of Japanese penetration into export markets.
    Mr. Kenneth Carlisle: Will my right hon. Friend point out to the Japanese as early as possible that the best way to solve their trading problems with Europe is to invest in a manufacturing base in Europe? In this respect, Britain has proved much the best place to date.
    Mr. Biffen: I am sure that this point is never far from the minds of those who are seeking to persuade the Japanese that the Nissan plant should come here.
    Mr. John Smith: Is the Secretary of State aware that the French Government have told the EEC that they intend to conduct bilateral negotiations about trade with Japan? Does he not think that it would be useful for the United Kingdom to follow this practice, as the French obviously consider it consistent with their obligations to the EEC?
    Mr. Biffen: That is a point to be borne in mind. I am sure that the right hon. Gentleman will recollect that we have our own bilateral arrangements with the Japanese over motor cars. This matter is handled through the Society of Motor Manufacturers and Traders.

    Air Fares (Discounting)
    Mr. McCrindleasked the Secretary of State for Trade what action is being taken to limit the illegal discounting of air fares.
    Mr. Lennox-Boydasked the Secretary of State for Trade whether he will endeavour to renegotiate those international agreements which prevent the lawful sale of air tickets at a discount.
    Mr. Eyre: The Government believe that the problem of discounted air fares would largely disappear if legitimate lower fares were available. It is our objective to negotiate such fares with our international partners and we have made some progress.
    Mr. McCrindle: I agree entirely with the sentiment expressed by the Minister. Will my hon. Friend nevertheless not agree that the Government's duty at this moment is either to prosecute those airlines which engage in illegal discounting of air tickets or—preferably—to lean heavily on airlines, including British airlines, so that they dispose of their surplus capacity at reduced rates through the legitimate travel trade, thereby making these discounted rates available to all rather than to some who choose to patronise the so-called "bucket shops".
    Mr. Eyre: I know that my hon. Friend will understand, with regard to prosecutions, that it is difficult to obtain evidence that will stand up in court, particularly as this would involve evidence of the complicity of airlines. My hon. Friend's second question related to the proposal about the wholesale system. As my noble Friend Lord Trefgarne, who has ministerial responsibility for these matters, made clear to the travel agents, who proposed such a scheme, it is a matter in the first place for discussion with the airlines.
    Mr. Lennox-Boyd: I recognise that this is a difficult matter. Will my hon. Friend nevertheless agree that it is absurd to have on the statute book a criminal offence that is widely committed but rarely prosecuted even if the
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    reason is that it is difficult to obtain suitable evidence in a liberal democracy? Will he not further agree that it is about time that IATA faced the problem openly with a view to modifying those provisions that are contrary to the interests of the consumer and to the operation of a free market?
    Mr. Eyre: My hon. Friend was raising a question of legal principle when he emphasised the difficulty about obtaining sufficient evidence to justify a prosecution and to obtain a conviction. I assure him that these matters are of considerable complexity. On the second point that he mentioned, it is really for IATA and ABTA to look at the matter in so far as it affects their members and the restrictions that apply. The restrictions are imposed by those associations.
    Mr. Anthony Grant: I recognise that the abuse of "bucket shops" can be overcome only by international agreement, but does my hon. Friend agree that the business traveller at least demands not only cheap fares but regular scheduled services? Will he bear in mind that this is important and not always obtained merely by a reduction of fares? Some regulation is necessary to help the business traveller as opposed to the bucket and spade brigade.
    Mr. Eyre: My hon. Friend raises an important aspect of the matter. He confirms the wisdom of the Government's approach, which is to seek, by international agreement, to obtain a whole system of lower fares coupled with good services.
    Mr. McCrindle: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply, I should like to give notice that I shall raise the matter again on the Adjournment at the earliest possible moment.

    Motorway Service Stations
    Mr. Dykesasked the Secretary of State for Trade whether he will use his powers under the Fair Trading Act 1973 to cause an investigation to be made into the trading practices of motorway service stations.
    Mr. Montgomeryasked the Secretary of State for Trade if he will cause an investigation to be made under the Fair Trading Act into the practices of motorway service stations.
    Mrs. Sally Oppenheim: Neither my right hon. Friend nor the Director General of Fair Trading has any plans to refer trading practices on motorway service areas to the Monopolies and Mergers Commission at present. A number of matters relating to competition and consumer protection are being discussed between my right hon. Friend the Secretary of State for Transport and the operators, and, naturally, I too am keeping a close eye on the consumer considerations involved.
    Mr. Dykes: I offer some thanks to my right hon. Friend for that reply. I would, however, ask her to reconsider the first part of the answer and to think again carefully about the matter. Does she not agree that this whole scene is dismal and appalling and that the public are increasingly confronted with the awful three Rs—rotten catering and facilities, racketeering over food and petrol charges and rip-offs on car repair costs? As an example, may I refer my right hon. Friend—
    Mr. Speaker: Order. This is becoming like an Adjournment debate. Will the hon. Gentleman give his example very quickly?
    Mr. Dykes: One quick example is that it is not possible to get the AA and the RAC on to garage forecourts in motorway service areas to repair cars which have broken down. These have to be done on the spot.
    Mrs. Oppenheim: I am unable to disguise my sympathy with the remarks of my hon. Friend. It is true that many motorists find the service provided by motorway service areas unsatisfactory and expensive. At the same time, it should be noted that some areas have high standards and are deservedly popular. These standards should not be the exception; they should be the rule. However, I should point out that the question of a reference to the Monopolies and Mergers Commission is largely one for the Director General of Fair Trading.
    Mr. Montgomery: Is my right hon. Friend aware that sympathy is not enough? We have waited far too long for action to be taken over service stations. As my hon. Friend has pointed out, people are sick of the rip-offs, the price of food and the price of petrol. As the Government believe in competition, the sooner we have action, the better for everyone concerned.
    Mrs. Oppenheim: I agree with my hon. Friend that sympathy is not enough, and the present situation is not acceptable. My right hon. Friend the Secretary of State for Transport hopes to encourage more competition between operators by selling long-term leases and giving them greater commercial freedom. But that will have to be monitored carefully to ensure that higher standards are achieved. That is why my right hon. Friend is currently discussing a star rating system with motorway operators.
    Mr. Hardy: Will not the Minister respond more helpfully to the advice and alliteration of her hon. Friend the Member for Harrow, East (Mr. Dykes)? Is not-the price of petrol prohibitive and the cost of food frightful? Since the right hon. Lady will not take action under the fair trading legislation, will she not at least publicly urge people to fill their car tanks before they reach motorways and use the motorway service areas only to eat the sandwiches that they should take with them in the hope that market forces will encourage the sense of responsibility from which this Government appear to have abdicated?
    Mrs. Oppenheim: I am disappointed because I thought I had been helpful and sympathetic. Now I shall be even more helpful to the hon. Gentleman about one of the matters that he raised. I understand that advice is often given to tourists, for example, by car rental firms, about the existence of off-motorway, nearby service stations which may offer lower prices and better service. There is scope for more widespread provision of such information. Any information which increases competition is welcome, because it leads to general improvement and higher standards.
    Mr. Marlow: Will my right hon. Friend confirm that, in 1982, consumers will be able to buy petrol in either litres or gallons at motorway service stations?
    Mrs. Oppenheim: I confirm that motorway service stations will be free in 1982 to offer petrol by the gallon or by the litre.
    Mr. John Smith: In her replies so far, the Minister has refused to commit the Government to any action on a matter about which both sides of the House have expressed deep and justified concern. Will the Minister refer pricing in motorway staions to the Office of Fair Trading under section 15 of the Competition Act—a power which the Government already have—and not rely on advice by voluntary organisations?
    Mrs. Oppenheim: That would be the simple solution if pricing were the only problem, but it is not. We are concerned about the standard of service. It is for that reason that my right hon. Friend the Secretary of State for Transport is currently engaged in negotiations. I agree that the current situation is not satisfactory. Unless the situation improves, the Director General of Fair Trading will take note of what is said and consider whether a reference is appropriate. However, it is entirely a matter for the Director General of Fair Trading.

    Pharmaceutical Products (Exports)
    Mr. Viggersasked the Secretary of State for Trade if he will list the value of exports of pharmaceutical products from the United Kingdom in 1980 and give an estimate of such exports in 1981.
    The Minister for Trade (Mr. Cecil Parkinson): The value of medicinal and pharmaceutical products exported from the United Kingdom in 1980 was £745 million fob. I prefer not to venture an estimate of future trade.
    Mr. Viggers: Does my hon. Friend agree that pharmaceutical manufacturing is one of our most healthy industries, by any standards? Does he agree also that the Government's review and simplication of clinical trials procedures in medicines should enable British industry to keep up the research and development that is necessary to maintain this satisfactory position?
    Mr. Parkinson: My hon. Friend is correct on both scores. The surplus of exports over imports of over £520 million points to the value of the industry to this country.
    Mr. Pavitt: If the Department keeps figures of the re-imports which multinationals manufacture overseas, bring here and then take away, will he publish them in the Official Report?
    Mr. Parkinson: As the hon. Gentleman knows, I always like to help him, but I cannot do so on this occasion, because we do not keep the figures.
    Mr. Barry Jones: Does the Minister know that in my constituency Graessers Chemicals finds it difficult to export because of energy costs and the strong pound? Is he aware that at the weekend the company announced 80 redundancies and proposes that some of the products now made in my constituency should be made in France? What can the Minister do to prevent the export from my constituency of jobs in pharmaceuticals?
    Mr. Parkinson: As the hon. Gentleman knows, my right hon. and learned Friend the Chancellor of the Exchequer announced in his Budget Statement a package of measures designed to help industry with its energy costs, to the value of over £120 million. In spite of the hard pound, last year British industry contrived to increase its exports substantially. The hard pound has forced companies to concentrate on their costs and to improve

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    their service and after-sales service. Long-term benefits to Britain will result from the action that companies have had to take because of the hard pound.

    Manufacturers (Liability)
    Mr. Greville Jannerasked the Secretary of State for Trade whether he will seek to introduce legislation to implement the recommendations of the Royal Commission on civil liability, the Scottish Law Commission and the English and Welsh Law Commission to impose strict liability on manufacturers and others in respect of death or personal injury caused by products put into circulation by them.
    Mrs. Sally Oppenheim: I do not propose any action on this until we know the outcome of the discussions in Brussels on the draft directive on liability for defective products.
    Mr. Janner: Why not?
    Mrs. Oppenheim: If we were to introduce national legislation at this stage we should need to amend it when agreement was reached on the draft directive. That would be confusing and counter-productive.

    Tourism
    Mr. Adleyasked the Secretary of State for Trade if he is satisfied that his Department offers satisfactory services for the development of tourism; and if he will make a statement.
    Mrs. Sally Oppenheim: The Government provide finance which amounted in 1980–81 to some £40 million to the British Tourist Authority and the national tourist boards for them to promote the development of tourism to, and within, Great Britain. I am sure that these bodies offer very satisfactory services for the development of tourism. I can also reassure my hon. Friend that finance provided by the Government is being fully maintained in real terms this year.
    Mr. Adley: Is my right hon. Friend aware that the British Tourist Authority was joined by British Airways and the British Hotels Restaurants and Caterers Association in making representations to my right hon. and learned Friend the Chancellor of the Exchequer about the proposal in the Budget on VAT for overseas visitors, and that they were disappointed at the lack of response and the widening of the gap in industrial building allowances? Can my right hon. Friend explain clause 54 of the Finance Bill? Can she say, for example, whether tourism is to be excluded from the proposals in that clause?
    Mrs. Oppenheim: My hon. Friend, as usual, has put up a robust and valid case for the British tourist industry. I am well aware of the value of the British tourist industry, which I believe is third, after North Sea oil, as an exporter. It is worthy of the greatest support because of its performance during difficult times and because it does not ask the Government for handouts, but seeks support and encouragement. That it will certainly receive from me.
    The taxation issues that my hon. Friend has raised are matters for my right hon. and learned Friend the Chancellor of the Exchequer, but I can reassure him on two issues. The business start-up relief scheme will apply
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    to the tourist industry in general, while the industry's views on the loan guarantee scheme have been made known and are being sympathetically considered.
    Mr. Michael Brown: Is my right hon. Friend aware that the development of the tourist industry does not depend only on rural areas, because there is a growing tourist industry in industrial areas? Is she aware, for example, that one of the problems of a developing tourist industry in a constituency such as mine—Scunthorpe—is that there are few hotels and they are full all the time? Despite what local authorities are trying to do, there are not enough hotels to cope with the excellent tourist facilities for those who wish to see British industry at its best.
    Mrs. Oppenheim: I am aware of the tourist potential of Scunthorpe. I am also aware that there is a lack of hotels in some similar areas, not least my own constituency. Some options and initiatives for tourist development areas have been put to my Department, and these are under consideration. We have to decide where there is the greatest need for the economic benefits of tourism and then direct the funds that are available to where they will do the most good. Clearly, however, we shall bear in mind what my hon. Friend has said.
    Mr. Clinton Davis: I recognise the invaluable work done by the British Tourist Authority, the English Tourist Board and other bodies in trying to ensure that the tourist trade benefits, but does the right hon. Lady agree that more positive action needs to be taken to deal with the rip-off in hotel pricing over wide parts of the country, but in particular in London, which is a handicap to the work of those bodies?
    Mrs. Oppenheim: The authorities and the hotels are very much aware of the adverse publicity that they have received, much of which has not been deserved, since, with the exception of perhaps four of five hotels, the hotels whose very high rates have been quoted in the press have a majority of their rooms occupied by people who are paying much lower rates. I have tried to encourage them to advertise their lower rates and not merely their rates, because I think that they are getting what I believe is known in the current vernacular as the name without the game.

    South America
    Mr. Neubertasked the Secretary of State for Trade what is the total value, for the most recent 12-month period for which figures are available, of exports to and imports from South America, respectively.
    Mr. Parkinson: In the period February 1980 to January 1981 the value of United Kingdom exports to Latin America was £1,048 million, and the corresponding value of imports was £988 million.
    Mr. Neubert: In the light of those figures, will my right hon. Friend welcome the arrival of Inchcape on the South American scene and the negotiation of the Tate and Lyle sugar project in Peru as an indication of the markets that remain to be recaptured in South America and the great good will that exists for us there?
    Mr. Parkinson: My hon. Friend is correct. We have a very small share of that market, which I believe has enormous growth potential. That is why the Government

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    are encouraging British industry and are mounting a special effort to back it up in trying to improve its share of the market.

    West Germany
    Mr. Marlowasked the Secretary of State for Trade what was the balance of trade in manufactures with West Germany over the last three months for which figures are available and what indication he has as to whether the balance of trade will improve or deteriorate in the current year.
    Mr. Biffen: Trade in manufactured goods with the Federal Republic of Germany in the period November 1980 to January 1981 resulted in a crude deficit of £289 million. I prefer not to venture an estimate of future trade.
    Mr. Marlow: My noble Friend Lord Carrington, the Foreign and Commonwealth Secretary, has performed a signal service to the nation by pointing out the massive deficit in manufactures with Japan and the number of jobs lost as a result. As our trade in manufactures with the Federal Republic of Germany is two and a quarter times as bad as our trade with Japan, would my right hon. Friend like to perform the same signal service with regard to that trade and inform the country how many jobs have been lost?
    Mr. Biffen: No, Sir, because I think that that would be to take the view that British trade had to be departmentalised country by country, and I do not think that that is a sensible way of looking at it. Furthermore, I should then be obliged to point out to my hon. Friend that, although the figure is £289 million for the three months to which he referred, in the corresponding three months a year before it was just short of £600 million and a year further back it was just short of £500 million. I do not know what conclusion one would draw from that.
    Mr. Arthur Lewis: Is the Secretary of State aware that last Thursday a Mercedes-Benz came into New Palace Yard and out got a well-known Conservative Member of Parliament? Across the back of the car was a ribbon announcement "Buy British. British is best". Did the right hon. Gentleman hear his right hon. Friend the Minister for Consumer Affairs say something about the vernacular a short time ago? A friend who was with me, a Cockney, said "They seem to have got their knickers in a twist." Does the right hon. Gentleman agree?
    Mr. Biffen: I was not aware, but now I am.
    Sir Anthony Meyer: Does my right hon. Friend accept that if our trade in manufactures with Germany is adverse that is because of British industry's failure to be competitive, but that in the case of Japan British exporters meet the additional difficulty of non-tariff barriers and other forms of discrimination, which in the European Community would be removable by the machinery provided for that purpose?
    Mr. Biffen: That raises much wider issues, which I should rather answer through a separate answer.
    Mr. Gwilym Roberts: Does the right hon. Gentleman accept that the biggest improvement in our trade with West Germany could be achieved by the Government's renegotiating an offset for the British Army of the Rhine? Will he try to make up for the failures of the previous Government in this respect?
    Mr. Biffen: That is a formidable invitation for one so lacking in ambition. The whole question of offset arrangements falls well outside the responsibilities of the Department of Trade. Germany is a major market for this country. Trade between the two countries goes much wider than manufactured goods. It would be detrimental to employment in this country if we started to build trade restrictions between ourselves and the Federal Republic.
    Mr. Ioan Evans: Are oil exports to Germany contained in the latest figures? If so, will the right hon. Gentleman separate them from the others?
    Mr. Biffen: The figures refer solely to trade in manufactured goods, and exclude throughout considerations of oil.
    Mr. Moate: Does my right hon. Friend agree that there is some validity in comparing Japanese trade with that of West Germany, inasmuch as we seek to get Japan to impose restraint on its exports to this country? Does he agree that our balance of trade in cars, for example, with West Germany is as bad as our balance of trade in cars with Japan? Should we not ask the Germans also to impose voluntary restraints?
    Mr. Biffen: The same considerations apply as I advanced to my hon. Friend the Member for Flint, West (Sir A. Meyer). There are substantial differences between the trading ethos of Germany and that of Japan, but I do not think that they can be reasonably differentiated in the form of question and answer now.

    South Africa (Machinery Exports)
    Mr. Allen McKayasked the Secretary of State for Trade if he will introduce legislation to prevent the export of secondhand machinery and other plant from factories in the United Kingdom on occasions where the machinery has been used at a factory which has been closed because the owners have decided to operate that machinery in a low-labour cost country such as South Africa.
    Mr. Parkinson: Such legislation would not be consistent with our obligations under the Treaty of Rome and the General Agreement on Tariffs and Trade.
    Mr. McKay: It would not be consistent with the Treaty of Rome, but does the Minister think that it would discourage redundancies and encourage the earlier reopening of factories? Is he aware that in my constituency a firm that was making hundreds of men redundant—David Brown—advertised for workmen in South Africa, thereby creating redundancies in my area and employment in South Africa, unlike a neighbouring firm, Naylor Brothers, which is investing in expansion?
    Mr. Parkinson: Successive Governments have refused to accept that there is any profit for the country in building up laws to restrict the export of secondhand machinery. I do not believe that this country's future prosperity will depend upon restrictions on the export of old machines.
    Mr. John Smith: Is the Minister aware that recent figures produced under the requirements of the EEC code of conduct show that a number of British companies operating in South Africa are still paying wages well below the level recommended by that code, and that this number is a blot on our tradition and reputation as a nation? What will the Government do about those companies that are paying African workers starvation wages?
    Mr. Parkinson: The right hon. Gentleman's question has nothing to do with the question on the Order Paper, but I hope that he will give credit to those British companies, overwhelmingly in the majority, that meet the standards, and that he will not harp on the tiny minority that do not.
    Mr. Smith: Why not?
    Mr. Cryer: Will the Minister enlighten the House on the Government's policy on the export of machinery where its purchase has been grant-aided by the British taxpayer? As he well knows, the machinery has to be used for four years only, and it is not then old, even in today's modern technological society. Machinery whose purchase has to a large degree been contributed to by the British taxpayer is then exported to provide a competitive product from, say, South Africa. Should not the hon. Gentleman be doing something about that?
    Mr. Parkinson: There are arrangements to reclaim grants if the machinery has not been used for a reasonable period. I believe that those arrangements are satisfactory.

    Exports
    Mr. Knoxasked the Secretary of State for Trade what was the value of exports from the United Kingdom in the past three months.
    Mr. Biffen: United Kingdom exports of goods were valued at £11,838 million in the three months December to February.
    Mr. Knox: Does my right hon. Friend agree that the figure would have been much higher if the exchange rate for sterling had borne a closer relationship to comparative manufacturing costs? Has he drawn the attention of my right hon. and learned Friend the Chancellor of the Exchequer to the damage being done to British exports—and not just in the short term—by the high exchange rate of sterling?
    Mr. Biffen: It is difficult to answer the first part of that question. It is entirely a matter of speculation. What is clear is that, notwithstanding the strong pound, we have had a very high level of exports.
    Mr. Straw: Does the Secretary of State accept that the combination of high exchange rates and subsidised energy costs in the United States has made a bad situation for the British textile industry very much worse? Is he aware that 320 employees in my constituency have been thrown out of work because of the unfair competition from America? Does he now accept that the EEC's negotiations with the United States Administration in respect of the textile trade have now failed? If so, what action does he propose to take?
    Mr. Biffen: I think that the substantive answer to that question is contained in the answer to a later question—No. 26. However, we have considered this matter, and we have decided that it would be inappropriate to seek action under article XIX of the GATT, because we believe that the potential retaliation would be more harmful than any protection that that would confer.

  OVERSEAS DEVELOPMENT

    Overseas Students
    Mr. van Straubenzeeasked the Lord Privy Seal at what figure his Department's support for overseas students is currently running; and at what figure he expects it to run in the academic year 1981–82.
    The Minister for Overseas Development (Mr. Neil Marten): At the start of this academic year about 5,200 students were supported by aid funds on degree or postgraduate courses in the United Kingdom. We expect this figure to rise above 6,000 next academic year.
    Mr. van Straubenzee: I welcome that increase. How does that figure compare with that in the last year of the Labour Government? Will my hon. Friend bear in mind the widespread interest in and concern for our commitment to overseas students in many parts of the House? Will he undertake to keep those figures carefully under review, with a view to increasing them still further as economic conditions improve?
    Mr. Marten: Yes, we shall keep these figures under review. As to the first part of my hon. Friend's question, as I said in my initial answer, in 1981 we expect the figure of 6,000 to rule. In the academic year beginning in September 1978 there were 5,700, although I do not pay too much attention to such ups and downs. I think that on the whole the general thrust is good.
    Mr. Christopher Price: Will the hon. Gentleman explain the logic of charging cheap fees to comparatively rich students from the European Economic Community, but expensive fees to poor students from the Lomé convention countries? When will the Government reply to some of the sensible Select Committee's suggestions about extending the European concession—knowing the hon. Gentleman's opinions on Europe I am sure he has strong views on this—to Third world countries, especially the poorest?
    Mr. Marten: My personal view is that it is an entirely paradoxical situation. However, the Select Committee's report is one for my right hon. and learned Friend the Secretary of State for Education and Science. I should not like to trespass on his responsibility.
    Mr. Alton: Does the Minister accept that one of the best investments that we can make in world development is to provide more opportunities in Britain for people from poorer countries? Does he accept also that many people have had to give up their courses and return to countries that are unable to pay the remainder of their fees? What figures are available to show the differences between the poorer and the better developed countries?
    Mr. Marten: If the hon. Gentleman will read my original answer he will understand that we are doing more to help. The question on the Order Paper refers primarily to overseas students supported by my Department, and that is very much a question of agreement between the developing country, and its aid budget and how to spend it, and ourselves in Britain.
    Mr. Hill: My hon. Friend will realise my interest in Sri Lanka, and especially the way in which his Department has supported that very poor island. I am thinking particularly of the £100 million granted towards the

    17
    construction of the Victoria dam. Nevertheless, the standard of living there is very low. The costs for overseas students are out of keeping with what they can afford. I should have thought that there was some way in which we could help such an island, which is very much a supporter of the British way of life, to enable more of its poorer citizens to come Britain to study.
    Mr. Marten: If the Sri Lanka Government were to consider using a higher proportion of their aid budget on education, that is something that we should seriously consider with them.

    "Village Adoption" Scheme
    Mr. Greville Jannerasked the Lord Privy Seal whether he will now seek to extend the scheme for matching money raised for overseas aid from nongovernmental sources with governmental aid, as with the "village adoption" scheme proposed by the former Chief Minister of Gujerat and presented to him by the hon. and learned Member for Leicester, West.
    Mr. Neil Marten: No extension is needed. The Narhari Trust, of which the hon. and learned Member sent me the particulars, appears eligible under the existing rules, and if it likes to apply for a grant for this scheme we shall be glad to consider it.
    Mr. Janner: I thank the Minister for that helpful answer. What funds are available through matching grants during the coming year? Does the Minister accept that there is vast and tragic poverty throughout much of India, not least in the State of Gujerat, and that we should be doing everything in our power to help these people to have at least the basic necessities of a decent life?
    Mr. Marten: Yes, I accept what the hon. and learned Gentleman says about poverty in India. The joint funding scheme expenditure in the financial year just ended was over £1.5 million, and it will be much the same, I think, in the coming financial year. I stress that if the trust were to ask us to contribute to what it wants we should consider the matter, but we must look at its administrative and accounting arrangements and examine the scheme under our normal criteria.

    Zimbabwe
    Mr. Brocklebank-Fowlerasked the Lord Privy Seal what discussions he has had with the Government of Zimbabwe regarding the availability of further aid funds for land purchase.
    Mr. Spearingasked the Lord Privy Seal what progress has been made in making funds available for the purchase of land in Zimbabwe.
    Mr. Neil Marten: We have never accepted sole responsibility for providing funds for land acquisition and development and have always made it clear that to do so would be beyond the capacity of any individual donor. However, we have already agreed to provide £20 million towards the cost of a £40 million programme of land acquisition and development, and at the recent aid conference we said we would provide a further £10 million for a second similar scheme.
    Mr. Brocklebank-Fowler: I am grateful to the hon. Gentleman for that reply. What success have the
    18
    Government had in persuading other Governments to make funds available for land purchase? Is the new sum of £10 million that has been made available by the British Government for the resettlement of land to be dependent upon a matching contribution from the Zimbabwean Government or any other Government?
    Mr. Marten: The whole scheme will amount to £34 million, and we are contributing £10 million to it. Obviously, it will have to be matched by other donations.
    The answer to the first question is that many of the sums pledged will have to be discussed in detail with the Zimbabwean Government on the timing and use of them.
    Mr. Spearing: Can the Minister be a little more specific about the use of the £10 million to which he has just referred? Is it all to be for land purchase, or is part of it for necessary infrastructure? What other countries have indicated a willingness to contribute towards the £24 million balance to which he has referred?
    Mr. Marten: The £10 million is entirely for land acquisition and development. As I said earlier to the hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler), it is up to the Zimbabwean Government to analyse the pledges—which are often made in very round terms. One needs to look very carefully at the details of the pledges and the timing of them before one can give an answer to the second part of that question.
    Mr. Archie Hamilton: What will the Government's attitude be towards further funds for Zimbabwe if land is confiscated and not bought under this scheme?
    Mr. Marten: When the sums that have been pledged have been used up we shall again see what is necessary.
    Mr. McElhone: Does the Minister agree that as 5,000 white farmers in Zimbabwe are living off most of the best land, while 650,000 peasant farmers are trying to live off very poor land, this is possibly a recipe for conflict at any given time? If so, how does he justify today the paltry sum of an additional £10 million to settle this situation? Is this not against the spirit of the Lancaster House agreement?
    Mr. Marten: Not at all. The Lancaster House agreement made it clear that no one country could cope with land resettlement. That was the basis of the settlement and we are contributing to it generoulsy.
    Mr. Deakins: Is the hon. Gentleman aware that if this issue is not settled satisfactorily fairly soon it will throw into doubt the democratic future of the Government of Zimbabwe, which this Government did so much to help bring about?
    Mr. Marten: I hope that it will be settled satisfactorily. The Zimbabwe Government, in conversation with my right hon. Friend the Lord President of the Council, were pleased with what we offered at the conference.

    Commonwealth Development Corporation
    Mr. Viggersasked the Lord Privy Seal what will be the cost to public funds during the current year of the Commonwealth Development Corporation.
    Mr. Neil Marten: Subject to parliamentary approval, provision for advances to CDC from the aid programme this financial year will be £30 million.
    Mr. Viggers: Will my hon. Friend pay tribute to the work of the Commonwealth Development Corporation,

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    which is widely admired in Britain and throughout the world? Does he envisage any possibility of extending its role?
    Mr. Marten: I paid tribute to the CDC in an Adjournment debate recently. We shall always be prepared to consider extending the role of the CDC when we are in a position to do so

Brixton (Disturbances)
The Secretary of State for the Home Department (Mr. William Whitelaw): With permission, Mr. Speaker, I will make a statement about the major disorders that took place in Brixton over the weekend.
The House is well aware of the violent clashes that have occurred between the police and young people, mainly black. The most serious disorder took place in the afternoon and evening of Saturday. Shops were looted, vehicles destroyed and other property, including private homes, seriously damaged. Again yesterday there were outbreaks of lawlessness in the area, though on a lesser scale. Over the two days a total of 149 police officers were injured, along with 58 members of the public. Ten police officers and one member of the public remain in hospital and 224 people were arrested.
We in Parliament, on behalf of the people of this country, have placed on the police the heavy burden of maintaining peace on the streets and of preserving order and the rule of law. Whatever questions may arise in people's minds about the reasons why this outbreak of violence occurred, there is no doubt in my mind, nor should there be in the mind of any Member of this House, that Metropolitan Police officers of all ranks carried out their duty with great bravery and professionalism. On our behalf I have asked the commissioner to pass this message on to all members of his force. I also wish to pay our tribute to the same courage and determination that were shown by the members of the London Fire Brigade.
Despite the determined efforts of the police, they were faced with violence which was very serious in its type, scale and intensity. In addition to the personal injuries, the widespread damage to property and consequent financial loss to wholly innocent people has been enormous. Whatever grievances individuals or communities feel they suffer, such violence—from whatever quarter it comes—cannot and will not be condoned. The police will continue to do their duty to maintain the law on the streets of London, and in this they are entitled to the full support of Parliament and the nation.
The events of this weekend call for the most thorough examination. I have therefore decided to appoint an inquiry under section 32 of the Police Act 1964. I have invited Lord Scarman to undertake this inquiry, and I am glad to say that he has accepted. His terms of reference will be:
"To inquire urgently into the serious disorder in Brixton on 10 to 12 April and to report, with the power to make recommendations."
The inquiry will be held in public save where Lord Scarman decides that it is appropriate to be held in private.
Mr. Roy Hattersley: First, may I offer the Opposition's sympathy to the many policemen and fire officers who were injured while performing their legitimate duties in Brixton during the weekend? Secondly, may I say what I hope hardly needs saying, that the Opposition deplore the violence that took place? We believe that suggestions that the police should have left the area and abandoned the protection of residents are wholly misplaced.
The Opposition support the setting up of an inquiry into what took place. However, we believe that it should investigate more than the specific incident or incidents that precipitated last weekend's violent events. It must
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examine what happened on Saturday and Sunday. It must examine how the police responded. But is the right hon. Gentleman aware that in our view that is only the beginning of the inquiry? The real issue is how the area can be helped to avoid a repetition of such incidents and how such incidents can be avoided in other parts of the country.
The events of the past two days have deep-rooted and fundamental causes. I hope that the right hon. Gentleman understands that in the Opposition's view those causes and roots must be explored. In short, the inquiry must go further than policing procedures. We hope that it will examine, first, the employment prospects of young people in the area. Even when the slump is over they will need special assistance to find jobs. Secondly, we hope that the inquiry will examine housing prospects in the immediate area. Anyone who has visited Mayall Road or Railton Road, as the right hon. Gentleman did yesterday and as I did this morning, must realise that the physical conditions of the area had a crucial effect on last night's events and that money should be provided for the improvement of the area.
Finally, we need a fundamental review of the relationship between the Brixton police and the Brixton public. I have no wish to allocate blame or responsibility, but the breakdown of the relationship between the police and the public is an undoubted fact. It will be the duty of the inquiry to discover how it happened and how it can be remedied.
An inquiry under section 32 of the Police Act 1964 may in many ways be inadequate., for it will concentrate on only two of the issues that we regard as fundamental. Therefore, I urge the right hon. Gentleman to keep an open mind on both the nature of the inquiry and those who will carry it out until he has had representations about its membership and terms of reference.
I urge the right hon. Gentleman to set up a wide-ranging inquiry into the causes of the events as well as the events themselves. I urge him to ensure that the inquiry is composed of a number of responsible and reputable persons who are familiar with the problems in such an area. A limited inquiry can be no more than a palliative. In our view, the time for palliatives is past.
Mr. Whitelaw: I am grateful to the right hon. Gentleman for his words of sympathy for the police officers and members of the fire brigade who were injured. I took the opportunity, yesterday afternoon, to visit the police officers who were in hospital, to express our disappointment and sadness about their injuries and our thanks for what they had done. I hope that I was acting on behalf of all hon. Members.
I am grateful to the right hon. Gentleman for his forthright response to the suggestion that the police should have left the area. I heard on television, as did other hon. Members, the pressure for that to happen. The commander of the police who rejected those representations was entirely and absolutely right. I am grateful for the right hon. Gentleman's support.
The inquiry's terms of reference will enable Lord Scarman to consider the issues that the right hon. Gentleman mentioned.
With regard to some of the wider issues, I had to bear in mind that the Home Affairs Select Committee is completing a study of racial disadvantage. I thought that it would be wrong to cross the wires of two inquiries,

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particularly when one is a Select Committee of the House. That is one point which was in my mind. I also believed that it was important to obtain a quick and urgent answer. When the Red Lion Square inquiry took place, Lord Scarman produced such a report quickly. It seemed sensible to follow that precedent.
I have asked Lord Scarman to carry out the inquiry. I know that he has wide support for his task throughout the House and I hope that it will be carried out urgently. I believe that the inquiry can go into the matters which the right hon. Gentleman raised. I hope that it will be able to do so quickly.
Mr. Hattersley: In the genuine and perhaps desperate desire to minimise the damage which will come out of the last two days, I reiterate my firm view that the circumstances which brought about the Red Lion Square events are different from those which caused the Brixton disturbances yesterday and the day before. I plead—if that is not an over-emotional word—with the right hon. Gentleman at least to consider accepting representations about the nature and membership of the inquiry before he closes all the doors. He has come quickly to his conclusion. I hope that he will leave his mind open for at least one day more.
Mr. Whitelaw: I came quickly to the conclusion because I took the view, on visiting the area yesterday and on hearing all the evidence on what had happened, that it was crucial for the House to take firm, clear and decisive action at the earliest possible opportunity. I am firmly convinced that that is most important. That is why I acted so urgently and managed to obtain the services of Lord Scarman. I wish to proceed on that basis, and I trust that the House will allow me to do so.
Mr. John Fraser: May I express my regret and shock at what happened over the weekend? Does the Home Secretary appreciate that it is not the immediate causes of what happened over the weekend which matter? They are well understood. What really matters is that there should be a broad-based and sensitive inquiry into the underlying causes. I should be failing in my duty if I did not tell the right hon. Gentleman that a deep disaffection about relations with the police is ascribed by most of my constituents in that area as being one of the causes. Is the Home Secretary aware that deep concern about unemployment and other consequences of economic policy are also ascribed as reasons for the disturbances? I urge the right hon. Gentleman to broaden the inquiry under the chairmanship of Lord Scarman to include those other underlying causes.
Does the right hon. Gentleman regard the disturbances as having been a riot for which the police will pay compensation under the Riot (Damages) Act? Will he urge that we have immediate community policing henceforth in the area?
Mr. Whitelaw: On the hon. Gentleman's last point, the disturbances will be regarded as a riot and compensation will be paid. That is a matter for the Receiver of the Metropolitan Police in the normal way.
The hon. Member referred to the immediate causes and to the possibility of there being a sensitive inquiry into the relationship between the police and the public in Brixton.
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That will be at the centre of Lord Scarman's inquiry and it is entirely covered by his terms of reference, as are the other matters raised by the hon. Gentleman.
Mr. William Shelton: Is my right hon. Friend aware how pleased many people will be to know that they will receive some compensation for the disgraceful events which took place at the weekend? Is he aware that evidence is mounting that what sparked off the business on Saturday might have been a planned trap for the police?
Is my right hon. Friend aware that the recent report on police and community relations sponsored by Lambeth council, which called the police an army of occupation, did much to increase hostility against the police? Is he further aware that over the last two weeks or so subversive leaflets—two of which I have here—have been circulating throughout the area? Does he realise that the vast majority of the community in Lambeth is sick and fed up with Left-wing agitators taking advantage of the genuine grievances of many youngsters to further their subversive aims?
Mr. Whitelaw: My hon. Friend, as one of the Members representing the area, intimates that there is strong support for the police in that area. That is undoubtedly true. The other matters which he raised will come before Lord Scarman in his inquiry. Therefore, I would not wish to repeat some of the views which I have held in the past. It is important for Lord Scarman to consider the matters afresh.
Mr. John Tilley: Will the Home Secretary accept that the vast majority of the people in the parts of Brixton which I represent also condemn the violence which took place? They will be disappointed that the inquiry seems to be restricted and that the underlying economic and social causes seem to be of secondary consideration in the inquiry. Does he remember, a year ago, after the Bristol disturbances, my begging him to take them as a warning that the Government would face similar outbreaks in the inner cities throughout the country if they did not act then to remove the sources and causes of frustration and anger? Will he acknowledge that since then the Government have done precisely the opposite? The local government services and job opportunities for youngsters, both black and white, in areas of that sort have become fewer rather than greater.
Therefore, will the right hon. Gentleman acknowledge that the Government must take action now and that the inquiry must be widened so that it may include the policies of the Government on industry, employment and the environment? If he cannot give us that guarantee, will he arrange for the Secretaries of State for Industry and for the Environment to visit Brixton to see the consequences of their economic policies?
Mr. Whitelaw: I am grateful for what the hon. Member said about condemning violence. It is important to be clear that there are many coloured people, whether in the Asian or West Indian community, who deplore the violence as much as anyone else. It is important that that should be said, because many of them have taken on the responsibilities of our country as well as the rights. Those who have done so need to be encouraged.
Lord Scarman can inquire into many of the other points raised by the hon. Gentleman. I remember what the hon. Gentleman said to me last year. I am entitled to set out one

25
fact. Lambeth received Government assistance of about £8 million in 1980–81 under the partnership arrangements. That is a fact which it is important for me to put before the House.
Sir Nigel Fisher: Will my right hon. Friend express a view on the question whether the police might have used tear gas to disperse the rioters, because that might have saved many police casualties? Will he bear in mind for the future that if the police had organised a pincer movement it would have reduced the area of the looting?
Mr. Whitelaw: Both those matters clearly come within the terms of reference of Lord Scarman's inquiry. Having heard from the police how they handled the operation, I believe that the pincer movement mentioned by my hon. Friend was carried out.
Mr. J. Enoch Powell: In reflecting upon these events, will the Home Secretary and the Government bear in mind, in view of the prospective future increase in the relevant population, that they have seen nothing yet?
Mr. Whitelaw: I shall reflect on anything that the right hon. Gentleman says.
Mr. Peter Bottomley: Does my right hon. Friend accept that after the inquiry into these particular incidents it will be necessary to give further thought, not only through inquiries but by every other means, to improving matters for the community in the centre of Lambeth? It is not a collection of separate communities; it is one community.
Mr. Whitelaw: I accept that. I also accept the importance of the work—there are no controversial points here—of the local council or authorities. It is as important as the Government's work. All those matters can be considered, and no doubt will fall within Lord Scarman's terms of reference.
Mr. David Alton: Has evidence come to light of extreme groups being involved in the run-up to the riots? When the inquiry meets, will the Home Secretary bear in mind that unemployment among young blacks quadrupled last year and that that is an underlying cause of many inner city problems?
Mr. Whitelaw: The hon. Gentleman's first point is a matter for the inquiry, and it would be wrong for me to anticipate it. Unemployment is serious, but it can never be made an excuse for violence on the streets.
Mr. Eldon Griffiths: Will my right hon. Friend ask Lord Scarman to look into the question of the use of Molotov cocktails since it can hardly have been spontaneous? They must have been manufactured beforehand with malice aforethought. Looking to the future, does he agree that it is wholly impracticable to ask the police to handle alone the complex problem of race relations? Will he support informal contacts between the police and immigrant communities, perhaps socially, for it is unjust to suggest that the Metropolitan Police are in any sense racially motivated?
Mr. Whitelaw: I entirely accept my hon. Friend's final remark. I am keen to see the police involved in more community relations work and social contacts. Much has already been done by the Metropolitan Police and their community relations officers in the area, which should be recognised.
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My hon. Friend's other points are inevitably for Lord Scarman's inquiry. He is right in saying that the police cannot deal with race relations problems on their own. They have to deal with problems that arise from various factors in the community and to keep the peace in such circumstances, and the inquiry will help to show us what the problems are.
Mr. Thomas Cox: As a South London Member, I echo the sympathy expressed to everyone one injured at the weekend, but does the Home Secretary really know what life is like in South London? Is he aware of the desert of despair? He has heard about the loss of services, but is he aware of the near-daily intimidation and attacks on the black and Asian communities by National Front thugs, about which nothing is done? Does he accept that such attacks lead to the events that we saw at the weekend? The Home Secretary can institute a dozen inquiries, but is he aware that unless the Government tackle the root cause of the problems in South London such incidents will occur again, and next time not only will property be destroyed but lives will be lost? Does he agree that no one in the House should let that happen?
Mr. Whitelaw: I note what the hon. Gentleman says and the feeling with which he says it. I wish to have the inquiry so that we can get to the root of some of the problems. I have good personal reasons for knowing and understanding the problems in South London.
Mr. Anthony Grant: Is my right hon. Friend aware that the Asian communities—certainly those in my constituency—utterly deplore the disgraceful disorder in Brixton, enjoy excellent relations with the police and will wholly support anything that he has to do to uphold the first duty of a democratic Government, which is to maintain law and order? Will the inquiry's terms of reference be wide enough to cover not only extreme Left and Right-wing organisations but organisations masquerading under grandiose titles such as the National Council for Civil Liberties?
Mr. Whitelaw: I am grateful to my hon. Friend for what he says about the Asian communities in his constituency, which confirms my opinion. Large numbers of Asian and West Indian communities deeply deplore violence and want nothing to do with it. I understand that the inquiry will be able to consider all organisations in so far as they contributed to the serious disorder in Brixton.
Mr. Douglas Jay: Is it not clear that the police at least cannot be blamed for the Government's policy of deliberately creating unemployment?
Mr. Whitelaw: The police cannot be blamed for the policy of any Government. It is their duty to serve the Government of the day and to maintain law and order in accordance with that Government's policies. I do not accept the right hon. Gentleman's final words.
Mr. David Mellor: When there is wholesale sacking and looting of a neighbourhood, as well as indiscriminate violence against the police, firemen, ambulancemen and ordinary members of the public, is it not grossly wrong and unfair to talk about social protest? What we should be talking about is sheer criminality. Does my right hon. Friend agree that the day that we confuse the two is the day that we shall be speaking of the end of civilised society?
Mr. Whitelaw: I entirely agree with everything that my hon. Friend said, and I hope that all that I have said is consistent with it. The police have the right to expect the full-hearted support of all hon. Members in maintaining law and order in our streets in accordance with the policy laid down by the Houses of Parliament.
Mr. Arthur Lewis: Does the right hon. Gentleman recall that almost a year ago today we had the Bristol riots and that, rightly or wrongly, the Director of Public Prosecutions initiated prosecutions costing the taxpayer over £½ million, which, in the interests of race relations, he withdrew? May we take it that in this case, in the interests of race relations, there will be no charges?
Mr. Whitelaw: What the DPP does is a matter for him and not for me. Many of the people who have been arrested have been charged, and consideration of the charges will continue.
Mr. John Hunt: I welcome the inquiry and hope that its report will be speedy and conclusive, but can my right hon. Friend tell us when and why the police liaison committee in Lambeth was suspended? Should it not be urgently reconvened to restore contact and, if possible, mutual respect between the police and the black community in Brixton?
Mr. Whitelaw: Again, that is a matter for Lord Scarman, but I shall call the attention of the Commissioner of Police of the Metropolis to what my hon. Friend has said.
Mr. Clinton Davis: Is the right hon. Gentleman aware that the majority of hon. Members will welcome his instant repudiation of the somewhat obscene view expressed by the right hon. Member for Down, South (Mr. Powell)? Does he accept that many representations were made to me over the weekend by people in Hackney, an area not dissimilar to Brixton, and that a Niagara of discontent exists among young blacks, who are discriminated against over jobs, housing and so on? Therefore, should not the inquiry consider broader issues? Although I have the greatest respect for Lord Scarman, should not the membership of the inquiry be extended so that the black community may feel that it is represented, as justice should not only be done but should be seen to be done?
Mr. Whitelaw: I note what the hon. Gentleman says about his area. It is in the best interests of everyone that the inquiry should report urgently. If more people served on it the inquiry would be longer, which would not be the best way to solve the problem.
Mr. K. Harvey Proctor: Will my right hon. Friend now end large-scale, permanent immigration from the New Commonwealth and encourage repatriation?
Mr. Whitelaw: My hon. Friend's question raises other issues, which I shall be ready to debate on another occasion.
Mr. John Sever: In the light of the weekend's events, will the Home Secretary take it upon himself to call together the chief constables and put to them, as will doubtless be put to him, the situation that occurred at Brixton this weekend and urge them to put into areas of high ethnic minority concentrations police officers who have been adequately
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trained and adequately supervised in race relations matters so that they may fully appreciate local circumstances and avoid incidents such as those that occurred this weekend?
Mr. Whitelaw: I am grateful to the hon. Gentleman. I agree with him. Chief officers throughout the country are already doing this. I shall take every opportunity to urge them further in that direction.
Mr. George Gardiner: Will my right hon. Friend express a view on the mass rally that has been announced in Brixton for this coming weekend and press upon all those involved his view that it can only exacerbate relations further in that territory to the detriment of all its citizens?
Mr. Whitelaw: I do not yet know of the mass rally—I shall investigate the position—but I make it clear that having announced that there will be an inquiry I hope that all concerned will do their best to cool the situation on the ground. I have thought it right to act quickly and firmly with that end in view. I hope that whatever reservations there may be I shall have the support of the House in having taken very quick and decisive action.
Several Hon. Members rose——
Mr. Speaker: Order. I propose to call four more hon. Members from either side. That will give a very good run indeed.
Mr. Edward Lyons: While condemning the lawlessness, may I ask whether the Home Secretary is aware that the best way of helping the unfortunate police in their thankless task of keeping the lid on the bubbling cauldron of frustration in Brixton is to remove the causes of the fire which stokes that cauldron? Does not that mean not only a wide-ranging inquiry but at the very least a commitment now for substantial additional funds, as it is obvious that many of the causes need to be treated and can only be treated by more resources? Will the Government give that commitment now, in advance of the inquiry?
Mr. Whitelaw: I have given the answer about what has been done for Lambeth in 1980–81. I do not believe that we can buy our way out of these problems, and I never have believed that.
Mr. W. Benyon: What can the inquiry tell us that we do not know already? Does not the inquiry itself appear to make the violence worth while?
Mr. Whitelaw: The inquiry should tell us why such serious disorder erupted, and the reasons behind it, which it is very important for the House to appreciate. That is the purpose of such an inquiry. I would not accept for one moment that it encouraged violence on the streets. The position is quite the reverse. If we do not take action to make this clear to people who feel the bitterness that they do, and if we do not take action to try to overcome that, we shall make the situation more dangerous.
Mr. Norman Atkinson: Will the Home Secretary explain to the House what social experience Lord Scarman has of areas such as this which makes him particularly suitable to carry out a one-man investigation into a situation of this kind? Is he now saying that the report to be made by Lord Scarman will not include any judgments at all but will be straight reporting of the evidence put to him?
Mr. Whitelaw: On the first point, I thought that Lord Scarman commanded great support in all parts of the House as someone who has carried out many inquiries and who would be widely respected. On the hon. Gentleman's second point, the terms of reference include the words
"and to report, with the power to make recommendations."
That surely answers the hon. Gentleman's second point.
Mr. John Stokes: Does my right hon. Friend realise, as I am sure he does, what a peaceable country England has been for many years and that riots on this scale have not happened for 200 years? Are not these riots something new and sinister in our long national history?
Mr. Whitelaw: They are certainly a serious and worrying development of which the House of Commons must take account. Over the years, there have been problems of various kinds in this country, but it is worth saying that over generations we have proved to be an extremely tolerant society. I am sure that all hon. Members would wish to ensure that we remain so. Our position as a nation depends upon our being a tolerant and understanding society. I trust that we shall always remain so.
Mr. Arthur Palmer: Does the right hon. Gentleman recall that a year ago, following the St. Paul's riots in Bristol, I and others urged upon him a public inquiry of this kind, which he refused? Does he not think in retrospect that that was a mistake, as it might have provided some lessons for the future?
Mr. Whitelaw: I believe that the situation in Brixton over the past three days was far wider and of far more depth than was the case in Bristol. That is the difference between the two situations.
Mr. Nick Budgen: Will the inquiry make later prosecutions more difficult? Further to his answer to the hon. Member for Newham, North-West (Mr. Lewis), would my right hon. Friend even go so far as to say that it would be wrong for the proper authorities to drop any prosecution, at least partly in the interests of good race relations?
Mr. Whitelaw: Obviously the question of prosecutions is one for the Director of Public Prosecutions and I must preserve that correct constitutional position. I am advised that at present there is no reason why charges against those involved in the events cannot proceed. Whether that continues to be the case must inevitably depend on the progress of Lord Scarman's inquiry. I understand that to be the case at present, and I trust that it will continue to be the case.
Mr. Michael English: Will the inquiry, or will the right hon. Gentleman, consider the demerits and merits of centralised police forces? Is it not true that since the Roy Jenkins Police Act there has been greater central control over provincial forces and a greater increase in crime? Is he aware that the greatest single increases in crime have occurred in two United Kingdom police forces, both of which the right hon. Gentleman has been in charge at various times? Is it not true that the two areas with the most centralised forces have the highest crime rates?
Mr. Whitelaw: I would not necessarily equate my involvement with those two forces as having been a
30
contributory cause one way or the other. If the hon. Gentleman thinks that it is, he is entitled to that view. I myself believe that our system of police authorities, decentralised as it is, is the best, and I should like to see it maintained.
Mr. Alan Clark: Does my right hon. Friend agree that the widespread and indiscriminate use of fire bombs introduces a totally new element into public disturbances in this country? Is it really fair to ask the police, outnumbered as they are, to face these and other weapons without giving them the means either to defend themselves or to retaliate? What steps is he taking to improve their equipment and to speed the possibility of their reinforcement, if necessary from other sources?
Mr. Whitelaw: With regard to the question of resources and the bringing in of reserves, all the reserves that were needed in this case were brought in as quickly as possible from the Metropolitan Police area. Considering the problems of doing so at the weekend, they were brought in very quickly indeed, in sufficient numbers. I think that there is no difficulty about bringing in reserves in the Metropolitan Police area. Following the events in Bristol, arrangements have been made to that end in other areas with smaller forces.
Clearly, the question of equipment must be and will be examined. As a result of the weekend's events, one can only say that, considering the very difficult work that the young police officers had to carry out—work that they carried out with such bravery—we should all be grateful that the level of their casualties was as low as it was.
Mr. Alexander W. Lyon: Will the Home Secretary remind some Conservative Members that most of the people involved in the disturbance were born in this country and that it may well be a reflection upon us that it ever happened in this way? With specific regard to the events at the weekend, is it correct that a large-scale police operation preceded these events and that the code name was "Swamp 81"? If so, does not that show a degree of insensitivity on the part of the police?
Mr. Whitelaw: I did not know about the latter point. Obviously where there have been widespread and large numbers of offences the police must have the right to seek to prosecute those committing them. I am sure that the hon. Gentleman agrees with that. I do not know of the particular point that he made.
The hon. Gentleman said that many of the people involved were born in this country. That is true. But it is also true that a large number of those concerned came here between 1957 and 1962, and all of us who were in the House at that time bear a similar share of the responsibility.
Mr. Hattersley: May I press the Home Secretary once more on the question of the width and depth of the inquiry? Section 32 of the Police Act 1964 enables the right hon. Gentleman to set up an inquiry
"into any matter connected with the policing of any area."
It is not in anybody's interest—especially that of the police—to limit the inquiry into these events to the policing of the area. These events concerned jobs, housing, social services and, more than anything, despair driving out hope in the area. May I urge the right hon. Gentleman to look again at the prospect of extending the inquiry to consider the causes of the events rather than what happened during the two days?
Mr. Whitelaw: The Lambeth inner area partnership has been conducting a major study of all these factors, in addition to which there is the broader inquiry to which I referred by the Select Committee on Home Affairs. There is no doubt that the policing of the area is affected by all the matters to which the right hon. Gentleman referred. However, to get the quick answer that we need necessitates holding the sort of inquiry that I have announced. I have no desire to limit the inquiry in that way, but I want to find out what happened to the policing in the area. The right hon. Gentleman asked about the relationship between the police and the people of the area. An inquiry is the best way to answer his question.

National Health Service (Hospitals)
Mrs. Gwyneth Dunwoody: 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 negotiations taking place between the Department of Health and Social Services and a company funded by the National Enterprise Board, United Medical Enterprises, to turn hospitals in Britain into private medical centres."
The matter is important because the National Health Service was established to provide health care for all our people free at the point of use. It is extremely urgent because it is widely reported that some squalid little deal is going on behind closed doors between the Government and a company that was set up by the NEB as a subsidiary to export our expertise in the sale of hospitals.
This issue is crucial to the areas concerned because the list of hospitals appears to include those in areas where there is already a chronic shortage of staff. If there is to be a sale of National Health Service assets, which will then be staffed, at the expense of the NHS, by doctors and nurses in a private profit-making unit, the House should consider it immediately.
A most worrying suggestion is that there is to be a private children's hospital in an area where NHS facilities already exists. If this country ever returns to the point where the treatment of a child is decided by the size of its parent's purse we shall have signally failed to do our duty as parliamentarians.
Mr. Speaker: The hon. Lady gave me notice before 12 o'clock today that she would ask leave to move the Adjournment of the House for the purpose of discussing
"the negotiations taking place between the Department of Health and Social Services and a company funded by the National Enterprise Board, United Medical Enterprises, to turn hospitals in Britain into private medical centres."
The hon. Lady has brought to our attention a matter which is undoubtedly of considerable importance. The House knows that under Standing Order No. 9 I am directed to take into account the several factors set out in the Order but to give no reasons for my decision.
I listened with care to the hon. Lady, but I have to rule that her submission does not fall within the provisions of the Standing Order. Therefore, I cannot submit her applications to the House.
Mr. Laurie Pavitt: On a point of order, Mr. Speaker. I do not wish to discuss this matter, but will you give guidance about how "urgency" is defined under the Standing Order? When a matter is raised with you as one of urgency, we usually presume that it concerns action
32
that is to take place in the immediate future. In determining applications—not this one, but others—what time scale do you consider makes a matter urgent?
Mr. Speaker: It would be most unwise for me to reply to the hon. Gentleman in terms of days or weeks. It is a matter of discretion, and the House has asked me not to give my reasons.

TOWN AND COUNTRY PLANNING (MINERALS) BILL [Lords]
Motion made, and Question put,
That the Town and Country Planning (Minerals) Bill [Lords] be referred to a Second Reading Committee.—[Mr. Thompson.]
The House divided: Ayes 170, Noes 12.

Division No. 153]

[4.16 pm

AYES

Adley, Robert

Greenway, Harry

Alison, Michael

Grieve, Percy

Ancram, Michael

Griffiths, E. (B'y St. Edm'ds)

Arnold, Tom

Grist, Ian

Atkins, Robert(Preston N)

Hamilton, Hon A.

Atkinson, David (B'm'th, E)

Hampson, Dr Keith

Banks, Robert

Hannam, John

Bell, Sir Ronald

Hawkins, Paul

Benyon, W. (Buckingham)

Heddle, John

Berry, Hon Anthony

Henderson, Barry

Best, Keith

Holland, Philip (Carlton)

Biffen, Rt Hon John

Howe, Rt Hon Sir Geoffrey

Biggs-Davison, John

Howell, Ralph (N Norfolk)

Boscawen, Hon Robert

Hunt, David (Wirral)

Bottomley, Peter (W'wich W)

Hunt, John (Ravensbourne)

Braine, Sir Bernard

Jessel, Toby

Brinton, Tim

Johnson Smith, Geoffrey

Brittan, Leon

Jopling, Rt Hon Michael

Brooke, Hon Peter

King, Rt Hon Tom

Brown, Michael(Brigg & Sc'n)

Kitson, Sir Timothy

Browne, John (Winchester)

Knox, David

Bryan, Sir Paul

Langford-Holt, Sir John

Buck, Antony

Lawrence, Ivan

Budgen, Nick

Lee, John

Burden, Sir Frederick

Le Marchant, Spencer

Butcher, John

Lennox-Boyd, Hon Mark

Cadbury, Jocelyn

Lester, Jim (Beeston)

Carlisle, Kenneth (Lincoln)

Lloyd, Ian (Havant & W'loo)

Carlisle, Rt Hon M. (R'c'n )

Lloyd, Peter (Fareham)

Chalker, Mrs. Lynda

Luce, Richard

Chapman, Sydney

Lyell, Nicholas

Clark, Hon A. (Plym'th, S'n)

Macfarlane, Neil

Clarke, Kenneth (Rushcliffe)

Macmillan, Rt Hon M.

Colvin, Michael

McNair-Wilson, M. (N'bury)

Cope, John

McQuarrie, Albert

Corrie, John

Madel, David

Costain, Sir Albert

Major, John

Crouch, David

Marlow, Tony

Dean, Paul (North Somerset)

Marten, Neil (Banbury)

Dickens, Geoffrey

Mates, Michael

Douglas-Hamilton, Lord J.

Maude, Rt Hon Sir Angus

Durant, Tony

Mawby, Ray

Dykes, Hugh

Mawhinney, Dr Brian

Eggar, Tim

Maxwell-Hyslop, Robin

Emery, Peter

Mayhew, Patrick

Eyre, Reginald

Mellor, David

Fairbairn, Nicholas

Meyer, Sir Anthony

Faith, Mrs Sheila

Miller, Hal (B'grove)

Fenner, Mrs Peggy

Mills, Iain (Meriden)

Finsberg, Geoffrey

Mills, Peter (West Devon)

Fletcher-Cooke, Sir Charles

Moate, Roger

Fowler, Rt Hon Norman

Montgomery, Fergus

Fox, Marcus

Morrison, Hon C. (Devizes)

Fraser, Rt Hon Sir Hugh

Mudd, David

Gardiner, George (Reigate)

Myles, David

Gardner, Edward (S Fylde)

Neale, Gerrard

Garel-Jones, Tristan

Nelson, Anthony

Glyn, Dr Alan

Neubert, Michael

Gow, Ian

Newton, Tony

Gray, Hamish

Normanton, Tom

33

Onslow, (Cranley)

Squire, Robin

Page, Rt Hon Sir G. (Crosby)

Stanbrook, Ivor

Page, Richard (SW Herts)

Stewart, Ian (Hitchin)

Parris, Matthew

Stradling Thomas, J.

Patten, Christopher (Bath)

Tapsell, Peter

Percival, Sir Ian

Taylor, Teddy (S'end E)

Pollock, Alexander

Thatcher, Rt Hon Mrs M.

Price, Sir David (Eastleigh)

Thomas, Rt Hon Peter

Proctor, K. Harvey

Thompson, Donald

Pym, Rt Hon Francis

Thorne, Neil (Ilford South)

Raison, Timothy

Townend, John (Bridlington)

Rathbone, Tim

Townsend, Cyril D, (B'heath)

Rees, Peter (Dover and Deal)

van Straubenzee, W. R.

Rees-Davies, W. R.

Viggers, Peter

Rhodes James, Robert

Wakeham, John

Rhys Williams, Sir Brandon

Waldegrave, Hon William

Rifkind, Malcolm

Walker-Smith, Rt Hon Sir D.

Royle, Sir Anthony

Waller, Gary

Sainsbury, Hon Timothy

Wells, Bowen

Shaw, Michael (Scarborough)

Wheeler, John

Shelton, William (Streatham)

Whitelaw, Rt Hon William

Silvester, Fred

Whitney, Raymond

Sims, Roger

Winterton, Nicholas

Skeet, T. H. H.

Smith, Dudley

Tellers for the Ayes

Speller, Tony

Mr. Alastair Goodlad and Mr. Selwyn Gummer.

Spicer, Michael (S Worcs)

NOES

Cryer, Bob

Thomas, Dafydd (Merioneth)

Ellis, Tom (Wrexham)

Wainwright, R(Colne V)

Homewood, William

Wilson, Gordon (Dundee E)

Johnston, Russell (Inverness)

Kilfedder, James A.

Tellers for the Noes:

Sandelson, Neville

Mr. A. J. Beith and Mr. David Alton.

Skinner, Dennis

Stewart, Rt Hon D. (W Isles)

Question accordingly agreed to.
Mr. Dennis Skinner: On a point of order, Mr. Speaker. According to the Standing Order relating to the Division that we have just had, 20 hon. Members have to stand in their places for an objection to a Bill to be committed to a Second Reading Committee to be effective. It might not have escaped your notice, Mr. Speaker, that we have just seen one of the first grand Social Democratic-Liberal exercises to thwart the will of the Opposition. However, they could not find more than five hon. Members to stand. They took it to the vote and managed to persuade only 12 hon. Members to vote with them, including two or three Labour Members and a Tory. Does not that show——
Mr. Speaker: Order. I was kind to let the hon. Member for Bolsover (Mr. Skinner) go as far as he did. I am sure that some hon. Members thought that I was a little unkind not to stop him sooner. However, the point is taken.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, proceedings on the Motion standing on the Order Paper in the name of Mr. Chancellor of the Exchequer relating to the Committal of the Finance Bill shall not be subject to the provisions of Standing Order No. 40(3) and may be proceeded with, though opposed, for a period of three-quarters of an hour after Ten o'clock or for three-quarters of an hour after they have been entered upon, whichever is the later, and that at the end of that period Mr. Speaker shall proceed to put any Question necessary to dispose of those proceedings.—[Mr. Thompson.]

