Sitting of 30 April 1981

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

    COUNTY OF KENT BILL [Lords]
    Orders for Second Reading read.
    To be read a Second time upon Thursday 7 May.

  BILL PRESENTED
    WESTERN ISLES ISLANDS COUNCIL (BERNERAY FERRY) ORDER CONFIRMATION
    Mr. Secretary Younger presented a Bill to confirm a Provisional Order under section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to the Western Isles Islands Council (Berneray Ferry): and the same was read the First time: and ordered to be considered upon Wednesday 6 May and to be printed. [Bill 126.]
Oral Answers to Questions
  NATIONAL FINANCE

    Inflation
    Mr. Knoxasked the Chancellor of the Exchequer what has been the rate of inflation in the most recent 12-month period for which figures are available.
    Mr. Flanneryasked the Chancellor of the Exchequer what is the present rate of inflation; and if he will make a statement.
    The Chancellor of the Exchequer (Sir Geoffrey Howe): The annual rate of inflation for the 12 months to March 1981 was 12·6 per cent., compared with an annual rate of 21·9 per cent. in May 1980. This underlines the considerable success of our policies to curb inflation.
    Mr. Knox: What proportion of the current inflation rate is demand-pull inflation, and what proportion is cost-push inflation?
    Sir Geoffrey Howe: It is neither easy nor elucidatory to answer my hon. Friend's question in those terms. Inflation is on a downward trend, and its underlying rate is now lower than the rate when the Government came into office. At that time it was on an upward trend, but now it is going downwards.
    Mr. Flannery: Does the right hon. and learned Gentleman accept that he has no reason to boast in the way that he has just done? He has utterly failed to make any connection between inflation and the increasing level of
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    unemployment, which many of us believe to be well over 3 million, when the unregistered are added. How can he satisfy us that he is not well on the way to sacking almost everyone, as the rate of inflation is bound to come down if such a policy is carried out? What will he do about the serious, massive and developing unemployment arising from the daily closure of factories?
    Sir Geoffrey Howe: The Government share the concern of every hon. Member about the level of unemployment. However, it is not helpful to refer to the unregistered. As the Manpower Services Commission said the other day, the current definition provides a good and well understood series for discerning trends, and once that firm ground is left there is endless scope for statistical and semantic debate. In addition, unemployment is bound to come down slower than the rate of inflation, but the best way of securing a reduction in unemployment is by maintaining the Government's attack on inflation.
    Sir William Clark: What is the current rate of inflation on a six-monthly basis? Does my right hon. and learned Friend further agree that our inflation rate compares favourably with the rate of inflation in the rest of Europe?
    Sir Geoffrey Howe: The annualised six-monthly rate is about 10·5 per cent. at present. As my hon. Friend has said, our performance on inflation, as well as in a number of other respects, compares increasingly favourably with that of other countries in the OECD.
    Mr. Shore: Does the Chancellor really think that an annual rate of inflation of 12·6 per cent. can possibly justify the savagery of his attack on the economy, the doubling of the level of unemployment and the major fall in the level of output? As the outturn of the money supply figures at the end of this financial year was about 20 per cent., and as the right hon. and learned Gentleman holds the view that the money supply is the predominant arbiter of the future rate of inflation, does he expect that in the coming year or the year after, inflation will resume its course and move up to its previous 20 per cent. rate or has he abandoned the whole preposterous theory of money supply?
    Sir Geoffrey Howe: There is no question of an abandonment of what the right hon. Gentleman has described as the preposterous theory of money supply. He may have chosen that course, but that was not the course followed by the Government of which he was a member, nor is it the course adopted by virtually any other country which manages its economy successfully. As we have explained in previous debates, the growth in money supply figures last year was due to a number of special factors, including distortionary factors. I prefer to take some account of the fact that 12 months ago predictions about the current rate of inflation were far more gloomy than the predictions then being made by the Government, and the Government's predictions have turned out to be right.
    Mr. Budgen: Will my right hon. and learned Friend confirm that a public sector borrowing requirement of £10·5 billion is more than enough if we are to reduce inflation in the future? Will he further confirm that if there are to be any concessions today to those who want reductions in taxation in any particular area, they will be compensated for by increases in taxation elsewhere?
    Sir Geoffrey Howe: I shall be dealing with the precise question raised by my hon. Friend with regard to this afternoon's debate in the course of that debate, but I certainly stress the point that he makes. The proposed level of the borrowing requirement is that which is consistent with continued success in the fight against inflation. The level of borrowing likely to be achieved by the Labour Party would be destructive of any hope of getting inflation under control.
    Mr. Richard Wainwright: If the international value of sterling, the level of which has been the main engine of inflation, ceases to apply and the exchange value enters a period of decline, will the Chancellor of the Exchequer alter his medium-term financial strategy in order to maintain a decline in inflation?
    Sir Geoffrey Howe: The hon. Gentleman will understand that the relationship between domestic monetary conditions and the exchange rate of sterling is just one of many factors which must be taken into account. The financial strategy is designed to secure the right results in domestic economic terms to maintain success in the fight against inflation.

    West Cumbria
    Mr. Campbell-Savoursasked the Chancellor of the Exchequer if he will make a statement on progress in assisting the economy of West Cumbria.
    The Chief Secretary to the Treasury (Mr. Leon Brittan): Our success in bringing down inflation and the further measures announced in the Budget will help to create the right conditions for industry to flourish over the country as a whole, including West Cumbria.
    Mr. Campbell-Savours: Is the Financial Secretary aware that the position in West Cumbria today is desperate, with monthly closures and escalating unemloyment figures—among the highest in the United Kingdom? Is he further aware that small firms are not being set up in the way that the Government suggested? During the Report stage of the Finance Bill, will he introduce further measures to reduce interest rates for smaller companies so as to allow them to set up operations?
    Mr. Brittan: I am sure that the Financial Secretary is as aware of conditions in West Cumbria as I am, but I am by no means persuaded that specific measures of the kind that the hon. Gentleman describes are the best way to help his constituents. I am, however, convinced that continuing to bring down the rate of inflation and providing a stable framework for the advance of the economy as a whole is the best way to deal with the problems of all parts of the country.

    Work Incentives
    Mr. Dubsasked the Chancellor of the Exchequer what is his assessment of the effect of the various tax changes he has introduced since May 1979 in providing incentives to the individual taxpayer.
    The Minister of State, Treasury (Mr. Peter Rees): While I have no doubt that the cuts in income tax introduced after May 1979 have had a positive effect on work incentives, it is impossible to assess the precise impact.
    Mr. Dubs: Has the Minister seen the article in The Times today, which shows that since the Labour Government left office the personal tax burden has increased for every group of taxppayers except those earning five times average earnings? Is not that a sign that the promises made by the Government in their first Budget have not been met? Or does the Minister believe that incentives allegedly created by tax reductions should apply only to the very rich?
    Mr. Rees: We certainly do not believe that tax cuts should apply only to the very rich. Indeed, the hon. Gentleman will recall that one of my right hon. and learned Friend's first measures was to cut the basic rate of income tax. I think that the hon. Gentleman has slightly misunderstood the thrust of today's article in The Times. Only by taking account of indirect taxes and putting a somewhat misleading construction on them could he possibly reach the conclusion that he has.
    Mr. Major: While on the subject of incentives, will my hon. and learned Friend calculate what the standard rate of income tax might be if the Government were to implement the spending plans pressed upon them by the Opposition? Is it not likely that the standard rate would rise by about 15p in the pound? What would that do for incentives?
    Mr. Rees: As my hon. Friend knows, it is difficult to cost Labour Members' plans as they alter from debate to debate, but I think that the figure that he puts on those plans is a fair estimate of their likely cost in terms of direct taxation.
    Mr. Harry Ewing: Does the Minister accept that district nurses are individual taxpayers? If he does, will he agree to abandon his rather stupid and penny-pinching decision to begin taxing the car mileage allowance of district nurses throughout the United Kingdom? What kind of incentive is that to those individual taxpayers?
    Mr. Rees: If the hon. Gentleman had studied the matter a little more closely he would know that no ministerial decision was involved with that taxation. If he had been following the problem closely, he would know that some of his hon. Friends had brought a delegation of district nurses to see me and that we had promised to look into the matter to see how far, consistent with the existing tax laws, which were enforced under the Labour Administration, it would be possible to meet their case.
    Mr. Nicholas Winterton: I welcome as strongly as my hon. and learned Friend the reduction in the higher rates of taxation and in the basic rate of taxation. Does he agree that overall taxation has increased under the Government, bearing in mind that the national insurance contribution, which is a form of direct taxation, has been dramatically increased? When will the Government really cut taxation to provide the incentives promised in our manifesto?
    Mr. Rees: I take issue with my hon. Friend in regarding the national insurance contribution as a form of direct taxation. It is a contribution to an insurance fund. As regards the general thrust of my hon. Friend's observations, I am sure that he will support my right hon. and learned Friend in his endeavours to moderate public expenditure and to control inflation, which will open the way to meaningful tax cuts over the lifetime of this Parliament.

    Public Expenditure
    Mr. William Hamiltonasked the Chancellor of the Exchequer what further plans he has for cutting public expenditure.
    Mr. Brittan: Our plans for public expenditure, which were published in the recent White Paper, will be reviewed in the course of the forthcoming annual survey of expenditure.
    Mr. Hamilton: Does the right hon. and learned Gentleman expect to make another slash before the Summer Recess or after it? In the light of article in The Times today, will he give an assurance that the Government will not further clobber the poor, the sick, the disabled and the old, who have been clobbered unmercifully in the past two years?
    Mr. Brittan: I have no announcements to make about public expenditure cuts at the moment. The hon. Gentleman might, however, have observed from the public expenditure White Paper that spending on social security and health is planned to increase during the period 1980–81 to 1983–84. His strictures are, therefore, wholly unfounded.
    Mr. Forman: Will my right hon. and learned Friend in his future plans for public expenditure concentrate on the control of public sector pay and look more favourably upon capital projects in the public sector which can have a reasonable rate of return?
    Mr. Brittan: I accept that many people feel that the balance ought to be shifted in that direction. But I also very much accept the implication behind what my hon. Friend has said, namely that there can be room for desirable forms of expenditure, whether of the kind that he identifies or others, only if matters such as the cost of the pay bill are kept in check. It is enormously important that this should be done if our other objectives are to be achieved.
    Mr. Shore: In view of the Chief Secretary's reply to my hon. Friend the Member for Fife, Central (Mr. Hamilton) some moments ago, are we to understand that in the forthcoming review of public expenditure he has firmly excluded any proposal for further cuts in the programmed increases for pensions, social security and other categories? Will he give that undertaking?
    Mr. Brittan: The right hon. Gentleman was in Government long enough to know that nothing is excluded from a process that has not even begun.
    Mr. Dorrell: When my right hon. and learned Friend reviews the Government's public expenditure programmes, will he take steps to draw a clearer distinction in the national accounts between capital and current expenditure? Does he agree that there is no necessary reason to insist that capital expenditure should always be funded out of current revenue and that, while there should be a broad balance between current revenue and current expenditure, the proper determinant of the level of capital expenditure may be the availability of borrowed cash at reasonable interest rates?
    Mr. Brittan: I am not sure that I accept the latter formula in quite the way that my hon. Friend has put-it. As I said in the debate on the White Paper on public expenditure, there are clear indications in the published documents of the division between capital and current
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    expenditure. We are considering the presentation of the facts in order to ensure that the House and the country have—as they are entitled to expect—a clear view of what has been done in this area as well as in the rest of the Government's accounts.

    Credit Cards (Interest Payments)
    Mr. Brothertonasked the Chancellor of the Exchequer what revenue would be raised by the imposition of a 1 per cent. calendar month charge on credit card outstanding debts.
    Mr. Peter Rees: It is not possible to estimate the revenue which would be raised, because figures are not available for outstanding debts on credit cards.
    Mr. Brotherton: Given the plethora of plastic money that abounds—I take an example from my wallet—would not such a form of taxation be sensible? First, it would raise a considerable sum of money. Secondly, it would tend to reduce the amount of consumer credit slopping around the country.
    Mr. Rees: With respect, I congratulate my hon. Friend on his creditworthiness. His suggestion is interesting. However, it would result in channelling borrowing into other areas and would not necessarily be the most effective way of raising money or of regulating such borrowing.

    Economic Regeneration
    Mr. Winnickasked the Chancellor of the Exchequer if he is satisfied with the effects of his Budget on the regeneration of the economy.
    Sir Geoffrey Howe: It will be some time before it is possible to give a considered answer to this question. But there is no reason to doubt its beneficial effects.
    Mr. Winnick: Do not all recent reports—even the CBI one—show that a further decline is to be anticipated in output, demand and employment? Leaving aside propaganda speeches, will the right hon. and learned Gentleman accept that there is no evidence of industrial recovery after the disaster of two years of Tory Government?
    Sir Geoffrey Howe: I do not accept that. A number of signs point in the opposite direction. The CBI survey to which the hon. Gentleman referred provides growing evidence of improving business confidence, a reduction in the expected rate of destocking and a stabilisation in company liquidity. Beyond that, there is increasing evidence of a growth in production. In February, there was growth in industrial production of ¾per cent. and a growth of 1 per cent. in manufacturing production. Therefore, there are signs that output may have stopped falling.
    Mr. Marlow: Will my right hon. and learned Friend agree that one of the canniest predictors of improvements in the economy, for obvious reasons, is the Financial Times index? Has he noticed any change in the index since the Budget?
    Sir Geoffrey Howe: Not only have I noticed a change, but most hon. Members will have noticed a significant change in the index. It is one of the indicators that points towards an improvement in the economy's outlook. There are others. For example, there is a clear sign of an improvement in housing starts in the private sector. In

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    addition, there are signs from at least one organisation that there was a sharp improvement, in executive recruitment in the last three months of last year.
    Mr. Straw: Is not the right hon. and learned Gentleman aware that the CBI trend survey, which was issued yesterday, said that at its best the economy was only bouncing along the bottom of the recession and that employment was likely to fall still further? Has he seen today's report, which suggests that 500,000 people have lost their jobs, over and above those on the dole? When will the unemployment figures, now above the 3 million mark, start to fall?
    Sir Geoffrey Howe: I repeat what I have said about measurement. Unemployment figures are being published today on the same basis as under previous Administrations. Our policies are directed towards lowering those figures. Hon. Members will have observed that the underlying increase in unemployment is slowing down. As the Secretary of State for Employment made clear earlier this week, it is inevitable that improvements in the level of employment should follow the beginning of improvements in the economy as a whole.
    Mr. Lee: Would my right hon. and learned Friend care to comment on a survey that I have carried out in the last 24 hours in my constituency in North-East Lancashire? Is he aware that of the dozen major firms that I talked to, six spoke about a maintained level of activity and six spoke about things distinctly improving?
    Sir Geoffrey Howe: I am grateful to my hon. Friend, because he has given an important piece of evidence from his constituency which supports the general evidence that is becoming more widely available.

    Direct and Indirect Taxation (Revenue)
    Mr. Ioan Evansasked the Chancellor of the Exchequer what was the amount of revenue raised from direct and indirect taxation on a yearly basis in the years ended April 1979, 1980 and 1981; and what is the estimated revenue for the year ending April 1982.
    Mr. Brittan: In the financial year 1978–79, £28 billion was raised from direct taxation and £30½ billion from indirect taxation. In 1979–80, the figures were respectively £33 billion and £40 billion; in 1980–81, £39 billion and £47 billion respectively; and for 1981–82, I estimate that about £46 billion will come from direct taxation and about £54 billion from indirect taxation.
    Mr. Evans: Does the right hon. and learned Gentleman agree that despite Tory election promises that the Conservative Party would reduce taxation, the vast majority pay more in income tax and in consumer taxation, because VAT has been increased from 8 per cent. to 15 per cent.? Before the day is out, will he consider the problems that face motorists? The Government have doubled taxation on petrol to 83p a gallon. In addition there is a £70 car tax. Is he aware that there has been a 40 per cent. increase since the Conservative Party took office.
    Mr. Brittan: The problems of motorists will be discussed in this afternoon's debate. There will be ample scope to deal with that question.
    Mr. Squire: May I congratulate my right hon. and learned Friend on the way in which the balance between
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    direct and indirect taxation has been improved by the Government and on the way in which taxation on those who work can be relatively balanced with taxation on those who do not?
    Mr. Brittan: I am grateful to my hon. Friend for those remarks. The proportion of direct taxation in the total is lower than it was before the Conservative Party was elected to office. We anticipated that change of direction and believe that it is both worthwhile and important.
    Mr. Weetch: Does the Chief Secretary realise that as a result of the selective effect of the civil servants strike action, the Government owe small firms in my constituency considerable amounts of money in VAT? Does he accept that, as a result, those firms are in short-term cash-flow difficulties, which include the repayment of high interest rates because they have had to borrow money? Have the Government any plans to help those in such difficulties?
    Mr. Brittan: I hope that those on strike will listen to what the hon. Gentleman has said. I hope that they will realise that their action causes harm and threatens employment in exactly the way that the hon. Gentleman has described. In so far as it is possible to give assistance and understanding to firms in such difficulties, the tax authorities seek to do so.

    Inflation
    Mr. Kenneth Lewisasked the Chancellor of the Exchequer what the present rate of inflation would be minus the increase in tax on tobacco, drink and petrol in the Budget.
    Mr. Peter Rees: The Budget measures were estimated to have a direct impact on the retail price index of about 2 per cent., of which approximately 1 per cent. was reflected in the March RPI. But in the longer run, by reducing public borrowing, they should help to bring inflation down.
    Mr. Lewis: Does not my hon. and learned Friend agree that as a certain amount of increase is built into inflation as a direct result of Government policy, the real rate of inflation is much lower than that shown and will be even lower by the end of the year?
    Mr. Rees: My hon. Friend is right to draw attention to the underlying rate of inflation, which is lower than that which we inherited when we took office.
    Mr. Dykes: Does my hon. and learned Friend agree that, as there is no evidence of any demand-full inflation in the economy, there is ample scope for expanding output without increasing the rate of inflation again?
    Mr. Rees: Certainly. We hope to see evidence of that later this year.
    Mr. Woolmer: Is it not clear that the Government have pushed up almost every price that they can control? By how much will it be seen that the Government have deliberately pushed up inflation this year when increases in council house rents, gas and electricity prices are reflected in the price index?
    . Mr. Rees: I am sure that the hon. Gentleman would like energy to be priced realistically. Like other hon. Members, he will want proper conservation of our energy resources.

    Interest Rates
    Mr. Cryerasked the Chancellor of the Exchequer what representations he has received regarding a further reduction in interest rates.
    Mr. Newensasked the Chancellor of the Exchequer what is his latest assessment of the prospects of a further fall in interest rates.
    Sir Geoffrey Howe: The 2 per cent. reduction in MLR which I announced in the Budget has been widely welcomed. I am aware, however, that industry would like to see interest rates reduced further, and this is a desire we all share.
    Mr. Cryer: Is it not true that the high interest rates imposed by the Government have cost the nation hundreds of thousands of jobs and sent thousands of small firms to the wall? Have not representations been made by both sides of industry for a reduction in interest rates? Is it not the case that the Government are using unemployment as a weapon against working people and the trade unions and that they will not reduce interest rates because they see them as being to their political advantage?
    Sir Geoffrey Howe: I cannot imagine the kind of world in which the hon. Gentleman lives if he believes that the Government—or anyone else—want to see unemployment increase. All our policies, including those for interest rates, are directed towards securing improvements in the economy and in the level of employment. The House should take notice of the fact that short-term interest rates in Great Britain today are below those in the United States and France, and below the average for OECD countries.
    Mr. Newens: Does the right hon. and learned Gentleman realise that, despite his boasts about inflation, interest rates have never fallen below the level that existed when the Government took office? Is he aware that, despite what he says, many industrialists in Europe continue to enjoy considerably lower rates of interest? Is it not fair to say that in this respect industrialists and borrowers have rarely—and certainly never since the war—been worse served by a Government than they have been by this Government?
    Sir Geoffrey Howe: The hon. Gentleman needs to be reminded of the fact—which I have just stated—that short-term interest rates in this country are below those in the majority of OECD countries. That is an important factor. The minimum lending rate has fallen by 5 per cent. since last summer. The CBI estimates that every point reduction reduces interest rates paid by companies by about £350 million. That is a significant improvement.
    Mr. Peter Lloyd: But is my right hon. and learned Friend satisfied that public sector borrowing has been reduced sufficiently to enable the private sector to finance a sustained recovery, without driving up interest rates again?
    Sir Geoffrey Howe: The judgment that I made in my Budget was designed to secure the result that my hon. Friend wishes to see.
    Mr. Ashley: If the right hon. and learned Gentleman says that the whole of his policy is directed towards reducing unemployment, will he accept that the present level of unemployment is an indictment and a clear indication of the failure of those policies?
    Sir Geoffrey Howe: No, Sir. The present level of unemployment is caused by many factors, including the necessary process of conquering inflation and factors operating in the world outside. Our policies are directed, as the right hon. Gentleman would wish, to securing a recovery of the economy, including a recovery in the prospects for employment.
    Mr. Body: Does my right hon. and learned Friend agree that any consideration of interest rates should have regard to the rate of inflation? It is not unreasonable for interest rates to be 3 per cent. above the rate of inflation.
    Sir Geoffrey Howe: I agree with my hon. Friend that one has to consider the rate of inflation, among many other factors. It is relevant that the interest rate is positive, as he says.

    Public Expenditure (White Papers)
    Mr. Richard Wainwrightasked the Chancellor of the Exchequer if he will take steps to ensure that the figure in annual White Papers on public expenditure are explicitly reconciled with the figures in annual Financial Statements and Budget Reports.
    Mr. Brittan: The figures are reconciled in table 16 of the Financial Statement and Budget Report.
    Mr. Wainwright: Does the right hon. and learned Gentleman agree that, even taking account of the use of that table, the House has no idea whether last year's substantial overspend was mainly an overspending of volume or was caused by excessively high prices? Will he assist the House in trying to control government expenditure?
    Mr. Brittan: I do not accept that there is any failure of information on that score. The combination of information provided in the public expenditure White Paper and the Red Book, and the information supplied to the House in debates, as well as the information provided to the Treasury and Civil Service Select Committee, enable those interested in these matters to take a view about what has happened, on the basis of the facts.

    Taxation Policy
    Mr. Haselhurstasked the Chancellor of the Exchequer if it remains his policy not to earmark individual taxes for specific purposes.
    Sir Geoffrey Howe: Yes, Sir.
    Mr. Haselhurst: Does my right hon. and learned Friend's reply preclude the possibility of a proportion of the revenue from income tax being remitted to local authorities as a substitute for the domestic rating system? My right hon. and learned Friend will be aware of the growing anxiety about the inequities of that system.
    Sir Geoffrey Howe: I understand the anxiety. To remit to local authorities a proportion of existing income tax levied nationally, would not achieve the objective of giving local authorities any discretion in relation to that part of their revenue. One effect of the existing rate support grant system is that it achieves the object that my hon. Friend has in mind.
    Mr. Cryer: Is there not a good case for allowing people to refuse to make a contribution to weapons of mass

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    destruction when they have a conscientious objection to doing so? Was not that the purport of the decision of the Inland Revenue commissioners to allow a person who wished to do so to opt out of that sort of horrendous expenditure?
    Sir Geoffrey Howe: As the hon. Gentleman knows, the case to which he refers did not represent a policy decision by the Inland Revenue. It was a mistake, which was corrected at the time. It would be unworkable if individual taxpayers were allowed to opt out of contributing to that portion of the tax burden that represented their particular dislike of expenditure.
    Mr. Eggar: Is there not a case for putting the real increase in North Sea oil revenues into a specific North Sea investment fund?
    Sir Geoffrey Howe: I am familiar with the suggestion made by my hon. Friend. The fact is that existing North Sea oil revenues, including increases, contribute to keeping down the present level of public sector borrowing. Although it is important for people to understand the contribution that is being made by North Sea revenue to the economy, successive Governments have rejected the suggestion for a specific North Sea oil fund.
    Mr. Woolmer: Will the Chancellor look again at the matter? Is it not strange that the United Kingdom, one of the few countries in the world with oil reserves and resources, appears, in the view of most people, to be throwing away the opportunity that that oil offers? Is there not a case for trying to establish much more clearly the relationship between the benefits that North Sea oil provide and the need to regenerate industry to make sure that the economy is stronger, even when the oil starts to run out?
    Sir Geoffrey Howe: There is a strong case for making sure that people understand the link between the benefits of North Sea oil revenue and such improvements as that can bring to the economy. The previous Government, like the present Administration, in their White Paper rejected the idea of a fund of that kind. One reason, no doubt, is that it might raise a presumption that all revenue coming from the North Sea should be directed exclusively to public sector investment. That would not be right.

    Inflation
    Mr. Dykesasked the Chancellor of the Exchequer if he is satisfied with the latest figures for the rate of inflation.
    Sir Geoffrey Howe: I refer my hon. Friend to the reply that I gave earlier to the questions from my hon. Friend the Member for Leek (Mr. Knox) and the hon. Member for Sheffield, Hillsborough (Mr. Flannery).
    Mr. Dykes: My right hon. and learned Friend has said that he hopes from now on to see a revival in the economy. As most of the increase in the deficit is made up of unemployment payments, and as the margin of spare resources is now so large, does he agree that the revival should come as soon as possible? My right hon. and learned Friend cannot, however, rely simply on the private sector and the "hidden hand". There will be need for Government action and intelligent new public investment.
    Sir Geoffrey Howe: There is a case for intelligent public investment, but it must always be undertaken in the context of maintaining proper and effective control of the totality of public spending and borrowing.
    Mr. Joel Barnett: When the Chancellor planned his policies to deal with inflation, did he know that they would also increase unemployment to 3 million and beyond? Did he plan that also?
    Sir Geoffrey Howe: No, but I recollect that 12 months ago the right hon. Gentleman forecast that inflation today would be running at a rate of 20 per cent. It is running at substantially less than that.
    Mr. David Atkinson: Does my right hon. and learned Friend accept that further devaluation of the pound will lead to an increase in the cost of living? Does he agree that there is no reason why British manufacturers should not now successfully compete abroad with the Germans and the Japanese, despite a high interest rate?
    Sir Geoffrey Howe: There is, clearly, a connection between the exchange rate of the pound and the level of domestic inflation. My hon. Friend is right to draw attention to that. The exchange rate is now about 7 per cent. down in its effective rate from its peak at the beginning of the year. Undoubtedly that factor contributes to the improving outlook of British industry.
    Dr. Bray: Has the Chancellor considered his response to Professor Meade's suggestion of a measure of reflation, conditional upon some agreement about incomes with other interests in the nation?
    Sir Geoffrey Howe: I agree that that is Professor Meade's suggestion. It is dependent upon agreement between the Government and a rather massive collection described as the Labour Party and the trade union movement. As that set of organisations, both in Government and in Opposition, have the utmost difficulty in agreeing among themselves, it would be hazardous for the Government to embark upon that course.

    Nationalised Industries (External Financing Limits)
    Mr. John Townendasked the Chancellor of the Exchequer what are the estimated total external financing limits of the nationalised industries for 1980–81, expressed as a percentage of North Sea oil revenues for the same year.
    Mr. Brittan: The estimated figure is 75 per cent.
    Mr. Townend: Does my right hon. and learned Friend agree that the figure answers the demand from many sources that more and more North Sea oil revenue should be invested in industry? Does he agree that it is disturbing that such a large proportion of the revenue is going to loss-making nationalised industries, and not sufficient into productive private investment?
    Mr. Brittan: The figure is a useful illustration of the reality of what is happening to the revenue. My hon. Friend's point illustrates the divergence of objectives. There is legitimate concern about the desirability of capital investment of a generally productive sort, but there is concern also that investment in the nationalised industries is not always of that character. Those concerned with investment might take account of the fact that 1 per cent. off the nationalised industries' wage bill would save £125 million.
    Mr. Foster: Is the Chief Secretary aware that there is a majority in the House, and a consensus in the country, in favour of reflating the economy by such public sector projects as the electrification of British Rail and investment in British Telecom? Is he further aware that there is widespread disbelief that such projects crowd out private investment, especially when private investment is widely expected to reduce, and when £3 billion was spent in overseas investment during the last six months of the last financial year?
    Mr. Brittan: I do not accept all the hon. Gentleman's remarks. All countries, as well as Britain, must take into account what should be the appropriate share of national resources—whether in capital or current expenditure—absorbed by the public sector. There is no way to avoid the fact that nationalised industries are in the public sector.
    The hon. Gentleman is right to suggest that we should find ways to finance the nationalised industries' investment programme that involve getting the private sector to take a genuine share in the risk of such investment. We are interested in considering any such suggestion.

    Tax Evasion and Avoidance
    Mr. Canavanasked the Chancellor of the Exchequer what is his estimate of the annual loss of revenue to the Treasury by (a) tax evasion and (b) tax avoidance.
    Mr. Peter Rees: I refer the hon. Gentleman to the reply I gave to the hon. Member for Newham, North-West (Mr. Lewis) on 27 April.
    Mr. Canavan: As some reliable estimates put the total amount lost through tax dodging at as much as the entire public sector borrowing requirement, is it not plain that the recent Vestey scandal is merely the tip of the iceberg? Are not such people the real scroungers in society today? Does the Government's reluctance to deal adequately with the position have any connection with the fact that the Minister is an accomplished expert on advising tax dodgers?
    Mr. Rees: I shall ignore the unwarranted and absurd personal attack by the hon. Gentleman and confine my remarks to the more serious part of his supplementary question. He is obviously unaware of the contents of the Finance Bill, which deals with the points disclosed by the Vestey case.
    Mr. Bill Walker: Does my hon. and learned Friend agree that the Government's policy of shifting tax from direct to indirect taxation is the best way to catch those who try to avoid their tax commitments?
    Mr. Rees: That is an interesting suggestion. It is true that indirect taxation is, on the whole, easier to collect than direct taxation. However, I am not wholly persuaded that the black economy does not represent a degree of evasion of VAT.

  PRIME MINISTER

    Engagements
    Mr. Stephen Rossasked the Prime Minister if she will list her official engagements for Thursday 30 April.
    The Prime Minister (Mrs. Margaret Thatcher):This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today.
    Mr. Ross: Is the Prime Minister aware of our continuing support of her stand on refusing to give special political status to IRA prisoners? Does she agree that the world should know that it is utterly wrong to give special privileges to IRA terrorists? Will she support the poor widows who are preparing a petition to the European Commission of Human Rights by saying that the Government's services in Northern Ireland should be availble to help them to that end?
    The Prime Minister: I am grateful to the hon. Gentleman for his remarks. There can be no question of granting political status to convicted criminals, now or at all. Individuals can make application to the European Commission of Human Rights. They do not usually need Government support, but I shall look into what the hon. Gentleman has suggested.
    Mr. Maxwell-Hyslop: Is my right hon. Friend aware, and will she tell the House, of the great achievement of our right hon. Friend the Secretary of State for Trade, who last month secured an enormous Brazilian agreement for British industry to refurbish Brazilian coal mines, power stations and the transport media?
    The Prime Minister: I am always delighted to hear about excellent export orders for Britain. My right hon. Friend the Secretary of State for Trade is good at securing them. British industry is doing very well in its export trade.
    Mr. Foot: Has the Prime Minister had the opportunity today to read the remarkable article by Melvyn Westlake in The Times, which from earlier questions, appears to have given rise to t reat interest in the House? Is she aware that the article shows that the Government's three Budgets have raised the nation's tax burden by one-fifth, that they have increased the numbers of those entering the poverty trap by 40 per c ent. and, generally, that what has happened has been a repudiation of the Government's claims of what they would do about tax cuts? Has she had the opportunity to read the whole article? Will she give the House and the country her considered response to it?
    The Prime Minister: The short answer is "No". To judge from the right hon. Gentleman's remarks, he will give the Government his full support in making further expenditure cuts.
    Mr. Foot: The right hon. Lady cannot run away from the most notorious of her election pledges. Is it not true that she won the election with her promise of tax cuts? She has increased the tax burden of the nation by one-fifth. Is it not true that a married man, with two children, on average earnings is now, following her Budgets, paying over 9 per cent. more in direct taxation than he was three years ago? When will she face those responsibilities?
    The Prime Minister: The right hon. Gentleman cannot run away from his arithmetic. If he wants tax cuts—and I do—we must first have expenditure cuts. I hope that he will support us in that. If he does not, he is saying that as a matter of policy he will posititively create inflation on top of inflation. I will not accept that.
    Mr. Foot: Why did the right hon. Lady make such widespread promises during the election about tax cuts before she knew whether she could carry them out?
    The Prime Minister: If the right hon. Gentleman reads the whole of the Conservative manifesto be will note that reductions in planned expenditure were promised. There have been reductions in planned expenditure. The right hon. Gentleman has given no support whatsoever to them. I reiterate that if he wants further tax cuts—and I do—he must support expenditure cuts. I look forward to the day when he does.
    Mr. Bendall: Has my right hon. Friend had an opportunity recently to see Avitol Scharansky, whose husband has been detained in a prison camp in Russia? What does she think the Government can do to help to get this man released?
    The Prime Minister: I received Mrs. Scharansky yesterday, as I always receive either ex-dissidents or the wives and relatives of those who are at present held in prison in Soviet Russia, in appalling conditions. In company with a number of other Governments we have made representations in Madrid—[Interruption.] I am interested to note that Labour Members below the Gangway do not seem to be the least bit concerned about those who are being held in appalling circumstances in Soviet Russia. They are not in the least bit interested, but we are. We are interested in doing everything that we can to secure their release, and we shall continue to try to do so.
    Mr. Ford: Will the right hon. Lady take time today further to consider the effects of the Civil Service industrial dispute? Is she aware that many small businessmen are on the verge of bankruptcy because of the non-repayment of VAT? Is she further aware that the Government have made an error of judgment and that to refer the issue to arbitration is the only way of achieving a fair and satisfactory settlement? Does she agree that the Government have made an error of judgment and that those who never make a mistake never make anything?
    The Prime Minister: I believe that the offer of 7 per cent. to the Civil Service this year is very fair. It comes on top of increases in pay to the Civil Service over the past two years of some 50 per cent. I believe that public opinion is behind us in agreeing that that is a fair offer. Although there are a small number of civil servants on strike, vast numbers are loyally continuing with their tasks.
    Mr. Warrenasked the Prime Minister if she will list her official engagements for 30 April.
    The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.
    Mr. Warren: Will my right hon. Friend confirm that in trying to resolve the Civil Service strike the public are much on her side, because this year more than 2 million workers in the public service have already settled for pay rises of less than the 6 per cent. limit set by the Government?
    The Prime Minister: It is true that about 2 million public servants have settled for pay increases within the 6 per cent. cash limit, and without industrial action. My noble Friend the Lord President saw the Civil Service unions about a week ago. He said that 7 per cent. was as much as the Government could possibly afford within the 6 per cent. cash limit, but he made proposals for an independent inquiry into arrangements for Civil Service pay, terms and conditions of service and so on. It is a matter of great regret that the Civil Service unions have not responded to an invitation to discuss that aspect of the matter.
    Mr. Guy Barnett: Does the Prime Minister think that Anglo-Indian relations are better or worse than they were before she went there?
    The Prime Minister: There is not the slightest shadow of doubt that they are better.
    Mr. Goodhew: Is my right hon. Friend aware that when I arrived at Heathrow last Sunday I was accosted by a young lady—[Interruption.]—merely because I happened to be the twenty-fifth person to pass through the United Kingdom passport check on my flight? I had to answer a Government questionnaire involving many personal questions, such as where I had been, who I had been with, why I had been there, how much money I had spent and what was my age group. Is it really necessary for the Government to have this information? Will she find time today to cancel the questionnaire?
    The Prime Minister: I shall certainly look at it, although to judge from the way in which my hon. Friend asked his supplementary question he seems to have enjoyed the experience.
    Mr. Ashton: Has the Prime Minister found time today to decree a cut in the the tax on petrol that was introduced in the Budget, or does she prefer to face disaster in the local elections in rural areas next week?
    The Prime Minister: As my right hon. and learned Friend the Chancellor of the Exchequer answered questions before I began to answer them, and as he will be speaking later, I think that I might leave the answer to that question to him.

    Canadian Constitution
    Mr. Adleyasked the Prime Minister if she will make a statement about the progress of discussions on the future of the Canadian Constitution.
    The Prime Minister: Discussion in the Canadian Parliament is now in suspense until the Canadian Supreme Court has delivered its opinion. The court began its proceedings on 28 April and its opinion is not expected before late May or early June.
    Mr. Adley: Will my right hon. Friend accept that presumably everybody in the House puts the highest priority on good relations between the British Government and both the Canadian Federal and provincial Governments? Does she agree that while a solution to this problem is obviously desirable, it should not be a solution at any price, and that we should not want to give Mr. Trudeau the impression that we would like to encourage him to force Westminster to find a solution that is not generally acceptable to the majority of Canadians?
    The Prime Minister: I hope that good relations between this country and Canada will continue. Obviously further decisions must await the completion of the political and legal processes in Canada.
    Mr. David Watkins: Will the right hon. Lady bear in mind the fact that there is considerable opposition inside Canada to Mr. Trudeau's devious moves in the matter of the Canadian constitution? Would not it be undesirable for this Parliament to be manipulated, or even to appear to be manipulated, in his interests rather than in the interest of the Canadian people?
    The Prime Minister: I do not believe that at the moment it is for me to comment on what went on in another Parliament. We have not received a request from that Parliament. We shall not receive one until all the Supreme Court and parliamentary processes have been completed. I believe that we should have respect for another similarly elected Parliament.
    Sir Derek Walker-Smith: Does my right hon. Friend agree that both the Government and Parliament in Britain would be well advised to await the informed guidance of the Supreme Court in Canada before taking up any fixed positions, in view of the rather paradoxical circumstance that we in this House of Commons, as the representatives of a unitary State without a federal constitution, are not best placed to advise on the intricacies of a federal constitution in written form?
    The Prime Minister: I wholly take and agree with my right hon. and learned Friend's point. I am grateful to him for putting it.

    New Businesses and Small Firms
    Q 4. Mr. Home Robertsonasked the Prime Minister what progress has been made with the implementation of that part of the Gracious Speech which referred to the encouragement of new businesses and to measures to permit small firms to expand and prosper.
    The Prime Minister: The Chancellor's recent Budget included a considerable number of measures to help small businesses and to encourage enterprise and risk-taking, for instance the business start-up scheme, the loan guarantee scheme and the venture capital scheme, raising the threshold of value added tax, investment interest relief scheme, new forms of stock relief and also the review of the statistical services to save small businesses 1 million forms a year.
    Mr. Home Robertson: I wonder whether the Prime Minister realises that her Government have succeeded in doubling the rate of liquidations among British companies to almost 200 every week. Will she consider the crippling effect on companies throughout the country of the high tax on petrol? Even if she succeeds in fobbing off some of her Back Benchers with concessions on diesel fuel, surely she must be aware that many companies, especially in rural areas, depend every bit as much on petrol as on derv.
    The Prime Minister: There is a higher number of liquidations than previously, but there is also a considerable number of companies starting up and there are good grounds for hoping that more will start up and expand. With regard to what the hon. Gentleman said about tax, I repeat what I said to the right hon. Gentleman the Leader of the Opposition. If he wants further tax reductions, he will either have to have cuts in expenditure or increases in tax elsewhere.
    Mr. Best: Is my right hon. Friend aware that, as from today, there is less likelihood of hon. Members and small businesses being accosted by young ladies because the Minister of State, Civil Service Department, has announced that three quarters of a million statistical returns will be cut out, at an annual saving of £25 million and 2,500 posts?
    The Prime Minister: I am aware of that. The review of the statistical services was excellent and will result in an annual saving of about £25 million as well as cutting out many forms, reducing Government scrutiny and helping small businesses and others.

Business of the House
Mr. Michael Foot: May I ask the Leader of the House to make a statement about the business for next week?
The Chancellor of the Duchy of Lancaster, Paymaster General and Leader of the House of Commons (Mr. Francis Pym): Yes, Sir. The business for next week will be as follows:

TUESDAY 5 MAY—Further progress in Committee on the Finance Bill.

Motion relating to the Education (Allowances for Assisted Places in Secondary Schools) (Scotland) Regulations.

WEDNESDAY 6 MAY—Until about 7 o'clock, further progress in Committee on the Finance Bill.

Afterwards, Second Reading of the Supreme Court Bill [Lords].

Remaining stages of the Judicial Pensions Bill [Lords].

Proceedings on the Statute Law Repeals Bill [Lords].

THURSDAY 7 MAY—Debate on foreign affairs, which will arise on a motion for the Adjournment of the House.

FRIDAY 8 MAY—Private Members' Bills.

MONDAY II MAY—Further progress in Committee on the Finance Bill, which it is hoped to complete on Tuesday 12 May.