Orders of the Day

  Finance Bill
  Order for Second Reading read.
  4.28 pm
  The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move, That the Bill be now read a Second time.
  Before considering the main clauses of the Bill, I would like to put the Budget in the context of our overall economic strategy. Proper analysis of the Budget obviously cannot be considered in isolation from other economic developments and actions of the Government. The Budget is another stage in our long-term strategy to meet long-term and very deep-seated problems.
  First and foremost among the objectives that we have consistently to put at the forefront is that of reducing inflation. Not, I hasten to add, because inflation is a greater social evil than unemployment, but because lower inflation is an essential condition for lower unemployment to be attained and sustained. Hard experience of recent history in the 1960s and 1970s suggests that, although the relationship is not a precise one, an acceleration in inflation tends to be followed by a rise in unemployment.
  Recent history also suggests that "reflation" simply does not work; it leads to more inflation and higher unemployment. The problem of the economy is not the lack of monetary demand. Between 1977 and 1980, for example, total final expenditure on goods and services rose by more than 50 per cent. in money terms but only by 5 per cent. in real terms, and the GDP rose by less than 2 per cent. over this period. The vast bulk of the increase in demand was transmitted into increased imports of goods and services—which rose by more than 10 per cent. in volume—or higher prices for final output—which rose by nearly 45 per cent.
  That is also why those who describe the Budget as deflationary misunderstand the basic objectives of the strategy. The misunderstanding comes from looking at the Budget in isolation rather than in the context of the Government's whole policy, including their expenditure response to the recession. In this latter sense, as our debate last Thursday showed, the Budget cannot possibly be described as deflationary.
  evertheless, it is said that the Budget is deflationary because, faced with the prospect of a PSBR of about £14 billion if we left tax rates unchanged in money terms, we chose to take action in the Budget to bring it down to £10½ billion. But taking this action was essential to pay for the spending that we had already decided was necessary: for example, higher spending on special employment measures and on corporations such as the BSC and British Leyland. That sort of spending can hardly be regarded as deflationary.
  Mr. Peter Shore: The right hon. and learned Gentleman is arguing that it is not deflationary, but I am sure that he will accept, whatever he may argue about the difficulty of raising money to cover an extended public sector borrowing requirement, that if he reduces the PSBR by some £3½ billion that is bound to
  36
  be deflationary compared with the position that existed before the Chancellor of the Exchequer presented the Budget.
  Mr. Britton: The point that I was making—I have made it in earler debates, and it remains as valid as ever—is that we have to look at both sides of the equation. I remind the right hon. Gentleman that it is not just a question of paying for past expenditures. It is also a case of the future financing of expenditures about which decisions have been taken but in respect of which the money has not been spent. If we are committing ourselves in the future to higher spending than planned as well as incurring it in the immediately preceding year, the two have to be taken in context and together. If we do that and we decide to finance it in the way that I have described, the total as a whole is not deflationary.
  Let me proceed to the second long-term objective of policy. It is to improve the "supply" side of the economy. Because inflation increases uncertainty and discourages risk taking, and hence investment and new enterprise, this objective is linked closely to the reduction in inflation. But the Government also have a role to play in improving fiscal incentives—by, for example, encouraging greater efficiency in the markets, especially in the labour market. The Government have moved some way in this direction already. We have abolished controls on prices, wages, dividends and foreign exchange movements. In the present Budget the further help given to new and small companies is an example of further movement in that direction.
  Of course, the Government's role in this area is essentially limited to that of creating the right conditions in the form of a stable financial framework and improved incentives.
  It is with these objectives in mind that the Budget must be seen as part of our continuing medium-term strategy. Restraint of the PSBR inevitably has meant tough decisions on taxation this year, but within the overall decisions that were necessary we have attempted to shield non-oil, non-bank business. Indeed, we have given significant help to industry. The brunt of the Budget tax increases has been borne by banks, oil companies and the personal sector. It is these sectors which have suffered least from the effects of the recession—in the case of banks and oil companies, high interest rates and rising real oil prices respectively have been important factors benefiting those concerned.
  But for industry as a whole the picture up to 1980 has frankly been grim: while real personal disposable income between 1977 and 1980 rose by about one-sixth, real disposable income of industrial and commercial companies fell by nearly one-quarter. Naturally the CBI and others would have liked more relief for business. We would have liked to be able to give it, but within the strict targets that we had set ourselves there was simply not enough room to provide across-the-board help.
  Some significant selective relief, however, is going to industry. First—I stress above all—there are the benefits of lower interest rates, which the CBI has estimated to be worth about £350 million a year for each 1 per cent. reduction. Short-term interest rates have come down five percentage points in the last nine months and are now below rates in the United States and Germany and most other OECD countries.
  Secondly, there is the improved stock relief scheme, worth £180 million in 1981–82 and £400 million in

  37
  1982–83. Thirdly, there are the energy measures to relieve bulk users of electricity and gas. These are worth some £120 million in 1981–82.
  Fourthly, there are the specific measures to encourage enterprise and small business, including an entirely new tax relief in the form of the business start-up scheme. These measures are much more significant than their revenue costs alone might imply, because of their implications for revitalising the enterprise sector.
  Taken as a whole, the Budget measures enable us to look to the coming year with greater confidence. First, the annual inflation rate has fallen from the peak of nearly 22 per cent. to 12½ per cent. in February. The underlying rate is even lower—not much more than 10 per cent. Moreover, inflation is forecast to fall into single figures early next year.
  Pay settlements have decelerated, too. The CBI figures show that the
  "trend of settlements in manufacturing industry is firmly in single figures".
  In comparison, manufacturing settlements were running at about 16 per cent. last July. Similar deceleration is found in other sectors, including public services. Since last August, underlying average earnings have risen by only ¾ per cent. a month—less than half the increase in the earlier part of 1980. This is still too high.
  Competitiveness in industry has declined by between 40 per cent. and 50 per cent. over the past three years, mainly because of higher unit labour costs. There must be a further substantial reduction in wage increases in the next pay round if we are to reverse the decline in competitiveness. The House will bear in mind that the more and the faster we can do this the greater will be the headroom for higher output and the better the prospects for jobs.
  There are already some encouraging signs. Output is likely to be on a rising trend over the coming financial year, 1981–82. This is not just a Government forecast. As the Treasury Committee report noted, reputable outside forecasters also see prospects of recovery, and this expectation is reinforced by the behaviour of indicator series published by the Central Statistical Office. Longer leading indicators have been rising since November 1979 and, shorter leading indicators since November 1980, and co-incident indicators have levelled out since last November. Also, more encouraging, the CBI and Financial Times business surveys and some anecdotal evidence from industry support that view.
  Dr. Jeremy Bray rose——
  Mr. Brittan: I shall develop this further.
  Dr. Bray rose——
  Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. The Chief Secretary is not giving way.
  Mr. Brittan: Housing starts, which have so often been forerunners of recovery in the past, rose sharply in January and February and the House Builders Federation is reported to be optimistic about prospects for the industry in 1981. But I shall refer specifically to one piece of hard evidence for those, especially Opposition Members, who seem reluctant to accept my comments. There is hard evidence that the fall in output may be over.
  Dr. Bray rose——
  Mr. Brittan: The February figures for manufacturing production, seasonally adjusted, were published this afternoon. They show a rise of 1 per cent. compared with January. For total industrial production the figures show a rise of ¾ per cent. Of course, not too much weight should be put on one month's figures. Everyone who has spoken from the Dispatch Box, whatever party he has represented, has made that qualification. I should be giving less than a complete picture to the House if I failed to point out that that factual information about what has happened, as opposed to predictions of what may happen, suggests increases of 1 per cent. and ¾ per cent. respectively.
  The renewed growth that we are expecting will come, in the main, from the reversal of the factors that have been responsible for the sharp fall in activity for the past two years. Rapid destocking should come to an end and there should be a sharp decline in destocking in the second half of 1981. The savings ratio reached a record 17 per cent. in the second half of 1980. The reasons are probably closely related to the effects of inflation, as people save more to preserve the real value of their financial wealth. The savings ratio is likely to fall as inflation and inflationary expectations continue to decline. Most observers also expect an upturn in the world economy this year. There are good prospects for the beginning of recovery in output during 1981–82.
  Mr. Terence Higgins: My right hon. and learned Friend speaks continually in terms of an increase in output. Presumably that is not likely to happen unless there is a prospect of that output being sold. Therefore, does it necessarily follow that he expects a corresponding increase in aggregate demand? If so, is it the Government's intention that that should continue?
  Mr. Brittan: One must take into account the overseas aspect to which I referred. I am not expecting that the output will not be sold. However, I qualify that because I am not suggesting that unemployment will start falling immediately.
  Mr. Nick Budgen rose——
  Mr. Brittan: It is realistic to expect unemployment to continue rising for some time. The House will appreciate that that factor follows rather than leads when an upturn begins. The key point on which the Government rest their strategy is that the faster we can make further inroads into inflation the earlier we can expect unemployment to fall. It is in that context that the Bill provides for raising revenue and also for some relief in particular areas.
  Among the Bill's most important features are the excise duties dealt with in clauses 1 to 9. I shall remind the House of some of the facts relevant to those increases. First, the real value of most of the duties has fallen substantially in the past few years. Our proposals do no more than make up some of that lost ground. Secondly, when additional revenue is required, on the whole it is preferable to raise taxes on discretionary expenditure such as drinking and smoking. Thirdly, the Government are committed to switching from taxes on earnings to taxes on spending. There is, of course, the health factor. Taken together, those considerations amply justify the increases proposed by my right hon. and learned Friend in his Budget Statement.
  I fully recognise that the justification for the increases proposed in the petrol and dery duties has been rather less

  39
  than readily accepted. I do not in any way seek to deny the depth of feeling on this issue, or to pretend that the increases are not extremely unwelcome to many people, but it is only right to put them in their proper perspective.
  As I have said, one of the main purposes of the Budget was to limit public borrowing. That could be done only by putting up taxes, and a major part of the increase—almost half—consists of an extra £1,200 million from the duty on petrol and derv. To suggest that anything approaching that sum could have been raised from further increases in the other indirect taxes is wholly unrealistic.
  Some people have tried to suggest that there were alternatives. We have, for example, been pressed to increase the taxes on gambling. But the total revenue from gambling taxes is only £510 million—less than half the increase in petrol and derv—and the main gambling revenue raisers are already close to the point of diminishing returns. Other suggestions that have been made in good faith are a tax on space invader games, which would probably raise less than £5 million, and an increase in dog licence fees, which would bring in only £3 million I mention those suggestions not to pour scorn on those who support them but to illustrate the scale of the problem. It has also been suggested that caravans should be taxed and that we should impose VAT on foreign package holidays. But caravans already bear VAT and their further revenue potential would be limited to a few million pounds. The Chancellor has made it clear that to impose VAT on foreign holidays would involve double taxation.
  Mr. David Ennals: While the right hon. and learned Gentleman is fully justified in imposing a 20p increase in petrol prices, will he explain why he voted against the 4p increase in the price of petrol introduced by the Labour Government?
  Mr. Brittan: I do not take the view that every change in an individual revenue, whatever the time and date or the circumstances when it is introduced, justifies the same response. That is an absurd proposition. It is like saying that either one votes for a tax or against it, never mind how much, why, or when. That is patently absurd.
  Mr. Roger Moate: Will my right hon. and learned Friend accept that there would be a much greater willingness to accept petrol duties if, at the same time, we were not imposing the immediate and direct extra burden on industry through the increase on derv? Does my right hon. and learned Friend agree that if there were scope for alleviating the burden of fuel duties we should find a way of helping industry, perhaps by reducing the total amount of dery duty? That would gain wider acceptance.
  Mr. Brittan: I am grateful to my hon. Friend for making that point and expressing his view of what would be acceptable. As I have said, I accept to the full that the increases on petrol and derv duty are much disliked by private motorists and businesses. But it is right to look at the extent of the burden that they impose. Even after the increases, the tax on petrol in now less in real terms than it was in 1970 or, for that matter, in 1960 or 1950. Before the Budget, the price of petrol in the United Kingdom was the lowest in the European Community, except for Germany, and the price is now broadly in line with that in the rest of the Community.
  40
  Moreover, a number of important activities will not be affected by the new duties. Tractors and others farm machinery are not affected by the new duties. Tractors and other farm machinery are not affected; nor are fishing vessels, glasshouses, diesel trains and stage bus services.
  I recognise that people living in rural areas are worried. They often have to travel long distances to work or to do the shopping, and depend on the motor car. Representing a rural constituency as I do, I am only too well aware of the strength of this feeling. Some people are particularly badly affected but, looking at the picture as a whole, one has to accept the evidence of independent studies, which suggest that while rural motorists travel, on average, about 8 per cent. further per year than urban motorists, the extra mileage can often be balanced by better fuel consumption per mile.
  Mr. Albert McQuarrie: If my right hon. and learned Friend is quoting from the Open University urban study, he has got it all wrong, for the simple reason that it was also clearly stated that the average British motorist in urban areas, as against rural areas, had to use only six more gallons per annum.
  The important factor is that the 1981 price—never mind 1970—to a person in a rural area is 20p more, on top of the 20p that the Chancellor of the Exchequer is seeking to impose. That is the problem. It is a question not of the price in 1970 as against 1981 but of the extra cash that the rural motorist now has to find.
  Mr. Brittan: My hon. Friend, in making that point, was referring to factors other than the tax increase that we are debating, although I appreciate that he is entitled to raise those points as well.
  When all is said and done, I absolutely accept, and have not in any way sought to deny, that the fuel duty increases are bound to be unpopular with many people—understandably so—but they are necessary if we are to achieve our main objective—a sustained reduction in the rate of inflation as a foundation for a healthy economic recovery.
  Mr. Robert Sheldon: The right hon. and learned Gentleman must be ready for a forest of questions. That is quite usual in Finance Bill debates. He ought to be ready to interrupt his carefully prepared speech in order to answer some of these important points. The right hon. and learned Gentleman did not take account of what the hon. Member for Aberdeenshire, East (Mr. McQuarrie) was saying. It is not so much a matter of the cost. The problem is that a person in a rural area usually has no other choice. Other forms of transport are often no longer available, as they were a number of years ago. He must take account of that factor.
  Mr. Brittan: I have not sought in any way to deny that there are parts of the country in which there were other forms of transport which do not exist at the moment. I am not seeking to deny in any way that that is a matter of considerable concern. I have not come to the House to say that none of this matters, or that it is a lot of hooey. I have not said that. I have said perfectly clearly that I accept and understand that many people, very reasonably, regard this as a real burden. I am not seeking to diminish it or to talk it away. I am merely trying to put it into perspective and to explain why it is necessary. That is quite a different matter.
  Mr. Eldon Griffiths: Before my right hon. and learned Friend leaves the question of petrol,

  41
  will he deal not with the alternative taxes—he and I were both elected not to increase taxes—but with the question whether there are other ways in which he can reduce expenditure to make up the difference?
  Mr. Brittan: I assure my hon. Friend that I welcome his support in the efforts that every Chief Secretary has to make, and that I shall most certainly make, in dealing with the expenditure side of the equation.
  I believe that we are entitled, in the same way as we are in relation to indirect duties, to ask people this year to bear a somewhat heavier burden of income tax than any of us would have wished. I shall not pretend that the decisions involved in that were at all easy. Leaving personal allowances at the same level as last year is bound to increase the number of taxpayers. It will be unwelcome to taxpayers at all levels, especially those with small incomes. But since the higher rate threshold and rate bands are unchanged as well, the largest cuts in real income will fall, perfectly reasonably, on those with very high incomes.
  As the House will be aware, the Institute for Fiscal Studies has come to the same conclusion, and the fully price-protectd increase in child benefit will be of particular help to families on lower incomes.
  Some people have said that we should instead have increased the basic rate. That would have meant raising it by 2½p or 3p, and about 24 million taxpayers would have faced an increase of that amount in their marginal rate. The effect on incentives of doing that would have been intensely undesirable; that is why we have not proceeded in that way.
  Like the other provisions dealing with the raising of revenue, the special tax on banking deposits must be seen in the context of the substantial effort that we are making this year——
  Dr. Bray rose——
  Mr. Brittan: I shall give way to the hon. Gentleman in a moment, if he will bear with me. I am dealing now with the special tax on banking deposits, which must be seen in the context of the substantial effort that we are making this year to restrain the PSBR. The banks have benefited, almost inevitably, from the high interest rates of the last two years. These have made a substantial contribution to their high profits in that period, at a time when profits in the rest of the economy have been under increasing pressure, not least because of the burden of interest payments.
  In these circumstances, and at a time when the Chancellor of the Exchequer has been compelled to increase the burden of personal taxation, it is reasonable that we should seek, for one year only, an extra fiscal contribution from the banks.
  I do not accept the charge that this penalises success. We are taking a once-for-all contribution from the endowment profits of non-interest-bearing deposits. Without that contribution we could not have proposed the measures that we have proposed to help industry.
  Mr. Richard Wainwright: The Chief Secretary described the tax on the banks as special. Will he agree that the tax is, in effect, restrospective? Will he justify that?
  Mr. Brittan: I do not accept that it is restrospective if we take into account what was said during last year on this matter, and also the way in which a tax is levied in many other areas to which no doubt——
  Several Hon. Members rose——
  Mr. Brittan: I have been trying to answer one point. It is extremely difficult to deal with more than one point at a time. In that context, I do not think that one can accept that the criticism is a valid one.
  Mr. Tim Eggar: Presumably my right hon. and learned Friend was referring to what he calls the retrospective element of taxation on corporations and the self-employed. Will he name any company, or any self-employed person, who does not know how much he will be taxed or, indeed, whether he will be taxed at all on last year's profits, as was the position of the banks before the Budget?
  Mr. Brittan: Although the nature of the tax may be substantially the same, the rate varies, so I am not sure that I accept what my hon. Friend said.
  Dr. Bray: I am grateful to the Chief Secretary for his enthusiasm in giving way to me. I simply wanted to offer him my support, against his own Back Benchers, on the bank tax, and to point out that, despite the tax on banks and the increase in indirect taxation, a paper which his Department sent today to the Select Committee on the Treasury and Civil Service states that the percentage of money raised by income tax, national insurance contributions and child benefit on a person with average earnings has increased from 11·2 to 12·6 per cent. over the period since the Government took office. For a person on twice average earnings it has increased from 28 per cent. to 28·9 per cent. So the Government have failed in their objective of reducing direct taxation.
  Mr. Brittan: Anything that the hon. Gentleman derives from a paper submitted by the Treasury must be uniquely accurate. I would not seek to dispute it. The hon. Gentleman fails to take account of the real and important fact of the comparative increase in real personal, disposable incomes over the last three years compared with the situation in the corporate sector. I do not disguise the fact that this Budget seeks to do something to redress that situation. If the chapter and verse are spelt out in the Treasury document, I am glad that it assists the hon. Gentleman.
  Mr. Budgen: Will my right hon. and learned Friend give way?
  Mr. Brittan: I wonder whether I could proceed a little further before I give way.
  Mr. Budgen: I am the only person seeking to intervene to whom my right hon. and learned Friend has not given way. [HON. MEMBERS: "Ah".] I recognise that that was a bad point. A better point is to ask my right hon. and learned Friend to comment on his remark that because the banks had been warned in the last Budget, that was a sufficiently clear warning for the present levy not to be retrospective. If that is his argument, will he explain what the banks and other persons who may be warned in such vague terms are expected to do when somebody suggests that a tax is possible?
  Mr. Brittan: I am glad to have given way to my hon. Friend because the last thing that I want to make of him is an object of pity. That would have been a real risk if I had not given way.
  On the point about retrospection, it is a mistake to think that the word "retrospective" can be bandied about as possessing a single and exclusive meaning and that this is the end of the matter. It is much better and more genuinely accurate to describe exactly what happened, who said what, and what has been done, and then allow the House to draw its own conclusion. Otherwise, one is arguing about the meaning of words. [Interruption.] I am making a genuine point. The assumption is that "retrospective" is a bad word and therefore that one seeks to apply it come what may. [Laughter.] I am making a genuine point. The House may laugh if it wishes. One gets a much clearer picture of what has happened if one traces, as will be possible in Committee, what was said, by whom, and what expectations were aroused.
  More substantially, in relation to what my hon. Friend says, it is not accurate to say that the banks were simply given a vague warning, brandished at them in the last Budget, and that they suddenly find this imposition. As the Chancellor has made clear, there were discussions with the banks when alternatives were explored. The banks made it clear that the alternatives in place of this form of levy were not acceptable to them. That was a view that they were entitled to take. I make no complaint.
  Mr. Hugh Dykes: Will my right hon. and learned Friend give way?
  Mr. Brittan: I think that this will be the last time that I can give way on this point. I do so with pleasure to my hon. Friend.
  Mr. Dykes: I acknowledge that my right hon. and learned Friend has given way many times. Is his argument the same as saying that the exigencies of extra Government revenue raising far outstrip any other consideration in respect of the banks and that making them share in the general increase in taxation was secondary?
  Mr. Brittan: No. I would not put it that way. It is not a question of the exigencies of Government taxation being primary, above all else. In the context of the cause of the bank profits, in the context of what was happening to industry and in the context of the Government's need for finance, and taking these factors as a whole, my right hon. and learned Friend concluded that it was reasonable this year to make that impost. Unless one looks at the various factors together one gets an incomplete picture.
  So far I have been dealing almost exclusively with the revenue-raising parts of the Bill, but the legislation also provides reliefs to industry, to which I wish to refer.
  The House will recall that stock relief was originally introduced in 1975 as a "temporary" measure. It has continued for much longer than could reasonably have been expected. Over the years, its defects have become increasingly apparent. In particular, clawback—the withdrawal of tax relief when businesses reduce their stocks—has become a major problem for many companies, and there has been some exploitation of the rules by artificial increases in stocks at the end of the year.
  The new scheme tackles the worst abuses of the existing arrangements and abolishes clawback for all practical purposes for the normal continuing business. Industry will
  44
  now be free to reach decisions about the optimum levels of stocks without fear of a crippling tax charge if they decide to run them down.
  The proposals as a whole will be worth £180 million to business in 1981–82 and a further £400 million in 1982–83. I think that the House will agree that these are significant sums at any time, but particularly in present circumstances. A further advantage is that many more small businesses will benefit under the new rules.
  Another valuable measure for industry is clause 69, which gives a boost to the construction, expansion or improvement of industrial buildings by increasing the rate of initial allowance from 50 per cent. to 75 per cent.—the first increase since 1974. In effect, we are increasing by half the amount of tax relief available on the construction of an industrial building, with the rest of the cost written off after about six years instead of 12 years. This complements the generous relief already available for investment in plant and machinery—the 100 per cent. first year allowance.
  Mr. W. R. Rees-Davies: My right hon. and learned Friend raises an important question. Why have the Government decided completely to exclude the tourist industry? This is the more inimical because, instead of going up to the new level, it has dropped behind to 25 per cent. Why has the Government's admirable strategy of helping industry also excluded those in the tourist industry from the £10,000 relief scheme? This is a major field for additional job creation. There would be a real return if this investment was made to help the tourist industry.
  Mr. Brittan: I shall be coming to the latter point. On the first point, there is a wide-ranging consideration of the whole of the tax and all its implications. That could not be concluded in time for the Budget, still less implemented. We were therefore faced with the choice of proceeding on the present basis but increasing the extent of the allowance, or doing nothing. Without prejudicing the future review that may or may not suggest that entitlement should be spread or varied in a different way from that now existing, the Government thought it was right to increase the allowance from 50 per cent. to 75 per cent.
  Mr. Shore: Can the right hon. and learned Gentleman refresh the memory of hon. Members about the total sum involved in this increased concession to the building industry?
  Mr. Brittan: It is comparatively small. I shall give it later if the right hon. Gentleman will bear with me. My right hon. and learned Friend the Chancellor, I think, referred to it in his Budget Statement. It is not a huge sum.
  The increase in the allowance will benefit not only manufacturing but employment in the construction industry, which is particularly hard pressed at the present time. The construction industry will, of course, also benefit from the changes to development land tax contained in clauses 118 to 121, which remove unnecessary obstacles to development and encourage house building.
  I will not need to remind the House that, for the second year running, the Bill contains a substantial package of measures aimed particularly at helping new and small businesses. The most important of these is without doubt the business start-up scheme covered by clauses 50 to 63.

  45
  Many people starting up new businesses have difficulty in getting enough risk capital. As a result, many potentially worthwhile businesses may not get off the ground.
  The clauses provide a relief to the individual "outside" investor to attract him into the field of venture capital. The outside investor in a qualifying company will be able to claim relief from income tax on risk capital up to £10,000 invested in any one year. He will have to leave his capital in the company for at least five years. The relief is to be given at the marginal rate so that new business can compete effectively with alternative uses for available funds.
  Sir David Price: Is my right hon. and learned Friend aware that, as drafted, clauses 50 to 63 are so complicated that several of my accountant friends tell me that it will be difficult to give advice to the typical investor whom he has in mind? Can the legislation be made simpler so that it may fulfil his intention?
  Mr. Brittan: There is considerable force in what my hon. Friend says. I was about to say that I know that some of my hon. Friends would have preferred a wider scheme and one which was less hedged about with apparent qualifications. But there are three points that I want to make clear now.
  First, with so novel an initiative as the business start-up scheme, a measure of caution is inevitable. The scheme breaks entirely new ground. There is nothing like it in any other major country. The French loi monory, which is often held out as an example, is subject to much more restrictive limits on the amount which can be invested.
  Secondly, the scheme concentrates on new corporate businesses, because that is where the main difficulties exist. It is intended not to encompass all forms of worthwhile economic activity but to deal with a specific, clearly defined purpose. Some concern has been expressed that the definition of an outsider would be so drawn as to prevent a shareholder participating in the scheme from also becoming a director. I am pleased to tell the House that clause 52(3) provides that a shareholder should not be disqualified from the scheme simply by virtue of becoming a director, provided only—this is important—that he is not remunerated as a director.
  Thirdly, a number of commentators have suggested that a scheme of this kind could give huge opportunities for tax avoidance. Clearly, it might—that has not deterred us from introducing the scheme at a very generous rate—but it follows that the scheme has to include some pretty strict and detailed provisions to ensure, as far as possible, that it is not used for those purposes. That covers the point that was raised by my hon. Friend the Member for Eastleigh (Sir D. Price). Those of us who believe that the scheme has an important and useful role to play will agree that nothing would discredit it more quickly than if it were simply to become a tax avoidance vehicle. That should be avoided.
  Mr. Dykes: I am sure that my right hon. and learned Friend would not wish to mislead the House unwittingly. He mentioned the French loi monory. Am I not correct in saying that that is a limited scheme for investing in quoted securities on the Stock Exchange only, and not a direct investment scheme in small companies?
  Mr. Brittain: My hon. Friend is quite right. Nothing that I have said is inconsistent with his clarification. I said
  46
  that the loi monory is the foreign legislation that is most commonly pointed to by analogy. I do not say that it does the same thing, but I am saying that it, too, has considerable limitations.
  Mr. Michael Grylls rose——
  Mr. Brittan: I shall not give way. I want to go a little further before doing so again.
  Finally, on specific taxes, I come to capital taxation. We remain committed to reducing the burden of capital taxation as economic circumstances permit, but it would be inappropriate to provide any major relief here in a year when we cannot increase the income tax reliefs. None the less, we have taken the opportunity to continue the process of improving the structure of the capital taxes, particularly capital transfer tax.
  The measures that we are proposing include a new scale of rates for lifetime gifts, the limiting of the period of cumulation for the tax to 10 years, and an increase in the annual exemption from £2,000 to £3,000. Those changes should help to encourage lifetime giving, which has been seriously inhibited under the existing structure. We are also introducing a new relief at a rate of 20 per cent. for let agricultural land, which I hope will improve the supply of farms available to new entrants to the farming industry. I also hope that this change will ease the way to agreement within the industry on changes in the land tenure laws.
  The cost of all these measures is relatively small—about £5 million this year—and in a full year it will be more than offset by the saving expected from the anti-avoidance measures affecting capital gains tax which are also in the Bill.
  The Bill, as a whole, reflects and reinforces our priorities—sustaining the fight against inflation and helping to redress the balance of the economy in favour of business and industry.
  Many people, including distinguished Members of the House, have spoken of the need to give this country hope. I share their view that that is essential, for revival is dependent on confidence, and confidence is dependent on seeing a more promising way ahead. But that promising way ahead must be credible. It must be realistic. It must be soundly based. The clearest possible signal that we could give of the way ahead was to reduce interest rates, but that signal could be responsibly given only if public borrowing could be held in check. That is why the PSBR could not be allowed to reach £14 billion. That is why the measures in the Bill are before the House. Some of them are painful, and many are controversial, but they are absolutely necessary for us to be able to offer hope of a way forward for the business community which will he a credible, sustainable way forward and not just another of the blind alleys into which Governments have so often steered the economy over the past generation. It is in that spirit that I commend the Bill to the House.
  Mr. Deputy Speaker: Mr. Speaker has not selected the amendment in the name of the hon. Member for Bury St. Edmunds (Mr. Griffiths).
  5.18 pm
  Mr. Peter Shore: At the end of the debate we shall vote against the Second Reading of the Bill. We had intended to do so in any event, but, having heard the Chief Secretary to the Treasury, we shall do so with even greater enthusiasm. The right hon. and learned

  47
  Gentleman, along with his Treasury colleagues, lives in a curious world of make-believe if he can end his speech on a note of hope for British industry, in the light of the policies that his Government are pursuing and the two main propositions that he advanced.
  The Chief Secretary told us, first, about all that the Government are doing to strengthen the supply side of the economy, yet the supply side of the economy is in greater disarray and nearer collapse than at any time in the experience and political memory of any right hon. or hon. Member. When the right hon. and learned Gentleman tells us that the major purpose of his counter-inflation policy is to increase employment he strains credulity to the very limit.
  Some time ago I read about a theory of detours, in which, instead of going from point A to the objective, point B, one goes in precisely the opposite direction—to point C—in the hope that at some stage, by a distant and elaborate outflanking movement, one finally comes back to the original target. All that I can say is that those who engage in the theory of detour often do not arrive. I fear that that is true of the right hon. and learned Gentleman and his policies.
  There are many charges to be made against the Bill. They will be the subject of many amendments, both on the Floor of the House and in Committee upstairs. Today I want to concentrate on the five major charges on which we indict the Bill. First, through its heavy increases in taxation it will add to the deflation that we are already so grievously experiencing and will consequentially reduce the capacity of the British people to buy from the output of their already seriously under-used factories, and therefore increase the level of unemployment, which is already at record heights. Secondly, the measures in the Bill increase the burden of costs upon our industries, already suffering from fierce competition at home and abroad. Thirdly, the tax measures single out particular industries for exceptional and disproportionate tax burdens. Fourthly, the Bill increases overall the burden of direct taxation on the British people and brings into the tax net hundreds of thousands of people on, by whatever standard they may be judged, very low incomes. Finally, the tax measures, both direct and indirect, on incomes and the changes in capital taxation are perversely redistributive and unfair.
  Those are the charges. I deal first with the crucial question of deflation. Most of us have now had time to consider more carefully last Thursday's report of the Select Committee on the Treasury and Civil Service. In paragraph 5 it itemises the various tax measures announced in November 1980 and on 10 March this year, all of which take effect in the fiscal year 1981–82. Taking account of changes in expenditure, the net increase in taxation is shown by the Select Committee as £4·9 billion. I am prepared to accept, as I think others are, that the oil taxation measures and the special tax on banking deposits—whatever their other merits and demerits—are unlikely to have any significant deflationary effect, so we are left with a deflationary total of about £3·5 billion of extra taxation. The Select Committee concludes:
  "These measures can therefore be seen as a tightening of the fiscal stance in 1981–82 compared with an unchanged policy position. This tightening comes at a time when the economy is already in deep recession."
  48
  It can say that again.
  "An alternative way of looking at the measures for 1981–82 would be to compare the change between 1980–81 and 1981–82 in the size of the PSBR measured as a percentage of GDP. Table 8 of the MTFS shows a reduction from 6 per cent. in 1980–81 to 4¼ per cent. in 1981–82."
  When challenged with that and other evidence of the deflationary effect of the Budget the Government have been extraordinarily evasive and, indeed, contradictory. The Chief Secretary on 11 March managed to persuade himself, but I think no one else, that the Budget could not be deflationary because the PSBR was to be larger in this financial year than the Government had originally planned for in the medium-term financial strategy published a year ago. That is nonsense, because what matters is not how this year's PSBR compares with last year's plans for the PSBR but how it compares with the outturn of 1980–81. I did not hear the Chief Secretary say anything today that carried him further towards safer ground.
  The Chancellor of the Exchequer himself, winding up the Budget debate on 16 March, said something quite different:
  "It is wrong to suggest—as some have argued today—that the Budget is too deflationary."—[Official Report, 16 March 1981; Vol. 1, c. 97.]
  The Chancellor's argument is not that the Budget is not deflationary but that it is not too deflationary. His principal defence was that we could not afford a PSBR larger than the £10½ billion set for this year.
  I disagree, though I do not necessarily go so far as the right hon. Member for Taunton (Mr. du Cann), who is not present. He closed his speech last Thursday with these memorable words:
  "All the cash in the world is available…if we just go out and get it. Cash is available at home and abroad on a massive scale."
  I have no doubt at all that the Budget strategy should have aimed to be less and not more deflationary than the Budget of 1980–81.
  Then we have—where is he?—the ineffable Financial Secretary to the Treasury. He does not agree with the Chancellor. It is the Financial Secretary's contention that the Budget is not deflationary at all, or, to use the word that he prefers, contractionary. The Financial Secretary denies that the Budget is deflationary, and the Chancellor asserts that it is not too deflationary. They cannot both be right.
  When challenged in the House last Thursday, and in response to specific criticisms by the Select Committee of his previous statements, the Financial Secretary subjected us to what those who heard it will agree was a flippant and arrogant discourse on the relationship between the growth of the money supply over the coming year and the growth of output that such an increase would allow. What it amounted to was that, on the best interpretation, monetary growth this year need not, in itself, have a deflationary impact. The assumptions about the growth of the money supply, the anticipated growth in the rate of inflation, and the relationship between the two, are all extremely precarious.
  What is astonishing is that even if the Financial Secretary were by some strange accident to be proved right about the broadly neutral effect of monetary policy during the coming year he dismisses the impact of fiscal deflation as though it has no weight or meaning. His only comment on the matter was that his conclusion

  49
  "is in no way affected by a Budget which increased taxation to pay for increased Government spending."—[Official Report, 9 April 1981; Vol. 2, c. 1187–95.]
  But taxation is not simply to be increased this year to pay for increased Government spending. Compared with last year, it is to be £3·5 billion more. So how on earth can the Financial Secretary continue to assert that the impact of the Budget is not deflationary?
  The adverse effects on unemployment, at any rate, are not in dispute. Although the Government evade the question, and although the Red Book takes the economic forecast only up to mid-1982, other sources—both official and unofficial—make the prospect all too clear. The public expenditure White Paper makes the assumption that unemployment will rise this year from 1·8 million to 2·5 million. Its assumption for each of the following two years is no less than 2·7 million—in all cases excluding school leavers. The CBI's latest forecast is that unemployment:
  "will continue to remain on an upward trend throughout the forecast period to the fourth quarter of 1982…By the end of 1982 we expect a figure of about 3¼ million (unadjusted, including school leavers) or of about 3 million (seasonally adjusted, excluding school leavers)."
  The latest post-Budget forecast of Phillips and Drew similarly estimates an unadjusted unemployment figure of 3·3 million by the end of 1982.
  I shall not on this occasion dwell at length on the human tragedy and the waste implicit in those totals. The appalling events of Brixton are rightly in our minds, but I shall not argue that appallingly high unemployment, unemployment that disproportionately affects school leavers and the young, is the sole, or even the major cause of growing tension, crime and violence in many of our worst-hit inner city areas. But of one thing we can be certain—that when large numbers of young people are forced into idleness, and when they lose hope of gainful employment, there is a background all too conducive to mischief, crime and alienation from the wider society. As I pointed out in my speech on 11 March, although unemployment is already a tragic one in 10 for the whole nation, in the age group 16–19 it is an appalling one in six.
  I come now to my second charge, that the Budget has not only failed to assist the competitiveness of British industry by reducing some of the fiscal costs that it has to bear but has actually increased, net, the total fiscal burden this year a year in which industry faces a continued fall in output and a corresponding fall in profitability. As the Chief Secretary must have read, the CBI's latest report gives a detailed account of the Budget measures as they affect industry. Those minor benefits that consumed a disproportionate amount of the speeches by the Secretary of State for Employment and the Chief Secretary, the former in the Budget debate and the latter this afternoon—the new stock relief scheme, the corporation tax changes as they affect small companies, and the changes in energy prices—total about £315 million. To that should be added, I suppose, the 75 per cent. initial allowance on the cost of industrial buildings.
  I know the answer to my own question—as the Chief Secretary may be surprised to learn. I looked it up, as he did not have the figure himself. The cost of that massive concession to get going commercial and industrial building will be nil this year, £10 million next year and £25 million, it is hoped, by 1984. That is the kind of stimulus, the kind of nonsense, the building bricks without straw, the kind of make-believe, to which we are being subjected in this Budget and Finance Bill debate.
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  Against these minor concessions, the direct costs on industry are much more formidable. There is the increase in the duty on heavy oil for use in vehicles, business's share of the higher duty on petrol, the higher vehicle excise duty, and the increase in employers' national insurance contributions—above what had already been planned, or what was the minimum that could have been exercised in April of this year. The CBI puts these impositions at a total of no less than £865 million, so the net impact of the Budget is an increase of about £500 million to £600 million in the costs of British industry.
  Even if one takes account of the 2 per cent. cut in the minimum lending rate, it is clear that in this, the worst year in the recent history of British industry, the Budget will contribute at most, including the cut in MLR, the tiny sum of £200 million. It is not surprising, therefore, that the CBI anticipates a continued fall of output this year and into 1982. Its estimate is that next year the volume of manufacturing output will, on average, be nearly 20 per cent. lower than it was in 1979.
  I could not find much encouragement in this afternoon's index of industrial production figures released by the CSO and quoted by the Chief Secretary. February's figures are slightly better than January' s, but February's figures also show a fall of 9·6 per cent. for total industrial output in February of this year, compared with February of last year, and a fall of 12·1 per cent. in manufacturing output in exactly the same 12 months.
  One thing that we know is that in the first quarter of this year we have had reported a record number of company liquidations—no fewer than 2,263—an increase of 51 per cent. on the first quarter of 1980.
  Mr. Brittan: Reverting to the figures issued this afternoon, perhaps I may ask the right hon. Gentleman whether he agrees that, if he is looking back over the whole year, the picture is as we know it has been, and that the only new feature in the figures that appeared today are the figures relating to February, which is exactly where I described them?
  Mr. Shore: One can compare one month's figure either with that for the previous month or with what it was the year before. I acknowledge that the Chief Secretary is entitled to draw what conclusion he can from the fact that the February figure was slightly better than that for January. I am simply saying what it was as compared with the figure a year ago. We must rein the two together.
  I have mentioned the record number of bankruptcies and liquidations that have taken place. I am referring here to the well-respected information sheet published by Dunn and Bradstreet Ltd., which is well known to those who follow these matters. The notice carries the name of a Mr. Hugh de Wet. I realise that this is likely to arouse all the prejudices of the Prime Minister and the Treasury team, but I must insist that there is no reason to doubt the authenticity of the figures.
  I simply cannot understand why the Government did not take the opportunity that the Budget presented this year to reduce the duty on heavy fuel oil, of responding to the NEDC task force's proposals on comparative energy costs, and of reducing, at least for manufacturing industry, the national insurance charge, and why they failed to take bolder action in reducing the MLR. Industry will pay the price for all these omissions.
  Our third charge relates to the quite disproportionate burden that the Budget imposes through increases in excise

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  duties on tobacco, alcohol and petrol. It is no less than £2,200 million this year. In normal circumstances I should not oppose the revalorising of excise duties, and I can also see a case for a careful and measured increase in these taxes, beyond valorisation, on both health and energy grounds, but I see no point at all in hitting these industries and their consumers with a sledgehammer in one year.
  Among alcoholic drinks, beer has been singled out for the harshest treatment. An increase of 4p on a pint is an increase of no less than 38 per cent. in excise duty. Wines and spirits are treated far less harshly. What on earth is the justification for so heavy and so selective an assault? I fear very much the repercussions of this on the large number of people employed in the brewing industry. Last year beer sales dropped by nearly 4 per cent. I shall be surprised if the fall this year is not even larger.
  Mr. Eggar: As the right hon. Gentleman is so concerned about the discriminatory actions that have been taken against specific industries, will he express his concern about the taxation of bank profits? The clearing banks employ 250,000 people. Will the right hon. Gentleman also express his concern about the taxation of oil companies? Much of the North-East of Scotland relies on the generation of profits and work by the oil companies operating in the North Sea.
  Mr. Shore: I shall say something about petrol in a moment. I have already mentioned my views on oil and bank taxation. On the whole, I take the view that the case for increasing the tax on oil is made. After all, oil prices doubled, and no one did anything extra to earn them. It happened. The effect on demand as a result of that increase in taxation will be nil or negligible, and that is the case also with bank profits.
  Mr. Eggar: That has nothing to do with it.
  Mr. Shore: It has everything to do with it. I am giving the reason why I am not particularly disturbed and why I have not gone out of my way to comment on the increase in these two taxes. I think that that is what the hon. Gentleman wanted to know.
  Mr. Peter Tapsell: Before the right hon. Gentleman commits himself to a point of view on the petrol tax, because the increase in that will have no effect on demand, will he consider the implications? As petrol is essential to the people who use it in country areas, of course the demand will not fall. It is quite different from the other taxes.
  Mr. Shore: I am sorry. I must have misled the House and used the wrong word. I meant the supplementary tax on oil profits, not petrol. I am coming to that matter shortly. I genuinely understand the point, and I am sure that the hon. Gentleman will, therefore, find my previous remarks acceptable.
  As for tobacco, an increase of 14p on a packet of 20 cigarettes is certainly the highest that I can recall. Since the Budget there has been a sharp drop in sales, although I acknowledge that it is too early yet accurately to estimate how far this will continue into the year. The House should be aware, however, that about 13,000 employees in the tobacco industry are shortly to go on to short-time working. The House should bear in mind, too, that cigarette smoking and beer drinking are very much a part
  52
  of the social habits of people of average and below-average income, particularly older people, including retirement pensioners.
  Lastly, there is the 20p a gallon increase in the cost of petrol. That increase follows the 22p imposed in the past two Budgets. We shall hear more of this during the debates on the Finance Bill. It is a heavy additional and unwelcome cost both on the business user and on the private motorist. Incidentally, nearly 1,000 filling stations closed last year following the earlier impost, and I believe that we shall see a similar contraction this year.
  Our fourth charge is that because of the Government's failure to index tax allowances large numbers of people on small incomes are brought back into direct taxation. We all recall the strictures of the right hon. Lady the Prime Minister about the weight of taxation on the lower-paid and on people generally, and the arguments that ensued about the "Why work?" syndrome.
  Mr. Budgen: If the right hon. Gentleman is complaining about the effect on the poverty trap, is he in favour of an increase in the standard rate of taxation?
  Mr. Shore: As between the two, yes. That is almost certainly so. I shall develop my arguments on that topic.
  It was argued in defence of the Government's first Budget that its principal virtue was that it would increase incentives at the top as well as at the bottom, by reducing the taxation of those who were allegedly badly over-taxed. I have studied the report of the Low Pay Unit, which was published today, and I suspect that others have done so. It is interesting to note that the proportion of low-pay families' earnings taken in income tax and national insurance contributions has increased from 21·9 to 23·6 per cent. since the Government came to power. In the immortal words of the Secretary of State for Social Services, the poverty trap has not deepened but widened.
  We know that retirement pensioners, especially women, between 60 and 65 years have been brought into the tax net. Although both the Secretary of State for Social Services and the Financial Secretary to the Treasury at first denied it, the accusation made by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) proved to be correct. Women between the ages of 60 and 64 years who have in addition to their basic retirement pension a State graduated pension—we know how big that is—will be brought into taxation for the first time. The £30 tolerance which the Treasury allows, and which the badly briefed Treasury team assumed would clear such women from taxation, has not proved enough.
  On 23 March, no doubt after much agony and anger in Great George Street, the Minister of State, Treasury was reluctantly compelled to admit:
  "In 1981–82 the estimated average payment of graduated pension to women aged 60–64 years when added to the basic retirement pension will exceed the proposed single allowance and also the Inland revenue assessing tolerance."—[Official Report, 23 March 1981; Vol. 1, c. 236.]
  Those with disagreeably accurate memories will recall the broadcast made during the general election campaign by the right hon. Lady the Prime Minister, who was then the Leader of the Opposition. She concluded her appeal to pensioners to vote Conservative on 11 April with the following words:
  "those pensioners who have another little pension of their own or some savings and who therefore pay tax will benefit from our income tax reductions."

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  Our final charge is that the net effect of the tax changes in the Bill will be to redistribute income regressively. Only those earning more than two and a half times the national average wage will pay proportionately less tax than in April 1979. The tax burden of a married man on two-thirds' average earnings was eased by 11 per cent. as a result of the Chancellor's first Budget. It increased by nearly 5 per cent. following his second Budget. Last month's Budget increased it again by a further 16 per cent. if we include, as we should, the increases in the national insurance contribution to the effect of non-valorisation.
  Let us contrast that with the experience of the taxpayer with five times average earnings. His tax burden fell by 18 per cent. after the 1979 Budget and by a further 7 per cent. following last year's Budget. It will increase by 8 per cent. following this year's Budget. That clearly falls far short of offsetting his previous and substantial gain.
  The figures quoted in today's report from the Low Pay Unit are relevant. In 1978 the tax threshold as a percentage of average earnings was 45·4 per cent. That relates to the typical two-child family with the earner on average earnings. By 1980 the tax threshold as a percentage of average earnings fell to 41·5 per cent. It is estimated that in 1981 it will fall to 38 per cent. The report asserts that the starting rate of income tax for the low-paid is the highest in the world, with the one exception of Australia.
  As we have been reminded so plaintively, Conservative Members were not elected in May 1979 to increase the tax burdens upon the British people. However, in clauses 27 and 29 the Chancellor is deliberately and meanly proposing to delay tax refunds due to employees on strike and to bring into the tax net short-term benefits, including those paid to the unemployed. We have yet to hear him give—we demand to do so now—an unequivocal promise that before those provisions come into effect he will restore the 5 per cent. cut that was a feature of the 1980 Budget.
  That cut was described as an interim measure in lieu of taxation. The House will want to hear a definite and firm commitment that it is the Government's intention to restore in full the cut in unemployment pay before the new measures come into effect. If the Chief Secretary wants to respond now, I shall willingly give way. If not, I hope that whoever replies for the Treasury will give us a straight and clear answer before the conclusion of today's debate.
  It will not have escaped attention that in the clauses dealing with capital transfer tax, especially clauses 88 and 89, major concessions have been made for those who are substantial owners of wealth. We shall explore that more fully in Committee. However, there can be no doubt that these are substantial changes, which are designed to weaken the effect of our present and still inadequate taxation of wealth.
  Mr. Brittan: The right hon. Gentleman talked about major concessions. He will have heard me say that the cost will be about £5 million.
  Mr. Shore: That is by no means the substance of the two clauses. It is proposed that the rates should be changed. In addition, we have the 10 or 12-year rule. We shall debate these issues before long.
  I do not know whether the Chancellor of the Treasury team has seen the interesting report of the March Gallup poll, which records the national response to the Budget. It helpfully records similar responses going back as far as
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  1949. The Chancellor may be interested to know that in the nation's view fewer people think that he has done a good job as Chancellor of the Exchequer than on any previous occasion in the past 32 years. He will be interested further to know that it is the judgment of his fellow-countrymen that his Budget is not a fair one. It appears that 75 per cent. of those asked considered that it was not fair, while only 22 per cent. thought that it was. No post-war Chancellor has received so adverse a judgment.
  Over the next 12 months GDP and industrial output will fall again. Unemployment will rise, and there is a high probability that the PSBR will overshoot the £10½ billion that is the Chancellor's current target. If last year's pattern is to be repeated we shall get further public expenditure cuts in November to reduce again the PSBR. These will prove to be inadequate, so in all probability we shall face yet another deflationary tax-increasing Budget in 12 months' time.
  These are the economics of the madhouse. We are in a downward spiral, and only a total change of policy will enable us to escape the trap into which the Government's obsessive policies have led us. I hope that the House will join us in declining to give a Second Reading to this utterly perverse and misconceived Bill.
  5.50 pm
  Mr. Maurice Macmillan: I must confess that I listened to the right hon. Member for Stepney and Poplar (Mr. Shore) with a certain feeling of having heard his argument not once but several times before. In his not very constructive speech there was one suggestion which I should like to recommend to my right hon. and learned Friend, namely, that he should try to continue to bring down the minimum lending rate. I am sure that by far the biggest single burden on industry is the cost of borrowing money—bigger even than the other burdens complained about by the right hon. Gentleman.
  I shall make one narrow and specific point and I shall make one suggestion on it to' the Chancellor of the Exchequer. As it is a little complex, I fear that I shall have to give some explanation before coming to my suggestion.
  There is no argument in the House or anywhere else but that inflation is a symptom rather than a disease. I am sure that the Government can succeed in squeezing inflation out of the economy. However, if, as so many Governments do, they continue to treat symptoms only, I fear that when the time comes for recovery the unemployment, the bankruptcies and all the difficulties will have been sacrifices made for no lasting success. For then the new growth which will come in the economy as things improve cannot but cause inflation, as it has so often before, under Governments of both political complexions.
  I am not trying to criticise the basic strategy of the Government and the Chancellor up to now, nor am I suggesting an immediate demand reflation. Some Members, including myself, have suggested in previous debates certain forms of selective capital expenditure by the Government to help our private sector industry. In addition, it is necessary for the Government to correct now one imbalance, which will otherwise cause difficulties in the future.
  This imbalance between supply and demand, which is outside the main stream of economic analysis, is the gap in many modern societies and economies between people's expectations and their willingness to supply enough to

  55
  meet those expectations. That is part of the cause of the extra imports to which the Chief Secretary referred. This particular imbalance is a disease—it does not merely affect the economy; it is more internal to business firms in the market sector. That is why the matter has escaped much political and economic analysis.
  I am deeply indebted to the work of Dr. George Copeman, with whom I worked for many years in the Wider Share Ownership movement. With him, I believe that there is a link between the rate of growth in economies and businesses and the amount of new labour coming on to the market at any given time. It could be migrant labour from abroad or labour moving from agriculture into industry. I shall give a few examples.
  The United States of America, in the words of one American President, is a "nation of immigrants". Its great economic miracle was based on the 34 million people who went to America between 1820 and 1920. Now that the flow of migrants is beginning to dry up and the United States has been developed to the full, that country may well find itself in difficulties similar to those already experienced in the United Kingdom and elsewhere.
  After the Second World War about 12·3 million people came to West Germany from Eastern Europe, as well as the "Gastarbeiter." France had a big flow of ex-colonists and about 4 million people of colonial origin. In the first 10 years after the end of the war, Japan benefited from 14 million peasants leaving the land to work in industry.
  Our economic miracle, alas, was a long time ago. It came with the movement from the land into industry—from 80 per cent. on the land to 33 per cent. in 1811. Also, later on in the United Kingdom, the Empire, the sterling area and the invisible exports made an enormous difference. If one looks carefully into our manufacturing industry one finds that it is only since the Second World War that we have begun to cover over 90 per cent. of our imports with exports. Before the war the figure never reached more than 75 per cent.
  Britain has been able to survive somewhat longer than many other countries because until fairly recently we have lived largely on the income which our predecessors earned by starting up enterprises abroad—on interest, profits and dividends, the service industries and the financial services which we have provided.
  In such growing economies—including, the United Kingdom in the past—the new labour coming on to the industrial market and into manufacturing industry was willing to supply more through its work than its expectations demanded. These people had problems of adjusting to the new life and in some cases to the new country. For some years, therefore, one could rely on the fact that the expectations of such people working throughout the economy would not exceed their willingness to supply.
  However, that was essentially a transitional phase, although in many cases it went on for several decades. It led to two factors. The first was a tendancy by employers to treat the new "migrant" labour as if it were not an essential part of the enterprise, leading to some alienation. Secondly, it led to a tendency for the labour market to become ossified. I shall not go into the details of that argument, because it is long and complex.
  After that transitional period, in some economies then, and now in those countries which lacked the benefits of
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  labour based on mass migration, when such economies and countries wanted to compete with the faster economic growth of their competitors that were still to some extent enjoying the benefits of new labour, they faced union restriction—rightly, from the union point of view. That -happened because of the nature of the economic development. Those union restrictions were inevitably inflationary. As a consequence, investment incentives were demanded, which in fact puts the cart before the horse.
  One of the key points of my argument is that the rate of investment depends on business growth and not vice versa. It is not possible to stimulate investment by tax concessions and allowances beyond a certain point. It is possible and frequently necessary to help people to finance their investment, but the only real stimulus to investors is a market in which they can sell successfully and which will lead them to make the necessary expansion and growth.
  Such growth has meant, even in the most well-conducted and prosperous businesses, that there is a problem for reinvestment. The cash flow of industries, which is required for reinvestment in their expanding future, is not sufficient to enable them to reward their employees directly and immediately, in proportion to the increasing profitability of the business concerned, without putting their growth at risk. The result may have been reasonable for a decade or two, but inevitably the fact that it is impossible through the wage structure directly to give to employees a reward that reflects the growth of the company must lead to the acceptance by the work force of what one might call alienating philosophies, because they have no constant share in the added value of the business. That is a major factor in the developed economies of the Western world.
  Therefore, I come to the one clear suggestion that I wish to make to the Chancellor. He should think again about encouraging schemes for employee shareholding not only to enable people to participate in the company in which they work but so that they may have a stake in the reinvested profits, which they can cash in the future if they want to. I am suggesting not that people should be locked in but that employees should have a share in the capital growth.
  The great failure of the capitalist system as it has developed in the free world is that, on the whole, the factors that I have tried to describe have led to wages tending to be too high for the effective growth of companies to be maintained and tending to be more in terms of income than the shareholders are getting out of the business. On the other hand, the increasing capital value of a successful business goes entirely to the shareholders. The fact that the shareholders may be institutions representing pension funds or investment or unit trusts in which many small people participate does not alter the argument. As a share of the capital value of that business, there is really no part for the earners. That is bad for industrial relations, it leads to over-powerful institutions and to the concentration of business into bigger and bigger firms, and, above all, it tends to mean that companies grow by financial rather than organic means.
  Companies tend to expand by acquisition, because they then do not have the cash flow problems that they would have if they reinvested on a scale necessary to grow organically. This has had the effect of tilting the major part of our effort towards the financial rather than the industrial sector. Those who, starting from nothing, wish to acquire

  57
  capital during their working life tend to move to the financial rather than the industrial side. Under successive Governments and over a long period we have tended to over-reward the dealer compared with the trader and manufacturer.
  In those circumstances, investment incentives tend to make matters worse. They add to the tax advantage that existing shareholders already have. It is not possible to redress the balance simply through monetary restraint. Therefore, when the time comes to expand the economy we cannot avoid inflation unless we are willing to make some radical and positive changes.
  In suggesting to my right hon. and learned Friend that he again considers and acts on the many plans put forward for spreading ownership of shares among management and employees in industry, I ask him to consider linking access to share schemes to some at least of his investment allowances—making it conditional, say, for the larger and medium-sized firms that the proportion of the total allowance that they get depends upon the validity of their employee share schemes.
  I have had only a short time to sketch the analysis that others, including Dr. Copeman, have done in more detail, but I believe it to be valid. It is the only non-inflationary way in which, in the longer term, we can meet the expectations of people in industry as it expands and becomes more prosperous. It is the only way in which, in the longer term, we can encourage people and match the expectations of those willing to supply. Even more important, it should be the next phase in the development of the capitalist system—away from institutions and towards individuals.
  This will be even more necessary in an age of high technology. As more and more wealth tends to be created by machines, I do not see how the wage system can spread the rewards beyond the people who look after the machines. We should now be taking the first steps so that in an age of high technology and, I hope, much leisure we may look forward to the time when it will be normal instead of the exception, as it is now, to have an investment income.
  Perhaps politically we can then look to see a certain amount of withering away of the State. We can hope to see the shrinking and eventual abolition of the proletariat. This is what today's Tory Party should mean by a property-owning democracy. The first steps must be taken very soon.
  6.6 pm
  Sir Harold Wilson: I hope that the right hon. Member for Farnham (Mr. Macmillan) will forgive me if I do not follow him exactly in the arguments that he presented to the House. I should like to deal mainly with the proposals of the Chancellor of the Exchequer for small businesses, offering one or two suggestions that I hope he will find helpful.
  First, I must refer to the right hon. and learned Gentleman's decision to levy his so-called windfall profits tax on the clearing banks. Apart from the somewhat capricious way in which the levy falls on different banks, the House should be very much concerned with the likelihood that it will obliterate practically all the profits of the Giro and also of domestic banks such as the Cooperative Bank, which have virtually no offsetting earnings overseas to cushion them against the levy.
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  Giro was set up by a Labour Government. It is an ideal repository for small savings. Hs link with 21,000 local post offices helps to make them, as well as itself, more viable. When we set it up in 1968 we shared the grave doubts about its viability, but the committee on financial institutions, which reported last year, recounted the history of Giro, and a majority of us recommended its continuance and recommended against any attempt to merge it with the National Savings Bank. Therefore, I hope that the Chancellor will take action to safeguard Giro and the Cooperative Bank from the lethal consequences of his proposed bank tax.
  I said that I would confine myself to the problems of small businesses, on which the Chancellor has laid a number of proposals before the House, some of which are useful but in total are far from adequate. Clearly I welcome the proposed increase in the VAT threshold, the quite useful move on small companies' corporation tax and the proposed easements for industrial co-operatives and partnerships, together with the proposals for next year's Finance Bill on companies purchasing their own shares and this year's extension of the venture capital scheme and proposals to put redundancy money towards the creation of new businesses. The last two proposals outlined in the Budget—the loan guarantee scheme and the business startup scheme, operated through the clearers and ICFC and FCI—are again to be welcomed.
  In welcoming those proposals as far as they go, however, I feel that the Chancellor could have done far more. With respect, he has had plenty of time to study the proposals for helping small business men—proposals made by the committee to review the functioning of financial institutions, which after three and a quarter years of hard toil produced its final report last July. For the information of any hon. Member who has not had the pleasure and privilege of reading the 800 pages of that report, it is Cmnd. 7937. A much earlier report, w hen we had been sitting for only about a year, dealt with small businesses. On the need to help small firms, the interim report made a number of specific proposals upon which the Government have not yet acted, and there was no sign in the Minister's speech today that they intend to do so.
  I remind the House of the committee's comments in its final report on the proposals in the interim report on small businesses. The final report said:
  "In the year that has passed since our interim report very little has been done to implement our recommendations. We recognise that during that time consultation and further discussion have been taking place and that a number of other measures have been taken to assist small firms, including those in the last Budget"—
  that was the previous Budget.
  "Nevertheless, with credit tight and interest rates high the difficulties for small firms identified in our interim report are now more intense. We therefore urge the earliest possible implementation of our recommendations."
  Even with the Budget proposals, credit is still tight and interest rates are high, especially for new and struggling firms, against a background of decline and slump in industry generally. When the gales lash such giant vessels as Unilever and ICI, with the effects that we have seen on their results, the effects upon often more fragile barks in small industry do not need to be imagined.
  The Chancellor has not lacked advice from either side of the House. On Friday 23 January, on the initiative of the hon. Member for Winchester (Mr. Browne), the House debated the main report of my committee. In my

  59
  contribution I dealt only briefly with the problems of small firms. On 6 March the hon. Member for Upminster (Mr. Loveridge) introduced his Small Finns Expansion (Inquiry) Bill. I agreed very much with the principal proposals in that Bill, some of which closely reflect matters with which we were concerned in our long inquiry.
  We approached the problems of small businesses in terms of four main groups. First, there are newly launched firms, many of them unincorporated, very small and often with no more than 10 employees. Secondly, there are firms which are growing rapidly, or have reached take-off point. Thirdly, there are established firms, well-rooted and stable, but growing somewhat slowly and still well within the proprietor's personal control. Fourthly, there are more substantial private companies which have crossed the private capital barrier and in many cases are guided and assisted by merchant banks, clearers or other advisers.
  It seemed to me that the Chancellor was very much, although not exclusively, concerned with the third group. I welcome the fact that he did something to quantify the concept of a small firm in relation to his specific measures. Ten years ago the Bolton report first examined the problems of small firms. It defined small firms in manufacturing as those with fewer than 200 employees. That is rather big in comparison with many that we have in mind. When we reported there were 80,000 such firms, accounting for about 21 per cent. of the total employment. Clearly such a definition was too wide. I believe that the Chancellor was right, as was our committee, to consider much smaller firms than that.
  It is important to distinguish between groups of industries in this regard. My committee took 25 employees as the criterion. In construction—building and contracting—there were 72,000 firms, accounting for 92·4 per cent. of the total number of firms but only 30·3 per cent. of the total employment and 23·2 per cent. of the total value of work done. In retailing, there were 276,000 firms with an annual turnover of less than £150,000, accounting for about 39 per cent. of the total employment.
  In preparing our report on small businesses we set up two inquiries into specific groups of small firms. One was a major inquiry into about 40 firms in the Nottinghamshire area, conducted by the University of Nottingham. The other was a survey of about 50 smallish firms. Every member of the committee was told the names of the firms, but in order to preserve the anonymity of those who had contributed so much information to us the names were not published. Those firms were of varying size, history and coverage.
  Whatever the differences in need, sophistication or profitability, two facts became clear. One was the extent to which a considerable number of large firms in this country help small firms to be launched and to expand without any real thought of profit for themselves. The Chancellor made that point. A special example is a firm which has perhaps two or three specialist engineers working on a specific problem which they wish to take further, beyond the plans of the firm which would find it rather difficult to control what they were doing.
  We found examples in which the firm had agreed that there might be something in the idea, perhaps going quite outside its own needs and plans, and was prepared to release the people involved to concentrate upon it. In some cases the firms helped with finance or equipment. Quite
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  frequently the firm would say that if those people succeeded and wished to continue on their own, they had the firm's blessing, but that if it did not work out the firm would welcome them back. This is being done by a number of large firms. I wish that more would do it, because it would be a most valuable incentive. It is of great importance that this should be done. It was not clear from the Chancellor's proposals in what specific ways he would help in such cases.
  We were told repeatedly in all our evidence that "Aunt Agatha" was dead. She is well known to us all, although she has other names in different parts of the country. She was the lady who used to help her nephew set up and develop his business. She is now a far rarer phenomenon than she was. Nowadays, if it is not the former employer, it is the bank manager who gives most of the help and advice. Many, though not all, bank managers are very experienced advisers, especially in connection with the financing of industry. They can obtain from specialists within their own banks the assistance and advice needed for these small firms.
  In recent years there has been a major constructive revolution—a revolution for the better—in bank attitudes to the small man. We had reason to conclude that no small part of it was the result of their having to think hard about what the banks could tell the committee they were doing to help the small man. The banks were most concerned about the quality of the evidence that they were preparing. They actually invited us to lunch and asked us what we wanted. When we told them, they went away. Their product, like so much of the evidence, was of first-class quality. It was published in hard-back form, and I gather that it is in the libraries of all the universities and many of the businesses in the country.
  I was very glad that, as we had suggested, nearly everyone who submitted evidence to the committee published it. That started a great debate, not to mention the development of a certain competitive spirit among those giving evidence to us.
  Mr. Dykes: Would the right hon. Gentleman none the less accept not the criticism but the comments of Lord Lever and others in their consideration of the amounts of money given in recent years for business in general and small businesses in particular, compared with the situation in Germany and other countries?
  Sir Harold Wilson: Yes. We made that point, but we were reassured by the improvement in the arrangements made during the period that we were sitting not so much because we were sitting, but because of pioneering work by those who had reported before us, and because of the lead given by the NEDC.
  Not only our reports but much of the debate since have made it clear that much more is needed, and that the Chancellor has gone only part of the way. In his Budget Statement he referred to the Council for Small Industries in Rural Areas. COSIRA was founded under Lloyd George's development commission scheme, which was his bonus to industry to offset his big and far-reaching tax increases. The council's terms of reference, however, limit its activities purely to rural areas and to country towns with fewer than 15,000 inhabitants. That is as far as England gets in the matter. That contrasts with the Scottish and Welsh Development Agencies, which the committee regarded as doing a first-class job. We went to

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  Edinburgh and took our evidence. Each of the agencies has within its country virtually a countrywide franchise. In addition, Scotland has the Highlands and Islands Development Board. Wales has the Development Board for Rural Wales. The two development agencies make no distinction between rural and urban areas as COSIRA is forced to do in England.
  We pressed strongly in our report that there should be a similar body for the urban areas—one might call it COSURBA—-exercising the same powers as COSIRA. We were aiming at putting England on a parity with Scotland and Wales. In order to avoid proliferating agencies, an aspect about which we were concerned, we suggested that the COSURBA should also be put under the aegis of Lloyd George's development commission scheme, at least to begin with.
  My committee believed that it was urgent to expand financing facilities. There are powers under section 7 of the Industry Act 1972, an Act that was created by the Government of the right hon. Member for Sidcup (Mr. Heath), whose illness all of us regret and to whose speedy return to the House we all look forward. Then there was section 8 of that Act as well as the powers of the Science and Technology Act 1965. When my committee dealt with equity finance we obviously referred to the famous Macmillan gap—that is a reference not to the right hon. Member for Farnham or his illustrious father, but to Lord Justice Macmillan's committee of inquiry, the last but one before we were set up, whose report dates from 50 years ago and which the older Members of the House will perhaps remember studying at the time.
  After a long delay that was partly caused by the war, that inquiry led to the creation of the ICFC in 1945. However, that did not solve the problem, and in many ways it has been something of a disappointment. In 1947, in my Board of Trade days, we set up the National Research Development Corporation to pick up bright inventions, especially by small business men, and to help with developmental capital. We expected it to lose money, but it made large fortunes for the Treasury, and I am told that it now looks like making still bigger profits for the British taxpayer in the near future.
  Our principal report showed the great power of the institutions, especially the pension funds in the control of the economy. It was a development that went totally unnoticed in the House—including by me. I looked up Hansard covering my last period at Downing Street. There were only four references to pension funds at that time. Three of them dealt with benefits, and not with the investment power or possibilities of pension funds. The fourth reference was, to me, a meaningless question which received an equally careful and meaningless written answer. That was apparently all there had been until that time. It is extraordinary.
  There have been arguments in the House over many years—for as long as I have been here and for about 50 years before that—about socialising or nationalising industry. Certain steps have been taken which have not always been reversed when the parties have changed places. The establishment of pension funds has created in this country a certain degree of social ownership without, as far as one knows, either the employers or the workers knowing much about it. That could be built on and could help to secure greater loyalties and better achievement.
  Sixty per cent. of the equity of the 200 or so of our largest firms in now held by the workers' pension funds.
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  That has developed without its ever being referred to in the House. In spite of this silent takeover, however, most pension funds, for reasons which appear sound to their trustees, and in the interests of their beneficiaries—the workers—invest very little in small businesses. One has suddenly decided, because it has been much criticised, to invest in street and city centre development. That is in the Elysee and the Rue Royale, however, and not nearer home.
  If that will get a better deal for the pension fund, as its managers clearly think it will, it is their duty to do it. However, as we say on page 13 of our report, few of the pension funds and investment institutions
  "are prepared to make direct investments to any significant extent in business valued at less than £5 million."
  Dr. Bray: As my right hon. Friend says, the important development of the pension funds is a major feature of his report. But did his committee consider the possible impact of the increased pension fund savings on the overall national savings ratio? I cannot recall that in the report. It could be that the Government are looking for a chimera in expecting the savings ratio to fall at a time when pension fund contributions are increasing.
  Sir Harold Wilson: Yes, we did. I do not have the figures with me, but in the report we showed that there had been not only an increase in pension funds and insurance companies but a heavy fall in the established savings media. It was almost equal to the increase experienced by the pension funds. There has been a complete switch in a period of only about 15 or 20 years. That aspect is summarised quite early in the report.
  Quite apart from Government action, and action from the Scottish and Welsh development agencies, there are other bodies such as the small business investment fund, set up by the Co-operative Insurance Society, and Moracrest, set up jointly by the Prudential, the British Gas pension fund and the Midland Bank. Then there is a joint enterprise between the coal industry pension fund and the Midland Bank. All of these are designed to help small businesses and are much to be welcomed. But the small businesses that they are helping are mainly the larger small firms and not the smaller ones that are struggling into existence and that were referred to by the Chancellor in his Budget Statement. Certainly my committee looks forward to seeing more small firms helped by large ones.
  Our recommendation on arrangements for changing the law on taxation to allow small companies to raise equity in a redeemable form should, we said, be examined by the Departments of Trade and Industry, the Treasury and others. I do not know how far that has been examined or rejected, but I hope that it will be studied by the relevant Departments. It did not appear to be in the Chancellor's list of measures to help small industry. I urge him and his Treasury colleagues to consider that proposed new weapon for small firms.
  I do not wish to go over the ground covered in the debate on 23 January, but I want to press the Government about the over-the-counter market. I draw attention in particular to the seven examples that I listed on that occasion of statutory discrimination in relation to the over-the-counter market compared with the Stock Exchange proper. I had in mind what firms such as Nightingale's are doing. The Minister undertook to examine the position, although it was not possible to act in time for the Finance Bill.