Mr. Foot: I thank the right hon. Gentleman for the announcement of the debate on foreign affairs for which we have been asking. Will we have further time for that, because many hon. Members will wish to speak?
Will there be a statement by the Prime Minister on the British Nationality Bill and her statement in India that one of the reasons for the introduction of that Bill was the number of immigrants pouring into this country? We asked the Home Secretary that question in the debate yesterday and received no answer. I hope that the Leader of the House will consider the possibility of the Prime Minister making a statement to the House on that matter, particularly because she did not do so on her general visit to the Middle East. Will she say anything before the debate, or will she be participating in it to discuss what she said in some of the states, where she seemed to be more interested in selling arms than in contributing to securing a peace settlement in that area?
Mr. Pym: I am grateful to the right hon. Gentleman for what he said about the foreign affairs debate. It would be for the convenience of the House if there were an extension until midnight, as many hon. Members wish to take part.
My right hon. Friend the Prime Minister does not intend to make a statement of the sort suggested by the right hon. Gentleman, who, had he wished, could have questioned her a few moments ago. It is not the intention of the Prime Minister to take part in the foreign affairs debate, but if the Leader of the Opposition wishes to return to that matter he will be able to do so.
Mr. John Stokes: Will my right hon. Friend allow time next week for a debate on the work of the European Assembly, so that we can evaluate the Members' work there and assess the value of the role that they play?
Mr. Pym: Not next week, Sir. Other opportunities are available to hon. Members to raise that subject in the House, but I cannot provide the time.
Mr. A. J. Beith: Is the Leader of the House aware of the great concern in universities and polytechnics about Government policy on higher education, particularly in the light of expenditure cuts, the abandonment of the Robbins principle and the overseas students issue? Will he ensure that we have a debate on that subject in the near future?
Mr. Pym: I note what the hon. Gentleman said. That is an extremely important subject and I acknowledge the interest of hon. Members. I cannot see my way to finding Government time in the near future, but I shall bear the hon. Gentleman's request in mind.
Mr. Michael Latham: Will my right hon. Friend undertake to keep the House informed on the progress or otherwise of the dispute in the Civil Service, if only because Conservative Members will wish to ensure that any offer made, particularly regarding cash limits, is in accordance with the general economic policy of the Government?
Mr. Pym: My hon. Friend the Minister of State was questioned on that subject yesterday. He made a statement just before the House rose, for the recess. If it seems appropriate to make a further statement, I shall arrange that. I shall try my best to see that the House is kept informed on the development of that most unfortunate dispute.
Mr. Alfred Dubs: Is the Leader of the House aware of the increasing concern about the effect that lead in petrol has on children? In view of the many rumours in the papers about an impending statement by the Government on their plans for lowering the lead content in petrol, will the Leader of the House tell us when that statement will be forthcoming?
Mr. Pym: The Government are still considering that matter. I do not expect that there will be a statement next week or necessarily the week after, but there will be one in the fairly near future.
Mr. Michael Brown: If my right hon. Friend is able to do so, will he consider making a statement next week on the recent meetings in certain Committee Rooms? Without wishing to deny the rights of any hon. Member to book a room for outside meetings, is my right hon. Friend aware that there is understandably deep concern—particularly on the part of my hon. Friend the Member for Bebington and Ellesmere Port (Mr. Porter)—about recent events and the implications of certain meetings that have been held in the House?
Mr. Pym: The arrangements for such meetings and the use of rooms in the Palace of Westminster is essentially a matter for the House authorities and not primarily one for me.
Mr. Andrew Faulds: In view of their tardy handling of the matter, when can we expect a Government statement about the full introduction of the public lending right scheme?
Mr. Pym: I am not aware that an announcement will be made in the near future, but I shall make inquiries and let the hon. Gentleman know.
Mr. Michael Shersby: May I draw the attention of my right hon. Friend to early-day motion 336,

911
in my name and those of certain of my right hon. and hon. Friends, about the threat to Britain's invisible exports constituted by the UNCTAD liner code?
[That this House expresses its concern about the threat to Great Britain's invisible earnings constituted by the United Nations Commission for Trade and Development Liner Code and believes that the international trading operations in commodities conducted in the City of London amounting to about £200,000,000 a year is being seriously affected by countries invoking the code even before it is officially approved, and by the operation of cargo allocation centres; considers that the Liner Code may be the forerunner of a bulk code which could seriously inhibit the shipment of commodities from the developing countries traded in the flexible commodity and hipbroking markets in London; and therefore calls on the Government not to ratify the Liner Code until its long-term implications have been fully understood and debated in this House.]
Will he arrange for the matter to be debated in the House before that code is approved?
Mr. Pym: If the code were approved it would require primary legislation. I shall consider the point raised by my hon. Friend.
Mr. Robert Hughes: Notwithstanding that there will be a foreign affairs debate next Thursday will the right hon. Gentleman arrange for the Lord Privy Seal to make an urgent statement about the reports that military equipment manufactured by Plessey was loaded on to South African aircraft yesterday? Is he aware that the equipment is clearly identified by Plessey as being sold purely as military equipment and that that is in direct contradiction to the United Nations arms embargo on South Africa and also to a letter sent by the Prime Minister to me over a year ago, saying that no such military equipment was being supplied? Therefore, will the right hon. Gentleman give us an urgent statement from the Lord Privy Seal on Tuesday?
Mr. Pym: I am not aware of the facts surrounding that matter. I doubt whether it will be possible or appropriate to make a statement before the debate, but I shall convey that request to my right hon. Friend.
Mr. Nigel Forman: If not next week, then some time between now and the Summer Recess, can my right hon. Friend hold out the prospect of a full debate on the important question of trade union immunities, in the light of the Government's recent Green Paper?
Mr. Pym: I should not like to make such a promise. However, I acknowledge the great importance of the issue and the great interest of all hon. Members in it. I shall bear the request in mind. If my hon. Friend has another opportunity to raise the matter he will no doubt take it.
Mr. Wm. Ross: Has the right hon. Gentleman seen the prayer in my name and those of my right hon. and hon. Friends, asking that the Firearms (Variation of Fees) Order (Northern Ireland) 1981 be annulled?
[That an humble Address be presented to Her Majesty, praying that the Firearms (Variation of Fees) Order (Northern Ireland) 1981 (S.R. & O. (N.I.), 1981, No. 80) dated 16th March 1981, a copy of which was laid before this House on 23rd March, be annulled.]
912
Is the right hon. Gentleman aware that fees for firearms certificates in Great Britain have been frozen pending the outcome of a review? Will the Government now withdraw the Northern Ireland order?
Mr. Pym: I regret that I cannot respond positively to the hon. Gentleman's request, but I shall try to find time for a discussion of the matter, probably upstairs. I shall not be able to do so next week, but I shall examine the possibilities and let the hon. Gentleman know.
Several Hon. Members rose——
Mr. Speaker: Order. I shall try to call all hon. Members who wish to ask a question, but that will be possible only if questions are brief.
Mr. Harry Ewing: Is the Leader of the House aware of early-day motion 351, criticising the Secretary of State for Scotland for his handling of the colleges of education question and the way in which he has planted questions with one of his hon. Friends who has no interest in colleges of education?
[That this House notes with regret that yet again the Secretary of State for Scotland has made a major announcement on the future of Scotland's colleges of education by means of Written Answer to an obviously planted Parliamentary Question; believes this to be both impolite and an outrageously disrespectful way of handling such an important issue and that continually to place honourable Members of this House in an inferior position to the Press in relation to crucial information on their constituencies is utterly unacceptable; and calls upon the Government to gather its courage and make available time for debate on their now discredited decision to close two Scottish colleges of education.]
Is the right hon. Gentleman further aware of a planted question on the Order Paper today dealing with the important subject of student intake numbers for the next session? Will the right hon. Gentleman please instruct the Secretary of State for Scotland to treat the House with some respect?
Mr. Pym: One has to make a judgment about oral statements and written answers. We have to get it right. If we have too many statements hon. Members complain that time is taken from debates. I have seen the early-day motion and will discuss it with the Secretary of State. Although I am not the best judge of the matter, it appeared to me that a written answer was the appropriate way to handle it.
Mr. Frank Allaun: Has the right hon. Gentleman forgotten that next Thursday is municipal election day? That is the day that he has chosen for a foreign affairs debate, which we have not had for a mighty long time. Is he aware that, similarly, on the eve of the poll many of us—certainly on the Labour Benches—are engaged to speak at meetings, and yet he has fixed business that will preclude our attendance? Is not that a shocking misdirection of business?
Mr. Pym: I do not believe so. I hope that the hon. Gentleman has a really good meeting on Wednesday evening and that he can catch a train that will arrive punctually on Thursday morning to enable him to be here for the foreign affairs debate.
Mr. Greville Janner: In view of the catastrophic state of the textile industry, may I draw the

913
right hon. Getleman's attention to early-day motion 319 signed by 84 hon. Members, on Royal Wedding souvenir T-shirts?
[That this House, recognising the deep recession and consequent unemloyment in the textile industry and the inevitability of foreign imports replacing royal wedding souvenir garments not manufactured in the United Kingdom calls for the reconsideration and revocation of the proposed ban on tee shirts bearing photographs of the royal bride and groom.]
Is the right hon. Getleman aware that I received a letter from the Lord Chamberlain's office saying that the longstanding convention must be upheld but that devices such as entwined Cs and Ds, bells, hearts, St. Paul's Cathedral, the rose of England, the daffodil of Wales and Union flags may be used? Will the right hon. Gentleman consult his colleagues to see who will make a statement on how the unhappy matter can be sorted out in a sensible way?
Mr. Pym: The hon. and learned Gentleman has made his point. I doubt whether a statement would be appropripate, but the matter could be considered.
Mr. Lawrence Cunliffe: Will the Leader of the House accept that it is imperative for us to have an early debate on the unemployment problems of the North-West, which has 357,000 people unemployed—12·5 per cent. of the total population in the region—a fact that is creating misery and distress? May I exhort the right hon. Gentleman to recognise that we need to debate thoroughly and quickly the causes of the anxiety of hundreds of thousands of people?
Mr. Pym: I hope that there will be an opportunity to debate unemployment in the North-West. We had a debate on London earlier in the week, when the subject of unemployment was raised. Just before the Easter Recess we had a debate on unemployment in the Northern region. I hope that other opportunites will emerge, but I cannot say how and when that will happen.
Mr. Robert Parry: Tomorrow the "People's Right to Work" march will begin in Liverpool, and will take a month to reach London, so will the Leader of the House speak urgently to the Secretary of State for Employment, who met a deputation of hon. Members this morning? Is he aware that without action we shall see more than 4 million unemployed, as forecast by Mr. Clive Jenkins of the ASTMS?
Mr. Pym: Unemployment is of the greatest importance and has been the subject most frequently debated this Session. There will be further opportunities for debate. I take note of what the hon. Gentleman says.
Mr. D. N. Campbell-Savours: How are discussions progressing through the normal channels on rearranging industry, trade and energy questions later in the week?
Mr. Pym: I cannot answer the hon. Gentleman's question without notice, but I shall pursue the matter.
Mr. David Winnick: Bearing in mind how infrequently we debate foreign affairs, will the right hon. Gentleman further consider having the debate on another day, as he knows full well that a number of right hon. and hon. Members who would like to participate will not be able to be here?
Mr. Pym: That will always be true to some extent, on whatever day the debate is held. The views that I have heard seem to show that Thursday is a day that will attract support from both sides of the House.
Mr. Bob Cryer: Is the Leader of the House aware of the debate on the pavement outside the Department of Employment this morning, with the Secretary of State, about unemployment, which occurred because the Government have persistently refused to arrange such a debate in their own time? Is he further aware that all the debates that he has mentioned have been in Opposition time? Is it not time that the Government gave the House an opportunity to debate their rotten unemployment policies, or are they too ashamed of them?
Mr. Pym: In January or February I arranged a day's debate in Government time on the important subject of unemployment, and we may be able to do so again, although I have no plans to do so at the moment. The House has given the subject a great deal of attention, which is appropriate.
Mr. John Home Robertson: Will the Leader of the House accept that many of us are not in the least impressed with the motions on the Order Paper concerning the future handling of Scottish business? In view of the assurances that the right hon. Gentleman gave to my hon. Friend the Member for South Ayrshire (Mr. Foulkes) two weeks ago about a debate on the future government of Scotland at an early date, may we now know when it is to be held?
Mr. Pym: The undertaking that I gave was to table the motions, which should provide an opportunity to debate the proposal contained in the all-party talks.
Mr. Guy Barnett: What statements can the House expect to hear early next week in connection with the local elections?
Mr. Pym: Will the hon. Gentleman repeat his question? I did not hear it.
Mr. Barnett: What statements can the House expect to hear early next week in connection with the local elections?
Mr. Dennis Skinner: Is it not time that we had a statement on the Government's policy on firms closing? Is the right hon. Gentleman aware that last week it emerged that Stone Platt, a fairly large firm, had been given £10 million in order to survive, yet 7,000 other firms went to the wall in 1980 and many more will do so in 1981? Is the right hon. Gentleman further aware that many workers are asking Labour Members how it is decided which firms to rescue with the connivance of the Government and the Bank of England and which small firms will go to the wall? It is high time that the Government came clean. They were elected on a policy—
Mr. Speaker: Order. The hon. Gentleman is supposed to be asking a business question.
Mr. Skinner: It is a business question.
Mr. Cryer: Answer.

Business of the House

  BALLOT FOR NOTICES OF MOTIONS FOR MONDAY 18 MAY
  Members successful in the ballot were:

  Mr. Hugh D. Brown

  Mr. Tim Eggar

  Mr. Robert Robert Rhodes James

  INNER LONDON EDUCATION AUTHORITY (EXPENDITURE CONTROL)
  Sir Brandon Rhys Williams, supported by Mr. Peter Bottomley, Mr. David Mellor, Mr. Nicholas Scott, Mr. William Shelton, Mr. Martin Stevens, and Mr. John Wheeler, presented a Bill to empower the Secretary of State to place a limit on the current spending of the Inner London Education Authority in any year: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed [Bill 130].

  STATUTORY INSTRUMENTS &C.
  Ordered,
  That the draft Employment Protection (Employment in Aided Schools) Order 1981 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Pym]

Orders of the Day
  Finance Bill

    (Clauses 1, 4, 19, 23, 27, 29, 88, 89, and 112 and Schedules 1, 2 and 11)
    Considered in Committee
    [Mr. Bernard Weatherill in the Chair]
    Ordered,
    That the order in which proceedings in Committee of the whole House on the Finance Bill are to be taken shall be Clauses 4, 23, 19 and 1, Schedules 1 and 2, Clauses 27, 29 and 88, Schedule 11 and Clauses 89 and 122.—[Mr. Brittan.]

    Clause 4

      Increase of duty on hydrocarbon oil etc.
      3.45 pm
      Mr. Peter Shore: I beg to move amendment No. 49, in page 3, leave out lines 1 and 2 and insert—
      '4.—(1) In section 6(1) of the Hydrocarbon Oil Duties Act 1979 for "£0·10" there shall be substituted "£0·115".'.
      The Chairman: With this we may take the following amendments:
      No. 2, in page 3, leave out lines 1 and 2 and insert—
      '4.—(1) In section 6(1) of the Hydrocarbon Oil Duties Act 1979 for "£0·10" there shall be substituted"£0·1191".'.
      No. 48, in page 3, leave out lines 1 and 2 and insert—
      '4—(1) In section 6(1) of the Hydrocarbon Oil Duties Act 1979 leave out 'a duty of excise at the rate of £0·10 a litre" and insert "£0·1382 a litre in the case of light oil and £0·115 a litre in the case of heavy oil".'.
      No. 1, in page 3, leave out lines 1 and 2 and insert—
      '4.—(1) In section 6(1) of the Hydrocarbon Oil Duties Act 1979 for the words "a duty of excise at the rate of £0·10 a hire" there shall be substituted the words "a duty of excise at the rate of £0·1382 a litre in the case of light oil and £0·1191 a litre in the case of heavy oil". '.
      No. 3, in page 3, line 2, leave out from 'for' to end of line and insert
      `for the words "a duty of excise at the rate of £0·10 a litre" there shall be substituted the words "a duty of excise at the rate of £0·1382 a litre in the case of light oil and £0·1285 a litre in the case of heavy oil".'.
      No. 5, in page 3, line 2, leave out from '1979' to end of line and insert
      `for "a duty of excise at the rate of £0·10 a litre" there shall be substituted "a duty of excise at the rate of £0·1095 a litre in the case of light oil and £0·10 a litre in the case of heavy oil".'.
      No. 7, in page 3, line 2, leave out `"£0·1382" and insert "0·1191"'.
      No. 47, in page 3, line 2, leave out '£0·1382' and insert £0·1285'.
      No. 42, in page 3, line 2, at end insert
      `save that in the case of aviation gasoline there shall be substituted £0·0077 per litre'.
      No. 9, in page 3, line 2, at end insert
      `except in the case of lead-free light oil when the duty shall be at the rate of £0·0691.'.
      No. 46, in page 3, line 3, leave out subsection (2) and insert—
      '(2) This section shall be deemed to have come into force at six o'clock in the evening on 10th March 1981, but as respects the period beginning at six o'clock in the evening on 10th March 1981 and ending at six o'clock in the evening of 5th May 1981 the rate of duty of excise charged by section 6(1) of the said Act

      917
      of 1979 shall, notwithstanding subsection (1) above, be £0·1382 a litre in the case of light oil, and £0·1382 a litre in the case of heavy oil.'.
      No. 445, in page 3, line 4, leave out `10th March 1981' and insert
      `5th May 1981; but as respects the period beginning at 6 o'clock in the evening of 10th March 1981 and ending at 6 o'clock in the evening of 5th May 1981, the rate of the duty of excise charged by section 6(1) of the said Act of 1979 shall, notwithstanding subsection (1) above, be £0·1382 a gallon'.
      Mr. Shore: For the convenience of the House, you, Mr. Weatherill, have decided to take with the Opposition amendments those standing in the name of the Leader of the Liberal Party and those tabled by Back Benchers on both sides of the House. I intend to speak, in particular, to amendments Nos. 48 and 49. We shall have a jumbo debate on the proposed increases in taxation on petrol and heavy oil, but that will not prevent us from having separate votes on the main individual amendments.
      With one exception, the theme that unites all the amendments is the desire to reduce, in varying degrees, the savage increase in the excise duties that are to be levied on petrol and derv. First, I shall say a few words about the one exception—amendment No. 9—which seeks to halve the proposed rate of duty on petrol in the case of lead-free light oil. Although it is a probing amendment it is an important one, because there are serious public anxieties about the effects of lead in petrol, particularly on the health of young children.
      The medical evidence—by no means unanimous—on the matter was submitted to Professor Lawther, and he reported in March 1980 in careful but generally reassuring terms. Shortly after the publication of his report, fresh and more disturbing evidence became available. According to an exchange of letters that I then had with the Secretary of State for the Environment, that evidence was to be carefully reviewed.
      Many months have passed since then and it is time that the House was informed of any further conclusions that the Government and their expert advisers have reached. If the evidence has mounted—if the weight of judgment supports the view that there is a health hazard in even a reduced lead content of petrol—I am certain that the House will feel that effective action should be taken. Strong fiscal encouragement of the use of lead-free petrol is the purpose of our amendment, but I wholly concede that other approaches, including direct regulation of lead content, could be equally or more appropriate.
      I come to the proposed new rates of excise duty. The arithmetic is unusually simple, as we are invited by the Government in clause 4(1) to increase the duty from its present level of 10p per litre to 13·82p per litre—an increase, according to my mental arithmetic, of just over 38 per cent. That is by far the largest increase that I can recall during my time as a Member of Parliament. It will fall heavily on all car users, both those who, for travel to work and other essential purposes, are obliged to use their cars, and those who choose to use their cars for leisure and other purposes.
      The increase also falls--although there may be some rebate on the VAT element—on commercial and industrial users. According to the Red Book and the statements made during the Budget and Finance Bill debate, the Government expect that this year the yield of the increased duties will be about £910 million from the duties on light oil and a further £270 million from the increased duty on
      918
      heavy oil for use in road vehicles—in sum, a total increase in taxation of £1,180 million. As if that were not enough, the Chancellor further proposes to raise £225 million by the increase in vehicle excise duty.
      We oppose those increases because they are a large part of the major fiscal deflation that is so lamentable a feature of the Budget and the Finance Bill. We also oppose the increased tax on derv, because it can result only in a further unwelcome increase in industrial and business costs. Because we believe that the Budget is perversely and wrongly deflationary, I shall not suggest any alternative tax measures to replace the revenue that I hope the Chancellor will lose in our votes tonight. It is a measure of the modesty of our approach that in respect of light oils and derv our amendments allow for the valorisation of duties on hydrocarbon oils. Valorisation is the underlying rationale for the figure of 11·5p per litre, which, in our first amendment, we seek to substitute for the Chancellor's 13·82p.
      If I understand correctly amendments Nos. 2 and 1, they simply intend to halve the proposed increase. I think that our approach is more logical, although if our amendment is lost we shall seriously consider the merits of the amendments standing in the names of the hon. Member for Bedford (Mr. Skeet) and his hon. Friends.
      The major new impost on petrol prices is demand-deflationary. Some people can use their vehicles less, or even do without them altogether, but the majority of motorists, private and commercial, use their cars and vans either for travel to work or for business purposes. They will therefore continue to consume the same quantity of petrol as they did before the Budget and Finance Bill increases. They will have less to spend, and will spend less on other goods and services, and so add to the deflation of demand in the economy.
      I note that it is no part of the Government's case that this is a fuel conservation measure. In the debate last year, when a smaller increase in excise duties on petrol was debated, there was a half-hearted suggestion that a fuel conservation objective might also be served but when pressed the then Chief Secretary—now the Secretary of State for Trade—said with his customary candour in Committee on the Finance Bill:
      "It has been suggested that this might be part of some wider energy conservation scheme. It is possible to argue that there is a modest, albeit intangible, energy conservation consequence in what is proposed, but this is essentially a revenue-raising step."—[Official Report, Standing Committee A, 20 May 1980; c. 104.]
      There was no suggestion by the Prime Minister in her somewhat amazing outburst at The Guardian lunch on 11 March, the day after the Budget—when she was infuriated by the criticisms of the Budget made by those in her own party and Cabinet—that fuel-saving had anything to do with the decision. She and the Chancellor had decided on a £10·5 billion PSBR, and the money was to be raised in whatever way they thought fit. The consequence and intention of clause 4(1) is simply to add to the deflation of demand, which is so lamentable a feature for the economy.
      Having made the general point about fiscal deflation, which we strongly oppose, I must make the further point that the motorist and road transport generally have been singled out for exceptionally harsh treatment in the

      919
      Budget. Hon. Members representing rural areas have been particularly vocal in their objections and I have no doubt that we shall hear more of their feelings during the debate.
      Mr. John Gorst: Will the right hon. Gentleman concede that those in rural areas are not as disadvantaged as he suggests? If one drives a car in a built-up area one probably gets 10 per cent. to 15 per cent. fewer miles per gallon than if one drives in rural areas.
      Hon. Members: Nonsense.
      Miss Joan Maynard: I disagree with the hon. Member for Hendon, North (Mr. Gorst). Speaking as one who represents rural workers, I agree with my right hon. Friend that car users will be hurt by the tax, and those in rural areas, particularly the workers, will be hardest hit. The level of car ownership in rural areas is about 70 per cent., whereas—
      The Chairman: Order. The hon. Lady must not make a speech.
      Mr. Patrick Cormack: On a point of order, Mr. Weatherill. We represent our constituents. The hon. Member for Sheffield, Brightside (Miss Maynard) represents a Sheffield constituency valiantly and well, but she does not represent a rural area. That should be put on the record.
      Miss Maynard: That is a pretty poor point, bearing in mind that I am sponsored in the House by rural workers. I am trying to make the point that they will be hurt more than anyone else by the increase in petrol tax. Many rural workers cannot get to work without a car, and the tax increase will be the final blow that will put their cars off the road.
      Mr. Shore: My hon. Friend the Member for Sheffield, Brightside (Miss Maynard) and the hon. Member for Hendon, North (Mr. Gorst) have anticipated the point that I was coming to. I want to give as balanced a view as I can of the effects of the taxes on the users of petrol and on different areas.
      Rural areas and their representatives have my sympathy on two counts. First, petrol prices vary in different parts of the country. In rural areas, particularly those in more distant regions of Britain, including large parts of Scotland and Wales and areas of East Anglia and the South-West, prices are significantly higher than in the main conurbations. That is within the observation of all of us who travel about our island.
      Secondly, in many of those rural areas no satisfactory public transport is available as an alternative to the use of the private motor car. The decay of public transport in those areas is a subject that requires separate and detailed debate, but the fact of its decline is not seriously in dispute, nor is the Government's failure to do anything to arrest it. If people are inclined to work—perhaps these days I should say "If they have the opportunity to work"—they have to use their cars in order to get to their places of work.
      The Chief Secretary does not accept those arguments about rural areas. Addressing the Kensington Conservative supper club—of all places—on 26 March this year, he conceded that those living in rural areas:
      "feel that they have to motor longer distances and they are more dependent on their cars."
      The right hon. and learned Gentleman sought to ingratiate himself with such motorists by saying that as
      920
      "someone representing a rural constituency I am well aware of the strength of that feeling."
      But he went on to slap down those people by asserting that
      "research that has been done suggests that rural motorists travel on average about 8 per cent. further each year than urban motorists, but, the nature of rural driving means that theitr petrol consumption per mile is significantly lower—perhaps by up to a third. So this would more than cancel out the increased number of miles."
      I do not know to what research the Chief Secretary was referring, but, although I represent an urban constituency, I am not persuaded that he has properly considered all the relevant facts in the matter.
      I emphasise to my hon. Friend the Member for Brightside and the hon. Member for Hendon, North that the case against the massive increase in excise duties is not basically a partial one. It is not confined to rural motorists. It is a case against a savage further imposition of taxes on the consumer and a case against a further massive demand deflation at a time when the economy is reeling under the impact of recession.
      In judging the imposition on the motorist there are two further points that we should bear in mind. First, it is not just demand-deflationary. Increased taxes will fall on business and commercial users of petrol and will, of course, be cost-inflationary as well. According to the CBI—I would welcome either a confirmation or denial of this point from the Treasury—about £320 million of the £910 million increase in excise duties on petrol—well over one-third of the total—will be paid by business and commercial users. That will inevitably increase their costs. I do not wish to exaggerate, but it is equivalent to, and totally offsets, all the alleged advantages—advantages that filled so many ministerial speeches in debates on the Budget and the Second Reading of the Finance Bill—that were supposed to flow from changes in the stock relief scheme, totalling £180 million; the increases in the limits of small companies corporation tax, totalling £12 million; the increase in the VAT registration limit, costing £5 million; and the increased initial building allowances, which will cost nothing in 1981–82.
      The cost of all those measures is less than the increased costs inflicted on business and commerce by the increase in petrol excise duty alone.
      So far I have confined my remarks to the increase in the excise duties on petrol and the increased costs for those who use petrol. I must also say something about derv. In this country, derv is used overwhelmingly, as far as I can judge, by commercial and industrial concerns. Even when allowance is made for reclaiming the VAT element, the increase in duty is very steep—over 17p a gallon.
      The Freight Transport Association has supplied some useful figures, which I hope all hon. Members have received, showing how United Kingdom derv prices, and the element of tax within those prices, compare with prices in other Western European countries. It is staggering to see that, following the Budget, the retail price per gallon in the United Kingdom will be 161p. Our nearest competitor in derv prices is the Federal Republic of Germany, where the retail price is 119p. Prices in all the other EEC countries are below that. The price in Italy is only 74p a gallon. Therefore, derv prices are one-third higher in Britain than in Germany and more than twice the level in Italy.
      Mr. Tim Eggar: Is it not true that when the right hon. Gentleman's party left office there was

      921
      a differential in favour of petrol—in other words, derv prices were higher than petrol? Furthermore, there was a wider differential then than there is now between the nearest EEC country and Great Britain.
      Mr. Shore: It is possible that that imbalance between the two parts of the taxation had something to do with the voting situation in the House at that time and the votes recorded by the Conservative Party. However, I should want to look closely into that before making a considered reply.
      There is an astonishing gap between the two. There is no doubt that it is the weight of taxation that makes the main difference. The tax is now taking 83·8p per gallon on derv in the United Kingdom, as against 54·1p in Germany and a mere 13 per cent. in Italy. That is ludicrous. That is why, in amendment No. 48, we have sought to ensure that whatever happens to petrol the Committee will have the opportunity for a separate vote on the new rate proposed for heavy oil.
      One of the most extraordinary features of the Government's thinking, as expressed in their fiscal and other policies, is that they apparently have little regard to the price competitiveness of British industry. I detail not merely the increase in derv duty, and how that compares with Europe, but the major increase in usiness costs that the increase in petrol duty will have. Far from setting themselves the objective of reducing costs wherever possible to promote competitiveness—in spite of the other terrible burdens, such as high interest rates and exchange rates—the Government go out of their way to increase the costs placed on British industry. That is a major charge that the CBI and virtually all business organisations make against them.
      We are not discussing a one-off increase in petrol duties, after a long period when no change has occurred, because last year excise duties resulted in an increase of 10p per gallon on petrol and in 1979, in the first Conservative Budget, excise duties were raised by 10p. That is a remarkable loading of costs on the motorist and the system of road distribution, which is predominantly the system under which goods move in Britain.
      Some hon. Members will remember, probably better than I, because I was otherwise engaged, the fierce debates in 1977 when my right hon. Friend the then Chancellor of the Exchequer proposed an increase in petrol excise duty. There are hardened men on the Treasury Front Bench, as we know, but there must occasionally be a blush on their cheeks—I welcome the Secretary of State for Energy. He has not begun to blush yet, but I am sure that he will, especially if I read his contributions to the debates—when they recall the hyperboles of denunciation that they let loose on the Labour Government for their proposal in that year. I remind the Chancellor of the Exchequer of what he said on 9 May 1977:
      "Our complaint is that this is a selective increase in a selective expenditure tax.
      He continued:
      "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 at home".—[Official Report, 9 May 1977; Vol. 931, c. 937.]
      He went on to say that he would much prefer to raise VAT than to single out the motorist. He has done so much
      922
      damage on VAT, and that may be why he does not feel that it would be right to consider that alternative now. Those words were used—that massive onslaught on what my right hon. Friend the then Chancellor had the audacity to propose when he introduced a 5½p increase. My vocabulary does not extend to the denunciation that a 20p increase in tax so richly deserves.
      4.15 pm
      There has been much talk in the papers about meetings between the Chancellor and his team and some of his Back Benchers. We have been led to believe that, stubborn and wilful as the Treasury team is, they may nevertheless be contemplating some minimum concessions—the old business of throwing a small bone to a hungry dog in the hope that he will be content and that after a little growling he will go back to his kennel. I hope that Conservative Members will not be satisfied by any such gestures made this afternoon, particularly if those gestures are confined to a concession on derv. We are talking about taxation that amounts to £1,200 million this year—one half of which goes in costs and the other half straight on to deflationary demand.
      I hope that right hon. and hon. Members will support both Opposition amendments Nos. 48 and 49. If they cannot bring themselves to do that I hope that they will have the courage and tenacity to pursue their own amendments into the Lobbies, where, if they are fortunate, we may support them later.
      Mr. T. H. H. Skeet: I have listened with interest to the right hon. Member for Stepney and Poplar (Mr. Shore). He referred to the argument used by the Treasury about the comparative performance in urban and rural areas. There is an enormous hole in that argument because four-star petrol in mid-April was priced in North Scotland at 160p per gallon, in Norwich at 152p and in Manchester as low as 149p. Therefore, even if there is an 8 per cent. gain it would be lost in the additional price paid in various parts of the country.
      Amendment No. 2 seeks to reduce the increase to lop on derv and petrol. Amendment No. 1 seeks to reduce the increase on derv alone.
      This is a time of cumulative burdens on industry and commerce with high interest rates, a strong pound, excessive rates and high energy and transport costs. I have taken two or three examples at random. I can put my case succinctly if I read extracts from two letters that I have received—the first from the Freight Transport Association dated 27 April 1981:
      "The Budget has increased the tax on fuel by a massive 38·2 per cent. &which when coupled with the 15 per cent. increase in vehicle excise duty adds over £300 million to the annual costs of operating goods vehicles. As a result, distribution costs have gone up by between 3 and 4 per cent., a not insignificant amount when one considers that such costs represent, on average, some 16 per cent. of industrial costs."
      I received another letter on 9 April this year from Wincanton Transport. It read:
      "If additional taxes have to be raised, I believe that it should not be done through increases in taxation which make it more expensive to manufacture products in this country than our competitors can manufacture them abroad."
      I received many other letters but I confine myself to quoting from two.
      I shall make only three points about derv. The tax imposed on derv in Britain is the highest in Europe. That

      923
      is surprising when Europe covers an area which is our best market. We are unique in Western Europe in that we have indigenous oil reserves.
      The right hon. Member for Stepney and Poplar quoted prices in pence per gallon. I refer to the other column of the table to which he referred which is even more interesting. It shows the tax take in pence per gallon. The tax take in the United Kingdom is 83·8p per gallon. For our nearest rival, Germany, it is 54·1p. In Italy, which is at the bottom of the list it is 13·1p and in the United States 6·4p. One can see why industry is not in a competitive position and why there is the need for corrective action now.
      The huge disparity across the board in prices in the United Kingdom and Western Europe was totally unsatisfactory before the Budget. The 20p on derv has simply aggravated that position.
      Seven years ago, during the Lib-Lab pact the duty on petrol and derv was increased by 10p. Eventually 5p was removed from the duty on petrol. It is high time that we restored the balance. I hope that the Chancellor of the Exchequer will be wise and accede to the proposition that lop should come off derv and that petrol and derv should be priced separately.
      Mr. Ioan Evans: I have heard reports that the Cabinet met earlier today and that there will be a concession on derv but not for the private motorist. Would it not help if the Chancellor of the Exchequer made a statement? That would make more sense because then we could put den/ out of the way and concentrate on the problems facing private motorists.
      Mr. Skeet: That was not a helpful observation. I gave way to the hon. Gentleman to give him an opportunity to put a question to me. His question is for others to answer.
      Mr. Evans: Will the hon. Gentleman give way again?
      Mr. Skeet: No. I want to economise on time. I want to give other hon. Members the opportunity to take part in the debate.
      The price-earning relationship in the United Kingdom is unfavourable. That is apparent from three figures. In the Federal Republic of Germany it takes 25 minutes to earn the price of a gallon of derv. In France it takes 35 minutes and in the United Kingdom 44 minutes. The earning capacity of the people involved is important in assessing comparative advantage.
      In the United Kingdom we treat derv as petrol and tax it accordingly. In Europe it is priced against a cheaper product—gas oil. In Western Germany and France there is a greater tolerance towards diesel. In both those markets 10 per cent. of the market is occupied by diesel cars as compared with 1 per cent. in the United Kingdom. The tax on derv in the United Kingdom is tantamount to an anti-diesel car tax.
      The natural advantages of the diesel engine have been ignored consistently by Governments. One of the advantages is that its operations are lead-free. The diesel engine is also more efficient than the internal combustion engine. One is about 15 per cent. efficient and the other over 20 per cent. efficient.
      I do not know what the Chancellor of the Exchequer will decide, but I can make a suggestion. According to my rough calculations, in a full year the reduction that I suggest will cost him £135 million. He has the advantage
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      of four months to the end of July when the Bill receives the Royal Assent. Therefore, the cost this year will be under £100 million.
      I shall tell the right hon. and learned Gentleman how in my opinion he should recover the money. He could tackle the general betting duty. He could put the on-course duty up from 4 per cent. to 6 per cent. and the off-course duty up from 7½ per cent. to 10 per cent. That would provide him with the necessary moneys.
      I turn now to the subject of petrol. There are several arguments put forward by Government. The first is that as a percentage of the retail price the tax is lower now than it was in the decade leading up to 1973. That of course applies to the United Kingdom. However, the combined duty is one of the highest in Europe. In Italy and Denmark is it higher. France, Belgium, Ireland, The Netherlands and the Federal Republic of Germany have lower rates. Top of the list is 61 per cent. In the United Kingdom it is 54 per cent. and in the Federal Republic it is 44 per cent.
      The other argument is that the petrol price in the United Kingdom is mid-way in the European league.
      Mr. Stephen Ross: Does the hon. Gentleman concede that the Isle of Wight is nearly at the top of the league and that only Italy is above us? Is he aware that four-star petrol on the Isle of Wight is between 166p and 170p per gallon? It is not the place to buy petrol. In April the price was about 174p a gallon. That is why we gripe against the Chancellor of the Exchequer.
      Mr. Skeet: I agree that the price is high on the Isle of Wight. The hon. Gentleman will have to examine the retailing system to discover whether prices are exorbitant.
      The retail price might be mid-way in the European league but the motor tax revenue and oil taxes in the United Kingdom are the highest in Europe. We have indigenus production of oil. The oil from the North Sea is particularly suited for refining into light petroleum distillates and yet the motorist in the United Kingdom has no advantage over his neighbours in Europe who have little oil of their own. That is a remarkable situation.
      European comparisons are unfavourable to the United Kingdom since Europeans draw larger salaries. In the United Kingdom the price of petrol is about 154p per gallon. It is about the same in Belgium. However, the gross hurly earnings for employees in manufacturing in April 1980 in Belgium was £3·26 per hour. In the United Kingdom it was £2·42 per hour. Obviously the Belgians can afford to pay a higher price since they are earning more. Workers in the United Kingdom are at a great disadvantage. Earnings in the Federal Republic of Germany were £3·18 per hour and in the Netherlands £3·15 per hour.
      The burden in the United Kingdom is also unevenly spread. In Northern Scotland four-star petrol cost 160p per gallon in mid-April. In Norwich it cost 152p in East Anglia 158p to 159p, in Manchester 149p and in Edinburgh 151p to 152p per gallon.
      4.30 pm
      The only remaining argument that the Government had on this score was the rural argument. Apparently that was derived from a report published by the Open University as recently as 1979. I am afraid that I do not accede to it. In the urban areas we do not really need the car for the simple reason that we can hop on a bus or go on the tube. But when it comes to the rural areas, frequently there are no buses and the use of cars is inevitable.
      Mr. Eggar: Would it not be the case that, just as my hon. Friend's rural constituents have to use cars to get to work, so my urban constituents have to use trains or buses? I do not remember him complaining when there was an increase in the cost of fares into inner London.
      Mr. Skeet: I fully appreciate the problem. Many years ago I took the opportunity of walking to work. It is good exercise and I dare say I could put the same idea to my hon. Friend.
      It is not much good making a broad comparison between urban and rural areas and saying that there is an 8 per cent. advantage for the latter. This is rubbish because of the mileage which has to be covered. In a Scottish constituency there is a vast mileage. In North Cornwall there is also considerable distance. Bedford itself is only 15 miles square but there is a problem there. My hon. Friend the Member for Croydon South (Sir W. Clark) lives in Box End in Kempston; it would do him the world of good if he walked to Bedford station.
      In my judgment the United Kingdom is well on the way to the £2 gallon of petrol which may be achieved within two years. The high incidence of tax, the need to improve refinery margins and the reduced amount of lead in petrol will all make their contribution. Government policy to cut the lead from 0·4g to 0·15g per litre will lower the octane rating from 97 to 94. This will necessitate expenditure of £400 million on new equipment in order to produce a suitable octane rating. Further, the United Kingdom will have to run an extra 500,000 tonnes of crude oil per year in order to accommodate the change. We know well in advance that if this is Government policy 4p or 5p more will be put on petrol. The county council in Bedfordshire says that the increases in both petrol and derv will add no less than £52,000 a year to its costs. Many local authorities will have similar difficulties.
      The Chancellor is well aware that, in a full year, to reduce the increase from 20p to 10p would mean that he would have to give up £455 million. He is also aware, because there is a suitable tabulation, that 1p on the basic rate of income tax would yield £800 million and that 1 per cent. extra on VAT would yield £780 million. I am not going to recommend either of those changes. I am going to refer him first of all to an extract from the Financial Times of 28 April 1981. According to Mr. Leslie Chapman:
      "Between £5bn and £10bn could be cut from annual government spending of £79·2bn if the Government took seriously its efforts to cut waste and improve efficiency in the public sector."
      This gentleman is not without experience. He is an ex-civil servant who has looked into this. No doubt he should be linked with Sir Derek Rayner so that they might jointly see what should be done.
      Mr. John Townend: Would my hon. Friend give the House some idea of the period over which these savings could be made? Is it not rather optimistic to expect that substantial savings could be made in this area over a period of six to eight months?
      Mr. Skeet: Sir Derek Rayner has been operating for some time and he has not been able to accommodate reductions of that order. It would take some years to achieve them. At the same time it is well to know that there is considerable waste in Government expenditure and that this is a problem area on which we should concentrate.
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      I have noticed that the cash Contingency Reserve for 1981–82 works out at £2·5 billion. The Government are not without cash to meet these requirements if they are assessed as important. But I shall simply be modest and I recommend the following prescription for the raising of the additional taxation. Beer might be increased by 6p a pint instead of 4p, cigarettes by 18p for 20 instead of 14p, spirits by £1 a bottle instead of 60p and wine by 35p a bottle instead of 12p. That would give the Chancellor all that he requires.
      I promised the Committee that I would deal with this factually. It may be noted that I have stressed the importance of derv and that I have put petrol in second place. I appreciate that the Government have to collect their revenue in a time of crisis. A month ago I recommended to the Government that this was the time to assess the prospects of industry and commerce. I hope they will take seriously the arguments put forward. On the Conservative side of the Committee there are a number of hon. Members who share my view that something has to be done to help industry because it has had so many charges placed on its back. This levy on derv, if unchanged, could be the final blow.
      Mr. David Penhaligon: The effect of amendment No. 5 would be to abolish altogether the tax increase on diesel and to allow a 5p increase on petrol. The net cost of this would be about £0·85 billion. we recommend this to the Committee, first, because obviously it would help keep down the cost of transport, and, secondly, because the Budget is unnecessarily deflationary and putting this extra money in circulation would help to relieve some of the economic effects that all of us are experiencing in our constituencies.
      In Britain we live in a desperately centralised economy. Commerce is centralised and power is incredibly centralised. Indeed, one would not argue that this was completely true, but there is some evidence to suggest that unemployment is proportional to how far an area is from London. In my county unemployment is 16 per cent. It is very high in Wales and in Scotland. There is clearly evidence to suggest that the only area where unemployment is not greatly above the national average is London. This is because the British economy is centralised politically and commercially.
      The effect of the Government's proposals to increase massively the tax on transport will increase the disadvantages for those areas which are a substantial distance from London. My area is not that different from other areas which are some distance from London. It is difficult to envisage a single commercial activity which is not dramatically affected because of the great burden of the increased cost of transport, whether it be in agriculture, tourism or mining, and whether it be taking goods to Cornwall or bringing the goods produced in Cornwall to the rest of the country. That represents a massive transfer of taxation away from the centre to the periphery of Britain.
      Surely no one would argue that an increase in petroleum and diesel tax is other than a penalty on areas which are far from London. Moving goods is the straight commercial argument, why diesel deserves greater consideration than petrol and the reason why we wish to increase the differential between the two. We have a slightly guilty

      927
      conscience about what happened to the price of diesel and petrol in 1977 and would like to see that corrected when the opportunity occurs.
      Secondary to the commercial effects and the question of centralisation, in the rural areas there is the problem of getting to work. The right hon. Member for Stepney and Poplar referred to a reduction in rural transport, but in rural areas there has never been much of a transport system. Until 20 years ago people lived so close to their work that they could either cycle to work or walk, but now that they have to go further to work they go by car. It is not true that people in some of the more remote rural parts of my county have ever gone to work by public transport. There are statistics available to back that statement.
      We in the rural areas are in difficulty not because of the demise of public transport but because the areas are rural and people have to travel perhaps 15 or 20 miles to get to work.
      The distances are greater than the distances across the constituencies of most hon. Members and would cover perhaps five, six or a dozen parliamentary constituencies.
      In these rural areas low pay is a statistical problem analysed from Westminster but a real problem for the people who live there; 25 per cent. of my male constituents earn less than £75 a week. The knock-on effect of the cost of transport is such that the penalty of working is increased. Before the general election I admired the way in which the Tory Party constantly drew attention to the "why work?" syndrome. It was right to do so. But virtually every action the Government have taken since they came to office has made the problem worse, whether by changes in the tax system, marginal fuel costs—
      Mr. Martin Stevens: No reference has been made in the debate to the substantial swing back of rate support grant from the cities to the rural districts, so much so that in many rural districts there has been either no rate increase or even a reduction. Will the hon. Member take that factor into account in giving his evaluation of the Government's performance in respect of rural areas?
      4.45 pm
      Mr. Penhaligon: Whether there has been a swing back of the rate support grant to the rural areas depends on which year is taken as the base. It can be argued that going back for eight years there has still been a transfer of the rate support grant in the wrong direction. I accept that that is a point, and I accept that some areas—not mine, unfortunately—have done quite well out of the change in the rate support grant system. Just going through the figures I can recollect, it is not the poorest rural counties that have benefited most from the change but the more prosperous rural counties near London.
      Constituents, whether the Chancellor's or mine, who have no alternative but to use their private transport to go to work are the only ones who pay the full commercial price. The travel to work of constituents who live in London or in other urban areas, or even in rural areas near a reasonable bus service, is subsidised, enormously in some cases. The only people who pay the full commercial price of getting to work, without one farthing of tax rebate or subsidy, are those who are forced to use their private cars in rural areas, and they are among the lowest paid workers. I sometimes wonder whether the Chancellor has any idea of what a really rural area looks like and the distances and costs involved in travelling.
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      The difference in petrol price between the urban and rural areas does not stand commercial examination. I accept that the necessity to carry petrol a long distance from where it is produced involves extra cost. It cart be argued that the difference in price of one or two old pence a gallon can be economically justified, but not the price differences now between some urban and rural areas of 20p or 25p a gallon—as much as the price of a gallon of petrol not many years ago.
      My hon. Friend the Member for Isle of Wight (Mr. Ross) said that the Australian Government had taken powers to stop oil companies from making these big price differentials and had forced them to keep the price in rural areas similar to the price in urban areas. If such powers can be taken by another Government, surely our Government should look again at this problem.
      The suspicion exists in rural areas that the big oil companies are exploiting their local monopoly position and increasing it by gradually closing some of the smaller petrol stations. That cannot be justified on any basis.
      Mr. Ioan Evans: The hon. Gentleman is making great play of the difference between rural and urban areas, but is it not right that all those who will be going by car to vote in the county elections on Thursday, whether in London, Cornwall, Wales or the shire counties, will be paying twice as much for petrol as they did before the Government came to office? They are all being affected, although the hon. Gentleman is right to draw attention to the rural areas.
      Mr. Penhaligon: I am not sure that it is quite twice as much.
      Mr. Evans: It is.
      Mr. Penhaligon: I stand corrected. I am looking forward to the county council elections. My party has a degree of optimism that it has not had for many years. It is a chance for people living in rural areas to express an opinion on what the Government do on the motion we are debating today seven days before polling day.
      The British people cannot comprehend how it is that the only industrial country in the Western world which is self-sufficient in oil has not been able to give them a farthing's advantage on the price of fuel. The petrol price in Britain is much the same as it is elsewhere, and the price of diesel is higher than it is anywhere else. The suspicion is that petrol and derv would not be any more expensive throughout the country if we had never found oil in the North sea. I cannot understand how the country can be so foolish as not to be willing to pass on at least a percentage of one of the few God-given advantages we have to the British people. I do not claim that oil and petrol should be priced as thy are in the United States, but is is unfair that the British people should have no benefit at all.
      Amendment No. 5, which we support, will abolish the tax increase on diesel and will allow five pence on petrol, at a cost of £800 million. That £800 million will help to correct the over-deflationary aspect of the Budget and, therefore, I and my colleagues commend the amendment to the Committee.
      The Chancellor of the Exchequer (Sir Geoffrey Howe): I hope that it will be for the convenience of the Committee if at this stage I respond to the point made by the hon. Member for Aberdare (Mr. Evans). Three alternative approaches have been presented by the official Opposition, my hon. Friend the Member for Bedford (Mr.

      929
      Skeet) and the Liberal Party. I propose to address myself primarily to those three main groups of amendments. In effect two alternative approaches are involved. One is the approach suggesting an across the board reduction in the duty on derv and petrol. The Opposition propose a reduction of 12p on both. The Liberal Party proposes a reduction of 15p across the board and 20p in respect of derv. My hon. Friend the Member for Bedford proposes a reduction of 10p in both. As an alternative, the official Opposition and my hon. Friend propose amendments confined to derv alone.
      A number of other amendments are also under discussion, including an amendment dealing with lead-free petrol. That was referred to by the right hon. Member for Stepney and Poplar (Mr. Shore). I propose to deal with the arguments advanced on those amendments at the end of the debate. At this stage, I intend to indicate the Government's position. I shall do so quite briefly, because this is not the centre of today's debate. We reject the whole of the central analysis offered by the right hon. Gentleman. He proffered it briefly, and I dismiss it with equal brevity.
      It is important to consider the road fuel duty increases in the context of the whole Budget strategy, which is designed to restore the health of the economy and to secure a proper balance between spending, taxation and borrowing, and it arrives at a judgment which produces that effect. The Committee will not have failed to notice that in recent months a number of signs have indicated an improvement in the economy in various respects. For example, there have been improvements in the private housing market. In addition, there have been improvements in the forecasts recently reported by the CBI as well as other signs which indicate that our strategy is on course. It is important that we should keep it so.
      It is always easy to single out some feature of any Budget's tax proposals for particular criticism, but the proposals cannot be taken separately:they hang together. It is my judgment, and the judgment outside this place, that it would not have been possible to reduce interest rates had we not then taken action to limit public borrowing to the £10·5 billion that we have in mind. The danger of higher public borrowing, particularly on the scale foreshadowed by the right hon. Gentleman, is that it would risk throwing away that improvement in interest rates as well as the prospect of continued improvement in the fight against inflation. In the present context, that inevitably meant the prospect of higher taxes. It resulted in a failure to index personal allowances, which we shall be discussing next week, and it required me to raise no less than £2,400 million from taxes on expenditure.
      My hon. Friend the Member for Bedford has already suggested that there is scope for further increases in some of those taxes. It may be that other hon. Members will make similar suggestions. However, it must be remembered that any proposals for increases of that kind must be set against the impact of such increases on the commodities and industries affected as well as on realistic revenue yielding capacity, which must be balanced.
      The Budget raises £500 million from additional taxation on tobacco, £225 million from taxation on vehicle excise duty, £370 million from taxes on beer and about £130 million from taxes on wines and spirits. Even those large increases taken together raise only just over £1,200
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      million. In order to get the right conclusion to the total Budget, that left another £1,200 million to be found. Obviously, I considered all the options extremely carefully, as I know my hon. Friends would wish me to do. I considered the impact on the community as a whole. I concluded that that sum had to be raised by the taxes on petrol and derv that I have proposed.
      I assure hon. Members that all the easy alternatives that have been urged upon me by my hon. Friends in correspondence and discussion, and those suggested by my hon. Friend the Member for Bedford today, were considered carefully, as they should be.
      As gambling is the least popular vice, probably the most popular alternative was the proposal suggested by my hon. Friend for higher taxes on gambling. However, the total revenue from all gambling taxes is only about £500 million a year. That structure of taxation was considered by the Rothschild Commission when the Labour Government were in power. In the light of that advice, I made increases in the gaming taxes in the 1980 Budget which became effective only from last autumn.
      I doubt whether any Chancellor would be reluctant to obtain the maximum amount of revenue possible from gamblers rather than from motorists, but any further large increase in gambling taxes would fail to raise anything like the £1,200 million needed. The general betting duty was considered by the Royal Commission on gambling, which argued that the present rate was already dangerously near the point at which illegal bookmaking would flourish and that to raise it would run a real risk of serious social evils by once again driving gambling underground.
      Mr. Peter Temple-Morris: Has any of my right hon. and hon. Friends suggested that my right hon. and learned Friend should raise the taxation on gambling to the extent of £1,200 million rather than a much smaller sum as part of the combination of other measures to raise the necessary money?
      Sir Geoffrey Howe: Of course not, but those taxes were increased last year after a considered judgment founded on the Royal Commission report. I can assure my hon. Friend that, even in the more modest context which he has urged upon me, there is a real limit to what could be done.
      Some of my hon. Friends have made other suggestions which I do not propose to deal with at this stage. Instead, I shall listen to any further comments that are made during the debate before discussing those.
      One suggestion worthy of mention is the extension of the car tax to caravans. That would raise only £ 5 million or £10 million, and again one must bear in mind the industrial implications. I would not want to repeat the experience of the caravan industry when the Labour Government were in power, when the then Chancellor doubled the rate of VAT on caravans to 25 per cent. One must take that kind of consideration into account when reaching these judgments.
      I therefore came to the conclusion—reluctantly as one would be bound to do—that in order to find the extra £1,200 million I had to look to the duty on petrol and derv. The 20p increase will raise £910 million on petrol and £270 million on derv. The reduction implicit in the Oppositions's amendments of 12p across the board would reduce the total yield by about £750 million. The reduction proposed by the Liberal Party would reduce the figure by

      931
      about £1 billion. Indeed, it might be even larger if all the Liberal proposals were accepted. In round figures, the amendment proposed by my hon. Friend the Member for Bedford would reduce the yield by £600 million.
      Any of those alternatives would be quite unacceptable. The increase on petrol was bound to be unpopular, but in my judgment it was necessary and justified in this context.
      Sir Frederick Bennett: My right hon. and learned Friend has mentioned various statistics. By how much would the £900 million be reduced if there were a 5p cut in the petrol tax?
      Sir Geoffrey Howe: A reduction of 5p on petrol would reduce the yield by some £220 million, which is again a substantial sum.
      The tax on petrol is in fact less now than it was in 1950,. 1960 or 1970. As a proportion of the total price of petrol, it is now lower than it was throughout the decade up to the oil crisis of 1973.
      The right hon. Gentleman invited me to comment on the conservation argument. I must put forward the proposition that it is a legitimate argument to bear in mind. It was legitimate to restore the proportion of tax as one aspect of a policy to maintain conservative use of energy of that kind.
      5 pm
      As I believe my hon. Friend pointed out, before the Budget the price of petrol in the United Kingdom was the lowest in the European Community, with the exception of Germany. Since the Budget, the price has come broadly into line with the rest of the Community, and in real terms it is the same now as it was after the 1980 Budget.
      As the right hon. Gentleman pointed out, higher petrol duty involves, among other things, an increase in business costs. But, again, one must approach that whole area in the context of a Budget that was designed to meet the burdens still facing us in fiscal terms by placing those burdens as far as possible upon consumers and doing as much as was possible within that context to help the business community.
      One must point out, for example, that businesses obtain relief on the VAT element of the increase in petrol duty. The effect on business costs must in any case be set alongside the benefits brought to industry by the Budget. There is the £450 million full year relief from the change in stock relief. There are the proposals in relation to energy prices. There is a whole range of tax incentives for new and small businesses. Above all, perhaps, because this is at the centre of the Budget strategy, there was the reduction of 2 per cent. in interest rates at that time, bringing the total reduction to 5 per cent. since last summer.
      Mr. Shore: In the balance sheet of benefit and disadvantage that the Chancellor has drawn up on costs to industry arising from the Budget, he quoted the figure of £450 million for stock relief. But that is the total figure. I believe that the additional element in the Budget is £180 million. The CBI as well as Members of the House, would be interested to know how he calculates an additional benefit of £450 million. That is not the CBI's calculation.
      Sir Geoffrey Howe: The two figures are part of the same story. The first year relief from the changes in stock relief is worth £180 million. The full year relief is worth £450 million. That is the figure which results from the changes in stock relief.
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      As I have said, that is all part of a Budget centrally designed to keep us on the course to lower interest rates, which industry rightly regards as important.
      I also took into account the fact that many aspects of business are unaffected by the increase in derv duty, which applies to vehicles used on the roads, but not, for example, to farm machinery not driven on the roads or to fishing vessels. For ordinary buses making regular stops, the duty is refunded. Oil used in the production of petrochemicals is generally free of duty. The House will also have in mind the further limited degree of duty relief proposed in clause 5.
      I am also conscious—and I shall return to this in a moment—of the concern expressed on various grounds by Members representing rural constituencies. Clearly the Government are concerned to do everything possible to maintain the health of the countryside as part of our progress towards a healthy economy. For example, a problem which may properly be described as unique faces glasshouse growers in the horticulture industry as a result of distortions of competition arising from the preferential gas tariff enjoyed by Dutch horticulturists. We have considered that matter carefully in the light of the fact that the European Commission has accordingly sanctioned special measures of assistance to growers in a number of other member States. As some hon. Members will know already, my right hon. Friend the Minister of Agriculture, Fisheries and Food has today announced a scheme for glasshouse growers in the horticulture industry which conforms fully with the Commission's guidelines, under which a special adaptation aid worth £5½ million in the year will be provided for glasshouse growers in the United Kingdom for one year.
      Mr. K. J. Woolmer: If the Government are anxious to overcome the problems of unfair competition through different energy pricing, w are they doing nothing about the problems faced by the textile industry due to the feedstock advantages enjoyed by the American industry? In the light of the decision to which the Chancellor has referred, are the Government prepared to look at this matter again?
      Sir Geoffrey Howe: I understand the problems faced by the textile industry, not just for that reason. One of the causes of those problems has been the special advantage enjoyed by the competing American industry as a result of their feedstock position. That in itself is a consequence of the energy pricing policy followed until recently by the United States of allowing energy to be supplied to domestic consumers at below world prices.
      One of the repeated commitments at world economic summits, renewed at Venice, was an encouragement by all those there represented to Governments and countries to allow their energy prices to move to world economic prices. That is one reason why it would not be right for us to move in the opposite direction, why the Americans, even under the previous Administration, were moving in the direction of proper world economic prices for their energy, and why, under the newly elected Administration, they are moving further in that direction. That is one development which will help in the matter to which the hon. Gentleman has rightly drawn attention.
      I now give some special consideration to the question of derv duty.
      Mr. John Wells: My right hon. and learned Friend will be aware of the enormous pleasure and satisfaction that his statement will give, not only to the horticulture industry but to consumers. If the British tomato industry went west, which it was in grave danger of doing, the British housewife, who goes east all too frequently in other sectors, would face a grave danger in respect of future supplies. The Minister has therefore done a very good day's work for horticulture.
      Sir Geoffrey Howe: My hon. Friend the Member for Maidstone (Mr. Wells) has been such a consistent champion of that industry that no one could more appropriately present a vote of thanks than he. I am most grateful to him for it.
      I turn rather more widely to the question of derv. I would not enthuse at taking advice on this from the right hon. Gentleman, because when the Labour Government left office there was a differential in the opposite direction, with derv bearing a 5 per cent. higher level of duty than petrol. One of the first things that we did was to reverse that. In the light of the various representations that have been made, which were very well re-presented by my hon. Friend the Member for Bedford this afternoon, I have given consideration to the industrial case that can be made for reducing duty on derv. It is true that there is a difference between the positions of petrol and derv in the international price league table, and it is true that our derv price is the highest in the European Community, by contrast with the central position occupied by our petrol prices.
      Care must be taken, however, even in the comparisons that were carefully presented by my hon. Friend this afternoon. Retail prices are by no means a complete guide. For example, in the United Kingdom, more than 80 per cent. of derv is sold under contract at a negotiated discount from the standard price compared with the rather smaller proportion marketed in that way in other member States. Moreover, some taxes are rebatable in some countries and not in others. In addition, some countries discriminate against diesel-engined vehicles through their vehicle excise duties. A complex of factors must therefore be taken into account.
      Even taking account of all those factors, however, there is little doubt that we have been in the lead. As my hon. Friend pointed out, we have received representations from the Freight Transport Association, the Road Haulage Association and other representatives of the industry. The duty on derv now accounts for about 8 per cent. of road freight transport costs. That, in turn, feeds through into other business costs and thus into final prices. A reduction in the duty would therefore be of particular benefit to that industry.
      I propose to accept amendment No. 1 in respect of derv. [HON. MEMBERS: "Hear, hear".] That duty reduction will be of particular benefit to rural areas because transport costs play an important part. Although the reduction does not meet all the points that have been urged on me by my hon. Friends, it will be of particular benefit to rural areas and to the Scottish economy. It will also meet the concern widely expressed about the distribution cost of many commodities, ranging from food for livestock to beer and petrol, which is not unimportant.
      Mr. Eldon Griffiths: As my right hon. and learned Friend knows, and indeed hinted, every
      934
      gallon of petrol that is delivered to the pump is carried in a heavy wagon that uses derv. As a result of the tax increases on both derv and petrol, all the oil companies substantially increased the delivery charge to petrol pumps, usually by 6 per cent. My right hon. and learned Friend has wisely decided to reduce the figure for derv. Will he ensure, or use the Government's best offices to try to ensure, that oil companies reduce the surcharge that has arisen on the price of petrol as a result of higher derv costs? Will he try to monitor that and report to us on it?
      Sir Geoffrey Howe: Several of my hon. Friends are concerned about this issue, and I am grateful to my hon. Friend for the way in which he has put his point. Petrol and derv prices are only one facet of the concern experienced by the rural community. My right hon. Friend the Secretary of State for Energy will bear in mind my hon. Friend's point. Indeed, he has already considered that aspect. The reduction in the duty on derv would in itself reduce the haulage costs of oil and petrol delivery industries as well as those of other industries.
      Mr. Cormack: May I press my right hon. and learned Friend a little further? It is essential that consumers should benefit from my right hon. and learned Friend's welcome announcement. Steps should be taken to ensure that they do.
      5.15 pm
      Sir Geoffrey Howe: I fully understand my hon. Friend's point. My right hon. Friend the Secretary of State for Energy has discussed such questions with the oil industry. It is important to remember, as my hon. Friends point out, that retail petrol prices are generally set by the retailer and not by the supplying oil companies. At least to some extent, high prices in rural areas reflect higher retail margins as well as the policies of oil companies. They also reflect the reality of higher unit costs, which are inevitable in rural areas. In rural areas higher wholesale prices are charged in order to help to meet higher delivery and other supply costs.
      As far as I can detect, there is no evidence that wholesale prices to rural sites are being used to cross-subsidise urban sites. However, I appreciate the point about higher petrol prices in rural areas and its impact. Petrol is not the only commodity that is more expensive in rural areas. My right hon. Friend the Secretary of State for Energy has had discussions with oil companies and has drawn to their attention the need for them to take account of their social obligations to different parts of the community, and to do so within the context of competition within a market economy.
      These matters were the subject of an examination by the Monopolies Commission in 1979 and by the Director General of Fair Trading in 1980. I am sure that my right hon. Friend will want to draw the points that have arisen from this change to the specific attention of oil companies and will keep the matter under review.
      Mr. Douglas Jay: The right hon. and learned Gentleman told the House that his right hon. Friend the Secretary of State for Energy has had discussions with the oil companies on this point. Have those discussions led to any conclusions?
      Sir Geoffrey Howe: The discussions are part of a series of discussions that take place between my right hon. Friend and the oil companies on a number of matters and

      935
      at a number of times. It would be surprising and wrong if they did not take place. In the same way, the review of trading or monopolistic conditions is undertaken not only by the Monopolies and Mergers Commission, when invited to do so, but by the Director General of Fair Trading. My right hon. Friend will know the points raised and will bring them to the attention of the companies involved.
      Mr. Eldon Griffiths: I am sorry to press my right hon. and learned Friend on this matter, but it is of great importance to several of us who have yet to decide how to cast our votes. It is important that the issues should be clear-cut. When the tax on derv was increased by 20p, most of the oil companies immediately put an increased charge of 6 per cent. on their deliveries. They stated that the increase had arisen because of the higher tax on derv. That tax is now to be halved. If oil companies can increase charges in order to reflect the increase in the tax on derv, they should obviously reduce charges when there is a reduction in the tax on derv.
      Sir Geoffrey Howe: That is a valid point and I have sympathy with it. However, the reduction from 20p to 10p in the duty on derv will lead to a reduction of a corresponding size in the costs of road haulage to industry. The Government have no power, and given that we have a policy to try to maintain competition, it would not be right to seek powers for that specific end. It is right to ensure that oil companies in this respect, as in any other, should recognise that they are subject to the potential scrutiny of hon. Members, of the Director General of Fair Trading and of other agencies that are designed for that purpose. It is right that the matter should be brought to the industry's attention in this way. However, it would not be right for me to take, or to argue that I was taking, specific powers.
      Mr. D. N. Campbell-Savours: Will the Chancellor of the Exchequer advise truck drivers who call at pumps on motorways and other roads to tell the attendants serving derv that they want the 10p discount?
      Sir Geoffrey Howe: No doubt customers will be aware of the change that I propose to accept. They will not be slow to draw such matters to the attention of their suppliers.
      Mr. Robert Sheldon: The right hon. and learned Gentleman has still not informed us when the measure will take effect. If they are not to take effect immediately—which is most unlikely—what change is expected in revenue?
      Sir Geoffrey Howe: If the right hon. Gentleman had waited, he would have heard. The amendment that seeks a reduction of 10p in the duty on derv will take effect on Royal Assent. Until then, the position is governed by the Budget resolution, under the provisions of the Provisional Collection of Taxes Act 1968. Thus, the 20p duty remains in force until the Bill becomes law. As my hon. Friend the Member for Bedford will realise, that is broadly similar to the procedure followed in 1977 for the reduction in petrol duty. Some consequential technical amendments may be required. If necessary, I shall propose them on Report.
      The amendment will probably cost £85 million. That is modest compared with the total involved in this clause. It is necessarily modest. As a result, I can accept my hon. Friend's amendment. However, it would be unwise to
      936
      allow that to be reflected in an increase in public sector borrowing. I shall have no option but to ask people to pay the costs in some other way. There is a range of possibilities to be examined, and I shall also take account of what is said in this debate. In due course I shall bring proposals before the House.
      Attention has been drawn to the case for offsetting the cost by lower public expenditure. I need no encuragement from my right hon. and hon. Friends to seek lower public expenditure. I said as much in my Budget speech and also in the public expenditure White Paper. That is one of the matters at which we shall be looking hard in a few months' time in the annual review of public spending for the next year and later years.
      Mr. Jack Straw: The right hon. and learned Gentleman spoke of a range of possibilities for raising taxation to cover this £85 million. Since he has had about five weeks to think about the matter since the Budget, will he spell out what those possibilities may include? He has made this measly concession in the hope of gathering a few votes at the county council elections. Would it not be honest to spell out to electors at the same time how they will have to pay for this increase in other ways?
      Sir Geoffrey Howe: I have made it clear that I shall be considering the discussion on the rest of the clause before coming to conclusions. I have no hostility towards the prospect of further savings in public expenditure. As my hon. Friend the Member for Bridlington (Mr. Townend) has pointed out, there is great difficulty in securing offsets from public spending reductions within the same financial year. It is often difficult to make reductions of that kind when the year is under way without involving oneself in bad management, not least because cuts undertaken in that way often tend to fall in the expenditure which it is easy to cut quickly rather than that which should have the lowest priority.
      I have no intention of seeking to offset this loss by cutting public sector investment this year. I am well aware of the concern of many of my hon. Friends and others about the levels of capital investment. The Government have sympathy with those who argue for a switch in priorities. That is why we are providing for increased investment by the nationalised industries.
      Mr. Hugh Dykes: The Committee will understand my right hon. and learned Friend's point about the need for recoupment. As the margin of error in Treasury forecasts over the years has shown that the figures cannot be accurately gauged, would it not be better to see how the economy progresses before reaching decisions?
      Sir Geoffrey Howe: That is a beguiling invitation. If one allowed oneself to aim off for the largest margin of error that has emerged statistically over recent years and always take the comfortable view, one would be aiming off to a disastrous consequence. I must make clear that I shall deal with the matter in the way I have described. We shall give particular attention to the balance between capital and current expenditure in our annual review of public spending.
      Mr. Joan Evans: As the right hon. and learned Gentleman has had second thoughts on derv, will he not also examine the possibilities about petrol? The

      937
      alternatives that he has mentioned—gambling, beer and smoking—are luxuries. People are not obliged to spend money on those items. On the other hand, people need to buy petrol to get to work. That is where the right hon. and learned Gentleman is imposing the burden. Why is he taking £2,400 million out of the economy in a recession? Why is he imposing this tax on petrol?
      Sir Geoffrey Howe: I am sorry that I gave way to the hon. Gentleman. He has sought to make a speech that would be more appropriate in a general debate. It was not an intervention directed to the argument with which I was dealing, nor to any other.
      The central point is that it is important for the Government to maintain in a way that is as acceptable as possible the balance of the Budget as originally designed. For that reason, I have given close condideration to the arguments advanced by my hon. Friends and others. We must keep the revenue side of the account in the right position in relation to the other side of the account represented by expenditure. It is right to try to do so in a manner that secures the best results for the economy and for the community as a whole. It is right to consider the impact of what we propose on particular sections of the community, including the rural community. I have taken account of the representations that have been made in reaching my conclusions, which I commend to the Committee.
      Mr. John Horam: I welcome the intervention of the Chancellor of the Exchequer at this point in the debate. It shows a genuine sensitivity to the feelings of the House. His action was also wise, given the fact that what he intended to say had been clearly trumpeted abroad in advance during the past few days. The hon. Member for Bedford (Mr. Skeet), in his opening remarks, seemed to know what would be forthcoming only a short time afterwards. So it was wise in a double sense for the right hon. and learned Gentleman to say what he did when he did.
      However, that said, the Government's response to the undoubted feeling that exists on the Government Benches as well as on the Opposition Benches has been inadequate, because it does not deal directly with the problem. The main burden of concern expressed by hon. Members, particularly on the Conservative side of the House in the past few weeks, has been the effect on poorer rural dwellers and their cost of living. This is the heart of the matter. There is concern among all parties in the House over the cost of living and other difficulties facing people, particularly those on low incomes in rural areas.
      The plight of these people was summarised by the Chancellor of the Exchequer himself in the debate in 1977. The right hon. Member for Stepney and Poplar (Mr. Shore) has already referred to that speech. The situation was clear-cut then. It is worse now. There have been the problems of school transport and school meals. There have been increased costs brought about by Government measures and other measures. Over the last two years there have been cuts in shire county appropriations for public transport in the rural areas. The dependence on the car is far greater now than in 1977 when the right hon. and learned Gentleman went to extremes of hyperbole in his condemnation of a 5p a gallon increase imposed by the then Labour Government.
      938
      It is thus hypocrisy for the Government now to come forward with a 20p increase, a rise of 38 per cent. in the tax rate, and then to meet the problem with a concession for the horticultural industry and a concession on derv. Those concessions go no way to deal with the problem met by hon. Members on both sides in their constituencies. Conservative Members know that people in the rural constituencies are not worried about derv or the horticultural industry. They are worried about their own cost of living and, to quote again the right hon. and learned Gentleman, the reverse yield gap between being able to work and not being able to work. The concessions that have been announced fail to go to the heart of the matter.
      A more general point arises. The Government say that there are burdens that must be borne. However, those burdens must be borne fairly. Hon. Members heard at Question Time today the evidence that is accumulating of the extent to which increases in taxation have not been fairly shared among the population. The Financial Secretary to the Treasury, who always goes abroad to make these speeches said, I think, in Geneva that the tax burden overall has increased. The fact is that the burden has increased twice as much for those on low incomes as it has for those on higher incomes. This is part of the general philosophy of the Government. Their philosophy is that burdens are to be unfairly shared. They are not shared across the board. The example we are discussing today falls into that category. The poorer country dweller will still face the high increase imposed in the Budget.
      Conservative Members, like all hon. Members, will rightly be concerned about the quality of life in country areas. It has become more difficult for many people, particularly the elderly, to live in country areas. They do not have the resources or the facilities that were once available to them at a reasonable price.
      Fewer people are living in country areas. There is still a drift towards the towns. The country needs a reinvigoration of the towns and villages outside the great metropolitan areas. If the rebirth of Britain is to take place, perhaps it should take place in the country areas. Government measures make that rebirth difficult to achieve—indeed, they are setting it back in every way.
      5.30 pm
      Mr. Allen McKay: Government policies are closing 1,000 primary schools, mostly in rural areas. Some pupils are already travelling between eight and 14 miles to existing schools. The Government's measures not only close schools but increase the cost of transportation to the already depleted educational facilities.
      Mr. Horam: The hon. Gentleman' remarks bear on the point that I was making. The difficulty of living a full life in the countryside has increased in many ways during the past two or three years. We were led to believe that the Conservative Party had a special care for rural areas. Many of its Members in the House come from country areas, and relatively few from urban areas. Yet the Government's actions, exemplified today by not changing their view about the 20p increase on petrol, have borne heavily on those whom they allege support them. They will have to explain that policy to their constituents in due course.
      Mr. Stephen Hastings (Mid-Bedfordshire): The hon. Gentleman is making a major point about the rural areas. I agree with much of what he says, but surely he will admit

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      that the change in the tax on derv will be a profound relief to farmers. A healthy agricultural industry is at the heart of a healthy countryside.
      Mr. Horam: The concession is only a small relief. There will still be a 10p increase, in addition to a lop increase in the last Budget and a 10p increase in the Budget before that. That gives a total increase of 30p. We are concerned with the plight of the less well off in rural areas. Agriculture in general is doing reasonably well, although some parts are doing less well. We should be concerned with the plight of those less well off. I thought that Conservative Members were concerned about that.
      Mr. Straw: Figures produced by the National Farmers Union show that farmers use five times as much petrol as derv each year. They use 17 million gallons of derv and 76 million gallons of petrol. The concession will have only a marginal effect on the farming communities.
      Mr. Horam: That leads me to my second point. The concession is mean. It will have only a marginal effect. The Government have chosen the concession because it costs little. We must not delude ourselves about that. The Government thought that it would be the best way to buy off the incipient revolt by Conservative Members. They wondered how little they could get away with that would prevent Conservative Members from voting against them. They chose derv because it costs only £85 million. They has the further meanness to defer the concession until the Bill receives the Royal Assent.
      Two amendments on the Notice Paper would allow the Government to introduce the concession quickly. That would be a more generous approach to the problem than waiting until the Royal Assent, whenever that may be. That will not happen for some weeks, or even some months. Farmers and the horticultural industry will have to pay that 20p until then simply because the Government are concerned about an additional £10 million on the public sector borrowing requirement.
      There is a further point. The arguments on transport grounds for a concession on derv are not that strong. The concession is right across the board. We must consider the arguments about the balance between the railways and the road haulage industry. Some may quote the relative disadvantage of the haulage industry in Britain as regards the cost of petrol in comparison with Europe, but in many respects it has considerable advantages. West Germany heavily regulates its haulage industry so that the railway industry can flourish. We must consider such elements in the broad argument whether we should differentiate between derv and petrol.
      The Government's mean approach to buying off a revolt with £85 million goes further. They say that they will offset the cost of the concession in other ways. I hope that the Chancellor will reconsider that. The Budget reduces the public sector borrowing requirement by almost one-third in one year. Yet the Government's forecast of the course of GDP is that it is decreasing by 2 per cent. That is massively deflationary by any standards. We are talking about only a small amount if we compare £85 million with the billions of pounds for the public sector borrowing requirement.
      The Government's decision to recoup to the £85 million invites the same fate that was suffered by the right hon. Member for Leeds, East (Mr. Healey) when he was Chancellor. He used the same words as the Chancellor
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      used today when he decided to drop a 5p increase. He said that he would recoup it at a later stage, but it never was recouped. The Chancellor is inviting the same fate by insisting that the money should be offset.
      Amendment No. 7 reduces the increase to 10p across the board for both petrol and derv. It has the same effect as amendment No. 2 tabled by the hon. Member for Bedford (Mr. Skeet). We will vote for our amendment. I hope that Conservative Members will vote for their amendment. The two amendments are the only ones that will have any real bearing on the difficulties that we are discussing today.
      Mr. Barry Henderson: I am grateful for the opportunity to speak to amendment No. 47. If my arithmethic is right when converting litres to gallons, the amendment will reduce the increase on petrol and derv by 5p. I shall attempt to reconcile the conflicting arguments between the interests of the general taxpayers and the interests of those who use petrol and derv. My attempt springs from strong feelings, especially in rural areas, about the increase. The difference in the strength of feeling is most marked between those living in rural areas and those in urban areas. That is reflected by the considerable difference in the balance of numbers in the Committee this afternoon. The number of Conservative Members compared with Opposition Members is about four to one. That is a reflection of the concern expressed to my right hon. and hon. Friends who represent rural constituencies.
      The more remote the rural constituency, the greater the concern expressed. The problem is that the person in a rural area needs to use a car more than the person in an urban area. He also has greater distances to travel. In the context of the remarks of my right hon. and learned Friend, it is important to remember that those in rural areas are more affected by the effects of transportation than anyone else. However, it is mainly the price differential as between rural and urban areas that has caused the particular sense of grievance among rural constituents.
      Obviously we have all been thinking hard about the various arguments advanced this afternoon, in which we have been involved intensively since the Budget Statement. I have considered carefully amendment No. 2, which would remove 10p per gallon from the increased price of petrol and derv, which I estimate would cost the Exchequer about £700 million.
      Mr. Robin Maxwell-Hyslop: It would cost £344 million in the remainder of this financial year, after Royal Assent.
      Mr. Henderson: My hon. Friend is right. I was talking of the effect in a full financial year.
      As a Member representing a broadly rural constituency, I have had to consider the interests of the rural dweller if the House of Commons accepted an amendment that would deprive the Exchequer of £700 million in a full year. In rural areas we are very much concerned to ensure the continuance of services of all forms. We have Ministers in the Scottish Office and the Ministry of Agriculture, Fisheries and food who have been especially sensitive to the needs of farmers and fishermen. They have reflected that concern by considerable support for those industries. To deprive the Exchequer of £700 million in a full year could have adverse consequences if we are to continue to ensure that the other special needs of rural areas are fully met.

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      I am conscious that the economic case for a reduction in the increase of the price of derv is strong. I hope that those who increased their prices substantially as a result of what they said were increases in transportation costs stemming from the increased price of derv announced in the Budget statement will be announcing at least a 50 per cent. reduction in the increases that they introduced so quickly the day after Royal Assent.
      In many of our discussions there has been reference to the relationship between prices in Britain and in other member states of the European Economic Community. The price of derv in Britain is significantly out of line with other prices in the European Community. I think that I am right in saying that, by contrast, four EEC countries have higher petrol prices than the price in Britain while only three other member States have lower prices.
      To revert to farmers, they transport their produce, which entails the use of derv.
      Mr. Dykes: My hon. Friend has taken the money price of petrol and has referred to the cost to the consumer in other European countries. Will he bear in mind that such comparisons must reflect average money incomes? In most other European countries such incomes are considerably higher. In Germany the ratio is 185.
      5.45 pm
      Mr. Henderson: I accept that important intervention. Another valuable tool in this discussion that has taken place since the Budget Statement is the paper produced by my hon. Friends the Members for Argyll (Mr. MacKay), Galloway (Mr. Lang), Moray and Nairn (Mr. Pollock) and South Angus (Mr. Fraser). It has been an extremely valuable paper. I have no doubt that it had an influence on my right hon. and learned Friend's decision. The arguments that my hon. Friends have adduced set out the facts and put into proper perspective petrol and derv prices. They refer to a number of other problems that are not concerned with taxation. I hope that the Government will take note of these matters, which may lead to further steps being taken to help deal with the specific problems that are facing rural areas when they increase the duty on petrol and derv.
      Above all, my hon. Friends have put the spotlight on the oil companies, their pricing policies and the way in which they operate their commercial policies. The difference in prices between rural areas and urban areas owes a great deal to those policies. These are policies which cause prices to be different in urban and rural areas and which lead to other unsatisfactory aspects of trade. The pressure from the commercial policies of the oil companies undoubtedly has the objective of reducing the number of independent people operating petrol stations in rural areas by concentrating benefits offered in their terms and conditions on petrol stations that they run in urban areas.
      It should be noted that 90 per cent. of our petrol sales—this applies certainly in Scotland—occur in urban areas. A marginal difference in the price of the 90 per cent. of petrol sales would be far more significant than the heavy on-cost that the petrol companies place upon those who run rural stations, who often provide a much wider range of service to the local community than that which is provided by stations in the large urban communities, which are concerned mainly to take a person's money and to wish him on his way as quickly as possible.
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      I appreciate what my right hon. and learned Friend said in what I thought was a sensitive speech. However, I hope that he will bear in mind the mood of the House of Commons on this issue in future Budgets and that he will do his best to encourage his right hon. and hon. Friends to do what they can to eradicate the anomalies that have occurred in the petrol supply industry.
      Mr. J. Grimond: The Chancellor's concession on derv will no doubt be welcomed, although it is not as great a concession as that for which Liberals hoped. It will still leave British industry at some disadvantage. I think that the rest of this speech will cause nothing but dismay. Throughout the rural areas there will be widespread disappointment that he finds himself unable to do anything about the increased tax on petrol.
      There were two notable features of the right hon. and learned Gentleman's remarks. First, he made no effort to explain how it is that he has changed his view. The views that he expressed about three years ago in the House of Commons were quoted by the right hon. Member for Stepney and Poplar (Mr. Shore). The right hon. and learned Gentleman made stringent attacks upon a proposed increase in the price of petrol of 5p a gallon by the previous Labour Goverment. He did not merely say that it was unnecessary to increase the price by that amount at that time. He said that the proposed increase was discriminatory and that it was a bad tax that would bear especially on a section of people who did not deserve that burden. He made no effort today to explain his changed attitude. One can only assume that he was being extremely cynical in 1977 or that he has no deep foundations for the type of Budget that he produces.
      It was at a late stage in his speech, and only when he was prodded by one of his hon. Friends in an intervenion, that the right hon. and learned Gentleman mentioned public expenditure. He has to find this extra taxation because the Government have failed to carry out their objectives by reducing public expenditure. They have failed to meet their targets.
      I wish to speak particularly about remoter areas, rural areas, farmers and the people who live in my constituency, but there is no doubt that the tax is contrary to the Government's general policy of bringing down the costs of industry and helping it to be economic. It affects a wider range of people than those who live in the rural areas.
      This year, my farmers and crofters face a decline in their surplus—if they have a surplus at all—of about 20 per cent. or more in real terms. At the same time, they read that civil servants are going on strike because they are offered only a 7 per cent. increase. The contrast is striking. Agriculture is in a serious condition. In my local paper, there are numerous advertisements for farms for sale and crofts to be disposed of. That was not so before the Conservative Government came to office. The Government are supposed to have feeling for and anxiety about what happens in the farming community and rural areas.
      On top of the disquiet in farming, there is the extraordinary increase of 20p on the gallon brought in by a party which strongly objected to an increase of 5p. The Treasury should realise that petrol is not the equivalent of beer or cigarettes, that it is not a luxury on which people squander their money. It is not like French scent which people buy for their wives and girl friends when they go

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      abroad. No Chancellor of the Exchequer would dream of putting such an increase of taxation on clothing. It may be argued that some people occasionally take their cars for a joyride, but some people buy clothes which are of better quality than is needed and some might say that they are extravagant. However, no one lumps clothes with whisky and cigarettes as a commodity on to which the Chancellor can slap on another 20 per cent. or so. As has been said again and again, petrol is not a luxury for people who live in the countryside, but an essential.
      The contrast in towns has been mentioned several times. Not only is there public transport in towns, but it is heavily subsidised. London Transport is extremely heavily subsidised. There is not only the tax on petrol, but the extraordinary difference between the price of petrol in my constituency and the price in London.
      Petrol in my constituency tends to be 15p to 25p per gallon dearer than in London. The Government should consider more closely why that is. Like many hon. Members, I have tended to say that the reason is the monstrous oil companies—the London-based monopolies. However, I am told that that is not so. I have been told—I feel bound to pass this on as I have accused them—that those companies deliver petrol at within a penny of the same price all over Britain. I wonder if that is so. Will the Government ask the Monopolies and Mergers Commission to investigate the whole matter? How does the enormous discrepancy arise—is it because of the smallness of the market, or does it arise from some other cause? We pay 15p to 25p a gallon more than the South. A table has been circulated showing how expensive petrol is in the islands off the coast of Scotland. It demonstrates that difference.
      Mr. William Hamilton: How much is being paid per gallon of petrol in Orkney and Shetland? That would be interesting.
      Mr. Grimond: Some weeks ago in Tyree, people were paying £1·90 per gallon. In Kirkwall-it was more in the outer islands of Orkney—the price was £1·64. In Stowaway the price was £1·68 and in Lewis generally it is £1·71. That is a considerable increase.
      Two reasons are given for this increase in tax. One is the extraordinary reason that all prices must be kept in line with one other. That is the nadir of economic fallacy and is curious coming from the Conservative Government. Everything must be made more expensive, or we shall be deprived of our place on the European league table or some such reason. If one wants to keep the price of petrol in line with inflation, it should rise by 8p and not 20p. I defer to our leading economic computer, my hon. Friend the Member for Colne Valley (Mr. Wainwright), who worked that out.
      If anyone seriously believes that the Western world will be saved by the amount of conservation which will be derived from raising the price of petrol by 20p. He needs his head examined. The question of conservation is important. There are almost illimitable resources of coal in the Western world and in the world as a whole, but I do not deny the importance of oil. However, those conservation needs will not be met by raising the price to such an extent. Something might happen if the price were raised by 200p—agriculture would collapse, among other things, but petrol would be saved. However, that is hardly the result which we want to achieve. Occasionally I feel
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      that the Government are obsessed with a suicide wish and that they are prepared to slaughter productive industry for the sake of a vague notion such as conservation.
      In my constituency, it is peculiarly annoying to see vast quantities of oil from the North Sea pass through the islands and to receive no benefits. It is an extraordinary feature of the Government's fuel policy that neither British industry nor the British people feel that they receive any benefit from the resources in the North Sea. They may be wrong—in a sense, they are wrong—but they are always told that the reason why the pound is so strong and why we cannot export is because of North Sea oil and gas. They are told that all the benefit must go to the Exchequer. They have the feeling that North Sea oil and gas are not assets, but drawbacks. I dare say that they are wrong in that, but I feel that it is equally wrong to deny British industry, agriculture, fishing and ordinary people any direct advantage from North Sea oil. Therefore, I would not be content with merely seeing that we are not penalised. I believe that we have a good case for reducing our fuel charges and the basic charges for industry below those in Europe.
      The increase is not in accordance with the Government's ostensible policy of helping British industry and farming to be more efficient. It is certainly not in accordance with their policy of helping small businesses. It is a direct impost upon production of a sort which is doing grave damage to the whole economy. It is proving fatal in some rural areas.
      Mr. Cranley Onslow: I am grateful to you for enabling me to catch your eye, Mr. Godman Irvine, as I am conscious of the fact that I have not been able to spend as much time listening to the debate as I would like, owing to calls of the House elsewhere.
      I shall briefly touch on a different subject, to which I understand my right hon. and learned Friend the Chancellor of the Exchequer has not referred. That matter arises under amendment No. 42, which relates to the duty levied on aviation gasoline. I shall be as quick as I can, as other of my hon. Friends may want to add something to what I have said.
      I shall explain the reasons for the amendment. The price of aviation gasoline has escalated in the past two or three years to such an extent that it is now extremely difficult to justify the differential between that aviation fuel and aviation turbine fuel—kerosene—which is much more widely used for commercial purposes and whose price is much greater than that of ordinary motoring petrol, on which the House has spent much time. The average price of aviation gasoline is now about £2·50 a gallon, which the average motorist might find more excessive than the price that he is now expected to pay.
      The consequences are considerable and damaging. I support the amendment because I wish to express that fact as forcefully as I can to my hon. and learned Friend the Minister of State. I hope that he will be able to devote a little time to responding to the arguments that I shall put to him. They have already been put to his Department.
      I have a letter from the private secretary to the Chancellor of the Exchequer to the secretary of the General Aviation Manufacturers and Traders Association, which has been making representations on behalf of the many users of aviation gasoline. The reply is a classic "Yes, Minister" letter. It contains all the familiar arguments about genuine problems of administration and

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      the difficulty over arguments about equity. However, the Government's stated view hitherto appears to be that it is difficult to do anything in particular for the sector of aviation that uses gasoline because it covers a wide range of activities, including leisure and sport, and because there are genuine problems of administration.
      6 pm
      I doubt whether the Government have yet understood the nature of the problem and why it is important. Aviation gasoline is used in relatively small quantities, but the principal users are important contributors to our economy. Business users, including air taxi and general aviation scheduled carriers, take 63 per cent. of the fuel used in this country, flying training accounts for another 25 per cent., and agricultural and other aerial work accounts for nearly 10 per cent. of the remainder. Sport and recreational flying account for only 2·5 per cent., so in advancing the argument I cannot be accused of being frivolous or not having a considerable justification for it.
      Because of the high price that our commercial operators are obliged to pay, they are at a disadvantage compared with others operating in the country fortunate enough to be able to use aviation turbine fuel, which bears a much lower rate of interest—in fact, the rate of interest to which the amendment seeks to reduce the rate on aviation gasoline. They are at even more of a disadvantage compared with their overseas competitors, which is particularly relevant for commercial operators who teach people to fly—not merely our own pilots but, in particular, those who have historically come here from overseas for commercial flying training. That trade is estimated at between £12 million and £15 million a year.
      I have been into the matter with care. There is considerable danger that most, if not all, of that trade will be lost within the next few months if the prospect is not held out to the industry of a real alleviation in the cost of fuel. My hon. and learned Friend needs only to look at the advertisements in aviation magazines to see that would-be pilots are being invited to do it in Dallas—that is to say, learn to fly. Comparative costs are so advantageous to American flying training schools that unless something is done quickly a great deal of business will be lost to this country altogether.
      I have a number of letters.
      Mr. Bill Walker: The flying training school in my constituency has advised me that even before the Budget it was losing business to its American counterparts because of the cost of avgas and value added tax, but the situation has now become impossible, which means the loss of millions of pounds in foreign earnings.
      Mr. Onslow: I am grateful to my hon. Friend. He was kind enough to pass me the correspondence. I have had correspondence from flying training schools elsewhere in the country, one of which is close to my constituency. The burdens placed on flying schools in an already highly competitive international market have caused them to lose business. The may now lose much of what they have retained.
      I hope that my hon. and learned Friend can show that the Government take the matter seriously and recognise that there will be no great breach of principle in applying
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      the same rate of duty to whatever type of fuel may be used for the same common purpose—that is, fuelling aircraft whether they burn petrol or kerosene. I hope that he will give encouragement and assurance to an important sector of the British economy to enable it to stay in business and to compete for still more overseas earnings.
      Mr. Joseph Ashton: Believe it or not, many Labour Members represent rural areas that have the problems mentioned by Conservative Members. My constituency has five pits and three massive power stations. A job applicant who has no car finds increasingly that he cannot get work, simply because rural bus services have been so decimated that it is almost impossible to travel. People want the power stations to operate on Christmas Day, but there are no buses. The Government expect people to get to work to produce the energy, and yet constantly penalise people by increasing petrol prices while giving no tax allowance when a car is used to get to work. They are making the job more and more difficult.
      In the country people without a car find it almost impossible to use the amenities that people in towns take for granted. Some of my constituents have to take a day off work to see the doctor because there is no bus service in the evening. If they leave the surgery at 6.30 pm, the last bus has gone and they cannot get back to their village, eight or 10 miles away. With unemployment at 2½ million, people are scared to take a day off work to see the doctor, so they continually put off getting the urgent attention that they need.
      It costs some people in my area £1 to draw the dole. They have to travel six or seven miles to prove that they are eligible for work. It costs them a £1 out of their limited income before they can sign on.
      Over the years, rural areas have been the backbone of the Tory Party, but it is the Tories who are stabbing them in the back. Conservative Governments and Conservative councils have taken away rural bus subsidies. In 1977, rural bus services in Nottinghamshire received £1·8 million a year, two-thirds of which came from the Labour Government. In spite of inflation, that figure has been cut to £0·6 million. Bus services across the country have been decimated. Many villages do not have a bus service on Sunday. People may have to travel 30 or 40 miles to visit the mental hospital at Balderton, which involves two or three changes of bus. On a Sunday, it may be impossible to get there. Patients at Rampton do not get visitors because the bus service has vanished.
      Where people are prepared to run an old banger because there are no bus services, they are continually under attack not only from the increase in petrol prices but in car taxes. The Royal Automobile Club is the backbone of the Tory Party, but members of the RAC are sending forms to their Members of Parliament asking them to protest loud and long about VAT on cars, petrol tax and the road fund licence.
      Many people in villages have to shop by mail order catalogue. Even Christmas shopping is disappearing. Small businesses are being liquidated because their customers cannot get to the towns. In the past, people would go to town to shop on Saturday, but now they go only once a month. They also buy a freezer and stock up with three months' supply of food from the hypermarket in the city, 25 miles away. Small shops in towns are going bankrupt because people cannot afford the cost of travel.