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  I put a proposition to the Government. I have referred to the committee's interim report on small businesses. We made 15 specific recommendations of which only a few have been implemented. I remind the House that the committee consisted of top industrialists, including the deputy chairman of the biggest company in the country, the chairman of Unilever, top bankers and City men, top trade unionists, economists, a highly respected accountant who was also Lord Mayor of London when we were working—that is why we had lunch in the Guildhall so often—and one of the most respected economic journalists in Fleet Street. The committee was authoritative.
  I ask the Government to publish a White Paper setting out our 15 recommendations for small firms. We can leave the final report for another occasion. I should like the Government to give their answer point by point to the 15 authoritative recommendations. They should say how far they agree with the recommendations, whether they wish to study them further, vary them a little or recommend them to the House. Such a White Paper would help the committee's work which aimed, as I believe the Government aim, at achieving the best and most sound assistance for small businesses.
  6.32 pm
  Mr. Peter Tapsell: I am glad to have the chance to speak immediately after the right hon. Member for Huyton (Sir H. Wilson). When I first entered the House he was Shadow Chancellor of the Exchequer. Everybody who remembers his brilliant, witty and sardonic speeches recalls that he was the most effective shadow Chancellor in living memory. Even the older Members of the House said that at the time. I am particularly glad that he is here today in all his old vigour.
  The right hon. Gentleman spoke with particular authority because of his recent chairmanship of the committee to review the functioning of financial institutions. That committee's report is well written and readable, unlike so many such documents. The right hon. Gentleman rendered great service to the City of London and financial institutions generally by putting to rest, one hopes for all time, some of the more alarmist views about the City which his right hon. and hon. Friends have sometimes held. I agreed with what the right hon. Gentleman said about the need to help small businesses more effectively. It is a pity that he was not chairman of the committee before he became Prime Minister instead of the other way round. As one of his most famous predecessors as Prime Minister once said
  "everything in life comes to one too late, but it is something if it comes at all."
  In our increasingly divided and embittered country, it is important to continue to stress the many things that we still have in common. They include the desire to secure a stable currency, high employment levels, growing prosperity and social justice for all.
  So our arguments are about the technical means best suited to achieve those generally agreed ends. They are not arguments about objectives, still less are they about morality of dogma; certainly not within the Conservative Party, because its tradition is alien to such concepts and the bitterness that they breed. It is important for us to remember that.
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  We should also remember the international context in which we operate—the world-wide recession and the great and growing threat of aggression by the Soviet Union. Do not let us blame ourselves or one another for difficulties which are not of our creation, or let us forget that there is an even greater danger than that of inflation and unemployment in the shape of Communist imperialism.
  The whole world is in recession. The prime cause of this recession should be kept constantly in mind because it has a direct bearing on what we have to do to cope with it in this small country. The prime cause is the reduction in demand caused by the economic sterilisation of the vast OPEC monetary surpluses year after year. These surpluses, perhaps amounting this year to $140 billion, are mainly placed in short-term monetary instruments at high rates of interest rather than being spent on real goods. They represent a huge annual deflationary transfer of wealth, and therefore demand, away from the industrialised nations and the poor primary-producing countries towards the oil-producing nations, some of which have small populations.
  That means that purchasing power which could otherwise be satisfied by work-giving production is being continually withdrawn by an unelected, invisible, international Chancellor of the Exchequer in greater amounts each year. Let nobody say that, in its world context, the basic economic problem, which faces the industrial countries is not a demand problem. It is no wonder that almost everywhere unemployment is rising, except in Japan, where there are special skills and the capacity to work together so well.
  So much for what we have in common. Why, against that unavoidably difficult world background, has our performance in Britain been so much worse than that of other countries? The Bank of England has told us that our competitiveness in the world dropped to an unprecedented extent in 1980. Our productivity has been falling and unit costs rising, industrial production is down by 12 per cent. in two years, and unemployment has almost doubled. Few other countries have done so badly.
  Why is that? I have no doubt that there are some fundamental reasons involving our self-discipline, our work ethic, our party-political divisions, our education system and our class structures, but as we are debating the Finance Bill I wish to confine my brief remarks to the technical factors which the Bill seeks to influence.
  In my view, four major errors of technical judgment contributed to our exceptionally bad economic performance in the past 12 months. Some of us have drawn attention to them with an ever-growing emphasis and sense of concern and urgency almost since the start of this Parliament. The errors were, first, an excessively high interest rate policy; secondly, an excessively high exchange rate policy; thirdly, an excessively tight credit policy for agriculture, business and industry; and fourthly, an uncompetitive industrial energy pricing policy.
  There is not time now for me to examine all four in detail, as I should like to do, and to show how damaging each has been and how avoidable each was. I have repeatedly done that in speeches in the country, many of which have been reported, and from time to time by interventions in the House, both at Question Time and in debates.
  As I said at the time, the decision to move to an MLR of 17 per cent. in the winter of 1979–80 and to retain a high interest structure for a long period after that was a grave

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  error of judgment. The policy was almost wholly counter-productive in pushing up bank lending, expanding the money supply, increasing industrial costs, reducing our international competitiveness, increasing public expenditure and now leading, irony of ironies, to a retrospective tax on bank profits. Far from reducing inflation, it helped to feed it. Even Professor Milton Friedman has condemned it, as he did the sudden move from 8 per cent. to 15 per cent. in VAT.
  There has been a great deal of breast-beating in public about the failure to achieve the ill-omened medium-term monetary targets, against which I strongly warned the Treasury team when they were first mooted, but at least it can be said of them that our national situation would be a great deal worse today if the sterling M3 and PSBR targets had been met.
  It was against that background that we approached the Budget and Finance Bill. Matters seemed to be improving. Indeed, before the Budget I would not have quarrelled with the Chief Secretary's forecast today of a likely pick-up in the economy in the second half of this year. That was very much my feeling, and many commentators attributed that likely pick-up to the arrival of Professor Alan Walters in 10 Downing Street.
  It is said—and no one has denied it in the way that such matters tend to be denied if they are untrue—that the professor advised the Prime Minister shortly after he arrived, and rather to the surprise of everyone—because he came here with the reputation of being the hardest-line monetarist of all—that the exchange rate was too high and was partly, at least, a reflection of excessively high interest rates
  Sir Frederick Burden: How would he control the exchange rate?
  Mr. Tapsell: My hon. Friend must put that question to Professor Walters, but on the day that his reported views appeared on the tape I asked my right hon. Friend the Prime Minister in the House whether the report accurately reflected the new views of the Government. I should point out that sterling exchange rate has hardly stopped falling since. Of course, it can be "talked down" for a time but, whatever the reason, the reductions in interest rates, together with the feeling that there was a new desire by the Government to have lower interest rates, produced a lower exchange rate.
  I fully accept the point that I take my hon. Friend to be making, namely, that no Government can completely control the exchange rate or put their finger in the dyke against market forces, but Governments can have an influence over the short term and perhaps even the medium term. However, I am not trying to solve that problem; I am merely attempting to analyse what it appears that Professor Walters, who is the chief economic adviser to the Prime Minister and whose views are therefore of some interest to us all, has reputedly said.
  In addition to the professor's views about the exchange rate and interest rates, which marked a revolutionary turn in the thinking of economic Ministers, he is also said to have concluded that the credit squeeze on industry, which the monetarist theoreticians had been lamenting as too lax, at nearly double the declared target, had in fact been too tight all along, as some of us had been pointing out.
  Treasury Ministers also at last discovered something else that many of us had been telling them, namely, that
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  it was possible to bring MLR down from 17 per cent. to 12 per cent., with a rapidly expanding PSBR, without causing a buyers' strike in the gilt market. The House may remember my intervening at the end of a speech by my right hon. Friend the Secretary of State for Trade, when he was Chief Secretary to the Treasury, to make precisely that point.
  The Government have brought MLR down by a further two points since then and have sold massive amounts of gilts in the process. It was obvious that that could be done, except to those whose vision of the practicalities of such things is blurred by academic monetarist dogma. Consequently, the prospects of our recession bottoming out of in the second half of this year began to look fairly good. Then came the Budget, which this Bill seeks to implement.
  I hope that the House will forgive me if, for the sake of brevity, I merely repeat the opening words of the press statement that I issued on the morning after the Budget. It achieved a certain amount of prominence in the press. I said:
  "This is not the Budget for our times. We are in a deep recession. To inflict a further savage deflation—up to 3 per cent. of gross domestic product—on our economy now is economically illiterate. The effect on the employment situation will be grave…What is most urgently needed is to give industry an incentive to invest. The overall impact of this Budget will have precisely the opposite effect."
  Mr. Eggar: The Financial Secretary to the Treasury took considerable time on Thursday night to tell the House why the Budget was not contractionary. How does my hon. Friend answer that argument?
  Mr. Tapsell: I become increasingly baffled, because each Treasury Minister says a different thing. One Minister has said—they were all quoted by the right lion. Member for Stepney and Poplar (Mr. Shore)—that the Budget is not deflationary. Another has said that it is not too deflationary and a third has said that it is deflationary but not contractionary. The Treasury team does not seem to be agreed on precisely what the Budget will do or was intended to do. When I issued my statement I assumed that Treasury Ministers had intended the Budget to be what I tok it to be, namely, severely deflationary.
  As each day passes I feel increasingly reinforced and strengthened in my original view of the Budget. I was interested to read in the Financial Times today, if I may give a little publicity to one of my respected commercial rivals, that
  "Laing and Cruickshank argue that, despite assertions to the contrary, the Budget is highly deflationary and Gross Domestic Product will fall 2¾ per cent. this year."
  Just over a month after I made my statement one of the leading stockbroking firms in the country, which has had an opportunity to study all the statistics with its professional economists—an opportunity which I did not have by 11 March—has reached almost exactly the same conclusion that I reached and has expressed it in almost identical words.
  The only possible justification for the policy is that it is considered that however harsh it may be in terms of ruined firms and broken lives it will permanently stop inflation and provide the foundation for a lasting recovery and prosperity. I understand that that is the justification which has inspired Ministers to pursue the policy so long and so bravely.
  Presumably the authors of the policy still believe that, but I can see no evidence that events are likely to prove

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  them right. My belief is that a year from now, if the policies are continued, not only will unemployment still be on a rising trend, and probably over 3 million, but inflation will be on a rising trend also. Many independent commentators now share that view. If that proves to be the case, it will be very sad.
  I should like briefly to explain some of the reasons why I think that these policies, if unchanged, will generate a higher rate of inflation in 1982 than we have at present. The greatest single cause of inflation in this country is the extent to which wage increases outstrip increases in production. The moderation in wage demands, which are still far too high, has been caused mainly by rising unemployment. But it is the rate of increase in unemployment rather than the absolute level which has the main braking effect on wage increases.
  Since the upward move in unemployment over the past year has been considerably sharper than it is likely to be in the coming 12 months, unemployment at 2½ million now is likely to act as a greater restraint on wage increases than a figure of more than 3 million will do next year.
  Secondly, I take the view that the only part of the Government's economic policies to have played a significant role in bringing down the rate of inflation over the past year, which has been mainly as a result of the general recessionary forces in the world, has been the high exchange rate. That, quite rightly, has now been abandoned, but it means that our imports will be dearer from now on while benefits to our exports will not be felt significantly until the second half of 1982.
  Thirdly, world commodity prices are likely to turn up fairly sharply, for the reasons given by my right hon. and learned Friend the Chief Secretary, as the rest of the world bottoms out of recession in the second half of this year, just as we begin to restock.
  Fourthly, the Budget is itself inflationary in a prices sense while deflationary in a demand sense—the opposite balance to what is desirable—and, like the 1979 Budget, will itself inspire greater wage demands than would otherwise be the case.
  If I may diverge for a moment from my main argument, that is why the increase in petrol tax, as well as being unfair and discriminatory between town and country, was such a bad increase to impose at this time. Nothing would improve the Budget more, at a stroke, than the withdrawal of the 20p increase in the tax on petrol and derv and a consequent addition of £1 billion to the PSBR. There is no need to replace the lost revenue from this source. At our stage in the recession, with private sector loan demand likely to decline and personal savings likely to remain very high, a £10½ billion PSBR would be over-restrictive if it were to be achieved. As a proportion of the GDP it would be nearly half that in 1975, when interest rates were much lower than they are now; it was a year in which interest rates were falling.
  For all these reasons—unemployment levels, the exchange rate, world commodity prices, wages and the effects of this Finance Bill—I expect the inflation rate, after dipping down into single figures towards the end of this year, to be on a rising trend again this time next year unless there is a change of economic policies in the fairly near future.
  Before this Budget and this Finance Bill, a slow and faltering industrial recovery was in prospect for Britain in
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  the second half of 1981, likely to be helped by the fall in interest rates and the exchange rate for which some of us had been campaigning for 18 months. In my judgment, this Finance Bill will postpone any real recovery in our economy until the middle of 1982 at the earliest, unless there is a change in policy. Therein lies another great anxiety that I have about the Bill. I am certain that economic and political pressures eventually will force a change of policy to one more similar to that now being pursued by France and Germany.
  Perhaps the change will come as soon as July, but more probably it will not be until the autumn, and perhaps not until next winter. But when that change comes, it will be more abrupt and more extreme as a consequence of this Budget and this Bill than it would otherwise be or than would be necessary or desirable if we started now making the change gradually. Nothing is worse than these sudden and abrupt changes from one extreme of economic policy to another, which have bedevilled British industrial policy and industrial life for so long.
  What is most urgently needed now is a clearly defined industrial strategy supported by the Government, the trade unions, business and the City, all working together, which can be followed broadly for a decade and backed by the revenues of North Sea oil. That is what we should all be working for on both sides of the House.
  During my first five years in the House Sir Winston Churchill was still a Member. I enjoyed the privilege of only one serious conversation with him. He told me that the decision which he regretted most in the whole of his turbulent political career was when, as Chancellor of the Exchequer, he put Britain back on to the gold standard. He said that almost all his senior economic advisers in the Treasury and the Bank of England urged him to do it, as did the financial journalists. City opinion was overwhelmingly in favour of the move, frightened as it had understandably been by the terrible inflation which swept Europe in the early 1920s. Sir Winston told me that his instincts warned him even then that it was the wrong thing to do, but he allowed himself to be overborne on what seemed primarily a technical question by the weight of the professional advice that he received and so embarked on a strongly deflationary policy which contracted the economy.
  Sir Winston said to me "Of course, they were all keen to go on fighting the previous war with the old weapons that they had come to know. But the job of a statesman is to peer into the future, and what the future held was a decade of slump and wasted resources with millions of men thrown on to the scrap heap." In my judgment, 50 years on, that is again what the future holds for us if we continue with these policies. There is still time, if not to avert at least to mitigate that fate, but there is not much time.
  6.57 pm
  Mr. Donald Stewart: I hope that the hon. Member for Horncastle (Mr. Tapsell) will forgive me if I do not pursue the matters which he raised in his speech, since I intend to make only a few brief remarks. However, I am sure that all of us listened to his interesting and informed speech, in the course of which I was glad to hear him say that nothing would improve this Budget more than the withdrawal of the proposed increase in petrol tax. I intend to confine myself to that topic and to make a constituency point about it. I make no apology for doing

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  so. It is a proposal whose effects are not confined to my constituency, although they will be felt especially acutely there since we have no railways and very few bus services.
  I listened to the hon. Member for Horncastle with pleasure and agreed with most of what he said, although I do not kid myself that I should have been able to take him on if I had not done so. I shall be interested to hear the Treasury Minister's reply to what he said.
  I was surprised to hear the Chief Secretary say that the increased petrol tax was less than readily accepted. I thought that that was pitching it rather low, since it had led to the largest revolt or abstention rate among Government supporters on any vote since the Conservatives came to power.
  My local authority—the Western Isles islands council—has estimated the increase which will fall on people in a year as a result of this iniquitous proposal. I may say that it is a conservative estimate, because it does not include the loss of revenue from tourism.
  We in the Western Isles use 2·6 million gallons of petrol a year. It is virtually all used by locals, and the increase will mean an additional impost on the constituency of £526,000. The derv addition will cost £92,000. The additional cost of road haulage, assuming that the present tonnage is maintained, will mean an extra £157,000. The extra cost of school transport is estimated at £12,000. The extra cost of air services will be £9,700. That is a total for my constituency of £800,000 a year from this one tax alone.
  The EEC has earmarked my area for a development programme. It is one of the most deprived areas in the United Kingdom. Petrol prices now are already higher than on the mainland. It was a crass error on the part of the Chief Secretary to repeat the ridiculous claim by the Chancellor that one achieves more miles to the gallon in rural areas. He should do some driving in my constituency. If he does he will find that that is not true.
  We carry much produce from the mainland on car ferries, and as transport costs go up, with VAT added, that will force up the already high cost of living. Unemployment is running at 20 per cent. and the imposition of a petrol increase is one of the heaviest burdens that has fallen on us for many years. I agree with the hon. Member for Horncastle (Mr. Tapsell) that nothing would improve the Budget more than withdrawal of the tax. I hope that there will be strong opposition to it in Committee. It is an impost that rural areas will feel very heavily.
  I used other arguments in a speech on the Budget Statement. I do not know whether my appeal will fall on receptive ears—probably not. I hope that the Treasury Bench will receive the utmost opposition from both sides to the 20p petrol tax.
  7.1 pm
  Mr. Terence Higgins: The right hon. Member for the Western Isles (Mr. Stewart), like my hon. Friend the Member for Horncastle (Mr. Tapsell), has advocated that the Chancellor should not increase the petrol duty in the way proposed in the Finance Bill. If the substantial revenue from that increase were not replaced, the upward pressure on interest rates would be much greater. Therefore, it is unlikely that the minimum lending rate would stay at its present level. That would have a serious impact on industry generally.
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  This debate, like the debate on public expenditure last week, takes place against the background provided by the report of the Select Committee on the Treasury, which was produced immediately after the Budget, in time for both the debates. The press, television and radio misrepresented the Select Committee's report. In one media report it was said that the Committee had criticised the Chancellor for not uprating the income tax threshold—the so-called Lawson-Rooker-Wise amendment. That is untrue. We did no such thing. Similarly, it was said that the Committee advocated more public borrowing. Again, that was untrue. Complex reports understandably present the media with a difficult problem if they intend to comment immediately or the following morning on the contents of such a report. Summaries are expressed in telegraphic terms, such as "Committee challenges public expenditure cuts", which give the impression that the committee is opposed to them whereas in fact it was objectively stated that it was doubtful whether the Government would succeed in making the cuts. That highlights the difficulty of reporting reports of that kind.
  Hon. Members who have read the report will have benefited from it. It provided valuable information for two debates. The evidence that we took in the Select Committee from the Chancellor and the Governor of the Bank of England was of considerable value. The general effects of the report have been to increase the standard of debate on the two issues.
  The late lain Macleod once said that in politics nothing ever is so good or so bad as it seems at first sight. I commend that saying to the Treasury team, because in considering the Select Committee reports published so far—for example, on public sector pay—the initial Treasury reaction was unfavourable. But in a short time it had accepted all the recommendations. We were told that what we had said about being more flexible on the medium-term strategy was not a good idea, but almost immediately changes were made, and they were contained in the Chancellor's Budget Statement. Our report on last November's measures prompted me to advocate strongly at that time an increase in indirect taxation. In the Budget those changes are made.
  We can reasonably claim that the Select Committee has been one stage ahead of the Chancellor. I welcome the fact that his response eventually—I stress eventually—has been seen to be correct. On the whole, we have reinforced and improved the Chancellor's policies. It is not true to say that we have suggested a reversal of them.
  The report was not as unanimous as some of the previous reports. To some extent, that diminishes its impact, but it is important to stress that it was not split on party lines. A Select Committee report that is split on party lines must inevitably have little impact. To some extent it is a duplication of a debate on the Floor of the House. However, that was not so with the latest report of the Select Committee on the Budget and the Government's expenditure plans. Such difference as there was was more a question of whether one believed that econometrics contributed to an analysis of the problems or whether one could rely on forecasts rather than on points of substance. I do not take as pessimistic a view as some of my colleagues about econometrics, or the need to take an analytical view of what is likely to happen to the economy.
  I am glad to see that my right hon. Friend the Financial Secretary has now taken his place. In the final paragraphs of the Select Committee report we concentrate on the

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  crucial issue—my hon. Friend the Member for Homchurch will agree—of whether we are likely to see an upturn or improvement in the economy. Together with the speech of the Financial Secretary in the debate last Thursday, the final paragraphs of the report concentrate on the main issue. In response to the speech of my right hon. Friend, the reaction of the right hon. Member for Stepney and Poplar (Mr. Shore) was extraordinary. He seemed to regard it as an insult that serious matters should be debated seriously. He seemed infuriated that my right hon. Friend had sought to debate issues raised by the Select Committee. The main issue is the mechanism by which there is likely to be an upturn in the economy. It raises important questions at two levels.
  It raises fundamental questions for manufacturing industry and those working in the economy. They feel desperately that they need to see light at the end of the tunnel. They want a prospect of future expanding markets in which to sell their goods. That is understandable, and is one of the reasons why, in the Budget debate and in the Select Committee report, there are appeals for the Government to explain how they see an upturn in the economy coming about.
  Some of our arguments have been in terms of change in the decline of stocks—the well-known accelerator effect if there is a fall in the rate of decline. But that argument to some extent is based on the idea of a normal level of stocks. I am far from sure that that is a valid assumption.
  Similarly, the Chief Secretary argued that there would be a change in savings ratio or an improvement in the world economy. Taken together, that may give one some hope for the future, but it does not reassure one on the central issue for manufacturing industry. Therefore, while my right hon. Friend the Financial Secretary tried very hard last Thursday to spell out the position as he saw it, I have some doubts about his success in that respect in relation to the ordinary manufacturer or the manager working in industry.
  We can all agree that over the last 18 months or two years there has been a great reduction in overmanning in industry. This in itself creates serious personal and human problems in terms of unemployment. But if there is an upturn in demand it is reasonable to suppose that firms will be able to spread their overheads and reduce their costs, and therefore be seen to be more efficient. That will certainly improve the so-called supply side of the economy. But in the longer term, what is important here is that there should be more investment in manufacturing industry and that the supply side of the economy should improve on a long-term basis, and that we should get real long-term economic growth.
  Here I find the argument put forward by the Financial Secretary somewhat curious, because it seems to me that while he is right in stressing the supply side of the economy, we cannot in economic analysis ever merely concentrate upon supply or demand; we must concentrate on both. Whether it is the micro-economic aspect—the determination of price or output, or the macro-economic aspect—determining overall prices and unemployment, both supply and demand are important.
  I do not think that it is reasonable to say that industry has become more efficient because it has reduced overmanning, and therefore that there is a marvellous improvement on the supply side, unless the people who
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  have improved their efficiency in this way believe that they will be able to sell the goods that they can now produce more efficiently. That is how I see the position in simple terms, and it is very important indeed.
  The good old Conservative principle of believing in the profit motive will be fulfilled and we shall get investment only if firms have both become more efficient and believe that there is a market for their products.
  I am concerned about the way in which the Chief Secretary this afternoon talked about expecting some improvement in output in the coming year, without being prepared to say that it would be in response—for whatever reasons—to some increase in the level of demand. We should not talk about output without talking about sales at the same time. That is a basic commercial principle and, I should have thought, also a basic Conservative principle.
  Mr. Eldon Griffiths: Will my hon. Friend give way?
  Mr. Higgins: No, with great respect, because I am about to get involved in a complex extension of what I have just said. I am not for one moment, as my hon. Friend well knows, advocating a massive U-turn or a boost to demand, and so on. That would undoubtedly get us back on to the old inflationary spiral, with all the problems that it creates, and even more unemployment in the longer term.
  What I am suggesting is that the Government must be more explicit in what they intend to do about demand, and that they need to back up their medium-term financial strategy, as argued in the Budget debate, with a medium-term demand strategy as well, if they are to create the kind of business confidence to which the Chief Secretary referred in his closing remarks today. The Financial Secretary shakes his head, and I want to turn specifically to the points that he has made.
  We asked the Financial Secretary some while ago to spell out why the economy was likely to recover eventually, not in terms of an engine of recovery—an expression to which he objects—but in terms of how he analyses the prospects for that recovery.
  I quoted in an earlier debate an extract from the Financial Secretary's speech to the Financial Times conference on 21 January 1980, when he said:
  "But in the world of monetary targets, the level of demand is effectively determined by the rate of inflation. A rate of inflation higher than the monetary target will cause demand to be depressed, as a smaller volume of goods is purchased at a higher price; similarly, a rate of inflation lower than the monetary target will give rise to a boost to demand. In other words, what matters is the rate of change in the real money supply."
  One can agree with that statement, although it is perhaps for consideration where the cross-over in the rate of change of the money supply, on the one hand, and inflation on the other, comes about. That would seem to imply some demand management in the economy. As my right hon. Friend says, it is the "real money supply" that is important. If that is so, a question has to be asked. If that is the position, what determines whether that increase in the real money supply—that is to say, demand—is reflected in real output, and to what extent it is reflected in prices?
  With great respect, my right hon. Friend did not spell this out in his speech last Thursday, although I was slightly surprised to discover, on the Friday morning, an article in The Times by Alan Budd, for whose technical ability I

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  have the greatest respect, saying what he thought the Financial Secretary had said in his speech a few weeks before, in March.
  What was curious about it was that Alan Budd seemed to draw his conclusion from the earlier speech—which had not really made a distinction between the short run and the medium term—and what appeared in a speech that was made only on the night on which the article had been written. It is a little worrying, for if two people both get the right answer in an examination it is reasonable to assume that the answer may have been arrived at independently. But if they both get the wrong answer, one is a little worried about how much co-operation there may have been.
  The Financial Secretary to the Treasury (Mr. Nigel Lawson): I can assure my right hon. Friend that there was no collusion whatever. We both arrived independently at the right answer. If my right hon. Friend will read my speech to the Institute of Fiscal Studies, he will see that in the passage to which he referred I was referring to 1981–82, the forthcoming year, and not to the longer term. I hope that I made that clear in my speech on Thursday night in the public expenditure debate.
  Mr. Higgins: I understand my right hon. Friend's point. If the House will allow me to detain it for just a little longer, I should like to go into it, because this is the crux of the argument as to whether there will be an upturn in the economy.
  Perhaps I may suggest what my right hon. Friend is saying now, if I understand him correctly, in his "FST Mark II". He was saying originally that there was a crossover, and that demand recovered but then he put the matter in this way:
  "Our contention is that while in the short term an expansion in the money supply can give a boost to real output"—
  that was his first point, which he then elaborated—
  "in the medium and longer term it has no positive effect on output. All that it does is to increase prices."—[Official Report, 9 April 1981; Vol. 2, No. 85, c. 1196.]
  My right hon. Friend, therefore, is drawing a distinction between saying that there is a cross-over between the rate of change in money supply and inflation which gives an increase in real demand which results in a real increase in output, and then saying—this is what I find puzzling, and this is where I think that he has got it wrong—that that does not continue indefinitely, that somehow, from then on—I quote Alan Budd's version, but essentially they are saying the same thing—
  "In the longer term the real growth of output will depend on the technical performance of the economy. The inflation rate will depend upon the growth of the money supply less the growth of output (and on any changes in the velocity of circulation). These factors in turn will determine the growth of the real money supply."
  He then points out that the real factors are things such as productivity and investment.
  If there is no increase in demand, or if there is not adequate demand, I do not see how these real factors are expected to respond, for precisely the same simple-minded reason that I spelt out earlier—that people will not become more productive, invest more and work harder unless they can get rid of the goods that they are making.
  I do not think, therefore, that the subtlety which my right hon. Friend has now introduced between the immediate future, when, he accepts, there can be an increase in real output, and the medium or longer term,
  74
  when somehow it all depends on the real factors, is justifiable. I appeal to my right hon. Friend very strongly indeed, at all events to continue the debate, which, despite the simple-minded view of the Leader of the Opposition, is an important one. I appeal to my right hon. Friend to spell it out in rather more detail. I do not think that in the pressure of the debate in the House of Commons last Thursday he explained it as clearly as he might have done. None the less, if I understand him correctly, if they are to reassure industry the Government need to admit that the level of demand is important.
  It is not "Keynesian" in some pejorative sense to say that demand management is in some sense a dirty expression and ought not to be uttered by any true monetarist. One must take into account the money supply—I have never denied its crucial importance—and the effect of the real level of demand. If one seeks not to do that, the result, I fear, may be great confusion, and the Government's objective, which we want to see, will not be achieved.
  7.20 pm
  Mr. K. J. Woolmer: The right hon. Member for Worthing (Mr. Higgins) spent some time giving yet another interpretation of what the Select Committee did or did not say. I shall not follow him in that direction. I note only that while listening to the right hon. Gentleman and his hon. Friend the Member for Horncastle (Mr. Tapsell) I could not help feeling that totally different languages are being used by Conservative Members. They are not differences of detail but they amount almost to people speaking foreign languages to each other and scarcely hearing or understanding what the other says.
  I share the doubts of the right hon. Member for Worthing about the demand side. All the evidence is that real consumption, real investment and real exports will fall in the coming months. The only possible hope on the horizon is that stocks will stop falling to an extent that permits some kind of stimulus. That does not seem to me a basis for getting out of the worst slump in 50 years.
  I oppose the Bill because I do not accept the Government's Budget judgment on increases in overall taxation or their cuts in public spending. Nor do I agree with the manner in which the Government propose to raise those revenues through the Bill. We cannot consider the Bill without regard to the Budget judgment that lies behind it. There can be no serious doubt in the minds of most commentators or most hon. Members that this is a sharply, even savagely, deflationary Budget, introduced at a time of deep recession. It will pile agony on to injury. It will damage more businesses, families and individuals and impose further strains upon the social fabric not only in the capital but in many industrial cities. The size of the deliberate act of deflation is concealed in a variety of tax rises, a variety of failures to protect taxpayers against inflation, of increases in national insurance contributions and of spending cuts.
  The Treasury and Civil Service Select Committee, as stated on many occasions, came to a view on the size of the deflation deliberately inflicted in the Budget. Its view was that the deflation amounted to about £5 billion. We can argue the pluses and minuses at the margin but this spending will drain activity and energy out of the economy. If this deflation had been concentrated into one single stroke of policy for all the country to see, the severity of the impact would have been that much clearer.

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  It is as if 5p or 6p had been put on to the standard rate of income tax at a stroke. One can imagine the uproar that would have been caused by such an act of vandalism in the middle of a depression. The Chancellor could hardly have denied that it was deflationary in the way that he has attempted to talk his way out of this act of vandalism.
  Concealed though the tax rises and the spending cuts are, the fact is that the Government, elected to reduce the so-called burden of taxation, have been responsible for increasing from 40 to 48 per cent. in two years the share of national income taken by all forms of taxation. Nor are the increases in income tax and in indirect taxes on the items that we buy the only way in which the Government have taken money out of the pockets of families, young and old. A deliberate policy of forcing up prices in many nationalised industries and of forcing up council house rents has been the equivalent of a sharp increase in taxes on many people. Gas and electricity prices, along with council house rents, have been the most obvious. It is clear that there will be further big rises in these charges for each of the next two years.
  It is nauseating to hear what I regard as the hypocrisy of Conservative Members attacking the monopoly position of nationalised industries and criticising local authorities on council housing, when the Government are forcing the gas and electricity industries and councils to raise charges far beyond what is justified and far beyond what those who should be in control of these industries wish to impose. The Government stand condemned of increasing unnecessarily the cost of living and inflation and of allowing their own blind ideological prejudice to colour their judgment in dealing with what are important examples of successful public and social ownership.
  In their crude acceptance of rising unemployment and of falling living standards the Government are building up a great well of resentment. Until a short time ago they had been saved in large measure by North Sea oil revenue and the over-valued pound, which helped support rising average living standards largely through cheap imports despite falling national production at home. Now, however, the harsher reality of government by unemployment is coming home to an increasing number of people. Why is there mounting unemployment and this further deflationary Budget in the midst of the worst depression for 50 years? It is surely because the Government want to get inflation down and have rejected any open form of incomes and prices policy, except, it must be noted, in relation to their own employees, and are using the iron discipline of the dole queue and factory closures to get wages and prices under control.
  Many voices of Left and Right in industry and the trade unions have argued against incomes and prices policies, saying that they are inefficient and inequitable and cause open clashes of interest between groups in society. I say to them "Look at the cost of an incomes policy by unemployment." Has the policy of the Government been without its costs? Production in manufacturing industry has gone down by 20 per cent. in two years. Fine, experienced workers and efficient companies have been put on the scrap-heap. North Sea oil revenues have been thrown away with an astounding disregard for the historic opportunities that they have offered. It will take many years even to make good what has been lost in these disastrous two years, let alone to catch up on lost ground.
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  Have the dole queue and its pay and prices consequences been equitable and fair? That question should be asked of the textile, engineering and construction industry workers. One needs to compare the profits made by banks and importers with the losses made by the wealth-creating industries of the Midlands and the North. Has an incomes policy of the dole queue avoided conflicts in the country? That question should be asked of the steel workers, and of the civil servants who are in the middle of the most serious dispute ever seen between employees and management. It should be asked of youngsters without work. It should be asked of ethnic minorities, so badly hurt by unemployment.
  It is clear that the market-place free-for-all has not succeeded, and cannot succeed. Even its limited success depends on mass unemployment. Is it not likely that a return towards full employment will again lead to inflationary wage and price settlements? I ask that because political parties, employers and trade unions need to face the issue. It will not go away. I reject the dismal view that mass unemployment is unavoidable in the future. I reject the view that public sector workers must be made redundant because private sector workers have suffered. Yet any serious measures, whether on the demand or supply side—I agree with the right hon. Member for Worthing, that both are important—aimed at redressing unemployment within a reasonable time scale are bound to bring with them renewed and escalating inflationary pressure. In considering how best to tackle these difficult problems, at least we all now know what logical analysis had previously shown us, namely, that a market-place free-for-all and deflation has vast costs, is inequitable and breeds its own brands of conflict.
  I conclude with a brief reference to two matters. Dissatisfaction with the Budget strategy and its associated Finance Bill was also expressed to Yorkshire Members of Parliament by the Leeds chamber of commerce and industry and by the Association of Yorkshire and Humberside chambers of commerce. The Leeds chamber drew particular attention to its opposition to the increase of 20p in the tax on derv fuel, estimating that it would increase haulage costs by about 4 per cent., with inevitable effects on prices. Even before the Budget, the United Kingdom price of derv of 161p compared with 120p in Germany, 116p in France, 97p in the Netherlands and '75p in Italy. The 20p increase in the Finance Bill makes matters even worse.
  Have the Government considered the effect of that increase on the ability of our producers to compete with our main competitors? As with other aspects of the industrial and energy policies, the increase in derv in the Budget appears to call into question the Government's policy judgment.
  The Association of Yorkshire and Humberside chambers of commerce told Members of Parliament in its brief that
  "the time has come to apply some gentle stimulus to the economy".
  Instead of that, there has been a sharp deflation. The association gave significant reasons for believing that the expansionary stimulus needs to be gentle. It would have to be gentle
  "because British industry would in its current state find it difficult to respond to any sharp increase in consumer demand, given that it would in many cases have to rebuild its workforce, would have difficulty in funding an increase in work in progress and could

  77
  have problems in obtaining adequate supplies of semi-processed goods and components. The net result would be an increase in our import bill".
  That is the realistic and commonsense view of experienced business men in Yorkshire.
  Far from laying the foundations of future growth, as we are frequently told by the Government Front Bench, the Government are currently reducing production, reducing investment, closing factories, and losing skilled workers. The economy is becoming trapped in a vicious circle—at best, a vicious circle of depressed stagnation, or, at worst, of spiralling decline. Doubt and concern are expressed not only by the Treasury and Civil Service Select Committee and outside commentators but by many Conservative Members, and must serve as a sharp warning to the optimists in the Government and to their depleted ranks of supporters.
  The Bill inflicts deflation on our economy, which is already in its deepest recession for 50 years. It raises prices through taxation and by forcing them on our nationalised industries and council house tenants. It increases the tax burden on the majority of workers and their families, while giving the largest concessions again to the most wealthy. It increases industry's costs rather than reduces them. It will fuel inflation, increase unemployment towards 3 million, and reduce investment and the prospects of recovery. I shall certainly join my right hon. and hon. Friends in voting against the Bill tonight.
  7.35 pm
  Mr. Chris Patten: I should like to come back later to the remarks of the hon. Member for Batley and Morley (Mr. Woolmer), and in particular to what he said about pay bargaining and what Professor Meade, in an article the other day in a book on social democracy, called our increasingly strong-armed attempt to try to extract a quart from a pint pot. I think that comes closer to the reasons for our economic difficulties than any argument about over-stimulation of demand in the 1950s or 1960s.
  First, I am anxious about part V of the Bill, particularly the extent to which it runs the risk of reintroducing the voluntary principle into the payment of capital taxation. The point was strongly argued by one of my most distinguished constituents Professor Sandford—who I think is known to my right hon. Friend the Financial Secretary—in a recent article in the Financial Times. No doubt we shall have a chance to discuss the issue after Easter.
  So I shall concentrate on two matters which are central to the Government's economic strategy, and which are both affected by what is in the Bill and what is not in the Bill but which I think should be in the Bill. In the wake of the Budget, I imagine that Treasury Ministers must have sympathised with the story of the prisoner in the magistrates' court. When the chairman of the Bench returned after an adjournment to consider the sentence, he said to the prisoner "There is a great deal of doubt in this case, but we are not going to give you the benefit of any of it".
  It would be unreasonable—not to say incautious—for those of us on the Government side of the House who have some doubts not to give Ministers the benefit of them. However, I hope that, for their part, Ministers will understand some of our doubts and will be prepared to act on them later in the year if—perish the thought—they should prove well founded.
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  The first concerns the timing and the extent of the recovery which has been the subject of much debate today—whether, for example, the Budget is contractionary or deflationary, or whatever is the allowed word. In the article to which my right hon. Friend the Member for Worthing (Mr. Higgins) referred, Alan Budd, who must be the most amiable of all the monetarist divines, said that he thought that this was a rather arid debate. I do not think that he would regard it as quite so arid if he were to run a firm in my constituency as he does running the forecasting unit in the London Business School. The debate is clearly affected by the tax increases in parts I, IV, VIII and X of the Bill.
  I do not think that I am being wilfully craven—presumably, I am being merely unintentionally stupid—in not entirely following the argument that the increase in the money supply this year ensures that there will be an increase in output. As a Tory, I am somewhat sceptical about certainty and simplicity in these matters. I always sympathise with those who tried to understand Hegel's philosophical thesis proving that there could not possibly be more than seven planets, only to discover, shortly before they completed the: impossible task, that someone with a telescope had actually discovered an eighth. Those are the sort of people with whom I feel that I, as a Tory, should sympathise.
  I shall deal first, as did my right hon. Friend the Member for Worthing, with the short-term argument. As I understand it, it says that real output grows by slightly more than the increase in money supply, minus the increase in inflation. If we use our telescope and consider the longer term we see that, as we have already been told, inflation equals the previous money supply increase after a suitable time lag minus the growth in output.
  I should find those two propositions much easier to understand if there were no overlap between the short term and the long term, but presumably the rate of inflation, which is crucial to the first of those propositions, must at some point in time—as the Americans would say—be affected by the second. If that is so, we should need a much greater surge in output than is forecast by the short-term proposition at present in order to prevent last year's increase in the money supply coming through into higher prices in two or three years' time. We have been told that that will not happen, so I am confused. I am reminded of the remark of Tweedledee in "Through the Looking Glass":
  "Contrariwise, if it was so, it might be; and if it were so, it would be: but as it isn't, it ain't. That's logic."
  I have another problem, which was referred to by my hon. Friend the Member for Bristol, West (Mr. Waldegrave) in his speech in the Budget debate. He argued that since we were putting up the rate of inflation in the short term by some of the measures now in part I of the Bill, presumably the amount that would be available for output would be that much smaller next year as a consequence of those indirect tax increases finding their way through into the inflation rate.
  I imagine that that is why my hon. Friend went on very courageously to argue the case for an increase in the standard rate of income tax rather than the indirect tax increases suggested in part I or the de-indexing proposals in part IV.
  I should be more prepared to agree with my hon. Friend's proposals if I had a more nearly wholehearted confidence in the "Lawson effect", as I think someone

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  called it—that is, the relationship between the money supply and output—than I have. With that relationship, if it exists, the prospects for an upturn are small but perceptible. Without that relationship, the prospects of an upturn are a great deal smaller.
  We hope that destocking will finish in the next few months. We hope that there will be some increase in consumer spending as inflation and savings fall, although consumer spending has been clobbered pretty hard this spring. We hope that there will be some increase in exports, despite what the Red Book says, even though the competitiveness of British industry is not all that one would like. We hope that there will be some increase in investment as the productivity of British industry increases, as I am sure it will, during the course of the year. But there seems to me to be too many definite "maybes" about all those conditional clauses. Particularly when one compares the restrictive or non-contractionary stance—I am not quite sure which—of the Budget, of fiscal and monetary policy in this country, with the position in West Germany, Japan and the United States, one cannot be too confident of much of a lift-off from the bottom for the British economy in the next few months.
  If we are to do a little more to help the creation of demand, of confidence and of hope, what should it be? I should have liked to see in the Bill the Government at least halving the surcharge that employers have to pay on their national insurance contributions and a guarantee to remove in the next Finance Bill what was left. I realise that that would have increased the public sector borrowing requirement by about 1½ billion, or perhaps slightly less, since there is not a pound for pound knock-on effect, because of the effect on the lower level of economic activity.
  Many of us heard the right hon. Member for Down, South (Mr. Powell) talk in the Budget debate about the undesirability of any increase in the PSBR. No one in the House is better than the right hon. Gentleman at reducing an argument to the absurd, and it must be said that he had some pretty good material to work on. Few people can put a more absurd argument than those on the Opposition Front Bench, with whose arguments about the PSBR he was then dealing. But I cannot help feeling that there must be a sensible mid-point between the rigorous arguments of the right hon. Gentleman and the IMF-bound extravagance of the right hon. Member for Stepney and Poplar (Mr. Shore), a mid-point on which many of us would be happy to take our pew. As my father used to say, although he did not put it quite so delicately, there is the world of difference between scratching one's nose and tearing it to shreds.
  My hon. Friend the Member for Devizes (Mr. Morrison) said in the Budget debate that a PSBR of Ell ½ billion or £12 billion could not possibly be regarded as wildly inflationary reflation, especially when one considered it as a proportion of gross domestic product, or one considered—a point that I have made before—the lack of any intimacy of relationship between a given level of PSBR and a given level of inflation or a given level of interest rates.
  I should like to make one more brief point about a reduction in the national insurance surcharge. That would not only help us greatly to fight inflation, rebuild profits, make industry more competitive, help exports and create
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  new jobs but would end the absurd fact of our subsidising employment on the one hand and increasing its costs on the other.
  I very much hope that some of the doubts that I have expressed this afternoon will be put to flight by events in the next few months, but I am worried that courage and faith, like monetarism, may not be quite enough. If they prove to be inadequate, I trust that we shall have the good old-fashioned Tory horse sense later in the year to come back and do rather more for British industry.
  7.47 pm
  Mr. Richard- Wainwright: Hon. Members may agree that Second Reading debates, apart from the forced adversary rhetoric of the Front Benches, usually revolve around the balance of national advantage or disadvantage that is supposed to flow from the Bill in question. But this Finance Bill deserves no mercy. I hope that it will have as little mercy in the Division Lobbies tonight as it has had from both sides of the House so far. Nobody could say that the speech that we have just heard by the hon. Member for Bath (Mr. Patten) showed the Bill much mercy.
  The Bill is the vehicle for a severely deflationary Budget. The amount of deflation in the Budget has not been effectively concealed by the extraordinarily wide variety of interpretations that each Treasury Minister has put upon it. The right hon. Member for Stepney and Poplar (Mr. Shore) let the Treasury team off rather too lightly this afternoon. He had some genuinely entertaining fun at the expense of the Chancellor of the Exchequer and the Chief Secretary, pointing out that the Chancellor had said that the Budget was not too deflationary, whereas the Chief Secretary had spent an inordinate amount of time this afternoon trying to show that it was not deflationary at all. But the right hon. Gentleman neglected the elegant place in this extraordinary cacophony from the Treasury Bench occupied by the Financial Secretary, whose elegant sidestep was to avoid the word "deflation" altogether and to insist that the proper term was "not contractionary".
  The Government set a great deal of store on influencing people's expectations. That is the core of their policy. As the Chancellor frequently reminds the Select Committee on the Treasury and Civil Service, nothing that has gone before in our economic history is a relevant guide to what is happening under the present Government, because they will change human expectations. He says that models and other mechanical devices can be thrown out of the window, because human nature and people's outlook will be changed by the signals from the Government. It is difficult to know how anyone could maintain a view that has been so fully demolished by so many reports in the last year or two. But if that is the Government's view, why do they persist in giving totally confused signals, one Minister against another, to the British people who are supposed to be waiting to have their expectations influenced?
  It was clear from the interest with which hon. Members present followed the remarks of the hon. Member for Horncastle (Mr. Tapsell) that he was going to the heart of the matter. There is no need to reinforce his points, because he made them with such a wealth of supporting evidence and so clearly. However, I should not like his speech to pass without commenting from the Liberal Bench that two points that he made seemed to us outstanding in their validity. The first was his expert

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  testimony, from the City itself, that all this talk—to use a polite word—of the last two years to the effect that a respectable non-deflationary public sector borrowing requirement could not be met without a serious rise in interest rates, has been so much wind.
  The House should not allow itself to be diddled by the stories, which have no foundation, that a PSBR of more than £10½ billion would inevitably involve an end to the drop in interest rates. The hon. Member was entirely convincing on that point.
  The other point made by the hon. Member, so graphically and rightly, concerned the danger that a House whose older Members have become connoisseurs of U-turns because they have seen such a variety executed by respective Front Benches in succession, is soon likely to be treated to the appalling spectacle of a V-turn. That means that the alteration in policy will be virtually total, and that instead of the luxury of a shallow progress along the bottom of the "U" the change in policy is to take the shape of a "V", to the utter dislocation of already demoralised industry.
  That is a warning which surely even the present Government ought to heed. Industry is continually reminding them of the havoc that has been wrought in the past by these zigzag policies. I believe that the present Government are heading for the sharpest and most dislocating reversals of policy that we have ever had in our long history of Government turns.
  I have no need to elaborate at length on the views of the Liberal Bench on the Budget strategy because they have been put during the Budget debate and in the debate last week on public expenditure. However, before I come to the particular mischief of the income tax changes I should like to mention two more general aspects of the Bill.
  In opening the debate the Chief Secretary claimed that the brunt of the tax increases in the Bill would be borne by the banks, the North Sea oil industries and the personal sector. That is an incredibly myopic point of view. The Select Committee made it clear, in paragraph 7 of its report, that it is necessary to consider
  "the direct effect on domestic sales and orders resulting from the overall tightening of the fiscal stance."
  The havoc that the Bill will wreak on demand in Britain will be far more damaging to business than the taxes on, for instance, the North Sea oil companies.
  The second matter to which I refer before dealing with income tax is the extraordinary passivity with which the Government accept that the savings ratio is bound to fall. Why they should be afflicted with this death wish, that the propensity to save despite all kinds of discouragement in Government policy, one of the greatest assets of our people, is suddenly to dwindle, passes my imagination. There may be some fears for the savings ratio, because who can tell with confidence what the attitude of savers will be from year to year. But to embody in the Red Book, as an important element in calculating demand during the coming year, a firm forecast that the savings ratio is bound to fall seems perverse. It is suggested that the British people's attitude to savings is diametrically opposite to that of the people of the United States of America, who, when inflation moderates for a time, have traditionally stepped up their savings because they then believe that it becomes worth while to save in the conventional sense.
  The income tax changes to which I turn are the most horrendous surrender by the present Government in
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  relation to their explicit election promises. It is worth reminding the House that in real terms—that is, with a full adjustment for inflation—the increase in income tax for the average taxpayer since the present Government came to power is 8 per cent. That is from a Government whose leader said on 25 April 1979, just before polling day:
  "I assert without hesitation: we will cut the tax on work. We will cut the tax on savings. We will cut the tax on extra skill and extra effort."
  The Red Book—and this is to be commended—also virtually puts the lid on any vestigial hopes that the Government may have that all this horrific contradiction of their promises can be put right in the next year or two. In the Red Book, under the usual coy title of "Implied fiscal adjustment", we have the figures for what the Government estimate they will be able to do by way of tax reduction in 1982–83 and 1983–84. On page 18 of the Red Book, for which the Financial Secretary is personally responsible, amongst large numbers such as £90 billion, £87 billion and sums of that magnitude, for implied fiscal adjustment next year in the Budget, we have precisely £1 billion, and in 1983–84, which may be a very significant year, only £2 billion. It has been stated—the Government have not denied it—that those implied adjustments, even if there is room for them, will do no more than repair some of the damage which is done in this Budget.
  The effects of this rise in income tax through failure to index the allowances are becoming fairly well known, but it cannot be repeated too often that it is the low-paid worker who will in many ways suffer most savagely. The level of income at which how-paid families will become liable to income tax, the threshold, will fall by more than £4 a week. In combination with the disastrous decision last year to abolish the reduced rate band, this means that over two years the marginal tax rate of the lowest paid has risen from 25p in the pound to 30p. That is an appalling blow to those who are least able to bear it.
  Turning from the personal damage to the national damage, there is the awful consequence that it will now be far more financially advantageous for many more people not to be working than to take work. Before the Budget, the gross earnings figure that a married couple with two children needed to have in order to put themselves on the same level as such a couple on supplementary benefit was £74·03 a week. If an individual managed to earn £74·03 a week and he was married with two children he could expect to take home the equivalent of supplementary benefit for a person in that position. According to the Low Pay Unit, which has an excellent record in these calculations, the Budget will increase that figure to £88·10 a week.
  In many areas—perhaps not in those so well represented in the Cabinet—north of the Trent and in the far West, many jobs that are advertised hold out no financial advantage to the unemployed man with two children. As the Government have been forced to admit, a poverty trap which was deepened in last year's Budget has been widened in this. That conflicts with the Prime Minister's statement in her election broadcast on 30 April, in which she said:
  "What we do believe is that there is all the difference in the world between creating a society in which it pays to work and creating one in which it does not."
  As to vehicle fuel taxes, my party accepts that there is a case for keeping the duty on petrol more or less in line with inflation. However, that should not be done in an erratic manner which requires an enormous leap in one

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  year, which destroys household budgeting, destroys the rationale which led individuals to live in a particular area and wreaks havoc in their financial calculations. We would have supported an increase of about 5p a gallon. We advocated such an increase before the Budget. The increase of 20p is savage. It demonstrates a total remoteness from the budgeting processes of the average family.
  The Liberal Party is unimpressed by the threats that have been made that if the House is so impudent as to deny the Chancellor his additional 20p on each gallon of petrol the most terrible taxes will be imposed that will turn British people's blood to frost and cause awful havoc, in comparison with which the additional duty on petrol would be a light impost.
  When the right hon. Member for Leeds, East (Mr. Healey) was Chancellor of the Exchequer in the Labour Government he issued similar threats in 1978 during the Lib-Lab pact. He said that if Liberals insisted on removing the 5p increase on each gallon of petrol that he had incorporated in his Budget he would without a doubt increase taxation on beer. He repeated that threat throughout the country. But when August came and the 5p was duly removed, no tax was imposed in its place. I hope that the House will not be moved by the fearsome threat that many desirable objects will have to be taxed if the additional 20p on each gallon of petrol is to be moderated.
  Mr. Chris Patten: Is the Liberal Party always against increases in the duty on petrol, or only sometimes? What are the reasons that sometimes lead Liberals to favour such increases? Are those reasons electoral or political? I hope that the hon. Gentleman will enlighten us.
  Mr. Wainwright: I believe that I am already in trouble for being diverted last week by an intervention and adding to the length of my speech. I thought that I had made it as clear as I am capable of making it that Liberals have always been in favour of a movement towards keeping the tax abreast of inflation. We are not in favour of vast and crude leaps of 20p. I remind the hon. Gentleman that in 1978 the extra 5p meant rather more than it does now.
  The increased duty on derv was carefully slid over by the Chief Secretary this afternoon. The right hon. and learned Gentleman was eloquent in saying that even after the increase in petrol tax we would be no worse off than most countries in the Common Market. However, he was silent on the comparative figures for derv. Even before the Budget Britain had the highest price of derv of any Common Market member State. It was well over twice the price which obtains in Italy, for example. In these circumstances we see no justification for any increase this year in the price of derv.
  The Financial Secretary has prophesied that the public's behaviour in the atmosphere created by the Government will not be like their past behaviour. The opinion polls are indeed endorsing that prophecy, and I believe that the Finance Bill may prove to be the spade that dug the Government's grave.
  8.7 pm
  Sir Graham Page: I apologise for being unable to rise to the heights of financial philosophy and economic policy that have been scaled in some earlier
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  speeches. I am capable of dealing only with the nuts and bolts of the Bill which happens to be before us for Second Reading.
  It must have been the ambition of every Treasury Minister to simplify and clarify our tax law. I imagine that every Chancellor has had the vision before him of being a Hercules, or statutory St. George, and slaying the taxation monstrosities conceived by unholy wedlock or deadlock between the Inland Revenue and the parliamentary draftsmen. Alas, we have, as in previous years, another monstrous child of 195 pages with scarcely an item of delegislation throughout its 126 clauses and 16 schedules. One can look in vain for any real clarification and simplification of revenue law that would help the taxpayer to understand that law and reduce the staff required to administer it.
  In part I, under Customs and Excise, we find that the duty on matches and mechanical lighters is to be increased. Do we need that tax? We may need the money to be derived from it, but do we need a separate tax? Are not matches and lighters used for 99 per cent. of the time to light cigarettes, cigars and pipes? Would not it be more sensible to add 1 per cent. to the £3 billion in tax that is collected from tobacco and to disband the matches and mechanical lighters duty division? If we considered whether some of our taxes were necessary we should find some that could be merged into others.
  Clause 10 introduces schedules 6 and 7, which amount to no fewer than 27 pages. These schedules introduce into the Bill the procedures for import and export. I do not know why they are in the Bill. Their proper place would be in a Customs and Excise Management (Amendment) Act or a statutory instrument. I am bound to ask whether these schedules are necessary. Paragraph 7 of schedule 7 states:
  "The Commissioners may relax all or any of the requirements imposed by this section as they think fit in relation to any goods and, if they do so, may impose substitute requirements."
  If one does not obey the substitute requirements one has to bear a penalty of £500. All those 27 pages of the two schedules could have been reduced to one sentence: "Do as the commissioners tell you or you will be fined."
  Part II deals with value added tax. I am sure that the small business man is delighted that the threshold for compulsory registration has been increased from £13,500 to £15,000. However, the realistic appraisal of inflation would have justified an increase not to £15,000 but to £20,000, as recommended by the National Chamber of Trade. That would have significantly reduced the administrative work, but it would not have significantly reduced the amount of revenue collected. That part could have been considered more from the point of view of the administration caused.
  Part III deals with the extension of car tax to motor cycles. That is another nail in the coffin of what could have been the greatest tax administration slimmer of all time—the merger of car tax and petrol tax. There is a simple way of doing that. One increases the petrol tax—dare I say it?—by another 20p. Every time one buys a gallon of petrol one receives a voucher for that 20p—rather like the old Green Shield stamps. When £70 worth has been collected one exchanges the vouchers at the garage for a car licence for next year. For the rest of the current year one produces that car licence every time petrol is bought, and a discount of 20p is obtained. That is a simple way of combining car tax and petrol tax.

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  Part 4 of chapter 1 seems to increase the number of instances in which there will have to be claims for repayment of tax because the tax has been deducted at source. Few contacts between the Inland Revenue and the taxpayer cause the taxpayer more frustration and fury than the time it takes to obtain repayment of tax overpaid. All those repayment claims cause much administrative work. That time lapse in getting money back often causes real hardship. Therefore, in the cause of relieving anger and hardship and in the cause of reducing administrative work, the need for repayment claims should be reduced and not increased.
  I shall give the House one example which has been called to the attention of the Inland Revenue by the Law Society. In the majority of court orders for maintenance, the recipient's means are below the tax threshold. For example, an ex-wife who has had to look after one child would have a basic tax-free income of up to £41·25 a week. However, under a statutory instrument, if her maintenance payments are more than £33 a week the payer—the ex-husband—has to deduct tax at source. For a maintenance payment of £34 a week, he pays her £23·80 and she has to claim the other £10·20 out of the Inland Revenue. It reaches her six months or even 12 months later.
  That is not only crazy; it is cruel. Hardship to the person entitled to the money and unnecessary work for the Inland Revenue could be avoided if the limit of maintenance payments below which the payments can be made gross were linked to the single person and one child allowance. That is one example of many of reclaims causing hardship and much administrative work.
  The system of "pay now and reclaim later" has been taken to its extreme in clauses 50 to 63. Those clauses deal with the welcome relief for investment in new corporate trades. That is a good tax incentive to encourage investment in new businesses. One receives the allowance of that investment against one's income. However, that allowance is not received when one makes the investment. One cannot claim it for that year, but one must claim it during the second year. The Inland Revenue can take it all back again within the next five years. That is an absolute nightmare of claims and reclaims. I do not believe that the Inland Revenue will let anyone have the benefit of that within those five years if it can claim it back again.
  Benefits in kind are dealt with in clauses 64 and 65. There is an administrative irony, if not a nightmare, in clause 65. The original justification for the flat rate benefit system in respect of company cars available for private use was to avoid the trouble of apportioning expenditure between business and private mileage. All that is to be resurrected in clause 65—at least from 1982–83. It will take a year to exhume the corpse, resuscitate it and provide it with accommodation and staff. I hope that during that year, or before that happens, someone will decide that we should let it rest in peace.
  I now turn to the part of the Bill which deals with capital taxation and its various breeds—capital gains tax, capital transfer tax, development land tax—and, on the other side of the picture, capital allowances. I am sure that my right hon. and learned Friend will recollect that during the debates on the Finance Bill last year we were denied amendments to capital taxation on the grounds that if we waited we would have a comprehensive Bill on capital taxation. We waited, hut, like Godot, the Bill never arrived. Instead, in the Finance Bill there are 26 titivating
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  clauses on CGT and CTT and another four on development land tax. At the very least, development land tax should now have its neck wrung. If we need the £25 a year, that it is said that the tax can raise its collection should be part of the income tax and capital gains tax system. The department which administered it should be disbanded.
  Mr. Budgen: Will my right hon. Friend explain why he has had that change of view? I remember that when he and I were debating the development land tax when it was first introduced, his view was that there was a necessity for some level of development land tax. There used to be a discussion on the question whether it should be 60 per cent. or 50 per cent. As to the proposition that there should be some tax, I remember my right hon. Friend being firm on the side that there should be a tax.
  Sir Graham Page: My hon. Friend is always fair when he intervenes. I said that if we need the £25 million which it is said development land tax can produce it should be collected through the income tax system. It should not be a levy. I have stuck to that opinion throughout the time that I have advocated that money should be raised from the windfalls which result from development. However, I do not believe that it should be raised as a separate tax.
  Finally, part VI deals with stamp duty. Clause 101 reminds us that the basic statute was passed in 1891. We are still collecting much of the duty by the impressed stamp, under a system 90 years old and, indeed, 90 years out of date. I do not know how many officials are employed in banging the press down on legal documents, but if we were permitted in all cases to use adhesive stamps they could be put to more productive work. I know that we should be licking large, high-value stamps, which would perhaps be exciting, but if we were allowed to buy, lick and stick our own stamps we could save much time and administration.
  I apologise to my right hon. and hon. Friends on the Treasury Bench for not having said the complimentary things about the Bill that its merits deserve, but I was anxious to use the time to point out that there are ways in which the Bill could have made the application of tax more intelligible and its administration less expensive.
  8.21 pm
  Mr. David Ennals: I remember as a Minister introducing a Bill on only one occasion when no one spoke in its favour. That was the measure concerning British standard time which I inherited and which suffered the fate that it deserved. This Bill has attracted no support, except for the 10-second non-tribute of the right hon. Member for Crosby (Sir G. Page), and I wish that it could suffer the fate that it deserves.
  We have today heard damning evidence against the Government. The right hon. Members for Worthing (Mr. Higgins) and for Crosby and the hon. Member for Bath (Mr. Patten) spoke against the Bill. The hon. Member for Horncastle (Mr. Tapsell) made a devastating attack on it. It is staggering that the Prime Minister, the Chancellor, the Treasury team and the Government have learnt nothing over the past 12 or 18 months and certainly nothing since the right hon. and learned Gentleman's disastrous Budget speech on 10 March. The Chancellor's strategy has been condemned by almost everyone—the CBI, the TUC, 364 or 895 economists, half the Cabinet, the Select Committee

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  and a large number of Back Benchers—yet he, with the backing or push of the Prime Minister, has blundered on with his academic monetarist dogma, to use the words of the hon. Member for Horncastle.
  What has been achieved? First, the burden of personal taxation has increased, and hundreds of thousands of additional people have been forced into the tax net. Secondly, an increasing number of firms have been reduced to bankruptcy. Thirdly, the Government have sustained the downward trend of our economic performance. The Financial Secretary saw a glimmer of light in one month's figures, but no one is impressed by that. The forecasts are that production will continue to decrease. Fourthly, unemployment, which has already become intolerable, will increase. The CBI estimates that next year well over 3 million people will be unemployed, and, if that happens, what occurred in Brixton over the weekend may be repeated in other parts of the country. There is a danger of social unrest with such high unemployment.
  Fifthly, the Budget has given an inflationary twist to an improving economic situation. I was surprised to hear the Government taking credit for reducing inflation, when in their previous Budget they stimulated it. They are trying to bring down inflation to the level that they inherited, but, especially since this Budget, the evidence is that it will not continue to fall.
  Sixthly, we have seen a sustained squeeze on housing, education and social services. In addition, although perhaps less important nationally, the Government have done nothing to relieve the serious plight of the voluntary organisations that do so much important work for the needy.
  It is staggering that the Prime Minister, the Chancellor and the Government have failed to listen to advice from any source. They have rushed headlong to the top of the cliff, like swine, and are followed willy-nilly from time to time by the Tory sheep into the Division Lobbies.
  I wish to raise two particular problems. The first concerns petrol tax, which many hon. Members feel strongly about. I shall not repeat what I said in the economic debate just over a month ago. Let me simply quote a letter that the Norfolk county council sent to the Chancellor, a copy of which I received the day before yesterday. The council is not at present Labour-controlled, although it may be in a few weeks' time. It stated:
  "Not only is the tax a substantial blow to those who rely on the use of their private cars for essential journeys, but it will undoubtedly escalate transport costs overall which, again, bears particularly harshly on a predominantly rural county. Many people in Norfolk have to travel substantial distances to work in their own transport where public transport is not available. Furthermore, the Council is concerned about the effect of the tax on its own expenditure, which gives rise to yet another increase in costs which will have to be met within the cash limits."
  I do not always agree with the Norfolk county council, but I agree absolutely with its condemnation of the tax increase.
  The Chancellor must listen to what is being said on both sides of the House. He has not been here for one moment of the debate. Perhaps he did not wish to hear the criticism that would be heaped on him, although he is not a man without courage. He has boldly and courageously pursued
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  a policy that is patently wrong. However, it is curious that he has not been here for this debate. [HON. MEMBERS: "He has."]
  Mr. Barry Sheerman: Only briefly.
  Mr. Ennals: He could not have been here for more than three or four minutes, and I do not know where he was sitting.
  My last point concerns charities. I raise it because, looking at the time, I fear that no one else will. In the debate on 3 February and again in the Budget debate on 12 March I pleaded with the Chancellor to do something to relieve charities from the intolerable burden of VAT at 15 per cent.
  No one can doubt that magnificent work is done by organisations such as the Spastics Society, the Society for Mentally Handicapped Children, Help the Aged, Age Concern, the Save the Children Fund, Dr. Barnardo's, the National Children's Home, the Royal National Institute for the Blind, the Royal National Institute for the Deaf and many other organisations, all of which over the years have given magnificent services to supplement the statutory authorities. I am sure that all hon. Members would wish to support them. Certainly, the Prime Minister and the Secretary of State for Social Services poured tribute upon them. Yet the Budget puts them in an intolerable position in trying to do their job.
  Those organisations are having to cut back on their work because of the burden of VAT. They sought to see the Chancellor before Christmas, but he refused. Representations were made to the Prime Minister, but received a negative answer. I, too, have written to the Chancellor, although I do not expect to get any more support than the charities themselves. Indeed, I have not even received a reply.
  Mr. Eggar rose——
  Mr. Ennals: Time is so short that it is not fair to others if I give way. [Interruption.] All right, if I am under criticism, I give way.
  Mr. Eggar: First, did not the right hon. Gentleman welcome the decision in the last Budget to alter arrangements for charitable giving under covenants? Secondly, has it not been established under Governments of both parties that charities pay VAT at the going rate?
  Mr. Ennals: But the going rate has doubled, against the views of all Opposition Members, who strongly condemned it, and after a pledge by the Prime Minister during the election campaign that allegations that VAT would be doubled were lies. Eight per cent. is a very different matter from 15 per cent.
  Mr. Eggar: Humbug.
  Mr. Ennals: I shall not give way again. Let hon. Members ask the charities their views, one by one, as I have. They believed that they had seen a spark of hope in the Chancellor's speech. I quote from the Spastics Society journal which I received today:
  "The high hopes of charities that the Chancellor's Budget would relieve them of the crippling burden of VAT were shattered, and millions of 's donated to relieve suffering will continue to be paid to the taxman.
  The injustice of that was bad enough, but what has really made the charities sour is the misleading way in which Sir Geoffrey Howe magnanimously appeared to give concessions to voluntary

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  organisations. Budget-watchers believed that kind Uncle Geoffrey was actually helping charities when he announced that the benefit of VAT zero rating on ambulances and wheelchairs would be extended to institutions caring for the handicapped.
  On investigation, this great 'concession' proves to be a cruel mirage. Only ambulances and wheelchairs which are gifts will be zero rated."
  Do any of these organisations use ambulances? The answer is "No". They are suffering far more from the extra cost of petrol than they have any chance of gaining if someone strangely decides to give them an ambulance.
  I hope that the Minister will convey this to the Chancellor. First, he must redefine what "ambulance" means. Far more seriously, because that is just chicken feed, he must recognise that if these charities are to do the job that over the years they have done and for which they have been applauded, there must be some recognition by the Government that they need the money to do it.
  This is, after all, the International Year of Disabled People. Instead of tax relief for private medical insurance and new expenditure on civil defence, let the Government do something now to help these fine charitable voluntary organisations so often praised by the Prime Minister and the Secretary of State for Social Services. Smooth words do not help. Only a change in the Finance Bill, which I hope will be made in Committee, will help to enable them to continue the job they have done so well.
  8.33 pm
  Mr. Eldon Griffiths: Much of the debate has concerned the balance between the demand and supply sides of the economy. The biggest single enginering and capital goods project available to this country is the construction of the North Sea gas gathering line. I greatly regret that, due to bureaucracy and indecision, it will no longer be possible to start work on that project until well into 1984 or even later. I make that point very simply because that demand could and should be injected into the economy and would cost the public purse nothing.
  It is the proper intention of the Government that since there is much profit in the North Sea, private companies—the equity owners of production and the private banks—should finance it. They are ready to do so, but a bumbling and inadequate approach has meant that this immense engineering project will not now proceed, at a time when it could inject genuine help on the demand side of the economy, without being accompanied by inflation.
  I have rarely spoken in finance debates. The last time was in 1964 when, with Mr. Airey Neave, I voted against the Government. I have an amendment on the Order Paper which, if it had been called, could have led to my doing the same again tonight. But I want to make it plain to the Treasury Bench that I had a much wider purpose than reducing petrol tax in placing that amendment on the Order Paper. I wish to send a signal to the big spenders. Some of the big spenders are in local authorities—mainly the Labour authorities. Some are in our nationalised industries, which are among the most incompetent industrial enterprises in the industrial world. Some of the big spenders, however, I regret to say, are in the Cabinet, and it is to them that I wish today to send this simple message.
  Since my right hon. Friend the Prime Minister, to her immense credit, tried, but without success, to persuade her colleagues to curb increases in expenditure, the time has
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  come for the Conservative party in Parliament to intervene in that debate. It is our duty to say that if the big spenders in the Cabinet go on pushing up their spending some of us will not be prepared to troop through the Lobbies to put through the extra taxation to pay for it. I, for one, was elected to reduce public expenditure and cut taxation. I regret that public expenditure has continued to rise.
  My objections to the increase in petrol tax are twofold. First, it is inflationary. Secondly, it is discriminatory. I speak of its being inflationary from my background experience as a Transport Minister. The Road Haulage Association, the Freight Transport Association and the National Farmers Union are right; there will be a substantial inflationary twist from the increased petrol tax and particularly from the tax on derv.
  The increase is also discriminatory. My right hon. and learned Friend the Chief Secretary is living in a different world from that of my constituents when he says that the proportion of the tax to the total cost of petrol is no different from what it was in 1970. Since then, two big factors have occurred. First, there are very few bus services today, whereas in 1970 there were many. So many rural people no longer have any choice except to use their cars. Secondly, many small businesses, I am happy to say, have established themselves in remote rural villages. But they need to bring together their workers and their management, who all rely heavily upon petrol.
  I am not a wet. If, as I suggest, the petrol tax increase were halved to lop, that would cost the Chancellor not less than £600 million. No one has any right to advocate such a large reduction of revenue unless he has the political guts to say pretty plainly how he would compensate for it.
  I was glad to hear the Chief Secretary say that the various options of tax increases make little sense, and that taxing gambling, caravans and foreign holidays is not the right way. He said, and I agree, that such taxes would not raise the necessary money and would, in almost every case, do more harm than good.
  I therefore recommend the Treasury Bench to ask themselves "What about spending less?" I am prepared to answer that question by describing precisely where the Government can save money. First, I welcome the reduction in the rate of increase in central Government expenditure. There has been some fall in the number of central Government employees and some reduction, I am glad to say, in the number of tax collectors. I also welcome the substantial improvement in EEC contributions wrung from the Community by the Prime Minister.
  The bad news is that, overall, Government expenditure has continued to rise at an unacceptable rate. I understand the reasons. Recession inevitably has generated more losses in the nationalised industries. It has also generated unemployment, so unemployment pay must go up substantially. Rightly we have undertaken increases in defence expenditure and in law enforcement, for which I had some responsibility, and both these I welcome.
  But while I well understand the upward pressure of central Government expenditure, there is one area where it appears to be out of control. I speak of rates of pay. The civil servants' dispute has demonstrated plainly that there are now two nations in Britain—but not of the kind that Disraeli described. One nation comprises the public sector, which has job protection, indexed pay and inflation-protected pensions. The other nation comprises the private sector, which more and more has no job security—indeed, it faces unemployment—and which no