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      Many small rural bus services are going to the wall because of the cost of fuel and because the Tory county councils will not subsidise them. A man in my area ran a bus on Tuesdays, Fridays and Saturdays into Retford from a small village. For the rest of the time he took children to school, and took people to the illuminations or to see Nottingham Forest play football 30 miles away. However, it was the three days a week—the market day trade—that kept him going. He was losing £2,000 a year, which may seem a trivial sum, though it was not to him. The Tory county council could have picked up £1,400 of that £2,000 from the Government if it had paid £600 towards it, but it refused, because it relishes cutting and cutting. As a result, 500 people lose their bus service, a small business man cannot continue in business, and rural life suffers once again.
      People are trapped in the villages. It is all right for the gin and tonic belt, the cocktail people, the solicitors and lawyers who use these areas as dormitory suburbs and drive 20 miles a day to work, but the hard-up farm worker and workers in the rural areas are constantly hammered because of the actions of a party that many of them felt was there to support them.
      So far in this Parliament there have been two revolts by Tory Back Benchers on matters affecting the rural areas. One revolt concerned rural post offices, where the whiz kid from Marks and Spencer, Sir Derek Rayner, wanted to pay pensions, social security and unemployment benefits every two or three weeks, which would have closed those post offices. A Back-Bench Tory revolt stopped that, and I am happy about it.
      There was the proposal for bus subsidies, with the three-mile limit for schoolchildren. That would have had a tremendous effect, paricularly on Catholic schoolchildren, who travel long distances to school. In the other place the Duke of Norfolk stopped that. That did the Tory Party some good in the rural areas.
      Seven days from now there will be county council elections. If Conservative Members have any sense they will join us in the Lobby to defeat the Government's proposals. If they do not, they will be unable to disguise from their supporters in rural areas the hard-nosed, cynical attitude of the Tory Party—the party of the commuters, the suburbs and places such as Reigate, Esher and Epsom, which have handy train services into get people to the City.
      The message is gradually getting through that the Tories are not the friends of rural areas. The only way to disprove what I am saying is for Conservative Members to join us in the Lobby tonight.
      6.15 pm
      Sir William Clark: It is interesting to speak after the hon. Member for Bassetlaw (Mr. Ashton), who rather overplayed his hand on petrol and rural transport.
      I want to concentrate on strategy. I am sure that everyone welcomes the Chancellor's concession, particularly to the horticulture industry, and the lop reduction in the price of derv. That will have an effect on deliveries and so on, particularly in rural areas. No one, including myself, likes taxes. This is not the only tax in the Budget that I do not like. I do not like the so-called windfall profit tax on banks.
      Nevertheless, we must realise that the Government are overspending. It is all very well for Labour Members to say that we have North Sea oil and that we should take
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      advantage of it. We are getting the advantage of North Sea oil in propping up nationalised industries, in our spending on defence and on education, roads, and so on. The money has already been spent. Nevertheless, having taken the North Sea oil revenues we still have a deficit of about £10,500 million—roughly an overspend of £20,000 a minute. Clearly, any responsible Chancellor must try to keep down the borrowing requirement. Before the concessions, the petrol and derv tax increases would have produced about £1,200 million. If the lop reduction amendment is accepted, it will cost the Exchequer between £500 million and £600 million. I cannot see any way of recovering that sum, short of putting up the standard rate of tax by 1p or 1½p.
      The derv concession will cost the Exchequer about £90 million. With a contingency of £2,500 million, it might be thought that it could be contained. Certainly, that figure probably could be swallowed in the context of the whole Budget, but I urge my right hon. and learned Friend to make up the concession that he has given on derv by some other form of taxation.
      I do not entirely agree with my right hon. and learned Friend on the question of betting tax. Of the £510 million that the betting and gaming taxes produce for the Exchequer, about £110 million comes from the horse racing side, both on and off course, and the other £400 million comes from one-armed bandits, casinos, pin tables and so on. Irrespective of the report that my right hon. and learned Friend mentioned, it would be easy to make up the £90 million by putting a 25 per cent. extra tax on pin tables, one-armed bandits and casinos. I do not think that that would have a detrimental effect. I accept that if dog race and horse race betting are taxed too much, they may go underground, but that argument does not apply to casinos and one-armed bandits. I hope, therefore, that my right hon. and learned Friend will have another look at the betting tax. Whether he does that or finds some other means of raising money, I hope that he will find a way to make up the £90 million that he has conceded in the derv reduction.
      Petrol tax is a money spinner—£910 million from a 20p increase per gallon. I do not suggest that I like that, but we Conservatives must remember that although our manifesto said that we would reduce taxes and do what we could, as soon as we could, to reduce the standard rate, the top rate of taxes, and so on, it also stated clearly that in future the incidence of taxation would concentrate more on indirect tax than on direct tax. My right hon. and hon. Friends should not forget that. It is still part of our philosophy, regrettable though it may be that we have to raise this extra money. In my view, it is better to do what we said in the manifesto, namely, to tax spending rather than earnings.
      People are, of course, upset by taxation, but let me give an interesting statistic. A survey was carried out on petrol consumption since 10 March, when the 20p increase took place, and I am told that the consumption has dropped by 0·1 per cent. I would not say that that was a massive drop in consumption
      My constituency is not a rural one, though it has rural parts, and people there do not like the petrol tax, but, by and large, they realise that the sooner the country starts to balance its books the sooner we will get back to real, sound money.
      Mr. Eldon Griffiths: I agree with my hon. Friend that there is a greater sense of realism in the country, but he is surely wrong to deduce that fact from the drop in petrol consumption of only 0·1 per cent. It will probably soon be a drop of nothing at all, because people will absorb the increase. The point is, surely, that many parts of the country have no choice. The assumption that it shows a greater realism is, with respect, in this instance a little misguided.
      Sir William Clark: I do not think that the assumption is all that misguided. After all, people are still buying petrol and getting about.
      Mr. Maxwell-Hyslop: Because they have to.
      Sir William Clark: I accept that they have to get about, but do not let us exaggerate the effect of the increase in petrol tax.
      I hope that my right hon. and learned Friend will not reduce the 20p per gallon increase unless he can introduce immediately another tax to produce £500 million or £600 million. Many of my hon. Friends and I believe that our overspending is far too high. We must get it down, If any of my hon. Friends believe that the increase in petrol tax should be reduced, without compensatory taxation being introduced, I remind them that the PSBR would go up to £11,000 million. If we allow that to happen we shall be putting off the day when we can say, at last, that we have sound money and will become prosperous.
      Of course, Labour and Liberal Members will press my hon. Friends to vote for the 10p reduction, but the Opposition do not have the responsibilities of government. Many of them would spend, spend and spend again. I remind my hon. Friends that if it were not for this Government the PSBR would be from £3,000 million to £4,000 million higher. The first act of the Government was to cut £3,500 million of the projected increase in the borrowing requirement.
      Mr. Campbell-Savours: Is not the hon. Gentleman assuming that there would have been a similar contraction in our manufacturing base under a Labour Government?
      Sir William Clark: In economics, one cannot try to blame only one section, namely, the Government. Every hon. Member knows that the reason why we are not competitive is that for too long we have been paying ourselves too much money for not enough work. Labour Members who try to compare this country with Germany or France do not realise that the Germans and others do not have the same borrowing requirement as we have, and do not have to find £12,000 million or £13,000 million to pay interest on the national debt. That is what is killing us. I welcome the fact that the Government are trying to balance the books.
      Mr. Shore: We all too easily assume that we have a proper basis of comparability of our PSBR with that in other European countries. I put it to the House that a large part of our PSBR is simply reflection of the fact that we have a substantial public sector. If that sector were in private hands it would be raising money for investment, and so on, and every hon. Member would approve. We must not allow ourselves to be trapped into a purely national accountancy position.
      Sir William Clark: I agree with what the right hon. Gentleman says. He put the point better than I could have put it. It is one solid reason for less nationalisation and
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      more privatisation. We cannot say that we are investing in steel. The British Steel Corporation lost hundreds of millions of pounds last year and we were merely making up the losses, rather than producing assets. That is where the taxpayers' money and the North Sea Oil revenues are going.
      I hope that my right hon. and learned Friend the Chancellor of the Exchequer will not concede a reduction in the petrol tax unless he has another means of taxation to balance the £500 million or £600 million that will be lost.
      Mr. John Farr: My hon. Friend is repeating an error. A 10p reduction in the increased tax on petrol and derv would have cost £600 million, but the Government will not get the revenue until August, because of the mechanics of the Finance Bill. My hon. Friend must not keep saying that the amount involved is £600 million. Because of the mechanics of the Bill the sum involved is probably less than £400 million.
      Sir William Clark: I accept my hon. Friend's strictures. I was speaking on a yearly basis. On an eight-month basis, the figure is between £340 million and £350 million. However, the concession on derv will cost another £90 million, and I am convinced that the Chancellor must replace that sum and not add to the PSBR. In the same way, if the House agrees to a reduction in the proposed increase in the petrol tax, the money lost must be replaced.
      I am not convinced that the Government have tackled our public spending with sufficient vigour. Almost every part of the public sector wastes money. If we need a change in policy, we must have it. Of course, the upsurge in the economy will result in the revenue of the Exchequer increasing in the next year or two, but the Government must reduce public expenditure, because we cannot go on with the present level of over spending. The Government have made some inroads and had some success, but we still have a long way to go.
      Mr. William Hamilton: It was amusing to watch the reactions of Conservative Members when the Chancellor of the Exchequer was trying to establish peace in our time, or at least peace when the vote is taken.
      I was wondering what would have been the reaction of Conservative Members if the boot had been on the other foot and a Labour Government were introducing a petrol tax increase of 20p per gallon. We remember vividly the Tories' reaction when the Labour Government proposed an increased of 5p a gallon. Every Conservative Member, not excluding the present Prime Minister, was outraged. They referred to the devastating effect of a 5p a gallon increase on rural areas.
      The hon. Member for Croydon, South (Sir W. Clark) makes a fair point when he says that public expenditure must be controlled. The Labour Government tried to control it, with some effect, but it has got out of hand under the present Government, who pledged themselves to savage it. Indeed, public spending will be savaged still further in the next two years, and that will adversely affect the rural areas that Conservative Members claim to represent.
      When the Chancellor of the Exchequer spoke about his concessions on derv and horticultural heating oil, totalling about £90 million, no doubt he had in mind that there will be local elections in the rural areas of England next week

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      and that £90 million will seem like manna from Heaven. However, the right hon. and learned Gentleman added that the £90 million will be clawed back, though he was less than specific about where the blows will fall.
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      Since the Budget the Chancellor has been under great pressure from his supporters to reduce, if not eliminate, the 20p on a gallon of petrol. The Chancellor and his cohorts have been at pains to ask "Tell us where we can get £90 million? Where can we save it or where can we cut?" He had obviously done his sums and put forward several alternatives for saving. In the Treasury he clearly has carefully prepared proposals for finding the £85 million-£90 million. He must be honest. For far too long the House and the country have put up with deviations and wriggling by the Government. They know what the answer will be. Will it be a £90 million increase in National Health Service charges or increases in the price of school meals? We have a right to know where the increase will be.
      The Government have already clobbered the disabled, the sick, the poor, and others. I guess that the £85 million will be found from such sources because that has been the Government's record to date. That is my argument against the hon. Member for Croydon, South. Taxation that has been reduced in the past two years has been reduced in favour of the rich. Today's article in The Times spells that out. That article is based on a paper given by the Treasury to the Select Committee on the Treasury and Civil Service.
      The hon. Member for Croydon, South could have used the argument that has been used by other hon. Members, that the petrol tax increase might be defended on energy conservation grounds. That was argued in a leading article in The Guardian earlier this week. The Labour Government had different proposals to safeguard energy resources, based on mileages for different cars. That was howled down by the Tory Party. The Labour Government's tax proposals to save energy were much more progressive and less regressive than the present proposals. The charge that my hon. Friends and I make against this tax is that it is regressive because the people who have to use cars and, at the same time, have the lowest income will be hit hardest. Such people use their cars not as a luxury but as a means of getting to and from work, for they live and work in rural areas.
      It is a simple sum. Let us assume that a worker in an agricultural area drives a modest 6,000 miles a year—not a large mileage. He gets 30 miles to the gallon. That is 200 gallons times 20p—an extra £40 a year on his overheads, or about 80p a week from an agricultural worker's wage. Such people generally exist on below-average earnings. That is a clobbering for them.
      The charge that we make against the Chancellor is coupled with a further argument. If the Chancellor had not been tied to his election promise to cut direct taxation he would have put 1p on income tax, which would have been a fairer and more progressive way of clawing back the revenue that he seeks.
      The article in The Times implies that the petrol charge is an additional burden on those on lower incomes on whom the Chancellor has already placed an additional burden. The article has been quoted extensively. It says:
      "The Chancellor has … acted"—
      that is, since the election—
      "like a Robin Hood in reverse, increasing disproportionately the tax bills of families on low wages and substantially reducing the tax burden of those families in the very highest income brackets."
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      In other words, he has increased the tax burden on the agricultural worker in favour of relieving the City tycoon. The article continues:
      "the tax burden on the majority of wage and salary earners has also risen, with the exception of the highest paid … the typical family man, receiving two-thirds average earnings, will experience a rise in his direct tax burden of no less than 22 per cent. over the period 1978–79 to 1981–82. Well over a third of all adult, full-time workers earn somewhere between two thirds average earnings and the average level."
      That covers almost every agricultural worker in the country. One has to add those tax burdens imposed by the Chancellor on low-paid families in Devon and Cornwall, the Highlands and Lowlands of Scotland and rural England and Wales to the present clobbering of the Chancellor with his 20p.
      I listened carefully to the hon. Member for Fife, East (Mr. Henderson). He represents the feudal part of Fife. One can draw a line on the map between the advanced radical part of Fife and the rural, feudal area that he represents. He knows the enormous hardship that is caused to the fishermen and agricultural workers in his constituency. They will be watching carefully how he votes. It is all very fine his making the smooth, oily speeches that he is capable of making all the time, but when it comes to the crunch tonight he will loyally join his colleagues in the Government lobby. I hope that the farmers, the agricultural workers and the fishermen in East Fife note the difference between the hon. Gentleman's words and his deeds. They will judge him by his deeds—by how he votes and not by what he says.
      Mr. Henderson: The hon. Gentleman should also bear in mind what my constituents will feel when they remember his words—the awful things that he said the Chancellor might do to recover £90 million, and what kind of horrors might be produced if the Chancellor had to recover £1,200 million, which the hon. Gentleman is suggesting.
      Mr. Hamilton: I am not sure about the hon. Gentleman's point. I said that the Chancellor could have been fairer to the community as a whole by putting 1p on the standard rate of income tax. That would have been far less regressive. Because he made an extravagant and phoney commitment at the election that he would cut direct taxes he was excluded from doing that.
      All the unfairness, injustices and inequities of the Budget and every Budget since the election flow from that—the VAT increase, the petrol tax and the £10 increase in car tax. My hon. Friend the Member for Bassetlaw (Mr. Ashton) reminded the House that we are discussing not only the 20p increase on petrol but the £10 on the car tax—that is a 16 per cent. or 17 per cent. increase in one go. The rural constituencies are being penalised by their friends in the Tory Party. With such friends, who needs enemies? I hope that when people vote next Thursday they know who their friends are. Their enemies are sitting on the Government Front Bench. There is no sign that the problems are diminishing.
      The Chancellor of the Exchequer clutches at straws. He says that the Stock Exchange and the Financial Times index are looking pretty. The CBI changes its mind every week. One day it is optimistic and the next it is pessimistic. The situation will get substantially worse in the next two years, particularly for people in rural areas.

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      Such areas will be turned into rural deserts within months under this Government. Voters must understand where their intersts lie when they vote next Thursday.
      Mr. Maxwell-Hyslop: It falls to me to explain to the Chancellor of the Exchequer why it is necessary for him to accept amendment No. 2 which, translated from its technical jargon into English, means reducing by 10p per gallon the tax on petrol as well as on derv. Clearly the Chancellor fails to understand the difference between rural and urban areas. Not for a moment do I say that the petrol tax cannot be onerous in urban areas. I am sure that it can be. However, according to the remarks made by the Chancellor since Budget day, it is clear that he is not fully aware of the difference between the need to use motor vehicles in rural areas and the need to use them in urban areas.
      The factors which differentiate rural from urban areas include characteristics of the roads of which the Chancellor seems to be unaware. In many rural areas there are no pavements. That means that pedestrians have to walk along the same road surface as vehicles are driven along. Rural roads are undrained. Usually they are higher in the centre than at the edge. That is the only form of drainage because they do not have sewers.
      During a considerable proportion of the year when it is raining, the edges of the roads are flooded, and children walking to school have to walk in the middle of the road. That injects an element of danger which many parents wish to avoid. They do that by using cars to convey their children to and from school, even when the distance is not such that the school is physically out of reach of their children. That is another reason why, even for short distances, people in rural areas need to drive when they could walk if they were in an urban area.
      The second factor to which a number of hon. Members have alluded, is the differences in income levels. In many rural areas incomes are substantially below the national average. That is so in Devon and in Cornwall. Therefore, a flat rate increase in tax falls more onerously upon people with smaller incomes.
      The problems of travelling to work can be greater in rural areas because of the distances between where people live and where they work. Often the option of public transport is not available. People in towns often have that option, even if for reasons of convenience some people prefer not to take up that option and use their cars instead. In many rural areas no alternative exists.
      In Devon the unemployment rate is substantially higher than the national average. It is 1 percentage point higher than the national average. That presents particular difficulties not only for people registering as unemployed but for people looking for work. Motor vehicles are needed for seeking work.
      The petrol tax falls onerously on rural areas. It also falls onerously on many economic enterprises. It is a mistake to believe that only private citizens use petrol and that only productive enterprises use derv. The agriculture industry uses 76 million gallons of petrol and 17 million gallons of derv per year. Therefore, if we take 10p off derv only we reduce agricultural costs by 10p per gallon on only 17 million gallons, not 76 million gallons.
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      6.45 pm
      I hope that the Committee will agree to amendment No. 2. I hope that it will do so with the Chancellor's blessing: but if that is absent, we must still agree to it. If we do pass the amendment, the cost in this financial year will be about £345 million. It might be less than that because the Chancellor will get the revenue in the particularly busy holiday months of June and July. The reduced rate would apply to only one holiday month—August. I am being generous in estimating the loss of revenue for a reduction in the tax on both petrol and derv.
      The Chancellor has already conceded the case for derv. We are now therefore discussing the implications of a revenue loss of about £266 million in the remainder of this financial year after the Bill receives the Royal Assent in July. There are a number of ways to make up that revenue. I know that the Chancellor is worried about some aspects of the gambling tax. He is worried that the illegal bookmakers and runners might take over legitimate bookmakers' business on which the tax is raised. If he doubled the tax on one-armed bandits he would recover the whole of the revenue that he needs. I have not heard it suggested that one-armed bandits are likely to go underground. It is not clear how they could do that and still attract their patronage.
      I might add, in parenthesis, that if the ridiculous distinction between clubs and pubs was abolished, so that pubs had the same freedom as licensed clubs to have one-armed bandits, the revenue would increase, with a great deal of equity to the licensee concerned. That alone would make up the lost revenue.
      I concede the Chancellor's overall Budget sums. I am not criticising them but suggesting a positive and much less socially and economically harmful way in which he could get the revenue he needs while still reducing the tax on petrol as well as on derv by 10p.
      When the Chancellor increases the tax on petrol by 10p the local garage has to find another £100 of working capital for every 1,000-gallon tank capacity, because the petrol companies do not give credit but insist on being paid on delivery. More and more they also insist on the garage taking a full tanker load, or else they impose quite punitive surcharges for part loads. Therefore, a garage which stocks two grades of petrol with a tank capacity of 5,000 gallons under each petrol pump has to find overnight £2,000 more working capital, out of thin air, when the Chancellor imposes an increase of 20p per gallon.
      This is the sort of consideration that we need to bear in mind if we want to maintain the distribution network of filling stations throughout the country, and particularly in rural areas. It may be asked why the people do not buy petrol in the towns, because they use their cars to go there anyway? The short answer is that the filling station is also the local garage where repairs are done. It is necessay for people to have this facility because, especially if they have children to look after, they cannot afford the time to take their car into town and waste a day sitting around while someone works on it.
      Rural garages provide a composite service not only to the motorist but to people with garden mowers, and to farmers for their vehicles and machinery. The garages need a certain turnover on their petrol if it is to be economically viable to sell it at all, and if it is to make a contribution towards the general overheads. Sometimes the garage proprietor, who is also the mechanic, has to

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      leave a job to serve one or two gallons of petrol. He is not helped either by some unnecessary regulations and interpretations of them in regard to MOT tests.
      All these have acumulative effect. The Rubicon has been reached and Back Benchers have to say "Stop; this has gone too far." That is what amendment No. 2 in the name of my hon. Friend the Member for Bedford (Mr. Skeet) does precisely. It says that the Chancellor has got his detailed judgment wrong and that he needs to correct it, not by altering his macro-judgment of the total amount of money he has to raise, but by raising it differently.
      I have put forward a practical way in which he can raise the taxation. If he prefers, he might put ½p on the standard rate of income tax which would actually bring in more than the amount we are talking about. There are several options open to him. I understand why he does not wish to tell the Committee before the end of the debate which of the options he prefers. When the time comes for the Chair to put the question, without doubt many of his colleagues on these Benches will be taking the view that the reduction must be of 10p on petrol as well as on derv. This can only be achieved by going into the Division Lobby in support of amendment No. 2.
      Mr. Geraint Howells: I am grateful for the opportunity of supporting my hon. Friend the Member for Truro (Mr. Penhaligon) and my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond). What seems amazing to hon. Members on the Liberal Benches—and probably to the whole electorate and to Members on both sides of the Committee—is the way in which the Chancellor of the Exchequer has failed to learn anything from his predecessors' mistakes. Knowing of the previous petrol revolt—was it only three years ago?—it is incredible that he should have employed the same tactics of raising tax on petrol and thus severely penalising all rural dwellers. It makes one wonder whether there was a need for any of the amendments that have been tabled. If the Chancellor of the Exchequer had done his homework properly and looked after the interests of rural dwellers, there would have been no need for us to discuss clause 4.
      Reference has been made by hon. Members to the high percentage of unemployed in many constituencies. In Mid-Wales perhaps we are unique in more ways than one. In my constituency of Cardigan over 20 per cent. of the work force are unemployed. Many hon. Members are aware that I represent a county with the highest number of self-employed in the whole of Britan, 31 per cent. We have more small businesses and farmers than any other constituency in Britain.
      I feel sorry for the Chancellor because he has had to make a humiliating climb-down in the face of protestations from his Back Bench colleagues. He should have known that it was inevitable. He should have learnt a lesson from recent history. I am sure that many of his colleagues will join us in the Opposition Lobby and vote against the Government's proposals. Even the Tory rebels, in their heart of hearts, must agree that the Chancellor has not gone far enough and that his proposals still penalise unfairly a section of society. Our contention is that the rural economy has already been hit hard enough in the current recession and that the rises suggested by the Government make nonsense of their earlier promises to give a fair deal to rural areas and those who live there.
      The farming industry is already suffering badly from rising production costs. As an industry which is heavily
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      dependent on road fuel, using both petrol and derv in order to carry out its work, the increases would inevitably make production costs rise steeply once again and put additional stress on farm budgets which are already under strain, not only in Wales but in other parts of the country.
      7 pm
      The National Farmers Union calculated that the extra cost of derv, before the concession that was made this afternoon, which would have to be borne by the agriculture industry would amount to about £25 million this year. Farmers are also very bitter that even before the Budget derv was far more expensive than in any country in Western Europe, giving our competitors a distinctly unfair advantage. Also, Britain is the only country in Europe where derv is more expensive than petrol.
      It is not just the farmer who suffers from this unfair taxation. Town dwellers often do not realise—this seems to be true of Government finance Ministers as well—that most people have to travel a fair distance to work when they live in the country, and public transport is virtually non-existent. That means that a private car is a necessity, not a luxury, for most people, and that the rural economy is highly dependent on petrol.
      The average wage in rural areas is far below that in the towns, and the situation is made worse when there are tremendous price variations within the various price zones. In my constituency, for example, the car driver has to pay lop more for a gallon of petrol than does someone living in London. There is a great discrepancy over the whole of Wales—up to 20p a gallon. I hope that the Chancellor will examine the pricing zones and how prices are being worked out in various parts of the country.
      I draw the Chancellor's attention to a letter I received about the Budget from the director of education for Dyfed, Mr. John Phillips. I am sure that many hon. Members who represent rural areas have received similar letters from their directors of education. The letter reads as follows:
      "I have been requested by the education committee to express concern at the effect of the recent substantial increase in the price of petrol. In view of the scattered nature of the schools within Dyfed, the cost of conveying pupils must inevitably be high. The effect of the recent price increase will, however, add a sum of £70,000 to the estimated cost of conveying school pupils for the next financial year. It is also anticipated that the increase will have a significant effect on the general cost of the supplies and services provided by the authority and the county treasurer has estimated that this, together with the increased cost of conveying pupils, will amount to additional expenditure of around £250,000.
      During the past 18 months the education committee has been closely involved in curtailing expenditure on certain aspects of the education service, and it is, therefore, extremely concerned that, even with its reduced budget, it will be required to find a substantial amount in order to meet the increased costs for transport within the county."
      I know that our amendment will not be accepted, although it was forcefully put by my hon. Friend the Member for Truro, but I hope that many Tory Members who have criticised the Government and are wondering how their electors in the rural areas will respond to the Government's proposals will join us, with the Opposition, and vote in our Lobby.
      Mr. Woolmer: May I draw the attention of the hon. Member to the remarks made by the Liberal spokesman in Committee on the Finance Bill last year when considering the proposed increase in petrol tax? His criticism was that the Government did not go far enough. He went on to say that people had had four years of warning that petrol would

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      become extremely scarce and therefore expensive, and they had to adjust accordingly. Last year the Liberal Party accused the Labour Party of political opportunism in opposing an increase in petrol tax. Does this mean that the Liberals have changed their mind yet again?
      Mr. Howells: The short answer is that wise men change their minds; fools do not.
      Sir Frederic Bennett: I was so impressed by the speech made by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) that my contribution can be even shorter than I intended. I shall limit it to reinforcing two or three of his arguments.
      First, however, I should like to make a general point, which has not so far been mentioned in the debate. It is an almost Alice-in-Wonderland, paradoxical situation that we spend a great deal of time using diplomatic, political and other pressures to prevent the OPEC countries from raising their prices because, we say, of the disastrous effect that a rise in oil prices has on the economies of the countries of the rest of the world, including the Third world. We repeatedly go out and visit OPEC Ministers, saying "Do you realise the near total ruin that you have brought to so many countries?" Some of the OPEC Ministers respond; others do not.
      I have had a little international experience, and I wish that I could enumerate all the Arab producers whom I know who tease me by saying "You constantly talk of the enormous damage that a rise in oil prices does to your economies and then yor slam on large increases for the benefit of your economy which you say we have irreparably damaged."
      All Governments should meditate on this ridiculous paradox. Our debate today and the Government's attitude will be noted in other parts of the world when new pleas are made in the autumn not to wreck our economy by increasing oil prices.
      I am glad to speak after the hon. Member for Cardigan (Mr. Howells) because my family home, where I was brought up, is very close to his constituency in Montgomery. In a non-political sense, I am well aware that much of what I say about my constituency of Torbay and about Devon applies also to the part of the world that he represents.
      The Chancellor of the Exchequer made a Freudian slip in indicating the advice that he had received and the people from whom he had received it when, in his Budget statement, he announced the increases he would have to make. He grouped together in one section drink, tobacco and petrol, as though all three were luxuries. He was right about cigarettes and drink—they are genuinely luxuries—but he did not appear to appreciate—with great respect to him I do not think that he has yet appreciated—that petrol is no longer a luxury, any more than food is a luxury. It is an absolute necessity of life.
      Apart from the people whom we have already mentioned—the workers, especially farm workers, and the shoppers—I cannot believe that the Treasury experts have given a thought to retired people living in areas where there is no communal transport. It is not a matter of saying "Let them walk down the middle of the road." There are many people who cannot walk any distance in the middle of the road or on either side, whether the weather is dry or wet. There are many people who live in rural areas
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      where there is no alternative to the use of a car. Therefore, for many people petrol is not only an economic necessity; it is a social necessity for a way of life that successive Governments have imposed on those concerned by steps that have converted this country from one relying mainly on communal transport to one that now relies mainly on private transport. It is just as ridiculous to say "Let us go back to the former situation", as it is to say "Everyone should take a long boat and traverse the canals".
      The hon. Member for Cardigan knows that in some areas it is a question not of buses being unavailable on Sundays, but, rather, of no buses being available on any day of the week. How will people who collect pensions, visit the doctor and go to the clinic to collect their medicine be able to bear the increase in costs?
      The Chancellor again warned of how much revenue could be raised, bearing in mind the law of diminishing returns. However, there is no law of diminishing returns in respect of petrol, except in so far as we inflict further hardship on people. We can stop them from drinking, but we cannot stop them from using a car if they live in an area where no other means of transport is available. His reply to this debate will certainly affect my judgment of the way in which I behave.
      Mr. Eldon Griffiths: Everything that my hon. Friend said makes total nonsense of the Treasury argument that somehow it is all right because in rural areas people get more mileage per gallon.
      Sir Frederic Bennett: I quite agree. That is one of the more nonsensical of the suggestions that have been put forward.
      I should like to discuss the alternative methods of raising revenue. I have with me a bunch of letters nearly half an inch thick which I have written to the Chancellor telling him that from the very start I did not believe that we could or should cut so many millions of pounds from taxes and thereby raise the PSBR. Every letter that I have written has included suggestions as to how the alternative revenue could be raised. I would not be making this speech if I thought that the PSBR would have to be increased, nor would I be advancing these arguments were I convinced that that was so.
      I was obviously delighted about the 10p off derv. However, I would have preferred to have seen 5p off derv and 5p off petrol. I am concerned about the social requirements of the country as a whole. Such a decision would have been better. Ideally, of course, I should have liked 10p off both, but I certainly believe that if this cannot be so he should make some sort of gesture at this time.
      I have done my sums, but I am sure that my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) will correct me if I am wrong. I notice that he has his calculator ready. I calculate that if the duty on petrol was reduced by 5p, the real cost, because of technical Finance Act reasons would be about £130 million. My right hon. and learned Friend said that he was not prepared to lose revenue amounting to £1,000 million or £1,200 million. With respect, no one was asking him to. No such suggestion has been made. I would be content with a reduction of £130 million, matched by corresponding tax increases.
      I shall not read out all the letters that I have written to the Chancellor suggesting ways in which that sum could be raised. However, I should like to reinforce one suggestion. Those hon. Members who have clubs in their

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      constituencies are well aware that one-armed bandits are doing extraordinarily well. If they were put into pubs they would do even better. I have never understood why it is more moral to gamble in a club. I have never understood the ethical arguments involved. Indeed, if one-armed bandits were put into pubs it might even reduce the level of drunkenness, because some of the money would go into the machines. However, I divert from the main theme of my speech.
      If action were taken on one-armed bandits, to increase substantially the revenue from them, the Chancellor would raise not only the £90 million in respect of derv but the £130 million in respect of petrol. We would avoid the risks involved of driving other gambling activities underground, and there would be no damaging social consequences.
      Even at this eleventh hour, I plead with my right hon. and learned Friend not to do something that I am sure he will regret later.
      There is a theory among some Ministers that Back Benchers are always wrong. I have been a Member of the House for nearly 30 years, and I can recall occasions when Ministers have subsequently said "You were right after all". I hope that this is one occasion when the Chancellor will not have to say that.
      7.15 pm
      Mr. Austin Mitchell: I am so suffused with pleasure at being the third Labour Back Bencher to be called after three Liberals and one member of the "Fun Party", that I cannot follow the hon. Member for Torbay (Sir F. Bennett). However, I hope that his courage in the Division Lobby has the same high octane rating as the arguments that he mobilised.
      I am also concerned that the critics of the increase in petrol tax have locked themselves into the syndrome that there must be a compensatory increase in other forms of taxation if the petrol tax is reduced. There does not, because the whole essence of the argument is that the Budget increased tax too massively and that it was too deflationary in a severely contractionary climate. Therefore, there is no need for any compensation or mobilisation of alternative sources of revenue.
      I support amendment No. 49 which seeks to increase the petrol duty in line with the cost of living—an increase of 8p—and amendment No. 48 which proposes another 2p cut in the duty on derv in addition to what the Chancellor has proposed this afternoon. I support those amendments as part of the strategy to cut the tax increases in this disastrous Budget. Taken in conjunction with the increases in national insurance contributions last November, the Budget amounts to what must be one of the largest tax increases ever in British history. It certainly increases taxation as a proportion of GDP beyond the level experienced at the time of the Labour Government. It also increases the proportion of tax imposed on the average income of the average family beyond what it was at that time.
      It also does what is routine these days—betrays the promises and expectations held out by the Conservatives during the election two years ago. The most disastrous effect of the Budget's tax increases is that they add a £5½ billion deflation in 1981–82 to an economy which is already in acute depression.
      I am aware that Ministers are desperately trying to convince themselves that optimism is around the corner, and that has to be a massive effort because of the refractory
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      nature of the material on which they are working. At times it seems that if they saw the Four Horsemen of the Apocalypse they would regard it as a sign of better things to come. The hopes held out by Ministers that the economy is on the turn and that the depression is bottoming out are fallacious because they defy common sense. The economy has drastically cut down on investment. We are facing competitors who are still investing and in many cases still growing. They are making themselves more competitive in a tougher and harder world, whereas we are closing down capacity, scrapping plant, selling off machinery to our competitors, failing to invest and renew and carrying an increased and massive burden of unemployment and unused resources. In those circumstances, how can there be a prospect of competing effectively and recovering in the way in which Ministers hope?
      It is inevitable that those who have been in the Treasury for some time will try to stake what remains of their credibility on these prognostications. But it is sad to see the new Chief Secretary, who could distance himself from the disaster that in a sense he has inherited, going out on the same limb. It is even worse to hear the Chancellor using these chimeras and mirages to justify the cut in the duty on derv. He suggests that because there is a possibility of recovery here, which we believe will not materialise, the Government will cut the proposed increase in duty on derv. He bases his case on a hypothetical possibility of recovery which will not materialise because things will get substantially worse.
      In that situation, it is vital to reduce the deflationary impact of this disastrous Budget. The Government have locked themselves into a spiral of decline which means in effect increasing taxation and increasing Government spending to finance the unemployment, the depression and the setbacks to nationalised industries that the Government have precipitated. Those are the economics of bedlam, not of any possibility of recovery. The tax increases in the Budget must make the depression and the decline far worse than they would otherwise be.
      It may be too much to expect Conservative Back Benchers to agree with that diagnosis, now, but they will agree in a year's time, and in two years' time positively clamouring to agree. Nevertheless, one might at least expect them to be a little more energetic in eating their own words. Only four years ago, I fought a by-election at the very time when the Labour Government proposed an increase of 5p in this tax--one-quarter of the amount now proposed. Going from door to door in Grimsby I discovered how disastrous was the reaction to that. I heard on the radio and read in the press of the hostility of the entire Conservative Party to that increase. It is interesting to look back at the arguments put to me as a candidate fighting an election at that time—the arguments the Conservatives were putting.
      The hon. and learned Member for Solihull (Mr. Grieve) told us that because of that increase in duty
      "The number of cars sold is bound to be fewer …
      Solihull will suffer, the West Midlands will suffer, and the country generally will suffer".—[Official Report, 30 March 1977; Vol. 929, c. 488.]
      The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) opposed the increase because
      "the sheer price of petrol is too heavy … This is the sort of tax that one levies on luxuries—a tax in excess of the base value of the product—and I do not believe that we should continue to pile it up."

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      They said all that in 1977 about an increase of one-quarter of that which the Government now propose.
      The hon. Member for Barry (Sir R. Gower) declared:
      "This should be a red light to future Governments that they must not take the easy way and soak motorists as Governments of both parties have done in the past."—[Official Report, 9 May 1977, Vol. 931, c. 980–89.]
      The hon. Member for Braintree (Mr. Newton) did not see
      "why any Government should deliberately go out of their way to make it worse."
      He said:
      "the Government are deliberately adding to what has already been a vast increase in petrol prices …
      People in rural areas feel, and I agree, that this increase comes on top of what has already been a disproportionate burden on those who do not happen to live in one of the great metropolitan areas."—[Official Report, 28 April 1977; Vol. 930, c. 1616.]
      The hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) now Minister of State, Ministry of Agriculture, Fisheries and Food reminded us that in the North-East of Scotland
      "there is often no alternative form of transport …
      I ask the Chancellor to remember that the car is essential for the person living in the remote areas."—[Official Report, 29 March 1977; Vol. 929, c. 298.]
      And so it went on. That was the litany that attended a Labour Government proposing to increase petrol duty by a quarter of the amount now proposed by the Conservative Government as their contribution to the deflationary disaster that they are preparing for us. There is, therefore, every case not only for those words to be eaten but for this increase to be voted down.
      I must add here what is perhaps a sectional plea on behalf of people in my constituency who will be hit by the increase. A constituency such as Grimsby is peculiarly hard hit by a substantial increase in duty on petrol and, indeed, on derv. It is a somewhat isolated town which is heavily dependent on road transport due to the decline in its bus services. There is a huge surrounding area in which bus services are very bad and people are heavily dependent upon their cars. Many people live in the town and work on the Humber bank some distance away. Most of them travel to the Humber bank factories by car. The increase is therefore a substantial tax on those least able to bear it—those who are struggling to keep a car going because they need it to get to work. The increase hits them very severely indeed.
      Moreover, the people of Grimsby already pay effectively 6p extra on every gallon that they buy, due to the insane pricing policy of the oil companies that places a disproportionate burden on such areas. The oil is refined into petrol at a major refinery only a few miles away. It then trundles along in tankers and the people of Grimsby have to pay 6p per gallon more for it than those in most other parts of the country although they are nearer the refinery than anyone else. The price of petrol is therefore already a source of anger and bitterness in Grimsby and represents an extra economic difficulty which, as a development area, Grimsby has to overcome while other parts of the country that do not have that status are not subject to this disproportionate tax. The Government now propose to add a further massive increase.
      The people of Grimsby also bitterly resent the increased tax on derv. Despite the cut in that increase proposed by the Chancellor today, it is still a heavy tax on an industry vital to Grimsby, where transport is a major local industry.
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      The industry's costs will be substantially increased despite the cut announced by the Chancellor. Moreover, we are still paying far more for derv in this country than most of our Continental competitors. We shall still be paying far more than the 74p per gallon which is the effective price in Italy, the 97p per gallon in the Netherlands, 98p per gallon in Denmark and £1·11 in France. Yet we send far more of our business by road and make far heavier use of road transport, particularly in Grimsby but also nationally, than those countries. The increase therefore represents an unfair and disproportionate tax on the road haulage industry.
      The main reason for opposing the increases for both petrol and derv is the contribution that they make to the deflation that the Government are now carrying through. The Chancellor of the Exchequer, locked as he is in the straitjacket of his own piggy-bank economics, will try hard to achieve these increases, but Conservative Members who may be inclined to vote against the increases should bear in mind the real possibility that he is bluffing. Even one as locked into his straitjacket as the Chancellor may well be bluffing, because there is no need to increase other taxes to compensate for any loss accruing to his Budget strategy by cutting the increase in petrol tax. If he is not bluffing, he certainly ought to be.
      If there is a revolt tonight it will be on something which I believe is vital for the sake of the country and indeed for the Conservative Party if it is to have any credibility and any hope of not making the present disastrous economic situation even worse. It will be a warning to the Chancellor that he has gone too far. Enough is enough. It is time to rethink, and to think exactly what this disastrous strategy is doing to the country and how it can be reversed.
      7.30 pm
      Mr. Peter Mills: I welcome the opportunity to debate these amendments and the effects of the recent increase in fuel taxation. This is an important debate. I shall not take up the points made by the hon. Member for Grimsby (Mr. Mitchell). He made many alarming exaggerations. It does no good to exaggerate in that way. I am a fanner and I see signs of spring in the countryside. I also see signs of spring in the economic world in which I operate in the South-West.
      I must be frank and declare an interest. I live in a rural area, and I farm. Indeed, my farmhouse is a mile from the main road. Therefore, the increased tax on fuel affects me personally. The Government do not realise how strongly rural people feel. Rightly or wrongly, people feel that the Government do not understand the difficulties that are experienced in our rural communities. The increase in the tax on petrol and derv has brought those feelings to a head throughout the South-West and in areas such as Scotland.
      To be fair to the Government, I should add that many of the difficulties experienced in rural areas have nothing to do with them. We live at a time when things in rural areas are rapidly changing. Social and economic changes are taking place at a fast rate. However much one might like railways to continue as a means of transport in rural areas, it is just not on. It is all very well to subsidise bus services, but few people use them. Sometimes, when I am at a meeting, I ask members of the audience to put up their hands if they have been on a bus or train recently. Few people do so. The difficulties in rural areas are not altogether the result of the actions of this or any other

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      Government. I can only ask the Government not to add to the burdens experienced in rural areas at a time when so many changes are taking place.
      I have no doubt that the tax increases on petrol and derv will affect all those living in rural areas. Not only farmers and agriculture will suffer. In many ways agriculture is at an advantage when compared with the retired person or the small industrialist in one of our small towns or villages. Over the past few weeks I have fought to make the Government realise the effect of their actions on the rural scene. I have also fought to get them to realise the effect in towns and cities of the increased tax on derv.
      I am grateful to my right hon. and learned Friend the Chancellor of the Exchequer for today's announcement. It is interesting that as soon as the increase was made in the price of derv transport contractors increased their prices by 5 or 6 per cent. That is a big increase. We shall be interested to see what reduction will be made. I hope that my right hon. and learned Friend will give that careful attention. That is also why I fought for a reduction in the tax on derv. Derv is top of the list, because all the goods that go in and out of the South-West are conveyed by diesel. There are few railways left in the South-West, and that is true of other areas. It is interesting that the increase in derv meant that the Milk Marketing Board had to pay millions of pounds more for the collection of milk. That is not a very happy situation.
      My next point has already been mentioned, but it must be raised again; I hope that the Secretary of State for Energy will pay careful attention to it. The Chancellor of the Exchequer's remarks on petrol companies and the Office of Fair Trading have not been strong enough for me. Much more needs to be done. I hope that it will be clearly spelt out that if the promised reduction takes place we shall expect a reduction in petrol prices. Every gallon is transported by diesel lorries.
      Although I have looked into the matter carefully, I am still not happy about the costs of distribution and the other methods that petrol companies can employ to make it difficult for garages to compete in rural areas or to remain in business. I tried to stop an iniquitous practice. Small garages were being paid to fill their tanks in with concrete so that there could be no competition. As a result, people were being forced to go to the big towns for petrol. Therefore, I hope that my right hon. and learned Friend will make strong representations to my right hon. Friend the Secretary of State for Energy in order to ensure that the Office of Fair Trading considers the whole matter.
      Some of my Scottish colleagues have produced a good brief on the problems in Scotland relating to petrol and derv. Amen to it. The situation in the South-West is exactly the same. The brief makes the following recommendations:
      "The Director General of the Office of Fair Trading should review the monopoly situation in the field of petrol supply.
      The Government should review the law on monoply to ensure that it is not too narrowly drawn.
      The oil companies should recognise their social obligations and review, as a matter of urgency, the structure of petrol prices in order to establish a uniform wholesale price throughout the country."
      Discounts and the cost of transportation must also be considered. I hope that the petrol companies will not have the nerve to go to agricultural shows with banners and posters saying "We are the friends of the rural area, buy our goods." They must prove to me that they are the
      964
      friends of the rural scene. I am still not happy about that. The matter must be considered. I hope that an assurance will be given on that.
      The question of petrol and the rural car owner is a serious one. For a variety of reasons, depopulation has occurred. If the cost of petrol continues to increase there will be further depopulation of the rural areas.
      Mr. Cormack: Does my hon. Friend agree that the resulting depopulation will also create a bad imbalance in the age structure of rural areas? Many of our villages are largely inhabitated by the elderly. If depopulation continues, there will not be any vigorous young people left in the countryside.
      Mr. Mills: I could not agree more with my hon. Friend.
      I welcome the announcement about the horticulture industry. It will prove a great help and will be of great benefit, and I thank my right hon. and learned Friend for it. It is most important to obtain from the Government a better realisation of the effect of policies and legislation on the rural areas. I am sorry to say that more careful consideration must be given. If I can do nothing more, I can at least put down a marker with the Government. We are not happy about some of the effects felt in rural areas. I should like more confirmation of the Government's determination in these matters. I have already stressed that many factors are outside the Government's control, but the Government should not add to the problems. I hope that they will not do so.
      Mr. Dykes: As an urban hon. Member, I have enormous sympathy for the difficulties experienced in rural areas. Will my hon. Friend concede that for urban dwellers such as those in my constituency the day-to-day costs for families are often higher than those in rural areas? A classic example is rates. I am sure that the average rates in my constituency would be three times the average of those paid in my hon. Friend's area. Will he bear those points in mind?
      Mr. Mills: I shall certainly bear them in mind. I fear, however, that I should bore the House even more if I were to start to speak of the problems of urban areas and cities. I have deliberately confined my remarks to rural areas.
      I hope that the Government will consider asking a Minister to act as watchdog over the whole rural scene. I am not asking for a new Minister to be appointed; I am simply calling for some Minister to be responsible for these matters. We have a Minister to watch over the problems and difficulties of sport. It might be a good idea to have a Minister——
      The First Deputy Chairman (Mr. Bryant Godman Irvine): Order. This is not covered by the amendment.
      Mr. Mills: With great respect, Mr. Godman Irvine, I suggest that it is. If a Minister watched over the problems and difficulties of the rural areas, he would be able to advise the Government that proposed legislation would have harmful effects. I hope that my remarks are in order.
      I am grateful for what my right hon. and learned Friend the Chancellor has done. We have obtained the 10p reduction that I set out to get. We have obtained the horticulture industry subsidy. I should like the Government to go a little further and to keep a watch on all policies as they affect rural areas. I want a Minister to be made responsible for this supervision. I want a study

      965
      to be made of discounts and delivery charges for petrol. I should also like a promise that there will not be a further increase in petrol taxation for some time.
      Mr. Campbell-Savours: If the Government and the Chancellor have appeared a little inconsistant following the argument that the right hon. and learned Gentleman himself put some years ago about the 5½p increase, that inconsistency is far exceeded by the inconsistency of the Liberal Party. That Party's appeal for reductions in petroleum taxation is totally at variance with the position put by the hon. Member for Colne Valley (Mr. Wainwright) on behalf of the Liberal Party during the Committee stage of the Finance Bill last year. The hon. Gentleman said:
      "It is my view and that of my political colleagues"—
      we presume, therefore, that it is the view of all the Liberal Members—
      "that the time has certainly come to keep the excise duty, in real terms, abreast of the appalling inflation that has been inflicted on the country. Therefore, I cannot for a moment support the amendment"—
      that was the amendment of my hon. Friends—
      and I am surprised and disappointed—as I am sure many young members of the Labour Party will be—that the Labour segment has discarded good, sound conservationist arguments and surrendered to political opportunism".—[Official Report, Standing Committee A, 20 May 1980; c. 89].
      7.45 pm
      If we have seen political opportunism in this Chamber tonight, it has come from the Liberal Bench. Their position is totally at variance with what they were saying only 12 months ago. I hope that the millions of the Liberal electorate that we are told exist, will hear of the comments that I have made. That is the real face of Liberalism that we, in the House of Commons, have to recognise.
      I congratulate the Chancellor on his change of mind. I speak in favour of amendment No. 49, in the name of my right hon. Friend, that would have raised the price of diesel fuel by 8p whereas the amendment accepted by the Government, or that part of it that has been accepted, will raise it by 10p. There is a difference of £27 million in the position taken by Labour as against the position taken by the Government. On the basis of a total package costing £270 million, we would have ensured that £27 million was available to secure cheaper derv commercial fuel prices in the national industrial interest. I say "the national industrial interest" because I wish to put the debate into a regional context.
      I must put on record my objections, on behalf of my constituents, to the petrol price increase. A great number of constituents have written to me stressing their objections. I should like to refer to a telegram that I know has also been sent to hon. Members on the Government Benches but to which none has referred. It was sent by the National Farmers Union in the regions. It reads:
      "Cumbria NFU objects stongly inflationary Budget fuel increase. Gross discrimination against rural areas where higher prices already prevail."
      That is the view expressed by the National Farmers Union regionally and nationally on light oil products. Conservative Members should have commented on it.
      I wish to concentrate on the question of commercial diesel fuel prices. A 10p increase in diesel oil, compared with the 20p originally recommended in the Budget, will fall on all hauliers in the Northern region and, indeed, on
      966
      all the major economic regions situated a considerable distance from London. When considering commercial fuel oil increases the Government would do well to examine the position of industries in the regions. It costs our industries considerably more to send goods to market. The 10p increase that remains will act as a considerable regional disincentive.
      On the question of bulk fuel, I have carried out some research within the last day regarding the distribution of fuel oil from the depots serviced by Shell, BP and a number of other multinational oil companies. It seems that these companies operate a zone system of distribution and that they run a three-tier tariff system. The tier that suffers most includes deliveries to parts of zones in distant parts of the country. My constituency in West Cumbria falls outside the area where favourable discount advantages exist on fuel prices.
      The level in the inner zone affecting those in the major conurbations amounts to 29·83p per litre of fuel oil. In the outer zone, it goes up to 29·87p per litre. Under the general zone designation the tariff is based on a rate of 29·91p per litre. This should illustrate to the House that some parts of the country are at a considerable disadvantage under the system of distribution of fuel oil that applies in the United Kingdom. Those figures are based on loads of 15,000 litres, substantially less than the full load that many vehicles can carry. If the haulier buying at those prices is based in a conurbation, he may get further discounts, such as those existing in Manchester or Birmingham, where fuel oil is available at substantially lower prices.
      Hauliers in the regions are usually smaller because their markets are smaller. Because they buy smaller quantities of fuel oil it acts against their interests in the purchase price. That is another disincentive to industries to move to the regions. It is a considerable impediment to manufacturing industry.
      Motorway pricing also acts against regional interests. For example, the price of diesel at Scratchwood this morning was 175p per gallon. The price at Killington Lake, on the motorway in Cumbria, was 179·6p. That is a 4½p differential. Yet larger quantities of diesel oil are used in the Northern region by hauliers carrying for individual manufacturers taking their products to the markets. There is another disincentive there. If motorway prices are 176p per gallon—or 36p per litre, VAT included—but the purchase price to the garage is at the most 31·74p per litre, VAT included, we must assume that motorway garages carrying diesel stocks are making a profit of between 30p and 35p per gallon. That is appalling. The Chancellor should step in and examine that high level of profit.
      British hauliers travelling overseas and hauliers working overseas have an advantage. In Belgium the price of diesel, excluding VAT, is 111p per gallon. In Spain it is 96p, in Italy 71p, in France 111p, in Sweden 78p, in Luxembourg 71p and in Denmark 67p. Yet in Britain it is between 125p and 130p. In a European regional context that acts against the interests of British hauliers and British manufacturing industry. Some have turned that to their advantage. Customs officials at the major Channel ports, such as Newhaven, Dover, Folkestone and Felixstowe, are aware that many hauliers are fitting 500-gallon tanks to their trailers.
      If a trailer picks up a load of fuel in Italy at 71p per gallon and drives through Europe the driver will arrive in

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      Britain with 400 gallons of diesel in his tank. Is he told that he must pay duty, or VAT, on that fuel? No. I know of representations made by a certain haulier to the Customs officers at Newhaven, who told him that it was not their business, but a matter for Parliament. If it is a matter for Parliament, it should be raised in this debate.
      Hauliers are entering Britain with hundreds of pounds worth of diesel on board. In the case that I quoted, the loss to the Exchequer, calculated on Treasury-take loss, would be about £320. That provides an artificial form of competition, because hauliers with the advantage of travelling abroad can use the fuel on the British domestic market and compete unfairly with those paying the full price at home.
      The situation operates especially against hauliers in the Northern region and in Scotland, who do not have the same advantage.
      I turn to the effect of cheap diesel prices in parts of Europe. The French, Germans, Norwegians and Austrians allow a certain level of diesel into their countries. If a truck carries more than those levels the Government charge t ax on the additional fuel. The french charge an excess literage tax of £26·83 per 100 gallons and the Germans £45·50 per 100 gallons for any fuel in excess of the duty-free quota. The Germans have a duty-free quota of 11 gallons per truck and the french of 45 gallons per truck.
      A disturbing development has arisen in France because of that concession. On the French-Italian frontier, at Cluses, Mont Blanc and the Cenisio Pass, and at the Customs post at Ventimiglia, which joins Italy and France, Customs officers are being bribed by truck drivers. The current bribe rate is £10. If they pay £10, they do not pay tax—
      The First Deputy Chairman: Order. Will the hon. Gentleman please return to discussing the amendment?
      Mr. Campbell-Savours: To offset some of the increase that the Chancellor has included in the Budget, he should press within Europe for a common commercial fuel price policy. He should introduce a system similar to that which operates in parts of Europe, which have a duty-free quota per wagon with a literage tax on any excess.
      I have raised only a few matters of concern. I hope that the Minister who is to reply will take the opportunity to answer them.
      Mr. Albert McQuarrie: I have no intention of following the hon. Member for Workington (Mr. Campbell-Savours) because we are here to discuss the amendment and not to take ourselves on a world tour examining fuel prices in Continental countries. It has no serious bearing on the debate tonight. It was time wasting by the hon. Gentleman to delay the proceedings of the Committee.
      The reduction in the tax on derv announced by my right hon. and learned Friend the Chancellor of the Exchequer will be welcomed by industry in general, and especially by the rural areas that support the agriculture and fishing industries that are fighting desperately for survival. However, it does not go far enough, which is why I want to deal specifically with amendment No. 2 in the name of my hon. Friend the Member for Bedford (Mr. Skeet), to which I have appended my name.
      The amendment would reduce the price of petrol and derv by 10p per gallon. My right hon. and learned Friend's decision to increase the duty on fuel as proposed in clause
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      4 will result in an increase of 20p per gallon on both derv and petrol. That is unacceptable to the rural areas. Since the announcement in the Budget statement of 10 March, there has been an overwhelming number of protests from the rural areas on the serious effect that the imposition will have. That applies not only to industry but to farmers, fishermen and the local communities that are entirely dependent upon their own transport to travel to work.
      8 pm
      Mr. Alfred Morris: I know that the hon. Gentleman takes a considerable interest in the problems of the disabled. Does he agree that the increases that we are discussing are even more grievous in their effect for the disabled? Is he aware that I have received a reply from a DHSS Minister to the effect that it would require an increase of £11 in the petrol allowance for disabled drivers to raise the allowance to the level that was achieved when it was last increased? Does he agree that the problem is considerably worse for the disabled, especially for those who live in rural areas?
      Mr. McQuarrie: I am grateful for the right hon. Gentleman's intervention. As he rightly says, I take a great interest in the problems of the disabled. It is correct to say that the disabled will be more seriously affected than motorists. However, that fact seems to have been overlooked despite this year being the International Year of Disabled People. We should be considering the problems that are insurmountable for the disabled. They cannot help themselves. They have to depend on the help that they receive from the authorities. If the authorities fail to consider them, the disabled will face the difficulties to which the right hon. Gentleman has referred.
      In my constituency there is no rail service. There is only a limited bus service. That bus sercice, such as it is, travels throughout the rural areas. The buses stop at almost every farmhouse. On occasions it takes nearly half a day to reach Aberdeen from places such as Turriff, Fraserburgh and Peterhead, which are about 35 miles from Aberdeen.
      No one in my constituency considers the ownership of a motor car as a luxury. It is regarded as an essential mode of transport. The increase imposed by my right hon. and learned Friend is regarded as a punitive tax, especially when often the cost of a gallon of petrol in my constituency is from 15p to 20p greater than it is in the cities of Aberdeen, Glasgow, Edinburgh and London.
      I must warn my right hon. and learned Friend that he should not underrate the hostility to the increases that have been forced upon rural areas since 10 March. He should not imagine that the original antagonism to the 20p increase is beginning to fade. On the contrary, I assure him that he has witnessed only the early warnings. Such increases add to the price of every commodity which is delivered into rural areas or sent out from them. It makes manufactured goods and agricultural and fishing products more expensive to the consumer in urban areas due to increases in freight costs from the rural areas and reduces the competitiveness of the producers.
      These penal increases are forcing many small businesses to close. In my constituency this week a firm operating 14 vehicles is to close with the loss of employment for the drivers and the clerical staff. This is only one of a number of firms that cannot continue because of the increases. That is an example of what is to follow in the months that lie ahead.
      Mr. Nicholas Winterton: What subsidy does my hon. Friend's county council pay towards the bus services within his constituency? Have the bus services applied for additional subsidies because of the extra costs that they are having to meet as a result of the substantial increases? What would be the reaction of his county council to such applications?
      Mr. McQuarrie: If I were at the Dispatch Box, I should be required to say "If my hon. Friend will give me notice of his question, I shall send him the information." The bus company receives a subsidy from the Grampian regional council. I am not aware that it has requested an increase. I imagine that if an increase were requested the regional council would not look favourably upon the application. It has already done its homework on the rate support grant and it has managed to impose only a small additional rate. It would not want an additional commitment to be taken aboard.
      Mr. Bill Walker: If my hon. Friend's constituency is similar to mine, he will agree that subsidies do not matter because the buses do not exist.
      Mr. McQuarrie: I am grateful to my hon. Friend for that intervention. That is exactly the position. There are no buses in many parts of the constituency, but constituents have to travel great distances. This morning I received in my mail a letter from one of the social service councils. One paragraph states:
      "As there is very little public transport in our area it is essential for most households to own a car. Only this month the Education Authority have withdrawn school transport in some areas making it necessary for some children to walk almost three miles to the collection point for school transport at 8.05 with a similar walk home in the evening at 16.30—a working day that many adults would claim to be excessive."
      When my right hon. and learned Friend the Chief Secretary to the Treasury spoke on Second Reading, he said that the Government had considered the alternatives that had been suggested in place of the petrol and derv price increases and had found them too minimal to raise sufficient money to meet that which will be raised from the increased duty on fuel announced in the Budget. It seems that the 20p increase in petrol and derv prices is expected to yield an extra £1,180 million in 1981–82, made up of £900 million from petrol and £270 million from derv. On the basis that the 20p increase has been paid since 10 March and that the amendment is accepted by the Chancellor of the Exchequer, the £1,180 million will be reduced to £600 million. Any reduction of the present prices will probably not be operative until 1 August 1981.
      If on that date the 20p were reduced to lop, the total amount required would be about £340 million up to the financial year 1981–82. The realisation of such a sum should not be insurmountable. There are some alternatives that would allow my right hon. and learned Friend to obtain the necessary amount to make up the shortfall. I shall suggest once more to my right hon. and learned Friend from where they could come.
      First, there is the dog licence. I know that this will attract some interest. My Bill on the subject will be considered on 19 May. The charge for keeping dogs was first devised in 1796. The rate varied from time to time until 1867 when it was replaced by the existing licence, which is now 37½p. At today's prices the cost of the licence should be about £9. The taxpayer lost £1 million
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      last year in the collection of dog licences. This is one area in which there is considerable scope to bring in extra revenue.
      There are estimated to be at least 6 million dogs in the United Kingdom. If the fee were increased to £10, the revenue would be about £60 million a year. That money could quite easily be raised; the Minister of Agriculture, Fisheries and Food is merely required to lay a statutory order as he has responsibility for the issuing of dog licences.
      I am sorry tha some hon. Members seem to treat this as a joke. We are looking for savings because of the serious impost on petrol increases which are being made by my right hon. and learned Friend. Some hon. Members represent those who do not suffer the same problems that are faced by constituents in rural areas, but they see fit to make a joke of the issue. It is no joke. If any hon. Member wants to come to a rural area so that he may appreciate the problem, I invite him to do so. Hon. Members should treat the debate as a serious matter and not as a joke.
      I would accept that guide dogs for the blind, the handicapped and the elderly and other work dogs should be exempt.
      Sir Albert Costain: The income from dog licences in England goes to the local authority and not to the Chancellor of the Exchequer. What happens in Scotland?
      Mr. McQuarrie: If the income goes to the local authority, the rate support grant could be proportionately reduced. The income from those licences would be not much less than the £60 million which I have quoted.
      As several hon. Members have illustrated in the debate, there is the gaming and betting tax, which is forecast to raise £510 million in 1981–82. If the duties were raised by only 20 per cent., the additional revenue would be £90 million. I cannot accept what my right hon. and learned Friend has said that, if those duties were raised, it would drive betting underground as the day of the back-street bookie is long past.
      I should also like my right hon. and learned Friend to take account of the space invaders machines which are flooding the country and which I mentioned during the Budget debate.
      Mr. Austin Mitchell: Impose landing charges.
      Mr. McQuarrie: I notice that the hon. Member for Grimsby (Mr. Mitchell) is making his usual jocular remarks and that he is taking little notice of a serious debate. That is his customary habit in the House. The hon. Gentleman knows little about space invaders; he is a television invader.
      It will not have gone unnoticed by the Chancellor of the Exchequer that over 80,000 space invader machines are operating in all manner of places in the United Kingdom. There are also 17,300 in private households. It is becoming a national craze, and sadly one which, if it is not checked, will end in tragedy because there have been many instances of young people stealing money to play the machines, the estimated profit on which is £200 per week. As there is no prize money to be gained from those, the Chancellor must have some means of raising the money. I suggest that he imposes an annual licence of £200 for each machine, which would bring in another £18 million as the number of machines in use is increasing daily.

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      That leaves some other alternatives which are open to my right hon. and learned Friend. such as another 1p on cigarettes, which would bring in £35 million and a further 1p on beer, which would bring in £95 million. An increase of 10p on a bottle of wine would bring in £50 million.
      Mr. Campbell-Savours: What about whisky?
      8.15 pm
      Mr. McQuarrie: The hon. Gentleman and others mention whisky. With respect, many hon. Members are ignorant because they do not realise that in many rural areas, were it not for the whisky distillers, there would be no rural areas. Therefore, we must try not to overdo the tax on whisky. We must ensure that we maintain the rural areas and the areas where the distilleries produce whisky.
      Mr. John Townend: My hon. Friend has made a valid point about whisky. Has he not seen in the press that a number of breweries are declaring rural workers redundant? Would he take the same attitude there?
      Mr. McQuarrie: In most areas where there are breweries there are alternative methods of employment, whereas in rural areas there are no alternative methods of employment.
      I am sure that many other options are open to my right hon. and learned Friend. I have only illustrated enough to him to show that the £340 million which would be required in order to reduce the 20p on petrol and derv to 10p, which is the subject of the amendment, can be raised. The Chancellor of the Exchequer should have a closer look at those alternatives, although it may mean coming back to the House in some cases to seek a new money resolution on the Budget.
      There could also be savings in the public sector borrowing requirement which is at present crippling the Government, as I am aware and as I am sure right hon. and hon. Members are equally aware. Because it has not been brought under control, the Chancellor of the Exchequer has been forced to make penal increases in petrol and derv.
      I have dealt at some length with those alternatives as some way must be found to provide the money if the amendment is accepted. I should like to think that my right hon. and learned Friend will realise that they are put to him in a genuine effort to find ways in which he could give the concessions which the amendment seeks to do. However, I should like to bring to the attention of the Committee the other reasons why there is a strong case for the reduction in petrol in addition to the reduction in derv.
      Many of my constituents must travel over 80 miles every day to their place of work, with an average 20p difference between the price at the rural station pump and that at the urban station pump. That will mean an increase in overheads of at least £100 a year, which in no way can be avoided. It has been said that the rural motorist obtains greater mileage per gallon than the urban motorist because of the open roads. That is utter rubbish, as has been illustrated by several hon. Members and as any rural motorist can prove. Additionally, the urban user has the facilities of alternative forms of transport which are not available to the rural user.
      Tourism must also be considered. Many rural areas depend heavily on tourism for their livelihood. The penal tax on petrol will drive people away, which can only lead to a greater depopulation of the rural areas. Once the people have gone, they will never return and the villages
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      will be desolate. Surely it is right that we should seek to retain and repopulate the rural areas. Penal taxes will do nothing towards that end.
      Even if the Chancellor of the Exchequer cannot take the whole amendment on board, I sincerely hope that he will be able to give some hope to the people who cannot fight back and who are totally dependent upon what he can offer. I am aware of the need to control inflation and to conserve energy, but the people in rural areas are not the ones who should be penalised, or who should have to pay the penalty of the failure of the large industries which are being bolstered up by the Government.
      It gives me no pleasure to be opposing the proposals of my right hon. and learned Friend because I believe in the Government's present strategy and I fully support their aims. However, I believe that the Chancellor of the Exchequer was ill advised to place such a heavy burden on all those who live and work in the rural areas. I appeal to him to grant some relief by making the reductions which are called for in the amendment which I commend to the Committee.
      Mr. Dafydd Wigley: I follow the hon. Member for Aberdeenshire, East (Mr. McQuarrie) in that I, too, have a tourist interest about which I shall address the House in a few moments.
      It must be clear to the Chancellor from the comments that have been made from both sides of the Committee and from all parts of Britain—from South-West and North-West England, from Scotland and from Wales—that there is widespread opposition to the increases in petrol charges in the Budget.
      The local newspaper in my constituency, which is edited by a former Conservative candidate for Anglesey—a man who is not renowned for attacking the Conservative Party—had an editorial on 20 March stating:
      "In primarily rural areas, such as Gwynedd, family life generally has been savagely hit by the latest increase in the price of petrol. The car here, is a necessity—for getting to work, for doing the family shopping, for making sure that a large proportion of our schoolchildren are educated and for a host of other absolutely essential activities."
      A car in an area such as Gwynedd is essential and is not a luxury. The majority of mileage motored by the resident population represents not luxury miles or leisure miles but miles of essential importance. That is seen from the figures that have been published on car ownership. Counties such as Gwynedd and Powys have a relatively low average per capita income. The last time that figures were published, in my county the average per capita income was 55 per cent. of the United Kingdom average, and yet we have 370 cars per 1,000 head of population and Powys has 437, compared with only 337 in Greater London and 281 in Greater Manchester. In such areas, even though incomes are lower, a car is an essential and not a luxury.
      On 15 April I asked the Department of Transport what proportion of the working population travelled to work by car. The figure for Wales was given as 57 per cent., compared with 46 per cent. for England. It is a factor of the topology and the rundown of the railways and bus services, and a car is essential to get to work. In my constituency we have 92 villages. It is a problem for me to visit the villages and for the villages to come to surgeries. More and more people are telephoning in instead of visiting my surgeries.
      As in Aberdeen and the other constituencies that we have heard about, in my constituency the cost of travelling

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      to work is becoming prohibitive, particularly when a man's income is fairly low—as in the service sectors. That cost makes a significant difference to the margin between a wage and what people would get on social benefits if they were out of work. That is a fact that the Chancellor must consider.
      Clearly there is not much elasticity of demand. After the Budget I did not expect a great reduction in petrol consumption, because it is essential, but I was surprised by the figure given by the hon. Member for Croydon, South (Sir W. Clark) of only 0·1 per cent. If that figure is correct, the statement in The Guardian editorial this week—that in the interests of conservation the resultant lower usage of petrol is one argument for the increase in price—is wrong. Even that small reduction will probably work itself out as people get used to the increased cost.
      There will be a reduction in the use of a car only where it is a genuine luxury or the use is only marginal, and that could affect the tourist industry. In Gwynedd tourism is 25 per cent. of the economic base. In a comment on the Budget, the chairman of the county council, Councillor Tom Jones, highlighted
      "the concern about the possible effect that the extra cost of fuel will have on the tourist industry in Gwynedd, where it is estimated that over 85 per cent. of tourists travel by car to the county.
      This could result not only in many of the hotels and guesthouses in the county suffering from loss of revenue but could also have a deleterious effect on the number of small businesses in the area who derive a significant proportion of their annual income from the tourist trade in summer."
      He is absolutely right. The marginal loss of trade from the loss of tourist traffic could force many small businesses out of existence.
      The effect of the Budget increase is much more severe in an area such as Gwynedd, the rural parts of Scotland, the South-West, East Anglia and the North-West than in urban areas. I cannot understand the Chancellor's logic in increasing a tax that has a disproportionate effect on many of our poorest areas. A few weeks ago, when we voted on the Budget proposals, many Conservative Members abstained. They felt that although some increase was necessary it should not be as much as 20p. They believed that the matter could be put right tonight. We have the opportunity now. As the Chancellor has not changed his proposals in relation to petrol, I hope that Conservative Members who previously abstained will vote against the increased petrol tax tonight.
      I accept that the reduction on derv is welcome. It is welcome to the agriculture fraternity, and it helps to bring goods into areas such as mine by road. However, whereas it will have an effect on the whole community in the long-term, it does not have half the effect on families that petrol has.
      Services in rural areas have been centralised in the nearest town. Small banks have been closed and have gone to a nearby town. Government offices have been closed, rationalised and moved to larger towns further away. Even health clinics and shops have been centralised. The result is that unless people who live in villages can reach the towns easily the rationale for living in a village disappears. The young married people will look for their first home in towns rather than in country villages. That is also true of their lives in social clubs, entertainments and sporting facilities, being centralised.
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      It was said earlier in the debate that some counties have benefited from the change in the balance of rate support grants. We in Gwynedd lost £4 million between 1974 and 1978 in rate support grant. We got about £2 million back, but that was not enough to make up the balance of what we lost during the 1970s, and certainly not enough to subsidise the bus services, which are rapidly disappearing. Even if those services were given massive subsidies it is doubtful whether we could keep the network that formerly existed.
      As the hon. Member for Cardigan (Mr. Howells) said, expressing the Liberal point of view, there are times when people can be wrong and should change their minds. I ask the Chancellor to accept that on this occasion he has been wrong. Even at this late stage, I ask him to change his mind.
      Mr. John Townend: As a Member who represents a rural area that contains four seaside towns I am conscious of the serious effect that the large increase in the price of petrol will have on my constituency. I do not like it, just as I do not like any increase in taxation.
      However, I shall vote with the Government tonight for the simple reason that I feel strongly that for some time Governments of both parties have been prepared to live beyond their means. They have spent taxpayers' money in providing services that were demanded but they have not had the courage to raise all the necessary money in taxation. I agree with what my hon. Friend the Member for Croydon, South (Sir W. Clark) said in this connection.
      In Yorkshire there is an old saying that there is nothing for free. If we want to increase old-age pensions every year, spend more money on defence and law and order, and spend more money on youth employment schemes, and if we go on providing hundreds of millions of pounds each year in bailing out the nationalised industries, we must remember that the money has to come from taxation.
      Labour Members who do not like to face the hard fact of life, that increases in spending mean increases in taxation, would say "Barrow more". That is what we have come to expect from the hon. Member for Grimsby (Mr. Mitchell), who seems to think that there is a bottomless well, and that we can spend, spend and spend without increasing taxation. I oppose that point of view. If the Chancellor had not taken the courageous decision to reduce the public sector borrowing requirement from £13½ billion to £10½ billion, it would not have been possible to reduce interest rates by 2 per cent.
      In rural areas, the reductions in interest rates were welcome and necessary, because the agriculture industry borrows heavily at present and interest rates are a major cost. The reductions were welcomed, too, by house buyers. In rural areas we have a higher percentage of home owners than in urban areas, and we are looking for further reductions in interest rates.
      In view of the effect of the Civil Service strike on the collection of Government revenue, it is fortunate that the Chancellor was wise enough to opt for a reduction in the PSBR. With such a delay in revenue coming in, the situation could have been more difficult had he taken more risks.
      I suggest to my hon. Friends who are considering opposing the Government that their opposition cames a little late in the day, because the increases became inevitable after the Government fixed their public expenditure plans before Christmas. At that time,

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      according to many reports—and although we hear much about leaks, there were so many reports that they must have been true—the Treasury asked the Cabinet for a package of reductions in public expenditure of £2 billion. It achieved. reductions of only £1 billion and from that moment the increases in petrol tax became inevitable in the light of the Government's financial strategy. In their battle to bring down inflation, the Government have rightly pledged to reduce public sector borrowing.
      Some of my hon. Friends seem to have forgotten that we committed ourselves in our election manifesto to reducing direct taxation. Therefore, the Chancellor of the Exchequer could not have increased the standard rate of tax, because that would have broken one of our firmest election pledges. The Chancellor was boxed in and he had to turn to indirect taxes.
      8.30 pm
      Mr. Nicholas Winterton: My hon. Friend is misleading the House and it is wrong that he should do so. It is not true to say that we have not increased taxation; the Government have increased taxation. Not only have we not indexed personal allowances, which we campaigned for in Opposition, but we have increased the national insurance contributions of employees. The overall tax burden under this Government is heavier than that under the previous Government.
      Mr. Townend: My hon. Friend could not have heard me correctly. I did not say that we had not increased taxation. I said that we were committed not to increase direct taxation, and we have not done so. We have not indexed the allowances this year, but there has been no increase in the standard or the higher rates.
      Mr. Nicholas Winterton: National insurance is direct taxation.
      Mr. Townend: I do not agree. When the public think of direct taxation they think of income tax.
      My right hon. and learned Friend the Chancellor of the Exchequer had no alternative but to turn to indirect taxation. Some of my hon. Friends have forgotten the law of diminishing returns. My hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) said in the Budget debate that those with knowledge of these matters believed that the Chancellor had been over-optimistic about the increased revenue that he will receive from the duty increases on tobacco and alcohol, because sales will fall. If further increases were imposed, as suggested by a number of hon. Members, they might not result in increased revenue.
      My hon. Friends who have been criticising the Chancellor should reserve their criticisms for the Ministers who fought so hard in December to protect their own departmental budgets. I have made known my view that the public expenditure cuts should have been greater. The Government were elected on a programme of reducing spending and reducing taxation.
      It would have been more politically acceptable if, instead of increasing the tax on petrol by 20p per gallon, the Chancellor of the Exchequer had increased the tax by 15p and found the additional £225 million that he would have required by reducing expenditure on overseas aid in the current year from £1,000 million to £775 million, which would still be a not insignificant amount.
      I suggest to my hon. Friends that they should support the Chancellor tonight and that later in the year, when the
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      Government once more review public expenditure, they should add their weight to the Treasury's efforts to reduce public spending. Then, in the next Budget, the Chancellor will not be boxed in and, one hopes, he will be able to redress the balance and either leave the petrol tax as it is or increase it by less than the rate of inflation.
      I welcome the Chancellor's concession of a 10p reduction on derv. That will undoubtedly help to keep down the cost of transporting goods in the rural areas.
      I am also grateful for the interim—I emphasise the word "interim"—aid to the glasshouse industry. A number of growers in my constituency have suffered badly. The matter is before the European Commission. To me, the Chancellor's action is a palliative, not a solution to the problem.
      I urge the Chancellor to urge our right hon. Friend the Minister of Agriculture, Fisheries and Food to push this matter as hard as possible at the EEC, so that the unfair competition of subsidised Dutch growers can be ended as soon as possible.
      I ask my hon. Friends to think carefully tonight. If the Government are defeated, it will be a great blow to our financial policy when it is beginning to work and when more and more people can see and accept that it is beginning to work.
      Mr. R. C. Mitchell: Hampshire is represented by a large number of Conservative Members and by one Labour Member—myself. All the rural areas of the county are represented by Conservative Members. I had not intended to speak in the debate until I discovered that not one Conservative Member for a rural area of Hampshire was either in the Chamber or had spoken in the debate. I thought that they would all be here, speaking on behalf of their constituents and supporting amendment No. 2.
      Where are they? It is now left to me, a Member who represents an urban area, to speak on behalf of those who live in the rural areas of Hampshire, because no one else is speaking for them.
      I agree with the hon. Member for Bridlington (Mr. Townend) that all services have to be paid for and that they cannot be paid for by continual borrowing. That means that any Government who want to provide a good level of services have to produce revenue from taxation. The important question, however, is where one gets the revenue from taxation.
      The hon. Member was wrong about direct taxation. Under this Government it has increased. The net effect of not indexing the allowances and of raising the national insurance contribution has greatly outweighted the 3p reduction in income tax introduced in the Chancellor's first Budget.
      Mr. John Townend: I think that the hon. Member has misunderstood me. I said that the rates of taxation had not increased. In fact, they have been reduced.
      Mr. Mitchell: But what is important to the ordinary person is the amount taken from his pay packet in tax. The amount that is taken has increased. Raising the price of petrol to the extent that the Government suggest, particularly as the world price of petrol—for all the reasons we know—has escalated sharply over the last few years, seriously affects rural areas. Indirectly, it may subsequently affect some urban areas such as mine.

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      Many people work in the towns in places such as Hampshire. They work in Southampton and live in the rural areas. Over the years, the employment opportunities in the rural areas have greatly declined. People work in the city and at the moment they must have a car because public bus services are rapidly disappearing.
      The hon. Member for Bridlington mentioned the law of diminishing returns. If he wants a good example of that law he need look no further than increases in bus fares. The more that one increases fares, the more people are prevented from using buses, the less revenue one collects and the more one has to increase the fares next time. Bus companies have found that there is a limit. Many rural bus services are going out of existence or operating only one or two services a day.
      Many people who work in the towns must go by car, because there is no other way. They have to use their own transport. That causes many problems in my town. It causes congestion and parking difficulties. If the price of petrol continues to rise many people will be faced with the choice of either giving up their jobs in town or moving into the town to be closer to their jobs. If they choose that option they will put pressure on the towns for housing and other services. Not only will the country districts suffer; areas such as that which I represent will suffer.
      Many more Government Members should have been in the Chamber to support amendment No. 2, at least. The Chancellor says that he must increase the price of petrol in order to bring in revenue. Suggestions for alternative sources of revenue were made by one of his hon. Friends. I shall give him another. Let him put back some of the tax that he took off high-income earners in his first Budget. The theory behind reducing those taxes was to provide more incentive. That has not worked, as many people warned the Chancellor at the time. Let him restore some of the tax at the top level and reduce the tax on petrol. If he does that the whole country will support him.
      Mr. Paul Dean: The debate is a classic example of Parliament working as it should. There was a long battle to win the principle of no taxation without representation. The interval between the Budget and the Finance Bill has enabled the strong views opposing the tax on petrol and derv to be brought to bear on the Government. To their credit, the Government have listened seriously. The Chancellor made a welcome response today.
      The debate has also focused attention on the problems of the rural areas. We often hear about the difficulties in the inner cities and development areas. A great deal of money is channelled to deal with those difficulties. Only rarely do we hear about the problems in rural areas. However, some of the main arteries of village life are being severed. Schools are being closed, shops and sub-post offices find it difficult to survive, and bus services are either declining or disappearing.
      The cost of the distribution of goods and services is one of the key factors in the argument about the cost of diesel and petrol. The growing difficulties in rural areas explain the strong opposition to the Government's original proposals. They add to existing anxieties. I mentioned sub-post offices as an example. They are bound to lose business when people can have their pensions paid straight into their bank accounts. Higher fuel costs are going to
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      aggravate the difficulties. Rural post offices must have the opportunity of winning new business and the Government should make good their welcome commitment to maintain an adequate post office network. Many of the possibilities for new business require Government action or the removal of existing restrictions on post office activities. We await action and I hope that we shall have an early announcement from the Government in that regard.
      8.45 pm
      My right hon. Friend the Chancellor has offered the House a package. There is the welcome reduction in derv duty, the assistance with energy costs for glasshouse growers, the examination of petrol pricing, particularly as it affects rural areas, and the general commitment to look more carefully at rural problems. These are welcome as far as they go, but I hope that they are merely the first step in a greater awareness of the problems and the feelings of the countryside. The Conservative Party has always prided itself on being a party of one nation, but we also have to remember that we have deep roots in the countryside, that we draw much of our nourishment from towns and villages, and that we neglect these roots at our peril.
      I am disappointed that my right hon. Friend has not been able to offer a concession on petrol similar to the one that he has offered on derv. I respect his arguments and the reason why he has not been able to make the concession. He has met us half way. He has shown clearly that the Government are prepared to listen to powerful arguments from their supporters in Parliament and in the county. Politics being the art of the possible, I am prepared to accept the Government's compromise. Consequently, I shall support them in the Division Lobby tonight.
      Mr. Richard Page: Before speaking about the duty on petrol I should like to say a little about diesel, not only because my right hon. Friend has made a concession to my hon. Friend the Member for Bedford (Mr. Skeet) but because of the remarks about the lead-free operation and the economy of the diesel engine. On the whole aspect of diesel engines in private cars, if we are to have a differential between the price of petrol and the price of diesel may I suggest that manufacturers are alerted that we are going down this route because we are very short of diesel engines manufactured in this country for use in private cars? Most of the diesel engines for private cars come from Continental manufacturers.
      It is a brave hon. Member who recommends an increase in taxation unless it is on something like cigarettes. I am no exception to that rule, but it would be right to look at the increases in petrol duty in its own right and outside the various Budget requirements. I do not propose to go down the path that many of my hon. Friends and hon. Members on the Opposition Benches have gone down in producing their own balancing of the Budget. We have had some interesting and unique ideas, such as a tax on space invaders and an increase in the cost of the dog licence. I must say to my hon. Friend the Member for Aberdeenshire, East (Mr. McQuarrie), who suggested the latter, that if he wants to have a deluge of constituency correspondence that is the right way to go about it. I want to put it on the record that I would not support such a proposal.
      The hon. Member for Grimsby (Mr. Mitchell) said that there was no need to try to hold the public service borrowing requirement at the level anticipated by my right

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      hon. Friend the Chancellor. I became a Member of Parliament a few months before the hon. Member and I did so because his Government was increasing the PSBR from some £40 billion to £80 billion in that period of five years. In that period the Government created an increase in debt on which we are having to carry the interest burden today. Table 14 in the Red Book estimates the interest that has to be paid as about £11 billion. Surely it must be right to control the PSBR on the lines that we are proposing so that we can reduce the cost of borrowing as a percentage of our gross national product. It is estimated to be 6 per cent. for last year and 4¼ per cent. for this year. As we go further down that line and reduce the amount of interest that has to be paid, we shall have more money to put into our economy.
      The right hon. Member for Stepney and Poplar (Mr. Shore) touched on conservation and rather lightly dismissed it. The country is just starting to learn the value of energy, and we shall be foolish if we do not develop this appreciation. We can look at the years lost on progressing our nuclear power programme as a disaster. The cheap electricity that France is starting to enjoy is giving French steel plants economic advantage within the Common Market.
      Mr. Nicholas Winterton: My hon. Friend referred to the great advantage that the development of nuclear power gives to France. Why should not we use our tremendous indigenous resources, namely, oil, to the benefit of the British electorate and British industry? We are failing to do that at present.
      Mr. Page: We are failing to do so because we are carrying round our neck like a millstone interest of £11 billion on previous give-aways. The sooner we pay that price, the sooner we shall be able to spend earned money rather than borrowed money.
      Mr. John Home Robertson: The hon. Gentleman is determined that money should be paid back in this way, but why should people from rural areas have to pay such an enormous share?
      Mr. Page: I wish that I could give a simple answer. The answer is that it cannot be done. We cannot distance ourselves from the problem. We can argue where the burden falls, but the Chancellor has made the decision that this is how the balance will be struck.
      The price of energy and the price that we shall be paying for petrol will be broadly in line with that paid in other EEC countries. It might be extremely painful, but it will concentrate our minds and the minds of our vehicle manufacturers. They will produce engines that will be more fuel-efficient, and with a strong home market led by demand for fuel-efficient engines we shall be able to go into the export market. We shall not make money by trying to sell high fuel-consuming engines within the Common Market. We need that form of economic base in the country as a springboard.
      My only regret about this large increase in petrol revenue is that it reduces the chance of something being done about the licence centre in Swansea. I have received many complaints from constituents, and I would like to see the money resulting from the increase in petrol tax used to do away with licensing and most of the activities of the licensing centre.
      I believe that the decisions today, although painful, will be appreciated in a few years time as we face reality. My
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      hon. Friend the Member for Bridlington (Mr. Townend) said that we needed to face economic reality by balancing our public sector borrowing requirement, reducing our interest rates and reducing our interest charges. In that way, with our economy under control, we shall be able to move into a far more stable pricing structure.
      Mr. Eldon Griffiths: I begin by commenting on the speeches of my hon. Friends the Members for Hertfordshire, South-West (Mr. Page) and Bridlington (Mr. Townend). They were absolutely right to say that we must balance our books, and I congratulate my right hon. and learned Friend the Chancellor on everything that he has sought to do during his period of office. He has tried to bring economic and financial truth and reality back to our country.
      The mistake into which my hon. Friend the Member for Bridlington unerringly fell was his reference to that battle in the Cabinet—so well described in such detail in the press—between the big spenders and the Treasury team and the Prime Minister. The Prime Minister and her Treasury Ministers rightly asked them to reduce their expenditure, but they did not. Consequently, the battle was lost. My difference with my hon. Friend is that the parliamentary party was nor invited, not could it be, to take part in that discussion.
      Along with some of my hon. Friends, I seek to go to the rescue of the Prime Minister and the Treasury team by indicating to the big spenders in the Cabinet that they can no longer count on this parliamentary party simply to troop through the Division Lobby to approve the taxation to pay for their increased expenditure.
      Although my hon. Friend and I agree on the purpose, the time has come for the parliamentary party to take a small part in this discussion, and this is the first occasion on which we can do so. This Budget must provide the money to finance the decisions which were taken in a series of Cabinet meetings, which increased public expenditure and increased in a manner that I find virtually intolerable the proportion of the gross national income carried by the State while diminishing the proportion of the gross national income held by the private sector.
      I have said before that I was elected to reduce public expenditure, but so far we have substantially increased it. I was elected to reduce taxation, but so far we have substantially increased it.
      Mr. Dykes: Does not my hon. Friend agree that the main reason why the deficit has overshot all the original targets has been the rise in unemployment and the benefits consequent upon that as well as the fact that revenue has been less than expected as a result of the recession?
      Mr. Griffiths: My hon. Friend anticipates me because I was about to mention the reasons. I understand them. When there is an international recession which is no fault of the Government, our nationalised industries will inevitably fall into even greater deficit, and consequently the Chancellor must go to the rescue. He has done so, and the cost has been billions of pounds. Similarly, if an international recession is made worse in Britain by a generation of poor management, bad labour practices and poor Government policies, there will be large unemployment. Once again, the Chancellor will have to go to the rescue of the unemployed, and he has done so.