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  longer can afford inflation-protected salaries. Salary increases in the private sector are now very low indeed. Nor can private firms possibly afford the inflation-protected pensions available in the public sector.
  Mr. Sheerman: Will the hon. Gentleman give way?
  Mr. Griffiths: I cannot give way, because of the time.
  The Chancellor would have been wiser to build into his estimates for the next year not a further 6 per cent. increase in pay for the public sector but an increase of 5 per cent. If he had done that he would have come close to saving about £200 million a year to offset petrol tax.
  Mr. Sheerman: What about the police?
  Mr. Griffiths: The hon. Member for Huddersfield, East (Mr. Sheerman) can make his own speech in his own way but the police, as I said, come under law enforcement, to which we are committed.
  On the local government front, I welcome the Secretary of State's efforts to reduce expenditure. However, we all know from our own areas that there are many ways in which local government can and should reduce its spending further. Another £100 million can be saved from that source.
  In the nationalised industries—in steel, in British Leyland and in shipbuilding—the subsidy received this year should be calculated on the basis of the amounts being paid over 13 months rather than 12 months. That adjustment, too, would yield a further £200 million in saving to the Exchequer.
  Finally, in present circumstances it is not necessary to barrel ahead with fourth channel television. We can do without it for a year or more. The revenue consequence of that is as high as £80 million.
  If the Chancellor of the Exchequer wished to do so, it is possible, in the various ways that I have described, to save on public expenditure the £660 million required to offset a halving of the extra duty on petrol and derv. I commend that suggestion and hope that the Minister will deal with it when he replies.
  8.44 pm
  Mr. John Horam: In view of the lateness of the hour and the number of hon. Members still wishing to take part in the debate I shall confine my remarks to taxation policy.
  There is no doubt that the overall burden of taxation has increased over the past two years. That is directly contrary to all the positions taken up by the Government before the election and since. The Financial Secretary admitted that in a speech in Zurich in January. I do not know why the right hon. Gentleman always goes to Zurich or Basle to make such admissions. He should occasionally make them in the House.
  I hope that the Minister of State will enlighten us on the extent to which that tax burden has been increased. My calculations, made with the invaluable help of the Library, suggest that the tax burden has increased over the past two years from just over 39 per cent. of gross domestic product, at factor prices, to 43½ per cent. I hope that the Minister of State will give us the facts and figures. We should have a clear statement from the Government on what has happened to the overall burden of taxation. It is not enough to get Sibylline whispers and admissions from foreign parts about what has happened.
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  The Government came to power with clearly conceived ideas about reducing the burden of taxation. The hon. Member for Bury St. Edmunds (Mr. Griffiths) said that he was not elected to increase taxation. Nor was the Treasury Bench, and it is time that we had an explanation from the Government.
  I would be prepared to accept an increase in the standard rate of income tax rather than a failure to index the thresholds, which is the main feature of the Budget. The consequence of that failure to index has been to make the burden of taxation bear most heavily on those least able to afford them—the poorest in our society. I am concerned because not only has the average burden of taxation increased but the burden has increased most on the poorest, on families and on women. They have suffered most.
  As I said, I would rather increase the standard rate than fail to index the thresholds, but we must look at the matter in the longer term. I accept that if we are to reduce the tax burdens we must control expenditure, but the Government should also consider that we need to widen the tax base. We must do that systematically, slowly and carefully. I do not underestimate the serious problems involved, but the Government should consider that course.
  We ought also to consider how the position of the family has deteriorated over the past 20 years. The taxation of families has got relatively worse compared with the taxation of single people. Even before we switched to child benefit we had not sufficiently indexed family allowances and child allowances, and the relative position of families had declined steadily.
  In those circumstances, any Government ought to give serious consideration to abollishing the married man's allowance and increasing child benefit by an equivalent amount. That would concentrate resources where they are desperately needed—on the family unit with children.
  It would damage the position of childless couples, but the majority of such couples have had children and are better off in real terms than when their children were at home. It would be redistributing taxation over their lifetime in a way which would help them most when they needed help most and damage them when they needed income less.
  Contrary to the Government's proposals in their recent Green Paper, they should treat women as individuals for taxation purposes in respect of earned income but not in respect of investment income. This is the right way forward: to give women equal status in taxation matters whilst not opening up a chain of loopholes to be exploited by those fiddling around with investment income and transferring it to their wives or their children. In my view, the Government will have to consider this seriously before the next general election.
  The country will get the message clearly that the obligations which this Government spelt out when they came to office have not been fulfilled. In terms of taxation, the average person is very much worse off, and so, particularly, are poorer people, families and women. That is to be deplored.
  8.50 pm
  Mr. Bowen Wells: I do not intend to take up any of the matters referred to by the hon. Member for Gateshead, West (Mr. Horam) other than to say that there can be no Government supporter who regrets more than I do that taxation has had to be increased in this

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  Budget. In saying that, I include the Treasury Bench. It is directly contrary to the ambitions and objectives with which we sought power in May 1979. To that extent, the hon. Member is exactly right.
  A valuable lesson which I learnt at university was never to trust economics and economists. We can all tell from the position into which the Government have got themselves that their projections and forecasts for last year have turned out to be wrong. Taxation has had to be increased to bring about a very necessary payment for the spending that the Government have continued to make. We have to realise that this Budget is based on a few undeniable, straightforward, common-sense truths. If we spend money we have to earn it, or we have to raise it. If we borrow too much money, by the laws of supply and demand interest rates will rise. If we print money, we increase the price of our imports and we get higher prices and higher wage demands—in short, inflation. Those are messages that we can all understand, whatever type of economic analysis we do, and that is what ordinary people understand.
  We have been spending money on stimulating demand. As my right hon. Friend the Member for Worthing (Mr. Higgins) said, all that industry needs is orders. That is what industry understands by demand. The money which the Government have pumped into steel, British Leyland, Rolls-Royce and other programmes has had to be paid for, and it provides jobs and demand in the form of orders for small businesses.
  This is the type of undogmatic approach that the Government have made to our problems, and they deserve support and encouragement. The alternative would have been not to make that investment and not to impose the taxation but to borrow more and more money, resulting in higher interest rates and a further generation of inflation.
  In the interests of time, I skip over the speech by the right hon. Member for Stepney and Poplar (Mr. Shore). His remarks today and, for that matter, his speech in reply to the Budget debate are best categorised as yah-boo politics of the worst kind. They lacked depth of analysis and any kind of suggestion about what he would do as an alternative. Indeed, it took my hon. Friend the Member for Horncastle (Mr. Tapsell) to show the House the analysis and the depth of understanding of the position which the right hon. Member for Stepney and Poplar should have displayed, speaking, as he was, from the Opposition Front Bench.
  The solution offered by the right hon. Member for Stepney and Poplar gave no idea of how the money should be raised. He gave us no idea by how much income tax and corporation tax would be raised as a result. He refused to estimate how much the public sector borrowing requirement would be raised, although the right hon. Member for Down, South (Mr. Powell) estimated it at £25 billion. The right hon. Member for Stepney and Poplar gave no indication about what would happen to the interest rate or to the minimum lending rate if his proposals were adopted. He did not say how his prices and incomes policy would work, but he showed us that he believed in a severely planned economy. Undoubtedly, that would lead to tariff barriers and trade protection of the worst kind. I suggest that his solution was truly the road of no hope.
  The Budget gives the nation opportunities to recover its self-confidence and to realise the disciplines that come from the profit and loss account, both nationally and in
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  companies. The one change that the Budget reinforces that will bring about an economic recovery is the sort of change in attitude occurring in every business in the country.
  Mr. Sheerman: In Stevenage?
  Mr. Wells: We are attracting more and more investment into Stevenage. We shall be the first town to show a positive recovery and a reduction in unemployment.
  Mr. Sheerman: When`'
  Mr. Wells: That will come about this year. That is the last reply that I shall make to sedentary comments.
  The Budget and the change in attitude which it represents have stimulated management and trade unions to work together to produce a product which will be delivered on time and of which they can be proud. Because the Government have made the money available to provide the orders through nationalised industry and investment, we shall begin to see that recovery. Then Britain will be competitive and will be able to supply the goods to the home and export markets instead of having to import them. If the Budget's objectives are realised, the country will understand that the Budget is crucial and consistent with the objectives that we set out. It will enable us to achieve the aims that we set ourselves in seeking election in May 1979.
  8.56 pm
  Dr. John Gilbert: I shall confine myself to three parts of the Bill which strike me as peculiarly perverse. I was surprised that I got no further than page 2, where clause 2(3) says that the additional duty on higher tar cigarettes will be abolished. I have had no explanation of that from the Front Bench, either in the Budget debate or today. It is perverse that that useful health enactment of the Labour Government should be eliminated without explanation.
  In addition, I regret that there has been no change in the taxation of cigarettes, which is still, since our conversion to the EEC basis of taxation, largely ad valorem. It also imposes a penalty on filter cigarettes, which do people less damage than unfiltered cigarettes.
  Clauses 4 and 7 have had much attention in the debate. Most hon. Members, especially Conservative Members, have drawn attention to the savage effects that clause 4 will have on their constituents who are car drivers, but these two clauses together will have a serious effect not only on car drivers. For my constituents they are a two-pronged attack upon the car industry and those who make cars. The increase in clause 4 would, on its own, have been acceptable if the Government had given more help to rural bus services and railway lines but there is nothing of that in the public expenditure plans. Clause 4 would have been acceptable if vehicle excise duty had been abolished, but vehicle excise duty has been increased and the difficulties which the British car industry is already suffering are merely compounded by the Government. But my main attack on the Bill relates to clauses 88 to 90 and to schedule 11, which between them run a cart and horses through the capital transfer tax.
  Clauses 88, 89 and 90 provide for an increase in the annual amount that a person can give away, exempt from capital transfer tax, from £2,000 to £3,000.
  Clause 89 introduces an iniquitous 10-year exemption rule. As I read the Bill—I hope that the Minister of State

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  will tell me that I am wrong, but I very much doubt it—if one gives a sum of money the day after the Bill becomes law, gives no more for 10 years, and then gives another sum of money, the second sum will attract no tax whatever, and one will start again at the lower limit of schedule 11—the lifetime rates of capital transfer tax.
  I have done a modest calculaton. If a well-to-do married couple, the day after the Bill become law, were each to give away £50,000, and then at intervals of 10 years over the following 30 years were to repeat that act of generosity, they could, in 30 years, give away £400,000 under that heading. At £3,000 a year each—that would be £6,000 for a well-to-do couple—they could give away another £180,000 without attracting any tax. Over a period of 30 years after the Bill becomes law, a total of £580,000 could be passed on without a penny tax.
  By taking advantage of the generous provisions for gifts out of income and gifts in connection with marriage, I see no reason whatever why a well-heeled couple could not pass on to their offspring nearly £¾ million without paying one penny tax. That is morally offensive to all of us on the Labour Benches, and I believe that it is offensive to many Conservative Members, as was made clear by the hon. Member for Bath (Mr. Patten) in his brave and witty speech.
  When I and my right hon. Friend the Member for Heywood and Royton (Mr. Barnett)—I am glad to see that he is in his customary place this evening—introduced the capital transfer tax into this House in 1974, although there were objections from the Conservative Opposition as to the rates of tax and the threshold of the tax, many of them welcomed its principle because they also found it offensive that death duty should be so easily avoidable.
  Now, by the combined provisions of clauses 88 to 90 and schedule 11 of the Bill, death duty—or capital transfer tax—will again be paid solely by the unlucky, the ungenerous and the unwise.
  I regard this as a socially retrogressive measure. It is particularly obnoxious that a well-heeled married couple should be able to transfer a fortune of about £¾ million in 30 years, quite legally and free from any tax whatever, at a time when we are cutting down on old people's homes and day nurseries and when children are having to find money from their parents to pay for their books at school.
  This item in the Bill stinks in the nostrils of Labour Members. It will, I believe, cause many Conservative Members to hold their noses as they go through the Lobbies tonight. If that were the only reason, I should be proud to vote against the Bill.
  9.4 pm
  Mr. Robert Sheldon (Ashton-under-Lyme): My right hon. Friend the Member for Dudley, East (Dr. Gilbert), because of his experience in sitting through the long hours of the night discussing the capital transfer tax, has a vested interest in preventing the erosion of that tax. It is a matter that I also consider to be very important. That is why we shall be debating clauses 88 and 89 at considerable length.
  The debate has been notable for two speeches—that of my right hon. Friend the Member for Huyton (Sir H. Wilson) and that of the hon. Member for Horncastle (Mr. Tapsell). the Government, who pride themselves on what they are doing, must compare what they are doing with the damage that they are causing. They have great pretensions
  96
  that they are responding to the small firms section of the Wilson report. The House is entitled—the speech of my right hon. Friend the Member for Huyton revealed this—to hear a considered reply. My right hon. Friend asked for a White Paper dealing with 15 points made in the Wilson report. It is right, when the Government attach so much importance to the small firms section, that my right hon. Friend should be given that White Paper or much better documentation in response to the arguments made in the report.
  Hon. Members listened with great interest to the speech of the hon. Member for Horncastle. I believe that the whole House has a great deal of sympathy for the hon. Gentleman. His difficulty is that he knows too much about the gilt market and too much about the financial situation and the way to sell gilts. If he had not possessed that knowledge he would have had the possibly happy experience of sitting in the only air-conditioned room in the Treasury—that of the Chief Secretary to the Treasury. It is his knowledge of what is happening and the way in which gilts can be financed that brought him to an understanding of what is wrong with the Government's policy rather than starting off, like so many hon. Members, with an instinctive feeling that the Government have got it wrong and seeking to discover the reasons.
  The hon. Member for Horncastle made a blistering attack, to which the whole House listened with close attention. He pointed out the errors of the Government and listed four particular errors, confirmed by many subsequent speeches. The hon. Gentleman mentioned the high level of interest and the high level of the exchange rate. He dealt with the tight credit policy and also examined the levels of energy pricing. He pointed out a fact that must be clear now to all hon. Members, that the level of 17 per cent. minimum lending rate was a grave error which, in his words, fed inflation rather than countered it.
  I wish to discuss two major aspects of the Bill. The first concerns the total of tax increases and their effect on the economy. The second concerns the manner in which the Chancellor of the Exchequer seeks to raise the money. The Bill proposes one of the largest increases in taxation, as a proportion of gross domestic product, in recent times. All hon. Members heard, I think with concern, the cri de coeur of the hon. Member for Bury St. Edmunds (Mr. Griffiths), who announced to the House that he and his right hon. and hon. Friends were not elected to increase taxation. Elected or not for that purpose, that is what they have done. The financial statement shows that the levels of taxation have been increased by £3·611 billion. No one can deny that figure, whatever view one takes of the deflationary effect of it. That level of increased taxation has to be added to what happened last year.
  This is proving very much a Government of tax increases rather than of tax reductions, with one or two interesting exceptions, to which I shall come. We are told that the increases in taxation are to provide for the large increases in public expenditure. Not everyone looks at the matter in this way. It is interesting that France and Germany, acting together, are bringing about a measure totalling £3 billion to increase investment and to stimulate the economy. The German economy has increased at 4½ per cent. over the last couple of months. That is a figure that we would be delighted to see. Nevertheless, it is the view of the Germans that they need to stimulate their

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  economy. They are doing so through the type of investment suggested by many hon. Members and by people outside.
  The chairman of the 1922 Committee, the right hon. Member for Taunton (Mr. du Cann), called for those investment measures. Even Alan Budd, the noted monetarist, who resigned from the Treasury and Civil Service Select Committee because he felt that it was not monetarist enough, said in The Times of Friday 10 April, talking about the Treasury and Civil Service report:
  "The report rightly criticises the cuts in public investment. I believe that this part of the Government's policy is barely defensible".
  I am sure that we all echo that sentiment. There must be room to allow industry the means for investment.
  The Chief Secretary said today that the purpose of the Finance Bill is to help the corporate sector by taxing those who have done well, reflecting the Bill's priorities in favour of business and industry. The Government make much of the assistance that they are giving industry. The CBI forsees a reduction of 20 per cent. of manufacturing output in the three years 1979–82. One-fifth of the country's output will be lost in those three years of Conservative rule.
  The problem is real, and we can understand the need for help, but what is the result of the Budget? The CBI has done its own sums. It has added up the various items. Stock relief is a modest item. Small companies' corporation tax is shown as £12 million. Then there is the threshold on VAT at £5 million. The changes in energy prices are shown at £115 million. Those are small items and total, according to the CBI's figures, £315 million on the credit side.
  On the debit side, heavy oil costs industry £270 million, the business share of vehicle excise duty £100 million, and the extra payments on national insurance contributions a further £175 million. So £315 million is received and £865 million is paid out. The CBI reaches the hardly surprising conclusion that the Budget is clearly deflationary.
  A number of hon. Members, too, consider that it is deflationary. As the hon. Member for Horncastle said, Treasury Ministers themselves seem to be unclear. There are three Treasury Ministers, and there are three views. One says that it is not deflationary, one says that it is not too deflationary, and the third says that it is not contractionary. That is a new word. We must always be suspicious when civil servants introduce new words for old concepts, because we understand the arguments that go on behind closed doors.
  When I consider the CBI's argument that it is clearly deflationary, and when I overhear the discussion between the pickpocket and the victim about how much was taken, I have a natural preference for the victim's view. In this case, the CBI is right when it says that we have a deflationary Budget and a deflationary Finance Bill.
  We must also consider how the money has been raised. Three items are involved. Two are considerable sums and the third is an important principle. The two sums are hydrocarbon oils and petrol and derv increases, and the failure to revalorise the allowances at the same time—as my right hon. Friend the Member for Dudley, East said—as giving relief for capital transfer tax. The third item is the taxation of benefits, to which I shall come later.
  Imposing a 20p increase in the price of petrol is the kind of action that one takes when dealing with an overheated economy. We can compare that increase with the 5½p
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  increase that we debated only four years ago, in the context of the problems that we had then. We must await with interest the further debates and arguments that will take place in Committee.
  I deal first with the failure to revalorise the allowances. The present Chancellor of the Exchequer talked on 25 July 1977 about the need to index the allowances, following the Rooker-Wise amendment. He said:
  "By failing to keep personal allowances in line with the dreadful ravages inflicted by inflation, the Government have extended the range of disincentives and deepened the poverty trap. Social benefits have risen with full indexation while personal tax thresholds have not. Therefore more people are moving into the band where their earnings in work hardly exceed their earnings out of work.…the real thief is inflation. It is the promoter of this increased burden of taxation and we are angry because, due to the Treasury' s failure to change the tax system in line with inflation, the Treasury itself becomes the main body to profit from the inflation that it has failed to check. The House should feel quite entitled to impose the indexation obligation on the Government."—[Official Report, 25 July 1977; Vol. 936, c. 70.]
  It will be interesting to see what happens in Committee. Will hon. Members feel as strongly now, on a much more important matter?
  The finance will be necessary to pay for the public expenditure. I mentioned earlier the way in which Germany and France were dealing with the matte'. Our problem in raising the money is to examine the various sources that are available. The Chief Secretary mentioned a number of other problems
  The arguments about how much petrol and derv should be valorised for can go on for ever. There never was a golden time when it was exactly right. We must see how much the economy can stand and how we may avoid the violent changes in prices that change people's expectations and lead to abrupt changes. The Government should have learnt their lesson from the increase in value added tax. Even if they thought that 15 percent. was the right amount for the tax, to increase it to that level at one moment brought about such a fundamental change in the operation of the distribution and production systems that it would have been better if the change had been carried out over a longer time.
  The Chancellor is right to draw attention to the importance of the rural motorist. The Chief Secretary talked about the smoother journeys that people make in rural parts of the country, as a result of which, he says, they should not spend much more on petrol than city motorists spend. Indeed, he says that they might spend even less. That fails to take account of what was said in an intervention—that there are a number of places where there is no alternative form of transport.
  Last year I went to a village in Scotland with which I had a past connection. Thirty years ago the bus service to the market town consisted of about one bus every hour. Now the bus runs twice a day. People living in that village cannot earn a living unless they have a car or access to car transport. That is what we are talking about—not whether they are more or less out of pocket. They have no choice.
  Let us examine what the then Chancellor said on this matter in May 1977, when we were talking about a 5p increase, and not a 20p increase. He said:
  "This is a selective tax. As has been pointed out by the Chief Secretary's hon. Friends and others, it is deliberately biased against those who have no option about the method by which they travel to work. It is deliberately biased against those living in rural areas. It is deliberately designed to have precisely the wrong effect on the reverse yield gap between going to work and staying

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  at home, which is the very point about which the Chancellor of the Exchequer has been expressing himself so eloquently for so long."—[Official Report, 9 May 1977; Vol. 931, c. 937.]
  This Chancellor of the Exchequer has been making the same point. It is a pity that he was not convinced by his own arguments and has thought it right to moderate his opposition to such tax increases. If the increase in the petrol duty had been brought about slowly over a longer period—although I do not wish to see this—it might have been more manageable, because increases would have been smaller and spread over a period.
  The Government are always anxious to tell us how much industry is benefiting from their lower interest rates. It is a new fashion in Budget debates to announce drops in minimum lending rate so that one can call it an advantage to industry. If anyone ever thought previously that a 12 per cent. rate would be a bonus presented to industry to enable it to expand he would have been laughed out of court. I think that that is the situation today.
  We compare the damage done to industry by the increased cost of derv. About £1 billion of revenue is to be raised on derv, with a £270 million increase this year. There will be an amendment by the Opposition and possibly by others to reduce this burden upon industry.
  I now come to the failure to revalorise the income tax allowances. As a result of this, 1·2 million people will be coming into tax. One-third of them are those with age allowance, those who will not find their tax thresholds raised. Then we take into account the point made by my hon. Friend the Member for Birmingham, Perry Bar (Mr. Rooker), who showed that women aged between 60 and 64 who are in receipt of only a pension, but a pension that happens to be a State graduated pension, will exceed the tolerance levels and find themselves subject to tax. The important question is this: do they then become liable not just for tax on the State graduated pension, which pushes them into tax, but for tax also on receipt of the pension? Are those tolerance levels not to be applied to them? Will the Minister of State give an undertaking tonight that he will increase those tolerance levels to make sure that those people do not come into tax? That is the very least that he can do. There is great unfairness both to the lower-paid and to the elderly.
  Looking at the question of the basic rate staying at 30 per cent. when the threshold is reduced, we must ask ourselves why the basic rate was ever reduced to 30 per cent. when the Government had to go to such extreme lengths in order to deny people the uprating of their allowances. We know that the 30 per cent rate was for the incentive effect. We do not hear much talk about incentives now. It seems that every now and again the Government believe that incentives matter and they lower the basic rate, or they lower the rate at top level, or adjust the higher thresholds, whatever they may be, and that is the last that we hear about it. The next thing we see is that the tax burden on the less-well-off starts to increase.
  The tax and prices index will race ahead. I am afraid that the Minister and his hon. Friends will be rather surprised if those who negotiate pay matters pay more attention to the retail price index than to the tax and prices index, which has been confirmed as the most relevant to their particular case.
  Many of us find it especially offensive that in a Bill that imposes such burdens on those at the lower end of the scale
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  those paying capital transfer tax on lifetime gifts will have the maximum obligation reduced from 70 per cent. to 50 per cent. If, for example, there is a lifetime transfer of £2 million, the tax will be reduced from 70 per cent. to 50 per cent. and every 10 years the slate is wiped clean and the accumulation principle for lifetime transfers comes to an end. We must oppose this. This is clearly wrong, without the shame of adding to the burden of the bulk of population and to that of older people.
  We are not opposed to the taxation of benefits, but we understand that last year the Government failed to increase benefits by 5 per cent. We need that money back. The money was withheld because there was no method of increasing taxation. We thought that the argument, the practice and the principle were wrong, but we understood that there was a basis that we could understand and on which we could disagree. That does not apply now that we are proceeding to the taxation of benefits.
  The most iniquitous and spiteful part of this section of the Bill concerns the repayment of income tax. If a person is on strike and not in receipt of any benefit he will be denied the refund of the tax which is his due. For example, a person might be earning £100 a week at the beginning of a tax year. His tax might be about £16 a week. If he is a member of a union that is in dispute with his employer it is possible that his earnings for the second week of the year will be zero. As a result, his income for the two weeks is an average of £50 a week and he is entitled to a refund of £14. That money belongs not to the State but to the person who is exercising the right given by Parliament to refuse to work when he does not wish to do so.
  Those who are in that position are not on schedule D. The State withdraws the money before the individual receives it. It keeps it and refuses to give it to him. The schedule D system allows the self-employed to keep their money and to pay the tax on it many months later. Payment is often made after discussion and negotiation. We understand the inequities that apply between a person on schedule D and a person on schedule E. Every one of us is rather ashamed of the difference, but the system is workable. We know that the system has to be a little rough and ready in certain areas. Of course, schedule D taxpayers have a claim to a wide range of expenses and the right to pay tax many months later. In a period of inflation, that is worth money. By withholding the tax, the capital may be put to use.
  Those who are in the pay-as-you-earn system must pay on the nail. There is a brush-off from the Revenue if the individual so much as attempts to obtain tax relief that goes outside the most rigorously designed list of expenses. There is the danger that the difference in the systems can lead to the contempt of the tax system. The Bill uses tax as a means of punishment. The clause prevents access to one's own money. If this is accepted, there is only a short step to take before the Revenue withholds other moneys belonging to strikers, such as national savings. The principle is the same. It is their money and the State has the mechanism to pay out, but it refuses to do so.
  Under clause 27 the social security department may wish to check on the tax that a person pays. A letter may be written to a one-parent family, to a mother who has a part-time job.
  The officer notifies her that she has received a benefit which is worth so much. According to clause 28, if she does not make an objection within 30 days, any objection made at a later stage will not be valid. Many such people

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  are not used to writing letters. They are not used to dealing with officialdom. They are not like the Minister of State, who is used to dealing with such matters. Those people are suspicious of officials and are much in awe of them. They may not have kept any records of such benefits. They do not have filing cabinets. They are people who are under pressure from events and circumstances and are more to be pitied than anything else, and are to be assisted.
  In such cases, a kindly person may help out and discover that an error has been made by the benefit officer—the social security officer, for example. He may take up that error. I shall read out clause 28(2) in order to convey its full horror. It states that if no objection is made within 30 days.
  "that amount shall not be questioned in any appeal against any assessment in respect of income including that amount."
  However right the original figure may be, it is intolerable that we can act in that way. However right the poor, unfortunate claimant may be, according to the subsection he is not entitled to contest officialdom's view. That must not and can never be the law of our country. We shall vigorously seek to oppose it.
  Many of us had hoped to see a suspension of the operations of the Government in relation to their control over the economy, and a move towards some inflation of demand. At any rate, we hoped for a suspension of the axe when unemployment was over 10 per cent. About one-sixth of 16 to 19 year-olds are unemployed. We have never had such an experience before. Before the war there were always a number of dead-end jobs for such people—errand boys, and so on. The social consequences which will arise from having no jobs for our young people will take us by surprise and will lead to devestating effects.
  It was said that destocking would come to an end in the second half of 1981. The Financial Secretary said that the upturn would come in January or February. In the Red Book we read that output would be increasing by½ per cent. I am always suspicious of½ percent. increases, particularly when there is a footnote. One sees the reservations in the footnote and one can see that it is no more than whistling in the wind, as many hon. Members have said.
  Iain Macleod once said that a Budget that was cheered in April tended to look unattractive in July. The Budget looked bad in March and it looks deplorable now. The Finance Bill has proved to be worse than the Budget, and we shall vote against it tonight.
  9.34 pm
  The Minister of State, Treasury (Mr. Peter Rees): It is inevitable and perhaps right that a substantial Finance Bill should have generated such a substantial and wide-ranging debate. We have moved from the grand sweep of macro-economics to a more detailed consideration of the Finance Bill itself.
  I make no apology, not even to my right hon. Friend the Member for Crosby (Sir G. Page), for the fact that this is a long Finance Bill. It is slightly shorter than that of 1965. I am glad that we were able to see, if only momentarily, the right hon. Member for Cardiff, South-East (Mr. Callaghan), who introduced that Finance Bill, gracing our debates.
  Our objective is still a tax regime of lower rates, greater simplicity and fewer reliefs, but I doubt whether hon. Members, particularly my hon. Friends, would ask us to eliminate the considerable number of special reliefs and
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  provisions, which undoubtedly complicate the statute book but which serve a distinct purpose, until we have moved further down the route which we mapped out for the country in the summer of 1979 and which was so singularly approved by the electorate.
  I do not know whether it deserves a long analysis, but I turn briefly to the speech of the right hon. Member for Stepney and Poplar (Mr. Shore). I hope that he will not think me discourteous, but it was a rehash of his speech on the Budget. He itemised five distinct points, and. in doing so he had the almost apocalyptic support of my hon. Friend the Member for Horncastle (Mr. Tapsell), who perhaps gave him a little more intellectual substance than any of his right hon. and hon. Friends gave him.
  The right hon. Gentleman said that the Budget was deflationary. We have heard that criticism from many parts of the House, but it does not automatically follow that that makes it a bad Budget. I shall not enter into the semantic debate that was started on the Opposition Benches, because I am not sure whether it advances an understanding of the issues involved. However,] remind the right hon. Gentleman that our fiscal measures are designed to redress the balance between the personal and the corporate sectors. I do not know whether he disputes that as a worthy objective. It is perfectly possible to envisage growth within the money supply figures that we have set.
  The right hon. Gentleman then referred to the burden of increasing costs. I remind the House that there has been a rapid response by the Chancellor and the Secretary of State for Energy to the NEDC task force, and the right hon. Gentleman will recall the measures of alleviation that my right hon. and learned Friend proposed in the Budget debate. Beyond that, the increase in the retail price index likely to flow from the increase in indirect taxes is slightly less than 2 per cent.
  The right hon. Gentleman said that we had singled out particular industries, but he was evasive when pressed. He approves of the special levy on bank profits and the supplementary petroleum duty. He harped a little on beer, but had the Labour Administration put up the duty on beer at the same rate as the duty on other consumer goods we should not have been in this predicament.
  The right hon. Gentleman and various of his hon. Friends who have a personal interest in the issue, as they were involved in the original measure, attacked with all the sound and fury at their flaccid command our proposals for mitigating the impact of capital transfer tax. The right hon. Gentleman suggested that a further measure of redistribution of assets was called for, so will he answer my question? Is a wealth tax still on the menu that the Labour Party is offering the country? Is the right hon. Gentleman prepared to answer "Yes" or "No"? I shall willingly give way to him. My hon. Friends realise that he needs considerable notice of such questions. His party is split in so many directions that he has to go back to Transport House to reconcile the divergent views before he can speak authoritatively from the Dispatch Box.
  Let me ask the right hon. Gentleman an easier question, which I put to him in the Budget debate. As it is difficult to reconcile his figuring, will he tell us what public sect or borrowing requirement he would regard as acceptable in 1981·82? I gave him plenty of opportunity to think about it. I even gave him a slight lead——
  Mr. Woolmer rose——
  Mr. Rees: Tempted though I am, I shall not give way
  Mr. Woolmer rose——
  Mr. Speaker: Order. I heard the Minister say that he would not give way.
  Mr. Woolmer: He said that he wanted to give way.
  Mr. Speaker: Order. I think that he caught the wrong fish.
  Mr. Rees: I must try to bait my hook again, Mr. Speaker. I intend no discourtesy to other right hon. and hon. Gentleman, but they do not speak with the full authority of the Labour Party in these matters.
  So that we, too, may do our figuring, we should like to know where the right hon. Gentleman stands on this issue. Until he tells us, his whole theme falls apart and we know how hollow is his criticism of the Budget.
  Mr. Walter Harrison: Does the hon. and learned Gentleman require guidance?
  Mr. Rees: That is a novel intervention in our debate. Of course I should like to hear the right hon. Gentleman's views but on some other occasion. Perhaps he will even be encouraged to give his evidence to the Treasury and Civil Service Committee. That, too, would be a novel diversion, but I do not wish to encourage him on this occasion. Nor, indeed, would I wish to encourage my hon. Friend the Member for Horncastle to supplement the views of the right hon. Member for Stepney and Poplar, because I suspect that on this occasion it must be the Labour Party's views that we hear and not those of my hon. Friend, however distinguished or apocalyptic they may be. I turn to the eloquent contribution of my right hon. Friend the Member for Worthing (Mr. Higgins)——
  Mr. Richard Wainwright rose——
  Mr. Rees: I shall not give way. I am moving to a new subject. I shall deal with the Liberal contribution in a moment. I am glad that there is at least an almost full Liberal Bench to contribute to the debate.
  Dr. Gilbert: Why is the Minister afraid to give way?
  Mr. Rees: I shall come to the right hon. Gentleman's puny contribution in due course. For the meantime, I shall make my own speech without assistance from him. It was almost nostalgic to see the right hon. Members for Heywood and Royton (Mr. Barnett), Dudley, East (Dr. Gilbert) and Ashton-under-Lyne (Mr. Sheldon) all concentrated in one debate. I was taken back, as, I am sure, was my right hon. Friend the Financial Secretary, to those keen debates on capital transfer tax in Committee Room 10. I shall come to their contributions in due course.
  As a matter of courtesy, I must say to my right hon. Friend the Member for Worthing that of course I appreciated the points that he made, but he seemed to be asking me to conduct some kind of exegetical examination of the speech of my right hon. Friend the Financial Secretary examining his own speech to the Institute of Fiscal Studies. Whichever right hon. Gentleman was unworthy enough to suggest that my right hon. Friend spoke only abroad should recognise that he has made his real lapidary contributions on the Floor of the House and to such distinguished bodies as the Institure of Fiscal Studies. However, I had better leave my two right hon. Friends to debate the particular points in their own time and their own place. I should be only a third onlooker to that Homeric contest.
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  My right hon. Friend the Member for Farnham (Mr. Macmillan) dealt with matters of more fiscal importance and reminded us of the importance of share incentive schemes. There I will give something to the Liberal Party. It was the Lib-Lab pact, which we must remember from time to time in our debates——
  Mr. Richard Wainwright: The golden age.
  Mr. Rees: I hope that those words will be written in letters of gold on the hon. Gentleman's election manifesto next time, but I suspect that he will be a little coy about his rather indelicate and indecent relationships with the Labour Party. However, they are a matter of history. It was the Lib-Lab pact that enabled the House to debate again the well-thought-out measures that were introduced reversing the actions of a previous Labour Administration and reviving share incentive schemes. My right hon. Friend the Member for Worthing played a distinguished part in reviving those measures. We came back to that issue last year and I dare say that we shall have occasion to look at it again.
  The right hon. Member for Huyton (Sir H. Wilson)—I hope that I do not sound presumptuous when I say how delighted we were to hear him make a contribution to the Finance Bill debate—invited us to look more closely at the report of his great committee. I found that report so gripping that I was able to read almost all 800 pages of it in the peace of the Tuscan hills last summer. I cannot say that I took his earlier point, but I have refreshed my memory of it.
  I hope that the right hon. Gentleman will recognise that we have deferred considerably to the recommendations of that committee. We have not been able to implement all of them, and some of them are not strictly budgetary matters. I hope that he will be the first to appreciate that we are, for instance, proposing to introduce measures to enable a company to purchase its own shares. I feel that that may adequately meet—although it may not entirely satisfy him—his interesting suggestion that companies should be able to raise equity capital in a redeemable form. I believe that the same objective can be met in that way.
  The right hon. Gentleman referred to discrimination in the over-the-counter market, and I was puzzled by that because I thought that by now the secondary market had been established. He invited us to consider the small firms investment companies. That is an interesting possibility. Again, I hope that when he has considered in more detail the business start-up provisions he will feel that we will channel a steady flow of investment into that area. If it is necessary to go further I shall be happy to debate the possibilities with him on some other occasion.
  We are introducing a loan guarantee scheme, and on publicity my right hon. and learned Friend the Chancellor announced with a fanfare that will, I hope, delight the heart of the right hon. Gentleman and the whole House, that there is to be a business opportunities programme. Finally, the right hon. Gentleman said a little wistfully that Aunt Agatha was dead. I have have news for him. She was revived last year. The kiss of life was given by my right hon. and learned Friend in last year's Finance Act, and now she is so active and rejuvenated that she will be able to take advantage of the business start-up provisions to the tune of £10,000 a year. I hope that the right hon. Gentleman is therefore reassured in his concern for Aunt Agatha.
  Sir Harold Wilson: The hon. and learned Gentleman referred to the over-the-counter market now doing what we hoped it would. Will he say in how may cases it has been involved? He can count them on the thumbs of two hands.
  Mr. Rees: I regret that I cannot answer the right hon. Gentleman without notice. This is not primarily a matter of Treasury responsibility. However, if I can extract the information I shall do so.
  The right hon. Member for Norwich, North (Mr. Ennals) cannot have noticed what we did for charities in the Finance Act last year or what we are doing for them in this Finance Bill. If he feels uneasy on this score it can only be because he was a distinguished Secretary of State for Social Services in the last Administration and was singularly unsuccessful in persuading his colleagues to do anything in that direction.
  Mr. Ennals: The point that I raised, and that the Minister recognised, is that we were dealing then with a VAT of half the current rate. That is why the problem exists.
  Mr. Rees: The rates were not half what they are now. They were 8 per cent. and 12½ per cent.
  The right hon. Member for Ashton-under-Lyne largely raised issues that I have already dealt with, but I shall come in due course to capital transfer tax.
  Mr. Robert Sheldon: Will the Minister of State also deal with the question of tolerances for women between the ages of 60 and 64 who are in receipt of State pensions?
  Mr. Rees: I recognise the sensitivity of that issue. However, it would be a bad precedent to increase those tolerances. I regret that we cannot do it.
  I turn to the two new taxes in the Finance Bill. In contrast to the right hon. Member for Leeds, East (Mr. Healey), we introduced the two taxes without any relish. The bank tax has been ventilated at length. I shall deal with the question whether the tax can be regarded as retrospective. I hope that the House will accept that no hon. Member is more sensitive about retrospection than I am. The tax is not retrospective, because it catches only banks that were in business on Budget day, although I admit that the amount of tax will be calculated by reference to chargeable deposits on three earlier dates. There are respectable precedents for that—corporation tax is one. The Finance Bill is not exceptional, in that it imposes a rate of corporation tax for 1980 by reference to accounting periods in that year.
  Mr. Budgen: Will the Minister deal with the Chancellor's suggestion that it is not a retrospective tax because he gave a warning to the banks that such a tax was possible when he spoke about it in the 1980 Budget? Will he compare that argument with the first of the "Rees rules" which he adumbrated in 1977 to guide the House in the Tories' attitude towards potential retrospection? The Minister said then that the warning must be precise in form. He stated clearly that that was the first of the rules that would guide the Tories in deciding whether there was retrospection.
  Mr. Rees: My hon. Friend knows that the rules, which unfortunately are associated with my name, have nothing to do with this case. The rules were devised to deal with tax avoidance. No one has pretended that what we are discussing is tax avoidance. I shall be delighted to debate tax avoidance in the context of certain provisions in the
  106
  Finance Bill. I rest my case on the basis that the way in which the tax is framed is respectable and precedented by corporation tax.
  We are sensitive to the need to balance two factors to ensure a proper return for the country from the exploitation of the North Sea. We are equally sensitive to the need not to discourage people from investing in the North Sea, where the circumstances are hazardous and the amount of capital that must be invested is enormous. A delicate balance must be struck. Such a balance was not struck by the last Administration. There was a perceptible pause when there was no investment in the North Sea.
  We shall have plenty of opportunity to debate the technicalities in Committee. If, whether by the oil companies or by any other source, a more constructive or sensitive tax regime can be devised, we shall be happy to come back next year. We are enacting this tax for only three accounting periods, which end in June next year
  Mr. Robert Sheldon: The Minister of State will recall that I mentioned the problem of those who were losing 5 per cent. as a result of the benefit cuts because the Government were waiting to bring in the taxation of benefits. Now that that taxation is being introduced will those cuts be restored? If so, when?
  Mr. Rees: The right hon. Gentleman knows that that taxation measure does not come into effect until the next financial year. We shall have plenty of opportunity to explore that point.
  Although we have had to devise two new taxes and to increase the yield of excise duty, the Bill also has a positive theme—to encourage investment and activity by businesses, particularly small businesses. I am sure that we shall carry the right hon. Member for Huyton on that.
  Mr. Sheerman: Peanuts.
  Mr. Rees: If the hon. Member for Huddersfield, East (Mr. Sheerman) looks through the record of the previous Administration he will search in vain for comparable measures. I remind the House of the new special income tax relief for investment in new trading companies. Some may crititcise it as too modest and too complex, but it is an unprecedented measure and it is right that we should move cautiously.
  I remind those who are concerned about the flexibility of the corporate sector of the demerger provisions that we introduced last year. We propose to move on in the next year to enable companies to purchase their own shares. We do not want to see large sums of capital locked inn) companies that have served their purpose. We shall be moving on that in parallel with the Companies Bill.
  We are providing relief for sums borrowed to invest in partnerships and co-operatives. I hope that that will encourage the Liberal Party and the Social Democratic Party. We propose to increase the industrial buildings allowance from 50 per cent. to 75 per cent. We can consider whether capital allowances should be increased further in the context of the Green Paper that will be produced in the next year. We have also liberalised the development land tax.
  The capital transfer tax has exercised the minds of those who were concerned in hatching it in the dog days of 1975. Although we have not yet achieved the capital taxation objectives set out in our manifesto—I remind the Opposition that we, too, have sacred manifesto

  107
  objectives—I hope that my hon. Friend the Member for Bath (Mr. Patten) will recognise that we clearly put our objectives to the country at the election and they were approved.
  The reduction of lifetime rates and the reduction of the accumulation period should encourage lifetime transfers, which is surely what the previous Administration wanted, since they introduced a special lifetime rate. Why should Labour Members complain about our carrying that theme a stage further?
  We hope that the relief that we propose for agricultural property will preserve a proper balance between let land and land in hand. Even the Opposition must recognise the fairness and desirability of that. If we want young men without capital or connections to enter farming we must surely not provide a fiscal penalty for landlords who let land.
  Of course we must go further, and next year we shall apply ourselves to the intricate problems of trust property. It is our stated objective to ensure that we are not a one-generation society and that capital transfer tax does not destroy the industrial and agricultural pattern of this country.
  My right hon. Friend the Member for Taunton (Mr. du Cann), writing to The Times on Saturday with all the authority of a former Chairman of the Public Accounts Committee and the current Chairman of the Treasury and Civil Service Select Committee, encouraged us to show imagination and determination. We are always suitably respectful of, and pay attention to, the massive contributions of those Committees, the memberships of which have been represented in the debate. We shall look forward to any advice that they feel able to give about those of the Government's activities which can be more rigorously and economically controlled.
  I hope that I can say that this Budget is one which shows determination and imagination—determination to match our needs and resources, and imagination to encourage the small business sector, the charities and the disabled. It is a Finance Bill which I commend to the House unhesitatingly.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 309, Noes 253

  Division No.154]

  [10 pm

  AYES

  Adley, Robert

  Biffen, Rt Hon John

  Aitken, Jonathan

  Biggs-Davison, John

  Alexander, Richard

  Blackburn, John

  Alison, Michael

  Blaker, Peter

  Amery, Rt Hon Julian

  Body, Richard

  Ancram, Michael

  Bonsor, Sir Nicholas

  Arnold, Tom

  Boscawen, Hon Robert

  Aspinwall, Jack

  Bottomley, Peter (W'wich W)

  Atkins, Rt Hon H.(S'thorne)

  Bowden, Andrew

  Atkins, Robert(Preston N)

  Boyson, Dr Rhodes

  Atkinson, David (B'm'th, E)

  Braine, Sir Bernard

  Baker, Kenneth(St. M'bone)

  Bright, Graham

  Baker, Nicholas (N Dorset)

  Brinton, Tim

  Banks, Robert

  Brittan, Leon

  Beaumont-Dark, Anthony

  Brooke, Hon Peter

  Bell, Sir Ronald

  Brotherton, Michael

  Bendall, Vivian

  Brown, Michael(Brigg & Sc'n)

  Benyon, Thomas (A'don)

  Browne, John (Winchester)

  Benyon, W. (Buckingham)

  Bruce-Gardyne, John

  Best, Keith

  Bryan, Sir Paul

  Bevan, David Gilroy

  Buchanan-Smith, Alick

  108

  Buck, Antony

  Hawkins, Paul

  Budgen, Nick

  Hawksley, Warren

  Burden, Sir Frederick

  Hayhoe, Barney

  Butcher, John

  Heddle, John

  Cadbury, Jocelyn

  Henderson, Barry

  Carlisle, John (Luton West)

  Higgins, Rt Hon Terence L.

  Carlisle, Kenneth (Lincoln)

  Hill, James

  Carlisle, Rt Hon M. (R'c'n)

  Hogg, Hon Douglas (Gr'th'm)

  Chalker, Mrs. Lynda

  Holland, Philip (Carlton)

  Channon, Rt. Hon. Paul

  Hooson, Tom

  Chapman, Sydney

  Hordern, Peter

  Churchill, W. S.

  Howe, Rt Hon Sir Geoffrey

  Clark, Hon A. (Plym'th, S'n)

  Howell, Rt Hon D. (G'ldf'd)

  Clarke, Kenneth (Rushcliffe)

  Howell, Ralph (N Norfolk)

  Clegg, Sir Walter

  Hunt, David (Wirral)

  Cockeram, Eric

  Hunt, John (Ravensbourne)

  Colvin, Michael

  Hurd, Hon Douglas

  Cope, John

  Irving, Charles (Cheltenham)

  Corrie, John

  Jenkin, Rt Hon Patrick

  Costain, Sir Albert

  Jessel, Toby

  Cranborne, Viscount

  Johnson Smith, Geoffrey

  Critchley, Julian

  Jopling, Rt Hon Michael

  Crouch, David

  Kaberry, Sir Donald

  Dean, Paul (North Somerset)

  Kershaw, Anthony

  Dickens, Geoffrey

  Kimball, Marcus

  Dorrell, Stephen

  King, Rt Hon Tom

  Douglas-Hamilton, Lord J.

  Kitson, Sir Timothy

  Dover, Denshore

  Knox, David

  du Cann, Rt Hon Edward

  Lamont, Norman

  Dunn, Robert (Dartford)

  Lang, Ian

  Durant, Tony

  Langford-Holt, Sir John

  Dykes, Hugh

  Lawrence, Ivan

  Eden, Rt Hon Sir John

  Lawson, Rt Hon Nigel

  Edwards, Rt Hon N. (P'broke)

  Lee, John

  Eggar, Tim

  Lennox-Boyd, Hon Mark

  Elliott, Sir William

  Lester, Jim (Beeston)

  Emery, Peter

  Lewis, Kenneth (Rutland)

  Eyre, Reginald

  Lloyd, Ian (Havant & W'loo)

  Fairbairn, Nicholas

  Lloyd, Peter (Fareham)

  Fairgrieve, Russell

  Loveridge, John

  Faith, Mrs Sheila

  Luce, Richard

  Farr, John

  Lyell, Nicholas

  Fenner, Mrs Peggy

  McCrindle, Robert

  Finsberg, Geoffrey

  Macfarlane, Neil

  Fisher, Sir Nigel

  MacGregor, John

  Fletcher, A. (Ed'nb'gh N)

  MacKay, John (Argyll)

  Fletcher-Cooke, Sir Charles

  Macmillan, Rt Hon M.

  Fookes, Miss Janet

  McNair-Wilson, M. (N'bury)

  Forman, Nigel

  McNair-Wilson, P. (New F'st)

  Fowler, Rt Hon Norman

  McQuarrie, Albert

  Fox, Marcus

  Madel, David

  Fraser, Rt Hon Sir Hugh

  Major, John

  Fraser, Peter (South Angus)

  Marland, Paul

  Fry, Peter

  Marlow, Tony

  Galbraith, Hon T. G. D.

  Marten, Neil (Banbury)

  Gardiner, George (Reigate)

  Mates, Michael

  Gardner, Edward (S Fylde)

  Maude, Rt Hon Sir Angus

  Garel-Jones, Tristan

  Mawby, Ray

  Gilmour, Rt Hon Sir Ian

  Mawhinney, Dr Brian

  Glyn, Dr Alan

  Maxwell-Hyslop, Robin

  Goodhart, Philip

  Mayhew, Patrick

  Goodlad, Alastair

  Mellor, David

  Gorst, John

  Meyer, Sir Anthony

  Gow, Ian

  Miller, Hal (B'grove)

  Gower, Sir Raymond

  Mills, Iain (Meriden)

  Grant, Anthony (Harrow C)

  Mills, Peter (West Devon)

  Gray, Hamish

  Miscampbeli, Norman

  Greenway, Harry

  Moate, Roger

  Grieve, Percy

  Monro, Hector

  Griffiths, E.(B'y St. Edm'ds)

  Montgomery, Fergus

  Griffiths, Peter Portsm'th N)

  Moore, John

  Grist, Ian

  Morgan, Geraint

  Grylls, Michael

  Morris, M. (N'hampton S)

  Gummer, John Selwyn

  Morrison, Hon C. (Devizes)

  Hamilton, Hon A.

  Morrison, Hon P. (Chester)

  Hamilton, Michael (Salisbury)

  Mudd, David

  Hampson, Dr Keith

  Murphy, Christopher

  Hannam, John

  Myles, David

  Haselhurst, Alan

  Neale, Gerrard

  Havers, Rt Hon Sir Michael

  Nelson, Anthony

  109

  Neubert, Michael

  Sproat, Iain

  Newton, Tony

  Squire, Robin

  Normanton, Tom

  Stainton, Keith

  Nott, Rt Hon John

  Stanbrook, Ivor

  Onslow, Cranley

  Stanley, John

  Oppenheim, Rt Hon Mrs S.

  Stevens, Martin

  Osborn, John

  Stewart, Ian (Hitchin)

  Page, Rt Hon Sir G. (Crosby)

  Stewart, A.(E Renfrewshire)

  Page, Richard (SW Herts)

  Stokes, John

  Parkinson, Cecil

  Stradling Thomas, J.

  Parris, Matthew

  Tapsell, Peter

  Patten, Christopher (Bath)

  Taylor, Robert (Croydon NW)

  Patten, John (Oxford)

  Taylor, Teddy (S'end E)

  Pattie, Geoffrey

  Tebbit, Norman

  Pawsey, James

  Temple-Morris, Peter

  Percival, Sir Ian

  Thomas, Rt Hon Peter

  Pink, R. Bonner

  Thompson, Donald

  Pollock, Alexander

  Thorne, Neil (Ilford South)

  Porter, Barry

  Thornton, Malcolm

  Prentice, Rt Hon Reg

  Townend, John (Bridlington)

  Price, Sir David (Eastleigh)

  Townsend, Cyril D, (B'heath)

  Proctor, K. Harvey

  Trippier, David

  Pym, Rt Hon Francis

  Trotter, Neville

  Raison, Timothy

  van Straubenzee, W. R.

  Rathbone, Tim

  Vaughan, Dr Gerard

  Rees, Peter (Dover and Deal)

  Viggers, Peter

  Rees-Davies, W. R.

  Waddington, David

  Renton, Tim

  Wakeham, John

  Rhodes James, Robert

  Waldegrave, Hon William

  Rhys Williams, Sir Brandon

  Walker, Rt Hon P.(W'cester)

  Ridley, Hon Nicholas

  Walker, B. (Perth)

  Rifkind, Malcolm

  Walker-Smith, Rt Hon Sir D.

  Rippon, Rt Hon Geoffrey

  Wall, Patrick

  Roberts, M. (Cardiff NW)

  Waller, Gary

  Roberts, Wyn (Conway)

  Walters, Dennis

  Rossi, Hugh

  Ward, John

  Rost, Peter

  Warren, Kenneth

  Royle, Sir Anthony

  Watson, John

  Sainsbury, Hon Timothy

  Wells, John (Maidstone)

  St. John-Stevas, Rt Hon N.

  Wells, Bowen

  Scott, Nicholas

  Wheeler, John

  Shaw, Giles (Pudsey)

  Whitelaw, Rt Hon William

  Shaw, Michael (Scarborough)

  Whitney, Raymond

  Shelton, William (Streatham)

  Wickenden, Keith

  Shepherd, Colin (Hereford)

  Wiggin, Jerry

  Shepherd, Richard

  Wilkinson, John

  Shersby, Michael

  Williams, D. (Montgomery)

  Silvester, Fred

  Winterton, Nicholas

  Sims, Roger

  Wolfson, Mark

  Skeet, T. H. H.

  Young, Sir George (Acton)

  Smith, Dudley

  Younger, Rt Hon George

  Speed, Keith

  Speller, Tony

  Tellers for the Ayes:

  Spence, John

  Mr. Spencer Le Marchant and Mr. Anthony Berry.

  Spicer, Jim (West Dorset)

  Spicer, Michael (S Worcs)

  NOES

  Abse, Leo

  Callaghan, Rt Hon J.

  Adams, Allen

  Callaghan, Jim (Midd't'n & P)

  Allaun, Frank

  Campbell, Ian

  Alton, David

  Campbell-Savours, Dale

  Anderson, Donald

  Canavan, Dennis

  Archer, Rt Hon Peter

  Cant, R. B.

  Ashley, Rt Hon Jack

  Carmichael, Neil

  Ashton, Joe

  Carter-Jones, Lewis

  Atkinson, N(H'gey)

  Cartwright, John

  Barnett, Guy (Greenwich)

  Clark, Dr David (S Shields)

  Barnett, Rt Hon Joel (H'wd)

  Cocks, Rt Hon M. (B'stol S)

  Beith, A. J.

  Cohen, Stanley

  Benn, Rt Hon A. Wedgwood

  Coleman, Donald

  Bidwell, Sydney

  Concannon, Rt Hon J. D.

  Booth, Rt Hon Albert

  Conlan, Bernard

  Boothroyd, Miss Betty

  Cook, Robin F.

  Bottomley, Rt Hon A.(M'b'ro)

  Cowans, Harry

  Bradley, Tom

  Cox, T. (W'dsw'th, Toot'g)

  Bray, Dr Jeremy

  Craigen, J. M.

  Brocklebank-Fowler, C.

  Crawshaw, Richard

  Brown, R. C. (N'castle W)

  Crowther, J. S.

  Brown, Ronald W. (H'ckn'y S)

  Cryer, Bob

  110

  Cunliffe, Lawrence

  Jones, Dan (Burnley)

  Cunningham, G. (Islington S)

  Kaufman, Rt Hon Gerald

  Cunningham, Dr J. (W'h'n)

  Kerr, Russell

  Davidson, Arthur

  Kilfedder, James A.

  Davies, Rt Hon Denzil (L'lli)

  Lambie, David

  Davies, Ifor (Gower)

  Lamborn, Harry

  Davis, Clinton (Hackney C)

  Lamond, James

  Davis, T. (B'ham, Stechf'd)

  Leadbitter, Ted

  Deakins, Eric

  Lestor, Miss Joan

  Dean, Joseph (Leeds West)

  Lewis, Arthur (N'ham NW)

  Dempsey, James

  Lewis, Ron (Carlisle)

  Dewar, Donald

  Litherland, Robert

  Dixon, Donald

  Lofthouse, Geoffrey

  Dobson, Frank

  Lyon, Alexander (York)

  Dormand, Jack

  Lyons, Edward (Bradf'd W)

  Douglas, Dick

  McDonald, Dr Oonagh

  Douglas-Mann, Bruce

  McElhone, Frank

  Dubs, Alfred

  McGuire, Michael (Ince)

  Duffy, A. E. P.

  McKay, Allen (Penistone)

  Dunn, James A.

  McKelvey, William

  Dunnett, Jack

  MacKenzie, Rt Hon Gregor

  Dunwoody, Hon Mrs G.

  Maclennan, Robert

  Eadie, Alex

  McMahon, Andrew

  Eastham, Ken

  McNally, Thomas

  Edwards, R. (W'hampt'n S E)

  McNamara, Kevin

  Ellis, R. (NE D'bysh're)

  McTaggart, Robert

  Ellis, Tom (Wrexham)

  McWilliam, John

  English, Michael

  Magee, Bryan

  Ennals, Rt Hon David

  Marks, Kenneth

  Evans, Ioan (Aberdare)

  Marshall, D(G'gow S'ton)

  Evans, John (Newton)

  Marshall, Dr Edmund (Goole)

  Field, Frank

  Marshall, Jim (Leicester S)

  Fitch, Alan

  Martin, M(G'gow S'bum)

  Fitt, Gerard

  Mason, Rt Hon Roy

  Flannery, Martin

  Maxton, John

  Fletcher, Raymond (Ilkeston)

  Meacher, Michael

  Foot, Rt Hon Michael

  Mellish, Rt Hon Robert

  Forrester, John

  Mikardo, Ian

  Foster, Derek

  Millan, Rt Hon Bruce

  Foulkes, George

  Miller, Dr M. S. (E Kilbride)

  Fraser, J. (Lamb'th, N'w'd)

  Mitchell, Austin (Grimsby)

  Freeson, Rt Hon Reginald

  Mitchell, R. C. (Soton Itchen)

  Freud, Clement

  Morris, Rt Hon A. (W'shawe)

  Garrett, John (Norwich S)

  Morris, Rt Hon C. (O'shaw)

  Garrett, W. E. (Wallsend)

  Morris, Rt Hon J. (Aberavon)

  George, Bruce

  Morton, George

  Gilbert, Rt Hon Dr John

  Moyle, Rt Hon Roland

  Ginsburg, David

  Newens, Stanley

  Golding, John

  Oakes, Rt Hon Gordon

  Gourlay, Harry

  Ogden, Eric

  Graham, Ted

  O'Halloran, Michael

  Grant, George (Morpeth)

  O'Neill, Martin

  Grant, John (Islington C)

  Orme, Rt Hon Stanley

  Grimond, Rt Hon J.

  Owen, Rt Hon Dr David

  Hamilton, W. W. (C'tral Fife)

  Palmer, Arthur

  Hardy, Peter

  Parker, John

  Harrison, Rt Hon Walter

  Pavitt, Laurie

  Hart, Rt Hon Dame Judith

  Pendry, Tom

  Hattersley, Rt Hon Roy

  Penhaligon, David

  Haynes, Frank

  Powell, Raymond (Ogmore)

  Heffer, Eric S.

  Prescott, John

  Hogg, N. (E Dunb't'nshire)

  Price, C. (Lewisham W)

  Home Robertson, John

  Race, Reg

  Homewood, William

  Radice, Giles

  Hooley, Frank

  Rees, Rt Hon M (Leeds S)

  Horam, John

  Richardson, Jo

  Howell, Rt Hon D.

  Roberts, Albert (Normanton)

  Howells, Geraint

  Roberts, Allan (Bootle)

  Huckfield, Les

  Roberts, Ernest (Hackney N)

  Hudson Davies, Gwilym E.

  Roberts, Gwilym (Cannock)

  Hughes, Mark (Durham)

  Robertson, George

  Hughes, Roy (Newport)

  Robinson, G. (Coventry NW)

  Janner, Hon Greville

  Rodgers, Rt Hon William

  Jay, Rt Hon Douglas

  Rooker, J. W.

  John, Brynmor

  Roper, John

  Johnson, James (Hull West)

  Ross, Ernest (Dundee West)

  Johnson, Walter (Derby S)

  Ross, Stephen (Isle of Wight)

  Johnston, Russell (Inverness)

  Rowlands, Ted

  Jones, Rt Hon Alec (Rh'dda)

  Ryman, John

  Jones, Barry (East Flint)

  Sandelson, Neville

  111

  Sever, John

  Urwin, Rt Hon Tom

  Sheerman, Barry

  Varley, Rt Hon Eric G.

  Sheldon, Rt Hon R.

  Wainwright, E.(Dearne V)

  Shore, Rt Hon Peter

  Wainwright, R. (Colne V)

  Short, Mrs Renée

  Watkins, David

  Silkin, Rt Hon J. (Deptford)

  Weetch, Ken

  Skinner, Dennis

  Wellbeloved, James

  Smith, Rt Hon J. (N Lanark)

  Welsh, Michael

  Snape, Peter

  White, Frank R.

  Soley, Clive

  White, J. (G'gow Pollok)

  Spearing, Nigel

  Whitehead, Phillip

  Spriggs, Leslie

  Whitlock, William

  Stallard, A. W.

  Wigley, Dafydd

  Stewart, Rt Hon D. (W Isles)

  Williams, Sir T. (W'ton)

  Stoddart, David

  Wilson, Gordon (Dundee E)

  Stott, Roger

  Wilson, Rt Hon Sir H. (H'ton)

  Strang, Gavin

  Wilson, William (C'try SE)

  Straw, Jack

  Winnick, David

  Summerskill, Hon Dr Shirley

  Woodall, Alec

  Thomas, Dafydd (Merioneth)

  Woolmer, Kenneth

  Thomas, Jeffrey (Abertillery)

  Wrigglesworth, Ian

  Thomas, Mike (Newcastle E)

  Young, David (Bolton E)

  Thomas, Dr R. (Carmarthen)

  Thorne, Stan (Preston South)

  Tellers for the Noes:

  Tilley, John

  Mr. James Hamilton and Mr. Hugh McCartney.

  Tinn, James

  Torney, Tom

  Question accordingly agreed to.
  Bill read a Second Time.

  Finance Bill

    BUSINESS OF THE HOUSE
    Ordered,
    That, at this day's sitting, the English Industrial Estates Corporation Bill [Lords], the Film Levy Finance Bill [Lords], the National Film Finance Corporation Bill [Lords], the Public Passenger Vehicles Bill [Lords] and the Judical Pensions Bill [Lords] may be proceeded with, though opposed, until any hour.—[Lord James Douglas-Hamilton.]

    FINANCE BILL
    Ordered,
    That Clauses 1, 4, 19, 23, 27, 29, 88, 89 and 122 and Schedules 1, 2 and 11 be committed a Committee of the whole House:
    That the remainder of the Bill be committed to a Standing Committee;
    That, when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Sir Geoffrey Howe.]

  English Industrial Estates Corporation Bill [Lords]
  Order for Second Reading read.
  10.14 pm
  The Solicitor-General (Sir Ian Percival): I beg to move, That the Bill be now read a Second time.
  This is the first consolidation measure to be considered this Session by this House, and it continues the process of bringing into one Act the statute law on a given subject for the benefit of all those who have occasion to use the statute book.
  The Bill consolidates the law relating to the English Industrial Estates Corporation. It is pure consolidation—that is to say, it does not amend the existing law in any way. It has been scrutinised by the Joint Committee on Consolidation Bills, which found nothing to draw to Parliament's attention. Nor do I.
  10.15 pm
  Mr. Peter Archer: If I detain the House for one moment on the Bill it may spare it having to listen to me on the four successive Bills. I intervene to say only two things. First, I think that I am right in saying that this is the first consolidation measure to reach the House since Lord Roskill assumed the chair of the Joint Committee on Consolidation Bills. On behalf of the Opposition, I welcome him to that chair. The Joint Committee continues to perform sterling service, not always with national acclaim. We on the Labour Benches would like to offer our congratulations and welcome to Lord Roskill on assuming that office.
  Secondly, I think that, on the first consolidation measure debate in this Parliament, when I had the pleasure of welcoming the hon. and learned Gentleman to his high office I mentioned that the Opposition would never seek to take any action on law reform measures that might discourage the Government from producing them. I repeat that invitation. I hope that the hon. and learned Gentleman will agree that we have lived up to that promise.
  Where law reform measures are controversial the House will clearly wish to debate them. One can understand that the Government might be a little reluctant to give parliamentary time to debate them. There are many worthwhile law reform measures which are probably no more controversial than consolidation Bills of this kind. If the Government were minded to bring them forward, I think they would find that the Opposition would be no less time-consuming and welcoming than on this Bill. I welcome the Bill on behalf of the Opposition.
  10.17 pm
  Mr. Barry Sheerman: I do not intend to speak at length on this matter. My scrutiny of the Bill leads me to worry that there has been no change in a situation that I found when I first came to the House. I discovered that there was no provision for the English Industrial Estates Corporation to anticipate legislation passed by the House. On becoming a Member of the House in May 1979, I was soon awakened to the real facts of life by the Secretary of State for Industry, who deprived most of West Yorkshire of intermediate development status.
  114
  This had severe consequences for the economic and industrial life of my constituency and of West Yorkshire in general.
  Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. I realise that the hon. Gentleman has had a disappointing day, but he must not enter into the merits of the Bill. This is a pure consolidation measure.
  Mr. Sheerman: I apologise, Mr. Deputy Speaker. I would merely like to point to a number of clauses within the measure—whether or not it is a consolidation measure—where it seems to me that the English Industrial Estates Corporation has withheld permission to develop any more estates within West Yorkshire in anticipation of the withdrawal of intermediate status, which is against not only the spirit but the letter of the Bill. I ask the Minister to help us by pointing out where in the Bill there is permission for the corporation to deny the people of West Yorkshire and industry in West Yorkshire the rights that exist under other enabling legislation. I should like to hear how the corporation can deprive us of that right.
  Mr. Deputy Speaker: Order. I hope that the Minister will not attempt to make any such clarification. He would be out of order, as the hon. Gentleman has been out of order.
  10.19 pm
  Mr. K. J. Woolmer: I understand that we are able to discuss only whether the Bill consolidates the law, as opposed to the merits or otherwise of the proposals. I want to know its effect in relation to existing law and I seek clarification of how, that is interpreted specifically in relation to clause 2(1), (4) and (6). When the law is consolidated, does it deal with a matter of interpretation that has been put to me by the West Yorkshire metropolitan council? It appears to the council that the English Industrial Estates Corporation frequently says that its functions are not to act in competition with the private sector. Thus, where sufficient development has already been generated by market forces, the corporation would not wish to be involved. In other words, the corporation would not get involved where the private sector was already involved.
  On the other hand, when local authorities put proposals to the corporation, the corporation applies criteria very much as though it were a private business—namely, it becomes involved only if the developments are profitable. I am told that the way in which the corporation acts is not the way that Parliament intends. As a result, in Batley the corporation is not carrying out the pump-priming exercise that Parliament expects.
  I want to ask the Minister two questions. First, is he satisfied that this consolidation Bill encourages the corporation to act in circumstances that are additional to the way in which the private sector would otherwise behave? In that regard, what particular directions in clause 2(4) and (6) would the Secretary of State use in authorising the corporation to behave in a way additional to that of the private sector?
  Secondly, do the Government recognise the problems of those areas losing assisted area status? Section 7 Industry Act grants—local employment Act grants—are being extended to take account of the loss of assisted area status in such a way that, provided that grant application is submitted by 31 July 1982, transitional arrangements

  115
  will cover development if it takes place by 1984. Will the Minister confirm whether, in this consolidation Bill, the English Industrial Estates Corporation will be able to operate within such guidelines and provide finance for projects in an area that is due to lose its intermediate area status in 1982, as long as the scheme is agreed by July 1982? In other words, would the corporation be able to act as long as the scheme was carried out by 1984?
  I ask that question because in West Yorkshire, and in Batley in particular, the possibility of the corporation carrying out the developments would be an essential part of the need to attract industry to the area. We are concerned that the Secretary of State appears to have certain powers but that it is not clear whether they are being used in the way intended.
  The Solicitor-General: I am sure that both the hon. Member for Huddersfield, East (Mr. Sheerman) and the hon. Member for Batley and Morley (Mr. Woolmer) know as well as I do that it is not within my province to answer their questions, though I understand their desire to air them, and it is fair enough that they should do so.
  I echo the welcome of the right hon. and learned Member for Warley, West (Mr. Archer) to Lord Roskill. We have had a succession of chairmen who have done us proud, and Lord Roskill has already shown the measure of what he will do.
  On the question of law reform, we look forward to discussing on other occasions matters of interest such as those that the right hon. and learned Gentleman referred to.
  For the moment, I ask the House to concentrate its mind on the proposition before us, which is that the Bill be now given its Second Reading.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. Cope.]
  Bill immediately considered in Committee.
  [MR. BRYANT GODMAN IRVINE in the Chair]
  Clause 1 ordered to stand part of the Bill.