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      During the last two years the Prime Minister in particular and the Government in general have fought hard to reduce public expenditure and public indebtedness.
      For the reasons that I have given, I do not altogether blame them for their failure so far to do so. I congratulate them on the steadfast way in which they have stuck to that policy. When I consider the detail, however, I have to say this. There are vast areas of our public industries and our public administration where waste is rife and where expenditure can and should be cut. In our local government, our nationalised industries, our statutory agencies and in Whitehall itself, every member of the Conservative Party knows perfectly well that greater economies can and should be achieved.
      9 pm
      The time has come when the parliamentary party has to blow the whistle and to say to Ministers that if they cannot contain public expenditure they must not expect this party automatically to go through the Lobby three weeks or three months later to provide for the taxation of the people to finance their failure to carry out their promised economic policies.
      That is the reason—and the only reason—why I find myself for the first time in painful disagreement with my right hon. Friends. It is always difficult for any hon. Member to disagree with those whom he respects, admires and supports. I find it all the more painful having been in Government for some years myself, and having seen how difficult it is for an individual Back Bench Member ever to place his judgment in advance of that of the collective wisdom of the Government, who have available to them all the information, all the expertise and all the sideways vision that they can bring to bear on so many issues of policy, both international and domestic. Such things are not possible for an individual Back Bencher. Not only do I find it painful; if I disagree, it is with considerable humility and hesitation. I do not arrive at my conclusion on this matter with any great sense of certitude. It is a question of striking a difficult balance.
      Coming to the amendment, to which my hon. Friends have so ably spoken, I say this. I could justify voting against the increased petrol and derv taxes on constituency grounds. Like many others represented here tonight, my constituency is a large one, with 130 villages, and most certainly my village people are taking a caning. Of course I could justify opposing the Government on constituency grounds. But that is not sufficient reason to oppose a government on a central plank of their policy. I think that every Member of the House—or at least, every Conservative Member—will always have regard not merely to his constituency interest but to the wider national interest. Therefore, in so far as I find myself torn over how to vote on this matter tonight—and I hope that the Chancellor will accept this—it is due to my view of the national interest rather than my view as some kind of tin-pot rural rebel. I am no tin-pot rural rebel. Like my hon. Friends, I am considering this matter on the wider national front.
      In my view, the increases in derv and petrol taxes are inflationary, because, as I discovered in three years as a Transport Minister, the cost of transport enters into the cost of everything. It enters into the cost of the ordinary individual's living and into his push for wage increases.
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      Let there be no mistake about it. The trade unions will most certainly push for higher wage increases because their members will have to face increased costs in getting to work.
      Secondly, the increases are inflationary because of their impact on the public services.
      Local authorities will have to pay a high price because of their garbage lorries, meter inspectors and so on. A vast number of their people also travel round the country on a large mileage allowance from the public purse. The increase is bound to be inflationary for industry. Indeed, the CBI, the Freight Transport Association, the Road Haulage Association and virtually every institution that reflects industry's opinion has made that clear to the Government. In addition, it will increase the worst aspect of public expenditure, namely, revenue expenditure.
      I was delighted when the Chancellor of the Exchequer said that he was looking carefully at the balance between revenue and the capital expenditure in the public sector. I understood him to say that if it was possible he would bring forward more capital expenditure on constructive, infrastructure projects in the public sector. I should welcome that. However, neither he nor I would welcome increased revenue expenditure. Yet the increase in the tax on derv and petrol will increase the Government's revenue expenditure. I shall be grateful if my right hon. and learned Friend will answer my next question. In terms of local government, the increase in the price of petrol and derv will have to be met in part by the Treasury, because it will enter into the rate support grant.
      Some of my hon. Friends, have, like me, been Ministers with responsibility for local government and have dealt with rate support grant settlements. What is the aggregate amount of rate support grant that will have to be provided to local government to make good the increased costs arising from the higher tax on petrol and derv? Sadly, too my right hon. and learned Friend has to meet the enormous deficits of nationalised industries. Some of them, as has been suggested, are justified but others are not. Some of our nationalised industries are incompetent. Many show a lack of competitiveness. However, if their costs increase—as they almost certainly will—how much will the Chancellor put in to make up the increased deficit that will arise from the higher tax on petrol and derv?
      I declare an interest in the police service. No Conservative should apologise for one moment for increasing public expenditure on the Armed Forces or on law enforcement. We undertook to do so in our manifesto and I am glad about that. However, I hope that there will not be further efforts in the next few months to claw back public expenditure from our defence forces. Nevertheless, I suspect that that will happen. Both the Armed Services and the police service will face increased costs as a result of the tax on derv and petrol. How much more does my right hon. and learned Friend calculate that he will have to pay to the Armed Services and to the police service solely to make up for the increase in taxation? It is only fair to the House to point out that the increase, which will have to be paid to nationalised industries, local authorities—through the rate support grant—and to the Armed Services and the police in order to compensate for the higher tax on derv and petrol, will have to be knocked off the revenue that will be received from that increased

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      tax. By now much has never been put plainly before the House, but it will clearly reduce still further the amount that has to be made up if these taxes are to be reduced.
      The tax is inflationary, and I regret it. It is also discriminatory. The hour is late and my hon. Friends are anxious to go home. There is no need, therefore, for me to rehearse its impact on the rural areas. We all know that it is harsh. When the Treasury imposes an extra hardship on the rural population it should not make it much worse by the humbug that has been expressed to the effect that those in rural areas get more miles per gallon. It is said that the difference as regards petrol usage, between rural and urban areas is not great.
      The argument I would put to anyone in the Treasury who falls for that kind of nonsense is that in the majority of rural areas represented by shire county Members in the Conservative Party it is not only one car that is a necessity. In many areas, two cars are needed. When the husband takes the car to work as he must—there is no alternative way of travelling—his wife and children are marooned. There is nowhere they can go. One effect of higher petrol tax will not be to reduce the mileage of the wage earner. He has no choice. He has to go out in his car. The increase will, however, cause a reduction in the use of the second car and so diminish substantially the quality of life in the countryside. I do not believe that those responsible for digging up this sort of claptrap for Treasury Ministers are living in the same world as my rural constituents.
      This tax is inflationary. It is discriminatory. It will add significantly to the revenue side of public expenditure. What should be done? Every hon. Member is his own Chancellor of the Exchequer. I plead guilty to that. All hon. Members are aware that within the recesses of the Treasury there is not simply stubbornness but a great deal of wisdom and knowledge that Back benchers cannot possess. I have concocted my own alternatives to the Chancellor's policy. I have heard today other interesting alternatives, many of them better than mine. I would be the first to admit, however, that hon. Members on the Back Benches, with the limited knowledge available to them, cannot possibly construct an alternative set of figures that will be as competent as that available to the Chancellor.
      The Chancellor said in his speech that if he made the derv concession and if he also made the petrol concession—which he did not—he would have to find alternative taxes. I believe that this is fundamentally the wrong approach. The Conservative Party should not be concerned about finding more taxes. It should be finding more economies. I revert to my comment on the speech of my hon. Friend the Member for Bridlington. My disagreement with the Government arises profoundly because I believe that the time has come for the parliamentary party to play its part in achieving sensible reductions in public expenditure which have so far not been achieved. If we do not achieve them, we shall find greater difficulty in winning the next election.
      I voted against the Government with the greatest sadness at the end of the Budget resolutions on this point. I made it plain on the Second Reading of the Finance Bill that I would find it hard to support the Government if they did nothing about petrol and derv. I welcome very much what the Chancellor has said about derv today. Indeed, I congratulate my right hon. and learned Friend. It is not easy for a Chancellor to make a significant concession of this sort and to have to alter at a late stage the balance of
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      his Budget, or at least the important details within his Budget. I congratulate him on his welcome concession and for his courage, and, also, for his candour. I hope that he will accept that tribute with the sincerity with which it was intended.
      9.15 pm
      I hope that my right hon. and learned Friend will help me to decide which way to vote by answering some questions. Will he say precisely why the Government did not table an amendment about the derv concession at the beginning of the debate? With respect, I think that the Chair would have selected it. We could have had a straightforward vote on that matter before coming to the amendment tabled by my hon. Friend the Member for Bedford (Mr. Skeet). I should have preferred that. I do not understand why that was not the case.
      I ventured to make a point when I interrupted my right hon. and learned Friend's speech. As every vehicle delivering petrol to every petrol station in Britain will be buying derv at a lower tax rate—10p less—there should be a vigorous effort by the Government to ensure that their concession, made at such cost to them, should be worked through to the ordinary motorist and consumer. I understand my right hon. and learned Friend's point that he does not have the power to do that—and nor should he. I was glad to hear that he has discussed the matter with his right hon. Friend the Secretary of State for Energy. However, that is not good enough for me. Will he prepare a number of exemplifications of the precise reduction that would be possible, taking into account the lop reduction in derv, for 50,000 or 100,000-gallon deliveries of derv to certain specified petrol stations? We could then see transparently and in public what the concession could mean to the price of the petrol at the pump. If my right hon. and learned Friend can go some way in that direction, so that we can see a real consequence and benefit for the motorist as a result of the derv concession, I shall be much happier.
      My hon. Friend the Member for Devon, West (Mr. Mills) said that the matter needs to be put in the context of rural policies. During the past year we have achieved a significant improvement in the rate support grant arrangements for many rural areas. I find it sad that we should give to the rural areas through the rate support grant and take it back through petrol tax. I hope that my right hon. and learned Friend will be able to say, and mean, that the Government have hoisted on board the real resentment in the rural areas about the way in which policies—whether about sub-postmasters, school buses or a variety of other activities—have come to bear on rural folk. I do not necessarily ask for a Minister to be responsible for rural affairs, as my hon. Friend requested, but that the Government should undertake to monitor the problems of the rural areas.
      For me, the vote on the amendment will turn largely on what my right hon. and learned Friend has to say about the points that I raised—namely, why the Government did not put forward an amendment, whether my right hon. and learned Friend will ensure to the best of his powers that the concession on derv results in a reduction in the price of petrol at the pump, and whether he will do all that within the context of a more vigorously pursued rural policy.
      Mr. Temple-Morris: To use the somewhat colourful phrase of my hon. Friend the Member for Bury St. Edmunds (Mr. Griffths), I rise as an about 80 per cent.

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      tinpot rural rebel. I shall speak about rural areas to a much lesser extent than would have been necessary because of the admirable debate that has been conducted from both sides of the Chamber about the needs of rural areas, which does not need to be repeated.
      Nationally speaking, it is surely possible to find the £344 million following the Government's concession. I shall speak to amendment No. 2 specifically. My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) referred to £344 million. If I may say so, he made an admirable and succinct speech. It was one of the best that we have heard from him for a long time, and one of the best speeches that we have heard this evening. He was advancing the case for amendment No. 2. He has made it unnecessary for me to say much of what I intended to put before the Committee.
      My hon. Friend the Member for Somerset, North (Mr. Dean) spoke about the art of the possible. At the time of the Budget debate we were told most emphatically by my right hon. and learned Friend the Chancellor of the Exchequer, in answer to an intervention from my hon. Friend the Member for Bury St. Edmunds, that there would be no turn and no change, and that no amendment was possible. We suddenly find that the great art of the possible has led to a 10p concession on derv. The art of what is politically possible—we have all been careful to keep within the context of the Budget in speaking inside and outside the House of Commons—makes a concession on petrol feasible.
      I do not speak as one of nature's greatest rebels. I do not relish the prospect of being a rebel. However, grateful though I am for the concessions, as are many of my hon. Friends, they are not sufficient. I hope that something positive will be said when the Minister replies. If it is not, I shall feel compelled, as I am sure will a number of my hon. Friends, to vote against the Government. I am not an abstainer by nature. As I said, I do not relish voting against the Government. However, if we think that the Government have done wrong in a national context—the rural areas are important nationally and, incidentally to the party of Government—it is our duty as Back Benchers to show our feelings clearly.
      I wish that the concession on derv had been made sooner. If one is against a Government proposal and a concession is made at a very late stage, the Government are encouraging Back Benchers to speak out both in the Chamber and elsewhere to try to persuade the Government to act. I hope that I am accurate in saying that had we not spoken out the likelihood is that no concessions would have been made.
      I turn from derv to horticulture. The Government's concession is admirable. It is long overdue. I am a rural Member and I have put the case to successive Governments. It is somewhat sad that the concession is made at a time when the Government are in a spot of bother because of the temporary awkwardness of people such as myself. We have asked for the concession on glasshouses for a number of years to bring our industry closer to the conditions enjoyed by the Dutch industry.
      Many of my hon. Friends have spoken about the price of derv, but the main politics of this issue lies in petrol. There is a great national interest in derv and the increased price is highly inflationary, as is the increased price in petrol. It seems to be suggested that I can return to my
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      constituency to say that I have had a magnificent victory against the Government because they have conceded lop on derv. I represent agriculture. I represent large farmers and small farmers. Some of them are poor and work extremely hard, and some are rich.
      I ask my right hon. and hon. Friends on the Treasury Bench to consider my position. Some of them represent rural areas. My hon. Friend the Member for Tiverton spoke about taking children to school. I represent the little woman in a little car and the low-wage person in a low-wage area who think that every farmer is extremely wealthy. My constituents will not congratulate me if I return to them to say "Look what I have done for the farmer" when I have done nothing for them. I hope that that matter will be settled in a balanced way by the Front Bench. It is a fool's paradise to think that we in rural areas can be satisfied just with the reduction in tax on derv.
      For all this century and for years before, this party was meant to be the political custodian of the majority of rural areas. In a situation such as this, suddenly to say that we will closely consider the problems and affairs of rural areas strikes me as so inadequate as not to be worthy of any further comment from me.
      In case I feel obliged to vote against the Government, I wish to put it firmly on the record that I, as other hon. Members, dislike putting other colleagues in difficulties, particularly colleagues in neighbouring constituencies. I also appreciate the position of colleagues who remain loyal. If the Government suddenly give way, they are put in an awkward position in their constituencies. That arises from the parliamentary system.
      In a sense, we are all part of the Government, but in that context, those on the Front Bench—the Chancellor of the Exchequer and others in the Government—have a special responsibility to consider the position of Government Back Benchers from the outset. If the Government are wrong, the only control on them at the end of the day, naturally with the help of the Opposition, is the independently minded Government Back Bencher. If the Back Bencher always succumbs to the call to be loyal to the Government and to his colleagues, which many of us have been asked to do, be the Government right or wrong, then in future the Government and subsequent Governments can do exactly as they like. I believe that that is utterly wrong.
      We have heard enough about rural areas for tonight. Post offices, shops, churches, schools, transport and other matters have been adequately dealt with. In a rural area the car is not an option but a necessity. We have our full share of unemployment and generally we are low-wage areas. These headlines points that I have mentioned have been adequately covered.
      I invite the Front Bench to deal with the financial aspects, as raised by my hon. Friends the Members for Tiverton and Torbay (Sir F. Bennett). On amendment No. 2, it comes down to £344 million in this financial year after Royal Assent. On the figures given by my hon. Friend the Member for Torbay, were the increase to be 5p on petrol, were an undertaking to be given about that, we come down to £220 million. With that figure, and with public expenditure of about £100 billion, leaving out all the other aspects, a further concession must be possible. We may be losing sight of our own supporters and of the British people.
      Are we being so insensitive in Government that we refuse to move, for reasons of no more than governmental

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      and political machismo unnecessarily and insufficiently connected with the economy of this country? If we are to go on forgetting our people, I am afraid that we do not deserve to remain for very long the Government of this country.
      Mr. Straw: Before coming to the main subject of the debate, I wish to add a word to what my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) said about lead in petrol, which is the subject of Opposition amendment No. 9. There has been increasing evidence of he health hazard caused by lead in petrol. Britain has lagged behind other countries in dealing with this, which is the fault of Labour and Conservative Governments. On 19 April, The Observer reported that the Government had decided to reduce lead levels. We were promised that the Government would announce the decision at the beginning of the following month. I hope that the Chancellor of the Exchequer deals with the issue and makes that announcement.
      9.30 pm
      While Conservative Members are agonising about how they will vote, let me repeat the argument against the 20p increase in the price of petrol and derv, which would have added £715 million to industry's costs. Even after the paltry concession made by the Chancellor today, the cost will still go up by £630 million. It will also add £28 million to farmers' costs. Above all, it will hit families and wage earners not only in rural areas, but also in urban areas.
      The Chief Secretary's claim about the low cost of motoring in rural areas has been sufficiently demolished by his hon. Friends, so I need not go into too much detail. Car ownership in rural areas is much higher than it is in urban areas, even though wages are much lower. The average weekly wage last year for all men was £124 in England and £123 in Scotland, but in the rural areas it was between £98 in Cornwall and £106 in East Anglia. Rural wage earners get significantly less. They have more cars than their urban counterparts, not because they are richer but because they cannot get around by any other means. In urban areas the poor, if they are lucky enough to have a job, can use public transport to get to work, inadequate though is may sometimes be, but in rural areas the poor have little alternative but to buy an old banger to get to work. Without one, they may be trapped not only in poverty but also in unemployment.
      Urban areas have also been hit by the increased price of petrol and derv. As public transport has declined, wage earners in the town have had to use their cars more and more to get to work. In the past four years, not only in the shire counties but also in the Conservative-controlled metropolitan counties, as subsidies have been slashed and slashed again, bus fares have increased. My hon. Friend the Member for Bassetlaw (Mr. Ashton) told us that the subsidy in Nottinghamshire had been halved and fares forced up.
      In all the gloom, one county shines as an example to the others and shows that it is possible to run a cheap and efficient public transport system. South Yorkshire has kept down bus fares. The cost per mile is only 9p compared with 44p in Conservative West Yorkshire, 25p in Tyne and Wear and 30p in the West Midlands. Conservative Members and the leader of the conservative group on the South Yorkshire county council will claim that the cost of cheap fares has added so much to the rates that jobs have been driven away. However, although unemployment in
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      South Yorkshire has risen, it has done so less quickly than in West Yorkshire, the West Midlands or other Conservative-controlled metropolitan areas.
      Mr. Martin Flannery: Coming from South Yorkshire, I uphold what my hon. Friend says. We should not take account of what the Government said yesterday about transport. There have been many cuts, some by the Labour Government—but I hope that that lesson has been learnt. We have repeatedly put our excellent bus service before the people in South Yorkshire—and at the previous election it was the major platform on which we went to the people in South Yorkshire and Sheffield. Our bus service is the only growth area in Britain. It is increasingly admired by Tory areas. It is winning through, and we shall see that more clearly than ever at the next election.
      Mr. Straw: As my hon. Friend says, the electors will have their chance to assess the value of the South Yorkshire transport scheme, and of the West Yorkshire scheme. I believe that the South Yorkshire scheme has the greater value.
      We object to the 20p increase in derv and petrol duty, not only because of the damage it does to those who use motor vehicles, but on macro-economic grounds. The Budget was highly deflationary and the sucking out of a further £1,200 million by the imposition of these charges will only add to that deflation. If the Government accepted our amendment for an increase of 8p, there would be no necessity for the Government to look for other increases in taxation to offset the £700 million which they claim would be lost as a result of accepting our amendments. Quite apart from the benefit that a cut of 12p in the increase in these duties, from 20p to 8p, will bring to motorists and transport users, there will be a major benefit to the economy as a whole in offsetting part of the savage deflation brought about by the Budget.
      I turn to the Chancellor's response to the 28 Conservative Members who failed to support the Government on 16 March and the massive opposition to these increases from both Labour Members and the Government's supporters. Following the increases, even the chintz brigade of the Conservative Party, the women's institutes, issued a political statement against the Government. Few taxation increases in recent years have aroused greater hostility.
      The Chancellor announced today that he will reduce the increase in derv from 20p to 10p, but he said that he would delay its implementation until Royal Assent in August, and that the cost would be £85 million. The Opposition believe that that is a mean and derisory concession, and is too little and too late. To some extent, of course, it will help industry, but the Government fail to acknowledge that even industry uses more petrol than derv. According to figures supplied by the Financial Times, industry spends £270 million on derv and £350 million on petrol duty. Farmers use four times as much petrol as diesel—76 million gallons as against 17 million gallons of diesel.
      Moreover, the concession does not in any way meet the objections advanced by Tories five weeks ago to the petrol increases. The objections were not to the increase in derv, but to the increase in petrol duty. Of all the Conservative Members who spoke in the Budget debate against the increases in petrol and derv, only one—the right hon. and learned Member for Hexham (Mr. Rippon)—singled out

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      the derv increase. Hon. Member after hon. Member voiced objections to the increase in petrol duty, yet the Government's concession does nothing to reduce the increase in petrol duty. The concession will help rural areas only to a limited extent, because in rural areas, above all, transport costs are the costs of cars.
      The public will have to pay for the concession. It may have bought off the Tory rebels, but the public will have to pick up the bill. We do not know how. It is a disgrace for the Chancellor to announce this mean-minded concession and to say that it will have to be paid for—something we do not accept—but refuse to say how. The Chancellor has had six weeks in which to think of ways of paying for the concession if he thinks that it should be paid for by taxation. Even the hon. Member for Aberdeenshire, East (Mr. McQuarrie) used the six weeks to advantage and produced a list of ways in which the concession could be paid for. The hon. Gentleman proposed that the cost of dog licences should be increased by a factor of 30, from 37½p to £10, which would raise £60 million, or that 1p should be put on the price of a packet of cigarettes or a pint of beer.
      We want to know the Chancellor's list. He said that the Government were examining the possibilities.
      Mr. Dykes: Do the Opposition favour increasing the cost of a dog licence to £10?
      Mr. Straw: I explained five minutes ago that we do not favour imposing any additional taxes to cover the Government's concession. We seek a much larger concession, costing £700 million, and we believe that it should be met from borrowing and not from taxation. The Chancellor of the Exchequer says that it must be met from taxation and he has a duty to tell us how he intends that it should be paid for.
      We want to know whether the cost will be paid by the rich or by the poor. Will the Chancellor find the £85 million by increasing the relatively small burden on the rich, in terms of the higher rates of taxation, or by increasing council house rents or prescription charges or cutting public spending? Let him tell us now.
      The hon. Member for Somerset, North (Mr. Dean) made the astonishing assertion that he would support the Government because they had met him half way. The hon. Gentleman cannot add up. The Conservative rebels have demanded a £600 million reduction in the duties. Half of that would be £300 million, and it is a mark of the derisory nature of the Government's concession that it will cost only £85 million. The concession is paltry above all because, apart from its trivial effect on transport costs, it will do nothing to affect the deeply deflationary nature of the Budget.
      While we question the Chancellor of the Exchequer's Budget judgment, the debate may show that he has skills in other areas, not least in judging the courage and backbone of the 28 rebels who refused to support the Government on 16 March. It is clear that it is the right hon. and learned Gentleman's judgment that throwing not even a bone but a piece of mouldy gristle to the rebels baying at him will be enough to get them off his back, and that the concession will be enough to force the rebels to cave in. If that is so, it is not surprising that the Prime Minister writes off the rebels on her Benches as wets—wets by name and wets by nature.
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      There were no finer words spoken against the inequity of this sort of taxation than those of the present Chancellor of the Exchequer against the 5p per gallon increase imposed by the previous Labour Government. His words bear repetition:
      "This is a selective tax … 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 at home."—[Official Report, 9 May 1977; Vol. 931, c. 937.]
      It is a selective tax, it is a harmful tax and, above all, it is an unnecessary tax. It is inflationary and deflationary at the same time. We shall vote to oppose the tax and the only honourable course for the 28 Conservative Members who failed to back the Government on 16 March is to join us in the Lobby.
      Mrs. Elaine Kellett-Bowman: I have sat through the entire debate and, although Labour Members may not like it, I have every intention of putting the point of view of my constituents.
      Like most rural dwellers and those representing rural constituencies, I was horrified at the increase of 20p per gallon on petrol and derv imposed in the Budget. I refrained from voting against the Government on the Budget, but I made it crystal clear that I would not support the two increases in Committee.
      9.45 pm
      Because of the world recession, unemployment is high in my constituency. My constituents intensely dislike being unemployed and they will go considerable distances to keep a job. This morning I received a message from one of my constituents who said that to avoid joining the ranks of the unemployed he and his son travelled no less than 60 miles a day to keep in employment. Therefore, not surprisingly, he asks me to vote against the 20p increase in petrol. I was sorely tempted. Had the Chancellor not accepted the amendment to reduce the tax on derv by 10p, I should have done so. However, he has reduced the tax on derv and in so doing has prevented the steep rise in the cost of living that would have followed such an increase in town and country alike.
      The battle against inflation is crucial to our well-being, and to the expansion of our health and education services, pensions and services for the disabled and our national survival. The Chancellor's action today shows that he listens to representations made to him, and I join my hon. Friend the Member for Somerset, North (Mr. Dean) in thanking him for doing so. There is no doubt that the rural areas have for many years been fighting for survival as living communities. Had not the Chancellor made his concession their plight would have been serious. In the expectation that they will continue the battle against inflation, a battle which we were elected to win, I shall support the Government in the Lobby tonight.
      Mr. Farr: I intervene briefly to support my constituents. I welcome what the Chancellor said about reducing the increase in the price of derv, but the reason for my opposition was not so much derv but petrol.
      In the rural areas, particularly the more remote places, the price of travelling to get out of the house or the village to go to town has risen steeply. Some of the most effective and tragic letters that I have received from constituents in recent weeks refer to the plight of the elderly, the infirm,

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      children, or people who have to go to hospital. Such people believe that the imposition of 20p on a gallon of petrol will mean that they will be unable to travel.
      There are a number of other reasons for my dissatisfaction with what the Chancellor has done. I support his Budget strategy as a whole, but alternative measures should have been used to raise the necessary revenue that is now being raised from petrol duty. In recent years in some of the remoter parts of the country, life has been made difficult under the Conservative Government. The increase in petrol duty is another difficulty, with the threat to school transport, and the attempt to close village post offices. In Leicestershire there are plans to shut 64 rural telephone kiosks. It is essential for some hon. Members, including myself, to register a protest. The people for whom we speak, by inclination and background, are Conservative and for God's sake let us see that they remain so.
      Sir Geoffrey Howe: My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) asked why there was no Government amendment dealing with the proposal accepted tonight. The position is dealt with by the amendment that we have been discussing from the outset of the proceedings which earlier I invited the Committee to accept—that introduced by my hon. Friend the Member for Bedford (Mr. Skeet).
      Two points on the margins of the debate were only briefly touched on. The first concerned the amendment about lead-free petrol tabled by the Opposition. The case for a reduction rests on benefits to the environment and the fewer health risks that could ensue. That must be balanced against the cost of meeting such a change. Any change in the vehicles would take a considerable time to execute. A statement about the Government's policy will be made to the House shortly. I shall say no more about it this evening.
      My hon. Friend the Member for Woking (Mr. Onslow) mentioned the tax on aviation fuel. I recognise the contribution made by the light aviation industry. It provides small scheduled services, air ambulances and crop spraying aircraft. However, the case for a distinction between that industry's tax position and that of other users of aviation fuel is complicated. It would be administratively difficult and would cost about £6 million a year. I am not prepared to respond by saying that I can accept the argument tonight. However, I shall ensure that the case is properly examined.
      The main issue is the taxation on derv and petrol. I am grateful to my hon. Friends who have spoken. Virtually all of them gave strong support to the Government's central strategy. My hon. Friends the Members for Hertfordshire, South-West (Mr. Page), Torbay (Sir F. Bennett), Croydon, South (Sir W. Clark), Iancaster (Mrs. Kellett-Bowman), Bury St. Edmunds, Somerset, North (Mr. Dean), Bridlington (Mr. Townend), Aberdeenshire, East (Mr. McQuarrie) and Harborough (Mr. Farr) expressed their strong support for that stategy.
      We also had the benefit of two speeches from Fifeshire—from the hon. Member for Fife, Central (Mr. Hamilton) and my hon. Friend the Member for Fife, East (Mr. Henderson). We appreciated the sharp contrast in their speeches. I am grateful for the strong support of my hon. Friend the Member for Fife, East.
      I considered carefully the arguments before these proceedings and in the course of them. I have listened to
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      the arguments closely and have considered them afresh. We can advise the Committee to accept amendment No. 1 tabled by my hon. Friend the Member for Bedford. I have been pressed to go further. However, I have reached the conclusion that that is not possible. It is inescapable that a concession of 10p off the price of petrol from 1 August would cost about £300 million. It is not possible to accept such a reduction in the revenue raised by the Budget.
      I have considered a number of proposals by my hon. Friends today. My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) suggested that we should go so far as to make an increase in the basic rate of income tax. The Government were not elected to raise income tax.
      I also considered the suggestions by my hon. Friend the Member for Bridlington for increases in taxes on beer and tobacco. Difficult considerations are involved and my hon. Friend mentioned them. I also considered the specific series of suggestions made by my hon. Friend the Member for Aberdeenshire, East. I appreciate that his speech was seriously made and meant.
      My hon. Friend suggested that there should be an increase in dog licences. That is not a frivolous suggestion. Dog licences are paid for about 3 million dogs. If we increased the licence to £10 per dog that would be a 28-fold increase which would have some impact on the electors who support my hon. Friend and on the number of dogs in respect of which licences are taken out. It is not realistic to contemplate such revenue from that type of tax change. Similarly his suggestion for a tax on space invaders, which are invading rural as well as urban constituencies, is something well worth considering but it would not begin to offer the sort of sum I was talking about.
      The suggestion most strongly pressed upon me by my hon. Friends the Members for Tiverton, Torbay, and Aberdeenshire, East was for a substantial increase in the tax on gaming machines and on other aspects of betting. The fact is that the gaming machine licence duty yields only £18 million and the rates of licence for the principal machines were trebled as recently as 1 October last year. There is no way of looking for revenue of the kind that is necessary from a change in that pattern of taxation. The suggested abolition of the distinction between taxes on machines in public houses and those in clubs raises quite important social issues. Even then it would not be sensible to think that this was a substantial source of revenue of the scale discussed.
      I have reached the conclusion that there is no sensible way that I could recommend to the Committee to raise sums of the order that would be necessary if we accepted amendment No. 2, which would involve costs of another £300 million. Of course I recognise, as do all my right hon. Friends, the concern expressed by many hon. Members in this debate for the special interests of rural areas. It is right to remind the Committee that, although I may be a relatively urban Member—even East Surrey contains substantial acres of rolling countryside and several hundred members of the National Farmers Union—my right hon. and learned Friend the Chief Secretary and my right hon. Friend the Financial Secretary represent manifestly rural constituencies. The constituency of the Chief Secretary includes vast areas of North Yorkshire, and nothing could be more rural than that.
      The case made by my hon. Friends the Members for Torbay, Fife, East, Aberdeenshire, East, Tiverton,

      993
      Somerset, North and Harborough on behalf of the rural community is one with which we all have sympathy. As one would expect, the case was made with particular authority by my hon. Friend the Member for Devon, West (Mr. Mills). We have considered most carefully the points which were made. It is in the light of those considerations that earlier I made the two important announcements—the package of £5½ million in respect of horticulture, and the concession amounting to £85 million in respect of the taxation on derv.
      I was pressed by some of my hon. Friends to go further. For example, I was pressed to ensure that the derv reduction was passed through in corresponding price increases and that I would take steps to secure that. There are no powers for achieving that and it would not be right for the Government to seek price regulatory powers to do so.
      Mr. Stephen Ross rose—
      Sir Geoffrey Howe: I understand that the pricing policy for petrol in rural areas is a long-standing problem which has been considered several times by Secretaries of State for Trade, by the Monopolies and Mergers Commission and by the Office of Fair Trading. It would not be right for me to offer any prospect of a change in powers in that respect, but I can assure my hon. Friends that both the Secretaries of State for Trade and for Energy will give close consideration to the points made, including the particular point made by my hon. Friend the Member for Bury St. Edmunds in relation to the consequences of the price changes following on from the duty changes.
      I was pressed also to give assurances in respect of the Government's willingness to consider more widely the problems of rural areas. This debate is one of a number that have impressed upon the Government the anxiety of my hon. Friends about that. It is an anxiety which the Government share, and I can give my hon. Friends the undertaking that we shall consider the whole complex of rural issues raised in this and in other debates in the light of the remarks that have been made.
      Mr. Ross rose—
      Sir Geoffrey Howe: My hon. Friend the Member for Leominster (Mr. Temple-Morris) argued in his cogent speech that we should be thinking as we come to vote in terms of victory for one side or the other as between the Government and certain Members on the Back Benches. It is right for Back Bench Members to represent the interests of their constituencies and for the Government to take account of them, as we have. But we must remember that Front Bench and Back Bench Members on this side of the Committee were all elected on the same platform on which we won success in the last election. We were all elected to restore the health of the economy and to curb public expenditure. We have done that, and we shall go on doing so. We were all elected in support of a policy to control inflation—
      Mr. Peter Tapsell: And to reduce unemployment.
      Sir Geoffrey Howe: I am most grateful to my hon. Friend. The reduction of inflation is at the heart of the policy to reduce unemployment. At the heart of that is the proper control of public sector borrowing.
      994
      The debate we have had tonight leads me to recommend the Committee to accept amendment No. 1 and to reject the other amendments. That is essential if we are effectively to control public borrowing and to secure the implementation of the policies on which we were elected. I ask the Committee to proceed in that way.
      Mr. Stephen Ross: I wanted the Chancellor to give way, but he did not do so. We have had the most appalling reply from him. He has done nothing for the offshore islands. The price of petrol in the Western Isles is £1·80 per gallon. He should set up an investigation on the margins. He has done nothing to help people living in rural areas. Tory Back Benchers should vote solidly against what he is proposing now.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 263, Noes 316.

      Division No. 164]

      [10 pm

      AYES

      Abse, Leo

      Dewar, Donald

      Adams, Allen

      Dixon, Donald

      Allaun, Frank

      Dobson, Frank

      Alton, David

      Dormand, Jack

      Anderson, Donald

      Douglas, Dick

      Archer, Rt Hon Peter

      Douglas-Mann, Bruce

      Ashley, Rt Hon Jack

      Dubs, Alfred

      Ashton, Joe

      Duffy, A. E. P.

      Atkinson, H.(H'gey,)

      Dunn, James A.

      Barnett, Guy (Greenwich)

      Dunnett, Jack

      Barnett, Rt Hon Joel (H'wd)

      Dunwoody, Hon Mrs G.

      Beith, A. J.

      Eadie, Alex

      Benn, Rt Hon A. Wedgwood

      Eastham, Ken

      Bennett, Andrew(St'kp't N)

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

      Bidwell, Sydney

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

      Booth, Rt Hon Albert

      Ellis, Tom (Wrexham)

      Boothroyd, Miss Betty

      English, Michael

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

      Ennals, Rt Hon David

      Bradley, Tom

      Evans, Ioan (Aberdare)

      Bray, Dr Jeremy

      Evans, John (Newton)

      Brocklebank-Fowler, C.

      Ewing, Harry

      Brown, Hugh D. (Provan)

      Faulds, Andrew

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

      Field, Frank

      Brown, Ron (E'burgh, Leith)

      Fitch, Alan

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

      Flannery, Martin

      Buchan, Norman

      Fletcher, Raymond (Ilkeston)

      Callaghan, Rt Hon J.

      Fletcher, Ted (Darlington)

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

      Foot, Rt Hon Michael

      Campbell, Ian

      Ford, Ben

      Campbell-Savours, Dale

      Forrester, John

      Canavan, Dennis

      Foster, Derek

      Cant, R. B.

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

      Carmichael, Neil

      Freeson, Rt Hon Reginald

      Carter-Jones, Lewis

      Freud, Clement

      Cartwright, John

      Garrett, John (Norwich S)

      Clark, Dr David (S Shields)

      George, Bruce

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

      Gilbert, Rt Hon Dr John

      Cohen, Stanley

      Golding, John

      Conlan, Bernard

      Graham, Ted

      Cook, Robin F.

      Grant, George (Morpeth)

      Cowans, Harry

      Grant, John (Islington C)

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

      Grimond, Rt Hon J.

      Craigen, J. M.

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

      Crawshaw, Richard

      Hardy, Peter

      Crowther, J. S.

      Harrison, Rt Hon Walter

      Cryer, Bob

      Hart, Rt Hon Dame Judith

      Cunliffe, Lawrence

      Hattersley, Rt Hon Roy

      Cunningham, G. (Islington S)

      Haynes, Frank

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

      Healey, Rt Hon Denis

      Dalyell, Tam

      Heffer, Eric S.

      Davidson, Arthur

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

      Davies, Rt Hon Denzil (L'lli)

      Holland, S. (L'b'th. Vauxh'll)

      Davies, Ifor (Gower)

      Home Robertson, John

      Davis, Clinton (Hackney C)

      Homewood, William

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

      Hooley, Frank

      Deakins, Eric

      Horam, John

      Dean, Joseph (Leeds West)

      Howell, Rt Hon D.

      995

      Howells, Geraint

      Penhaligon, David

      Huckfield, Les

      Powell, Raymond (Ogmore)

      Hughes, Mark (Durham)

      Prescott, John

      Hughes, Robert (Aberdeen N)

      Price, C. (Lewisham W)

      Hughes, Roy (Newport)

      Race, Reg

      Janner, Hon Greville

      Radice, Giles

      Jay, Rt Hon Douglas

      Rees, Rt Hon M (Leeds S)

      John, Brynmor

      Richardson, Jo

      Johnson, James (Hull West)

      Roberts, Albert (Normanton)

      Johnson, Walter (Derby S)

      Roberts, Allan (Bootle)

      Johnston, Russell (Inverness)

      Roberts, Ernest (Hackney N)

      Jones, Barry (East Flint)

      Roberts, Gwilym (Cannock)

      Jones, Dan (Burnley)

      Robertson, George

      Kaufman, Rt Hon Gerald

      Robinson, G. (Coventry NW)

      Kerr, Russell

      Robinson, P. (Belfast E)

      Kilfedder, James A.

      Rodgers, Rt Hon William

      Kilroy-Silk, Robert

      Rooker, J. W.

      Kinnock, Neil

      Roper, John

      Lambie, David

      Ross, Ernest (Dundee West)

      Lamborn, Harry

      Ross, Stephen (Isle of Wight)

      Lamond, James

      Rowlands, Ted

      Leighton, Ronald

      Ryman, John

      Lestor, Miss Joan

      Sandelson, Neville

      Lewis, Ron (Carlisle)

      Sever, John

      Litherland, Robert

      Sheldon, Rt Hon R.

      Lofthouse, Geoffrey

      Shore, Rt Hon Peter

      Lyon, Alexander (York)

      Short, Mrs Renée

      Lyons, Edward (Bradf'd W)

      Silkin, Rt Hon J. (Deptford)

      Mabon, Rt Hon Dr J. Dickson

      Silkin, Rt Hon S. C. (Dulwich)

      McCartney, Hugh

      Silverman, Julius

      McDonald, Dr Oonagh

      Skinner, Dennis

      McElhone, Frank

      Smith, Cyril (Rochdale)

      McKay, Allen (Penistone)

      Smith, Rt Hon J. (N Lanark)

      McKelvey, William

      Snape, Peter

      MacKenzie, Rt Hon Gregor

      Soley, Cllve

      Maclennan, Robert

      Spearing, Nigel

      McMahon, Andrew

      Spriggs, Leslie

      McNally, Thomas

      Stallard, A. W.

      McNamara, Kevin

      Steel, Rt Hon David

      McQuade, John

      Stewart, Rt Hon D. (W Isles)

      McTaggart, Robert

      Stoddart, David

      McWilliam, John

      Strang, Gavin

      Magee, Bryan

      Straw, Jack

      Marks, Kenneth

      Summerskill, Hon Dr Shirley

      Marshall, D(G'gow S'ton)

      Thomas, Dafydd (Merioneth)

      Marshall, Dr Edmund (Goole)

      Thomas, Jeffrey (Abertillery)

      Marshall, Jim (Leicester S)

      Thomas, Mike (Newcastle E)

      Martin, M(G'gow S'burn)

      Thorne, Stan (Preston South)

      Mason, Rt Hon Roy

      Tilley, John

      Maxton, John

      Tinn, James

      Maynard, Miss Joan

      Torney, Tom

      Meacher, Michael

      Varley, Rt Hon Eric G.

      Mellish, Rt Hon Robert

      Wainwright, E.(Dearne V)

      Mikardo, Ian

      Wainwright, R. (Colne V)

      Millan, Rt Hon Bruce

      Walker, Rt Hon H.(D'caster)

      Miller, Dr M. S. (E Kilbride)

      Watkins, David

      Mitchell, Austin (Grimsby)

      Weetch, Ken

      Mitchell, R. C. (Soton Itchen)

      Welsh, Michael

      Morris, Rt Hon A. (W'shawe)

      White, Frank R.

      Morris, Rt Hon C. (O'shaw)

      White, J. (G'gow Pollok)

      Morris, Rt Hon J. (Aberavon)

      Whitehead, Phillip

      Morton, George

      Whitlock, William

      Moyle, Rt Hon Roland

      Wigley, Dafydd

      Mulley, Rt Hon Frederick

      Willey, Rt Hon Frederick

      Newens, Stanley

      Williams, Sir T.(W'ton)

      Oakes, Rt Hon Gordon

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

      Ogden, Eric

      Wilson, William (C'try SE)

      O'Halloran, Michael

      Winnick, David

      O'Neill, Martin

      Woodall, Alec

      Orme, Rt Hon Stanley

      Woolmer, Kenneth

      Owen, Rt Hon Dr David

      Wrigglesworth, Ian

      Paisley, Rev Ian

      Young, David (Bolton E)

      Palmer, Arthur

      Parker, John

      Tellers for the Ayes:

      Parry, Robert

      Mr. Donald Coleman and Mr. James Hamilton.

      Pavitt, Laurie

      Pendry, Tom

      996

      NOES

      Adley, Robert

      Emery, Peter

      Aitken, Jonathan

      Eyre, Reginald

      Alexander, Richard

      Fairbairn, Nicholas

      Alison, Michael

      Fairgrieve, Russell

      Amery, Rt Hon Julian

      Faith, Mrs Sheila

      Ancram, Michael

      Fell, Anthony

      Arnold, Tom

      Fenner, Mrs Peggy

      Aspinwall, Jack

      Finsberg, Geoffrey

      Atkins, Rt Hon H.(S'thorne)

      Fisher, Sir Nigel

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

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

      Baker, Kenneth(St.M'bone)

      Fletcher-Cooke, Sir Charles

      Baker, Nicholas (N Dorset)

      Fookes, Miss Janet

      Banks, Robert

      Forman, Nigel

      Beaumont-Dark, Anthony

      Fowler, Rt Hon Norman

      Bell, Sir Ronald

      Fox, Marcus

      Bendall, Vivian

      Fraser, Rt Hon Sir Hugh

      Bennett, Sir Frederic (T'bay)

      Fraser, Peter (South Angus)

      Benyon, Thomas (A'don)

      Fry, Peter

      Benyon, W. (Buckingham)

      Gardiner, George (Reigate)

      Best, Keith

      Gardner, Edward (S Fylde)

      Bevan, David Gilroy

      Garel-Jones, Tristan

      Biffen, Rt Hon John

      Gilmour, Rt Hon Sir Ian

      Biggs-Davison, John

      Glyn, Dr Alan

      Blackburn, John

      Goodhart, Philip

      Blaker, Peter

      Goodhew, Victor

      Body, Richard

      Goodlad, Alastair

      Bonsor, Sir Nicholas

      Gorst, John

      Boscawen, Hon Robert

      Gow, Ian

      Bottomley, Peter (W'wich W)

      Gower, Sir Raymond

      Bowden, Andrew

      Grant, Anthony (Harrow C)

      Boyson, Dr Rhodes

      Gray, Hamish

      Braine, Sir Bernard

      Greenway, Harry

      Bright, Graham

      Grieve, Percy

      Brinton, Tim

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

      Brittan, Leon

      Griffiths, Peter Portsm'th N)

      Brooke, Hon Peter

      Grist, Ian

      Brotherton, Michael

      Grylls, Michael

      Brown, Michael(Brigg & Sc'n)

      Gummer, John Selwyn

      Browne, John (Winchester)

      Hamilton, Hon A.

      Bruce-Gardyne, John

      Hamilton, Michael (Salisbury)

      Bryan, Sir Paul

      Hampson, Dr Keith

      Buchanan-Smith, Alick

      Hannam,John

      Buck, Antony

      Haselhurst, Alan

      Budgen, Nick

      Hastings, Stephen

      Bulmer, Esmond

      Havers, Rt Hon Sir Michael

      Burden, Sir Frederick

      Hawksley, Warren

      Butcher, John

      Hayhoe, Barney

      Butler, Hon Adam

      Heath, Rt Hon Edward

      Cadbury, Jocelyn

      Heddle, John

      Carlisle, Kenneth (Lincoln)

      Henderson, Barry

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

      Heseltine, Rt Hon Michael

      Chalker, Mrs. Lynda

      Hicks, Robert

      Channon, Rt. Hon. Paul

      Higgins, Rt Hon Terence L.

      Chapman, Sydney

      Hogg, Hon Douglas (Gr'th'm)

      Churchill, W. S.

      Holland, Philip (Carlton)

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

      Hooson, Tom

      Clark, Sir W. (Croydon S)

      Hordern, Peter

      Clarke, Kenneth (Rushcliffe)

      Howe, Rt Hon Sir Geoffrey

      Clegg, Sir Walter

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

      Cockeram, Eric

      Howell, Ralph (N Norfolk)

      Colvin, Michael

      Hunt, David (Wirral)

      Cope, John

      Hunt, John (Ravensbourne)

      Cormack, Patrick

      Hurd, Hon Douglas

      Corrie, John

      Irving, Charles (Cheltenham)

      Costain, Sir Albert

      Jenkin, Rt Hon Patrick

      Cranborne, Viscount

      Johnson Smith, Geoffrey

      Dean, Paul (North Somerset)

      Jopling, Rt Hon Michaei

      Dickens, Geoffrey

      Joseph, Rt Hon Sir Keith

      Dorrell, Stephen

      Kaberry, Sir Donald

      Douglas-Hamilton, Lord J.