  English Industrial Estates Corporation Bill [Lords]
    Clause 2

      FUNCTIONS OF THE CORPORATION
      Question proposed, That the clause stand part of the Bill.
      Mr. Woolmer: I do not wish to detain the Committee, but, although I understand the technicalities, the response to my question on Second Reading was unsatisfactory, certainly to my constituents. I drew attention to the way in which matters have apparently been consolidated in the clause. I think that the Committee will agree that the Secretary of State's powers set out in the clause are wide-ranging. They relate to the kind of issue to which I drew attention.
      I accept that the Solicitor-General may not be able to give an immediate response, but the way in which operations are being carried out and the interpretations of the consolidation——
      The First Deputy Chairman: Order. On a consolidation measure, the hon. Gentleman cannot discuss the merits of the Bill. It is purely a question whether clause 2 as it stands should be consolidated in the Bill.
      Mr. Woolmer: I apologise, Mr. Godman Irving, but I hope that you will agree that it is of some importance that I should understand what the clause means in relation to how it has been understood in the past. However, perhaps I am wrong——
      The First Deputy Chairman: The hon. Gentleman is wrong. That is not what we are debating. We are debating whether the clause should stand part of the Bill.
      Mr. Sheerman: What places both me and my hon. friend the Member for Batley and Morley (Mr. Woolmer) in a quandary is that we do not wish to oppose the Bill but we seem to be forced into opposing certain clauses because we are very disturbd about some of the activities that have been going on within the corporation as they affect West Yorkshire. We have not had much guidance from the Chair on Second Reading. In this Committee stage, Mr. Godman Irvine, perhaps you could give a little guidance as to how we may object to clauses which we find harmful to the interests of our constituents.
      The First Deputy Chairman: I can assist the hon. Gentleman. This is precisely the law as it stands today. There is no question about debating the law. It is merely a question whether it is more convienient to have it in one Bill.
      10.30 pm
      The Solicitor-General: Perhaps I may say that my responsibility is to satisfy the House of Commons that this measure is pure consolidation. I entirely accept that responsibility. We have had a very happy relationaship over these debates. It is important that it should be recognised that that is the Minister's responsibility. I shall never shirk that responsibility.
      The effect of the law is another matter altogether. All that is at issue here is the convenience of having it in one Bill. That is undoubted. As the right hon. and learned Member for Warley, West (Mr. Archer) would confirm, my responsibility is to satisfy myself, and therefore the House of Commons, that we are not making any changes in the law. I assure the Committee about that in connection with the clause. I hope that we can make progress on that basis.
      Mr. Woolmer: I have no wish to detain the Committee, and I do so only because this is a matter of considerable importance to my constituency. As to subsection (6), in guiding us in knowing whether that consolidates what was previously the law as I understand it, I ask the Minister to indicate on how many occasions the powers under that subsection have been applied. If the answer is "None", will the Minister assure us that this is a consolidation?
      The First Deputy Chairman: Order. Again, I fear that that is not in order. The Solicitor-General has already explained clearly that it is purely a question of consolidation. This is the law, and it is only a question whether we should have it in the one Bill.
      The Solicitor-General: Of course I cannot tell the hon. Gentleman what he asks. If he had asked me the question before tonight, I might have been able to do so. I am sure

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      that he has been a Member long enough to know that we do not all reckon to answer every question off the cuff. We would be very silly if we did so. I am here to assure the House of Commons on one thing: that the Bill merely consolidates the law as it is. That assurance I give. I hope that we can make progress on that basis.
      Mr. Archer: In an effort to be helpful, perhaps I may make a suggestion to the Solicitor-General. Historically, I think, on consolidation measures there has been some argument whether, when there is an ambiguity in the existing law, that ambiguity should be deliberately perpetuated in the consolidation measure or whether an attempt should be made to resolve it.
      I think that my hon. Friends the Members for Batley and Morley (Mr. Woolmer) and for Huddersfield, East (Mr. Sheerman) are suggesting that there may be an ambiguity in the existing law. If the Solicitor-General were to indicate that he would draw that to the attention of the Secretary of State, it may be as much progress as we can hope to make tonight. It may be a method of satisfying the Committee.
      Mr. Sheerman: I welcome the comments of my right hon. and learned Friend the Member for Warley, West (Mr. Archer). He has correctly indicated the point that disturbs my hon. Friend the Member for Batley and Morley (Mr. Woolmer) and myself. We thought that we understood what the Bill meant. The Bill led us to understand that the corporation could act legally in our constituencies and in West Yorkshire until intermediate development status was withdrawn, but we understood from the original legislation that this was not allowed. We do not want this ambiguity to be perpetuated—
      The First Deputy Chairman: Order. The hon. Gentleman is endeavouring to debate another Bill. We are repeating the section that appeared in the original measure. That we cannot debate further, other than to ask whether it should be in the Bill.
      Mr. Sheerman: I apologise, Mr. Godman Irvine, for the persistence of myself and my hon. Friends. It seemed to be suggested by the Solicitor-General that certain hon. Members were second-class citizens and that unless one is a solicitor one cannot participate in debates on consolidation measures.
      The Solicitor-General: That is not right. I have been in this place a long time and I know that when one makes a point it is made no stronger if it is repeated on umpteen occasions. The hon. Gentleman knows that the point is on the record. I have no doubt that it will be considered. My job is to assure the Committee that this measure repeats the law as it is and makes no change. Labour Members have argued their case firmly, and I suggest that it becomes no stronger by unlimited repetition.
      Question put and agreed to.
      Clause 2 ordered to stand part of the Bill.
      Clauses 3 to 10 ordered to stand part of the Bill.
      Schedules 1 and 2 agreed to.
      Bill reported, without amendment.
      Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading) and agreed to.
      Bill accordingly read the Third time and passed, without amendment.

  Film Levy Finance Bill [Lords]
  Order for Second reading read.
  10.37 pm
  The Solicitor-General (Sir Ian Percival): I beg to move, That the Bill be now read a Second time.
  The Bill consolidates the Cinematograph Films Act 1957 and the succeeding measures set out in schedule 2, which make provision far a levy to be imposed on exhibitors of films and for the British Film Fund Agency to make payments out of the proceeds of the levy for purposes connected with the British film industry. It has been considered by the Joint Committee, which was satisfied that the measure was pure consolidation. I as sure the House that I am so satisfied.
  10.38 pm
  Mr. Bob Cryer: We have received the assurance that the law is not being changed, and that is important. However, there is more to consolidation than merely not changing the law. The purpose is to get rid of any items in the law that have fallen into desuetude and to place the law into a more convenient order and arrangement. Various measures should be in one Act rather than scattered throughout as many as 20 or 30.
  What has been the purpose of this consolidation? The Films Act 1980 is now split into three measures. In this Bill sections 2, 4 and 9(1)(b) of the 1980 Act are repealed and in the National Film Finance Corporation Bill some other sections are repealed. It is very recent legislation, as the title clearly indicates. Some sections of the 1980 Act remain alive.
  I should have thought that on the basis of consolidation, for the convenience of the users of the legislation, which must be an element, it would have been wiser not to have divided the film levy from a body such as the National Film Finance Corporation. In the 1980 Act, many of the important elements—the film levy and the operation of the National Film Finance Corporation—were contained in one Act, which is surely more convenient than being scattered throughout three.
  I understand and appreciate that the consolidating Committee has gone through and has repealed a number of items, which is useful and of advantage. However, why did it not go further and consolidate all the film legislation into one consolidated Act? The levy, which is dealt with in the Bill, is also applied to the National Film Finance Corporation. The money which that corporation applies in the next consolidation measure derives most of its revenue from this consolidation measure. Therefore, I should have thought that the link was plain and that it would have been of benefit to the users to have the legislation in one Act rather than spread over three.
  Accepting that some consolidation has taken place, I wonder whether it has not been too separated and whether we could look forward to the production of one item, of legislation instead of three as now, which seems unnecessary.
  10.42 pm
  Mr. Teddy Taylor: I hope that the Minister will answer one small question.
  Why, in clause 9(2) of this consolidation Bill, have we defined a British film in terms of the Films Act 1960? I

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  appreciate that a consolidation Bill cannot change the law, but the interpretation of the law can depend on other legislation which has been passed since then. Since 1960, the European Communities Act and the Treaty of Accession have been passed. Will the Minister say whether a British film is still a British film or whether there is any content of the Treaty of Accession or of the European Communities Act, because of nondiscrimination, which would give a different legal interpretation of what was a British film? By declaring that British films should receive the help set out in the legislation, would we be contravening Community law on non-discrimination?
  10.43 pm
  The Solicitor-General: There may be arguments in favour of what the hon. Member for Keighley (Mr. Cryer) said. The decision that was taken was that the convenience lay in having a number of Acts consolidated into these two Acts. I am sure that the hon. Member will agree that that is an improvement. There are now two Acts instead of a considerable number. Although there may be some overlap, each one consolidates a particular sort of legislation into one statute. It is a value judgment—that is the judgment that has been taken. It comes to the House as something that has already been done in that form and which has been considered by the Joint Committee. I commend it.
  The point made by my hon. Friend the Member for Southend, East (Mr. Taylor) had not occurred to me, because I am assured that the Bill will make no change in the law. My hon. Friend raised a particular point. I shall not pretend that I can answer off the cuff every such point in detail. I cannot do so. I shall consider the matter and write to him. I do not believe that it has made any difference in substance. The fact that we are a member of the Community—whatever one may think about that—makes no difference to the Bill.
  My hon. Friend raised a specific point. I hope that he will agree that it is better for me, rather than to pretend that I can answer it off the cuff, to look at it and to give him a considered answer. That I am only too willing to do.
  Mr. Teddy Taylor: My worry is that this consolidation measure could be used to define a British film under the 1960 Act. If, as a consequence of the consolidation Act, there is an alteration to what is defined as a British film, will the Government ensure that there is no change in the law or practice in defining a British film?
  The Solicitor-General: I cannot give my hon. Friend any such assurance. To the best of my knowledge and belief the provisions merely repeat the law as it exists. My hon. Friend raised a point of detail. I shall look at it and give him a detailed answer, but that is as far as I can go.
  Mr. Cryer: The intervention of the hon. Member for Southend, East (Mr. Taylor) emphasises the point that I was making. The consolidation seems less than adequate. Clause 5 of the Films Act 1980 altered the definition of a British film for the purposes of quota—for example, to cover Community films. Perhaps the two points are interrelated. Other matters could and should have been covered by legislation. It is a limited area, and one Bill could ideally have covered the whole subject.
  The Solicitor-General: That is a valid point, but this is not the time at which to take it. The House has a choice. The Bills have been through the consolidation process. We have to decide whether we want the measure.
  My hon. Friend the Member for Southend, East (Mr. Taylor) has been here long enough to know that had he given notice of his point he would have been entitled to expect a detailed answer, but I have been in the House long enough to know that the silliest thing that one can do is to attempt to answer a point of detail off the top of one's head. I have said that I believe that my hon. Friend's point makes no difference to the law. I shall go no further tonight. I have assured him that I shall look at the point. I do not complain about the fact that he did not give me notice of it. I merely tell him that I am too old a hand to try to give detailed opinions on such intricate points off the cuff. My belief is that the law is not altered. If he believes that it is, let him say so and vote against the Bill.
  Mr. Teddy Taylor: The Solicitor-General is probably one of the straightest and most honourable Members of the House. If, inadvertantly, the measure allows, for instance, a French "X" film to be a British film, will he correct that?
  The Solicitor-General: I am obliged to my hon. Friend for what he said. I hope that other hon. Members will agree. However, as he knows, I do not have it in my power to alter the matter. I can go no further. If he believed that there had been a change it would have been helpful had he drawn it to someone's attention beforehand. I do not believe that there has been a change. If there has, someone will have egg on his face, but I am not going to give an assurance that I cannot carry out. My hon. Friend has made his point. The matter will be considered, and he will get a detailed answer.
  Question put and agreed to.
  Bill acordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. Cope.]
  Bill immediately considered in Committee; reported, without amendment.
  Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading) and agreed to.
  Bill accordingly read the Third time and passed, without amendment.

  National Film Finance Corporation Bill [Lords]
  Order for Second Reading read.
  10.51 pm
  The Solicitor-General (Sir Ian Percival): I beg to move, That the Bill be now read a Second time.
  We come to the third of these "controversial" Bills. It consolidates enactments relating to the constitution and functions of the National Film Finance Corporation—a second group of acts which relate to the film levy imposed on exhibitors that we have just considered. The Bill is pure consolidation. It makes no amendment to the existing law. The Joint Committee has scrutinised it and has satisfied itself that there are no points to draw to the attention of the House.
  10.52 pm
  Mr. Bob Cryer: I feel that I should once again make my comments about the means of consolidation. The Minister adopted a slightly jesting manner when he described this as a consolidation measure, but I believe that hon. Members who feel that they have comments to make have a duty to do so, so that those comments may be borne in mind by the Joint Committee.
  I was a member of the Standing Committee which considered the Films Bill of 1980—indeed, it is a very short time since it became law—which established the current framework of the National Film Finance Corporation which is here being consolidated. Nobody objects to the principle of consolidation. Indeed, it is intended as a general aid to help people through the labyrinth of legislation which is strewn along the path of successive Parliaments. That is entirely reasonable.
  This consolidation repeals the whole of the Cinematograph Film Production (Special Loans) Acts of 1949 and 1954. But the Cinematograph Films Act 1957, the Films Acts of 1966 and 1970, the Superannuation Act 1972 and the Films Act 1980 presumably still have to be examined by anyone wishing to consider the whole of the legislation on the film industry, because the repeal under this consolidation is only in part and not in whole.
  With the splitting of the Films Act 1980 into three, this consolidation has left a residue, which includes, for example, the definition of films now covered by quota which have to be shown on British screens, which are covered at least in part by film levy finance. The framework of the National Film Finance Corporation under this Bill will now be in a separate measure, but presumably some residual parts will remain in the Films Act 1980.
  I therefore simply reiterate my plea that in dealing with a narrow subject such as the film industry the Joint Committee should consolidate the legislation completely and not leave 20 or 30 enactments—I have not counted them—still to be consulted in addition to the three that it has created.
  The Committee has reduced the number of Acts, but the job has not been completed as satisfactorily as it might have been so that in seeking to examine the legislation covering the film industry the exhibitor, the members of the National Film Finance Corporation and the producers will all be able to go to one consolidated Act. The consolidators must bear in mind that this narrow subject will be referred to in Acts of Parliament of a wider nature, but there are some specific narrow items of legislation which they have not thought fit to draw into this consolidation.
  I urge the Minister to pass these remarks on to the Committee. I do not envy it its task. The subject is as dry as dust. We are grateful to the Committee for spending tedious hours on its work, but we must draw its attention to how these matters can be improved upon, and we hope that in future it will tackle them along the lines that I have described.
  10.57 pm
  Mr. Teddy Taylor: The Minister says that this is pure consolidation and that there is no change in the law. There is a definition in clause 9(3) of "British company". I have looked through the Acts that
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  have been consolidated, and I cannot find it. It may be that I have been unable to find all the documents. A British company is defined as one
  "over which a Commonwealth citizen has control".
  Where did this provision come from? It must have come from some other Act or it would not be pure consolidation. What is "a Commonwealth citizen"?
  10.58 pm
  Mr. John Sever: I wish to raise a point on the issue raised by the hon. Member for Southend, East (Mr. Taylor). I should be grateful to have the interpretation for which the hon. Gentleman asked.
  Are we likely to be in any difficulty in the future in defining a "British company"? Does that mean, for example, a company whose employees consist mainly of British passport holders, for example? Or does it simply mean, as it indicates in the Bill, a company incorporated under the laws of Great Britain? That seems to be a little ambiguous, unless I have misread the situation.
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. The hon. Gentleman cannot ask for an interpretation of a Bill. He is entitled only to tell us whether he is in favour of consolidating the Bill as it stands. The question which was asked by the hon. Member for Southend, East (Mr. Taylor) about what is a Commonwealth citizen does not arise on the Bill and is out of order.
  Mr. Teddy Taylor: On a point of order, Mr. Deputy Speaker. Since this is consolidation, surely it is in order to ask the Minister not what a Commonwealth citizen is but whether those words appear in the legislation that has been consolidated.
  Mr. Deputy Speaker: That does not happen to come under this Bill
  Mr. Sever: I am somewhat puzzled, as other hon. Members may be, in interpreting your ruling on this point, Mr. Deputy Speaker. It would seem relevant, if we are consolidating legislation this evening, that the interpretation that is now before us should be either explained or defined in other legislation. I share the hon. Gentleman's view that it does not seem that that definition is apparent in other legislation being consolidated.
  Mr. Deputy Speaker: There are plenty of occasions when these matters can be adequately ventilated in this House or in the other place, but that is not part of the proceedings in which we are engaged at the moment, which are concerned with pure consolidation.
  Mr. Peter Archer: On a point of order, Mr. Deputy Speaker. Hon. Members seem to be asking about the derivation of the provisions. That appears in the table of derivations and relates to section 12(3) of the 1957 Act.
  Mr. Deputy Speaker: If that was what hon. Members were asking, I could accept it. However, they seemed to be going further.
  The Solicitor-General: I am obliged to the right hon. and learned Member for Warley, West (Mr. Archer). Some people have to spend more time with such Bills than others and they understand what they are about. It is no good saying that the Joint Committee should do this, that and the other. The Committee deals with that which is sent

  123
  to it. A Bill starts in one House or the other and is sent to the Committee, which considers whether it is consolidation. It is not up to the Committee to add and consolidate other statutes. The Bills received Second Readings in the other place and were sent to the Committee.
  That does not mean that points such as those raised tonight cannot be dealt with. If hon. Members wished to ask questions, I should have been happy to do my best to answer them. The questions are not difficult to answer. I invite hon. Members to watch the progress of such Bills. If they have questions, I invite them to ask them at an earlier stage. I assure them that I shall be happy to do as my predecessor did and answer them.
  At this stage we have to decide whether we accept the measure as consolidation. I assure the House that it is pure consolidation and invite hon. Members to proceed on that basis.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. Cope.]
  Bill immediately considered in Committee; reported, without amendment.
  Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading) and agreed to.
  Bill accordingly read the Third time and passed, without amendment.

  Public Passenger Vehicles Bill [Lords]
  Order for Second Reading read.
  11.5 pm
  The Solicitor-General (Sir Ian Percival): I beg to move, That the Bill be now read a Second time.
  Life is full of surprises, and there may be some points of great importance arising on this Bill. I am sorry to see that the hon. Member for Keighley (Mr. Cryer) is leaving. This is a pure consolidation Bill and consolidates into one enactment the existing statutory provisions relating to passenger vehicles used for public transport services in England, Wales and Scotland. The joint consolidation Bills Committee was satisfied about the Bill, and so am I.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. Berry.]
  Bill immediately considered in Committee; reported, without amendment.
  Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading) and agreed to.
  Bill accordingly read the Third time and passed, without amendment.

  Judicial Pensions Bill [Lords]
  Order for Second Reading read.
  11.7 pm
  The Solicitor-General (Sir Ian Percival): I beg to move, That the Bill be now read a Second time.
  124
  The Bill consolidates enactments relating to judicial pensions and contains certain technical amendments to the law made pursuant to the recommendations of the Law Commission. It has been scrutinised by the Joint Consolidation Bills Committee, which had no points that it considered ought to be drawn to the attention of Parliament. Nor have I, save that the ease with which we have been able to deal with this Bill and the four that preceded it has been made possible only by the work done by the Committee. It further demonstrates the immense debt that we owe the Committee and which I am happy to acknowledge once again.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. Berry.]
  Committee tomorrow.

  SCOTTISH AFFAIRS
  Ordered,
  That Mr. Allan Stewart be discharged from the Committee on Scottish Affairs and Mr. Bill Walker be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

  ENVIRONMENT
  Ordered,
  That Mr. Reginald Freeson be added to the Environment Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

  Unemployment (Mid-Glamorgan)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]
  11.8 pm
  Mr. Ioan Evans: On Monday 30 March I asked the Under-Secretary of State for Wales, who is to reply for the Government tonight,
  "what are the latest percentage figures of unemployment in Aberdare, Mid-Glamorgan and Wales, respectively; and what action is proposed to improve employment prospects."
  He replied:
  "The unemployment rates in Aberdare, Mid-Glamorgan and Wales on 12 March 1981 were 15·6, 14·4, and 13·6 per cent. respectively. Between May 1979 and March 1981 the level of unemployment in Mid-Glamorgan increased by 80·2 per cent."
  My hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands), who is here tonight, asked
  "Did the hon. Gentleman say 80 per cent?"
  and the Under-Secretary of State confirmed that since the general election unemployment had increased by 80·2 per cent.
  I then put a supplementary question:
  "Is that not proof that the Government's economic and industrial policies are disastrous? Unemployment is increasing by more than 1 million per year. When the Prime Minister reiterates that there are no alternative policies, will she look at the documents issued by the Wales TUC, the British TUC, the CBI, the Select Committee on Welsh Affairs and the Select Committee on the Treasury and Civil Service, because they have said that monetarist policies will not work and will have disastrous consequences?"
  The Under-Secretary of State then replied:
  "Some of the amalgams of those policies were put forward in a recent debate in the House by the right hon. Member for Stepney and Poplar (Mr. Shore), and the cost was analysed. That did not prove to be an attractive possibility."—[Official Report, 30 March 1981; Vol. 2, No. 78, c. 6–7.]

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  That, I am afraid, is not a satisfactory response to the fact that since the Government have been in office, for less than two years, unemployment has increased by over 80 per cent. That is why I have the Adjournment debate this evening.
  On 21 November 1980 I raised the subject of unemployment in South Wales, and I make no apology for returning to the issue again this evening. When I spoke then the October statistics showed that 2,062,866 people were unemployed in the United Kingdom. Of those, 129,144 were in Wales—that is, 11·9 per cent. of the Welsh working population.
  The latest March statistics that have been confirmed by the Minister show that 2,484,712 people were unemployed in the United Kingdom, and of these 146,800 were in Wales—that is, 13·6 of the Welsh working force. In the Cynon Valley, the area that I represent, 15·6 per cent. of the working people are unemployed.
  My right hon. Friend the Member for Rhondda (Mr. Jones) is here. The figures in his area are worse. The figures are also bad in the area of my hon. Friend the Member for Merthyr Tydfil. Similar figures can be mentioned for the whole of the Rhymney Valley and Taff Ely.
  The school leavers have been hit worst. A total of 6,584 school leavers were unemployed in Wales in January. A further 13,761 were in the Manpower Services Commission's youth opportunities programme. For that number, only 81 vacancies were available for the under-19s. Worst hit was Mid-Glamorgan, where 5,082 youngsters were either unemployed or on the YOP scheme.
  The unemployment position has greatly deteriorated since October—a deterioration that has gathered pace since the Tory Government were elected in May 1979.
  The Manpower Services Commission's quarterly labour market report for Wales, for the period ending December 1980, summarises the general unemployment position in Wales as follows.
  First, the number of people in employment continued to fall during the second quarter of 1980, with the loss of a further 11,000 jobs. An increase in employment in the service industries was offset by a large decrease in the numbers employed in the manufacturing and production industries.
  Secondly, unemployment is rising more quickly than in previous downturns of the economy and is higher than at any time since the 1930s. In December, Wales and the North of England had the highest unemployment in Great Britain, at 12·7 per cent. Wales and the North of England also share the highest unemployment at present.
  Thirdly, the stock of notified unfilled vacancies is still falling. There has been a decrease of about 1,400 at ESD offices since the September quarter. Fourthly, redundancies notified in Wales to the Department of Employment under the Employment Protection Act are at the highest level since the Act came into effect in 1975. A total of 64,833 redundancies were notified in Wales in 1980, more than double the figures of the previous year.
  Unemployment is higher now than at any time since the 1930s. The official figure of 2·5 million masks the true extent of the damage. There are already well over 3 million people out of work. Many of those who become unemployed do not register and are therefore not included in the statistics.
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  The Government's policies have plunged the country into this misery. Our country suffers deep-seated problems. Industry is in decline. Machinery is outdated. Exports are dwindling because of the value of the pound. Much of the world is in the grip of a recession. The Government are doing nothing to solve these problems. They are making the problems far worse.
  The Government claim that they have the only policies that will work. That is nonsense. It is arrogant. There is no evidence to show that the Government's policies will work. There is plenty to show that the policies are leading to economic disaster. It is sad to hear that there is trouble again tonight on the streets of Brixton. I believe that unemployment is one of the causes of the troubles.
  Professor Frederick Hayek, the Prime Minister's leading economic guru, speaking about Britain's economic future, said on BBC radio on Sunday
  "Unless there is a major change the great catastrophe is not further than something like ten years away."
  To say 10 years is perhaps a little optimistic. The wrecking of the economy has gone far enough. The alternatives have been spelt out in the report on employment by the Select Committee on Welsh Affairs. These were positive proposals that the Government could have implemented. The alternatives have been outlined in the Treasury Select Committee report on monetarism and in its more recent report criticising the Budget. The Budget and the Finance Bill discussed today are likely to add a further 300,000 to the massive unemployment figures.
  The TUC has published "A plan for growth—the economic alternative" which states:
  "There is an alternative—a radical and challenging plan for national economic recovery. It is a plan to channel Britain's immense resources in the North Sea, in the financial institutions and elsewhere into the biggest programme of investment the country has ever seen. The economic alternative is literally to rebuild the economy by creating the new jobs, the new industries, the new projects and the improved services that the British people desire."
  The Wales TUC, in its social plan, has outlined alternatives, as has the CBI in its criticism of the Government's economic and industrial policy. At least 364 leading economists recently criticised the Government's economic policies. Early-day motion 309.
  "welcomes the statement by 364 university economists condemning the mad monetarist policies of the Government and demanding an urgent consideration of alternatives; notes their conviction that there is no basis in economic theory or supporting evidence for the Government's belief that by deflating demand they will bring inflation permanently under control and thereby induce an automatic recovery in output and employment; and further recognises that the time has come to consider alternative policies that offer a far better hope of sustained economic recovery."
  These leading economists—many more have added their names to the 364 since that was submitted—are saying what the Labour Opposition have been saying since the Government embarked on their mad monetarist policies.
  What is the position in Mid-Glamorgan, the largest county in Wales, with the highest unemployment'? Already many manufacturing companies have collapsed. In my own area, in the Cynon valley, Helliwell, a part of Tube Investments, Cambrian Castings, in the car component industry, and Inega in the textile industries—longestablished companies—have collapsed. There is a catalogue of closures that have taken place in Mid-Glamorgan in the past two years.

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  Many factories are working short-time. There is a fear that unless there is a change in Government policy the workers who are now on short time will in due course join the army of the unemployed. Industrial companies complain about the high cost of borrowing, competition, restrictions imposed by the high value of sterling, and local authority rates, forced higher by Government policies, which will mean further reductions in their already thin order books.
  What specific action should be taken? I believe that the Government should restore special development area status to those areas in Mid-Glamorgan, such as the Cynon valley and Merthyr, where they have taken away that status when those areas are going through a period of crisis. There should have been an expansionary Budget, and not one that adds 300,000 to the unemployment queue.
  There should be a reversal of the Government's restrictive monetarist policies, which, unless they are changed, condemn Mid-Glamorgan, Wales and Britain to low growth and high unemployment throughout the 1980s. There needs to be an extension of the Government's and the Manpower Services Commission's special employment measures. In particular, there should be an expansion of the skillcentre programme, particularly in areas such as Mid-Glamorgan. There needs to be a development of special Government schemes to encourage investment in new technology, new products and new processes, using agencies such as the National Enterprise Board and the Welsh Development Agency to stimulate investment and promote employment.
  Mr. Edward Rowlands: Does my hon. Friend agree that what is vital to the confidence of Mid-Glamorgan is an urgent statement on the future of the South Wales coalfield? We are still waiting for an announcement about the tripartite talks. Growing concern is expressed by miners in our areas that some pits will be closed by slow strangulation and the absence of a good statement by the Government.
  Mr. Evans: I am grateful to my hon. Friend for that intervention. We hope that the action taken by the miners will solve their problems. The Government have given undertakings that they intend to meet the miners' demands. I hope that they will not renege on those promises. The coal industry is a major industry in Mid-Glamorgan. It plays a large part in my hon. Friend's constituency and in mine. The miners have shown what can be done if workers take a stand and prevent the implementation of the mad monetarist policies, the cash limits, that have been imposed on other industries.
  Planned investment in our basic industries, such as coal, steel and the railways, taking account of the direct and indirect subsidies of our European competitors, should be carried out, using public sector purchasing power to create markets and jobs. For each job created in the public sector a further job is created in the private sector.
  When the Prime Minister came to Swansea she said that people should be prepared to go elsewhere to look for jobs. Where else in Wales or the whole United Kingdom can they go to find jobs? Mobility is not the answer to the problem of unemployment. That is why I have raised the issue again tonight. I hope that we shall have some
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  answers from the Minister and that the Government and the Welsh Office will take positive action to deal with the serious unemployment problems.
  11.24 pm
  The Under-Secretary of State for Wales (Mr. Michael Roberts): I welcome the opportunity to respond to the debate.
  The hon. Member for Aberdare (Mr. Evans) has raised on a number of occasions the unemployment problems in Mid-Glamorgan. I agree that the current levels of unemployment are too high, but the hon. Gentleman's simplistic analysis of the reasons for our present difficulties does him little credit. The hard fact is that the world recession, coupled with a lack of competitiveness in British industry, has resulted in the economic difficulties that we now face.
  The high rate of unemployment in Mid-Glamorgan must be seen in that context. There is no way in which the county can be isolated from the effects of the general economic situation. It is important to Mid-Glamorgan that we tackle these fundamental problems not by short-term measures taken for political expediency but by taking firm action which holds out the hope of sustained growth in output and employment prospects. This is what our economic policies are designed to achieve.
  The hon. Gentleman will know that my right hon. Friend met representatives of the Mid-Glamorgan county council and Heads of the Valleys standing conference recently. The hon. Gentleman was present at the meeting with the standing conference, and I am aware of his close association with the points made at the meeting by the standing conference representatives. We are therefore fully aware of the situation in the area.
  During an Adjournment debate in the House on 21 November I made clear, in response to the hon. Member, that we are committed to the retention of valley communities, and we acknowledge that to do this we have to try to ensure that sufficient job opportunities exist to meet the needs of those who live in the valleys. We accept that the Government have a role to play in this, particularly in the provision of adequate infrastructure to help stimulate industrial development.
  Much is being done. The Welsh Development Agency is actively reclaiming areas of derelict land throughout South Wales, and in Mid-Glamorgan in particular. This legacy of earlier industrial activity has been a major constraint on industrial development in the past. Apart from the adverse effects on the environment, it has meant that vast areas of South Wales have been left idle, incapable of use at a time when the amount of land available for industrial development, housing and the like has been severely limited by the topography of the region. This is slowly changing, and the WDA is now able to proceed with the provision of industrial sites and advance factories.
  In Mid-Glamorgan as a whole there are 32 factory units, totalling 311,000 sq ft, currently available. In addition, the WDA has units totalling 202,000 sq ft under construction in the area and a further 17 units planned. One of the most encouraging features is that, despite the depth of the recession, 19 factories totalling 167,000 sq ft were allocated last year, and already this year eight factories totalling 204,000 sq ft have been allocated. We believe that these allocations will result in over 1,000 jobs being provided in the area.

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  The Government's recognition of the problems of the valleys has been consistently reflected in urban programme allocations. The scale of resources—[Interruption.] The hon. Member for Merthyr Tydfil (Mr. Rowlands) has intervened from a sedentary position several times already in a short Adjournment debate. He seeks, no doubt, to earn the reputation in South Wales of being the junior Member for Bolsover, but I should be obliged if he would allow me to continue.
  The scale of resources available under the programme means that it cannot pretend to tackle all the problems experienced in the area, but it represents excellent value for money and allows funds to be channelled flexibly to localities experiencing particular difficulties. Of some £9 million expenditure approved throughout Wales in the last financial year, over 30 per cent. was for schemes undertaken by local authorities and voluntary organisations in Mid-Glamorgan and in the Blaenau Gwent, Islwyn and Torfaen areas of Gwent. The £10 million package of urban programme schemes recently announced by my right hon. Friend for 1981–82 maintains this ratio. Seventy-five per cent. of local authority expenditure under the programme is met by Government grant.
  The emphasis of approvals has been on schemes which are intended to create employment opportunities. In Mid-Glamorgan, for example, we have contributed towards the cost of providing small factory units, industrial sites, and help towards placing mentally handicapped people in employment. In the Cynon valley, in which the hon. Member will be particularly interested, we have contributed towards expenditure under the urban programme by the borough council next year amounting to over £92,000.
  Some hon. Members representing constituencies in the valleys seem to be preoccupied with the action that the Government have been taking to help the coastal areas, particularly in the case of the steel closure areas. As I have explained, we recognise the need to see jobs provided in the valleys themselves.
  Mr. Alec Jones: I am glad to welcome all the advance factories and improvements that the hon. Gentleman has listed, but one of our major problems in Mid-Glamorgan is not the hope of attracting new industries but the preservation of the jobs that we have already got, and the Government are proving disastrous in that respect.
  Mr. Roberts: I shall deal with that intervention in a few minutes.
  It would be naive to think that all the job requirements of the valleys can be met from within those areas. The lack of large industrial sites in the valleys means that inevitably we must look to the coastal plain and valley mouth areas to provide the sites for the bigger industrial developments. There is nothing sinister or underhand in that: it is simply an acknowledgement of the facts of the situation. The important thing surely is to see that as many jobs as possible are provided in, or within easy travelling distance of, the valley communities. If we succeed in doing that we can halt the out-migration from the valleys, especially among young people.
  The situation now facing industrial South Wales is not novel. The area has, of course, experienced, and is continuing to experience, a change in the structure of employment as we move away from its dependence on the
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  coal industry and steel industry. It ill-becomes hon. Members to lecture the Government on the need to recognise the contribution that the coal industry could make to our economy. I remind them that it was their party, and the Government whom they supported, that presided over the period during which large numbers of pits were closed in South Wales. Some 27,000 jobs were lost during the latter part of the 1960s in South Wales alone, when 39 pits closed.
  I cannot accept the criticism levelled at us by the Opposition about our policies for the coal industry. It is irresponsible of hon. Members to suggest that this Government want anything other than a successful and modern industry. We are enabling the NCB to continue its massive investment programme in new capacity, and the Government fully support the aims of the Plan for Coal. But it is for the board to decide on its priorities for investment in particular schemes. All the unions accept that closures in an extractive industry are inevitable, and it is for the NCB to judge any closure under the established review procedure. As hon. Members are aware, the Government and the NCB are together reviewing the board's financial requirements and strategy, so I cannot comment on the matters of detail at this time.
  However, I am sure that hon. Members will welcome the improved redundancy terms available to those men affected by closure of exhausted pits, and the announcement by the Chancellor of a scheme to aid industry to convert from oil-fired boilers to coal, for which we are committing £50 million over the next two years. Both sides of the industry accept that this country must import certain types of coal which are not available from our own mines in sufficient quantity, but the scope for replacing some imported coal forms part of the detailed discussions which are continuing and to which I have referred.
  The Heads of the Valleys standing conference has made a plea for special assistance for the area. As I have already indicated, much is already being done in terms of provision of infrastructure and factories. Massive expenditure has already taken place, and is continuing to bring new jobs to the area, particularly to unemployment black spots like Blaenau Gwent. A comparison has been drawn with the special package of assistance for Llanwern and Port Talbot. But hon. Vlembers must realise that these areas did no have the advantage of an ongoing factory building programme such as that in existence in the valley areas. The job losses in steel were on a massive scale over a relatively-short space of time.
  Mention has been made of assisted area status. I of course recognise the views strongly held by hon. Members about the need for SDA status for this area, but we have to consider the situation there alongside developments elsewhere in the country. The availability of Government financial assistance is only one of the many factors which industrialists take into account when deciding on future investment. The most important factor is the general economic situation at the time. The other important factor is the provision of infrastructure and factory space, and I am confident that these latter points will not inhibit investment in valleys in any way.
  This is not to say that assisted area status does not have a part to play, but blanket SDA coverage is not the answer. We have tried to concentrate assistance on those areas with the greatest problems in terms of unemployment: and structural change. This is why we have retained SDA

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  status for areas such as the Rhondda, Bargoed and Ebbw Vale. If we were to extend SDA status to other parts of South Wales with relatively less severe problems we would have to do the same for other areas of the country facing similar problems.
  Mr. Ioan Evans rose——
  Mr. Rowlands rose——
  Mr. Roberts: I hope that hon. Members will excuse me for not allowing them to intervene. I have already allowed one intervention and there have been about 24 sotto voce interventions by the junior Member for Bolsover, the hon. Member for Merthyr Tydfil.
  The hon. Member for Aberdare made a speech containing not one constructive thought. It was full of the same old inflationary talk, about an inflationary Budget and inflationary policies and economics which have failed before and would fail again. If the hon. Gentleman reads the report of his speech tomorrow he will realise why the Wales TUC and the Labour Party in Wales failed so abjectly to organise a rally last week. They took for that rally the Sophia Gardens, which can hold between 2,000 and 3,000 people. With such great speakers as the hon. Member for Bedwellty (Mr. Kinnock) and the right hon. Member for Rhondda (Mr. Jones), the rally attracted about 70 people.
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  The reason is clear. The people of South Wales anticipated the sort of speech that they would have heard—and the sort of intervention that they would have heard from the hon. Member for——
  Mr. Alec Jones: Will the Minister give way?
  Mr. Roberts: I will not give way on this——
  Mr. Jones: The Minister's speech is a disgrace.
  Mr. Roberts: They have learnt——
  Mr. Rowlands: Answer the debate.
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. It is customary for speeches on the Adjournment to be heard in silence.
  Mr. Alec Jones: This rubbish should not be heard in silence.
  Mr. Roberts: Such comments would be better made in the bar than in the Chamber of the House of Commons.
  We have heard the usual inflationary arguments for expansion. They proved a disaster in the past in South Wales. That is why the people of South Wales reject that economic approach to their problems. They know that their problems are deep-seated and that the Government are tackling them to the best of their ability.
  Question put and agreed to.
  Adjourned accordingly at twenty-two minutes to Twelve o' clock.

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

Disarmament: United Nations
Lord Brockway: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how the United Kingdom voted on the resolution adopted by the United Nations General Assembly authorising the Secretary-General to carry out a study of the organisation and financing of a world disarmament campaign and to place it on the agenda of the next session; and what was the result of the vote.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, the United Kingdom, along with most other Western countries, abstained on this resolution. The result of the vote in plenary was 128 votes in favour, with 17 abstentions.
Lord Brockway: My Lords, can the Minister say why the United Kingdom abstained, when he himself has said that the Government are in favour of the proposals for world disarmament? Does he appreciate that the object of a world disarmament campaign is multilateral disarmament, as proposed by the United Nations Special Assembly in 1978? Is it not logical and justifiable for the United Nations, which has endorsed those proposals, to seek to establish a campaign to advocate them?
Lord Trefgarne: My Lords, the proposal which was considered was of course a proposal for a study. It was not a proposal which of itself would necessarily have led to further effective steps of multilateral disarmament. However, I can say that the Secretary-General's Advisory Board on Disarmament Studies, from where the proposal came, was not indeed unanimous upon the value of it, although of course there is much public interest in disarmament and informed discussion is promoted by both Governments and non-governmental organisations, not least in the United Kingdom. We concluded eventually that an abstention was justified.
Lord Goronwy-Roberts: But, my Lords, surely the Minister will confirm, especially in view of the repeated attempts of the Swedish Government, for instance, through SIPRI and other organisations to instigate such a study—and, like the Minister, I emphasise the word "study"—that a vote in favour of a study would have had a very marked effect upon public opinion, and indeed on opinion in the United Nations?
Lord Trefgarne: My Lords, we concluded that the limited resources available to the United Nations, in terms not only of money, but of the facilities of the Secretariat and other things were not best deployed in the moving forward of the study. However, as I said in my earlier reply, despite our abstention, the study will in fact go forward.
Lord Brockway: My Lords, while recognising the service which the United Nations Centre for Disarmament provides, is there not now a case for the setting up of an expanded information department of the United Nations to distribute information such as, for example, that contained in its own report of experts, which says that there has now been made a bomb 4,000 times more destructive than the bomb which fell on Hiroshima, and that there exist enough explosives to fall on every man, woman and child on earth? Do not those facts need to be known?
Lord Trefgarne: My Lords, I am highly suspicious of Government organisations designed principally to disseminate information. I prefer the free press that we have, which can disseminate whatever information appears to it to be the most relevant. However, in that context I can tell the noble Lord, Lord Brockway—as I think he knows—that the Government distribute a document called the Arms Control Newsletter, and I believe that the noble Lord is on the mailing list.
Lord Orr-Ewing: My Lords, will my noble friend ensure that United Nations' papers are circulated in Afghanistan, Poland, and Helsinki?—in view of the ruins of the peace treaty which currently exists, and which are still being debated at Madrid.
Lord Trefgarne: My Lords, I am afraid that the distribution of United Nations' documents is not within my gift, but I certainly agree that a freer dissemination of information in some of the countries to which my noble friend has referred would be most advantageous.
Lord Shinwell: My Lords, is the noble Lord aware that, though, as your Lordships' House knows, I frequently oppose my noble friend Lord Brockway on the subject of defence in general, I see no objection whatever to the United Nations, which is presumably a peace-promoting organisation, undertaking an extensive study of world disarmament propaganda? There is no objection at all to that. There can be no harm in undertaking a project of that kind, and I cannot understand why there should be any opposition to it.
Lord Trefgarne: My Lords, we are not opposed in principle to the United Nations studying these matters. What we think is important, though, is that the United Nations should establish an order of priorities in these matters having regard to the fact that their resources and facilities are limited. We thought that on this occasion there were matters of greater importance to which it was more immediately necessary for the United Nations to turn its attention.
Lord Taylor of Gryfe: My Lords, would the noble Lord accept, first, that this is a matter of multilateral world disarmament; and, secondly, that this is a matter of the highest priority in any reasonable person's thinking, and that it requires some allocation of resources and funds on the part of the United Nations to study this problem, which is worrying the whole of mankind?
Lord Trefgarne: My Lords, the United Nations is of course well involved in the question of multilateral disarmament negotiations. There already are a number of fora in which such negotiations take place. As I have said on many previous occasions from this Box, it is sometimes disappointing that more progress has not been made. There is the conference at Geneva; there are the multilateral balanced force reduction negotiations, as they are called, which go on in Vienna; and there are various other meetings which take place from time to time in New York. We are not without fora; what we are so far without are concrete results.
Lord Goronwy-Roberts: My Lords, will the Minister pay particular attention to what my noble friend Lord Shinwell has said, with the very great experience and authority that there is behind it; namely, that, among other things, a study of this kind will smoke out those countries which make lavish disarmament proposals simply as a smoke screen for something else?
Lord Trefgarne: My Lords, if that were to be achieved I would be very much in favour of it, but I suspect that the best way to smoke out those who make lavish proposals which have no conviction behind them is by bringing them to the conference table in genuine negotiation.
Lord Brockway: My Lords, arising from the intervention of my noble friend Lord Shinwell, which I so much welcomed, is the noble Lord the Minister aware that many of us understand that it is quite logical to be asking for more defence while at the same time being in favour of multilateral world disarmament? And is not the latter now quite a practical proposal made by the United Nations Special Assembly, being discussed by the Geneva Committee, which is to make a report to the renewed United Nations Assembly in June next year? Is it not now a realistic proposal which the Government should support?
Lord Trefgarne: My Lords, I am not quite sure which proposal the noble Lord is referring to, but if he is referring to the proposal which is contained in his Question then, as I said earlier, the motion to carry that study forward was carried, and therefore presumably the study will in fact go forward. But on the noble Lord's earlier assertion that continued maintenance of military vigilance is not consistent with talks on multilateral disarmament, I must simply say that I disagree with the noble Lord.
Lord Hale: My Lords, is the noble Lord aware that of all the lamentable statements from the Government Front Bench to which I have listened for 40 years, from all Governments—disastrous and appalling statements—I think the last two, in the last few minutes,
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are really the worst and the most disastrous? We are turning our back on freedom of speech, on freedom of information—
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, I think that if the noble Lord would be kind enough to put his observations in the form of a question it would be more suitable.
Lord Hale: Of course, my Lords, I accept the invitation. What I am saying is that in my view and, I believe, in the hearts of the majority of the Members of this House, this is a disastrous turnabout.
Several noble Lords: Question!
Lord Hale: My Lords, it seems to swell—
Earl Ferrers: My Lords, with respect to the noble Lord, he knows as well as any of us that it is customary to put one's observations in the form of a question. The noble Lord continues to make a statement, which is contrary to the practice of the House.
Lord Hale: My Lords, as the noble Lord clearly understands what I am saying, will he answer it?
Lord Trefgarne: My Lords, the noble Lord began his observations by saying that what he had heard today was the worst statement he had ever heard from the Government Dispatch Box in 40 years. I have been at this Dispatch Box for a much less period of time than that, and I have heard a lot worse, too.
Earl Ferrers: My Lords, I think with respect to the noble Lord, Lord Brockway, he has put three supplementary questions and we have now gone on for 11 minutes; and the noble Lord, Lord Brockway, has the next Question, too. If he would agree, I think it might be suitable if we moved to the next Question.
2.48 p.m.
Lord Brockway: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will propose that all meetings of the ad hoc working groups of the United Nations Committee on Disarmament at Geneva shall be held in public and all documents and records made available to the press and to non-governmental organisations.
The Earl of Avon: No, my Lords. It has been the practice in the committee to make a distinction between plenary and informal or working group meetings. The aim is to permit a freer exchange of views in private sessions. The Government think that this is right.
Lord Brockway: My Lords, does the Minister not agree that the public are almost unaware of what is happening at the meetings of the Geneva Committee,

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appointed to implement the recommendations of the United Nations Assembly in 1978? Is it not the fact that they are now considering, first, an underground test ban treaty; second, international conventions on chemical and radiological weapons; and, third, a comprehensive disarmament treaty as proposed by the United Nations? Have not the people the right to know what is happening, and have not the nongovernmental organisations which participated in the 1978 Assembly the right to have documents upon these subjects?
The Earl of Avon: My Lords, the Government accept the need for informed public debate on arms control and disarmament issues. To meet the demand for regular information the Government publish a quarterly disarmament newsletter, which describes developments in the international negotiations and is distributed free of charge to non-governmental organisations. Obviously, some selection needs to be made about what is published. It would be prohibitively expensive to publish everything that was said, even if this were thought desirable.
Lord Campbell of Croy: My Lords, as someone who, over 30 years ago, was for three years dealing with disarmament at the United Nations at New York, may I ask my noble friend whether he is aware that there are occasions when progress in negotiation with the Soviets is much more likely when it is carried out away from the glare of publicity?
The Earl of Avon: My Lords, I am grateful to my noble friend and I agree with him.
Lord Shinwell: My Lords, is the noble Lord aware that, although speaking for myself and probably for many other Members of this House, I would not yield a single inch of opinion in the matter of national security and the need for creating an effective military organisation? Nevertheless, as one desiring to be well informed on the subject, I see no reason why, apart from certain matters involving security, we ought not to be better informed on this subject.
The Earl of Avon: My Lords, I agree with the noble Lord. The United Kingdom is in favour of maintaining the closed nature of working group sessions, not because we are in any way attempting to keep our views secret but because this is the most efficient way of negotiation. However, there are many other fora, including plenary meetings of the Committee of Disarmament, where national positions are publicly stated.
Lord Goronwy-Roberts: My Lords, while appreciating the difficulties and the possible disadvantages of making public from time to time the workings of technical sub-committees, would not the spirit of the Question of my noble friend Lord Brockway be implemented if Her Majesty's Government and like-minded Governments who are members of the Disarmament Commission in New York were to consider gathering together the results of all the meetings in Vienna and in Geneva and publishing them through the agency of the com-
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mission? I do not expect the noble Earl to make a definitive reply to that suggestion at the moment. I merely ask him to consider with his honourable and right honourable friends the possibility of using the commission in the sense that my noble friend Lord Shin well suggested.
The Earl of Avon: My Lords, I appreciate the noble Lord's point and will make sure that it is considered. As to Lord Brockway's Question, which dealt with the ad hoc working groups of the United Nations Committee, as the noble Lord is well aware there is a great distinction between plenary discussions which are open and the informal or working group meetings which must be private.
Lord Brockway: My Lords, is it not the case whenever world disarmament is suggested that the Government insist on verification? Is it not the case that the Soviet Union has now accepted verification in principle? Furthermore, is not the need for greater information made necessary by the fact that agreement has been largely reached at Geneva on a proposal that if a complaint is made, then on-the-spot United Nations inspection shall take place and if a Government refuse it they will be assumed to have breached the convention? Is this not a way out of this great difficulty?
The Earl of Avon: My Lords, I would enjoy a debate with the noble Lord on this subject but it is Question Time and we are at this moment a long way from the ad hoc working groups when we are talking about verification.

Botswana: Proposed Beef Exports to EEC
2.55 p.m.
Lord Alport: 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 support is being given to the request of the Government of Botswana to the Commission of the European Communities to allow the resumption of beef exports from Botswana to the EEC.
Earl Ferrers: My Lords, the Government will continue to support the Botswanan authorities in the proposals which they are making to the European Communities for the resumption of exports of beef to member states, provided that adequate animal health safeguards are maintained.
Lord Alport: My Lords, is my noble friend aware that the Botswana Government are taking the strictest precautions to prevent foot and mouth disease in their country, that this has been possible as a result of the ending of the UDI situation in neighbouring Zimbabwe, and that the export of beef from Botswana to other countries, particularly to the EEC, is of the greatest importance to the whole of the economy of that country?
Earl Ferrers: I am aware of those facts, my Lords. It is for Botswana to negotiate with the EEC over this issue. I understand that, in the latest way in which their proposals have been made, they are likely to be adequate. But I can only assure my noble friend that this will be discussed after Easter by the Standing Veterinary Committee of the Commission.
Baroness Llewelyn-Davies of Hastoe: My Lords, can we say how much the House appreciates the fact that Her Majesty's Government will do everything they can to support the Botswana Government, as this is a matter which is absolutely vital to them?
Earl Ferrers: My Lords, I understand that and I am grateful to the noble Baroness for having made the point. I can say that the reason why there was a cancellation was an outbreak of foot and mouth disease, of a variety called SAT 1, not at the moment applicable in Europe; and it is appropriate that the most stringent regulations are applied in order to ensure that Europe does not get that variety as well as the others.

Supplementary Benefit and School-leavers
2.56 p.m.
Baroness Jeger: 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 the effect on the number of 16-year-old pupils leaving school at Easter of the changes in supplementary benefit arrangements which exclude those who do not leave in April from benefit until September.
Lord Cullen of Ashbourne: My Lords, the current regulations governing supplementary benefit came into force in November 1980. The Government have not yet been able to obtain firm evidence of the effect on school leaving patterns. My right honourable friend the Secretary of State for Education and Science has asked the CSE examining boards for returns relating to entry and attendance at the summer term examinations and expects that this will enable him to assess the effect of the regulations in the autumn.
Baroness Jeger: My Lords, while thanking the noble Lord for that Answer, may I ask him whether he can explain why this change was made and whether Her Majesty's Government appreciate what unfair pressure is being brought on children, especially where their parents are unemployed, to leave at Easter so that they can immediately collect their social security; whereas if they stayed on and took their examinations in June they cannot get benefit until September? Will he undertake to monitor this carefully, if not to look again at the whole scheme, which I think is intolerable?
Lord Cullen of Ashbourne: My Lords, as I am sure the noble Baroness knows, this new system was introduced as a result of Social Assistance which came out
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in 1978, during the time of the last Administration. The Supplementary Benefits Commission accepted the proposal and it was brought in after a very great deal of consultation. I think that 50,000 copies of Social Assistance were sent out, there has been a White Paper since then, in 1979, and the matter has been very fully discussed. I am not saying that everybody agreed with the proposal, although many did. To see whether it has been a good idea or a bad one will not be possible until we see the result of this year's examinations.
Baroness David: My Lords, may I ask the noble Lord to ask his right honourable friends and perhaps his right honourable friend in the Department of Education and Science whether they could do something about the fact that O-level candidates who leave at Easter can go back to school and take their exams in the summer, whereas those taking CSE examinations cannot? This seems to be grossly unfair and something which ought to be corrected quickly.
Lord Cullen of Ashbourne: My Lords, that is a slightly different point; but I understand it is planned that the two examinations are to be brought together in a few years' time. We are going to move towards that situation but I doubt whether the single examination will come into being before 1986.
Baroness David: My Lords, it is said, even now, that the examinations will not merge until 1985; but it seems to me that there is a long time between now and then. Could the noble Lord get his right honourable friend to get things moving faster?
Lord Cullen of Ashbourne: My Lords, the movement will be quite rapid, but it will take some time before it is effective.
Lord Alexander of Potterhill: My Lords, I wonder whether the noble Lord the Minister will give some indication of when Her Majesty's Government will recognise that the unemployment of young people leaving school is not transient but long term, and will give serious consideration to the education and training of young people aged from 16 to 19 in which we have lagged so badly behind every other European country?
Lord Cullen of Ashbourne: My Lords, I shall certainly pass on the noble Lord's comments to my right honourable friend.
House adjourned during pleasure, and resumed by THE LORD CHANCELLOR.

Brixton: Public Disorder
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Belstead will, with the leave of the House, repeat a Statement that is to be made in another place on the Brixton disturbances.
British Railways (Victoria) Bill [H.L.]
Read 3a, and passed, and sent to the Commons.

Criminal Attempts Bill
3.2 p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, I beg to move that the Bill be now read a second time. I believe that the Bill will be of particular interest to your Lordships' House since it is concerned with the reform and codification of an important part of our common law, and with the repeal of an offence which has been much criticised for its defects and for its effect on community relations.
The Bill is also of particular interest for another reason. It is the first to have been the subject of the new Special Standing Committee procedure in another place. As noble Lords who have followed closely the progress of this Bill will be aware, the evidence given in the committee's open sessions led the Government to propose a number of significant changes to the Bill.
But, as so often in these matters, I should like to acknowledge our debt to the Law Commission. Part I of the Bill, as the House will be aware, derives from the Law Commission's report, Attempt, and Impossibility in relation to Attempt, Conspiracy and Incitement. The report is characterised, if I may say so, by its scholarship and attention to detail, and I am sure that noble Lords will wish me to say that we are most grateful to the commissioners.
Turning to Part II of the Bill, I acknowledge also the part played in the repeal of the suspected person offence (known as "sus") by the Select Committee on Home Affairs in another place. The Select Committee produced a valuable report, which recommended in no uncertain terms that the offence should be repealed. Subject to the safeguards proposed in this Bill, the Government agree that repeal is now the right course, and Clause 8 of the Bill provides for this.
The Select Committee stated that the suspected person offence was objectionable in principle. They drew attention, in particular, to the danger that quite innocent actions might be interpreted as suspicious acts, and that criminal intent could then be inferred from those acts. The Government believe that there is considerable force in these criticisms. The Government have also had regard to the fact that the offence has given rise to suspicion and hostility among the ethnic minority communities, and not simply among the young. This is obviously an important factor which adds considerable weight to the case for repeal.
On the other hand, noble Lords will be aware that the police representative bodies have argued that the offence should be retained because it enables the police to intervene before crimes are actually committed. My right honourable friend the Home Secretary has paid careful attention to the views of the police. But he has concluded that these arguments are not sufficiently persuasive. "Sus" has been useful. Not even those who have argued most fervently for its repeal can deny that it has enabled the police to nip many crimes in the bud. But one must see the usefulness of the offence in its wider perspective, and also consider whether, in the absence of sus, the police could not generally intervene in other ways which are less open to objection.
There will be instances in which, in the absence of
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sus, proceedings will not be able to be brought. This is implicit in the repeal of the offence and must be squarely faced. But this does not mean that the police will simply have to stand and watch as crimes are committed. In some instances it may be necessary for the police to continue discreet observation for a little longer; on other occasions it may be appropriate to make clear to the individual that he is being observed. Where the police have reasonable cause to suspect that an offence is about to be committed, they may arrest the individual concerned under Section 2 of the Criminal Law Act 1967. There are also other courses of action which may possibly be followed according to the circumstances.
However, the Government believe that the simple repeal of the suspected person offence would leave the public insufficiently protected in two important respects. The first—and the most important, in our view—is that sus is frequently used in cases of individuals seen tampering with parked cars. As many noble Lords know, perhaps to their cost, offences involving the theft of motor vehicles or their contents are all too common. A difficulty, to which the Select Committee in another place drew attention, is that at the point when the individual is seen tampering with the car door or window it is often unclear precisely what he is intending to do. Is he intending to steal the car? Is he intending to steal something out of the car? Is he intending simply to take the car away and drive it?
If the individual is to be charged with attempting to commit an offence, one must be clear what that offence is. Understandably, therefore, prosecutors have in some cases fallen back on sus in these circumstances. The Select Committee hoped that the difficulties which sometimes arise in charging an attempt in this situation would be remedied by the Law Commission's report. As noble Lords may be aware, the Law Commission did not make any recommendations which could materially ease the difficulties which had been encountered in this respect. In the Government's view, there would be an unacceptable gap in the criminal law if sus were repealed without any action to tackle this specific problem. The Government therefore propose the creation of a specific offence—the elements of which are set out in Clause 9 of the Bill—which would penalise interference with motor vehicles.
The offence took a somewhat different form on introduction in another place. The action constituting the offence has remained unaltered, but, as originally drafted, the prosecution was required to prove only that the defendant has acted with intent to gain entry to the vehicle. The absence of a requirement to prove criminal intent was widely criticised, however, and the Government responded by introducing what is now subsection (2) of Clause 9. This requires the prosecution to prove that the act of interference was carried out with intent to commit one of the following offences: theft of the vehicle, theft of its contents or load or taking and driving away. But your Lordships will note that it is unnecessary for the prosecution to prove which of the offences the defendant, or an accomplice, intended to commit, provided that it can satisfy the court that it was one or other of those three offences. This is, I am advised, probably a unique

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provision; but I would argue that it seems wholly suited to the circumstances. For, if the prosecution had to prove which of those three offences was in prospect, one would of course be back at square one, faced with the same difficulties that have been experienced in trying to bring any charges of an attempt. I hope that noble Lords will agree that, if this provision is indeed unique, it is none the less fully justified.
The second potential gap identified by the Select Committee in another place which I mentioned and which brings me to the direct link between the repeal of sus and the provisions on attempt, concerns the circumstances in which a pickpocket tries to steal from a pocket or handbag which turns out to be empty. Here, again, the Select Committee expressed the hope that the difficulties which had been encountered in charging the offence of attempt in such cases would be remedied by the Law Commission's report. They were not to be disappointed. Indeed, the proposal to make "impossible attempts" of this kind subject to the criminal law is probably the most important feature of the Law Commission's proposals to reform and codify the law of attempt, which forms Part I of the Bill.
Having thus arrived in a roundabout—but I hope not wholly confusing—fashion at the beginning of the Bill, I think it may be helpful to examine in greater detail what Part I of the Bill is designed to achieve. Clause 1 sets out the elements of the new statutory offence which will replace the common law of attempt which is abolished by the Bill. The mental element, in the words of the Law Commission's draft Bill, is expressed as an
"intent to commit an offence to which this section applies".
The Law Commission considered that this would be interpreted in the light of the decision of the Court of Appeal in R. v. Mohan and that it would not, accordingly, alter the present position regarding a person's intention to bring about the consequences of his acts. The conduct which constitutes an attempt is defined as
"an act which is more than merely preparatory to the commission of the offence".
This is not intended to make any change of substance in the position under the present common law. Noble Lords may have noticed, however, that this differs slightly from the wording of the Law Commission's draft Bill, which spoke of an act
"which goes so far towards the commission of an offence as to be more than a merely preparatory act".
I hasten to assure your Lordships that this change in drafting involves no point of substance and has the approval of the Law Commission. I have already touched on the question of impossible attempts—the subject of subsections (2) and (3) of Clause 1—in referring to the case of the would-be thief and the empty pocket. I hope your Lordships will not think that, as a non-lawyer, as my right honourable friend the Home Secretary put it in another place, I am attempting the impossible by adding just a few more words on this subject.
I must refer to the decision of this House, sitting in its judicial capacity, in the case of Haughton v. Smith. This concerned the handling of goods which the offender believed to be stolen but which, technically, had ceased to be so, because they had earlier been
766
taken into police custody. The offender was charged with attempting to handle stolen goods. Hitherto it had not been clear whether an individual was guilty of an attempt in such circumstances, but noble and learned Lords on that occasion decided unanimously that he was not liable.
Their Lordships went on to consider whether liability should attach in other cases of impossible attempts, in particular what are commonly called "factually impossible" attempts. Here the impossibility generally lies in the fact that the object of the offence does not exist or is not present. An example to which I have already referred is that of the empty pocket. Before Haughton v. Smith it had been accepted for some 80 years that a charge of attempt did lie in these circumstances: it was no defence to a charge of attempted theft that the pocket or safe was empty. But in dicta, which were followed by the Divisional Court in subsequent cases, noble and learned Lords took the contrary view.
The Law Commission were in no doubt that "factually impossible" attempts, such as the attempt to steal from an empty pocket, should be within the scope of a statutory law of attempt. The Government wholeheartedly agree. There is, however, much greater room for disagreement about cases like Houghton v. Smith. In cases such as these the offender even if he carries his actions through, will not commit the full offence because some essential legal ingredient of that offence is lacking. Thus, in that instance the offence was handling stolen goods, but the goods were not, at the material time, stolen. The Law Commission considered that liability should attach in such cases. They argued that this result was right on merits, but they also considered—with justification, as it transpired—that it would be extremely difficult to draft provisions which would distinguish this species of impossible attempts from others. The Law Commission considered that it would be appropriate instead to rely on discretion in bringing prosecutions to ensure that proceedings did not take place in the more extreme cases.
To cut the story short, the Government tried in the Bill as introduced originally to draft the distinction which I have been attempting to describe and found that it could not be done. Or, to be more accurate, we concluded that there was no hope of drafting the distinction in a way which would be reasonably concise and which would be free of ambiguity. In another place the provisions as originally drafted were strongly criticised by eminent witnesses who gave evidence to the Special Standing Committee. In the light of these criticisms, the Government tabled amendments which had the effect of reverting to the Law Commission's recommendation of introducing liability for all impossible attempts. I cannot conceal from your Lordships that we have departed from our policy with some regrets. But we have accepted throughout that, whatever the arguments of principle, there was little difference in practice between the Law Commission's recommended policy and that which the Government initially sought to follow.
Before leaving the subject of impossible attempts, it remains only for me to say briefly how subsections (2) and (3) of Clause 1 implement the Law Commission's recommendation. Subsection (2) provides that a

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person may be guilty of an attempt even if the facts are such that he could not have committed the full offence. This subsection should be sufficient in most cases to bring impossible attempts within the scope of the Bill. But it may possibly be argued in a case such as Houghton v. Smith that a person lacks the intent specified in subsection (1) because his intention is to handle particular goods, which do not happen to be stolen. Subsection (3) precludes this argument by providing that, in such a case, the defendant's intent shall be determined by reference to the facts as he believed them to be.
Turning to subsection (4) of Clause 1, I should draw attention to one respect in which the Bill now differs from the Law Commission's recommendations. This concerns attempts to commit summary offences. It is generally thought that it is not an offence under the present common law to attempt to commit such an offence. The Law Commission recommended on balance that it should be, and the Bill as introduced gave effect to their recommendation. This provision met with criticism in Standing Committee in another place on the grounds that it extended the scope of the criminal law without any practical justification. The Government decided on reflection that since there seemed to be no evidence that the position under the common law was unsatisfactory, there was insufficient reason to extend the criminal law in the manner proposed. Accordingly, Clause 1 of the Bill now applies only to offences which are triable only on indictment and those triable either way.
I will not linger over the remaining clauses. Clause 2 is procedural. Clause 3 is consequential. Whereas it was originally intended that existing statutory offences of attempting to commit a summary offence were to be replaced by the offence in the Bill, it is now necessary for them to be preserved if the protection afforded by the law is not to be diminished. Clause 3, although it looks formidable, simply ensures that such offences, and any which may be created in future, will follow the provisions in Clause 1 of the Bill in regard to such matters as the mental element and impossibility.
Clause 4 is principally concerned with the mode of trial and penalties, in respect of which it makes no change in the position at common law, and perhaps we can come back to that later on. Clause 5 makes similar changes in respect of conspiracies to achieve the impossible as Clause 1 makes in respect of impossible attempts. Clause 6 abolishes the common law offence of attempt. It also abolishes any offence at common law of procuring materials for crime, for the existence of which the case of Gurmit Singh is an authority. I have already discussed the substance of Part II of the Bill and need therefore refer only briefly to the provisions concerned. Clause 8 repeals "sus" and Clause 9 creates the vehicle interference offence. The remaining clauses in Part III of the Bill, are concerned with formal and procedural matters.
I think it will be clear that the Bill, though brief, is concerned with weighty and with—what I confess to the layman are—some rather complex parts of our criminal law. The Government have demonstrated their willingness to listen carefully to, and if necessary to act upon, constructive criticism of the Bill's provisions. We shall of course, pay close attention to the views which are expressed now in your Lordships'
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House. I therefore hope that the House will this afternoon give a welcome in principle to the important reforms which this Bill seeks to make in our criminal law. My Lords, I beg to move.
Moved, That the Bill be now read 2a.—(Lord Belstead.)
3.21 p.m.
Lord Mishcon: My Lords, the House will, as always, be grateful to the noble Lord the Minister for the clear, lucid way in which he has dealt with a very technical Bill. There are, however, implications in this Bill which, I hope in fairly simple language, can be made abundantly clear to all Members of this House. If I myself understand what I am saying, I hope that your Lordships will equally find my words intelligible.
There is no doubt at all that, in general terms, the Opposition welcomes this Bill. There are certain reservations, but without any doubt at all we shall certainly not be opposing the Second Reading. The unequivocal welcome goes to the abolition of the suspected person offence in Section 4 of the Vagrancy Act 1824. That is the offence which is commonly known as "sus". One wishes that it were possible under this Bill to get rid of other antiquated offences under that Act, but, although an endeavour was made in the other place to do it, it was felt, quite understandably, that this Bill was not the appropriate vehicle to achieve that end.
As we are, as it were, interring Section 4, I think it is appropriate to accord some thanks to those who are responsible for, at long last, giving it a decent burial. The first people to thank, as the noble Lord said, are the Select Committee on Home Affairs. In May 1980, this committee recommended the immediate repeal of sus and then, with admirable prodding ability, issued a further report in August 1980 asking the Home Secretary why he had not yet implemented their first recommendations. Secondly, we ought to accord our appreciation to all those who have campaigned for the repeal of sus. If I may say so from this Box, not least to be counted are the very sober efforts of the noble Lord, Lord Avebury, whom we are glad to see in his seat, and who will, indeed, be echoing his sober thoughts later in this debate.
In praising those who have campaigned for the end of sus, I in no way associate my noble friends with any who have sought to cast racial aspersions on the police in general. On the suggestion of deliberate racial bias, the Select Committee said that it did not believe that it existed or that it exists—nor do we. That there are some black sheep, if that is not an inappropriate phrase to use, in any grouping, all your Lordships know. Indeed, except for those who are present in this House, it may even be conceded that there are black sheep in your Lordships' noble House. But, certainly, any question of general aspersion of racial bias in regard to the police is not admitted when, as I have said, we see the decent burial of sus.
For my own part, I could do no better, in recommending the worthiness of the end of that offence, than to quote the very words which the Home Secretary himself used in another place on the Second Reading of this Bill. I quote from Hansard of 19th January 1981, at column 22. He said:

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"I believe that the offence has become so widely mistrusted that it is really now in everybody's interest that it should be repealed".
He also referred at column 21 to,
"the detrimental effect which the offence has undoubtedly had on relations between the police and the ethnic minorities".
Having done this, however, as your Lordships heard from the Minister, the Government feel that they must fill a gap left by the repeal of sus, and they have created a new offence in Clause 9 of interference with a motor vehicle. I wonder whether I may ask your Lordships to follow me in the argument which I now wish to advance in regard to Clause 9, by having a look at it, as I am sure your Lordships have done. As the noble Lord said, this is in a reformed state. It came before another place in a very much weaker form than it now is, and that I readily concede. But this is the new offence which is to be created. It reads:
"A person is guilty of the offence of vehicle interference if he interferes with a motor vehicle or trailer or with anything carried in or on a motor vehicle or trailer with the intention that an offence specified in subsection (2) … shall be committed by himself or some other person".
So subsection (2) deals with those offences of which an intention has been shown by the vehicle interference. Those are:
"(a) theft of the motor vehicle or trailer or part of it;
(b) theft of anything carried in or on the motor vehicle or trailer; and
(c) an offence under section 12(1) of the Theft Act 1968 (taking and driving away without consent);
and, if it is shown that a person accused of an offence under this section intended that one of those offences should be committed, it is immaterial that it cannot be shown which it was".
Then, in subsection (3) there is provision that the accused if convicted is,
"liable on summary conviction to imprisonment for a term not exceeding three months or to a fine not exceeding £500 or to both".
Your Lordships will have noted that this is a summary offence, which means that the defendant—as was the case with sus—cannot elect for trial by jury. He will be dealt with in the magistrates' court. In nine cases out of 10, as your Lordships well know, it will be a youngster—white or black, it matters not. The only reason given by the Government, so far as I can ascertain, is, as the Minister said, that there is a gap left by sus in that there is a high proportion of car door handlers where there is not sufficient evidence—and I ask your Lordships to consider this very carefully—to support any other charge, including an attempt, because there is not sufficient evidence of a preparatory act to show which precise offence was going to be committed. It is absurd to introduce this new charge, which is supposed to do some good, if you consider the harm that it undoubtedly will do. Indeed, it is taking away much of the good, if not all of the good, done by the repeal of sus.
In another place the Home Secretary pointed out as one of the reasons for doing away with sus that in England and Wales during 1979 fewer than 3,000 cases were brought under sus. Only a proportion of those offences could be car offences. Therefore, however high that proportion is, it must be negligible. The Home Secretary, as I have said, used the argument about the small number of cases brought under
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sus as a very good reason why Section 4 should be repealed and sus abolished. But may I advance to your Lordships, because this is so important—your Lordships may feel, on this of all days, it is very important—that even with the improvement brought about in the original clause by the special Standing Committee we are doing something highly injurious.
I wonder whether your Lordships would allow me just a few quotations first from the report of the Select Committee:
"We do not consider that the public interest is best served by an offence which leaves a significant proportion of those convicted with a sense that their conviction was unjust".
That was said about sus. It would be equally true of this new offence. Secondly, may I repeat what the noble Lord the Minister said:
"This is not an offence which owes its origin to any recommendation of the Law Commission or the Select Committee".
May I now quote from paragraph 223 of the report of the Law Commission:
"For reasons we have given above we have, as a matter of policy, decided against the possibility of penalising criminal intent accompanied by merely preparatory acts".
This is precisely, by definition, Clause 9. Let me also quote from the evidence given before the Special Standing Committee on this Bill in February 1981, only a couple of months ago.
First, may I quote from the evidence given by the Inner London lay magistrates. I must be careful to distinguish them from the Magistrates' Association and say, in frankness to your Lordships, that the Magistrates' Association gave evidence which diverged from this. Mrs. Harvey, an important lay magistrate in Inner London, said:
"First, I welcome Clause 8. Personally, I do not see the necessity for Clause 9 which is presumably intended to fill a gap. I question it first on the ground of need: that is, is there, in fact, a gap? In my experience as a magistrate at Camberwell Green and Tower Bridge, the courts are not unduly bothered by cases involving motor cars. We have no figures about what proportion of our cases applies to motor cars. I have made inquiries amongst the clerks and the guess is that the figures involving motor cars could be one in 10, or it could be a third".
Lower down, Mrs. Harvey said:
"I suggest that the clause is superfluous. The magistrates courts have an armoury of measures at their disposal. Apart from that, the police have preventive measures".
Lower down still she said:
"Although I did not mention it in my previous evidence there is the power of arrest under the Criminal Law Act. In respect of the courts, a number of offences could apply to cases concerning vehicles".
Mrs. Harvey goes on to set them out and to detail them. Then Lady Mitchell, another important lay magistrate in Inner London, said in evidence:
"I simply believe that in court we shall be faced with the same situation we faced in 'sus'. That is, if you go into court, look at the list and see that there is a 'sus' case, one of interfering with a motor vehicle, you have a feeling of total misgiving and dread, knowing that the nature of the offence is one that is difficult to comprehend because it is a sort of pre-attempt, and the nature of the evidence will presumably also be as unsatisfactory as it is in 'sus'. I just do not see that there is any need to replace that part. I do not deal with attempt, of course, because that covers the whole of the criminal law, but to replace that part of 'sus' that dealt with auto crime is quite unnecessary and will simply lead to trouble in our courts".
I could give many more quotations but I do not wish

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to over-extend the usual patience of the House. I will merely say that the same sort of evidence was given by the National Association of Probation Officers and the National Council of Civil Liberties. However, your Lordships will possibly forgive me if I quote briefly from the Law Society's evidence. I am looking at col. 194 of the Official Report of the Special Standing Committee on this Bill. At col. 194 Mr. Girling of the Law Society said:
"I shall not go into the statistics which have been before the committee but the number of occasions when such provisions were used in relation to motor vehicles were in specific areas and not in great numbers. Whether it is therefore desirable to have a specific offence which could be used for that is not something which the Law Society would firmly hold as its view. I do not think that the Law Society would object to a provision which did not make a specific offence of interference. If it were tightened up in these ways I think that is how we would look at it. I do not think that we consider that it is necessary or essential".
As I have already intimated to your Lordships, I am looking at this in the light of events of which we heard with such dismay over the last weekend. I do not wish to anticipate any discussion that there may be on the Statement which is to be made later this afternoon. But is it not absolutely disastrous, in these days of growing unemployment among the youth of our country, black or white, and when there is evidence that, justifiably or not, there is tension between youth, black and white, and the police in certain areas that there should now be introduced a new offence, with all the wrong points about "sus" that made the Government decide to bury it by repeal in this Bill?
I am hoping very much that after due consideration the Government will decide that Clause 9 of the Bill should go. If they and this House decide otherwise, I can only hope that there will be an opportunity at a later stage to introduce the right of trial by jury, if we do not do away with it completely, or to take advantage of a suggestion which was made in another place by my honourable friend Mr. Cunningham, the Member for Islington North and Finsbury: that if this offence has to be put on to the statute book the Minister can introduce it by order at some future date; that he will decide (if he decides it at all) after seeing whether we are overrun with motor vehicle cases with which we cannot possibly otherwise deal.
Your Lordships will be delighted to know that I have only a couple of minutes to spare on the rest of the Bill. As the noble Lord the Minister said in his eloquent and lucid introduction, it is a very necessary follow-up of the Law Commission's recommendations in regard to clearing up the law of attempt and conspiracy. This Bill clarifies it. It codifies with amendments the common law of attempt and it amends the statutory offence of conspiracy. It is based, as your Lordships heard from the noble Lord the Minister, on the Law Commission's Report. It follows upon the decision in Houghton v. Smith in your Lordships' House and, in so far as the recommendations of the Law Commission were concerned, those recommendations were eventually followed in the Standing Committee by amendments that were made and I believe I am right in saying that, where there was a difference, there was a reversal in all cases back to the Law Commission's recommendations, with the exception of the matter of attempt and summary trial.
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There is only one point that I wish to raise in this Second Reading debate, and it is this: The Minister was so right in expressing appreciation to the Law Commission and I am sure we all share in that expression of appreciation. But of course what was not mentioned was that this extraordinary situation arose when this Bill was being considered. This was brought out very clearly when the Law Commission gave their evidence. What was brought out was the fact that there had been no consultation whatsoever with the Law Commission on the drafting of this Bill and certainly not in regard to the matters where the Bill differed from the Law Commission.
One knows that the Government were endeavouring to move with some expedition, and nobody surely is going to suggest to your Lordships that there was not enough time for a copy of the draft Bill to be sent to the Law Commission and for consultation to take place with them on it. The result was that there was a great waste of time because, as the noble Lord the Minister frankly said, it was subsequently found that indeed the drafting was impossible and did not, and could not, carry out the intention of the Government because it was not possible to do it if one wanted to legislate with any clarity at all—and if one does not legislate with clarity on criminal law one does not know the meaning of clarity.
I shall quote quickly from col. 9 of the Official Report of the Special Standing Committee so that your Lordships may appreciate this point, and may I express the hope to the Government that this lack of courtesy does not happen again. I am quoting the Minister here, but obviously I must quote what was said to the Minister before he replied at col. 9:
"Mr. Cunningham: Let me see whether I have understood that correctly. There was some discussion between the Home Office and the Law Commission at a time when it was clear that the Home Office had severe doubts about the wisdom of the Law Commission's recommendations on the impossibility; but am I to gather that the words used in the Bill were not the subject of discussion with the Law Commission before the Bill was presented?
Mr. Mayhew, Minister of State at the Home Office: That is right".
There is only one happy, classic quotation that I am going to make to your Lordships before I sit down, upon precisely the same point and, if I may say so, I shall dine out on this very lovely reply that was given by Mr. Justice Skinner, who gave evidence before the committee on the wording of this Bill. This is what Mr. Mayhew, the Minister of State at the Home Office, said to the judge:
"I wish to take up the point you made a short time ago. I have accepted that there was confusion in the Bill; I ought to make clear that what I intended to convey was that if, on reflection, we consider that there is confusion here we shall remove it if we can. Naturally we take seriously the views that have been expressed, not least by you".
To which the learned Mr. Justice Skinner replied:
"The confusion is clear".
My Lords, it is upon that classic note that I have tried to make the confusion clear that exists in the minds of the Opposition in regard to Clause 9 and the various other points connected with it and I have taken the liberty of bringing the matter before your Lordships.