      Kellett-Bowman, Mrs Elaine

      Dover, Denshore

      Kershaw, Anthony

      du Cann, Rt Hon Edward

      King, Rt Hon Tom

      Dunn, Robert (Dartford)

      Kitson, Sir Timothy

      Durant, Tony

      Knight, Mrs Jill

      Dykes, Hugh

      Lamont, Norman

      Eden, Rt Hon Sir John

      Lang, Ian

      Edwards, Rt Hon N. (P'broke)

      Langford-Holt, Sir John

      Eggar, Tim

      Latham, Michael

      Elliott, Sir William

      Lawrence, Ivan

      997

      Lawson, Rt Hon Nigel

      Rees-Davies, W. R.

      Lee, John

      Renton, Tim

      Lennox-Boyd, Hon Mark

      Rhodes James, Robert

      Lester, Jim (Beeston)

      Rhys Williams, Sir Brandon

      Lewis, Kenneth (Rutland)

      Ridley, Hon Nicholas

      Lloyd, Ian (Havant & W'loo)

      Ridsdale, Sir Julian

      Lloyd, Peter (Fareham)

      Rifkind, Malcolm

      Loveridge, John

      Rippon, Rt Hon Geoffrey

      Luce, Richard

      Roberts, M. (Cardiff NW)

      Lyell, Nicholas

      Roberts, Wyn (Conway)

      McCrindle, Robert

      Rossi, Hugh

      Macfarlane, Neil

      Rost, Peter

      MacGregor, John

      Royle, Sir Anthony

      MacKay, John (Argyll)

      Sainsbury, Hon Timothy

      Macmillan, Rt Hon M.

      Scott, Nicholas

      McNair-Wilson, M. (N'bury)

      Shaw, Giles (Pudsey)

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

      Shaw, Michael (Scarborough)

      Madel, David

      Shelton, William (Streatham)

      Major, John

      Shepherd, Colin (Hereford)

      Marland, Paul

      Shepherd, Richard

      Marlow, Tony

      Shersby, Michael

      Marshall, Michael (Arundel)

      Silvester, Fred

      Marten, Neil (Banbury)

      Sims, Roger

      Mates, Michael

      Skeet, T. H. H.

      Mather, Carol

      Smith, Dudley

      Maude, Rt Hon Sir Angus

      Speed, Keith

      Mawby, Ray

      Speller, Tony

      Mawhinney, Dr Brian

      Spence, John

      Maxwell-Hyslop, Robin

      Spicer, Jim (West Dorset)

      Mayhew, Patrick

      Spicer, Michael (S Worcs)

      Mellor, David

      Sproat, Iain

      Meyer, Sir Anthony

      Squire, Robin

      Miller, Hal (B'grove)

      Stainton, Keith

      Mills, Iain (Meriden)

      Stanbrook, Ivor

      Mills, Peter (West Devon)

      Stanley, John

      Miscampbell, Norman

      Steen, Anthony

      Mitchell, David (Basingstoke)

      Stevens, Martin

      Moate, Roger

      Stewart, Ian (Hitchin)

      Monro, Hector

      Stewart, A.(E Renfrewshire)

      Montgomery, Fergus

      Stokes, John

      Moore, John

      Stradling Thomas, J.

      Morgan, Geraint

      Tapsell, Peter

      Morris, M. (N'hampton S)

      Taylor, Robert (Croydon NW)

      Morrison, Hon C. (Devizes)

      Taylor, Teddy (S'end E)

      Morrison, Hon P. (Chester)

      Tebbit, Norman

      Mudd, David

      Thatcher, Rt Hon Mrs M.

      Murphy, Christopher

      Thomas, Rt Hon Peter

      Myles, David

      Thompson, Donald

      Neale, Gerrard

      Thorne, Neil (Ilford South)

      Needham, Richard

      Thornton, Malcolm

      Nelson, Anthony

      Townend, John (Bridlington)

      Neubert, Michael

      Townsend, Cyril D, (B'heath)

      Newton, Tony

      Trippier, David

      Normanton, Tom

      Trotter, Neville

      Nott, Rt Hon John

      van Straubenzee, W. R.

      Onslow, Cranley

      Vaughan, Dr Gerard

      Oppenheim, Rt Hon Mrs S.

      Viggers, Peter

      Osborn, John

      Waddington, David

      Page, Rt Hon Sir G. (Crosby)

      Wakeham, John

      Page, Richard (SW Herts)

      Waldegrave, Hon William

      Parkinson, Cecil

      Walker, Rt Hon P.(W'cester)

      Parris, Matthew

      Walker-Smith, Rt Hon Sir D.

      Patten, Christopher (Bath)

      Wall, Patrick

      Patten, John (Oxford)

      Waller, Gary

      Pawsey, James

      Walters, Dennis

      Percival, Sir Ian

      Ward, John

      Peyton, Rt Hon John

      Warren, Kenneth

      Pink, R. Bonner

      Watson, John

      Pollock, Alexander

      Wells, John (Maidstone)

      Porter, Barry

      Wells, Bowen

      Prentice, Rt Hon Reg

      Wheeler, John

      Price, Sir David (Eastleigh)

      Whitelaw, Rt Hon William

      Prior, Rt Hon James

      Whitney, Raymond

      Proctor, K. Harvey

      Wickenden, Keith

      Pym, Rt Hon Francis

      Wiggin, Jerry

      Raison, Timothy

      Williams, D.(Montgomery)

      Rathbone, Tim

      Winterion, Nicholas

      Rees, Peter (Dover and Deal)

      Wolfson, Mark

      998

      Young, Sir George (Acton)

      Tellers for the Noes:

      Younger, Rt Hon George

      Mr. Spencer Le Marchant and Mr. Anthony Berry

      Question accordingly negatived.
      Amendment proposed: No. 2, in page 3, leave out lines 1 and 2 and insert:
      `4.—(1) In section 6(1) of the Hydrocarbon Oil Duties Act 1979 for "£0·10" there shall be substituted "£0·1191".'.—[Mr. Skeet.]
      Question put, That the amendment be made:—
      The Committee divided: Ayes 276, Noes 304.

      Division No. 165]

      [10.12 pm

      AYES

      Abse, Leo

      Douglas-Mann, Bruce

      Adams, Allen

      Dubs, Alfred

      Allaun, Frank

      Duffy, A. E. P.

      Alton, David

      Dunn, James A.

      Anderson, Donald

      Dunnett, Jack

      Archer, Rt Hon Peter

      Dunwoody, Hon Mrs G.

      Ashley, Rt Hon Jack

      Dykes, Hugh

      Ashton, Joe

      Eadie, Alex

      Atkinson, N.(H'gey,)

      Eastham, Ken

      Barnett, Guy (Greenwich)

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

      Barnett, Rt Hon Joel (H'wd)

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

      Beith, A. J.

      Ellis, Tom (Wrexham)

      Benn, Rt Hon A. Wedgwood

      English, Michael

      Bennett, Andrew(St'kp't N)

      Ennals, Rt Hon David

      Bidwell, Sydney

      Evans, Ioan (Aberdare)

      Booth, Rt Hon Albert

      Evans, John (Newton)

      Boothroyd, Miss Betty

      Ewing, Harry

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

      Farr, John

      Bradley, Tom

      Faulds, Andrew

      Bray, Dr Jeremy

      Field, Frank

      Brocklebank-Fowler, C.

      Fitch, Alan

      Brotherton, Michael

      Flannery, Martin

      Brown, Hugh D. (Provan)

      Fletcher, Raymond (Ilkeston)

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

      Fletcher, Ted (Darlington)

      Brown, Ron (E'burgh, Leith)

      Foot, Rt Hon Michael

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

      Ford, Ben

      Buchan, Norman

      Forrester, John

      Callaghan, Rt Hon J.

      Foster, Derek

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

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

      Campbell, Ian

      Freeson, Rt Hon Reginald

      Campbell-Savours, Dale

      Freud, Clement

      Canavan, Dennis

      Garrett, John (Norwich S)

      Cant, R. B.

      George, Bruce

      Carmichael, Neil

      Gilbert, Rt Hon Dr John

      Carter-Jones, Lewis

      Golding, John

      Cartwright, John

      Graham, Ted

      Clark, Dr David (S Shields)

      Grant, George (Morpeth)

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

      Grant, John (Islington C)

      Cohen, Stanley

      Grimond, Rt Hon J.

      Coleman, Donald

      Hamilton, James (Bothwell)

      Conlan, Bernard

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

      Cook, Robin F.

      Hardy, Peter

      Cowans, Harry

      Harrison, Rt Hon Walter

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

      Hart, Rt Hon Dame Judith

      Craigen, J. M.

      Hattersley, Rt Hon Roy

      Crawshaw, Richard

      Haynes, Frank

      Crowther, J. S.

      Healey, Rt Hon Denis

      Cryer, Bob

      Heffer, Eric S.

      Cunliffe, Lawrence

      Hicks, Robert

      Cunningham, G. (Islington S)

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

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

      Holland, S. (L'b'th, Vauxh'll)

      Dalyell, Tam

      Home Robertson, John

      Davidson, Arthur

      Homewood, William

      Davies, Rt Hon Denzil (L'lli)

      Hooley, Frank

      Davies, Ifor (Gower)

      Horam, John

      Davis, Clinton (Hackney C)

      Howell, Rt Hon D.

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

      Howells, Geraint

      Deakins, Eric

      Huckfield, Les

      Dean, Joseph (Leeds West)

      Hughes, Mark (Durham)

      Dewar, Donald

      Hughes, Robert (Aberdeen N)

      Dixon, Donald

      Hughes, Roy (Newport)

      Dobson, Frank

      Janner, Hon Greville

      Dormand, Jack

      Jay, Rt Hon Douglas

      Douglas, Dick

      John, Brynmor

      999

      Johnson, James (Hull West)

      Race, Reg

      Johnson, Walter (Derby S)

      Radice, Giles

      Johnston, Russell (Inverness)

      Rees, Rt Hon M (Leeds S)

      Jones, Barry (East Flint)

      Richardson, Jo

      Jones, Dan (Burnley)

      Roberts, Albert (Normanton)

      Kaufman, Rt Hon Gerald

      Roberts, Allan (Bootle)

      Kerr, Russell

      Roberts, Ernest (Hackney N)

      Kilfedder, James A.

      Roberts, Gwilym (Cannock)

      Kilroy-Silk, Robert

      Robertson, George

      Kinnock, Neil

      Robinson, G. (Coventry NW)

      Knox, David

      Robinson, P. (Belfast E)

      Lambie, David

      Rodgers, Rt Hon William

      Lamborn, Harry

      Rooker, J. W.

      Lamond, James

      Roper, John

      Leighton, Ronald

      Ross, Ernest (Dundee West)

      Lestor, Miss Joan

      Ross, Stephen (Isle of Wight)

      Lewis, Ron (Carlisle)

      Rowlands, Ted

      Litherland, Robert

      Ryman, John

      Lofthouse, Geoffrey

      Sandelson, Neville

      Lyon, Alexander (York)

      Sever, John

      Lyons, Edward (Bradf'd W)

      Sheldon, Rt Hon R.

      Mabon, Rt Hon Dr J. Dickson

      Shore, Rt Hon Peter

      McCartney, Hugh

      Short, Mrs Renée

      McDonald, Dr Oonagh

      Silkin, Rt Hon J. (Deptford)

      McElhone, Frank

      Silkin, Rt Hon S. C. (Dulwich)

      McKay, Allen (Penistone)

      Silverman, Julius

      McKelvey, William

      Skinner, Dennis

      MacKenzie, Rt Hon Gregor

      Smith, Cyril (Rochdale)

      Maclennan, Robert

      Smith, Rt Hon J. (N Lanark)

      McMahon, Andrew

      Snape, Peter

      McNally, Thomas

      Soley, Clive

      McNamara, Kevin

      Spearing, Nigel

      McQuade, John

      Speller, Tony

      McTaggart, Robert

      Spriggs, Leslie

      McWilliam, John

      Stallard, A. W.

      Magee, Bryan

      Steel, Rt Hon David

      Marks, Kenneth

      Stewart, Rt Hon D. (W Isles)

      Marshall, D(G'gow S'ton)

      Stoddart, David

      Marshall, Dr Edmund (Goole)

      Strang, Gavin

      Marshall, Jim (Leicester S)

      Straw, Jack

      Martin, M(G'gow S'burn)

      Summerskill, Hon Dr Shirley

      Mason, Rt Hon Roy

      Tapsell, Peter

      Maxton, John

      Thomas, Dafydd (Merioneth)

      Maxwell-Hyslop, Robin

      Thomas, Jeffrey (Abertillery)

      Maynard, Miss Joan

      Thomas, Mike (Newcastle E)

      Meacher, Michael

      Thorne, Stan (Preston South)

      Mellish, Rt Hon Robert

      Tilley, John

      Mikardo, Ian

      Tinn, James

      Millan, Rt Hon Bruce

      Torney, Tom

      Miller, Dr M. S. (E Kilbride)

      Varley, Rt Hon Eric G.

      Mitchell, Austin (Grimsby)

      Wainwright, E. (Dearne V)

      Mitchell, R. C. (Soton Itchen)

      Wainwright, R. (Colne V)

      Morris, Rt Hon A. (W'shawe)

      Walker, Rt Hon H. (D'caster)

      Morris, Rt Hon C. (O'shaw)

      Walker, B. (Perth)

      Morris, Rt Hon J. (Aberavon)

      Watkins, David

      Morton, George

      Weetch, Ken

      Moyle, Rt Hon Roland

      Welsh, Michael

      Mudd, David

      White, Frank R.

      Mulley, Rt Hon Frederick

      White, J. (G'gow Pollok)

      Newens, Stanley

      Whitehead, Phillip

      Oakes, Rt Hon Gordon

      Whitlock, William

      Ogden, Eric

      Wigley, Dafydd

      O'Halloran, Michael

      Willey, Rt Hon Frederick

      O'Neill, Martin

      Williams, Sir T. (W'ton)

      Orme, Rt Hon Stanley

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

      Owen, Rt Hon Dr David

      Wilson, William (C'try SE)

      Paisley, Rev Ian

      Winnick, David

      Palmer, Arthur

      Winterton, Nicholas

      Parker, John

      Woodall, Alec

      Parry, Robert

      Woolmer, Kenneth

      Pavitt, Laurie

      Wrigglesworth, Ian

      Pendry, Tom

      Young, David (Bolton E)

      Penhaligon, David

      Powell, Raymond (Ogmore)

      Tellers for the Ayes:

      Prescott, John

      Mr. Albert McQuarrie and Mr. Peter Temple-Morris.

      Price, C. (Lewisham W)

      NOES

      Adley, Robert

      Alexander, Richard

      Aitken, Jonathan

      Alison, Michael

      1000

      Amery, Rt Hon Julian

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

      Ancram, Michael

      Fletcher-Cooke, Sir Charles

      Arnold, Tom

      Fookes, Miss Janet

      Aspinwall, Jack

      Forman, Nigel

      Atkins, Rt Hon H.(S'thorne)

      Fowler, Rt Hon Norman

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

      Fox, Marcus

      Baker, Kenneth(St.M'bone)

      Fraser, Rt Hon Sir Hugh

      Baker, Nicholas (N Dorset)

      Fraser, Peter (South Angus)

      Banks, Robert

      Fry, Peter

      Beaumont-Dark, Anthony

      Gardiner, George (Reigate)

      Bell, Sir Ronald

      Gardner, Edward (S Fylde)

      Bendall, Vivian

      Garel-Jones, Tristan

      Benyon, Thomas (A'don)

      Gilmour, Rt Hon Sir Ian

      Benyon, W. (Buckingham)

      Glyn, Dr Alan

      Best, Keith

      Goodhart, Philip

      Bevan, David Gilroy

      Goodhew, Victor

      Biffen, Rt Hon John

      Goodlad, Alastair

      Biggs-Davison, John

      Gorst, John

      Blackburn, John

      Gow, Ian

      Blaker, Peter

      Gower, Sir Raymond

      Body, Richard

      Grant, Anthony (Harrow C)

      Bonsor, Sir Nicholas

      Gray, Hamish

      Boscawen, Hon Robert

      Greenway, Harry

      Bottomley, Peter (W'wich W)

      Grieve, Percy

      Bowden, Andrew

      Griffiths, Peter Portsm'th N)

      Boyson, Dr Rhodes

      Grist, Ian

      Braine, Sir Bernard

      Grylls, Michael

      Bright, Graham

      Gummer, John Selwyn

      Brinton, Tim

      Hamilton, Hon A.

      Brittan, Leon

      Hamilton, Michael (Salisbury)

      Brooke, Hon Peter

      Hampson, Dr Keith

      Brown, Michael(grigg & Sc'n)

      Hannam,John

      Browne, John (Winchester)

      Haselhurst, Alan

      Bruce-Gardyne, John

      Hastings, Stephen

      Bryan, Sir Paul

      Havers, Rt Hon Sir Michael

      Buchanan-Smith, Alick

      Hawksley, Warren

      Buck, Antony

      Hayhoe, Barney

      Budgen, Nick

      Heath, Rt Hon Edward

      Bulmer, Esmond

      Heddle, John

      Burden, Sir Frederick

      Henderson, Barry

      Butcher, John

      Heseltine, Rt Hon Michael

      Butler, Hon Adam

      Higgins, Rt Hon Terence L.

      Cadbury, Jocelyn

      Hogg, Hon Douglas (Gr'th'm)

      Carlisle, Kenneth (Lincoln)

      Holland, Philip (Carlton)

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

      Hooson, Tom

      Chalker, Mrs. Lynda

      Hordern, Peter

      Channon, Rt. Hon. Paul

      Howe, Rt Hon Sir Geoffrey

      Chapman, Sydney

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

      Churchill, W. S.

      Howell, Ralph (N Norfolk)

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

      Hunt, David (Wirral)

      Clark, Sir W. (Croydon S)

      Hunt, John (Ravensbourne)

      Clarke, Kenneth (Rushcliffe)

      Hurd, Hon Douglas

      Clegg, Sir Walter

      Irving, Charles (Cheltenham)

      Cockeram, Eric

      Jenkin, Rt Hon Patrick

      Colvin, Michael

      Johnson Smith, Geoffrey

      Cope, John

      Jopling, Rt Hon Michael

      Corrie, John

      Joseph, Rt Hon Sir Keith

      Costain, Sir Albert

      Kaberry, Sir Donald

      Cranborne, Viscount

      Kellett-Bowman, Mrs Elaine

      Dean, Paul (North Somerset)

      Kershaw, Anthony

      Dickens, Geoffrey

      King, Rt Hon Tom

      Dorrell, Stephen

      Kitson, Sir Timothy

      Douglas-Hamilton, Lord J.

      Knight, Mrs Jill

      Dover, Denshore

      Lamont, Norman

      du Cann, Rt Hon Edward

      Lang, Ian

      Dunn, Robert (Dartford)

      Langford-Holt, Sir John

      Durant, Tony

      Latham, Michael

      Eden, Rt Hon Sir John

      Lawrence, Ivan

      Edwards, Rt Hon N. (P'broke)

      Lawson, Rt Hon Nigel

      Eggar, Tim

      Lee, John

      Elliott, Sir William

      Lennox-Boyd, Hon Mark

      Emery, Peter

      Lester, Jim (Beeston)

      Eyre, Reginald

      Lewis, Kenneth (Rutland)

      Fairbairn, Nicholas

      Lloyd, Ian (Havant & W'loo)

      Fairgrieve, Russell

      Lloyd, Peter (Fareham)

      Faith, Mrs Sheila

      Loveridge, John

      Fell, Anthony

      Luce, Richard

      Fenner, Mrs Peggy

      Lyell, Nicholas

      Finsberg, Geoffrey

      McCrindle, Robert

      Fisher, Sir Nigel

      Macfarlane, Neil

      1001

      MacGregor, John

      Roberts, M. (Cardiff NW)

      MacKay, John (Argyll)

      Roberts, Wyn (Conway)

      Macmillan, Rt Hon M.

      Rossi, Hugh

      McNair-Wllson, M. (N'bury)

      Rost, Peter

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

      Royle, Sir Anthony

      Madel, David

      Sainsbury, Hon Timothy

      Major, John

      Scott, Nicholas

      Marland, Paul

      Shaw, Giles (Pudsey)

      Marlow, Tony

      Shaw, Michael (Scarborough)

      Marshall, Michael (Arundel)

      Shelton, William (Streatham)

      Marten, Neil (Banbury)

      Shepherd, Colin (Hereford)

      Mates, Michael

      Shepherd, Richard

      Mather, Carol

      Shersby, Michael

      Maude, Rt Hon Sir Angus

      Silvester, Fred

      Mawby, Ray

      Sims, Roger

      Mawhinney, Dr Brian

      Smith, Dudley

      Mayhew, Patrick

      Speed, Keith

      Mellor, David

      Spence, John

      Meyer, Sir Anthony

      Spicer, Jim (West Dorset)

      Miller, Hal (B'grove)

      Spicer, Michael (S Worcs)

      Mills, Iain (Meriden)

      Sproat, Iain

      Mills, Peter (West Devon)

      Squire, Robin

      Miscampbell, Norman

      Stainton, Keith

      Mitchell, David (Basingstoke)

      Stanbrook, Ivor

      Moate, Roger

      Stanley, John

      Monro, Hector

      Steen, Anthony

      Montgomery, Fergus

      Stevens, Martin

      Moore, John

      Stewart, Ian (Hitchin)

      Morgan, Geraint

      Stewart, A.(E Renfrewshire)

      Morris, M. (N'hampton S)

      Stokes, John

      Morrison, Hon C. (Devizes)

      Stradling Thomas, J.

      Morrison, Hon P. (Chester)

      Taylor, Robert (Croydon NW)

      Murphy, Christopher

      Taylor, Teddy (S'end E)

      Myles, David

      Tebbit, Norman

      Neale, Gerrard

      Thatcher, Rt Hon Mrs M.

      Needham, Richard

      Thomas, Rt Hon Peter

      Nelson, Anthony

      Thompson, Donald

      Neubert, Michael

      Thome, Neil (Ilford South)

      Newton, Tony

      Thornton, Malcolm

      Normanton, Tom

      Townend, John (Bridlington)

      Nott, Rt Hon John

      Townsend, Cyril D, (B'heath)

      Onslow, Cranley

      Trippier, David

      Oppenheim, Rt Hon Mrs S.

      Trotter, Neville

      Osborn, John

      van Straubenzee, W. R.

      Page, Rt Hon Sir G. (Crosby)

      Vaughan, Dr Gerard

      Page, Richard (SW Herts)

      Viggers, Peter

      Parkinson, Cecil

      Waddington, David

      Parris, Matthew

      Wakeham, John

      Patten, Christopher (Bath)

      Waldegrave, Hon William

      Patten, John (Oxford)

      Walker, Rt Hon P. (W'cester)

      Pawsey, James

      Walker-Smith, Rt Hon Sir D.

      Perclval, Sir Ian

      Wall, Patrick

      Peyton, Rt Hon John

      Waller, Gary

      Pink, R. Bonner

      Walters, Dennis

      Pollock, Alexander

      Ward, John

      Porter, Barry

      Warren, Kenneth

      Prentice, Rt Hon Reg

      Watson, John

      Price, Sir David (Eastleigh)

      Wells, John (Maidstone)

      Prior, Rt Hon James

      Wells, Bowen

      Proctor, K. Harvey

      Wheeler, John

      Pym, Rt Hon Francis

      Whitelaw, Rt Hon William

      Raison, Timothy

      Whitney, Raymond

      Rathbone, Tim

      Wickenden, Keith

      Rees, Peter (Dover and Deal)

      Wiggin, Jerry

      Rees-Davies, W. R.

      Williams, D.(Montgomery)

      Renton, Tim

      Wolfson, Mark

      Rhodes James, Robert

      Young, Sir George (Acton)

      Rhys Williams, Sir Brandon

      Younger, Rt Hon George

      Ridley, Hon Nicholas

      Ridsdale, Sir Julian

      Tellers for the Noes:

      Rifkind, Malcolm

      Mr. Spencer Le Marchant and Mr. Anthony Berry.

      Rippon, Rt Hon Geoffrey

      Question accordingly negatived.
      Amendment proposed: No. 48, in page 3, leave out lines 1 and 2 and insert—
      1002
      '4--(1) In section 6(1) of the Hydrocarbon Oil Duties Act 1979 leave out 'a duty of excise at the rate of £0·10 a litre" and insert "0·1382 a litre in the case of light oil and £0·115 a litre in the case of heavy oil". '.—[Mr. Shore.]
      Question put, That the amendment be made:—
      The Committee divided: Ayes 264, Noes 318.

      Division No. 166]

      [10.28 pm

      AYES

      Abse, Leo

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

      Adams, Allen

      Ellis, Tom (Wrexham)

      Allaun, Frank

      English, Michael

      Alton, David

      Ennals, Rt Hon David

      Anderson, Donald

      Evans, Ioan (Aberdare)

      Archer, Rt Hon Peter

      Evans, John (Newton)

      Ashley, Rt Hon Jack

      Ewing, Harry

      Ashton, Joe

      Faulds, Andrew

      Atkinson, N. (H'gey,)

      Field, Frank

      Barnett, Guy (Greenwich)

      Fitch, Alan

      Barnett, Rt Hon Joel (H'wd)

      Flannery, Martin

      Beith, A. J.

      Fletcher, Raymond (Ilkeston)

      Benn, Rt Hon A. Wedgwood

      Fletcher, Ted (Darlington)

      Bennett, Andrew(Sr'Kp't N)

      Foot, Rt Hon Michael

      Bidwell, Sydney

      Ford, Ben

      Booth, Rt Hon Albert

      Forrester, John

      Boothroyd, Miss Betty

      Foster, Derek

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

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

      Bradley, Tom

      Freeson, Rt Hon Reginald

      Bray, Dr Jeremy

      Freud, Clement

      Brocklebank-Fowler, C.

      Garrett, John (Norwich S)

      Brown, Hugh D. (Provan)

      George, Bruce

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

      Gilbert, Rt Hon Dr John

      Brown, Ron (E'burgh, Leith)

      Golding, John

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

      Graham, Ted

      Buchan, Norman

      Grant, George (Morpeth)

      Callaghan, Rt Hon J.

      Grant, John (Islington C)

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

      Grimond, Rt Hon J.

      Campbell, Ian

      Hamilton, James (Bothwell)

      Campbell-Savours, Dale

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

      Canavan, Dennis

      Hardy, Peter

      Cant, R. B.

      Harrison, Rt Hon Walter

      Carmichael, Neil

      Hart, Rt Hon Dame Judith

      Carter-Jones, Lewis

      Hattersley, Rt Hon Roy

      Cartwright, John

      Healey, Rt Hon Denis

      Clark, Dr David (S Shields)

      Heffer, Eric S.

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

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

      Cohen, Stanley

      Holland, S. (L'b'th, Vauxh'll)

      Coleman, Donald

      Home Robertson, John

      Conlan, Bernard

      Homewood, William

      Cook, Robin F.

      Hooley, Frank

      Cowans, Harry

      Horam, John

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

      Howell, Rt Hon D.

      Craigen, J. M.

      Howells, Geraint

      Crawshaw, Richard

      Huckfield, Les

      Crowther, J. S,

      Hughes, Mark (Durham)

      Cryer, Bob

      Hughes, Robert (Aberdeen N)

      Cunliffe, Lawrence

      Hughes, Roy (Newport)

      Cunningham, G. (Islington S)

      Janner, Hon Greville

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

      Jay, Rt Hon Douglas

      Dalyell, Tam

      John, Brynmor

      Davidson, Arthur

      Johnson, James (Hull West)

      Davies, Rt Hon Denzil (L'lli)

      Johnson, Walter (Derby S)

      Davies, Ifor (Gower)

      Johnston, Russell (Inverness)

      Davis, Clinton (Hackney C)

      Jones, Barry (East Flint)

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

      Jones, Dan (Burnley)

      Deakins, Eric

      Kaufman, Rt Hon Gerald

      Dewar, Donald

      Kerr, Russell

      Dixon, Donald

      Kilfedder, James A.

      Dobson, Frank

      Kilroy-Silk, Robert

      Dormand, Jack

      Kinnock, Neil

      Douglas, Dick

      Lambie, David

      Douglas-Mann, Bruce

      Lamborn, Harry

      Dubs, Alfred

      Lamond, James

      Duffy, A. E. P.

      Leadbitter, Ted

      Dunn, James A.

      Leighton, Ronald

      Dunnett, Jack

      Lestor, Miss Joan

      Dunwoody, Hon Mrs G.

      Lewis, Ron (Carlisle)

      Eadie, Alex

      Litherland, Robert

      Eastham, Ken

      Lofthouse, Geoffrey

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

      Lyon, Alexander (York)

      1003

      Lyons, Edward (Bradf'd W)

      Robinson, G. (Coventry NW)

      Mabon, Rt Hon Dr J. Dickson

      Robinson, P. (Belfast E)

      McCartney, Hugh

      Rodgers, Rt Hon William

      McDonald, Dr Oonagh

      Rooker, J. W.

      McElhone, Frank

      Roper, John

      McKay, Allen (Penistone)

      Ross, Ernest (Dundee West)

      McKelvey, William

      Ross, Stephen (Isle of Wight)

      MacKenzie, Rt Hon Gregor

      Rowlands, Ted

      Maclennan, Robert

      Ryman, John

      McMahon, Andrew

      Sandelson, Neville

      McNally, Thomas

      Sever, John

      McNamara, Kevin

      Sheldon, Rt Hon R.

      McQuade, John

      Shore, Rt Hon Peter

      McTaggart, Robert

      Short, Mrs Renée

      McWilliam, John

      Silkin, Rt Hon J. (Deptford)

      Magee, Bryan

      Silkin, Rt Hon S. C. (Dulwich)

      Marks, Kenneth

      Silverman, Julius

      Marshall, D(G'gow S'ton)

      Skinner, Dennis

      Marshall, Dr Edmund (Goole)

      Smith, Cyril (Rochdale)

      Marshall, Jim (Leicester S)

      Smith, Rt Hon J. (N Lanark)

      Martin, M(G'gow S'burn)

      Snape, Peter

      Mason, Rt Hon Roy

      Soley, Clive

      Maxton, John

      Spearing, Nigel

      Maynard, Miss Joan

      Spriggs, Leslie

      Meacher, Michael

      Stallard, A. W.

      Mellish, Rt Hon Robert

      Steel, Rt Hon David

      Mikardo, Ian

      Stewart, Rt Hon D. (W Isles)

      Millan, Rt Hon Bruce

      Stoddart, David

      Miller, DrM. S. (E Kilbride)

      Strang, Gavin

      Mitchell, Austin (Grimsby)

      Straw, Jack

      Mitchell, R. C. (Soton Itchen)

      Summerskill, Hon Dr Shirley

      Morris, Rt Hon A. (W'shawe)

      Thomas, Dafydd (Merioneth)

      Morris, Rt Hon C. (O'shaw)

      Thomas, Jeffrey (Abertillery)

      Morris, Rt Hon J. (Aberavon)

      Thomas, Mike (Newcastle E)

      Morton, George

      Thorne, Stan (Preston South)

      Moyle, Rt Hon Roland

      Tilley, John

      Mulley, Rt Hon Frederick

      Tinn, James

      Newens, Stanley

      Torney, Tom

      Oakes, Rt Hon Gordon

      Varley, Rt Hon Eric G.

      Ogden, Eric

      Wainwright, B.(Dearne V)

      O'Halloran, Michael

      Wainwright, R(Colne V)

      O'Neill, Martin

      Walker, Rt Hon H.(D'caster)

      Orme, Rt Hon Stanley

      Watkins, David

      Owen, Rt Hon Dr David

      Weetch, Ken

      Paisley, Rev Ian

      Welsh, Michael

      Palmer, Arthur

      White, Frank R.

      Parker, John

      White, J. (G'gow Pollok)

      Parry, Robert

      Whitehead, Phillip

      Pavitt, Laurie

      Whitlock, William

      Pendry, Tom

      Wigley, Dafydd

      Penhaligon, David

      Willey, Rt Hon Frederick

      Powell, Raymond (Ogmore)

      Williams, Sir T.(W'ton)

      Prescott, John

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

      Price, C. (Lewisham W)

      Wilson, William (C'trySE)

      Race, Reg

      Winnick, David

      Radice, Giles

      Woodall, Alec

      Rees, Rt Hon M (Leeds S)

      Woolmer, Kenneth

      Richardson, Jo

      Wrigglesworth, Ian

      Roberts, Albert (Normanton)

      Young, David (Bolton E)

      Roberts, Allan (Bootle)

      Roberts, Ernest (Hackney N)

      Tellers for the Ayes:

      Roberts, Gwilym (Cannock)

      Mr. Joseph Dean and Mr. Frank Haynes.

      Robertson, George

      NOES

      Adley, Robert

      Bell, Sir Ronald

      Aitken, Jonathan

      Bendall, Vivian

      Alexander, Richard

      Bennett, Sir Frederic (T'bay)

      Alison, Michael

      Benyon, Thomas (A'don)

      Amery, Rt Hon Julian

      Benyon, W. (Buckingham)

      Ancram, Michael

      Best, Keith

      Arnold, Tom

      Bevan, David Gilroy

      Aspinwall, Jack

      Biffen, Rt Hon John

      Atkins, Rt Hon H. (S'thorne)

      Biggs-Davison, John

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

      Blackburn, John

      Baker, Kenneth(St.M'bone)

      Blaker, Peter

      Baker, Nicholas (N Dorset)

      Body, Richard

      Banks, Robert

      Bonsor, Sir Nicholas

      Beaumont-Dark, Anthony

      Boscawen, Hon Robert

      1004

      Bottomley, Peter (W'wich W)

      Gray, Hamish

      Bowden, Andrew

      Greenway, Harry

      Boyson, Dr Rhodes

      Grieve, Percy

      Braine, Sir Bernard

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

      Bright, Graham

      Griffiths, Peter Portsm'th N)

      Brinton, Tim

      Grist, Ian

      Brittan, Leon

      Grylls, Michael

      Brooke, Hon Peter

      Gummer, John Selwyn

      Brotherton, Michael

      Hamilton, Hon A.

      Brown, Michael(Brigg & Sc'n)

      Hamilton, Michael (Salisbury)

      Browne, John (Winchester)

      Hampson, Dr Keith

      Bruce-Gardyne, John

      Hannam, John

      Buchanan-Smith, Alick

      Haselhurst, Alan

      Buck, Antony

      Hastings, Stephen

      Budgen, Nick

      Havers, Rt Hon Sir Michael

      Bulmer, Esmond

      Hawksley, Warren

      Burden, Sir Frederick

      Hayhoe, Barney

      Butcher, John

      Heath, Rt Hon Edward

      Butler, Hon Adam

      Heddle, John

      Cadbury, Jocelyn

      Henderson, Barry

      Carlisle, Kenneth (Lincoln)

      Heseltine, Rt Hon Michael

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

      Hicks, Robert

      Chalker, Mrs. Lynda

      Higgins, Rt Hon Terence L.

      Channon, Rt. Hon. Paul

      Hogg, Hon Douglas (Gr'th'm)

      Chapman, Sydney

      Holland, Philip (Carlton)

      Churchill, W. S.

      Hooson, Tom

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

      Hordern, Peter

      Clark, Sir W. (Croydon S)

      Howe, Rt Hon Sir Geoffrey

      Clarke, Kenneth (Rushcliffe)

      Howell, Rt Hon D. (G'ldfd)

      Clegg, Sir Walter

      Howell, Ralph (N Norfolk)

      Cockeram, Eric

      Hunt, David (Wirral)

      Colvin, Michael

      Hunt, John (Ravensbourne)

      Cope, John

      Hurd, Hon Douglas

      Cormack, Patrick

      Irving, Charles (Cheltenham)

      Corrie, John

      Jenkin, Rt Hon Patrick

      Costain, Sir Albert

      Johnson Smith, Geoffrey

      Cranborne, Viscount

      Jopling, Rt Hon Michael

      Dean, Paul (North Somerset)

      Joseph, Rt Hon Sir Keith

      Dickens, Geoffrey

      Kaberry, Sir Donald

      Dorrell, Stephen

      Kellett-Bowman, Mrs Elaine

      Douglas-Hamilton, Lord J.

      Kershaw, Anthony

      Dover, Denshore

      King, Rt Hon Tom

      du Cann, Rt Hon Edward

      Kitson, Sir Timothy

      Dunn, Robert (Dartford)

      Knight, Mrs Jill

      Durant, Tony

      Knox, David

      Dykes, Hugh

      Lamont, Norman

      Eden, Rt Hon Sir John

      Lang, Ian

      Edwards, Rt Hon N. (P'broke)

      Langford-Holt, Sir John

      Eggar, Tim

      Latham, Michael

      Elliott, Sir William

      Lawrence, Ivan

      Emery, Peter

      Lawson, Rt Hon Nigel

      Eyre, Reginald

      Lee, John

      Fairbairn, Nicholas

      Lennox-Boyd, Hon Mark

      Fairgrieve, Russell

      Lester, Jim (Beeston)

      Faith, Mrs Sheila

      Lewis, Kenneth (Rutland)

      Fell, Anthony

      Lloyd, Ian (Havant & W'loo)

      Fenner, Mrs Peggy

      Lloyd, Peter (Fareham)

      Finsberg, Geoffrey

      Loveridge, John

      Fisher, Sir Nigel

      Luce, Richard

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

      Lyell, Nicholas

      Fletcher-Cooke, Sir Charles

      McCrindle, Robert

      Fookes, Miss Janet

      Macfarlane, Neil

      Forman, Nigel

      MacGregor, John

      Fowler, Rt Hon Norman

      MacKay, John (Argyll)

      Fox, Marcus

      Macmillan, Rt Hon M.

      Fraser, Rt Hon Sir Hugh

      McNair-Wilson, M. (N'bury)

      Fraser, Peter (South Angus)

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

      Fry, Peter

      Madel, David

      Gardiner, George (Reigate)

      Major, John

      Gardner, Edward (S Fylde)

      Marland, Paul

      Garel-Jones, Tristan

      Marlow, Tony

      Gilmour, Rt Hon Sir Ian

      Marshall, Michael (Arundel)

      Glyn, Dr Alan

      Marten, Neil (Banbury)

      Goodhart, Philip

      Mates, Michael

      Goodhew, Victor

      Mather, Carol

      Goodlad, Alastair

      Maude, Rt Hon Sir Angus

      Gorst, John

      Mawby, Ray

      Gow, Ian

      Mawhinney, Dr Brian

      Gower, Sir Raymond

      Maxwell-Hyslop, Robin

      Grant, Anthony (Harrow C)

      Mayhew, Patrick

      1005

      Mellor, David

      Price, Sir David (Eastleigh)

      Meyer, Sir Anthony

      Prior, Rt Hon James

      Miller, Hal (B'grove)

      Proctor, K. Harvey

      Mills, Iain (Meriden)

      Pym, Rt Hon Francis

      Mills, Peter (West Devon)

      Raison, Timothy

      Miscampbell, Norman

      Rathbone, Tim

      Mitchell, David (Basingstoke)

      Rees, Peter (Dover and Deal)

      Moate, Roger

      Rees-Davies, W. R.

      Monro, Hector

      Renton, Tim

      Montgomery, Fergus

      Rhodes James, Robert

      Moore, John

      Rhys Williams, Sir Brandon

      Morgan, Geraint

      Ridley, Hon Nicholas

      Morris, M. (N'hampton S)

      Ridsdale, Sir Julian

      Morrison, Hon C. (Devizes)

      Rifkind, Malcolm

      Morrison, Hon P. (Chester)

      Rippon, Rt Hon Geoffrey

      Mudd, David

      Roberts, M. (Cardiff NW)

      Murphy, Christopher

      Roberts, Wyn (Conway)

      Myles, David

      Rossi, Hugh

      Neale, Gerrard

      Rost, Peter

      Needham, Richard

      Royle, Sir Anthony

      Nelson, Anthony

      Sainsbury, Hon Timothy

      Neubert, Michael

      St. John-Stevas, Rt Hon N.

      Newton, Tony

      Scott, Nicholas

      Normanton, Tom

      Shaw, Giles (Pudsey)

      Nott, Rt Hon John

      Shaw, Michael (Scarborough)

      Onslow, Cranley

      Shelton, William (Streatham)

      Oppenheim, Rt Hon Mrs S.

      Shepherd, Colin (Hereford)

      Osborn, John

      Shepherd, Richard

      Page, Rt Hon Sir G. (Crosby)

      Shersby, Michael

      Page, Richard (SW Herts)

      Silvester, Fred

      Parkinson, Cecil

      Sims, Roger

      Parris, Matthew

      Skeet, T. H. H.

      Patten, Christopher (Bath)

      Smith, Dudley

      Patten, John (Oxford)

      Speed, Keith

      Pawsey, James

      Speller, Tony

      Percival, Sir Ian

      Spence, John

      Peyton, Rt Hon John

      Spicer, Jim (West Dorset)

      Pink, R. Bonner

      Spicer, Michael (S Worcs)

      Pollock, Alexander

      Sproat, Iain

      Porter, Barry

      Squire, Robin

      Prentice, Rt Hon Reg

      Stainton, Keith

      1006

      Stanbrook, Ivor

      Waldegrave, Hon William

      Stanley, John

      Walker, Rt Hon P.(W'cester)

      Steen, Anthony

      Walker-Smith, Rt Hon Sir D.

      Stevens, Martin

      Wall, Patrick

      Stewart, Ian (Hitchin)

      Waller, Gary

      Stewart, K.(E Renfrewshire)

      Walters, Dennis

      Stokes, John

      Ward, John

      Stradling Thomas, J.

      Warren, Kenneth

      Tapsell, Peter

      Watson, John

      Taylor, Robert (Croydon NW)

      Wells, John (Maidstone)

      Taylor, Teddy (S'end E)

      Wells, Bowen

      Tebbit, Norman

      Wheeler, John

      Thatcher, Rt Hon Mrs M.

      Whitelaw, Rt Hon William

      Thomas, Rt Hon Peter

      Whitney, Raymond

      Thompson, Donald

      Wickenden, Keith

      Thorne, Neil (Ilford South)

      Wiggin, Jerry

      Thornton, Malcolm

      Williams, D.(Montgomery)

      Townend, John (Bridlington)

      Winterton, Nicholas

      Townsend, Cyril D, (B'heath)

      Wolfson, Mark

      Trippier, David

      Young, Sir George (Acton)

      Trotter, Neville

      Younger, Rt Hon George

      van Straubenzee, W. R.

      Vaughan, Dr Gerard

      Tellers for the Noes:

      Viggers, Peter

      Mr. Spencer Le Marchant and Mr. Anthony Berry.

      Waddington, David

      Wakeham, John

      Question accordingly negatived.
      Amendment made: No. 1, in page 3, leave out lines 1 and 2 and insert:—
      '4.—(1) In section 6(1) of the Hydrocarbon Oil Duties Act 1979 for the words "a duty of excise at the rate of £0·10 a litre" there shall be substituted the words "a duty of excise at the rate of £0·1382 a litre in the case of light oil and £0·1191 a litre in the case of heavy oil".'.—[Mr. Skeet.]
      Clause 4, as amended, ordered to stand part of the Bill.
      To report Progress and ask leave to sit again tomorrow.—[Mr. Brittan.]
      Committee report Progress; to sit again tomorrow.