Brixton: Public Disorder
3.45 p.m.
Lord Belstead: My Lords, with the leave of the House, I will now repeat a Statement being made in another place by my right honourable friend the Home Secretary.
The Statement is as follows:
"With permission, Mr. Speaker, I will make a statement about the major disorders which have taken place in Brixton over the weekend. The House is well aware of the violent clashes which have occurred between the police and young people, mainly black. The most serious disorder took place in the afternoon and evening of Saturday. Shops were looted, vehicles destroyed and other property (including private homes) seriously damaged. Again yesterday there were outbreaks of lawlessness in the area, though on a lesser scale. Over the two days a total of 149 police officers were injured, along with 58 members of the public. Ten police officers and one member of the public remain in hospital; 224 people were arrested.
"We in Parliament, on behalf of the people of this country, have placed on the police the heavy burden of maintaining peace on the streets and of preserving order and the rule of law. Whatever questions may arise in people's minds about the reasons why this outbreak of violence occurred, there is no doubt in my mind, nor should there be in the mind of any Member of this House, that Metropolitan Police officers of all ranks carried out their duty with great bravery and professionalism. On our behalf I have asked the Commissioner to pass this message on to all members of his force. I would also wish to pay our tribute to the same courage and determination which were shown by the members of the London Fire Brigade.
"But despite the determined efforts of the police, they were faced with violence which was very serious in its type, scale and intensity. In addition to the personal injuries, the widespread damage to property, and consequent financial loss to wholly innocent people, has been enormous. Whatever grievances individuals or communities feel they suffer, such violence—from whatever quarter it comes—cannot and will not be condoned. The police will continue to do their duty to maintain the law on the streets of London, and in this they are entitled to the full support of Parliament and the nation.
"The events of this week-end call for the most thorough examination. I have therefore decided to appoint an inquiry under Section 32 of the Police Act 1964. I have invited Lord Scarman to undertake this inquiry and I am glad to say he has accepted. His terms of reference will be:
'To inquire urgently into the serious disorder in Brixton on 10 to 12 April and to report, with the power to make recommendations'.
"The inquiry will be held in public save where Lord Scarman decides that it is appropriate to be held in private".
My Lords, that is my right honourable friend's Statement.
3.49 p.m.
Lord Boston of Faversham: My Lords, I should like to thank the Minister, the noble Lord, Lord Belstead, for repeating the Statement. It is of course a most sombre one and there was indeed, as we have seen both from the Statement itself and from the reports over the weekend, a very serious breakdown in law and order in Brixton. I join in condemning the appalling violence and the looting and the other criminal acts, including the arson and the destruction that took place. Whatever the causes, whatever the tensions, whatever the frustrations, there can be no excuse whatsoever for action of that kind.
I would also join in commending the courage and efforts of the police and of the other essential services. It needs to be plainly stated—and I would ask the Minister if he would accept this—that no one must be allowed to force the police off the streets in this country. It is the police's duty to protect all law-abiding citizens and to bring to justice those who break the law. I think in the context of the disturbances it is reassuring, and, if I may say so, praiseworthy, that there was no withdrawal of police officers from the area over the weekend. Clearly lessons have been learned from last year's Bristol experiences. I would just mention one point in passing about the actual circumstances, and that is the question of the police shields which went up in flames; perhaps that matter has been receiving urgent attention already.
We welcome the decision to set up an inquiry, and particularly the fact that it, or part of it, as the noble Lord, Lord Scarman, directs, can be held in public, and that it has been set up so swiftly. We would also welcome the fact that the noble and learned Lord, Lord Scarman, has been invited to take the inquiry. I would ask the Minister whether there are limitations and, if so, what in the scope of the inquiry? Under Section 32 of the Police Act 1964 an inquiry of this kind is held to look into the policing of an area, and that is capable of quite a wide interpretation, one would hope. Obviously it will need to go into the causes, but including, one would hope, the underlying causes; whether, too, there is any evidence of people coming in from outside, whether the action taken was spontaneous or in any way planned, and indeed also whether there is any evidence that any police activity before the rioting took place was insensitive in any way. But, of course, it must also be clearly understood that the police presence anywhere must be what is needed to protect all citizens and to maintain law and order.
Also I would ask whether the scope of the inquiry would cover such causes, if they be causes, as unemployment and housing in the area, and indeed whether the inquiry can indicate, in the course of the report which has been mentioned by the Minister, measures to avoid similar difficulties in the future. We would, of course, offer sympathy to those who suffered injury and damage in the course of these disturbances. My only other question to the Minister is whether he can give any indication to people affected by damage about compensation questions.
Lord Avebury: My Lords, may we also thank the Minister for repeating the Statement and may we ask him to associate us with the expressions of sympathy voiced by the noble Lord, Lord Boston, for the police

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officers and members of the public who have been injured in these events, and particularly those who have had to be taken to hospital. May I also express on behalf of my party a very warm welcome for the inquiry which the noble Lord has announced, under the chairmanship of the noble and learned Lord, Lord Scarman, and say that no one is more fitted to undertake such an inquiry than the noble and learned Lord.
With regard to the terms of reference, Section 32, as we understand it, limits the scope of the inquiry. While we agree that it is a matter of considerable urgency that the events immediately surrounding the disorders should be explored and explanations found for them, would the noble Lord not agree that a more thorough and far-ranging inquiry is necessary to find out what are the origins of the fury and resentment which boiled up over the weekend, which were a repetition of the events which occurred about this time last year in Bristol?
Would not the noble Lord agree that, while a very thorough inquiry was undertaken by the chief officer of police into the events as they affected the police in Bristol, the underlying causes of those disorders were never revealed because they were not properly explored, and that some more far-reaching inquiry into the underlying causes of both Bristol and Brixton is now necessary, so that we do not have a third event, perhaps further events, of this kind happening in our major urban centres in future?
3.55 p.m.
Lord Belstead: My Lords, I am grateful to both noble Lords for their response to my right honourable friend's Statement, and for the expression of sympathy from both noble Lords for those who have been injured in the violence of the weekend. The noble Lord, Lord Boston, expressed the view that the police must protect all law-abiding citizens in this country and preserve the law wherever it has to be preserved. I confirm what has already been said in my right honourable friend's Statement: that during this very difficult weekend the Metropolitan Police discharged their duty very bravely indeed.
Both noble Lords have asked me in rather different ways about the scope of the inquiry. The noble Lord, Lord Boston, referred specifically to the effects of Section 32. I have already referred in my right honourable friend's Statement to the terms of reference which the noble and learned Lord, Lord Scarman, will have in the inquiry which he will conduct. It might be worth repeating them:
"To inquire urgently into the serious disorder in Brixton on 10 to 12 April and to report, with the power to make recommendations".
Speaking for my right honourable friend, I am just as concerned, and so I believe will be the inquiry, about the circumstances which precipitated these matters and how for the future disorder on this scale can best be prevented. But in saying that may I remind your Lordships that at the present time there are issues which are relevant to the Brixton disturbances which are under study already in different ways.
I would simply remind your Lordships that the Sub-Committee on Race Relations and Immigration of the Select Committee on Home Affairs in another place is undertaking a wide-ranging inquiry into the problems
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of racial disadvantage; and, as your Lordships will know, the Home Secretary has instituted a study of the incidence of racial attacks wherever they are to be found. It must be for the noble and learned Lord, Lord Scarman, to decide exactly on the lines of his inquiry, and this of course he will do within his terms of reference.
The noble Lord, Lord Boston, asked me about compensation. As the Statement says, the damage has been enormous. The vehicle for handling claims for compensation is the Riot Damages Act 1886. This provides that, subject to certain conditions, the police authority shall pay out of the police compensation fund, compensation to any person whose house, shop or building has been injured or destroyed, or the contents of which have been injured or destroyed or stolen by persons who riotously and tumultously assemble together. Claims must be made within 14 days. The consideration of claims in respect of the disturbances in Brixton is a matter for the Receiver of the Metropolitan Police district.
The Lord Bishop of Southwark: My Lords, when I moved recently from Newcastle to Southwark I knew that one of the major differences between the two areas would be in the degree and extent of racial tension in the inner city areas of my new diocese. I did not expect to be walking round scenes of destruction yesterday which reminded me of the early days of the last war. Being new, I cannot speak from much personal experience, but I have been in close touch with clergy and others who live and work in this area. Yesterday I spoke at length with the vicar of the parish and with the Methodist minister one of whose churches is actually in Railton Road, the so-called "front line", and with one of our senior clergy who exercises a ministry to the whole borough. I have studied private reports on church life in the area going back to 1976, and the more recent report of the working party into police and community relations.
As a result of this, I want to say two things to your Lordships today. I will try to weigh my words carefully, because this is a very fragile situation and it is easy to be misunderstood. First, I, like others of your Lordships, very much welcome a full-scale inquiry which may at least lay bare the roots, or some of the roots, of this tragedy and I am sure that I speak for all the Churches in the area when I say that. It is a tragedy because all the evidence suggests that the pressure has been inexorably building up despite the efforts of many people. The roots are long and complex, as one would expect. They are also intertwined with the national situation and the policies of central Government. After the inquiry there must be the will to act in ways which will undoubtedly require financial and other sacrifices from the rest of the community. One thing is certain, to my mind, and that is that Brixton—
The Lord President of the Council (Lord Soames): My Lords, I hope that the right reverend Prelate will forgive me for intervening, but perhaps he would be so kind as to frame his remarks in the form of questions to the Minister. That is the form we adopt in this House. This is not the moment for a speech on the situation so much as perhaps to give, within the form

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of questions, the right reverend Prelate's own observations as to these sad events.
The Lord Bishop of Southwark: My Lords, I apologise; I shall do my best. I have not very much more to say. Is the Minister aware that the state of community and police relations in Brixton is something which has been giving cause for great concern over recent years? I should like to say in relation to that question that that is a question which I have been very reluctant to put and very sceptical about because I know very well what an intensely difficulty job the police have to do on our behalf, often acting in some degree as our scapegoats. I know at second hand from a friend in Uganda what it is like to live in a country where law and order has largely broken down. I know also that it is not easy to be constantly criticised, especially if that criticism shows a lack of understanding of the job one does and the majority are given a bad name because of the faults of a minority. It was only a few days ago that your Lordships had some very critical things to say about bishops and clergy in this very Chamber. But in recent years—
Noble Lords: Speech!
The Lord Bishop of Southwark: My Lords, I shall leave it at that.
Lord Belstead: My Lords, I should like to reply to the right reverend Prelate, who was good enough to welcome this inquiry. The right reverend Prelate, of course speaking with his knowledge now of the diocese, also mentioned the need for sacrifices to be made for this particular area of London. No one, I think, would gainsay the needs of people living in the area of Brixton, but I believe that it is just worth putting on record in reply to the right reverend Prelate's observations that Lambeth received assistance of about £8 million in the last year under what are known as the "partnership arrangements for inner cities" and, without in any way prejudicing the findings of the inquiries of the noble and learned Lord, Lord Scarman, I would doubt whether financial matters are the whole story.
The right reverend Prelate was also good enough to say that the police have an intensely difficult job. I would only add again that in Parliament I think that we need to support the police in that job which they have to do.
Lord Brockway: My Lords, I should like to ask the Minister three questions. First, while welcoming the appointment of the noble and learned Lord, Lord Scarman, as chairman, will the Government be very careful to appoint a membership of this inquiry which receives the confidence of those involved? Will they include a member of the racial community councils and of the ethnic organisations? Secondly, can the Minister say whether the apparently rather restricted terms of reference will include a discussion of the deeper reasons for the sense of frustration, particularly the unemployment among young workers, mainly blacks, but also including whites? Thirdly, will the inquiry pay special attention to what has been done in Handsworth, Birmingham—a very similar locality—
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where, by the action of the racial community councils, this situation has been avoided?
Lord Belstead: My Lords, perhaps I may answer those questions one at a time. The noble Lord, Lord Brockway, asked me about other appointments to this inquiry. My right honourable friend the Home Secretary much appreciates the swift reply of the noble and learned Lord, Lord Scarman, in agreeing to undertake this inquiry, and my right honourable friend has not indicated that he intends to make any other appointments to this inquiry. As regards the other two questions which the noble Lord asked, I think that they are both matters for the noble and learned Lord, Lord Scarman, when the inquiry begins.
Lord Boothby: My Lords, is the noble Lord aware that the Americans have been through all this, and much worse, since the war, and that they have now managed to establish better racial relationships than those which exist in this country today? Will the noble Lord give us an assurance—I am sure that it is really unnecessary—that the Government will request the commission of inquiry to examine how they have done it in the United States, because there is no doubt at all that racial relations in the United States have vastly improved, despite massive unemployment, in the last 10 years?
Lord Belstead: My Lords, I am not sure, with respect, that I would agree with the premise on which the noble Lord's question is fixed. However, I should like to repeat the information which I have given—and I do so in the form of an assurance to the noble Lord, Lord Boothby—that, at the same time as this inquiry will be running, there are, of course, other inquiries which are going on at present in this country: one is the inquiry of a Select Committee of another place into racial disadvantage and another is a study promoted by my right honourable friend the Home Secretary into the incidence of racialist attacks in this country. We take very seriously the trend of the question which the noble Lord, Lord Boothby, has asked me, but I repeat that I do not agree with the premise on which the question was asked.
Lord Gifford: My Lords, is the noble Lord aware that the devastating events of this past weekend were foreshadowed as recently as January this year in a very full report of an unofficial inquiry headed by Mr. David Turner-Samuels, Q.C., bringing to light case after case of intimidation and harassment of black people in Brixton by members of the police, leading to the most profound alienation and distrust? Quite apart from the setting up of the inquiry, which I welcome, I should like to ask the noble Lord: has any action been taken, and will any action be taken, to change the attitudes and the methods of work of the police, including the special patrol group, in the light of this valuable report?
Lord Belstead: My Lords, if I may say so, the noble Lord, Lord Gifford, overlooks the efforts, the very real efforts, which have been made by the Metropolitan Police to try to improve police/community relations within the boundaries of the metropolis, and not least

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in this area which has to face so many very real difficulties. So far as the report to which the noble Lord referred is concerned, that was a report which consisted of, or at least included, a number of anonymous allegations, and I do not think that it was a particularly helpful report at all.
Lord Mishcon: My Lords, will the Minister accept from someone in your Lordships' House who was born in that area, who spent his youth there and who represented it on the London County Council and the Greater London Council for over 20 years, a sense of horror at what took place over the last weekend? Will the noble Lord the Minister also take it from someone who knows this area well that any preconceived judgment—which I am sure my noble friend Lord Gifford did not seek to make, but it might be inferred that he did—about the police being responsible, by harassment or otherwise, for troubles is not shared by many in your Lordships' House? Finally, will the Minister take it for granted that we shall await the recommendations, which I hope will be positive, with very great interest and with very great concern?
Lord Belstead: My Lords, I am grateful to the noble Lord, Lord Mishcon, for the two questions he has asked. I agree with the noble Lord that, whatever the reasons for the violence which occurred over the weekend, nothing can condone it, because it has caused misery to so many people and such a threat to law in this country. I also agree with the noble Lord, and thank him for saying, that with an open mind we should now support the fact that the most thorough examination into the events of the weekend will be undertaken in the inquiry which will be headed by the noble and learned Lord, Lord Scarman.
Lord Soames: My Lords, on that note I suggest that we might move on to the next business.

Criminal Attempts Bill
4.11 p.m.
Second Reading debate resumed.
Lord Wigoder: My Lords, after that very sombre 25 minutes, might I revert now to the not entirely disconnected topic of the Criminal Attempts Bill. It is not entirely disconnected because, of course, among other matters, the Bill deals with the abolition of the "sus" offence, and I think that there is no doubt that it was the misunderstanding of and the misrepresentations about that offence which have contributed, at least to some extent, to the lack of goodwill between the black community and the police in recent years.
I am sure that it would be entirely inappropriate for any Member of your Lordships' House to seek to criticise the procedures of another place. But I hope that it is in order if I venture to praise them to the extent of saying that their experiment on this occasion of having a Special Standing Committee appears to have worked most admirably and has produced a fascinating volume of evidence, cross-examination and
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reports leading eventually to a very productive Committee stage in the other place.
The Bill deals with a number of different matters. As a result of that Committee stage, I think that there is no doubt that the law about attempts in Part I of this Bill has been substantially improved, particularly where it deals with the whole fascinating academic issue of attempting to commit something which is impossible, and whether or not that should be a criminal offence. On balance, I am inclined to agree that the Bill is now better than it was when it was first presented, in that it has reverted to the Law Commission's recommendation instead of the original Government proposal.
But although a great deal of evidence was given in another place about this issue, I hope that perhaps in your Lordships' House we shall not concentrate too much upon it, because it is, in fact, very much an academic issue. The question to what extent an offence should be impossible to commit in order that there should be an offence of attempting to commit it, is one that does not very often arise in practice. Whatever view one takes—the Law Commission's view or the original Government view—one can very easily produce a hypothetical situation which is quite absurd. But, in fact, in practice it is not a matter that troubles the courts with any regularity or, I think, a matter that is worth any very careful attention in your Lordships' House.
That deals with Clause 1(2) and (3), where those matters are set out. I note in passing that in subsection (4) there appears to be a list of offences which it is not possible to attempt the commission of—if I may end a sentence in that rather appalling way. I am a little surprised to see that manslaughter is not included among the offences. I think that it is generally agreed that there is, in fact, no such offence as attempted manslaughter, and I think that it would give rise to difficulties if manslaughter was not included as one of the matters in subsection (4).
Perhaps the more important part of Clause 1 is the definition of an "attempt" as being—with, of course, the necessary intent—doing an act.
"which is more than merely preparatory to the commission of the offence".
The degree of proximity to the commission of the offence that is necessary to constitute an offence of attempt has always caused trouble, and I think that it is inevitable that in due course the present definition is also likely to cause trouble, although I can think of no more satisfactory way of putting it than is set out at the moment in Clause 1.
However, I want to raise one particular matter on Clause 1 and ask the noble Lord to reflect on this, because it will be referred to again in a moment or two when I deal with the second half of the Bill. If a person goes along trying shop doors with the necessary intent of stealing, the question would arise as to whether he was doing an act which was more than merely "preparatory to the commission of the offence", the offence being of attempting to enter with intent to steal. I should have thought that most judges would rule that that was, in fact, conduct which is more than merely "preparatory to the commission of the offence", and that, therefore, trying shop door handles in that way was capable of being an attempt to commit a criminal offence.

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Apart from being a very common form of misbehaviour, I think that that has some relevance when we come to consider the second half of the Bill, which deals with the abolition of the offence of suspected persons and the proposed new offence in Clause 9. I welcome the abolition of the suspected persons offence in Clause 8 of the Bill. It is long overdue and its repeal has long been advocated by many of us on these Benches, and conspicuously my noble friend Lord Avebury, who will speak a little later in this debate.
In saying that, at the same time I want to make two other comments about the offence of being a suspected person under Section 4 of the Vagrancy Act. First, I do not believe that the evidence supports the myth that has been put around that that Act was being deliberately operated in a racially discriminatory way. I agree with what the noble Lord, Lord Mishcon, said on that subject. Secondly, it seems to me that there has rarely been an Act of Parliament about which more gibberish has, in fact, been talked in past times. It has been widely put about that the fault with Section 4 of the Vagrancy Act was that it allowed police officers to arrest anybody simply because they suspected that an offence might be committed, which is quite wrong; it has also been widely put about that the intent to commit an offence, which is necessary under Section 4 of the Vagrancy Act, was in some way an unusual provision of the criminal law.
I think that it is worth remembering that, in fact, under Section 4 of the Vagrancy Act it was necessary to prove that the defendant had committed at least two specific acts; in fact, in the way in which the courts have operated, no prosecution has ever been brought unless at least three specific acts had been seen by a police officer to have been committed by a defendant. It was also, of course, the fact that once those acts had been proved it was then for the court to infer whether or not there was an intent to commit a criminal offence. There was nothing in the least unusual about that. It is a perfectly common feature of almost every criminal trial that intent, in one form or another, has to be proved. The whole myth that grew up about Section 4 of the Vagrancy Act was, I think, very largely due to its extremely unfortunate and rather archaic wording. I am, therefore, delighted to find that in Clause 8 that is to be repealed and that an attempt is to be made to put in its place some other provision which might be more accurate and more easily understood.
That leaves me to consider for one moment the provisions of Clause 9—the offence which is proposed of interference with a motor vehicle. I do not go along with the noble Lord, Lord Mishcon, in his argument that some such provision may not be necessary. All of us in the criminal courts know that in fact much criminal misbehaviour takes place in relation to motor vehicles, and indeed also in relation to shopping bags on London Transport, where that type of offence is particularly prevalent, which is not caught under the existing law. I can well understand that there is a case for replacing Clause 8—that is, the repeal of the suspected persons law—by some new form of offence to deal with what is a widespread form of criminal misbehaviour, particularly in the London area.
The problem that arises is that one cannot in the
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ordinary way deal with motor vehicles in particular under the existing criminal law because of the fact that somebody who is interfering with a motor vehicle may, as the noble Lord, Lord Belstead, pointed out, be committing any one of three quite separate offences. Whether Clause 9 is an entirely happy resolution of this problem is a matter that I should like to raise at a later stage on Committee. I content myself with pointing out at the moment that as it stands anybody could be convicted under Clause 9 who had tampered with one motor-car door handle if it was shown that he had the necessary intent to commit one of the three offences set out in Clause 9(2), whereas of course under the existing law of suspected persons he would in fact have had to be shown to have tampered with no less than three motor-car door handles. There is, therefore, a sense in which the proposed new offence is rather more stringent in its terms than the existing offence of suspected person which it is in fact now proposed to repeal.
The other observation I want to make, which takes me back to where I began, is this. If I am right in saying that a person who tampers with shop door handles is committing the offence of attempting to enter with intent to steal, would it not fit more easily into the scope of this Bill if Clause 9 were redesigned so that it became an attempt to enter the motor-car with intent to commit one of the offences set out in Clause 9(2)? It seems to me that that would deal with the form of misbehaviour that it is desired to deal with without giving rise to the argument that all the Government are doing is to abolish "suspected persons" on the one hand and replace it by something more or less identical on the other hand. Those are limited aspects about a small number of the points that arise on this interesting and worthwhile Bill. We on these Benches will certainly support the Second Reading today, and hope to pursue these comparatively minor points when the Bill reaches its Committee stage.
4.24 p.m.
Baroness Macleod of Borve: My Lords, this Bill is short, but it is very important. I am grateful to my noble friend for explaining it so succinctly, but so adequately. Those of us who have had the privilege, though at times and often it is an onerous one, of judging cases before us in the magistrates' courts will welcome this Bill so long as when it is applied in the future it is proved to go far enough. I think that only time will tell. The problem of judging whether a defendant when seen to be loitering was waiting for the next bus or for his girlfriend, or was waiting for the opportunity to snatch a handbag, has always been a difficult one.
Likewise, if someone is seen going round motor vehicles in a cinema car park, it may be difficult to prove that he intended to steal a car when he says he is interested only to see the gearbox, or the numbers of miles on the mileometer. In so many cases it is so much better if witnesses could be called by the police and by the defence. It would help the magistrates' courts enormously to have third parties to give evidence. The police are thought in some quarters to possibly be conniving together to get a conviction.

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Clause 9, as my noble friend has said, is important in that it goes a long way to protect the public and to reassure them that a police officer may arrest without warrant anyone whom he, with reasonable cause, suspects to be guilty of interfering with a motor vehicle, or theft of a vehicle, or theft of anything in the vehicle, or taking and driving away. Conduct of this kind will always continue, whatever the law. The theft of, or from, cars is, I know, considered to be petty crime, but the loss to the owner can be considerable and sometimes disastrous.
I query, as I think the noble Lord, Lord Mishcon, did, whether it is only this particular Clause 9 which will be triable summarily, or whether it will be triable either way. I have a feeling that it is only to be tried summarily, and I wonder whether that is the Government's final word on this subject. This morning I spoke to the Magistrates' Association, and they told me that they support this Bill as amended. I hope it has a speedy passage through your Lordships' House.
4.27 p.m.
Lord Pitt of Hampstead: My Lords, as one of the Members of your Lordships' House who in December 1978 tried to get Section 4 of the 1824 Act repealed on the basis of a Bill introduced by the noble Lord, Lord Avebury, I want to welcome this Bill in so far as Clause 8 is concerned. I do not think that there is any need for anybody to dilate on the difficulties and dangers that existed in this particular section; this law which made it possible for people to be convicted and even go to prison without having committed any offence. That was the danger of "sus". In effect, it was possible under the law for somebody to be convicted and imprisoned without ever having actually committed an offence. Therefore, I am glad that that is to be out of the way.
I must confess that like my noble friend Lord Mishcon I am worried about Clause 9. The original Clause 9 was very bad. It was merely replacing sus by another section in terms only of the limited scope of the Bill. In fact, in some respects, as was pointed out by the noble Lord, Lord Wigoder, it was worse because you only needed to touch one door handle and you were had. The amended Clause 9, the one before us, is better than the one the Government originally introduced. On the other hand, it is still not tight enough.
As there are sufficient legal brains in this House, what I should like to suggest is that if in fact your Lordships decide that we must have Clause 9—and I share Lord Mishcon's view that it is not necessary for us to have Clause 9—then we must try and see to what extent we can tighten it, so that you do not just get out of Clause 9 the problems that we used to get out of this suspected persons law. Therefore, I hope that the Government—and, also, all sections of your Lordships' House—will bend their minds towards tightening Clause 9, so that anybody convicted under it will be satisfied that they committed an offence and would take their punishment. The real problem with sus was that many people convicted of it felt they were unjustly dealt with. That was the most important undermining danger of the sus law. I still
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feel that Clause 9 as drafted will allow for a certain amount of that and I therefore hope your Lordships will try so to tighten the clause that that situation will not arise.
I also share the view of the noble Lord, Lord Mishcon, that, if at the end of the day the clause remains, the question then will be whether the offence should be triable by jury, and that too we shall have to explore in Committee. The accused should not have the feeling of having been badly done by, and if he is convicted by 12 of his peers, that may overcome the problem. Therefore the question whether it should be a summary offence or one triable by jury will have to be considered carefully in Committee.
Part I of the Bill deals with an extension of the law of attempt. It was inevitable that once we had removed the sus law, the law of attempt would need to be carefully codified, and that is what Part I sets out to do. I do not feel competent to join in the arguments that have taken place about "impossible attempt"—I am not a lawyer, just an ordinary simple layman—and my worry is about the question of conspiracy. Having decided to extend attempt to attempting the impossible, we have proceeded to say that one can conspire to do the impossible.
There has been a general feeling that the law of conspiracy is abused in any case; people feel that if there is no other way of getting at them—at an individual or a few people—they are charged with conspiring. I think conspiracy must remain for most offences, but I am not altogether happy—I do not know the views of the rest of the House on this—that a person may be guilty of conspiracy to commit an offence,
"even though the facts are such that the commission of the offence is impossible".
I would find it difficult to support that and I hope that that provision will be looked at carefully in Committee. I must be honest and say that if all we can do is vote against the clause, I shall certainly vote against it. I am unhappy about an extension of the crime of conspiracy in the way that is proposed in the Bill. Having said that, I welcome the Bill, which is an important measure. I hope that in Committee your Lordships will tidy it up so that there are no mistaken consequences as a result of its passage.
4.34 p.m.
Lord Avebury: My Lords, I find myself in the unusual but highly agreeable position of agreeing with most of the remarks of the noble Lord, Lord Belstead, and I share with him the welcome that has been given to the repeal of "sus" in particular, and I shall follow him by starting with a discussion of Clause 8, and go backwards through the Bill. In welcoming the abolition of sus, I suggest that it would have been sensible if your Lordships had taken the opportunity which was provided by the Suspected Persons (Abolition) Bill which I introduced in December 1978 of taking some action then, even though it would have left a gap in the law in that Part I of this measure, which deals with attempt, had to wait until the Law Commission had completed its work.
If we had gone ahead and abolished sus when we had the opportunity of doing so two years' ago, that might have speeded up the work of the Law Commission and of the deliberations of the Select Committee

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in another place, and certainly it would have concentrated the minds of the Home Office on producing legislation to deal with whatever gap existed in the criminal law if sus had been repealed and not replaced by anything else. In my view, it would not have been a serious gap. Certainly the effect of not having provisions for dealing with impossible attempts of certain kinds would not have been critical, as is proved by the fact that law enforcement was not gravely undermined by Houghton v. Smith, which I believe was decided well over seven years ago; it is referred to in a 1974 document, although I have not looked up the actual date of the case.
Looking at Clause I, one is bound to have doubts about the interpretation of the phrase "more than merely preparatory", and all we as non-lawyers can say about that is that the phrase was recommended by the Law Commission as having been carefully examined by the distinguished minds of the legal profession. On that I tend to agree with the noble Lord, Lord Pitt of Hampstead—namely, that it is not for us as laymen to enter into such technical provisions of the Bill—and that we can only say that something of that kind is necessary and we hope the courts will be able to interpret the phrase as the lawyers tell us they will.
Looking at it from a commonsense point of view, if one takes the impossible offence which is immediately related to that of sus—where somebody reaches into some sort of receptacle (a handbag or shopping basket perhaps) and there is not in the receptacle any object which he would have liked to steal, but he does not know that—then obviously an act can be more than merely preparatory to the intention of taking something. He put his hand into the receptacle only because he thought the shopper had somethings in there of value which he wanted to take. If one looks at a simple case like that, one can see that it is fairly clear what would have been meant in those circumstances by "more than merely preparatory". But whether it would be equally easy to construe that phrase under other and more complicated examples is not for me to say. I only hope it will not be difficult for the courts.
As for the argument concerning factually impossible offences and the disagreement between the Law Commission and Home Office, I would not presume to enter that discussion. I agree with my noble friend Lord Wigoder in that it is a matter of great fascination, as he found it, looking through the proceedings in another place, in particular looking at the examples that were adduced by the Law Commission of the impossible offence. I particularly liked the story of the umbrella taker, of Mister (I suppose he was "Mister" and not a Member of your Lordships' House) Baron Bramwell, who took an umbrella from a stand intending to steal it, but it turned out to be his own umbrella. I am not sure whether Mr. Bramwell was convicted; that is not clear from the Law Commission's document. Then there was the example of the bigamist who went through a ceremony of marriage mistakenly believing that his first wife was still alive or in any event was still his wife. A series of examples of impossible offences is provided and, as I understand it, the Bill is saying that if a person intends to do any
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of those things, he is committing an offence. I do not know whether in fact there will be prosecutions arising from the difficulties that the Home Office have had in trying to distinguish between the absolutely impossible offence and those offences of another character. But it seems to me a little odd that while those acts if completed did not constitute a criminal offence, an attempt to commit them would result in proceedings.
That is the situation we have got into as the result of the Home Office's difficulty, as I understand it, of proceeding along the lines that it first intended. But perhaps that cannot be helped, and one must hope that discretion will be exercised by the DPP in not producing the absurd situation of prosecuting people for attempting to do something which if it were completed, would not in itself be an offence.
I rather agreed with the noble Lord, Lord Mishcon, when he said that he wished that an opportunity had been taken, if it had been possible, for the other offences in the 1824 Act to be dealt with at the same time. I shall not pursue that point because I believe it is to be discussed by a later speaker, but it appears to me that it would be possible for your Lordships to incorporate provisions to deal with the other parts of the 1824 Act, if it were thought expedient to do so and we had information on which to base action.
Finally, I come to the vexed questions of a car door or window—the interference with a motor vehicle. The question here is: What is the person intending to do? We are creating a specific offence which requires the court to establish not only that interference with the motor vehicle took place, but that the person intended to do certain things. I agree with my noble friend that possibly we have made convictions easier to secure by requiring that only one attempt to interfere with a motor vehicle should be brought in evidence, and I am not very happy about that provision. I agree with the noble Lord, Lord Mishcon, that some of the magistrates who looked at it said that it was not necessary at all. The particular magistrate whom the noble Lord, Lord Mishcon, quoted expressed the opinion that cases involving motor-cars might have amounted to between 10 per cent. and 30 per cent. of all the sus charges in England and Wales, making between 254 and 849 cases in total. As I said when we discussed sus on a previous occasion, many of those incidents could have been dealt with under other provisions of the law, such as going equipped for theft, which is sometimes an alternative charge to sus.
In order to be perfectly fair I would say that on the other side of the argument evidence was given to the special Standing Committee by Sir Philip Knights, the Chief Constable of the West Midlands, that in his area 61 out of a total of 82 offences of sus related to motor vehicles. So one is forced to agree with my noble friend Lord Wigoder that we need a provision in the law which deals with the problem of the interference with motor vehicles, even if it is not exactly in the form that the Bill has it. In conclusion, I would say that almost any price is worth paying to get rid of the offence of sus. I should certainly be happy to have Clause 9 as it stands if it means getting the Bill on to the statute book as soon as possible.
4.44 p.m.
Lord Gifford: My Lords, I apologise for the fact that I was not able to be present for the start of the debate and to hear the introduction given by the noble Lord, Lord Belstead. Like the noble Lord, Lord Avebury, I wholeheartedly endorse and applaud the repeal of the "sus" law. But in considering the nature of the offences that are proposed to be put in its place I feel that we must be very clear about what was the reason for the widespread agitation over, and call for the repeal of, that law which has grown up over the last decade. I considered that the noble Lord, Lord Wigoder, was absolutely correct in his analysis of the law. It is not true to say that people could be lawfully arrested under the sus law merely for behaving suspiciously. There had to be evidence of a number of guilty acts in order for a conviction to be obtained. The difficulty was, and the reason for the agitation was, that the law was being abused, that prosecutions were being brought by police officers on an alleged basis of true fact which turned out to be totally false. There is really overwhelming evidence that that was being done and, what is more, being done in a racially disciminatory way.
I say to the noble Lord, Lord Wigoder, and indeed to my noble friend Lord Mishcon, in answer to his intervention on the Statement on Brixton, that they must read about what is going on, because otherwise you legislate in a state of appalling ignorance—
Lord Mishcon: My Lords, I intervene only because my name has been mentioned. I hope that, like my noble friend Lord Gifford, I not only read and study, but that I go into the courts; and I would not at all agree with his interpretaton of my remarks, unless he agrees that that interpretation is as the Select Committee found and as his honourable friends in another place have said: that the police have not generally been found to be guilty of racial bias; and I shall not from these Benches say that they have been.
Lord Gifford: My Lords, I know that when I make these assertions they are no doubt attacked because I am believed not to be reliable in my assessments or observations. That is why when this matter was debated in this House on the Bill of the noble Lord, Lord Avebury, I took great pains to go to the sources on which I made that particular statement. I do not want to weary the House with a repetition—the matter is reported in Hansard of 14th December 1978—but I would say that the sources were organisations of the highest repute dealing with race relations: the Runnymede Trust, the Catholic Commission for Racial Justice, and a report put forward by a number of black community leaders of the highest responsibility—all to the same end. Therefore in considering what this Bill in fact does we must take account of the opportunities for abuse.
Obviously it is not the existence of a sus law which causes injustices of the kind that I have mentioned; it is the existence of prejudice that is the cause; and my attack on Clause 9, like that of other noble Lords, is that it is an invitation to abuse. The same evidence, or even less evidence, is required to form the basis of a case under Clause 9 of an act of interfering with a motor vehicle—less evidence than was needed for sus.
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I do not stop at Clause 9. I am also seriously worried about the new definition of "attempt" in Clause 1. It seems to me that there could be put before a court the same evidence, or less evidence, than was necessary for sus in order to found a conviction for attempt. It would need only one officer to say, "I saw him reach towards the handbag", and that would be evidence of an attempt. It would not be necessary to produce the owner of the handbag, or any independent witness at all. The only improvement is that that offence—though not the offence under Clause 9—is triable by jury.
Lord Avebury: My Lords, will the noble Lord agree that the purpose of the words that I was trying to understand, more than being merely preparatory, does in fact exclude the person who reaches out towards a receptacle but does not put his hand into it?
Lord Gifford: My Lords, I hope so, and I look forward with interest to the answer to that question that will be given either today or at Committee stage when we come to consider this. But certainly the legal studies into this provision that I have been informed about give me cause for concern that one could have the need for the same campaign against the new attempt provisions as has been mounted against the "sus" law.
My own answer to the question, "Do you not need some offences such as are provided in Clause 1 and Clause 9 for attempts of this kind?", is: "No, they are not needed because a police officer should be able to watch and wait". If he sees someone trying a car door he can watch, and if in fact the person trying the car door breaks it and drives the car away, he can be arrested for taking and driving away. If he reaches in, having broken a window, and takes something from inside, he can be arrested for theft. These offences which rely on proof of only some very insignificant preparatory or initial act are very dangerous and open to abuse. We can come back to the details of these offences in Committee, and for the short remainder of my speech I wish to turn to something completely different.
The sus law is not the only provision of the Vagrancy Act 1824 which has attracted criticism and calls for repeal. There are other provisions, too, which ought to go. They are currently being considered by a Select Committee on Home Affairs in another place, and the reports that I have read in the press are that the considerations of that Select Committee will be complete in time for an amendment of this Bill to be considered in your Lordships' House.
The particular sections that I have in mind are three provisions of the Vagrancy Act. The first makes it an offence for a person to wander abroad and to beg or gather alms. Such a person shall be deemed "an idle and disorderly person". The second makes it an offence,
"to wander abroad and lodge in any barn or outhouse, or in any deserted or unoccupied building, or in the open air, or under a tent, or in any cart or waggon, and not give a good account of yourself".
Those people are deemed to be rogues and vagabonds; and, of course, are also liable to a prison sentence. The third provision makes it an offence,

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"to be found in any dwelling-house or any enclosed yard, garden or area for any unlawful purpose",
and such people are also deemed to be "rogues and vagabonds". These offences are brought into use, not in all areas but in some areas, for dealing with homeless people, down-and-outs, and those who beg. The offences and the way of dealing with them smack of a pre-Victorian era. We really should not be putting into prison, as we do in many parts of the country, people whose offence is to sleep out in the open, or to beg, or to go into enclosed premises for an unlawful purpose—a definition which has all the same problems of the sus offence and has been criticised by, among others, the Bar Council for that very reason.
I hope that we can make a clean sweep before this Bill leaves your Lordships' House. There are plenty of offences in the criminal law to deal with the unsavoury aspects of begging, if there is a breach of the peace, or if there is pestering, or dishonesty or false pretences, and I hope that we can bring to an end these awful cases of people being sent to prison because they are down-and-out, because they have no roof over their head or no money. They really should go, and I hope that in his reply the noble Lord, Lord Belstead, can give us some indication that the timetable makes this possible having regard to the great speed and urgency with which the Select Committee in another place is considering this matter.
4.55 p.m.
Baroness Phillips: My Lords, I sometimes wonder when I listen to discussions on a Bill of this kind whether some of your Lordships live in the same world as I do. I certainly do not feel that they live in the same city as I do, or sit in courts of the same type as those in which I sit. I should first of all like to congratulate the Government on introducing a Bill which is among very few of its kind (a kind among which I always saw the much disliked, certainly on the part of the noble Lord, Lord Avebury, "sus" Act)—that is, one of crime prevention. We have enough laws which deal with people who commit an offence, but we have very few laws which give the police powers to prevent a crime being committed. The noble Lord, Lord Mishcon, said, I think, that there were only 3,000 offences recorded of trying the door handles of cars.
Lord Mishcon: My Lords, I am sorry to interrupt, but it is only so that my noble friend can continue the argument factually correct. What I said was that the Home Secretary had said in another place that one of the reasons for getting rid of "sus" was that in 1979 less than 3,000 charges were brought in the United Kingdom under the sus law. I then went on to say that only a proportion of that number could be motor vehicle cases.
Baroness Phillips: My Lords, I am much obliged to my noble friend. In a way, that strengthens my point, because if there were only 3,000 cases at one given time—and I know that the noble Baroness who sits opposite is also a magistrate—you get the feeling that half of those came up in your court. Anybody who sits in the magistrates' courts in central London has
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to deal with those who attempt to commit offences. I travel on the underground, and this sort of offence has become increasingly apparent. I have had at least five people, personal friends, who have had their handbags snatched by this same type of offender. They act in threes. They jostle persons moving along the tunnels between one platform and another; and they must loiter on the platform in the first place, before they in fact commit the offence. I know your Lordships will say that this is not covered by this Bill; but, equally, these people loiter outside Westminster Abbey when the tourists are there—not with the intention of going into the Abbey and saying a few prayers, but hopefully so that they can relieve a few people of their wallets or their bags while they are lining up to go in.
My Lords, I am not inventing this. This is actually happening every day of the week; and these cases come into the central London courts and are dealt with very clearly under this particular Act. So it would be quite disastrous if one were to remove from the statute book the possibility of dealing with these people. In other words, it is to prevent the crime being committed, which must be right. My noble friend Lord Mishcon I think deplored that these offences would not be triable by indictment if necessary. As a magistrate, I would say that we want more offences dealt with summarily, not less; because, surely, the higher courts have their time, money and energy taken up all too often with offences which could be dealt with adequately by three magistrates.
I was very glad that the noble Baroness on the opposite Bench said that the Magistrates' Association agreed with this Bill, because I thought it would be rather unfortunate if this very august body, which represents the major opinion of magistrates, was not to be mentioned in this connection. The Lay Magistracy, I must confess to my noble friend on the Front Bench, I have never actually heard of, but I imagine it would be a smaller body than the one of which I have the privilege to be a member.
The noble Lord, Lord Avebury, and the noble Lord, Lord Gifford, both made the suggestion that it was not possible to attempt to commit an impossible offence. I am wondering whether, if three people were to hang about in a bank long enough with the intention of trying to get through a bulletproof screen, which in the end proves to be impossible, they would not be lingering there with an intent to do the impossible. In other words, I do not think it is quite as unreal as certain of your Lordships have suggested. In court, when someone has been charged with taking a handbag, I have heard counsel plead, "He did not get anything from it". It is a common plea. In effect, because the victim was inconsiderate enough not to have anything in the handbag, it is suggested that the person who attempted to snatch it should be let off.
On one occasion I remember interrupting learned counsel. This is a dangerous operation for a lay magistrate. I pointed out that the bench considered any attempt on a person to be a very serious offence. The horror of someone lurching at you to snatch your handbag is something you do not easily forget. We are living in a very lawless city, I am sorry to say. Whereas some time ago, perhaps five years ago, one could read in the papers of what happened, one now

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hears from friends and relatives of handbags snatched, wallets snatched, cars stolen. How many noble Lords would leave any valuables visible in their cars when parked in central London? It is common knowledge that when one gets out of one's car one locks the valuables in the boot; otherwise they will not be there when one returns.
We are dealing with an offence constantly being committed. I am glad that the Government, in yielding in some degree to the kind of campaign which has gone on, have introduced a Bill which I hope will deal with what I should like to emphasise concerns crime prevention. That, surely, is what most of us want. We want crime to be prevented and not necessarily to have to deal with the offender after it has been committed.
Baroness Wootton of Abinger: My Lords, may I add a few words to associate myself with my noble friend Lord Gifford. I should have thought that the law of attempts was quite sufficient to deal with attempts to steal motor-cars, to steal property from motor-cars and to drive motor-cars away, just as much as it is available to deal with crimes of attempts to steal or to murder. For that reason, it seems to me that we are still picking out a particular class of action and a particular kind of object to which these provisions are to attach. This is quite unreasonable. We should allow it to be covered by the general law of attempt.
5.3 p.m.
Lord Belstead: My Lords, I should express my gratitude to all noble Lords who have taken part in this Second Reading debate for providing not only a stimulating debate but also for giving me some guidance as to the lines of thought that your Lordships intend to pursue perhaps at later stages of the Bill on a subject which I realise is sensitive and has highly technical features. I assure your Lordships that I have listened with great interest to the speeches which have been made. I will not repeat the arguments for repealing the suspected person offence of the 1824 Act in this Bill. I think that every speech made on this Second Reading has said that noble Lords feel that it is right to do this. The only thing that I would say in passing is that I join with the noble Lord, Lord Mishcon, in not agreeing with Lord Gifford's assessment that there was racial motivation in bringing charges under the "sus" offence. I should have thought that paragraph 33 of the report of the Select Committee of another place put the matter fairly and I would not want to depart from what the Select Committee said in that paragraph.
I was grateful also to the noble Lord, Lord Mishcon, for his recognition, no doubt with regret, that this Bill probably does not provide a proper opportunity to consider the future of other Vagrancy Act offences. I say that because the Select Committee on Home Affairs in another place has now decided to conduct an inquiry into such offences and indeed, officials of my right honourable friend's department are giving evidence to that committee this afternoon. I can give an assurance to the noble Lord, Lord Gifford, on this point that the Government will give careful consideration to the Select Committee's report; but we
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do not intend to add to the Bill in this respect before and when it may pass through this House.
Most noble Lords have made reference to Clause 9 of the Bill. The noble Lord, Lord Avebury, fairly made the point that in evidence before the Select Committee, the chief constable of the West Midlands had made the point that tampering with cars in one way or another is a considerable problem. May I follow that by saying that the number of offences—and these are recorded offences, not findings of guilt—recorded by the police in 1979 (which is the latest year for which I have figures) were: thefts from vehicles, 278,349 offences and thefts of vehicles (or taking and driving away) 309,245. We are talking about an area where the police are experiencing very great trouble as far as cars are concerned—quite apart from our personal experience with our own vehicles or of stories which we may hear from other people.
The noble Lord, Lord Mishcon, suggested that the offence in Clause 9 is designed to deal with situations in which there is insufficient evidence to charge an attempt. But this is not its purpose. In some cases an individual may even have got as far as opening the door of a car or of getting inside the vehicle and such action would be sufficient to constitute an attempt provided that one is clear which offence is being attempted; but if one is not clear, then difficulties can and do arise in charging an attempt. It is in these circumstances that the new offence will be particularly useful.
Lord Mishcon: My Lords, may I intervene if only so that the argument is quite clear? If this is the point the noble Lord takes, then, with respect, would he not also be prepared to consider (not necessarily this afternoon if I have perhaps caught him by surprise) the inclusion in the law of an attempt which, if proved in regard to something which could apply to any one of these three cases, would still be an offence committed under the law. In other words, in the same way as he has in this provision one of three cases which could relate to any one, once you have proved the act had been done, could this not equally be dealt with in regard to another provision in regard to attempt? Then one would get to the stage of an attempt in the law instead of the pre-stage which Clause 9 provides for.
Lord Belstead: My Lords, of course, I will look, with my advisers, closely at what the noble Lord, Lord Mishcon, has said. I do not think that I can go further than that this afternoon but probably—and I will be ready on a subsequent occasion to try to explain why—we find difficulties with this; and one of the difficulties is the one which I have rehearsed just now. The noble Baroness, Lady Wootton, said that, looking at Clause 9, she felt that there was no need for this specific offence. Rather than rehearse again the arguments to rebut what the noble Baroness has said, I would just say that the noble Lord, Lord Wigoder, said (as I understood the noble Lord in his speech) that there are difficulties under the law as it stands at the moment in bringing a charge of attempt in a case of this kind. Therefore, may I go on and answer a point which was put by the noble Lord, Lord Pitt, in his speech. He said in essence that he would like to see what he called a tightening of Clause 9.

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I should like to respond to him by comparing Clause 9, as drafted, for a moment with "sus". I would suggest that one only has to glance at the definition of the respective offences to see that they differ profoundly. "Sus" talks of every suspected person or reputed thief frequenting or loitering about; and the specific offence in Clause 9 talks of interference with a motor vehicle or trailer in a public place. "Sus" is a general offence concerned with an indeterminate range of suspicious behaviour to which the noble Lord, Lord Pitt, expressed the objections which led to the proposal to repeal. The new offence, by contrast, is limited to acts of interference with motor vehicles or trailers. In the case of "sus", the suspicious acts need not be overt. They need be no more than, for example, two separate instances of loitering near shopping bags. The new offence, on the other hand, requires overt acts of interference. It would not be sufficient if a person were simply seen loitering near a vehicle, leaning against it of even peering through its windows. There has to be actual interference. For example, the individual has to try the car door handle or attempt to open the window. Moreover, the prosecution must prove that the act of interference was done with the intention of stealing the vehicle, any of its contents or taking the vehicle and driving it away without consent.
Although I am not entering the Committee stage with a closed mind to what the noble Lord may be saying then, none the less at this stage I believe that these differences are fundamental and that this new offence bears no relation at all to sus. It has been very considerably tightened from the way in which the law was framed under the former offence.
Lord Pitt of Hampstead: My Lords, I do not want to delay the House unduly. What I said was that there are certain features of this new law which will allow for the same feeling of not having been justly dealt with as existed on sus. This was my point.
Lord Belstead: My Lords, I hope that the noble Lord is not right. For the reasons that I attempted to give just now, this is a specific offence. It requires overt acts and I would have thought that this was self-evidently fair, but this is a matter which we can come back to again in Committee.
Lord Inglewood: My Lords, may I ask my noble friend one short question in the interests of clarity? If he cannot do it now will he at the Committee stage make quite clear not just the relation between "sus" and the new clause, but also between the stop, search and detain provisions in the Metropolitan Police Act and one or two other Acts in this country and the new clause? One does not want a grey area where police constables do not know what they are doing. They must have an absolutely clear picture, otherwise we shall have the same ill-will building up again.
Lord Belstead: My Lords, off the cuff, I do not think that the new offence in Clause 9 affects the other powers which my noble friend Lord Inglewood has mentioned. Certainly, I would be ready to come back with my noble friend to this matter in Committee. The noble Lords, Lord Mishcon and Lord Pitt, and
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my noble friend Lady Macleod suggested that consideration should be given to making the offences triable by jury. We do not consider that this is necessary. The offence is a relatively minor one, as indicated by the maximum penalties which it attracts. We believe that it would be appropriate for such cases to be determined by magistrates' courts and it is of course important to avoid burdening the crown court unnecessarily with cases which can be dealt with satisfactorily on a summary basis. If the offence were made triable either way the penalties would have to be increased to cater for conviction on indictment.
May I come back to Part I of the Bill? The noble Lord, Lord Pitt, expressed himself as being dissatisfied with Clause 5. The only point at this stage that I should like to make on Clause 5 is that of course it corresponds to a recommendation that was made by the Law Commission and it corresponds to a draft clause which was put into their draft Bill by the Law Commission. Again, I shall certainly look, with advice in the Home Office, at what the noble Lord has said at this stage. Perhaps the noble Lord, for his part, would care to glance again at the Law Commission's report before we reach the next stage of the Bill.
The noble Lord, Lord Wigoder, suggested that manslaughter should be added to Clause 1(4) to prevent there being an offence of attempted manslaughter. I am advised that, under present law, there does not appear to be any offence of attempted manslaughter. The defences of provocation and diminished responsibility which apply to reduce murder to manslaughter do not apply to attempted murder. The other kind of manslaughter, killing by gross negligence, cannot be attempted.
So far as the more general point which the noble Lord made about the parallel between our vehicle interference offence in Clause 9 and burglary is concerned, I am afraid that the noble Lord rather left me and those who advised me behind in this considerable part of his speech. May I look in the Official Report at what the noble Lord said? I shall attempt to be ready to reply to the point when we reach the next stage of the Bill.
The Government were criticised by the noble Lord, Lord Mishcon, and one of his noble friends for lack of consultation with the Law Commission. Your Lordships will be aware that there have been complaints about the length of time that elapses before action is taken on reports—and not least reports by the Law Commission. On this occasion perhaps your Lordships will acquit the Government of having acted with any discourtesy because we have introduced legislation in record time after the Law Commission's report. The report was published only in June of last year and the Government introduced the Bill in another place in December. I understand that the Home Office arranged a meeting with the Commission on 16th September at which the main differences of policy were discussed. Principally because of the rapid pace of events, consultation thereafter was perhaps not as thorough as it should have been.
Lord Mishcon: My Lords, the noble Lord, the Minister, has been very gracious in the last remarks that he made. My criticism, with respect, was not in

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regard to the consultations that took place on the differences. I acknowledge those and the necessity for speed. My surprise—expressed also in another place and in the evidence that was adduced before the Select Committee—was that the draft Bill was not even sent to the Law Commission so that they could have given their advice on it. The result of that was a complete waste of time, as it emerged, because the Law Commission, in the evidence that they gave before the Select Committee, were able to show that the draftsmanship was extremely bad—I do not mean that offensively—and did not and could not achieve the object that the Home Office sought. I merely ask for an assurance on a positive basis that in future at least the Law Commission, when they have made recommendations, will be consulted on a Bill which is supposed to deal with them.
Lord Belstead: My Lords, I certainly give an assurance that we will endeavour to consult in a more practical manner in the future. I should like to assure the noble Lord and your Lordships that no discourtesy to the Commissioners was intended. It is right for me to put on the record that when we found that the drafting of the offence (which the noble Lord referred to as being virtually impossible) raised great difficulties, the way in which the Government felt it was necessary to turn was towards the recommendations which had been made by the Law Commission. Of course almost the entire Bill which is before your Lordships' House today is based almost verbatim upon the recommendations of the Law Commission.
I realise that I speak not as a lawyer and I may be wrong but I was a little surprised to hear the noble Lord, Lord Gifford, referring to the provisions in Clause 1(1) regarding the doing of an act which is more than preparatory as being highly contentious. Indeed, the noble Lord was very trenchant in the words that he used. He said he thought it would be a matter for division for the future and a campaign. Maybe I am approaching this in too simple a manner. My understanding has always been—ever since I started reading the papers on this Bill—that there is no intention in Clause 1(1) to make any change of substance in the position under the present common law. Not only here do we—almost verbatim once again—follow the recommendations of the Law Commission, but I assure the noble Lord that we did not intend to do anything which was going to be violently contentious.
Lord Gifford: My Lords, I would accept that Clause 1(1) merely restates the existing law. But it is Clause 1(2) which introduces a new element. It was the dangers of that to which I was calling attention. That provision, and the implications of it, we will have to look at more in Committee.
Lord Belstead: My Lords, I do apologise to the noble Lord. I was under the impression that he was referring to Clause 1(1). Of course, exactly the same argument applies to Clause 1(2), in that the Bill is following exactly word for word the recommendations which have been made there also by the Law Commission. May I again thank your Lordships for the speeches made today. I realise we have differed on points, but, if I may say so, it has been extremely
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helpful for the Government to have an indication of the line noble Lords feel they should take on this Bill. From the Government's point of view, we have had a most useful debate, and I repeat the assurance that I gave in opening the debate; that we shall look very carefully at what your Lordships have said.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

British Telecommunications Bill
Brought from the Commons, read 1a, and to be printed.

Interpretation of Legislation Bill [H.L.]
5.22 p.m.
Read 3a.
Lord Scarman: My Lords, I beg to move that this Bill do now pass. I hope that in moving this Motion I may say a few words about the Bill. It contains only two effective clauses, but those clauses enjoy the support not only of the Law Commission but of the committee presided over with such distinction by the noble Lord, Lord Renton, which inquired into and reported on the preparation of legislation. The Bill, short as it is, does not go as far as the Law Commission recommended, but it does go as far as it could go, enjoying the consent of both the Renton Committee and the Law Commission. It is therefore an uncontroversial Bill and, if I may say so, I hope it will be so regarded if and when it reaches another place.
There was only one matter of controversy concerning the Bill. That was a point upon which the Law Commission, and indeed others, took a strong view. That view was not shared by the Law Society, the Bar Council or a number of my noble and learned colleagues in this House. Therefore, preferring the good and attainable to the best and unattainable, I yielded and it has gone. Now there is no controversy.
I present this Bill as one which, though short, could have a significant influence for the good of the development of English law. I say that for one simple reason. Increasingly, owing to the complexity of the society in which we live, English law is becoming more and more statute based. It is absolutely essential, if the enacted will of Parliament is to be fulfilled, that the judges should adopt the correct approach to Parliament's enactments.
This Bill, if passed, will improve communications between Parliament and the judges as to the intention of Parliament in those enactments which, under our Bill of Rights, our judges have to accept, interpret and apply. If the principles of this Bill be accepted and passed into law, then the task and duty of the judges is clear and the Bill does not add one whit to the power of the judges. The judges already stand between Parliament and the citizen: it is their interpretation and application of the statute law which bears upon the citizen. It is therefore very important that they should get it right. This Bill, my Lords, will help them, and I beg to move.
Moved, That the Bill do now pass.—(Lord Scarman.)
Lord Mishcon: My Lords, not for the first time has the noble and learned Lord fulfilled a very useful public service and, as we have learned this afternoon, it will not be the last time he will be fulfilling a great public service. I imagine he heard the acclamation with which his name was greeted this afternoon when we heard of the important duty he is now to undertake. My Lords, this is a useful Bill and, as the noble and learned Lord said, it is a non-controversial one. We on these Benches hope that it will have a speedy voyage without anybody seeking to interfere with its course until it safely reaches port.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, perhaps I may be allowed to add my word of thanks and congratulations to my noble and learned friend on the Cross-Benches, and to say that when he was absent—I believe actually in Brixton this afternoon—the notice we received from my noble friend Lord Belstead of his acceptance of this onerous and, in the nature of things, painful task was very well received in all quarters of the House. My only regret is that we shall lose his comradeship in the Appellate Committee for a short time. I think it says a very great deal for my noble and learned friend's sense of public duty that he has accepted this task from my right honourable friend the Home Secretary, and I am sure that the whole House is grateful to him for having done so.
Several noble Lords: Hear, hear!
On Question, Bill passed and sent to the Commons.

ECC 14th Report: Regional Policy
5.27 p.m.
Lord Plowden Lord Plowden rose to move, That this House takes note of the Report of the European Communities Committee on regional policy (14th Report, H.L. 93).
The noble Lord said: My Lords, I beg to move that this House takes note of the Report of the European Communities Committee on regional policy. It is 32 years almost exactly to the day that the noble Lord, Lord Roberthall, the late Sir Alan Hitchman and I started a week's discussion in Paris with M. Jean Monnet and his two principal colleagues. The subject of our discussion was the possible unification of the British and French economies. As noble Lords know, nothing came of this French initiative: it was premature. But one of M. Monnet's objectives was to bring about a higher standard of living together than could be reached separately, and inherent in the policy was the endeavour to bring up the standard of living in the regions to that of the whole—the subject which we are debating today.
The purpose of regional policy is to help the poorer areas of a country to come nearer to the general level of prosperity, and in the words of the EEC:
"to correct the principal regional imbalances within the Community";
that is, to do for the individual member countries of the Community what this country, for instance, is trying to do for its regions. This is the policy of convergence and it has always been recognised that a
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common economic policy, which is the ultimate objective of the Community, cannot be expected to work well if there are great per capita differences in wealth between the member states. Unfortunately, as Community policy papers constantly reiterate, there is little progress towards convergence. Freedom of movement should help this process, but experience shows that even with a common language there can still be wide disparities; and language differences of course accentuate them.
A positive instrument is needed, and for the Community this is the Regional Fund. It receives an allocation from the Community budget and it is distributed in grants to member countries, to be used to support their own regional policies. The gap between the poorer and the richer members of the Community is not decreasing, and it will increase with the advent of the three new members—Greece, Spain and Portugal. The Regional Fund amounts to about 3 per cent. of Community spending, and it is so small that it can hardly scratch the surface of the problem.
Of course, as noble Lords know, by far and away the largest part of Community spending goes on the common agricultural policy—over 70 per cent. of the total spending. This is not an occasion for discussing the CAP, but its reform is one of the biggest problems facing the Council of Ministers. It cannot be stressed too strongly that, so long as it takes the lion's share of Community money, the hopes for convergence through regional policy are quite illusory. Twenty times more money is spent on price support for farmers than on regional assistance, and the way that this agricultural support is spent, on balance, helps the already most prosperous areas more than those most needing help. So when we talk about what the Regional Fund might, or might not, do, we must always bear in mind that it is so small and, on present policies, is likely to remain so.
The Regional Fund has no policy of its own. It distributes 95 per cent. of its money to member countries to support their national policies in the form of quotas. These quotas are assessed according to population size and relative wealth. The system is criticised as inflexible but, at least, it transfers resources from the richer member countries to the poorer, unlike the common agricultural policy. Until this year, the United Kingdom, which pays about 20 per cent. of the total budget, received 27 per cent. of the Regional Fund, but Greece has now joined the Community and this has reduced our share for the coming year to about 24 per cent. With the further accession of Spain and Portugal in the coming years, this process is likely to continue.
The more poor members join the Community, the less funds there will be for existing member states, such as the United Kingdom, who are the poor members of the Community at present. For this reason, the Select Committee suggested that, in the long term, only member states below the Community average—to be defined by agreed economic indicators—should receive any money from the Regional Fund.
The resources of the fund are limited. The fund is supposed to transfer resources to the poorer regions and, therefore, rich member states should not receive a quota at all, but at present, of course, every country receives something. The evidence that the Select

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Committee took showed a great deal of enthusiasm for the principle of the Regional Fund. Local authorities, regional development agencies, the CBI, the TUC, academics, Members of the European Parliament—all were in favour. But almost all criticised the way in which the fund works at present.
Additionality—that is, whether the regional fund causes additional things to happen—is at the root of the problem. The Government claim that the receipts from the Regional Fund enable more to be spent on regional development in this country than otherwise would be spent. But the claim is difficult to substantiate. In the case of aid for industrial investment in the regions, national aid under the Industry Acts is virtually open-ended. Indeed, in practice, no ceiling is placed on the aid in any one year. If all corners with eligible schemes would receive national aid anyway, and the Government then reclaim from Brussels some of the aid which they have actually granted, then, clearly, nothing additional has happened: the firm would have got the grant anyway.
On the infrastructure projects—that is, roads, port facilities and so on—additionality is also difficult to substantiate. In fact, the Department of the Environment's guidelines, which are quoted in our report, explicitly say:
"it is not the Government's intention that the availability of assistance from the Fund should enable (local) authorities to undertake additional projects".
Understandably, there is a widespread belief that, whatever the Government may say, additionality is not respected. This reflects another of the main criticisms that was made in evidence. There is little incentive for the supposed beneficiaries of regional aid—firms, local authorities, regional agencies and so on—to seek fund money.
This is clearest in the case of industrial projects. In this case, Government departments draw up a list of applications for Regional Fund assistance out of industrial projects which are going ahead anyway, and which are receiving national aid. They ask the firms' permission to use their investments as applications for fund aid; the firms may be requested to do some paper work. When the applications have been approved in Brussels, money is paid from the Community to Government departments which then keep the money. The firm is informed that the application in respect of its project has been successful. Not unnaturally, the firm sometimes asks "Well, where is the money?" to which the answer is "You've already had it." This may be a harmless exercise, but it contradicts statements by the Commission that EEC aid is actually helping British firms.
In the case of infrastructure projects, the position is better. Despite the complaints that we had, the keenness of local authorities to get Regional Fund aid suggests that they must feel that the effort is worthwhile. Although no new projects may be generated by Regional Fund aid from Brussels, aid does mean that an authority partly finances a project with a grant instead of a loan, so it has no interest to pay and no principal to pay back. But it does not mean that they do anything more than they would otherwise have done.
It was tempting—and we did consider it—to suggest that the whole complicated procedure of individual
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project applications to Brussels should be scrapped. A great deal of time and effort could be saved if the bureaucratic requirements for projects were dropped, and straight budgetary transfers were made between the exchequers of member states, according to the ERDF quotas. The net result would be the same. It would be simpler and the partial illusion of Community regional assistance would be avoided. But the Select Committee decided against this idea. The Regional Fund is a symbol of the Community's concern for the regions. It may not do much good, but it does do some good and, if it is seen to be efficiently administered, it is good for the Community's image. This was stressed to us strongly when the committee visited Brussels. Moreover—and much more important—we must work to obtain a larger share of the Community's budget for the Regional Fund.
So should a partially effective Regional Fund be kept just for show? The evidence suggested to the committee that the fund should be kept but that it should be improved in such a way that local disenchantment with it was reduced. That was what guided the proposals that we made.
As I have already said, the worst example is the fund's assistance for industrial projects. The committee suggest that this should be abandonded, either by the Community as a whole or optionally by individual member states but at any rate by the United Kingdom. Instead, they suggest a system of development programmes which would increase local involvement and pass on more money to local authorities.
The United Kingdom has an understandable interest in getting its full quota from the Regional Fund and getting it as quickly as possible. We have been very successful at this. Whatever the faults of the present system, Government departments, and in particular the Department of Industry, are to be congratulated on the way they have handled this. From the point of view of the Government, the present system therefore has some advantages and any suggestions for change must ensure that we draw our quota in full, and speedily.
As so often is the case, national interest is not identical with local interest. A system that meets the national requirements is not necessarily liked by the regions, the very people who are supposed to benefit from the fund. The proposals which the committee put forward are intended to try to meet both these needs. We suggest that local bodies—local authorities, groups of authorities, regional agencies, or all of them together—should draw up development programmes for their regions, for which they would seek EEC assistance. These would not rule out individual applications for large infrastructure projects but they would replace the present system of individual industrial projects. Industrial projects could of course be included in the programmes, together with other schemes.
This suggestion for programmes is not new. Programmes are already being drawn up for the non-quota section of the Regional Fund—that is, 5 per cent. of the Regional Fund. On a much larger scale, programmes are also being used to allocate some of the budget refunds which the United Kingdom negotiated in the 1980 settlement of our budgetary problem.
So far, I understand, we have received about £645 million from the Community as contributions to public

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sector investment programmes. These are principally in the regions. I believe that programmes have been drawn up for Northern Ireland, Scotland, Wales, the North of England, North-West and South-West England, Yorkshire and Humberside. The programmes cover such things as roads, railway investment, water and sewerage, land reclamation, advance factories, housing and telecommunications. So it cannot be claimed that the committee's suggestion is impractical. It is already being put into practice in another context.
The programmes would continue to be submitted to Brussels by Government departments. We see no way round this. Direct access to Brussels, although desirable and asked for by many local authorities, is just not practical. The Commission could not cope without a very much larger staff. It would add to the paperwork and it would not produce any more money. Payments from the Regional Fund for successful programmes should then be passed on in full to the local bodies concerned. The advantage of this system is that it would simplify administration, because there would be fewer but larger applications, and move the burden from central Government to local authorities who would, as they want, be more directly involved. By grouping projects of all sorts into programmes, the impact of fund aid on a particular locality would be greater than it is now, with individual projects scattered over a much wider area.
There is no reason why this system should not meet national as well as local requirements. It would of course be in the interest of local authorities, as it is in the interest of central Government now, to send in applications which lead to quick payment of funds from Brussels. This is a point which central Government could and should check when they send programme applications to Brussels. There is no reason to suppose, therefore, that well constructed programmes would draw funds out of Brussels any more slowly than individual projects do at present.
As for taking up our full quota, again there is no reason to suppose that local authorities would not be able to put forward schemes that would cost altogether £150 million, because that is all that we are talking about this year. And if the Government object to this shift in the balance between central and local government, on the ground that all ERDF payments being passed on in full to local authorities would no longer help the national exchequer, then that would be an admission that additionality does not come about.
Those are the reasons why we suggest changing to programmes. There would still be bureaucracy. There would still be applications and payments flowing to and from Brussels. It would not be as simple as straight budgetary transfers between Member States. But at least within the political constraints with which we have to live, which in the committee's view make a root-and-branch reform impossible, the proposal for programmes would avoid the worst absurdities of the present system while meeting more requirements, both national and local, than are met at present.
However the common agricultural policy is reformed, it is probable that this country will always be a net contributor. It is for this reason that, at least for the time being, we should work for a Regional Fund that disposes of greater resources than it does at present and that works in a more practical way than does the
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present system. But it would be an illusion to suppose that a Regional Fund can be a substitute for reform of the common agricultural policy. I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on regional policy (14th Report, H.L. 93)—(Lord Plowden.)
5.49 p.m.
Lord Banks: My Lords, I am sure that the whole House will be grateful to the noble Lord, Lord Plowden, for the interesting, helpful and constructive way in which he has introduced the debate this afternoon. I should like to express appreciation of the work done both by the noble Lord and by the members of his committee in producing the very comprehensive and yet succinct report to which we have our attention drawn this afternoon.
The committee last reported on this subject in 1977, four years ago, and we debated it on 31st March 1977. I remain as strong a believer in the aims of a Community regional policy as I was then. The final communiqué of the Paris Summit in 1972 which is quoted in the current report spoke of correcting the structural and regional imbalances which might affect the realisation of economic and monetary union. The guidelines for Community regional policy which were adopted by the Council of Ministers in 1979 state this:
"Regional policy is an integral part of the economic policies of the Community and member states. It forms part of the various elements which contribute to the attainment of a high degree of convergence of the economic policies of the member states".
As the noble Lord suggested, the convergence of economic policies seems as far off as ever, and economic monetary union, although brought slightly nearer by the welcome establishment of the European Monetary System, nevertheless still seems fairly remote. But as I said, my belief in the aims of the Community regional policy is as strong as ever. My confidence in the possibility of the member states ever taking the necessary steps to achieve those aims is somewhat less buoyant. The report indicates that the problems of the poorer regions of the European Community are more acute now than they have been at any time since the United Kingdom joined the EEC. Regional disparities within the Community are greater now than in 1975, when the European Regional Development Fund was launched. Reading the report one sees that the difficulties are the same as they were four years ago.
First, the report makes clear, despite the introduction of the regional impact assessment system, that there is still no properly co-ordinated Community regional policy. As the noble Lord, Lord Plowden, pointed out, the common agricultural policy takes 70 per cent. or more of the expenditure of the Community and it has a regional emphasis quite different from that of the Regional Fund, and to a considerable extent, the report says, it works in the opposite direction. The Regional Fund is really a fund for assisting national regional policies and is not itself based on any very clear Community policy.
Secondly, as the noble Lord, Lord Plowden has said, the Regional Fund is too small. It has grown since four years ago, but in 1980 it was only 2·57 per cent. of the total Community expenditure as against

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70 per cent. on agriculture. So, compared with the amount spent on other EEC policies and compared with the amount spent on national regional policies, the Regional Fund is too small to achieve the aims of the Community regional policy or to make much impact. I am convinced that the noble Lord, Lord Plowden, is right when he says that the Regional Fund must be considerably larger, and that is particularly so when enlargement of the EEC is taken into account. If the problems of balance between the various expenditure programmes are to be solved—problems between the various EEC policies can be put right—the budget itself, of which the Regional Fund constitutes such a small part, must be larger. I think it is important to emphasise this at a time when the finances of the Community are due for overhaul as the Community's own resources on the present basis run out.
In 1977 the MacDougall Committee pointed out that the EEC lacked the mechanisms for redistributing income between members—mechanisms which already existed for redistributing it within the regions of existing nation states. About 40 per cent. of the gross disparities between regions within individual nation states is eliminated simply by collecting taxes on a progressive basis throughout the nation and spending them on national services. This has an automatic bias towards the poorer regions, and by transferring some expenditure from a national to a Community level a similar redistributive effect would be achieved between the member states.
The MacDougall Committee suggested that by raising the expenditure of the EEC from 0·7 per cent. of the Community's gross domestic product to 2·5 per cent. of the Community's gross domestic product, this aim could be achieved, and I am sure that a larger budget for the Community is the only way to deal with the dominance of the common agricultural policy. Certainly we want to seek to reform the common agricultural policy; certainly we want to reduce the surpluses and to reform the system by which they are created, but this year's farm price settlement suggests that there is not likely to be any drastic reduction in the total amount spent on agriculture. The increased budget, largely a transfer of expenditure and functions from national to Community level, would have a redistributive effect but it should contain a considerably increased Regional Fund which would not be a transfer but an addition designed to accentuate the redistributive effect in clearly defined directions.
That brings me to the thorny question of additionality, to which the noble Lord, Lord Plowden, referred. This we discussed four years ago. We deplored the lack of additionality then, and the report and what the noble Lord has said to us this afternoon indicate that the position has not changed. As he pointed out, so far as industrial projects are concerned it makes no difference to the firm carrying them out whether they are said to be helped or not. The Government keep the money to offset their own contribution. Noble Lords may recall a song in the Gilbert and Sullivan opera The Mikado which begins in this way:
"See how the Fates their gifts allot
For A is happy, B is not.
Yet B is worthy, I daresay,
Of more prosperity than A".
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Yet no such problems arise under the workings of the Regional Fund. It does not matter that A is selected for help and B is not: their happiness is equal.
The Government say that they judge the total level of regional expenditure which they plan to make, taking into account what they expect to get from the Regional Fund, so that in effect the Regional Fund does enable the total amount spent to be increased; but, as the noble Lord, Lord Plowden, has said, this cannot be proved and there is certainly no incentive for firms to apply for help from the fund. So far as infrastructure payments are concerned, to local authorities and similar bodies there is an advantage—again described by the noble Lord, Lord Plowden—but no additional expenditure necessarily made.
When we debated this matter in 1977 the noble Lord, Lord Elton, for the Conservative Opposition declared of this process, as far as it affected both industrial projects and infrastructure projects, "This is not additionality". Those were his words, and he added:
"I believe additionality to be important, because it should result in more investment, positively directed to where it is most needed".
I should like to ask the noble Lord, Lord Trefgarne, if the party opposite still adhere to that point of view, and if they do, how they hope to see it made effective.
I welcome the introduction of the non-quota allocation, which was merely hinted at at the time when we had that last debate. The quota system and nationally determined criteria for assisted areas mean that some areas receiving aid—in Germany, for example—are better off than areas in Britain which do not qualify for aid. The non-quota allocation, over and above the quota allocation to national Governments is, at 5 per cent., very small but it is a beginning. I should like to see it expanded as the basis for a real Community regional policy. I should like to see more concentration on areas of real need, coupled with a recognition that there can be pockets of need within relatively prosperous areas and that means of assisting them also are necessary.
In our last debate I asked whether it would not be desirable that there should be direct access to the Community for such bodies as the Highlands and Islands Development Board and other regional agencies, so that they could have direct access while working within the national regional programme drawn up by the national Government. The committee, on balance—and the noble Lord, Lord Plowden, referred to this—reject this idea on the grounds of administrative complication. But I wonder whether they are right. If regional development programme applications, covering many projects which were explained by the noble Lord, Lord Plowden, tended to replace individual project applications—this is what the committee recommend—I wonder whether the administrative burden on the Commission would be quite as great as feared.
My Lords, to sum up, I would urge support for a very much larger Regional Fund as part of a larger Community budget, support for genuine additionality, support for a co-ordinated regional policy including a much increased proportion of the Regional Fund distributed on a non-quota basis, and support for more direct formal access to the Commission for

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regional authorities and agencies, or at least a further consideration of the possibility of that. I hope that when the Select Committee produce the next of their excellent reports on this subject, in 1985 or whenever it is, they will be able to report progress in these directions.
Lord Saint Oswald: My Lords, the whole House, though not the whole country, is aware of the factors which make a debate of this nature timely and significant, and we therefore owe gratitude to the noble Lord, Lord Plowden, and the committee which produced this report. The European Commission are charged with producing a new design for the financing of the Community, a restructuring of the budget, to produce it soon after 1st June, the month in which the United Kingdom takes over the presidency of the Council of Ministers. I hope that restructuring here means as much as it promises by implication, and I hope that the date of the report will not slip much further than 1st June. It is the first recognition that a deep, injurious problem exists and that a solution must be found.
Sad to relate, speeches on the subject of Europe during this epoch tend to be either defensive or antagonistic; few are openly optimistic. That is unnatural, given the balance of facts and a balanced outlook. The debate in another place last Wednesday was opened by the statement that Britain's relationships with her European partners had deteriorated since Christmas last. It would be difficult to contradict that statement. It would require some fairly strenuous wishful thinking to deny it. But one thing I can and do affirm; to whatever extent the trend may exist, it is unnecessary, it is deplorable and it is reversible. Some of us have been saying for many years, before the signing of the Treaty of Rome in 1957, that Britain's best hope of serving humanity and herself to the full was through membership of the European Economic Community. Perhaps those of us who have fought in wars and have a sense of the history of a war-torn Europe have been saying it with greater vehemence and conviction than others. Great men have said it with a wisdom eclipsing any effect that I can hope to have. Yet today in this very climate of doubt and publicised disappointment I make a point of saying so again.
This debate today does not deal with the basic concept of European harmony, but it does deal with one of the keys to Britain's viability within the present Community, and it describes the urge to mutual support replacing the old urge to mutual destruction. There is a tendency within our land, ugly and unreal, to blame every ill we suffer upon our membership of this Community. It is hard to judge whether the ugliness or the unreality is the more harmful aspect of this false diagnosis. There are even those who obtain satisfaction from noting signs of disharmony with our partners. They celebrate such signs of disharmony. I will mention one of them by name in a minute or two. I consider it a sick satisfaction.
Such signs should cause dismay to all, and, my Lords, because I feel so strongly upon this matter I am ready to make a challenging assertion. I believe that a cardinal explanation of our present partial failure is that we are not always regarded, even not often regarded, as "good Europeans", and sometimes, not
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always, we draw this charge upon ourselves. We loudly lament the injustice of paying a high contribution widely at variance with our gross national product. There is injustice, at least inequity; but in my view we often set about describing it and curing it in the wrong way.
Our complaint has been made and heard, and regional aid is one of the means which is being applied to satisfy it, in addition to the revised financial mechanism. The present new level of regional aid has to be seen as related to our gross contribution, or people will not appreciate the intention behind its provision. All noble Lords attending this debate will be aware that the gross contribution is the result of the method of collecting the resources propres, a method agreed and incorporated into the treaty which we signed. This method, established by Article 131 of the Treaty of Accession, has in fact had a punitive effect on our economy, but in a very real sense its effect and scale are determined by our own commercial habits, our own commercial behaviour, traditional to our ways and still operated by our own choice.
The major portion of each partner nation's contribution to the Community comes from the collection at its borders of duties and levies on goods from the world outside the Community. Customs officers of each nation are acting as agents for the Community. It happens that citizens and firms in this country choose to buy a great volume of goods outside the Community, as is their undoubted right; the duties and levies on those goods are passed to Brussels as agreed. I am among those responsible, in driving a Japanese car and operating a Japanese video-recorder. My little bit of tax goes on to Brussels, and it would not have been collected if I had bought a British or French car or a Belgian recorder. There is nothing sinful or un-European in such behaviour. The Community was not set up as an inward-looking rich man's club, as some more ignorant or mischievous propagandists were wont to claim. One of the declared principles was to liberalise and expand world trade, and so it remains. Some of the imports which pay levies are worthier perhaps than cars and recorders. New Zealand butter and lamb, and the crops from the sugar-producing countries which were British dependencies, are brought in to keep faith with those countries, to honour a promise. They all pay levies to Brussels and so inflate our gross contribution, to make it inordinately large.
Regional aid is one of the means of lightening our net contribution, and I hope that noble Lords will explain in the country the neighbourly goodwill which is demonstrated by our partners in seeking to do this. It would be appropriate but unwise to introduce into this debate a technical passage on the quota and non-quota allocations of regional aid directed to Britain, and even to identify what my own territory of Yorkshire and Humberside has received or will receive. The noble Lord, Lord Plowden, with his immense specialised knowledge, has touched on this. No doubt there will be other opportunities for me to do so. My emphasis must be on what happens when regional aid resumes its normal pattern, or takes a new pattern, and what can be done to make us less reliant on favoured treatment.
Of course I should like to see the regional fund

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enlarged. It should be larger. The noble Lord, Lord Thomson of Monifieth, whom I shall always regard as my noble friend wherever we may sit in this House, opted in 1973 for the commissionership of regional affairs because he thought that it would provide the scope he deserved. It did not. That fund and the Social Fund have been starved of means from their inception—and again the noble Lord, Lord Plowden, made this point. There is a culprit in this and that culprit is also distorting Britain's net contribution. For that reason I beg the House to indulge me for a moment or two if I speak on matters not evidently or directly related to the title of this debate, but matters inextricably related to Britain's present need for refunds—refunds largely in the form of regional aid.
Those refunds, designed for Britain, directed to Britain, are specific to our present difficulties and the special levels have a limited life. The ultimate correction of our imbalance has to be sought in other ways, and let us not deceive ourselves. Our problem is created not so much by the gross contribution as by the net contribution, as everyone present evidently knows. We do not recover as usefully or as substantially as we should from the money pooled. The culprit is—and this has already been mentioned today—the common agricultural policy. That is what consumes three-quarters of the Community's, resources propres, the financial lifeblood of its existence.
From the very beginning we, the pro-Europeans, have made it plain that it was our intention to change and improve and refine that policy. In a parliamentary context Peter Kirk, in Strasbourg on 16th January 1973, said so in a famous introductory speech for the British delegation, of which I was a member. Geoffrey Rippon who succeeded him as leader of the Conservative group after Peter Kirk's tragic death, reiterated it consistently. Both did so with great force, and it is my contention that their expression of our dissent was as correct and convincing, as that of some others, including some Ministers, has not always been correct and convincing. They did not say, "It is wrong because it does not suit Britain". They said, "It is wrong because it is a waste, a misapplication of European resources. It is wasteful of what we all share". That was and remains a positive and persuasive approach, but in a way it has been frustrated by clumsier attacks from other quarters.
While I am on this theme I must also be critical of the vocabulary employed by some of our spokesmen. In the matter of our gross contribution, the method and purpose of collection is known to them, and it is therefore wrong, inexact and misleading to speak of it as "our money". When levies and duties are collected in Rotterdam, Marseilles or Bremen they are not claimed to be "Dutch money" or "French money" or "German money". This unhappy and repetitive slip—more than a semantic slip—on our part gives the impression of Britain trying to change the rules to suit Britain, and that provokes suspicion and it hampers understanding. It is prejudicial to our own best negotiating interests. It enables, for instance, my friend Mr. Enoch Powell to gloat at me, as he did the other day, when he quoted a speech he had made on the Continent after Parliamentary approval had been
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obtained for Britain's entry by a majority of 112 in another place and a majority of seven to one in your Lordships' House. What he said in that speech, made as it happens in Vaduz in Liechtenstein, but addressed to all continental dwellers, was, "Don't count on Britain. Don't suppose that those parliamentary votes mean anything. We shall rat on them—you will all see that we shall rat on them". Those are not the exact words that he used or which are printed in the speech, but they are not so much a reinterpretation as a condensation.
Enoch Powell has remained a personal friend despite the deep cleft between us over Europe and other matters. Three weeks ago in the shadow of recent events he quoted and he gloated amiably, but with open glee, at causing me intended discomfort. He is certain that he is right. I am certain that he is wrong, but so long as some people entrusted with our voice—the voice of our country—either in Government or in Opposition parties, appear to corroborate his warning, we are in trouble. We are creating trouble for ourselves which we do not deserve. We are disturbing our friends and satisfying our opponents. We are to be trusted: I wish we could always make that clear by communication.
I have done, but I should like to leave a final thought with your Lordships. This is a time when other equally old and splendid nations—one in particular—at the other end of Europe—are showing that they cannot be forced into unity by an imposed discipline. We can show that the nations of Western Europe are capable of combining by our own individual wisdom and will. That must, it appears to me, effectively hearten them. We are all part of the great creative Continent of Europe. Those of us who are free have the opportunity to prove that freedom not only enables us to combine, but persuades us to do so, to draw together by our own will and wisdom. If those peoples see this as the shining prize to be won in the end, it may lift their spirits. I hope that the example of our success may do so.
6.15 p.m.
Lord Lever of Manchester: My Lords, it gives me especial pleasure to follow the noble Lord, who is very welcome back to the House with this contribution. The fact that I happen to be in almost complete and categorical agreement with every sentiment that he has expressed I do not think is alone due to the value which I place upon his contribution, which I find to be very relevant to the subject which we are discussing. Of course, we are all very grateful indeed to the noble Lord, Lord Plowden, for his usual lucidity and the persuasive understatement with which he brought in his report and recommendations. I think that few of us will be disinclined to disagree with him. But I, who may be pardoned if I do not stay within those limits of valuable responsibility for a few moments, shall comment rather generally on some points.
First, it seems to me that there are two problems here which are being confused and perhaps deliberately confused. One is the question of regional aid from the Community's point of view and the other is the inter-country regional aid. The central problem from the Community point of view is not specific concern

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with the disparities within the country, though they may have very healthy and creative views about that. Their central concern and responsibility must be to affect the disparities between the country members of the Community so that we can achieve a greater convergence in economic policies than has so far been possible. I think that it is important to stress this because that is the Community's central purpose and that should be the Community's central role.
I do not have to repeat my own passionate belief in the central importance of the European Community to European co-operation and to world co-operation. But it is very important that we should not, when suffused with this general sense of collective Community co-operation, lead ourselves down paths of centralisation where centralisation is inappropriate. The role of the Community is absolutely relevant in deciding the apportionment of the Regional Fund as between different countries. In my opinion, the role of the Community must necessarily be a small one, or a negligible one, in deciding how, within each country, regional development is given preference.
Therefore, it follows that I do not altogether support the notion that it is self-evident that the absence of this ugly word "additionality"—which probably appears in no reputable dictionary—is to be deplored. In fact, the absence of the word would certainly not be deplored by me! The reason for that is that if in fact the Community were deciding to alter the structure of the aid given to the regions of, for example, our own country, it would be unnecessarily and irrelevantly interfering in decisions which ought to be made from a more decentralised and knowledgeable basis.
It is not hard to say that our regional policies are inadequate and ought to be stepped up. That is a matter for the people and the Government of this country. But I believe that the role of the Community is not especially significant—at best it is marginally significant—in encouraging convergence. We must be very careful about accepting the self-evident desirability of additional benefit from the regional aid of the Community, because we shall follow it up with what I believe will be very unrewarding, mechanical achievements. It means that we enlarge detailed supervision by people in Brussels of individual projects about which they do not have adequate experience, and cannot have adequate experience; they certainly do not have an experience comparable with that of the local departments, which have a universal enthusiasm, but which, even with their considerable local advantages, do not perform this task to the undiluted satisfaction of all those concerned.
Therefore, to allocate this task to Brussels—which will deal not only with this country's detailed regional problems but will presume to pronounce upon individual projects on this principle throughout the enlarged Community—would be a great error, would result in a useless extension of bureaucracy and would be precisely the wrong use of the Community in encouraging centralisation, whereas we all ought to be encouraging decentralisation and local knowledge. If we are not very careful and go into other schemes of enlarging the quota—or removing the quota—for Britain and depending wholly on ex-quota contributions made with this detailed supervision and judgment of individual projects in Britain, we shall end up with the
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Community fund being a vast beehive of bureaucratic activity—a beehive with no honey to be seen.
Lord Plowden: My Lords, I am not quite sure whether I have understood the noble Lord, but is he implying that the committee recommended that there should be direct access to Brussels and to Brussels' bureaucracy?—because that was exactly what the committee did not recommend, as it would create an enormous bureaucracy which could not possibly work.
Lord Lever of Manchester: My Lords, I am sorry if I did not make it absolutely clear; I thought that I had made it clear that I agreed with everything that the noble Lord said and with the conclusions that lie reached that the logic of those who are passionate for additionality must lead to the concept of the enlargement of the non-quota contribution. I do not want to press this in detail, and I could hardly describe the conclusions which the noble Lord reached as a passionate enthusiasm for demonstrative additionality in the impact internally.
Of course, we all want a bigger Regional Fund, which is a different matter, but it is in order to deal with disparities between countries. I did not understand the committee's great passion for increased surveillance of detailed projects from Brussels. If the noble Lord is saying that the conclusions imply that our own Government ought to be pressed to make those funds assuredly additional to the funds which would otherwise be engaged, he is merely asking—and I would support him—for increased regional aid to be given within our own country.
However, it seems to me that that is not precisely the same as demanding that the Regional Fund, as between countries, is not intended to correct the inadequacy of the national disposable resources in dealing with regional problems. The logic must be that if you are to insist that these projects should be additional, it is almost inevitable—though I accept the noble Lord's assurance that he would not support it—that this would mean greater detailed surveillance from Europe.
At the present time the overwhelming effect of the operation of the Regional Fund is to make a modest correction towards the disparities which exist between countries. It does so under the guise of adding to—but fails to add to, to any significant extent, except the trifling extent of infrastructure interests—the internal policy of regional aid. The reason for this ought to be considered, It is that its central purpose—which I insist must be to correct divergence between countries—is being evaded by all the members of the Community, including this country. That is why the tendency is to move away from convergence, and not towards convergence, of the broad outlines of our economic policy.
Here we have a regional policy which makes a small contribution to inter-country convergence in order to counter the very massive contributions to inter-country divergence which the failure of the leading countries of Europe to co-operate adequately has brought about in recent years. Let me take one issue, such as parity. Failure of Britain to understand the need to co-operate adequately on international monetary matters is one thousand times more important in promoting divergence

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between the performance of countries than can be any marginal, regionally dressed-up, contribution made by the Community. We are a Community that is still insufficiently co-operative. If it is not a misuse of language, our country is one of the leaders in failing to bring about the enhanced co-operation which is absolutely vital if we are to have the significant achievement for Community purposes that those in favour of the Community have in mind.
I welcomed the speech of the noble Lord, Lord Saint Oswald, because those who believe this are largely silent. The massively chauvinist unilateralists—alas! well-represented in both parties, but more heavily, influentially and contemptibly represented in my own party—tend to take the floor to play upon the naive, popular publicity available to them; whereas some of us recognise—as does the noble Lord, Lord Saint Oswald, and as do I—that this massive increase in co-operation is what is required rather than a foolish, unilateralist regression.
I raised the point about parity. Why are we not in the European Monetary Fund? Why are we not co-operating in that sense? I cannot go into this subject without trespassing too far on your Lordships' indulgence, but I must make the bold assertion that it is because the present Government and the previous Government—encouraged in their errors by the Treasury of our country in particular, and not sufficiently discouraged by the more enlightened areas of foreign policy—have stayed out for what they believe to be national advantage. We welcome the principle, but we refuse to participate in the practice.
I shall only say briefly that it was a very unrewarding exercise in unilateralism because staying out of this central Community purpose for our own short-term gain was motivated by a desire to see our currency parity rather lower than higher. The reward we got for our chauvinistic unilateralism is to be left in our present position with a ruinously high parity and without the means of co-operatively, in alliance with our European partners, dealing with a problem of that kind. Until the spirit of co-operation is greater among all the leaders of the Community, and until this country above all starts to make a positive contribution of a co-operative character, we shall be frolicking on the margin of the problem of convergence that is national and inter-country convergence.
Therefore, while welcoming the report and its constructive character, I have to emphasise that until we, as a member of the Community, show a heightened willingness to recognise that we are missing a great opportunity of an entry point into the outlying world economic financial strategies which can alone avoid the cataclysmic dangers which are threatening the world, and unless we in this country take a very different standpoint from that evidenced by our Governments so far, we shall get no progress made, and not only get no progress made in general but in the detail of matters like reform of the Community itself. You cannot expect the French to accept the kind of agonised reappraisal in terms of the co-operation required of them to accept serious modifications in the common agricultural programme unless you show that that is part of a general determination by us all to make the kind of sacrifices involved in constructive co-operation.
6.33 p.m.
Lord Cobbold: My Lords, the noble Lord, Lord Plowden, has set out clearly the main conclusions of this report. I thought it might be of interest to your Lordships on this occasion to recall briefly the previous report on this subject that was made by this committee at the end of 1976, to which the noble Lord, Lord Banks, referred. It might be of interest to consider to what extent regional policy has developed in the intervening four years. It may also be useful to draw attention to some of the criticisms and suggestions which were put forward in the earlier report and see to what extent they have been met.
First, may I recall, though it is perhaps not absolutely connected with the subject we are discussing, that the earlier report arose from concurrent sittings of subcommittees of both Houses of Parliament. It was one of the few occasions when this concurrent procedure has been adopted. I am aware of the complications involved in that procedure, but I should like to repeat, as I had the privilege of chairing those joint sessions, what I said on the subject in introducing the debate on 31st March 1977:
"If I may express a personal view, though I believe that it is generally shared by my colleagues, the experiment of the two sub-committees sitting concurrently has been very rewarding. It saves the time of witnesses and parliamentary staff; it avoids a great deal of duplication; and we have found the somewhat different approach very helpful. The terms of reference and the practice of the two sub-committees differ and the reports made by the two Select Committees need not be identical, the practice of this House being to go in more depth into detail and recommendations. The fact that the two reports are, on this occasion, not identical, though they are in no way contradictory, does not, in my view, invalidate the usefulness of the 'concurrent' exercise".—[col. 1054.]
The final conclusion, in paragraph 52 of the earlier report of 1976, read as follows:
"The committee conclude that it was wise on both economic and political grounds to establish the Regional Fund, and that the fund has great potential for encouraging Community cohesion. The difficulties facing the future development of a coherent and viable regional policy in Europe are long term ones. Initially effort should, therefore, be concentrated in the Council of Ministers on a limited number of the more important problems, which would include additionality, the improvement of communication between all those concerned, the future size of the fund, and improvement of co-ordination of all aspects of Community policies which affect regional development".
The present report deals with each of these points. As the noble Lord, Lord Plowden, has pointed out, although there has been some increase in the size of the fund since 1976, it remains quite inadequate to have any great impact by itself, a situation which is liable to be made much more difficult by the inclusion of new member states with heavy regional problems. This report lays great emphasis on the need for coordination with other funds and other policies of the Commission, referring in particular to the regional effects of the common agricultural policy.
The earlier committee had the advantage of evidence from Lord Thomson shortly after his retirement as commissioner, when he described this co-ordination with other Community funds as "the most obvious need". Further co-operation with the European Investment Bank is advocated in both reports. The problem of additionality remains much where it was four years ago, and no evidence to the committee shows convincingly that the size of each member

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state's regional aid programme is bigger as a result of setting up the Regional Fund. I shall not go into the argument between the noble Lords on the subject of additionality. It is a complicated subject. I found myself in agreement with the noble Lord, Lord Plowden, and not with the noble Lord, Lord Lever.
Lord Lever of Manchester: My Lords, I thought so myself too, and I shall explore the supposed difference, but elsewhere.
Lord Cobbold: My Lords, the present report goes more deeply into the improvement of communication between all concerned and makes a number of recommendations. Both the earlier report and, more specifically, the present report stress the value of development programmes. I agree with the noble Lord, Lord Plowden, that this is an extremely important point. The report also welcomes the introduction of the non-quota section.
In general it seems fair to say that in the last four years a little progress has been made on a number of the points emphasised in the earlier report, except on additionality. But the fund remains far too small to have any real impact on the growing regional disparities in the EEC; and the problems which will result from enlargement of the Community remain to be dealt with. Though there has been some improvement in co-ordination within the Community and between the various funds, there is still a very long way to go. Some evidence to the committee suggested that the Regional Fund in its present form caused little to happen that would not have happened anyway, and that there could be some doubt whether the administrative time and effort involved could be justified.
Nevertheless, the bulk of evidence given to the committee indicated a widespread desire to see some Community involvement in regional matters, and also to see local authorities in the member states playing at any rate a more active role. The committee feel that much could be done to improve the existing practical framework and to encourage more substantial longer-term developments. It will need concentrated effort by the Community authorities. The committee hope that their recommendations may prove helpful.
6.40 p.m.
Lord Tranmire: My Lords, the noble Lord, Lord Plowden, has the happy gift of being able to extract clarity out of the confusion of some witnesses by a very courteous and penetrating examination, and he has shown that quality today. Indeed, I found his speech so clear that I thought I could throw away most of the notes for my speech, because he had dealt with the subject clearly, however not sufficiently clearly for the noble Lord, Lord Lever. However, I felt something was wrong in that one thing I thought he was not doing was creating any beehives of activity without honey and we were trying to reduce the number of honeyless beehives.
I will briefly look at the position historically and what it is now. I recall on 26th October 1971 in another place—this was before accession—arguing the question of regional policy, and the Minister said:
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"I am one who believes that entry into the Community would provide the regions of Britain with a unique opportunity of breaking through into better times".
He said that at the time when a book was written by Kevin Allen and M. C. McLennan on the whole question of regional policy, and I quote from their conclusion:
"The disparities between the richer and poorer regions within the EEC"—
the EEC as it then was—
"are quite startling. Income per head in the richer regions is six and a half times as great as that in the poorest: the higher regional unemployment percentages are 70 times greater than the lowest".
They went on to give a warning:
"A most disturbing point is that there is no public evidence that the regional implications of entry have been investigated in any depth by the authorities".
When we took evidence before the recent report was written we got the views of the CBI, who said (paragraph 98 of our report):
"Income per head in the richer regions is six and a half times as great as in the poorest regions".
In other words, no progress had been made in those 10 years. The fund report for 1979, published in August of last year, confirmed that the gap between the richer and poorer regions widened in the '70s, and in our 14th Report we make the same point:
"Regional disparities within the Community are greater now than in 1975".
I differ from the noble Lord, Lord Lever of Manchester, on the question of disparities. My picture—what I want to get right in relation to the Regional Fund—is one which removes disparities within countries, not merely between countries, and that to my way of thinking is the whole purpose. But as we see, the disparities are growing wider each year, and they will continue to grow wider unless something is done.
As I see it, there are three main reasons for that. The first—this point was made by the noble Lord, Lord Plowden, among others—is the insignificant contribution the Regional Fund makes to the problem of regional disparities For 1979, the year about which we took evidence, we received in infrastructure and industrial grants £107 million from the Community. Our total expenditure in that year on infrastructure and industrial grants was £1,326 million, so the proportion was only about 8 per cent.
Secondly, the point has been made by many that in 1979 the Regional Development Fund represented some 3 per cent. of Community expenditure, while the common agricultural policy represented 75 per cent. The CAP is in fact pulling in the opposite direction to the regional development fund, and therefore we have a tug-of-war, and that is the main reason for the regional disparities.
But thirdly—and this is probably the most potent argument of all—the Commission had made a study of the regional impact of the common agricultural policy and have concluded:
"Many of the farmers in the richer states are not working full-time in farming. In Hessen, Bavaria, Rhineland, Baden-Wurttemberg, Saarland, Alsace Lorraine, Rhone Alpes, Languedoc-Roussillon and Provence, 50 to 70 per cent. are part-time farmers".
In Italy, the proportion goes up to between 70 and 90

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per cent. That means that the guarantee and guidance funds are being used to bolster up the incomes of small part-time farmers in regions which are in general richer than most, are non-agricultural and prosperous. In many cases, part-time farmers receiving those sums have other sources of income. Further, when the Community imposes co-responsibility levies, those small part-time farmers are excused payment of the levies, which then have to be paid by the other members.
Probably the best way to illustrate the anti-regional effect of the funds is to look at table 7 in the 1979 report on the guarantee and guidance funds. There one finds that the chief beneficiaries of those two funds are the three richest countries in the Community—Germany, France and the Netherlands—and the United Kingdom, except for Luxembourg, comes at the bottom of the list. I should have said that British farming was as efficient as any in the Community, yet next to Luxembourg we come bottom in the list.
If, next, one examines the figures in the development fund report for 1979 and adds those to the guarantee and guidance funds, one finds that—adding the regional aid we get to the guarantee and guidance funds—France and Germany receive three times as much in European units of account as the United Kingdom (I am quoting the figures for 1979, taking the tables from the two reports for that year) that the Netherlands and Italy each receive twice as much, and that only Ireland and Luxembourg receive less. That means that, in accordance with the way in which the Community is being run at the moment, the poorer countries are receiving far less than the richer ones.
That is worrying; but still more worrying is what will happen when we get enlargement. Then we shall have disparities of not 6½ to 1, as we had in 1971 and as, according to the CBI, we have today, but disparities, bearing in mind the new entrants, of 12 to 1 or more. If the same system of the guarantee and guidance funds, as well as the Regional Fund, continues without amendment, quite clearly there will be no regional improvement, and probably in the end it will be necessary to bankrupt the fund, unless it is increased beyond the 1 per cent. VAT.
Therefore, there is an urgent need to get it right. Incidentally, in the guidance fund there can be found a very good illustration of what is going wrong. This is contained in the study that I mentioned earlier relating to the regional impact of the common agricultural policy. It is pointed out how in the guidance fund very little money is spent. However it varies, it says, from 20 per cent. for some projects in Ireland and Italy, to 70 per cent. for projects in Germany and the Netherlands. Quite clearly the guidance fund is being far more anti-regional even than the other fund.
How are we to get this right? I think that we must look to see why it is necessary to have an arrangement under which aid to rural communities is paid under one system out of the CAP, whereas the Regional Fund is paid under another system based on a quota and with the rules of additionality—whatever may be required. I should have thought that the time has come to draw together. In fact in our report a few years ago we recommended that the rural and urban systems of regional aid be put on the same basis. I should have thought that in the case of a rich country, such as the
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Saar or the Rhineland, if aid is being given to that country it should be given by the nation state rather than by using the guarantee and guidance funds.
Again, I would suggest that the money should be disbursed by the Community under the same system of national quotas. Having sat on many of the subcommittee's examinations, it strikes me that we are failing to make a success of the Community. Now after accession, whatever have been our former attitudes, we should be trying to make a success of it. We are finding that the Commission is trying to harmonise everything from the noise made by lawnmowers, to banking, insurance, and company law. But it is failing to harmonise what is essential—that is, the rules of regional aid, in order to correct regional disparities both urban and rural. I fear that until we do that regional disparities will increase.
6.54 p.m.
Lord Croham: My Lords, I agree with what the noble Lord, Lord Tranmire, has said about the great clarity with which the noble Lord, Lord Plowden, introduced the valuable report of the Select Committee. Indeed, my reaction has been very similar to that of the noble Lord, Lord Tranmire—I have considerably reduced what I wish to say this evening. The noble Lord, Lord Cobbold, made a quite important point when he referred to the concept of the European Fund as something which would improve the European spirit. I am sure that originally the Regional Fund and the Social Fund were both seen as part of a bringing together of Europe, of which the CAP was another manifestation. But we in this country have tended to concentrate most of the time on the use of the Regional Fund as a means of offsetting the known costs of the common agricultural policy. This is important because a fund seen as a means of improving the European spirit must have in it a degree of additionality, so that the regions can be seen to be benefiting from the European Fund. In terms of an offset to the balance of payments and resource costs of the CAP additionality must be at a minimum—and I shall come to that point in a moment. The fund was also seen as a way of reducing what now seems rather ironical in retrospect—the attraction of industry and jobs to the prosperous golden triangle of South-East England, which in those days certainly was seen to embrace the Midlands.
The quantitative expectations of those who saw the fund as a very important contribution to the offset of the CAP when making arithmetical assessment of the pros and cons of Common Market membership were bound to be disappointed. The fund has always been too small, and even though we have had quite a substantial share, the quota system has had unsatisfactory results. There was a time when it would certainly have been in our interest to criticise the quota arrangements of the fund on the grounds that—and I quote from the report:
"all the ERDF aid to Germany is going to areas which are wealthier than any part of the United Kingdom".
The accession of Greece, and the impending accession of Spain and Portugal, too, may make the retention of the quota system as the key to the distribution of ERDF monies appear in a more favourable light to us. I am not as convinced as were the committee that

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a formula based on the average will be entirely beneficial to this country. I agree with their view that larger funds must be put up now that we have enlargement, but larger funds have to be put up by somebody. It could be that ending the quota system will make some of the countries that would have contributed more unwilling to contribute. Moreover, one must stress the point—it comes back a little to additionality—that if we have to put up a lot more money ourselves, we shall need to get a lot back before we have really gained very much.
The committee, I think rightly, attached importance in their report to the two features which I think probably account for much of the disappointment about the Regional Fund. I have already mentioned the matter of additionality. The second problem has been the insistence of all member Governments that all assisted projects must be submitted through national Governments. That has to be done to reduce bureaucracy, but the fact that the programmes have to be part of central governmental programmes has certainly increased the degree of central control and I think has reduced the interest and attraction of regions in a European Fund as such.
As I have already said, the desire to use the Regional Fund to offset the balance of payments and resource costs of the common agricultural policy certainly makes all the finance Ministries and treasurers insist that as far as possible the funds are used to pay for expenditure which otherwise central Government would pay for and should not represent additional expenditure. Of course that is contrary to the spirit of the fund, and therefore one has to go along as far as possible without much resource commitment to making it appear that our policies are in line with the rules. But given that there has been little additionality—so long as we insist on the offset for CAP there will be little additionality—there is obviously a substantial reduction in the attraction to regions of the ERDF monies because they do not receive any very obvious benefit from them.
One suspects also that the insistence of Governments in having all the applications controlled by them is not merely in the interests of reducing bureaucracy at the centre, but is also an indication of a reluctance to give up any element of national sovereignty. I think that the economic logic of these factors is impeccable, but I doubt whether the interest in the country in the European Fund as such has benefited very much by the fact that it is so much controlled by Government and appears to be mainly an outdoor relief for Government rather than extra relief for the regions.
I referred to the initial arithmetic of our entry. I had no great expectations that membership of the EEC would quickly produce a large economic benefit for this country. I had no great expectations that the regions would be transformed by a European Regional Development Fund. But I am sure that we could have secured a better result from our membership had we devoted more effort during the period we have been a member to getting a larger fund and administering it in a way which provided more obvious incentive for the assisted regions to relate to it—and I use that word that I do not like very much, "relate" to it, because I think that one needs to get more of a feeling in this country that Europe is not something that is entirely hard economics; there are social and political
818
elements in it, and by concentrating too much on balance of payments offset we neglect those.
I believe that the proposals which the Select Committee have made in their report as to the size of the fund and the modification of its procedures are very important. I think that I would like to stress particularly the desirability that local bodies should be involved more directly in the fund and be placed in a position where they bear more direct responsibility for the success of an application for aid. That does not contradict the point made by the noble Lord, Lord Lever of Manchester, about bureaucracy. Greater involvement and bearing more responsibility can, I think, be achieved quite compatibly with the present basic framework of arrangements.
Our continued and effective membership of the Community is now essential; it is quite idle to think otherwise. But our poorer regions will not see it that way unless both our national and community regional policies are far more effective in securing a better regional balance than they have been in the recent past.
7.2 p.m.
Lord Sandford: My Lords, I greatly welcome the timely, concise and astringent report that we are speaking to today, and particularly the lucid delivery of it this evening by the noble Lord, Lord Plowden. He started, quite properly, with a reference to the noble aspirations which lie behind the Regional Fund and his conversations in Paris with M. Monnet and others some 30 years ago. The report records the worthy political gesture of 1972, later endorsed in 1979, by which the ERDF is looked to as one instrument among several designed to obtain greater convergence between the economies of the member states of the EEC.
Those noble aspirations and political gestures, and that very worthy symbol, are all, I think, still widely endorsed, though perhaps not widely enough. But the report makes it quite clear (though the noble Lord is too polite to put it in such crude words) that what we in fact have is a complicated and time-consuming sham. If your Lordships think that is too strong language, you have only to compare paragraph 9 with paragraph 1 of the report's introduction to see that, alas! it is true. You have only to look at the size of the fund in relation to its task—at the comparison between this fund and the CAP, which is such that a by-product of the common agricultural policy is more than sufficient to reverse the whole effect of the regional fund in quite a number of rural areas in quite a number of countries. You have only to see that the EEC funding in relation to the United Kingdom funding is such that the effect of it is barely perceptible—and I will give your Lordships a few illustrations before I have finished of how true that is.
In addition to that—and this is a point on which the Association of District Councils feels fairly strongly—there is no mechanism by which the regional fund as it is operated in this country can reach black-spots which are far worse off, by all indicators, than a number of other areas in other countries which are being supported by the fund. Nor are there any means whereby, at present, any small projects (which we are all now so keen on, following the advice of the noble Lord, Lord Lever) can be supported by the fund.

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Personally I find that, having occasion to debate the common agricultural policy last Thursday and the regional fund today, one's loyalty and enthusiasm for the European ideal is being rather sorely tested. I am afraid I disagree with the noble Lord, Lord Plowden, when he says that the fund symbolises something worth while; it does no great harm and it is probably still doing some good. My impression—and it is only an impression; it is not based upon hard evidence—is that as one local authority after another comes face to face with the hard facts of the situation, the disillusionment and the frustration they feel is positively harmful to their general attitude towards the European ideal. The sooner this system in the form into which it has degenerated is changed, the better all round.
Speaking now as president of the Association of District Councils, who have a very direct interest in the better working of this, I am grateful to the noble Lord for having recognised and recorded in his report the very considerable enthusiasm that nevertheless still persists for first of all wanting to see this system improved and then wanting to participate more actively and constructively in operating the improved system.
Fortunately, all local government—not just the district councils but the metropolitan authorities and the county councils—are in a good position to respond to the idea of development programmes, because in response to my right honourable friend the Secretary of State for the Department of the Environment, in an initiative which he took last May to do with better relations between local authorities and local business interests, all the associations have conducted a survey of the initiatives which were being taken by our members in respect of their support of local businesses and of their development. The survey we sent out led to a better response than we have had to any survey we have ever done. We now have a great compendium of detailed notes on all the investments they were making in land, the servicing that they were undertaking on their land, the construction of factories—advance factories—the promotion of industry, the giving of advice, the holding of exhibitions, et cetera—all the constituent elements which, I take it, will go into the preparation of a development programme.
This raw material was supplied to the Secretary of State and mulled over by what has become known as the Burns Committee. Sir Wilfred Burns reported to the Secretary of State at the end of July, and so far we have heard nothing further. My question to my noble friend—I think the first question he has had to deal with—is to ask him why there has been no progress so far, when we can expect progress and what form progress will take when we see it. It is highly relevant to this debate today, because what is involved in focusing all the separate and disparate initiatives of the various local authorities—the metropolitan authorities, the county authorities and the county council authorities—is the same thing as is involved in making those initiatives up into a development programme which can be aided by the fund.
There are a number of other points of which the ADC has criticisms and troubles in connection with the ERDF, but my noble friend Lord Irving of Dartford, who is a vice-president of the association, will I think be dealing with a number of those in his speech,
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and so I do not have to deal with them now. So I conclude by welcoming the progress that has been made—it is not very great, but there has been some—in the Commission towards the idea of development programmes. I enormously welcome the extent to which our own committee has identified this as the way forward.
By way of conclusion, I should like to illustrate such progress as there has been and such progress as there needs to be by reference to a couple of our member authorities. Consett is one of our districts. It is an area in which virtually the sole employer has collapsed, has closed. It is a steel closure town. It is in a special development area and therefore the most qualified of any area to receive help from this fund. It will be eligible, when it is operating, for the particular form of integrated assistance from the Commission that is recorded in paragraph 33 of the report. But in the latest set of grants allocated under the Regional Fund—and dated 16th February—Consett, with all its problems, with well over 20 per cent. of unemployment, benefits to this extent: Consett, Watling Street Industrial Estate, construction of an additional access road; Phase II, Consett, Tanfield Lea Industrial Estate, construction of access road, foul and surface water sewers and water and electricity supply. That is all. For the highest priority area, which I think we have, with the highest unemployment, that is not a particularly significant contribution. I think your Lordships can see from that how much more valuable will be development programmes to embrace everything that Consett is doing—and I have three pages of material on what Consett is doing—all of which should be strongly supported.
Turning by way of illustration to something that seems to be more satisfactory, to Corby, also one of the top-priority assisted areas in this country, we have progressed this far. Eight separate projects, all to do with infrastructure, (pumping stations, sewers, roads, industrial estates) have been lumped together and are being aided under what is called a global application. That is still only dealing with infrastructure. It could be dealing with the umpteen other things Corby is up to to alleviate their situation; but it is not yet (although it is eligible) for the integrated support from non-quota section set out in paragraph 33.
I believe that we are making more progress on the rural front. Your Lordships will remember that when the Select Committee did a study on the enlargement of the Community they were appalled at the prospects for the rural areas under the impact of the unreformed CAP and I was asked to do a study of EEC policies for rural areas. During this time the EEC made their own proposals for three pilot programmes in integrated development of rural areas. Among the three they chose, one was the Western Isles, which comes under the good offices of the Highland and Islands Development Board. This programme, I trust, has now been agreed and is beginning to operate. Our own report on rural policy was accepted and has been taken on board by the Commission to the extent that they have now commissioned further research into the general idea of an integrated approach to rural areas; and I am glad to say that the Rural Planning Research Trust and two members of my association, the Radnor district of Mid Wales and the Eden District of Cumbria

821
have been entrusted with one of the seven or eight research projects allocated across the community. We are making progress. I think it is pitifully slow and I am delighted that our committee has now made such a practical series of proposals. I hope they will be taken up and advocated powerfully by our own Government at the next appropriate meeting in Brussels.
7.16 p.m.
Lord Seebohm: My Lords, we have had some serious criticisms of the modus operandi of this scheme, both in the report itself and today in speeches by noble Lords. I think that these criticisms are justified but I myself do not wish the whole thing to be dismissed as of no consequence as a result of that. If properly administered, this fund could be and should be of great use. There are a lot of differences between this and other forms of aid agencies. For instance, the European Investment Bank makes loans, the European Coal and Steel Community makes loans. But what we are talking about today are grants that need no repayment. Therefore, for certain depressed areas where development is absolutely essential, this money could probably produce a good scheme whereas, if loan finance were needed, the repayments and interest would make the burden intolerable.
I think that the real importance of this report is the concentration that has been placed on changes which must take place; and I shall confine my remarks to that. Most people who have had any experience of distributing development aid or even funds from a large charitable foundation know that if they are spread too thinly they are quite useless almost anywhere. They must be concentrated to do any good; and particularly with the smaller amounts. This is where additionality comes in, because it shows that it is not being used as it was originally intended and that it is being spread around with no effect. We have had a lot of evidence from local authorities who are getting frustrated and who would like to have direct contact with Brussels. I do not think that that is possible. In this country alone there are 330-odd district councils with planning powers, and another 100 unitary or second-tier authorities; and there is no question of over 400 bodies having direct contact with Brussels.
On the other hand, if the proposal is that we should move from project finance to programme finance, the situation seems to be different. First, the amount of work that would have to take place in Brussels would be minimal compared with what it is now. That means that it would be possible for more people to be in direct contact with Brussels than is the case now. I suggest, therefore, that we look to see whether we cannot move at least one tier from the chain of operations. There are only seven development regions in this country and it seems to me possible, therefore, that seven regions could deal direct with Brussels. This means that the obvious tier to eliminate is Whitehall. I see no reason why Whitehall should come into the picture at all so far as the development fund is concerned. It would enable the regions to have the money paid to them direct and the local authorities would see the money coming into their hands in a form which would be welcome as a grant which was not going to cost them anything.
822
This seems the obvious solution and the one which in business one would use. One would get rid of a tier—and the nearer the top it is removed the better.
We have had a certain amount of complaint that the minimum of the project is too low. It is 50,000 EMU (£27,500 or thereabouts). I do not agree with that because the administrative costs of just putting it on the books would swallow up most of the money before one started. If we move to the programme system, this becomes irrelevant, These things can be slotted in as and when the local authority likes and in the form it likes. In order to get the development fund efficient and effective, the first thing is to move, as the noble Lord, Lord Plowden, has stressed quite strongly, from the project approach to the programme approach, and that we should then also be able to deal direct from Brussels with the development regions themselves.
7.20 p.m.
Lord Irving of Dartford: My Lords, I want first of all to congratulate the noble Lord, Lord Plowden, and the committee on their report, and on the enormous amount of work that has gone into it. I can do that with a good conscience because I am now a member of the committee, but my first meeting was on the day that they approved the report so I am not congratulating myself. I give my wholehearted support and congratulations to the committee on their report. It is a valuable addition to the considerable number of reports—now more than 300—which the committee have produced since our entry into the Community and which have become so influential in helping the development of European legislation and policy. It will also be a very valuable contribution in the review that the Commission have to make of the European Regional Fund which is due to be deposited some time this year.
The report makes it clear that the overriding problem is the smallness of the monies available to the fund. The United Kingdom received £136 million in 1980. However, this year, because of the accession of Greece, our share of the total will fall from 27.03 per cent. to 23.8 per cent., and the share of the three poorest nations—the United Kingdom, Italy and Ireland—will come down from 72.9 per cent. to 65.2 per cent. The committee says in one of the most significant paragraphs of the report:
"The problems of the poorer regions of the European Community are more acute now than at any time since the United Kingdom joined the EEC. The Community's Regional Fund has grown since the establishment in 1975, but it is still comparatively small, and the problems have not disappeared. In fact, regional disparities within the Community are greater now than in 1975".
It is not surprising that in the evidence that the committee received it detected a disenchantment with the fund, and in general the view was that it was too small to make any significant contribution to the objectives that it was set up to achieve. These, as the noble Lord, Lord Banks, indicated, were set out at the Paris Summit of 1972 as correcting,
"the structural and regional imbalances"
between member states. As the report points out, the guidelines for Community regional policy adopted by the Council of Ministers in 1979, stated:

823
"Regional policy is an integral part of the economic policies of the Community and member states. It forms part of the various elements which contribute to the attainment of a high degree of convergence of the economic policies of the member states".
This is an important role which it cannot carry out as long as the amounts available are so small. We welcome these amounts; but in terms of the total need they really are only scraping at the surface of the problem.
I listened to my noble friend Lord Lever with the care and respect I give to everything that he says; but I find it difficult to go along with him. I entirely agree that more co-operation is necessary and I want to see that speed up and be successful. But to assume that we must back-pedal on everything else until that co-operation is achieved seems to ignore the size of this problem. The budget of the fund represented only 2.57 per cent. of the total Community expenditure in 1981. I believe that the amounts have to be trebled to be even significant.
Lord Lever of Manchester: My Lords, my noble friend must not accuse me of urging back-pedalling on anything else. I was merely seeking to point out that as long as there is a tug-of-war in Community policies, with some tugging in the direction against convergence and the Community fund in favour, and as long as you have a number of giants on one end of the rope and a shivering pygmy on the other, you will not get the major advance that you want to convergence by merely giving a tonic now and again or a pick-me-up to the pygmy.
Lord Irving of Dartford: My Lords, I certainly accept the difficulties of the problems that we are facing, but I hope that now we have the support of my noble friend in seeking to extend by whatever degree the amount of monies available to the Regional Fund. It is important that this should be done because the CAP—which many noble Lords have said absorbs three-quarters of the total Community budget—has, as suggested in the report, the opposite effect to that of the Regional Fund in that it transfers income to areas which already have high agricultural incomes, such as North Germany and the Paris basin.
I would, however, guard against the view that we can, simply be reforming the CAP—and reform is necessary—switch resources from the CAP to the Regional Fund, because I believe that difficult as the CAP problem is, it still constitutes only 1½ per cent. of the total gross national product of member states, which is about the same as Japan, about the same as America, and a lot less than Russia, which is not surprising. What I am really pleading for is that we need new funds but we also need a new commitment.
One of the other problems that the report indicates is that there are no Community-wide criteria in determining allocations, which creates the totally anomalous situation where the aid from the Regional Fund to Germany is going to areas which are wealthier than any part of the United Kingdom. In my view aid should go to those parts of the Community that really need it.
As the noble Lord, Lord Sandford, indicated, I am vice-president of the Association of District Councils. I want to put the point that they have very cogently
824
made to me. This is on the question of additionality. This is very important. The principle is that any money received from the Regional Fund must be in addition to money available from National or local reserves. If there is not a respect for this principle it calls into question the whole of the Regional Fund, in my view. The noble Lord, Lord Plowden, indicated that of course it is very difficult indeed to determine whether the money is additional or not.
The Government now take the view that because of the need to restrict public expenditure, the availability of assistance from the fund should not enable authorities to undertake any additional projects. Money from the fund is to be passed to the authorities responsible for the projects for use in reducing the amounts that would otherwise have to be borrowed to finance the projects, but are not additional to the capital allocations that they would otherwise receive. Indeed, under the new capital expenditure control system operative as from 1st April 1981, any capital grants from the Regional Fund must be deducted from the annual expenditure allocation to each local authority.
We have a clear indication of policy, as I understand it; but whereas previous Governments have never admitted that they were not operating additionality, here we have almost institutionalised the fact that it will not be allowed to happen from 1st April onwards. I should be very grateful if the noble Lord the Minister would comment on that. The ADC maintains that the money which is available should be additional to national and local reserves; anything else destroys the value and idea of the fund and is out of harmony with its spirit.
I should also like to talk about assisted areas. The ADC agrees in principle with the conclusion of the Select Committee report (paragraphs 43, 55, 75 and 76) that the Regional Fund should be concentrated on smaller areas in the most needy regions which meet certain minimum criteria of need, such as measures of income per head and unemployment levels. It also firmly supports the view that concentration of the fund's resources should not prevent national Governments from designating limited "black spots" outside the assisted areas as eligible for Regional Fund assistance.
The ADC believes strongly that the greater the concentration in national priority areas, as defined by the individual national Governments, the more important it is to ensure that the pockets of need outside those areas are not rigidly excluded from eligibility for Community aid. The definition of "priority area" is at best arbitrary, and the use of regional and county area unemployment figures often masks the reality of individual pockets of unemployment. The latest available unemployment figures as at 12th February this year show clearly that there are high unemployment rates in many black spots outside assisted areas. For example, although the average rate of unemployment in the non-assisted South-East is 7 per cent., there are many pockets of much higher unemployment. Clacton has 14.4 per cent., Margate, 15.9 per cent., Milton Keynes, 12 per cent., Sheerness, 15.2 per cent., Chatham, 11.2 per cent., and Ramsgate, 12.1 per cent. Also, if you take East Anglia, the average unemployment rate is 8.4 per cent., but it masks Cromer with 14.9 per cent., Great Yarmouth with 12.3 per cent., Hunstanton with 19 per cent., Leiston with 14.2 per cent., and Wisbech with 13.5 per cent.

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The same applies to tourism—and I ought to declare an interest, as a director of a travel company. In many areas tourism makes a significant contribution to the local economy and to employment. While the existing financial aid to assisted areas for tourism projects is welcome, the need for tourism is not confined to the assisted areas. There are many parts of the country—for instance, East Anglia and the South-East—which do not qualify for aid, and yet the increasing volume of tourism from Community countries arriving at coastal ports and visiting tourist centres and attractions makes heavy demands on transport and facilities such as parking, toilets, information centres, accommodation, caravan and camping sites. In small towns the facilities cannot be funded from local resources, which are inevitably very limited. Therefore there is a very strong case for the special needs of tourism being recognised in the allocation of Community resources, regardless of whether or not a town or district is within an assisted area.
I should like to talk briefly about development programmes. I welcome the committee's proposal that individual applications for industrial projects should be abandoned in favour of a system of broader development programmes. I believe this could save a great deal of administrative work. I am particularly anxious as a member of a local authority to say nothing of being a vice-president of the ADC that the maximum consultation should take place with the local authorities in the development of these programmes, both in the United Kingdom regional development programme and in local programmes. In the larger towns and cities, district councils have developed corporate policy statements and development plans as a basis for consultations with other public bodies as well as with commerce and industry. This framework could be readily adapted, in my view, to drawing up development programmes for regional aid.
As to the criteria for eligibility, I certainly welcome the broadening from 1979 of the criteria for assistance to infrastructure projects. However, the Regional Fund requires a minimum investment of 50,000 European units of account, or something like £20,000, on projects. That means that the smallest projects, which are often quite significant in a local context, are excluded, so that a number of schemes which could contribute to the creation of jobs cannot be considered. The threshold for the small project, I believe, is set too high to help in establishing small industries; and local development programmes should have a lower minimum, which would enable such schemes to be assisted.
Finally, there is one way in which I perhaps differ from the committee, and that is regarding the question of subsidised interest rates. I have always been attracted to the use of a larger proportion of Regional Fund moneys in this way. The proportion—anyone in local government knows this very well—of total costs attributable to interest in any project is exorbitant. I believe it could be avoided while at the same time enabling the fund to help many more authorities.
The committee points out that the obligations stemmed in part from the fact that the grants are paid in mixed currencies and the cost and risk of dealing
826
with the foreign exchange problems eliminates almost all the advantages of paying a lower interest rate. However, I think that the subsidy, in present-day terms, is too small anyway to be significant. Nevertheless, I should like to see a great deal more work put in on this aspect of the problem than I believe has been given in the past. I believe that here I am in very good company because Jean Monnet was one of the most important advocates of the use of subsidised interest rates in projects of this and other kinds. I wish to congratulate the noble Lord and the committee on a splendid job of work, and I hope that most of its recommendations will at one stage or other be accepted.
7.37 p.m.
Lord Greenhill of Harrow: My Lords, it is late. I shall be very brief and I hope that what I say you will not consider to be frivolous. The message which comes to me from this characteristically lucid report is two-fold. It is, first, that the fund is not achieving its objectives and, secondly, there is very little chance of significantly improving the position. This, I fear, is the message which today all too frequently comes when the workings of the Community are examined by subcommittees of this House. Shortcomings are identified, but for political reasons it is virtually impossible to rectify them, and this situation will surely become even more difficult after the enlargement of the Community. Dissatisfaction with the present situation is not peculiar to this country, to the British, but is felt by many members of the Community who share it with us. Even the Germans have come recently to express some of their misgivings.
What can be done about this? First, we could decide to leave the Community. It is not the course I would favour, but there is a case to be argued and a case to answer. Secondly, we can stumble along in the face of growing hostility in public opinion, hoping against hope that it will come right in the end, and on the way, as the report has done, we can suggest sensible reforms which we hope will be taken up and successfully incorporated.
If we pursue that second course we have to face the fact that progress is going to be extremely slow; maybe there is no other way. But there is one other way which can be briefly mentioned, I think. One is tempted to think impatiently that the best course would be to try for a wholesale revision of the Treaty of Rome—not just a renegotiation of the British terms of entry but a fundamental look at the whole treaty. No treaty is Holy Writ for all time; many years have passed since the negotiations and the shape of Europe has very much altered, and very much altered economically.
I am sure that many of your Lordships will say that this is utterly impossible and that it would probably be very unwise to attempt it. I am reminded that some years ago the noble Lord, Lord Stewart of Fulham, who was then Foreign Secretary, suggested to Mr. Gromyko that the United Nations Charter should be revised. Mr. Gromyko replied, rather wearily I thought, that if the noble Lord had known how difficult it had been to negotiate the charter he would not make such a suggestion. I daresay that those who took part in the negotiations on the Treaty of Rome

827
would feel exactly the same way. But in spite of all this, I do not think that the idea of a fundamental revision of the Treaty should be entirely dismissed, and the time may well come shortly after some of the future enlargements have taken place.
7.40 p.m.
Lord Bruce of Donington: My Lords, the House has already expressed its appreciation of the quality of the Report on Regional Policy that has been produced by the Select Committee. I, too, should like to commend the noble Lord, Lord Plowden, for the lucidity of his speech which, in support of the report itself, gave one of the best factual analyses of the working of the European Regional Development Fund that the House has had before it for some time.
I was a little sorry that I could not agree altogether with the conclusions that he derived from the Committee's factual analysis. Your Lordships will recall that the question became reduced by the noble Lord to whether it was worth retaining the European Regional Development Fund as a symbol of European unity within the EEC. It will be my respectful submission to your Lordships that it is far better to face the facts as they are, to assess the prospects as to how the factual situation is to develop, rather than to retain a mere symbol which, on all reasonable expectation and projection of the facts, is likely to remain only a symbol and may tend to people looking at symbols of distant vistas, of dreams rather than of facts.
Many of your Lordships have drawn the attention of the House to the fact, which is outlined in the report itself in paragraph 9, that the regional policy was designed to correct,
"the structural and regional imbalances which might affect the realisation of Economic and Monetary Union."
It may well be, as my noble friend Lord Lever has hinted, that that was probably a wrong objective for the Regional Fund, anyway; that convergence of the European economies could be achieved by a combination of other means. Be that as it may—and I do not want to be drawn into arguments outside the Regional Fund—the purpose of the Regional Fund was certainly to correct regional imbalances.
As the noble Lord, Lord Banks, has pointed out from the Liberal Benches, shortly after accession a study group was formed under the chairmanship of Sir Donald MacDougall of the FBI, in order to consider the whole question of how convergence could be established to a point where economic and monetary union became a feasibility. This was the whole purpose of the conduct of the study which, characteristically enough, was never laid by the Commission before the European Parliament where it could properly be debated; it was only referred to.
The study revealed that it would need about 10,000 million units of account, or roughly £5,500 million at the current rate of exchange between the ECU and the pound, in order that 10 per cent. of the existing per capita differentials between member states could be removed. Indeed, four times that amount would be required to remove the 40 per cent. differentials, which, at that time, was conceived to be the only feasible basis upon which economic and monetary union could be achieved.
828
Nothing at all like that has happened and, as noble Lord after noble Lord has pointed out, far from there having been the achievement of a greater convergence between the various economies, despite the operation of the Regional Fund, the position has become very much worse, partially due, as noble Lords have pointed out, to the operation of the CAP. That is the position.
What has gone wrong, on the assumption that the whole concept of the Regional Fund at the beginning was the correct one? Of course, the first reason, as many noble Lords have pointed out, is that the funds allocated to the Regional Fund have been so derisory that the effects on individual economies have been absolutely marginal. The total payment appropriations out of the Regional Fund amounted to £331 million in 1979, £352 million in 1980 and, in 1981, they are estimated to be £340 million.
On a percentage basis, £91 million went to the United Kingdom in 1979, £68 million in 1980 and £80 million in 1981. Those figures are based on percentages which are set out clearly in the report. On the basis that Britain makes a contribution to the fund of about 20 per cent., that gives a net disbursement into the United Kingdom of £25 million-odd in 1979. £17·71 million in 1980 and £12·92 million in 1981. I am talking in net terms; the money we pay in and the money we get back.
Be that as it may, what we now have to consider, not merely on the basis of the small net amount that we get back—incidentally, in sheer money terms, it is about the only profitable aspect of the entire Community budget that we get apart from a slight benefit from the Social Fund in certain years—is the measurement of the total Regional Fund figure of around £350 million to which I have referred. That is less than the amount payable out of the United Kingdom Exchequer to the local authorities in Northern Ireland. The Regional Fund is also less than Titles 1 and 2 of the budget that deal with the Commission's expenditure on its own administration. Titles 1 and 2 together are in excess of the total amount paid into the Regional Fund. Of course the effects are marginal.
What are the prospects for an increase? The noble Lord, Lord Sandford, and my noble friend have referred to the ambitious plans which have been drawn up by local authorities. What prospect is there of these plans materialising except as part of the refund in kind or in cash that is coming as part of the refund of Britain's net contribution to the European budget? As has already been said, the regional policy amounted to only 3·63 per cent. of the entire Community budget in 1979, 2·62 per cent. in 1980 and 2·64 per cent. in 1981. The agricultural fund, the common agricultural policy, was 20 times greater than the Regional Fund in 1979 and 28 times greater than the Regional Fund in 1980. On the basis of estimates, it will be 25 times greater than the Regional Fund in 1981.
What are the prospects of the Regional Fund increasing to a point where it can make even the remotest statistical impact or even the remotest material impact, net, on any part of the regions of the Community? Noble Lords know perfectly well that under the Treaty of Rome, the "own resources" is limited to some 1 per cent. of the VAT base. What other prospects of any more money being available are there?

829
As the noble Lord, Lord Trefgarne, will confirm, we are already pressing, after the recent price review of the common agricultural policy, against the 1 per cent. VAT limit. The noble Lord may perhaps correct me after consulting his right honourable friend the Minister of Agriculture, but it may well be that the price increases which were granted in the recent price review, on the basis of a very good harvest in Europe (which there might well be) will send the Community over the top of the 1 per cent. VAT limit. In the event of that happening, what is going to give? The answer is that payments to the Regional Fund, the Social Fund and to the other funds are going to give. As your Lordships know, agricultural expenditure is what is called compulsory expenditure, which means that it originates in the regulations themselves. As past agricultural Ministers have admitted and as agricultural Commissioners have also admitted, expenditure of that kind under the agricultural regulations is largely out of control.
What are the prospects for the Regional Fund? Surely the fund can only increase, even marginally, if either the common agricultural policy is changed to a point where it takes less of the Community budget or the VAT base itself is changed. But the right honourable lady the Prime Minister pronounced her verdict on this on 3rd December 1979 at col. 40 of Hansard:
"I have made it perfectly clear"
said the right honourable Lady, and everybody knows how she makes things perfectly clear,
"that I believe that the limit on the budget of 1 per cent. contributions on value added tax should not be exceeded".
We know that the lady is not for turning, so I would rate very low the prospect of going beyond the 1 per cent. limit.
Let us take the other alternative. What is the prospect for a fundamental change in the common agricultural policy, upon which I will not expatiate at length except to point out the wastage not only of the levies, to which the noble Lord, Lord Saint Oswald, referred, but also of the vast sums paid for the storage of "mountains" which are quite surplus to anybody's requirements and which are continually being enlarged. What are the prospects for changing the CAP? Initially, early in 1979, Mr. Peter Walker gave a very good prospect. On 14th June 1979 he said:
"The reform of the CAP is an aim which I shall be pursuing in forthcoming negotiations ….—[Official Report, Commons; 14/6/79; col. 606]
Those were the fine days of confidence. A little later, the noble Lord will recall that his right honourable friend the Prime Minister referred to the madness of the common agricultural policy. But now it is all receding because, as noble Lords who were present at the debate last week will recall, the noble Earl, Lord Ferrers, said that his right honourable friend had made it plain that he has an interest in persuading the Council to adopt a long-term approach. He then said that a comprehensive five-year plan for the whole food and agricultural sector might be pretty ambitious and he doubted whether it would be achievable. This was the noble Earl, Lord Ferrers, speaking last week on behalf of the Minister of Agriculture. In those
830
circumstances, do we really have to consider the whole of the European Regional Development Fund as anything other than a symbol?
A further point which arises is exactly what happens and how the fund is administered. Let us consider the trouble, the time and the expense that is now incurred in ensuring this recycling of money from one member state up to the Commission and back again to its own country. Industrial projects for consideration by the European Regional Development Fund are sponsored by the Department of Industry. This is made quite clear in the report produced by Lord Plowden's committee. So far as the infrastructure is concerned, local authorities make their applications to the Department of the Environment. Therefore all the applications for regional aid in one form or another go through one of two Ministeries. And three times a year, as the noble Lord has correctly pointed out in his report, a commission is formed which groups the applications and takes them up to Brussels for consideration.
Who comprise the people who consider the whole question at the Commission end? There are two committees. There is a regional policy committee and there is a fund management committee. Each of these committees contains representatives of the Government of each member state. Therefore what happens is that when the applications go, for example, from the United Kingdom up to the Commission for consideration they are sent to these committees upon which already sit representatives of their own Government. This happens in both committees, so it is all channelled upwards. These applications are considered by Governments who support them, and they are considered again by Governments sitting on these two forms of management committee.
Moreover, there is no question ultimately of judging them on their merits. The report makes quite clear that the project particulars that are sent up are not of a frightfully satisfactory quality. But it is not as though even after that the projects are dealt with on their merits. They are dealt with according to quotas. Every member state has its certain quota. Bearing in mind the triviality of the sums involved, I should not have thought that it was worth while going to all this trouble of gathering the projects together, having them considered by Ministers or by ministerial departments, having them sent to the Commission with another costly and time-consuming translation review, having them considered again before any decision can be made and then seeking the final decision of the various committees which consist of representatives of member states who are required to distribute, in terms of the totality of the money involved, exactly in accordance with a pre-arranged format. That does not seem to be a very good way of conducting the business.
It may well be that there are other ways of achieving a greater convergence within the EEC countries. I devoutly hope that there are, but I do not think that this country ought to be deceived by symbols. I do not think they should have prospects held out to them in respect of the marvellous things that the Regional Fund is capable of doing when, first, it does very little other than append its label to projects that in the main come back to the country which supplied the money. It should not do that and it should not hold out prospects

831
for the future which are not based on logical expectations and all reasonable suppositions based upon the facts.
I am well aware that in so saying it may be said that I am taking the traditional anti-European posture. I am not. I do not regard the EEC as being synonymous with Europe. Europe operates within a wider context and within more countries than the EEC does and indeed, in President Jenkins' own assessment shortly before he left, he said he had come to the reluctant conclusion that the EEC itself was mainly the common agricultural policy with the other activities as a periphery.
I do not think that we should assess our affairs on that basis. I think that so far as we can we should be factual. I do not think that we should retain symbols and, unless the EEC is prepared greatly to reduce its common agricultural policy doubt, we ourselves should be quite bold and say that we do not want anything to do with symbols and it would be far better and far saner and make for a far better understanding of public affairs if such artificial concepts were abandoned.
8.4 p.m.
Lord Trefgarne: My Lords, I have heard it said that the reports of your Lordships' European Communities Select Committee are read with the closest attention, particularly in the Commission itself. I hope and believe that that will be so in the case of the report that we are considering tonight because it is of the same high standard that we have come to expect from our European Community's scrutiny committee and its sub-committees. Indeed, following the timely Motion of the noble Lord, Lord Plowden, this evening the Hansard of tonight's debate should, I believe, be appended to the report when the Community officials study it, as I hope and believe they will.
As your Lordships will recall, the Regional Fund was established when we joined the Community, in order to provide a means by which the Community could help us by contributing towards the convergence of the less prosperous regions of the Community, which include in particular Northern Ireland and the assisted areas of Great Britain.
Although the fund has been increased in size each year since it was formed, its total resources—as the committee point out at the beginning of their report—are limited. They are a very small part of Community expenditure—the allocations for commitment in the 1981 budget were only about £832 million at the current exchange rate. These commitments represent about 7·3 per cent. of the total Community budget, while the appropriations for payments against commitments were even smaller—about £335 million. Similarly ERDF expenditure is far less than national spending on regional policy. Thus in 1980, for example, the United Kingdom received new commitments of about £153 million, and payments of about £136 million for both industry and infrastructure projects, while central Government aid for industry in 1979–80 was over £500 million and expenditure on infrastructure in the assisted areas was of the order of two or three billion pounds.
While the fund's resources are thus limited, they are
832
not negligible. Since the inception of the fund to the present day, we have received commitments of some £647 million, and payments, against these commitments, of £377 million. We have been able to take up our full quota each year with a wide range of projects. For example, last year, the Commission made commitments of £2 million towards the Ely link road at Cardiff; £3·2 million towards the Monkland motorway at Glasgow; a further £4 million making £27 million in all towards the Kielder Reservoir; and some £3 million towards port and harbour improvement schemes in Northern Ireland. The fund contributions to these and other infrastructure projects bring a real and attractive benefit to local and public authorities in the form of reduced interest charges over several years.
Turning to the future, in addition to the part which the fund may play in the community budget restructuring exercise, the regulation governing the operation of the fund is due to be re-examined by the Council before the end of 1981 following a proposal from the Commission. Thus, the arrangements and conditions governing the operation of the fund will be thoroughly scrutinised by ourselves and other member states during the next few months.
One question which is often raised is that of the size of the fund; and while, as I have already said, it has increased in size each year, there have been proposals from the Commission, the European Parliament, and others, for even further increases. While I have some sympathy with these suggestions, it is necessary to take into account the overall budgetary effect, and the consequences of the further enlargement of the Community. We cannot come to a decision on this matter until the Commission have presented their proposals and we have studied them.
I would now like to consider some of the more detailed suggestions put forward in the report. First of all, there is the very interesting idea that local authorities or regional development agencies, should prepare development programmes which would include industrial and infrastructure projects. The programmes might also include service and consultancy projects and groups of small industrial projects which are below the existing minima. The concept of submitting a comprehensive programme which will be aided by the Community is at first sight very attractive, not least to the Commission itself. Indeed, the procedures adopted for the non-quota section of the fund are based on programmes. However, there are considerable practical difficulties to be borne in mind. Some of these stem from accounting and auditing requirements.
When we apply for fund aid for an individual project, the application gives a great deal of information about the justification for the project, and the cost and time scale involved. In preparing a programme for a range of activities, it is likely to be necessary to provide a similar amount of detailed information about the justification for the activities which will be aided, and the way in which the activities to be aided fit into the overall regional policy for the area concerned.
The Commission will require such information in order to enable them to commit Community funds, and even if they were prepared to look sympathetically at programmes which gave less precise data it is likely the programmes would have to be considered by the

833
fund's management committee or some other committee of member states where such detailed information is likely to be a prerequisite of approval.
There is the further point that a wide range of consultation would be needed if programmes were adopted as the basis for fund aid. I am sure that the local authorities and agencies could prepare programmes to cover their own activities, but in order to be comprehensive, and to forestall possible criticism in Brussels, any such programme would need to refer to investments by other public authorities—water boards, gas and electricity authorities, British Telecom et cetera—and to comment on the use made of other Community funds. I believe that the Government departments concerned are better placed to provide this overall view, and to hold the balance for allocatng ERDF monies between local and other public authorities. This is not to say that local authorities do not have a large part to play in the administration of the fund. They do; and their co-operation is essential and much appreciated. I hope that it will continue.
I would also emphasise that I am certainly not ruling out the use of programmes as a basis for fund aid, but I am uttering a word of caution; they are not a panacea to the problems which can arise when fund aid is based on individual projects. The committee also suggested that the geographical area covered by the fund should be reduced in order to increase its impact, but that the fund should also cover some individual black spots outside the normal aided areas. I would accept the first of those suggestions, which is well in line with the Government's policy of reducing the size of the assisted areas in order to concentrate our own regional aid in areas where it is most needed.
However, the suggestion that it should cover some black spots outside the assisted areas does present difficulties. Such black spots would by definition not be eligible for the normal kinds of regional aid under the Industry Acts. The fund regulation imposes a clear link between eligibility for national regional aid and eligibility for ERDF aid, and the Government would not support the idea of breaking this link; it is difficult to see the justification for providing Community regional aid to areas which the Government of the member state concerned considered did not justify national regional aid. Indeed, I would expect considerable opposition from other member states to breaking this link for this very reason. Such an extension of the fund would be extremely difficult to make, unless the black spots in question were in receipt of some other regionally differentiated system of aid to industry. Nevertheless, I would not wish to give the impression that the Governments mind is closed in this matter.
On a point of detail, I would support the suggestion that the arrangements for making interest rebates on EIB loans should be amended to make them more attractive. As the committee point out, these rebates have been unpopular, simply because a 3 per cent. rebate spread over many years is less attractive than an immediate block grant.
The committee also proposed that consideration should be given to broadening the scope of ERDF aid to cover operating subsidies. The Government would not support such a step. Our policy on assistance to industry is firmly based on providing assistance only
834
to new investment and to companies with good prospects of long-term viability. Using funds to provide operating subsidies could encourage inefficiency and a misuse of resources. Such assistance would also be contrary to the Community's normal competition policy.
I think I should now mention one of the most frequently voiced criticism of the fund, namely, that the fund payments should be additional to national regional aids and should be passed on to the sponsors of the projects concerned. This is a matter which has I think been raised by almost every noble Lord who has spoken this evening. Perhaps I can touch on this in some detail as I think the implications are frequently misunderstood. Let me consider first fund aid to industry projects.
Under the present fund regulation, aid can only be given to new industry projects which are already receiving national regional aids. This implies that a decision has already been made to grant national regional aids, and that the project will already be proceeding, so that any decision to grant fund aid—whether or not it is passed on to the company—cannot provide an incentive to the company to carry out the project. Our quota is not sufficient to enable us to obtain fund aid for every eligible project, and if fund contributions were passed on to some companies, it would simply be a windfall, which would be unfair to those other firms who would have received national regional aid but not fund aid. Moreover, there is the very real difficulty that passing on fund aid would, in some cases, breach the Community ceilings on the total amount of regional aid that may be given to any particular project.
While the present regulation imposes the condition that the only industry projects which are eligible for fund assistance are those receiving national regional aids, this requirement could in principle be removed if all other member states agreed to do so. Such agreement is unlikely, as member states—and I think the Commission—would not wish to spend Community money in aiding a project which was not being given national regional aid. Similarly, we ourselves would support the principle that Governments are in the best position to determine the thrust of regional assistance, and we would not welcome ERDF assistance—or indeed other Community money—going to projects which we did not think should be supported.
Before leaving this question of the fund contributions towards industrial projects, I should like to take the opportunity to thank all the companies who have voluntarily co-operated with the Government by allowing their projects to be used for applications to the fund even though, as I have explained, the benefits of fund aid do not go directly to them. The applications do involve some requests to the companies for additional information—which we keep to a minimum—as well as occasional visits by the Commission or the European Court of Auditors. This extra burden falls on local managers to whom we are particularly indebted.
The position with infrastructure projects is different, in that the fund contributions are passed on to local or other public authorities concerned, although without any corresponding increase in their ceilings on capital expenditure. Given that all such authorities plan their investment programmes several years ahead,

835
removal of this limitation would not enable entirely new projects to be introduced. The most that Fund aid would be likely to achieve in these circumstances would be an earlier date for implementing projects which were already in mind, and this could be of some help to a region. However, given the need to contain the total of public expenditure, I think that the present arrangement, which gives authorities a very signficant saving in loan charges, is a good compromise.
There is no doubt that the concept of additionality is a difficult one; it involves an assessment of what would have happened if the fund aid had not been available. Nevertheless, it is true to say that the Government does take account of receipts from the ERDF in determining its public expenditure plans; if these receipts were not forthcoming some cuts would be required if the totality of public expenditure was to be contained. In this sense, ERDF receipts are fully additional.
May I deal with a point made by the noble Lord, Lord Irving of Dartford, about additionality in the context of the new capital expenditure control system for local authorities. There is no change of principle imported with the new system of capital expenditure control. The new rule recognises that ERDF grants are a source of finance for capital expenditure. Control of capital expenditure nationally requires that the grants should not be used to increase expenditure which has been set at levels that already take into account expected ERDF receipts.
The report also referred to complaints about difficulties in dealing with some particular kinds of projects—advance factories, tourism developments and service and industry projects. It is true that some other member states are taking a narrower interpretation of the fund regulation than we do, and they have therefore objected in the fund management committee to some of our applications for advance factories and tourist projects. We are continuing to argue that such projects make a valuable contribution to regional development and fully deserve fund support.
We are, however, concerned at the suggestion that some applicants find it difficult to discover what has happened to their application. While a project which is non-eligible because it does not meet the criteria of the regulation, can be ruled out quickly—and the applicant authority informed—decisions as to which eligible infrastructure projects will be submitted to the Commission cannot be taken until all the possible candidates for submission at the same time have been received. This must cause some delay for early applications. We do our best to keep the authorities concerned informed. Nevertheless, departments have taken note of the criticism and I hope that this particular problem will not recur.
My noble friend Lord Sandford raised the matter of the alleged delay in taking action on the Burns Report, which refers to local authority powers of assistance to industry and commerce and which I think was mentioned in paragraphs 7 and 8 of the Association of District Councils' Memorandum. The Government recognise the important contribution which district councils can make in providing the right environment for economic regeneration, and we are urgently considering the issues raised in the Burns Report. I
836
am sorry if that is rather cryptic, but my noble friend will appreciate the difficulty that I find myself in when I am asked to anticipate the outcome of ministerial consideration on matters such as this. I might also say, in fact, that with regard to the delay to which my noble friend referred some local authority interests invited to comment on the report have been rather slow in coming forward with their views.
My noble friend also referred to a number of specific cases including in particular the case of Consett. I can say that any further applications for infrastructure grant received from the Consett authorities will be considered for the next batch of submissions to Brussels, which is due in June or July.
Lord Sandford: My Lords, before my noble friend leaves that point, may I say that his remarks are not at all cryptic: they are just contradictory. It is a fairly simple committee making a fairly simple report and to have taken nine months to fail to arrive at any conclusion at all is just too much of a delay.
Lord Trefgarne: My Lords, I am sorry that my noble friend feels like that. I shall certainly convey my noble friend's views to my other noble friends and right honourable friends who are responsible for reaching these decisions, and I am sure that his anxiety will spur them on to even greater efforts.
The noble Lord, Lord Plowden, in opening this debate referred to the suggestion that areas eligible for fund aid might be determined on the basis of common Community criteria of need. Such fixed criteria might well exclude some of the areas in more prosperous member states, such as Germany or France, where fund aid is now available in areas which are below their national average but which are better off than most parts of the less prosperous members. However, such fixed criteria would necessarily have to be agreed on a Community basis and they might well be set at a level which would exclude parts of our own assisted areas which we ourselves would wish to receive fund aid. While I have some sympathy with this concept, I am not sure that it would necessarily be in our long-term interests, and I think that some other member states might likewise see difficulties in transferring the decision as to which parts of the country should receive ERDF aid from capitals to Brussels.
The noble Lord, Lord Plowden, also referred to the use of programmes, as did at least one other noble Lord, as the basis for payments under the supplementary measures regulation. This was a special short-term measure and it is not necessarily a sound precedent for programmes in other areas. A political will existed to approve these programmes which would not necessarily exist for ERDF programmes.
The noble Lord, Lord Banks, asked if we still supported the principle that most aid should go to areas in greatest need. Indeed we do—most fund aid is paid in respect of projects in development and special development areas. Indeed, some 58 per cent. goes to SDAs and to Northern Ireland.
The noble Lord, Lord Greenhill of Harrow, raised a very fundamental issue. I hope that he will forgive me if I do not attempt to answer him tonight, but

837
perhaps I may consider what he has said and if there is anything new to report on that matter I shall write to the noble Lord.
I had better come to the end of my remarks. It is expected that the Commission will be sending their formal proposals for amendments to the regulation to the Council within the next two or three months, and we shall then carefully consider them. While I have had to sound a note of caution on some of the conclusions of the Select Committee, I can assure your Lordships that we shall keep this very helpful report fully in mind when we are looking at the Commission's proposals, together, of course, with the views that your Lordships have expressed tonight.
8.28 p.m.
Lord Plowden: My Lords, we have had a long and most interesting debate on this subject and the number of noble Lords who have taken part is an indication of the interest in regional policy generally. Most speakers have expressed dissatisfaction with the working of the ERDF. However, all appear to wish to improve its working and various suggestions have been made to that end and not to abolish it, with the exception of the noble Lord, Lord Bruce of Donington, who in his usual inimitable and forceful way appeared to be discussing a report other than the one that we are discussing this evening, because he appeared to suggest that we were setting out to deceive the country by advocating symbols and that moreover there was no possibility whatever of the Regional Fund offsetting the amounts that have to be paid to the common agricultural policy. I think that in almost the last words of my speech I said, "Do not let us be deceived into believing that any reform or increase that is possible in the Regional Fund can in any way be a substitute for reformation of the common agricultural policy".
The noble Lord, Lord Seebohm, suggested, contrary I think to almost every other speaker, that a region should have direct access to the Community in Brussels. As a former bureacrat I would deplore that. I cannot imagine what kind of organisation would be necessary to consider applications from the Highlands and Islands and from the Mezzogiorno, from Portugal and various parts of Spain and the Greek Islands. Tempting as it might be, I do not believe that it would be practicable.
I am grateful to the noble Lord, Lord Trefgarne, for his replies. On additionality, his views were as I expected. On the question of programmes, I was disappointed that he received it with really faint consideration. I am reminded of a remark that the late Lord Bridges once made to me when I was in the Treasury that I should not say things like that as it savours of the official grimace. I felt that the comment was very luke-warm. I believe that there is more to be said for programmes than perhaps the noble Lord is willing to accept. However, this has been a most useful debate and I welcome Lord Trefgarne's statement that the Government will take into account our report in negotiating in Brussels.
On Question, Motion agreed to.

The Police Act 1964
8.30 p.m.
Lord Allen of Abbeydale Lord Allen of Abbeydale rose to ask Her Majesty's Government whether they are satisfied that the provisions of the Police Act 1964 dealing with the functions, duties and accountability of police authorities and chief officers of police are working as Parliament intended.
The noble Lord said: My Lords, this evening we embark on a discussion about the police against a sombre background. Come what may, I believe that our police service can stand comparison with any other in the world. But leaving aside the results of the inquiry which has been announced today, which links up with issues going well beyond the concern of the police themselves, I suspect that before very long we shall be engaged in a debate on police powers in the light of the report of the recent Royal Commission on Criminal Procedure. However, that report hardly touches on the question of police accountability, a subject which has itself aroused a good deal of public comment and some disquiet, and indeed an attempt at legislation in another place. So I thought it opportune to have quite a short discussion on this issue in your Lordships' House today.
I remember a judge rebuking a witness for saying that at a certain scene he had observed three civilians and a police officer. The judge, quite rightly, pointed out that the police officer was a civilian too. Indeed, it is a basic concept that a policeman is a citizen who is discharging certain duties on behalf of his fellow citizens. The question is how the views of the community on law enforcement are to be conveyed to those who are carrying out these duties on their behalf, and how those so charged are to account to the communitity's chosen representatives.
The Police Act 1964, which is the subject of my Question, sets the present pattern. This Act followed the report of a Royal Commission, this being one of the rare occasions when a Royal Commission report was followed by legislation, and legislation at that which bore some relation to what the Royal Commission had said. As a member of two more recent Royal Commissions, I can only comment si sic omnia!
The Royal Commission report recommended the continuance of separate local forces, even though in passing it successfully demolished the usual arguments against a national police force; and, in its turn, the Act duly reiterated the pattern, which was by then pretty familiar, of sharing responsibility between central and local government. But it was the declared aim of the legislation that the police should be brought under more effective supervision and made more accountable, and that the balance between central and local government should be tilted towards the centre.
The noble Lord, Lord Brooke of Cumnor, who was Home Secretary at the time and whom I had the great privilege of serving in two Ministries—although not, I hasten to add, at the time that this particular legislation was being passed—put it like this on Second Reading. He said that the Bill carried Parliament a long distance beyond the old concept of separate and autonomous forces by superimposing on the system a measure of firm central supervision, but sought

839
to do this without derogating from local initiative and local interest. This evening I should like to pose one or two questions aimed at ascertaining whether those aims have been achieved.
But the Act of 1964 cannot be considered in splendid isolation. For one thing, it barely touched the biggest force of all, the Metropolitan Police Force, where the Home Secretary remained as the police authority, and the sole privilege which the local authorities had was of footing part of the Bill. Then powers, which were set out in the Act for amalgamating police forces, were but a continuous part of a long-established story. The need to have forces big enough to command the resources needed for modern policing had resulted, over the years, in various amalgamations carried out in advance, as it were, of the reorganisation of local government itself; and even now we have a number of forces which cover more than one county. I cannot help thinking that all this must have put something of a strain on the traditional relationship between the police and local government.
Also, some of the policies in which the police are involved have taken on new dimensions since 1964. I have in mind, for example, the use of computers and the storage of information; the role of special branches and the use of firearms by the police; also the control of riots and relations with the ethnic minorities—problems which were tragically highlighted in the events which we were discussing earlier today.
Against this general background, I should like to pick out just four questions from the many which could be asked. My first one is the quite general question whether, in the Government's view, since 1964 police authorities have been able to exercise a substantial policy responsibility going beyond a concern for housekeeping, if I could put it that way; whether it is a general practice for chief constables to give really informative accounts to the police authorities of their policing policies and to listen to what the authorities have to say about them; whether the traditional partnership between central and local government is thought to be alive and well; and whether the Government remain committed to the maintenance of that partnership as the essential feature of our police service.
I should also like to ask whether the present financial stringency—when I am sure that many a chief constable has been careful to explain to the county treasurer that he is not as other men are—has given rise to friction at local level. Is the Home Office itself still attached to preserving the separate police grant when the practice of stopping it seems to have fallen into desuetude, and there must be some doubt whether it is still, realistically, a nuclear-type deterrent?
As it happens, my second question also relates to a topic which has been a good deal in the news recently, and that is the handling of complaints against the police. The provisions of the 1964 Act on this point, I think, led to some increase in the practice of calling in investigating officers from another force, but certainly the relevant provisions in the Act did not prove to be very satisfactory, and since then we have seen new legislation and the setting up of the Police Complaints Board.
However, the problem has not really been solved. The board itself recently suggested that there was need
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for a more independent element in investigating serious complaints, in particular perhaps those involving unexplained injuries when people were arrested or kept in police custody. Although a working party with a strong police representation would not go along with the board's own course of action, as it suggested, the working party did acquiesce, rather reluctantly, in plans for developing the existing arrangements for bringing in investigating officers from another force, possibly with some supervisory role for the chairman of the complaints board or, as a rather surprising alternative, the Director of Public Prosecutions. But, as I read the report, the police representatives themselves saw no real need for any change at all and thought that all concerned would be satisfied if only they understood how thorough police investigations into complaints were. So that it was not altogether surprising that there was what one could, without too much exaggeration, describe as a howl of anguish when The Times the other day discovered a draft report from the Home Office Research Unit which suggested that, after all, police inquiries were not always quite as thorough as they might be.
I think that this is the first opportunity to ask a Home Office Minister about all this. Although obviously when the noble Lord replies he will not be able to give a final view, perhaps he could tell us what the present thinking is about the report of the working party and about the possibility of publishing this research report when it is finished—I understand that it is not a complete document—so that we can then all assess it for ourselves. One other comment, too. I noticed that the working party had no representatives of the police authorities on it at all. I wonder what the Home Office think that the role of the authorities is on this extremely important issue.
My third question—and this will take but a moment—relates to one area where the recent Royal Commission did make proposals bearing on accountability, and that is the responsibility for prosecutions. I am in no doubt that the Minister will say that it is too soon to expect a Government pronouncement on the Commission's idea of a new prosecution service, the rightness of which is not completely self-evident, and I shall content myself with drawing attention to this issue as being important in any review of police accountability.
My fourth and final question is this: for reasons I can well understand, the police service is now headed by individuals who have come up through the ranks. It was not always so. When I first had dealings with the police the Commissioner, Deputy Commissioner and two of the four Assistant Commissioners in the Metropolitan Police were not professional policemen, nor were a good many of the provincial chief constables. But while there is no going back to anything like that, I am bound to say that during the time I was chairman of the board of governors of the police college at Bramshill—a centralised service for which the 1964 Act, as I recall, made specific provision—I was never really sure in my mind that the college had succeeded in doing what we had hoped in identifying and training the leaders of the service. Nor was I indeed satisfied that the service was attracting, and retaining, enough people of high intellectual quality and good academic qualifications.
I must ask whether the Government think that the position is now better; that enough able people are being attracted to the service and are being encouraged to stay there; that the likely future leaders are being spotted, and that they are being trained to be sufficiently alive to relevant issues affecting the community they serve; and going beyond professional police instruction which, of itself, is not enough for those who fill the highest posts. I put my point briefly, but it is crucial to the future of the service. I end, as I began, by paying tribute to the high reputation and competence of the police, and by saying that they have nothing to fear from the public discussion of questions of the kind I have been touching on this evening.
8.45 p.m.
Lord Plant: My Lords, I am grateful to the noble Lord, Lord Allen, for putting down this Question. It is very appropriate. I intervene because I was a member of the Lord Edmund-Davies police inquiry and have followed closely many of the recommendations that that committee made. Of course accountability and complaints are bound together. The noble Lord, Lord Allen, said that the issue of complaints had not been solved even by the latest working party. I find it somewhat strange that the working party had 12 members and, reading the report, seven of them were opposed to its recommendations.
In a free society, bureaucracy has to expect that it will be attacked from time to time. The difficult task of enforcing law and order falls on the police. It is a tendency of anyone subject to discipline against his wishes to complain against those people who are enforcing law and order. Many complaints against the police are fictitious and highly coloured, and that is why most are not proceeded with.
In the current issue of the Police Magazine the editor said:
"there is no reason at all why the [Complaints] Board should not seek to discover why so many complaints, anything between a third and a half of the total, are withdrawn. The explanation, in a great majority of cases, will simply be that tempers have cooled and explanations have been accepted. Some complainants are appalled at the forces they have unleashed. They have rushed to a police station to get their opinions off their chests, not realising that they were setting in motion a long and painstaking procedure to probe the rights and wrongs of a trivial incident. All this stems from the requirement to record and investigate every complaint and although everyone agrees that trivial complaints should not have to go through the full treatment, no one has succeeded in defining what is trivial".
The police are the only group of workers I know who can be fined by their senior officers anything up to £500. The chief constable and the deputy chief constable investigate internal complaints with great thoroughness and demotion and fines of a considerable amount are not unknown. In fact, one of the complaints of the police at the moment is that the very success of the Edmund-Davies committee in putting right their pay has meant more vicious fines by some chief constables.
Very few policemen are deliberately going to encounter disciplinary procedures. Errors of judgment of course take place. They do among Governments, too, but they are not demoted or fined. There is an appeals procedure on fines and other actions, but men
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who pound the pavements seem to have little confidence in this appeals system. The Home Office and the Police Advisory Board should re-examine the fines procedure.
The number of justified complaints is small, but the time taken to investigate them is very great. The police on the beat feel the administration leans over backwards to protect the citizen, and that is as it should be. I hope no one will be charged for excessive force or dereliction of duty over last week-end in Brixton. I agree with the views of the Association of Chief Police Officers, the Superintendents' Association and the Police Federation in the Working Party report to which the noble Lord, Lord Allen, referred. The Association of Chief Police Officers have a standing committee and close liaison with the complaints board. I believe that should be tightened. I also believe that investigations take too long. It may be they are being done very thoroughly, but the longer they go on the more difficulty occurs.
On the question of training, the police college, now under the control of Sir Kenneth Newman, who was at one time in Northern Ireland where he did outstanding work, is doing extraordinarily good work in training people to take the highest posts in the police service. One of the questions the noble Lord, Lord Allen asked, was whether able people were being attracted to the police service and, once attracted, were they being retained. I am in no doubt, having probed this question in some depth, that the reasonable pay offered since Edmund-Davies reported is not only attracting but keeping able people, and university entrants are being put on the express train for advancement, as is the case in the Civil Service.
I agree with the noble Lord, Lord Allen, that everything should be done to attract the best brains to fill the top posts in the police service. There is a training council on which the staff associations have membership. It is an ongoing thing and I believe the Home Office is doing everything possible to expedite the training of the brightest prospects in the police service for holding top posts in the future.
The Edmund-Davies Committee made some outstanding proposals in Part III of their report which is now in the process of implementation, and I would call the attention of noble Lords to a few of them because they affect some of the points mentioned by the noble Lord, Lord Allen. One recommendation was that there should be a joint negotiating and consultative committee on which the three police staff associations would serve. Being chaired by the chief constable, it would deal with consultative problems. The report said that consultative problems are forced policy—not negotiable items but consultative issues which are force policy. Therefore, for the first time, force policy—which really means everything which hitherto has been in the sole control of the chief constable—can now be shared with the three staff associations and the chief constable, hammering out the best approach to some of the issues which hitherto have been considered only in the giving of the chief constable. The minutes of the JNCC are to be monitored by Her Majesty's Inspectors of Constabulary. The report went on to say that if there was disagreement shown in the minutes, it was the job of HM Inspectors to try to resolve the disagreement between the two

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sides. The Home Office therefore will know what is being discussed in a consultative capacity on the JNCC, will know the areas of disagreement and in my view that will take industrial relations within the police force a great step forward.
Another recommendation was that the police authority could be attended by staff association representatives. Up to the time of Edmund-Davies, staff association representatives could attend only as members of the public and had to leave the police authority when the open agenda had concluded. Most, if not all, police authorities have now accepted that staff association representatives—and they are small in number—can be present in both parts of the agenda, the open and confidential agenda, though there may be a super confidential part when they must leave. They can attend as a matter of right in duty time; previously they could attend only the public part in their own time.
The more important point in relation to the police authority is that the three staff associations will meet privately with the clerk of the authority, the chairman of the police authority and members of the authority jointly to discuss items of interest, the policing of the area and some of the issues which the noble Lord, Lord Allen, mentioned. The associations will be able to let the police authority membership know of their aspirations and objectives, and that will be very useful in relation to some of the problems highlighted by Lord Allen.
The Edmund-Davies Committee also recommended that there should be regional meetings of forces. At present, the Association of Chief Police Officers and the Superintendents' Association may have regional meetings in duty time, probably several forces meeting, but the Police Federation does not have that opportunity, except for its women members who meet on a regional basis to elect their representatives to go to their conference. It is strange to me, coming from the trade union movement, that I find that 60 per cent. of the forces allow regional meetings in duty time while 40 per cent. do not. I find it incredible that at the same regional meeting more than half will be there in duty time and the remainder in their own time.
I was greatly impressed when I heard Sir Philip Knights of the West Midlands Constabulary talking about violence and law and order, and he was tracing the question of law and order from medieval times to the present day; the influence of the Church, the squire, voluntary bodies, the police and of course the sad influence of television. He said that in the West Midlands they had opened six houses where surgeries would be held by constables in their patches to receive constituents and talk to them about problems affecting their everyday lives and the policing of the area. I am told that in the West Midlands there will eventually be 200 of these surgeries, when money is available. I was told by one constable who is operating surgeries on his patch that he has had no callers and all that his parishioners" have done is let down the tyres on his car. That is a sad commentary, and such a situation must be looked at, because here the police are trying to help the community, trying to bring in a community spirit; yet somehow they cannot get through. What is to be done? How can we further
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help the police?—not by continually attacking them. They need our support, and I know that this House has given them full support.
Those are some of the problems that I feel have to be raised. There is nothing conclusive about them, but I am quite certain that the Edmund-Davies Report is now giving the police associations a better opportunity to put their points of view to the chief constable and to the police authority, and indeed through the Police Advisory Board, to the Home Secretary—which has never happened before. I believe that in 12 months' time there will be a different outlook and indeed a better police service.
9.1 p.m.
Lord Inglewood: My Lords, I am very glad that the noble Lord, Lord Allen, has raised this subject, because it is very timely. I should have liked to take up some of the arguments of the noble Lord, Lord Plant. I agree with some of what he said, though not all of it, but I think that at this time of the evening I ought to stick to the notes that I have prepared and speak about accountability, which is one of the points raised by the noble Lord, Lord Allen. Accountability has for long been a grey area, a great uncertainty, and I hope that the Home Office will take the point and act where possible to clear up uncertainties.
I do not want to seem overcritical this evening. I am very proud of my police associations and of those who have helped me here and abroad. They have infected me with a large part of their irresistible loyalty, but I have never been attracted by the police party line. I am far too independent; I have an independent mind. I admire their strong points—and they have very many. I agree with the noble Lord who opened the debate that there is no other police force with which I should like to exchange ours. I admire their strong points, but I am not blind to their weaker ones.
First, I should like to speak, briefly, about the accountability of police authorities, and then I wish to say something about the accountability of chief constables. So far as I can see, police authorities are in a very awkward position because among other things they are responsible for something which is very important—efficiency. This responsibility is written into the 1964 Act, but no one has yet defined what is efficiency in this sense and what the relevant subsection of the Act really means. I have spoken to members of different authorities in various parts of the country and one thing that they have in common is that they all seem to be unhappy because they are used to such a large extent as rubber stamps They do not know where their power and responsibility begin or end, and, as like as not, today chief constables pay as much—or more—attention to the federation as they do to the police authorities. Really they are different kinds of animals; neither should take the place of the other. The police authority has a very important role laid down in the statute and I submit that it is not always allowed to carry it out.
I wonder how many members of police authorities thought of looking at the living conditions in the police station cells for which they are responsible during the unhappy weeks of the prison officers' strike; I should think that very few did. An efficient county

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police force depends on a partnership between the authority and the police, and I submit that mostly that partnership is not as close as it ought to be. The key to this is the quality of the chairman of the authority. Top-class councillors and magistrates will want to serve on police authorities only if they have a real job and a real share of responsibility. They do not want to take over someone else's job, but they want the job which Parliament intended that they should have. The chairman should be chosen by the authority itself, not by the party caucus of the county council outside, which nominates someone on the authority, and then lobbies the authority to elect that person. I consider that that is very wrong, but the state has been reached where 19 out of 20 chairmen of authorities are nominated by the caucus of the majority party of the county council.
I now wish to turn briefly to the question of chief officers, and here I am referring to ACPO members in general, not just to chief constables. Chief constables and ACPO members are not all equal, any more than are men forming any other group, or as was said earlier today, than we, the Members of this House. There are some in ACPO whom all of us must admire unreservedly, and there are some few under whom would not care to serve—I shall not say any more. Generally speaking, they are over-sensitive about their position and their "kingdom". They are paranoid about whom they call politicians—it is really humorous—and so they discourage many good friends, which is a tragedy. They fail to see the wide difference between close co-operation and understanding and attempts at interference. They still dream dreams about watch committee interference over promotions and other smaller points. But that is all of the past, and none of us, I am sure, wants to see it brought back.
Mr. Anderton, the chief constable of Greater Manchester, the other day wrote an article in one of the police magazines, and it was reprinted in some of the others. It was a terrific outpouring. He really went to town on the question of accountability and freedom from political interference—and he is very muddled about it. It is a pity. He is not the only chief officer who misses few opportunities of criticising those whom he calls politicians, and so I do not think that they can complain when we lob back a little of it, because they started it.
It is obviously very desirable for individuals with police powers to be clearly accountable to the law, but it is not so simple to achieve that in practice. What happens if a chief constable's conduct brings his headquarters into disrepute, and yet he breaks no law? I think that something must have been in the mind of the Home Office when, in December 1978, it produced a memorandum, as a basis for discussion, of the procedures for dealing with allegations about the conduct of chief officers of police. The memorandum was circulated rather over two years ago, and I believe I am right in saying that absolutely nothing has happened since, except that every attempt to make progress has been blocked by one so-called consultation or another. Perhaps the Minister could tell us something about that when he replies.
As an example of what I have in mind, take heavy drinking. It is not a crime to drink heavily in this country, and yet we all know that in all classes there
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are some men who do; and whether you are the chairman of a company, a chief constable or the head of any other organisation, it brings that organisation into disrepute. That is the sort of thing, I imagine, that was in the mind of the Home Office when they produced this memorandum. In this field, HMIs appear to me to be quite powerless. There are no regular confidential reports on senior officers, who serve until they are 65. That is worth noticing: it is five years longer than senior civil servants or ambassadors, and 10 years longer than major-generals. It is also believed by those down the line and more junior that it blocks promotion, and that it would be a happier service if this age was brought more in line with the retiring age of other comparable servants of the Crown.
I am not the only person who has been gravely worried over recent years by the lack of interest, I could almost say neglect, shown by chief constables in special constables, whose numbers have fallen steadily over the years. I would have expected them to fall over the years immediately after the war, but that fall has continued. They even fell after the first working party reported and was thought to be giving the special constabulary a new start. They are still falling, to the best of my belief, and this during the time when the second working party is sitting. The number is falling at the rate of about 1,000 a year, and I think we could say that if this continued, then in two years or so the special constabulary would no longer be any significant national force.
One could hardly imagine a time when it would be more urgently needed than it is at present or when special constabulary could perform a more valuable service, not just in terms of civil defence in the case of major disasters but even in policing parts of London over this past weekend. I wonder very much what steps have been taken to mobilise special constables over these days, when regulars have been drawn from their normal divisions and concentrated in Brixton, but I do not want to pursue that now. The numbers are still falling; and one has to admit that this is something to be expected when so little encouragement has been shown by so many regulars. This is an ill service to the community in the difficult times in which we live.
My reading of the Act is that if any chief constable decided overnight to have no more special constables, he could dismiss them there and then—the whole lot. That power is found in Section 16 of the 1964 Act. If all chief constables thought the same, we might wake up tomorrow and find that the entire special constabulary had been dismissed—all within the perfectly proper exercise of powers which we have given to chief constables in the 1964 Act. I have mentioned that in this House before. The last time I mentioned it, the Minister did not refer to it in his reply, so I am hoping tonight to be a little more fortunate. This is not really so far-fetched, because, after the report of the first working party on special constables, when an effort was made to bring their ages more into line with those of the regular service, which I think is not necessarily a good idea, one chief constable in this country, in a night of the long knives, sacked 133 there and then. Needless to say, he gave the morale of that force a blow from which it has not

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yet recovered. The HMI whom I asked about this thought it was all right, when I would have thought it was all wrong.
My Lords, for this decline in the special constabulary—and this neglect, if I can use a stronger word—the greater part of the blame must be borne by chief constables, and I cannot think of a single one who has spoken up for them in public. Chief constables speak often enough in ordinary conversation about how useful special constables are, but I cannot think of one who has come out into the open and spoken boldly in support of special constabulary and followed up his words with action. The police authorities are to blame, too, although I would say in smaller measure; and so is the Home Office, who must have known about these falling figures over the years and have never, I think, made any national appeal. They are all accountable to a greater or lesser extent.
In conclusion, may I repeat that I am sure it is right, and we all agree that it is right, to defend the independence of the police from political interference. But we also want to make them accountable to the law. Today there are gaps, which have to be examined. It may be that these gaps should be filled by amendments to the disciplinary code. In any event, we do not want to see too much secrecy about these things. The tradition in Britain is to be over-secretive about the police. Compared with one country whose police I know fairly well, Germany, this country is far more secretive, and I cannot see why.
Equally, in this country we do not want imperium in imperi. The police, as the noble Lord has said, are civilians doing a special job for their fellow men. Much of their work is exacting, much of it is confidential, but a great deal of it need not be surrounded with secrecy in the way that much of it is today. All power tends to corrupt. We must not forget that. There was a delicate balance built into the 1964 Act, a truly British device, which needs readjustment. I hope that the Home Office will not fail us but will take the necessary lead.
9.15 p.m.
Lord Boston of Faversham: My Lords, the noble Lord, Lord Allen of Abbeydale, has raised an important subject tonight and I am sure that we are grateful to him for that. As a former Permanent Secretary at the Home Office, he speaks with great authority on these matters. In the course of his remarks, he raised a number of particularly important matters within this whole subject: the extent to which chief constables pay attention to police authorities, accountability (to which the noble Lord, Lord Inglewood, has also addressed his remarks) and the system of prosecutions. All are matters on which we could have major debates. I should like to follow him as far as all those particular parts of this subject are concerned, but I shall resist the temptation in view of the hour.
The point on which I should like to follow him is his other major point, the question of complaints against the police, to which my noble friend Lord Plant also referred. I should like to say first of all that we have been immensely fortunate in the chairmanship of the Police Complaints Board. We have had, in its first year, a most distinguished and widely respected chairman
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in the noble Lord, Lord Plowden, and now, in Sir Cyril Philips, we have as his successor another highly respected and knowledgeable figure. One of their most important attributes, especially in the context of this work, is the board's independence and independent-mindedness.
It needs also to be acknowledged at the outset that the police are in a peculiarly influential and powerful position for many of them are specially well placed to know the circumstances surrounding the subject matter of complaints against them. They are also the best placed and most experienced body of people when it comes to carrying out investigations of various kinds, not just into complaints; and they are also experienced in assembling evidence. But it also needs to be emphasised that the police are peculiarly vulnerable to all kinds of wholly unmeritorious, trivial, fabricated complaints from, for example, cranks or vindictive defendants disgruntled at being found out and found guilty. It cannot be passed without notice that many complaints come from people who are hardly the most reliable sources of fact and truth. That vulnerability must be taken into account in any system for investigating complaints that is devised, so as to ensure that that vulnerability is not allowed to place them at a disadvantage. They need to be no better but also no worse placed than the rest of us. At the same time—and, I believe that this is for the benefit of the police as well as for everyone else—there needs to be as great an independent element in investigating complaints as possible, consistent with recognising those principles that I have referred to, for this will help safeguard the credibility of that system.
The Police Complaints Board, in the triennial review report published on 15th July 1980, to which the noble Lord, Lord Allen of Abbeydale, referred, looked thoroughly into the system and came up with a series of suggested improvements to which he has also made reference in his remarks. It is fair to say that the report was generally reassuring about the way that the system as a whole was working. The most important of those recommendations for improvement was the proposal in Chapter 5 of the report to which the noble Lord, Lord Allen of Abbeydale, referred that complaints of serious injury should be investigated by a specialist body of investigating officers answerable to an independent lawyer, and preferably one who has exercised judicial office. The board said that before a final decision was taken a number of important issues needed further consideration; namely, practical matters concerning the relationships between the proposed investigating body, the Director of Public Prosecutions, chief officers of police and the complaints board itself. The board's report also contained a number of other useful recommendations which I do not intend to go into now.
The Home Secretary immediately announced that he was setting up the working party to which the noble Lord, Lord Allen, and my noble friend Lord Plant referred, to consider the implementation of the board's main recommendation. That working party, as we know, reported last month and Lord Belstead's right honourable friend the Home Secretary at once invited comments upon it.
Although the working party's report contains some valuable further thoughts and suggestions, especially

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to widen somewhat the nature of the serious cases to be subjected to a new form of investigation—corruption cases were mentioned, for example—it is disappointing that the working party's report does not endorse the principal point in the board's proposal for greater independence in the procedure for investigating complaints: the recommendations for an independent supervisor and for a specialist team of investigating officers.
It is worth noting that the terms of reference given to the working party by the Home Secretary were:
"To consider in detail how it might be possible to implement the recommendation"—
not whether it might be possible but how it might be possible to implement the recommendation. We have no means, outside the words of the working party's report, of knowing whether—and, if so, to what extent—there was disagreement between members of the working party in the course of their discussions. What we do know is that they did not feel able to put forward detailed proposals stating how it might be possible to implement the board's actual recommendation.
We also know that the working party came up with a unanimous report. I know that there were reservations expressed in the body of the report on certain matters: nevertheless, so far as the conclusions and recommendations were concerned, it was a unanimous report. That is a considerable tribute to the skilled chairmanship of the noble Lord, Lord Plowden. We know, too, that while rejecting on various grounds—and because of certain specified problems—the board's idea for a specialist team of investigating officers, the working party's report noted at paragraph 19:
"These problems, though difficult, are not necessarily insuperable".
We know that, while rejecting on certain grounds—including financial and administrative ones—the board's proposal for an independent person with judicial experience, the working party's report noted at paragraph 36 that:
"a completely new appointment would not be impracticable".
Again, I suspect that we can probably detect in the terms in which the report is drawn—though I must say immediately that I have not discussed any of these matters with anyone connected with either the working party or the board—the painstaking and experienced chairmanship of the noble Lord, Lord Plowden.
I hope that the Minister and his right honourable friend the Home Secretary will bear very much in mind the view that, although there are difficulties—there usually are difficulties in matters which require investigation, otherwise they would not be subjected to it—they are difficulties which can be overcome. Also I hope that the Ministers will keep firmly in mind the board's original proposals put forward in the triennial review after much thought.
Finally, I turn briefly to another matter which was referred to by the noble Lord, Lord Allen of Abbeydale: this was the report in The Times last week about the unpublished Home Office research department's report on studies by the department of investigations by the police of complaints against officers of assault. I am not going to repeat any of the contents of the report
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in The Times because I do not see that any special purpose is served by repeating any of the claims said to be made in the research reports without having seen the full report itself. I am concerned, I confess, about certain aspects of the matter.
First, I hope very much—and here I join strongly with what the noble Lord, Lord Allen, has said that the report will be published. I believe that it should be open to examination—and if it is not complete yet then it should be open as soon as possible after it is.
Next, at a time when we are considering all possible changes in the complaints procedure, it is surely additionally important for us to see any relevant material. Again, I do feel that it is a pity that all the members of the Home Office working party whose report we have been discussing tonight were not at least told of the existence or preparation of the research report, including Mr. James Jardine, the chairman of the Police Federation. In these circumstances I can well understand the reaction of the police to the reported contents of the research report. Certainly my own direct experience of the investigation by the police of complaints against officers is that those investigations are carried out with great thoroughness and, if there is any evidence of shortcomings within the police service on the part of officers, those shortcomings are most rigorously rooted out.
One of the reasons why I feel sure that the report of the research department should be published and made available to the police, among others, is that, if indeed it does reveal any shortcomings on the part of the police service, the police themselves would wish to take action to correct them, as it would indeed be their duty to do. In any event, while the Minister may not be able to say now that the report will be published, I hope that the noble Lord, Lord Belstead, will be able to say that it will be made available to the Police Complaints Board now or as soon as it is complete.
Finally, I would join with the noble Lord, Lord Allen of Abbeydale, and with other noble Lords in the tribute they have paid to the police service. I believe it is the finest police service, and when something unfortunate does occasionally happen I do not believe we should forget the splendid routine and often dangerous work the police do; nor should we forget their part in happenings such as the Iranian Embassy siege—not so very long ago, after all—and their other anti-terrorist activities. These are actions which I believe deserve our full and strong support.
9.27 p.m.
Lord Belstead: My Lords, I am grateful to the noble Lord, Lord Allen of Abbeydale, for giving us the opportunity to hold this important short debate today. It is an important debate, for the noble Lord reminded us, in a brief story he told, of the tradition which we have in this country of identifying with the police force of the area in which each of us lives; and of course the events of this weekend remind us forcibly of the disastrous course people embark upon if they turn their backs on this tradition.
The system of policing in this country—I think it is fair to claim—is not the product of statute. Rather, the legislation is the expression of what has evolved

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historically. I believe, as I know that my right honourable friend the Home Secretary also believes, that the process of historical development has provided us with a constitutional framework which is basically sound and which can meet the many demands made upon it.
The Police Act 1964 gave effect to the recommendations of the Royal Commission on the Police, which sat from 1960 to 1962. The Royal Commission identified two salient features of the structure of policing which were needed, as they thought, for each community. The first of those salient features was that chief officers of police had complete discretion in directing and deploying their forces. The Royal Commission accepted that must be so if the criminal law was to be enforced impartially.
The second feature was that the structure of forces was based on the local community. The Royal Commission noted that the local body responsible for administering the service—the police authority—could give advice and guidance to a chief constable on local problems, without detracting from his operational independence. And the Royal Commission considered that the lack of control which this relationship implied could be offset by increasing a chief constable's accountability for his actions. It was this delicate balance of interests which the Royal Commission sought to preserve in making its recommendations. Its conclusions were generally accepted by the Government of the day and, as the noble Lord reminded us, were enshrined by Parliament in the Police Act 1964.
That Act recognises the three elements which need to combine to provide effective policing arrangements—professional expertise, the interest of the local community and the national interest. These are reflected in the responsibilities and powers given by the Act to the chief constable, the police authority and my right honourable friend the Secretary of State. There have been many changes in our society since 1964, but these essential elements remain. I should just like to comment briefly on a few aspects which are of particular significance in trying to answer the questions which have been put in this short debate.
The Royal Commission acknowledged the need for chief constables to be operationally independent. Neither the Home Secretary nor the police authority may instruct them to institute proceedings in a particular case, or direct them in the deployment of their forces. This is one of the key elements in our policing arrangements. There can be no room for political interference from either central or local government. The operational independence of chief officers is essential to the confidence of Parliament and people in the police in discharging their duty. But this does not mean that the chief constable is not accountable. He is first, after all, accountable to the law and is answerable, ultimately, for his actions in the courts. The chief constable is responsible to his police authority for the general efficiency of his force and is required to submit an annual report to the authority on the policing of his area. Under Section 12 of the 1964 Act, he may also be required to report to his authority on any matter connected with the policing of the area.
In listening to the speech of my noble friend Lord Inglewood, I reflected that this is quite a packet of
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powers. I think that a police authority which is fully aware, as I am sure authorities are, of those powers, has only to decide that the authority ought to use them, for the authority to feel that it has quite a considerable influence—a proper influence—so far as the policing of its local area is concerned; putting that always, of course, in the context of the operational independence of the chief constable. Incidentally, of course, the Home Secretary also has power to call for reports and Her Majesty's inspectors are appointed to report to my right honourable friend on the efficiency of each force.
A further element in the accountability of the police was added by the arrangements for dealing with complaints, through the establishment of the Police Complaints Board in 1976. I was very interested in the speech which the noble Lord, Lord Boston, made and, if I may, I should just like to add this. The working of the police complaints system is under review, as we all know, in the light of the board's triennial report review. The report of the working party, under the chairmanship of the noble Lord, Lord Plowden, was published on 18th March.
It is, of course, true, as the noble Lords, Lord Allen and Lord Boston, said, that the local authorities were not part of that working party. But this was because, since the working party was concerned with the practicability, rather than the desirability, of the original recommendation which had been made in the triennial report for an independent element in police complaints, it seemed right to limit membership of the working party to those most directly concerned with the actual process of investigating complaints. The matter will be considered in July by the Police Advisory Board upon which the police authorities are represented.
Having said that, I would emphasise that police authorities continue, under Section 50 of the 1964 Act, to have a general duty to keep themselves informed about the manner in which complaints from the public against members of the force are dealt with. I think that this is an important function of authorities. But the primary responsibility of a police authority is to provide an efficient police force for its area. The authority must ensure that the force is properly housed and equipped. The Royal Commission attached importance to the principle that the ratepayer, through his elected representatives, should have a voice in the scale and cost of the policing of the community in which he lives.
Lord Inglewood: But not in London.
Lord Belstead: No, my Lords, not in London because, so far as London is concerned, it is the one case where people living in the metropolis have the good fortune, if I may put it that way, to have their police authority directly responsible to Parliament, in that the police authority is my right honourable friend the Home Secretary. I believe that that is absolutely the right system for the metropolis.
If I may talk about the housekeeping to which the noble Lord, Lord Allen of Abbeydale, referred, since the Edmund-Davies Report recommendations on police pay were implemented in full—implementation was going to take place but it was brought forward somewhat by my right honourable friend and was implemented in full in May 1979—there has been an increase

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in England and Wales of over 6,300 in police strength. However, we recognise that the service cannot be wholly exempt from the general search for economies which are necessary.
The noble Lord, Lord Allen of Abbeydale, asked whether the need for financial stringency had given rise to any friction at local level. In reply to that question I can say that in this respect there is, I know, a constructive sense of realism. I know that my right honourable friend welcomes the initiative of many chief constables in exploring how to use their resources more efficiently. The use of resources everywhere must be subjected to scrutiny so as to ensure maximum cost effectiveness at the present time. In all this, Her Majesty's Inspectors of Constabulary have a key role to play. They call on the resources of the Home Office for advice upon technical matters (a point which was mentioned also by the noble Lord) such as communications or computers.
My noble friend Lord Inglewood mentioned that there are no standards for the efficiency of police forces in this country. Of course that is true, but we rely upon the inspectorate. In general we are satisfied that the terms of the 1964 Act have ensured that efficient forces are maintained. The Home Office has not had to withhold a specific grant under the 1964 Act, nor has a police authority needed to call upon a chief constable to retire on grounds of inefficiency. But I have no doubt that the existence of these powers is wise and that they should remain upon the Statute Book.
My noble friend mentioned the metropolitan police. It is true, of course, that for historical reasons the metropolitan police, for which my right honourable friend is the police authority, is not inspected by Her Majesty's Inspectors of Constabulary. Let us recognise, however, that the present commissioner set up in 1979 a greatly strengthened internal inspectorate under a deputy assistant commissioner. This inspectorate has made encouraging progress and has close links with Her Majesty's Inspectorate.
The responsibility of the inspectorates to conduct annual inspections of forces and to advise my right honourable friend on police efficiency is evidence that the police service cannot be run on precisely the same basis as are other local services. It is the police authority's responsibility to administer the force budget, which it naturally does in liaison with the chief constable. In doing this, the police authorities are obviously in close contact with their local authorities. In each area, the county council's allocation of resources to the police has to take account of both national priorities and local needs, while fulfilling the obligation to maintain an efficient force. Once the authority has concluded, with the police authority, how much can be made available for the police force, it is then the responsibility of the police authority and the chief constable to consider how best to allocate the resources and to make any savings which may be necessary.
The police authority also has a special role as a link between the police and the local community. In terms of the Police Act, this is expressed through the duty of chief constables to submit annual reports, when the authority asks, on any matter connected with the policing of the area. Of course, one cannot create good working relationships by legislation. Within the statutory framework there will always be room for
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development and improvement. Police authorities have a vital role to play as the link between the police and the people's elected representatives. But, if this is to develop usefully, they must respect the chief constables' independence in enforcing the law and deploying their officers.
The noble Lord, Lord Allen, asked me a general question at the very beginning of his speech, which was whether since 1964 police authorities have been able to exercise influence on policing responsibilities. I should like to answer that question by quoting some words which were spoken by my right honourable friend the Home Secretary a few months ago. In a speech my right honourable friend said:
"it has become increasingly desirable that police authorities should see themselves not just as providers of resources but as a means whereby the chief constable can give account of his policing policy to the democratically elected representatives of the community and, in turn, they can express to him the views of the community on those policies".
That is the way in which my right honourable friend wishes to see the responsibilities of police authorities continuing to develop.
Lord Allen of Abbeydale: My Lords, I am sorry to interrupt the noble Lord, and in fact I am familiar with that quotation; but is that an expression of what ought to happen or is it an account of what does actually happen?
Lord Belstead: My Lords, the whole burden of my speech has been trying to underpin the case that this is an expression of what is happening and that, so far as in any parts of the country it may not be happening, it is the desire of my right honourable friend, with his general overall responsibility, to draw to the attention of authorities that this should be the situation and this is the way he would wish to see it develop.
Finally, at national level the local authority associations play their part on the police advisory board and in the work which it initiates: for example, the current working parties on police cadets and upon the special constabulary, which my noble friend Lord Inglewood mentioned, and the report on the special constabulary I hope will be concluded very shortly. Similarly the local authorities are fully involved in the work of the Police Training Council.
May I turn aside just for a moment before I finish in order to answer four specific questions which were put to me. The noble Lord, Lord Boston, and the noble Lord, Lord Allen, mentioned the articles which appeared a few days ago in The Times and which referred to an uncompleted research study begun in 1978 on the way in which the Metropolitan Police deal with complaints from both black and white people. The research study is intended to compare two years—1973 and 1978—before and after the establishment of the Police Complaints Board. On completion it will be the subject of discussion with the Commissioner, and the timing, about which the noble Lord, Lord Boston, asked, and the form of publication will be considered at that stage.
My noble friend Lord Inglewood mentioned the review which was carried out in 1978 by the Home Office on possible changes in existing disciplinary arrangements for senior police officers. It is true, as my noble friend recorded, that a memorandum was

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sent out by the Home Office at that time proposing in essence that the Secretary of State should be given a responsibility to oversee the exercise of functions by police authorities in this respect. My right honourable friend has asked the local authority associations to put forward their views on this matter. Comments have been received at the end of last year and these are now under consideration.
Both the noble Lord, Lord Allen, and the noble Lord, Lord Plant, referred to police training at Bramshill, and the noble Lord, Lord Allen, asked whether police training at the college is identifying and training leaders of the police service for the future. I happened to be at the police college at the end of last week and I was able to hear at first hand about changes which are being introduced at the college from January 1982 which follow recommendations by a working party of the Police Training Council. On all courses there will be emphasis on practical policing issues, with an increasing range of specialist options, such as manpower deployment and good financial management. From January 1982 all command courses are going to prepare experienced senior police officers before promotion for the responsibilities of their next higher rank. The junior, intermediate and senior command courses will respectively prepare officers for their duties as superintendent, chief superintendent and chief officer level. Consequent reductions in the number of places on command courses will enable the college to develop, however, a programme of short specialist courses, and in addition there will be a programme of seminars and conferences for senior officers on broad professional and policy matters. I was grateful to the noble Lord, Lord Plant, for the recognition in his speech of the work which is being done at Bramshill by the commandant, Sir Kenneth Newman. I am sure much is being done to draw on the most able officers for higher training.
Finally, the noble Lord, Lord Plant, asked me about what, in shorthand, I would call Edmund-Davies Part 3. The Police Advisory Board has considered the recommendations of the Edmund-Davies Report on the structure and role of the police staff associations. The board consider the recommendations dealing with consultation and negotiating procedures at force level to be particularly important. The board accepted the recommendations as a basic framework while emphasising that the exact nature of the procedure should be decided at local level, and indeed some of these negotiating procedures recommended by Edmund-Davies have been in operation in some forces for some time. My right honourable friend has accepted the board's advice on these matters and has commended these recommendations for immediate implementation.
My Lords, the Government believe that the Police Act 1964 continues to provide the right framework for policing in this country. By its very nature the constitutional balance of responsibilities is a delicate one. The precise way in which it is achieved can be adjusted, as it has been in the past, to suit changing circumstances as well as local needs. But we are convinced that within the basic structure provided by the Act the role of the three elements which compose it and the relationship between them can develop in a constructive way which enables each police force to discharge its duty.

United Reformed Church Bill [H.L.]
Bill committed to an Unopposed Bill Committee.
Barnsley Borough Council Bill
Reported from the Unopposed Bill Committee with an amendment.
Milford Docks Bill [H.L.]
Bill committed to a Select Committee.
  ELECTION EXPENSES
  ELECTION EXPENSES
  PRISONERS DETAINED 15 YEARS OR MORE
  PRISONERS DETAINED 15 YEARS OR MORE
  PSBR: TOTALS SINCE 1961
  PSBR: TOTALS SINCE 1961
  GARAGE CHARGES: PROTECTION OF CAR OWNERS
  GARAGE CHARGES: PROTECTION OF CAR OWNERS
  ANTIGUA: INDEPENDENCE ORDER
  ANTIGUA: INDEPENDENCE ORDER
  ST. KITTS-NEVIS: INDEPENDENCE PROPOSALS
  ST. KITTS-NEVIS: INDEPENDENCE PROPOSALS
  IDA DARWIN HOSPITAL, CAMBRIDGE
  IDA DARWIN HOSPITAL, CAMBRIDGE
  EXPORT OF LIVE ANIMALS
  EXPORT OF LIVE ANIMALS