  Power Plant Industry
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thompson.]
  10.41 pm
  Mr. Mike Thomas: The nuclear industry in Britain over the past quarter of a century has had, to say the least, a chequered career. I make no apology tonight for raising the matter again. The Minister will know well of my interest and that of my constituents who work at the turbine generator manufacturer NEI Parsons. He will know as well of the industry's importance for the North-East as a whole, where 8,000 jobs will still depend on power plant manufacture by the end of 1981, some 2,300 less than when the Government took office less than two years ago. I make no partisan point on that. Employment in the industry has declined under successive Governments. However, the fact that by the end of 1981 there will be fewer than seven jobs where two years ago there were 10—a reduction of 35 per cent. in the work force in power plant in the North-East—cannot but be of major concern in an area like Tyneside, with its desperate unemployment problems.
  However, that is not the main burden of the matter that I wish to raise this evening. After the nuclear order famine of the last decade, the Government, endorsing the approach of their predecessors, announced in 1979 their nuclear thermal reactor policy. I share the Government's view that uncertainty as to the future costs and availability of fossil fuels by the end of the century must dictate a major nuclear programme if long-term energy supplies are to be secured and the energy balance got right. I also share their view that a reconstruction of the National Nuclear Corporation is essential if we are to carry through such a programme successfully.
  It is about the manner of the Government's implementation of these decisions that I wish to question the Minister. In December 1979, the Secretary of State announced the Government's decision to build two further AGR stations at Heysham and Torness, to seek to build a PWR station, subject to consents and safety clearances, at Sizewell, and to plan to order, depending on electricity demand, one nuclear power station a year in the decade from 1982 or, in other words, about 15 GW of capacity over 10 years.
  As far as the two AGRs are concerned, now that the long delayed orders have been placed, I wonder whether the Minister could first of all tell the House why there was this much protracted delay and in precise terms what he estimates it has cost in job opprtunities in the industry, not only in the North-East. Just as important, why have the Government hardly had a good word to say for their own decision to build on the excellent experience of the AGRs at Hinkley and Hunterston, and allowed those black propagandists who are always ready to run our country down, especially if it is in their own commercial interest, to peddle the myth that the AGR experience has been wholly bad for the British nuclear industry?
  Will the Minister confirm tonight that the reasons for the Government's decision were good ones? Will he also confirm that the design the new AGRs will be based on is cheap? In capital terms, Hinkley and Hunterston will have
  1008
  cost, at most, about £200 per KW in historic cost terms after allowing for interest charges and delays; and operating costs, including capital charges, even during the first two years of commissioning with the inevitable teething troubles in working with a prototype, were only at the level of coal-fired plant, and now that the stations are operating nearer to optimum load they are considerably cheaper. The Minister should have no difficulty in confirming these facts. He only has to consult the CEGB and SSEB published annual reports laid before his right hon. Friend to do so. May I also perhaps tempt him to agree with me that it is a little ironic that those who have been busy building, or rather failing to build, the other two AGRs to these capital cost and operating standards should be those who constantly tell us, even in evidence to Select Committees of this House, that the AGR programme is. a costly millstone around the country' neck?
  What do the Government suppose to be the morale and motivation of the highly skilled and dedicated work force in Parsons in my constituency, or at the boilermakers Clarke Chapman in Gateshead—I see that the hon. Member for Gateshead, East (Mr. Conlan) is here on their behalf—if Ministers announce orders and then fail to place them, while jobs are gratuitously lost and carefully built up technical teams threatened with disbandment? What does it do to morale—and, by the way, to export prospects—if in placing the orders the Government fail to speak up boldly and proudly for the merit of their decision and the reasons for it? I hope that the Minister will take the opportunity to put that right this evening.
  But none of that is to argue that the Government's decision also to pursue the PWR option is necessarily a bad one, although I must confess I find it a little hard to follow their logic to a satisfactory conclusion. If the objective is, as stated by the Secretary of State, to establish the PWR as a valid option, will the Minister tell us tonight when the Government expect that objective to be achieved? The CEGB talks of major new plant orders awaiting the outcome of the Sizewell inquiry—more delay there no doubt, too. Delay seems to be a special refinement in this game. For Drax B, I seem to remember, the then Government even agreed to pay compensation to the industry for ordering "early" a station which was in fact ordered two years late. But we will pass over that.
  But surely we can evaluate the difficulties, cost and success in operation of a British PWR only when we have one running. That cannot be before the 1990s now, and in the meantime the truth is that any assumptions made about PWR in the interim—other than on whether the CEGB can get planning and safety clearances for it in the face of the legitimate concerns of local people and the environmentalists, which the Sizewell inquiry will presumably resolve—will be just as likely to be proved wrong as were the assumptions about the first AGRs or indeed about the Isle of Grain oil-fired station—which is in fact a far greater scandal than any part of the nuclear programme. Yet the Government allow to grow abroad the feeling that they will, come what may, order a series of PWRs. That is not the position of the CEGB or the formal position of the Government, who have till now insisted that the mix will be open to decision for the future. The industry will be more reassured if the Minister takes this opportunity to confirm again that the Government's options are genuinely open. I suspect that he may have some difficulty in doing that—or, conversely, may do so with relief—because the fact is that the Government do not know what they are

  1009
  doing, and the industry will stagger on with no clear direction, no real support from the Government, and no steady ordering programme.
  Against this horrendous background, the National Nuclear Corporation is expected to make the whole thing work. It has a first class and independent chairman and an experienced and dedicated management; and the success of Hinkley and Hunterston owes much to the NNC team at Knutsford, but the NNC and those who work in it are being given an impossible task. They are expected to manage our nuclear programme, but their capital structure is such that they end up as agents of the CEGB. Will the Minister tell us when their capitalisation is to be increased and the whole matter sorted out?
  The NNC is expected to supervise the building of the AGRs. Yet, because of the agreement between GEC and the UKAEA not to appoint or remove without joint written agreement any of the seven out of 10 NNC directors whom they nominate between them, the board appears to be dominated by pro-PWR opinions and British Nuclear Associates, with 35 per cent. of the shares and including those most concerned with the design and construction of the AGRs, which are, after all, the major part of our nuclear programme at present, has no independent right to appoint directors and, by any reasonable standards, is under-represented.
  How long will the Government allow that to continue? The termination of the GEC supervisory management contract has not made a ha'p'orth of difference to the situation. I make no apology for making the case of the industry in all of this. Wherever one stands, and whatever interest one holds, the arrangement cannot make sense and will certainly ensure that the dismal mistakes of the past will continue to be repeated.
  If our nuclear programme is to succeed, we must pursue it, and the Government must pursue it—it is their responsibility and they cannot fob it off on to the CEGB, the NNC or anyone else—with an open mind and defend it with conviction. Why is it, for example, that while the AGRs are denigrated and the Government do nothing to stop that process—indeed, they seem almost to encourage it—the PWR is placed on a pedestal and the Government allow people to think that they have already taken a decision about a series of PWR stations? No one seems to be giving any serious consideration to, for example, the suggestion that it may be a more sensible option for the country to pursue our successful AGR experience rather than getting into more experimentations with the PWRs. The one thing that we know for sure is that every time we start a new form of nuclear project we get into trouble. At the same time as building on our AGR experience, we should work hard to be able to make the next stage a more rapid move into the fast breeder than is planned at present.
  I do not know whether that is the right route. No one knows, but it ought to be examined objectively. My complaint is that there is little chance of that in the current climate and with the current structure of the NNC.
  No wonder the CEGB struggles to keep the decisions to itself. The NNC satisfies nobody but those who hold on to control it. The industry can never plan its future and is actively encouraged by the uncertainty of will on the part of successive Governments to concentrate more on its internal disputations than on the job of getting the product right and selling it abroad.
  1010
  Successive Governments have failed to face that problem when pushed from pillar to post by the various barons, especially one particular baron, involved. But it is their uncertainty of purpose that creates the situation. The answer does not lie in a covert preference for one manufacturer over another—export help for one manufacturer presented enthusiastically and export help for another reluctantly—and it does not lie in the restructuring of the industry so that one argument permanently prevails because the other has been shut up by being put out of business.
  Nor can the answer lie in the confused hotch-potch of a report from the Select Committee on Energy, with its less than helpful suggestion that overseas competitors should be allowed to obtain work here while there is no chance of the British industry obtaining a single order in their country. The answer can lie only in the Department of Energy and Ministers in the Department taking a firm, constructive and objective hold of the situation. I hope that the Minister will give me and the hon. Member for Gateshead, East, who is equally concerned, some specific evidence that there is some hope of that in the near future.
  10.55 pm
  The Under-Secretary of State for Energy (Mr. Norman Lamont): The hon. Member for Newcastle upon Tyne, East (Mr. Thomas) has raised an important subject. It is unfortunate that it has had to be raised in an Adjournment debate late at night. It is a subject that deserves more time for discussion. The three Opposition Members present have a close interest, and I pay tribute to the assiduousness of the hon. Member for Newcastle upon Tyne, East in repeatedly raising this subject and stoutly defending his constituents at Question Time and in debates in the House.
  The first part of the motion as it appears on the Order Paper relates to employment in the power plant industry. I shall discuss that first and then answer the questions that the hon. Gentleman raised.
  The United Kingdom power plant industry is a high skill, high value-added industry which makes an important contribution to our balance of payments. It directly employs around 46,000 people, with at least another 30,000 employed in ancillary sectors—many in assisted areas. It is a key industry with a track record of success. It has demonstrated its ability to compete by winning major export orders. The recent order to construct the Castle Peak power station in Hong Kong and other recent orders won by the industry in the Middle and Far East are evidence of this.
  When discussing the export record of the industry, the hon. Gentleman referred to the Government helping one part of the industry and not another. I assure him that the Government are anxious to help all firms in the industry. The help that was given to GEC and Babcock would be given to other firms exporting to other parts of the world. We shall do everything in our power to help NEI, too. We do want not one sector of British industry to prosper but all of it.
  The Government recognise that not all sectors of the industry have shared in recent good fortune. Across the industry, there have been cutbacks and redundancies. Inevitably the current world-wide recession has significantly depressed order books. I repeat that we shall do everything practicable to assist the industry to win export orders, and I am confident that the upturn will come

  1011
  provided that the industry itself remains fully determined to maintain, and to improve wherever possible, its competitiveness.
  Although continuing export orders will be a vital factor in the industry's success, the Government also recognise the industry's need for home orders from which to plan its investment in products and facilities and its competitive assault on world markets. This was one of the important factors taken into account by my right hon. Friend the Secretary of State for Energy when he announced on 18 December 1979 our plans to allow the electricity industry to proceed with orders for new nuclear power stations to ensure that our long-term energy supplies are secure when supplies of North Sea oil and gas decline in the 1990s.
  Of these new orders, site work on the two advanced gas cooled reactors at Heysham and Torness is under way, and major contracts have recently been placed with British manufacturers for the supply of key components including the steam boilers and gas circulators. As the hon. Gentleman knows, NEI Parsons, in his constituency, will supply the turbine generators for Heysham, and NEI Clarke Chapman will supply 80 per cent. of the boiler work for both stations. The orders total some £300 million and NEI has received over half the main contracts placed. Heysham and Torness represent the first major home nuclear power station orders for 10 years; and their importance to the nuclear and power plant industry and to regional employment prospects are considerable.
  I dissent from what the hon. Gentleman said about the CEGB not wanting to explore the PWR option. The CEGB wishes to proceed with the PWR option, subject to safety and other clearances being obtained, with the ordering of a pressurised water reactor. Our proposal to allow the CEGB to proceed should assist with employment prospects in the industry. Some components will have to be imported, but we shall seek to ensure the maximum contribution from United Kingdom industry. It is our hope and expectation that the industry will see this as a valuable opportunity to add to its existing capability to handle AGRs, which, if grasped, will strengthen its ability to gain nuclear power station orders on a world-wide basis over the longer term.
  Looking further ahead, the electricity supply industry's foreseen requirement for further nuclear power station orders over the next decade should do much to ease the uncertainties which have so bedevilled the industry in recent years. Decisions about the precise timing of these future orders, and about the choice of reactor, will be taken in due course and, as my right hon. Friend has made clear, will depend upon the development of electricity demand and the performance of the industry. I must at this point stress the importance which the Government attach to the need for future power station orders to be completed on time, and to cost.
  The Government do not want to knock the AGR. I endorse what the hon. Gentleman said about the Hinkley and Hunterston AGRs. They are good investments. They are good engineering projects and great successes. If their example were followed in the British nuclear industry, our problems would be fewer. I pay tribute to the Hinkley and Hunterston reactors. The hon. Gentleman is right to ask me to do that.
  The Government's hope is that the benefit of future home power station orders will be felt in all sectors of the United Kingdom power plant industry. However, hon. Members will understand that it would not be right for me
  1012
  to offer tonight any assurances about specific orders for particular stations since the electricity supply industry and the NNC rather than the Government are responsible for the placing of individual contracts.
  I would now like to say something about the role of the National Nuclear Corporation. NNC is the sole design and construction company for nuclear power stations in the United Kingdom. It is a private sector company but with a minority Government shareholding of 35 per cent held through the Atomic Energy Authority. The other shareholders are GEC with 30 per cent. and British Nuclear Associates, a consortium of interests, with 35 per cent.
  As my right hon. Friend the Secretary of State announced in December 1979, the Government attach importance to the steady build-up of the NNC into a strong and independent design and construction company, fully able to supply nuclear power stations at home and abroad. The corporation's main tasks are currently to carry forward work on the AGR programme, and to complete work on PWR design, ready for safety scrutiny. In addition, the Government's wish is that the company should take on total project management responsibility for the PWR. I believe that good progress is being made towards that goal.
  We consider that this is a great challenge. We believe that the NNC functions for the potential benefit of the whole of the United Kingdom nuclear and power plant industry, and not merely its own shareholders. Indeed, one of the company's considerable strengths is that it operates impartially in the placing of contracts; that is to say, it has an open purchasing policy, and is bound, by agreement, to award contracts solely on merit. The NNC is therefore ideally placed to harness the best skills and technology to Britain's future nuclear programme. We have every confidence that it will succeed.
  The hon. Gentleman asked me about reactor choice. It is a momentous and important decision. Decisions will depend, first, as the Secretary of State said, on demand for electricity at the time and on the experience with AGR stations which are being constructed and with the PWRs—that is, on the experience of PWRs world-wide and our experience. That does not mean, as the hon. Gentleman suggested, that the PWR will have to be completed.
  Considerable experience will be obtained from the design and the preliminary work; and decisions could be taken at that point as well. I give the hon. Gentleman the assurance that he asked for that no decision has been taken by the Government on this matter and that the Government will take the decision later in the light of the experience that is gained. It is wrong to suggest—I do not think the hon. Gentleman went as far as this—that a decision has already been taken.
  The hon. Gentleman also asked about the shareholding in NNC and whether it would he increased, As I said, it is our intention that NNC should be allowed to develop into a free-standing company able to do the project management on its own. The Government are a shareholder but a shareholder along with other bodies, and they want a commercial approach to be taken essentially on these matters. The hon. Gentleman will know that there has been some concern recently about the contractual relationship between the CEEB and NNC and about whether NNC would have to act as an agent in future

  1013
  contracts. This is a matter on which there is legitimate argument on both sides. A resolution of this question is being pursued urgently.
  Another matter referred to by the hon. Gentleman was the GEC and AEA shareholding in NNC, the relationship between their directorships and the agreement about directorships. If he will forgive me, I think it would be wrong to describe the NNC as a body biased towards the PWR option, or as lobbying for the PWR or the AGR. There is considerable experience of the AGR in NNC and it is determined that the AGR programme should be persisted with. A very large part of NNC's resources is being devoted to the AGR.
  Mr. Mike Thomas: I want to make a distinction. Certainly the staff and many of the technical people in NNC are absolutely adequate; there is no question in my mind about that. They are not biased in any way. They are running the AGR programme at Knutsford extremely well. The question is whether the board, structured as it is, is biased towards the PWR. It seems to me undeniable that it is. That is very unreasonable for those who are trying to build AGRs under the NNC's instructions.
  Mr. Lamont: I do not think that the history of what has happened recently bears out what the hon. Gentleman has said. I repeat what I said to him earlier, that the position remains open for the future. The AGR has a very good chance. If the Hinkley and Hunterston pattern of success is pursued, obviously the AGR will be a major success, and I hope it is.
  The hon. Gentleman also referred to the alleged delay in the confirmation of the two latest AGR stations. The orders for the two AGRs represent the first orders for home power stations placed in 10 years. They have followed within only a year of the Government taking office. When we came into office in May 1979 it was appropriate that we should review our strategy towards nuclear power, as we reviewed other important parts of our energy strategy. After only seven months, in December 1979, we made the initial statement, and our commitment to order two AGRs was announced. The orders were confirmed early in 1980. Site work commenced shortly after and all the major contracts have now been let. In regard to what the hon. Gentleman called delay, NEI does not attribute any redundancies to any slippage in the AGR programme. That is the information that it has given us.
  1014
  In conclusion, I reiterate that the Government regard the question of employment in the power plant industry as a most important one. We believe that the twin pillars of our approach are right—encouraging and assisting the industry to obtain overseas orders and embarking on a further home power station programme—and provide a real chance for recovery in the industry's fortunes. The NNC has an important role to play. Ultimately, however, the onus rests on the United Kingdom power plant industry as a whole to demonstrate that it can produce to cost and on time, and to develop further its technological skills. If it meets this challenge, as the Government believe that it can do, the outlook will be bright for British companies and British workers.
  Mr. Bernard Conlan: I am grateful to the Minister for giving way. Does he not appreciate that the Government's policy of ordering one station a year is bound to fail unless the PWR is subsituted for an AGR? The argument about planning, the public inquiry and all the rest is bound to defer the PWR decision, and many years will be lost. Therefore, it might be better for the Government to order an additional AGR in its place.
  Mr. Lamont: I appreciate what the hon. Gentleman has said. However, we must take account of the situation in the electricity industry and bear in mind the planning margin as well as the existing surplus capacity. We have gone much further than the Labour Government in giving a steady commitment to the future. We have taken a bold step which previous Administrations have missed. I appreciate what the hon. Gentleman has said, but I do not think that we could take further orders. The decisions that we took resulted in considerable controversy and criticism from some quarters.
  The hon. Member for Newcastle upon Tyne, East referred to the Select Committee. He disagreed with it, but that shows that there is another side to the argument. We believe that we have got the balance about right and that in the interim to the 1982 programme, whatever the reactor choice, the two AGR orders will give the industry—
  The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at eleven minutes past Eleven o'clock.

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  Telecommunications Industry
  Telecommunications Industry
  Manpower (Recruitment Moratorium)
  Manpower (Recruitment Moratorium)
  Saudi Arabia (Defence Equipment)
  Saudi Arabia (Defence Equipment)
  India (Jaguar Deal)
  India (Jaguar Deal)
  Factory Closures
  Factory Closures
  Youth Benefits
  Youth Benefits
  May Day Holiday
  May Day Holiday
  British Summer Time
  British Summer Time
EMPLOYMENT
  British Railways (Closed Shop Memorial)
  British Railways (Closed Shop Memorial)
  Capital Expenditure
  Capital Expenditure
  United Kingdom—European Community Nationals
  United Kingdom—European Community Nationals
  Young Persons
  Young Persons
  Unemployment Statistics
  Unemployment Statistics
  School Leavers
  School Leavers
  Liquefied Gas Clouds
  Liquefied Gas Clouds
  Methane Gas Terminal (Canvey Island)
  Methane Gas Terminal (Canvey Island)
  Special Employment Measures
  Special Employment Measures
  Disabled Persons (Quota Scheme)
  Disabled Persons (Quota Scheme)
  Capital Expenditure
  Capital Expenditure
  European Community—United Kingdom (Nationals)
  European Community—United Kingdom (Nationals)
HOME DEPARTMENT
  Ships (Radio Licences)
  Ships (Radio Licences)
  Member's Correspondence
  Member's Correspondence
  British Nationality Bill
  British Nationality Bill
  Metropolitan Police Officers (Caribbean Origins)
  Metropolitan Police Officers (Caribbean Origins)
  Tobacco Sales (Prosecutions)
  Tobacco Sales (Prosecutions)
  Mr. Bhutto
  Mr. Bhutto
  Citizenship
  Citizenship
  Poorang Shahabi
  Poorang Shahabi
  Prisoner Transfer Treaties
  Prisoner Transfer Treaties
  Nationality
  Nationality
  Metropolitan Police (Arms)
  Metropolitan Police (Arms)
ATTORNEY-GENERAL
  Riotous Assemblies
  Riotous Assemblies
WALES
  Postgraduate Medical Centres
  Postgraduate Medical Centres
CIVIL SERVICE
  Resignations
  Resignations
  Statisticians
  Statisticians
  Researchers
  Researchers
  Pensions
  Pensions
  Costs
  Costs
INDUSTRY
  Submarine Building Complex (Cumbria)
  Submarine Building Complex (Cumbria)
  Public Holiday—(29 July)
  Public Holiday—(29 July)
  Steel Industry
  Steel Industry
  International Computers Ltd.
  International Computers Ltd.
SOCIAL SERVICES
  Census Department (Salaries and Allowances)
  Census Department (Salaries and Allowances)
  General Practitioners (Fees)
  General Practitioners (Fees)
  Tobacco Sales
  Tobacco Sales
  Hospital Waiting Lists
  Hospital Waiting Lists
  Invalidity Pensioners (Therapeutic Earnings)
  Invalidity Pensioners (Therapeutic Earnings)
  Industrial Dispute (Benefit Payments)
  Industrial Dispute (Benefit Payments)
  Health Services (Expenditure)
  Health Services (Expenditure)
  Oxford Regional Health Authority
  Oxford Regional Health Authority
  Muslim Population
  Muslim Population
  Deprivation (Research Programme)
  Deprivation (Research Programme)
  Community Homes (Working Party Reports)
  Community Homes (Working Party Reports)
EDUCATION AND SCIENCE
  Burnham Further Education Committee
  Burnham Further Education Committee
  School Meals (West Midlands)
  School Meals (West Midlands)
  School Curriculum
  School Curriculum
  16 to 19-year-olds
  16 to 19-year-olds
  Overseas Students
  Overseas Students
  Law Students
  Law Students
FOREIGN AND COMMONWEALTH AFFAIRS
  Albania (Gold)
  Albania (Gold)
  Lebanon
  Lebanon
  Palestine Liberation Organisation
  Palestine Liberation Organisation
DEFENCE
  Defence Establishments (Woolwich and Greenwich)
  Defence Establishments (Woolwich and Greenwich)
  Maze Prison (Security Costs)
  Maze Prison (Security Costs)
  Second World War Hangars
  Second World War Hangars
  Unemployed Sailors
  Unemployed Sailors
ENERGY
  Energy Conservation
  Energy Conservation
  Nuclear Power Stations (Defects)
  Nuclear Power Stations (Defects)
  Offshore Safety
  Offshore Safety
NATIONAL FINANCE
  European Community Budget
  European Community Budget
  Joint Ventures (Accounting Rules)
  Joint Ventures (Accounting Rules)
  Petrol Pump Markings (Price Adjustments)
  Petrol Pump Markings (Price Adjustments)
  Petrol Prices
  Petrol Prices
  Family Expenditure
  Family Expenditure
  Wholesale Prices (Increase)
  Wholesale Prices (Increase)
  Output and Employment
  Output and Employment
  Civil Service Dispute
  Civil Service Dispute
  Tax Revenue (Alternative Sources)
  Tax Revenue (Alternative Sources)
  £ Sterling (Value)
  £ Sterling (Value)
  Benefits in Kind
  Benefits in Kind
  Money Supply
  Money Supply
  Industrial Building Allowances
  Industrial Building Allowances
  Duchy of Cornwall (Income)
  Duchy of Cornwall (Income)
  Personal Allowances and Duties
  Personal Allowances and Duties
ENVIRONMENT
  Courts of Justice (Temperature)
  Courts of Justice (Temperature)
  Rent Rebates and Allowances
  Rent Rebates and Allowances
  Council House Sales
  Council House Sales
  Local Authorities (Closed Shop)
  Local Authorities (Closed Shop)
  Airports (Siting)
  Airports (Siting)
  Birmingham Airport
  Birmingham Airport
TRANSPORT
  Road Vehicles (Costs and Taxation)
  Road Vehicles (Costs and Taxation)
  Road Vehicles (Underground Damage)
  Road Vehicles (Underground Damage)
  A38 (Alrewas-Burton)
  A38 (Alrewas-Burton)
  Public Stage Carriage Omnibuses (Inspections)
  Public Stage Carriage Omnibuses (Inspections)
  London and Liverpool Docks (Wages)
  London and Liverpool Docks (Wages)
AGRICULTURE, FISHERIES AND FOOD
  Fisheries
  Fisheries
  Farm Rents
  Farm Rents
  Holland
  Holland
  Fish Conservation
  Fish Conservation
  European Community (Trade Statistics)
  European Community (Trade Statistics)
  Fishing Industry (Aid)
  Fishing Industry (Aid)
  Glasshouse Industry
  Glasshouse Industry
  Laxton Estate
  Laxton Estate
NORTHERN IRELAND
  School Management
  School Management
  School Governors (Astin Report)
  School Governors (Astin Report)
  Maze Prison (Visit)
  Maze Prison (Visit)
  Terrorists (Release from Prison)
  Terrorists (Release from Prison)

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

Cash Remuneration: The Truck Acts
The Earl of Selkirk: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are aware that only 1 per cent. of all employees in the USA are paid in cash compared with 60 per cent. in the United Kingdom; and whether they are prepared to amend the Truck Acts.
The Minister of State, Department of Employment (The Earl of Gowrie): My Lords, the Government believe there are a number of advantages in non-cash payment of wages and are aware of international comparisons. The Central Policy Review Staff have prepared a discussion document on the subject which is due to be published in the summer. A copy will be placed in the Library. We will of course carefully consider the future of the Truck Acts in the light of the response to the document.
The Earl of Selkirk: My Lords, am I right in thinking that basically the payment of wages depends upon a statute which was passed in the reign of William IV and that at present £1 billion a week is spent on cash wages? This provides a splendid target for armed robbery. Is it not a very great burden for productive industry to have to carry this expense?
The Earl of Gowrie: My Lords, I agree altogether with my noble friend. My brief tells me that the Truck Acts were passed in Victorian times, but no doubt my noble friend is right that they were passed in the reign of William IV. Nevertheless, they are certainly out-of-date. The difficulty is that there is still a very strong bias in this country towards being paid in cash, but I am glad to be able to tell the House that every year there is a slight decline in the number of people who wish to be paid in cash.
Lord Barnby: My Lords, would the Minister comment on the difference between this country and the United States? As my noble friend has said, the United States is much more advanced in paying wages otherwise than in cash and therefore in avoiding robberies than is the United Kingdom. What relationship does this bear to female emancipation in the United States compared with the backwardness of this country? Whereas we in this Chamber are graced by the presence of many fellow Members who are ladies, in the States there is none in the Senate—or at least only one from the State of Maine.
The Earl of Gowrie: My Lords, I confess to some personal bias in favour of cashless payment and, speaking for myself, I think that it would certainly do more for continued female emancipation than any other piece of legislation that we could devise.

British Exports: Non-Price Competitiveness
3.9 p.m.
Lord Gainford: 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 improvements are being made in the non-price competitiveness of British exports.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, it is extremely difficult to measure the non-price competitiveness of goods. However, I believe that United Kingdom manufacturing industry is in fact improving its performance in this area and certainly the fact that design, quality, marketing, delivery and after-sales service are vitally important in gaining and maintaining export markets is one which is now much more widely understood.
Lord Gainford: My Lords, I thank my noble friend the Minister for that Answer. May I ask him whether there is any possibility of considerable improvement in British industry following such ideals?
Lord Trefgarne: My Lords, over the last two years the British Overseas Trade Board, which is under the chairmanship of my noble friend Lord Limerick, has been running a campaign on the importance of non-price factors to export performance. Conferences have been held in London, Glasgow, Newcastle, Cardiff, Bradford, Manchester and Coventry, drawing on the experience of representatives of successful exporters in these localities who attribute their success to paying great attention to these non-price factors. Your Lordships may wish to know that these conferences were chaired either by my noble friend Lord Limerick or, more importantly, by His Royal Highness the Duke of Kent, and that they have been well attended.
Lord Mackie of Benshie: My Lords, is what is meant by "non-price factors" quality and delivery?
Lord Trefgarne: Among other things, yes, my Lords.
Lord Inglewood: My Lords, may I ask my noble friend whether the ability of a salesman to speak a foreign language is a non-price factor?
Lord Trefgarne: My Lords, I believe that it is certainly a factor in achieving the orders in the first place.

Territorial Army: Man Training Days
3.11 p.m.
Baroness Phillips: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are aware of the effect on training, efficiency and morale of the Territorial Army following the decison to reduce the number of man training days in independent units.
The Minister of State, Ministry of Defence (Viscount Trenchard): My Lords, planned expenditure on Territorial Army man training days will be higher in real terms in 1981–82 than 1980–81, but we are having to impose restrictions as part of the measures to contain expenditure on the defence budget. I am aware of the concern felt within the TA about the possible effects, but I do not expect adverse effects on training and efficiency nor on the ability of the TA to perform its operational role.
Baroness Phillips: My Lords, while I thank the Minister for that reply, it is rather disappointing that, however it is worked out, the number of man training days is fewer. I wonder whether the Minister is aware—I am sure that he is—of the high cost-effectiveness of the Territorial Army. I wonder also whether he will speed the review, because in these days of very specialised training it is important that a volunteer army receives the maximum opportunity to train.
Viscount Trenchard: My Lords, I am sorry that the noble Baroness is disappointed with the Answer. My right honourable friend has already made clear in public that he attaches great importance to the Territorial Army and that its function, role and size are being reviewed in the long-term costing exercise which he is currently engaged in forming. The noble Baroness said that, whatever way it was looked at, we were bringing down the number of training days. I do not know whether that will prove to be so, but if it does it will be by a very marginal amount. In fact, although in past years the entitlement to training days for units has been 44, in 1979–80 the actual uptake averaged 38; in 1980–81 it averaged 37, and in 1981–82 we have allocated to units 36; districts have one training day up their sleeves and we have a fraction up our sleeve in the centre as well.
Lord Peart: My Lords, may I say from the Opposition Front Bench that I am grateful for the way in which the noble Viscount has treated this Question. I think my noble friend has put her finger on something which is very important, namely, to create an organisation for the defence of our country; but may I ask the noble Viscount to reconsider this, and perhaps during the defence debate which we shall soon be having he will be able to give a further report?
Viscount Trenchard: My Lords, may I first wish the noble Lord the Leader of the Opposition many happy returns of the day.
Several noble Lords: Hear, hear!
Viscount Trenchard: My Lords, having wished him a happy birthday may I then say to the noble Lord that I do not think on the aspect of my Answer to the noble Baroness I can tell him that I will reconsider it, but what I will certainly say is that I am sure that the role of the Territorial Army will be brought forward in future defence debates.
Lord Gisborough: My Lords, will the noble Viscount confirm that the transferability of man days has now been stopped, and therefore each man is only able to do his strict number of days rather than borrow from another, and will this not impinge on the maintenance of vehicles which were maintained by active members doing more than their strict number of days working in place of those who did not turn up?
Viscount Trenchard: My Lords, my noble friend is not quite correct in that. Indeed very recently we have agreed to increase the flexibility for the current year. The entitlement was 44 days but it was never taken up; it is now to be 36 days, of which 27 (and this figure has always been the same) are obligatory and 9 are voluntary. Commanding officers have always had discretion in relation to the voluntary days and we have recently agreed that they can be flexible in relation to four man days of the obligatory kind.
Lord Renton: My Lords, is it not a fact that some training days are less costly than others, and will my noble friend give some indication as to whether the Government are going to allow the less costly days to be more numerous?
Viscount Trenchard: My Lords, this comes in a further area of the CO's flexibility. We have asked COs in order to contain the over-expenditure of our budget (in regard to which the T.A. is being asked to do slightly less than the rest of the Army) to consider the various types of training days and the degree to which they can help to contain the budget in the manner suggested by my noble friend.
Lord Morris: My Lords, arising out of his earlier answer, is my noble friend the Minister aware that the reduction in man training days can hardly be described as minimal. It may be marginal, but it represents a reduction of over 25 per cent.
Viscount Trenchard: My Lords, I think I have made clear that the average number of man training days used by units in the last two years has been 38 and 37 and that we have allocations this year which, at maximum, reached 38.

Concorde: Select Committee Report
3.18 p.m.
Lord Balfour of Inchrye: 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 when they will make a decision on the future of Concorde in view of the report from the Select Committee of the House of Commons on Industry and Trade (H.C. 265).
Lord Trefgarne: My Lords, the Select Committee's observations and recommendations, which cover many aspects of Concorde, are being studied in detail; and, in accordance with the normal practice, the Government's final and considered reply will be delivered to Parliament as soon as possible. However, I cannot at present anticipate when this will be, or the form or content of the Government's response.
Lord Balfour of Inchrye: My Lords, while thanking the Minister for that reply, may I ask him whether he will go this far: will he confirm that although economies may have to be made in the Concorde programme, nevertheless the Concorde achievement, which has put Britain into the first world place in supersonic travel, will not be abandoned?
Lord Trefgarne: My Lords, we shall of course have to take very careful account of the report of the Select Committee. My noble friend refers to the first place for Britain in civil aviation matters. While that is most certainly the case with regard to the technical achievements of Concorde, it is unhappily not the case with regard to the profitability of British Airways.
The Earl of Bessborough: My Lords, may I ask my noble friend two short questions: First, can he tell us what the position is in regard to discussions with the National Aeronautics and Space Administration in the United States of America regarding the loan of Concorde to them; and, secondly, whether any progress has been made in discussions between British Aerospace and United States aircraft manufacturers regarding the possible building of Concorde II; that is to say, a second generation of supersonic transports?
Lord Trefgarne: My Lords, I am ashamed to have to say that I am not able to give my noble friend an answer to either of those questions; but I will certainly find out what the position is in both cases and write to my noble friend.
Lord Beswick: My Lords, can the noble Lord at least give an assurance that, whatever decision is taken, it will not be a short-term decision but a long-term decision? Would he also say that, whatever arguments might have been made against the investment in the first place, way back in the late 1950s or early 1960s, now that this enormous sum of money has been spent, now that a great amount of expertise has been amassed, it would be sheer defeatism to throw it away and let others exploit it in the future?
Lord Trefgarne: My Lords, there are many considerations which will have to be taken into account in this matter. The financial implications are only one aspect. We shall certainly want to take all those considerations into account in reaching any new decision.
Lord Merrivale: My Lords, as this is, in effect, a joint venture with the French, can my noble friend be given an assurance that the French Government will be kept au fait with reports on this question to Her Majesty's Government, and will they also be consulted before any decision is reached on the report of the Select Committee?
Lord Trefgarne: My Lords, I think it would be possible in theory for the British Government to reach a decision unilaterally on this matter, but I must emphasise that we would much prefer to reach any new decision in conjuntion with our French partners, and I have no doubt that we should.
Lord Orr-Ewing: My Lords, before my noble friend reaches a decision, could he take into consideration whether other operators might be more enthusiastic, whether either United States operators or British independent operators might operate this aircraft on profitable routes, because British Airways has always had an element within it not madly enthusiastic about Concorde? There may be other operators who could make a profit by operating it in a slightly different way.
Lord Trefgarne: My Lords, I am not aware of any lack of enthusiasm in British Airways at the present time for the operation of Concorde. The principal inhibition against extending the route network over which Concorde could operate is securing overflight rights from the Governments concerned.
Lord Duncan Sandys: My Lords, having myself as Minister been responsible for initiating the Concorde project with the French Government, may I, following the words of the noble Lord, Lord Beswick, ask the Government whether they recognise that very great seriousness would be involved in abandoning this project?
Lord Trefgarne: My Lords, my noble friend is indeed quite right; such a decision, if we ever came to take it, would be a very serious one indeed, and would therefore receive the necessary prior consideration.

Animal Health Bill [H.L.]
Read 3a, and passed, and sent to the Commons.

Companies (No. 2) Bill [H.L.]
3.25 p.m.
The Lord Advocate (Lord Mackay of Clashfern): My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Companies (No. 2) Bill, have consented to place their interests so far as they are affected by the Bill at the disposal of Parliament for the purposes of the Bill.
Lord Trefgarne: My Lords, I beg to move that the Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord Trefgarne).
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, before the amendments are called I should like to draw the

1277
attention of your Lordships to a procedural point. I do so strictly in my capacity as Deputy Leader and not as a Government Minister—I would emphasise this—and I do so with some hesitation, because I realise that the provisions of the Bill to which I am about to refer have raised considerable controversy on the Floor of the House.
Your Lordships will recall that the House recently agreed to the recommendations of the Procedure Committee which drew attention to and endorsed the practice of the House that an issue which has been fully debated and decided upon at a previous stage of a Bill should not be reopened on Third Reading. It is my view, and I fancy I am correctly interpreting the opinion of the House, that the noble Lord, Lord Mishcon, in his Amendment No. 2 reopens again the issue of the registration of business names. Although questions of order are, of course, for the House to decide, I feel that I should draw your Lordships' attention to this, as it has so recently been the subject of consideration both by the Procedure Committee and by the House as a whole, in order that the noble Lord, Lord Mishcon, may consider whether it is in accordance with the procedure of the House that he should move his amendment.
If I may, just to refresh your Lordships' minds, quote what the Procedure Committee said, it was:
"The principal purposes of amendments on Third Reading are to clarify any remaining uncertainties, to improve the drafting and to enable the Government to fulfil undertakings given at earlier stages of the Bill. It is considered undesirable that an issue which has been fully debated and decided upon at a previous stage of a Bill should be reopened on Third Reading".
The committee then went on to say:
"The Committee wish to draw particular attention to the use of the word 'undesirable' and to remind Lords that in the context of a House where there is no Speaker with powers to rule on matters of order the word as used in this House is equivalent to the expression 'out of order' in the context of the House of Commons".
Lord Mishcon: My Lords, I wonder whether, with the leave of the House, I may be allowed to comment on what the noble Earl the Deputy Leader of the House has just said. In the first instance, may I assure him, if any assurance is necessary, that we on our side of the House will always to the best of our ability abide by the rules of procedure and the great traditions in this House. But I would most respectfully submit—although obviously we are all of us in the hands of the House itself—that the amendment to which the noble Earl referred in no way breaches the principle which he read out. May I also say that if in any way it is held to breach it—and, I repeat, I, like him, am in the hands of the House—the Government themselves have brought this upon their own shoulders.
I remind the House that the principle of whether there should be—and I am not going into the debate on this, obviously—a central Registry of Business Names and whether that should continue to exist, came before the House at the Committee stage. The Committee decided after a very full debate that it wanted to retain the principle of the central Registry of Business Names. Rather unusually, if I may say so, the Government decided not to abide by the decision of the House at Committee stage, in the sense that they decided to bring, it back before the House in
1278
precisely the same form by way of principle at Report stage.
On that occasion, and because they did it in that way, no alternative could be considered by the House at all. On the vote being taken, the Government on that occasion—I know the noble Earl will forgive my smile—called in the cohorts from various parts of the House, not always the Chamber; the House then decided against that principle. This House has never been able to consider, therefore, whether there is any alternative to a central registry once you take it for granted that the principle of the central registry not continuing to exist must be accepted. My amendment deals with an entirely alternative position which has never been considered before—that the registry goes but there is some other form of registration, not a central registry at all, and not the Registry of Business Names. I would only weary the House, and therefore not encourage other rules of procedure if I did so, by continuing. I repeat, I am in the hands of the House, but I hope that I have said sufficient to make it open possibly to other noble Lords, who might agree or disagree with me, to voice their opinions as to whether or not an alternative on this vital issue is this afternoon to be stifled.
Lord Maybray-King: My Lords, I am grateful to the noble Earl the Deputy Leader of the House for raising this matter, and I congratulate the noble Lord, Lord Mishcon, on the courteous way in which he has stuck by his position, and yet conceded at the beginning something of the principle at which the Procedure Committee is trying to aim.
History shows that year by year and century by century we have narrowed our methods of procedure. There was a time when there were six or seven readings of any Bill coming before Parliament. Now, in both Houses, the First Reading is formal; on Second Reading the whole Bill and anything approaching it or in connection with it is discussed—almost everything is in order. Then, in Committee, we go through a Bill with a toothcomb; every detail of the Bill that anyone wants to examine can be examined in Committee. The Report stage affords an opportunity to raise matters which have been raised in Committee and which have received a promise from the Government that they will do something about it at the next stage; some new aspects can be raised and all kinds of new terms can take place on Report. In the other place the debate on the Report stage is quite tightly drawn.
The Procedure Committee has tried to tighten a practice that has been growing tremendously on Third Reading: that of a series of almost Second Readings or Committee Readings on the Third Reading of a Bill on the Motion that the Bill do now pass. I hope that your Lordships will give serious consideration to what the noble Earl the Deputy Leader of the House has said, to see whether, together, we cannot tighten up the procedure—which is in our own hands—of making the Third Reading a stage when you talk about the Bill, the whole Bill and nothing but the Bill, apart from certain exceptional circumstances which the Procedure Committee has recommended.
Earl Ferrers: My Lords, perhaps I could make one point to the noble Lord, Lord Mishcon, who said that

1279
the Government had brought this upon themselves. That is understandable—and I re-emphasise the fact that I speak in my capacity as Deputy Leader of the House and not as a Government Minister—and is a perfectly reasonable comment for the noble Lord to have made. He said that the Government did it rather unusually by bringing in on Report something that was identical to what was done in Committee. It might have been unwise to do that, but it was certainly in order.
The only point I would make to the noble Lord, Lord Mishcon, in addition to that, is that if one tries to interpret the spirit of the Report, one ought to try to do so by construing the Report and the Standing Orders as Standing Orders as opposed to Acts of Parliament. In trying to construe the spirit of the Report and what the House wants, once an issue has been debated and decided, it would be wrong to reopen that issue, whatever may be the nuances to it. There are stages in another place for this to be reconsidered. I shall merely leave the matter at that, for I only offer this advice to your Lordships' House to accept or reject as your Lordships see fit.
Lord Elwyn-Jones: My Lords, with great respect, would it not have been better if we could have discussed this matter when the second amendment was sought to be moved or considered? Then, among other matters, we could see the merit of the contention and the argument of my noble friend Lord Mishcon. With respect, I do not quite follow the procedure which we are adopting in this matter. I hear noises from the Woolsack, emanating in its own inimitable fashion, but I should like to hear the views of the Deputy Leader of the House on this.
Earl Ferrers: My Lords, the purpose of bringing this matter up at this stage was twofold: first, I was advised that it was the appropriate moment and, secondly, in order precisely to avoid getting the principle of the amendment muddled up with the objectives of the amendment. That is why I thought it fit to produce it at this moment, in order that the noble Lord, Lord Mishcon, could take into account what had been said when he decides whether or not to move his amendment.
On Question, Bill read 3a.
3.37 p.m.
Lord Mishcon Lord Mishcon moved Amendment No. 1:
After Clause 22, insert the following new clause:
("Preparatory steps before registration of company
.—(1) Application shall not be made for registration of a company under the 1948 Act or for re-registration under that Act or the 1980 Act until 21 days after notice of intention to apply has been published in the Gazette, stating the proposed name of the company.
(2) Any person, being a body the name of which is entered on the index of names kept by the registrar in pursuance of section 23 of this Act, may make to the Secretary of State an objection in writing within 21 days after the publication in the Gazette of notice of intention to apply for registration or re-registration, but such objection shall be limited to an objection on the grounds that the proposed name of the company is so similar to the name of the person making the objection that confusion is likely to be caused.
(3) The Secretary of State shall take account of any objection
1280
under subsection (2) above before deciding whether to permit the registration or re-registration of a company by a name to which objection has been made.").
The noble Lord said: My Lords, with a feeling of complete propriety, I beg to move the amendment which stands in my name. It will be remembered that one of the matters which disturbed the House on a previous occasion in regard to this Bill was the fact that the protection which is given by the existing companies legislation in regard to the registration of a similar name of a company was absent from this Bill and, indeed, was intentionally removed from the Bill in the sense that the companies' registrar was no longer to have the jurisdiction and the duty of looking at the names of proposed companies and to decide whether, in his view, a name was objectionable on the ground that it had a similar ring to an already existing company.
I am sure that I do not have to emphasise to your Lordships, with all your Lordships' varied experience, the avenues that become open to people who recklessly or intentionally wickedly try to adopt a similar name to that of an existing company. As I understood it, the Government's answer was that it was a very difficult, if not impossible, task for the registrar to carry out in view of the number of registrations that now take place, and furthermore that it was giving to the registrar a judicial duty which it was more appropriate for a court to have. That meant two things; first, that the registrar was incapable to dealing properly with this matter and, secondly, that it was not suitable for him to do so.
Your Lordships were reminded that this is a duty that has been carried out by the registrar to the great satisfaction of the legal profession, the accountancy profession and all the other people interested in company registrations over a great number of years. We heard the statistic—which was rather interesting—that even if you looked at the number of applications for registration in recent years, there were only about 300 complaints that the registrar had gone wrong; and, of course, not all those complaints were in the end held to be justified. So there was a great body of opinion in your Lordships' House which came to the view that this duty of the registrar should be continued unless some other alternative, as efficacious, could be thought of. It was in that spirit that an amendment was put down at the Committee stage and again at the Report stage, and that is the amendment now before your Lordships.
What happened at the Committee stage was that the House was sitting extremely late. Although the quality of the House was, as always, very high, I am afraid that the quantity of the House was unfortunately very low. In those circumstances, it was thought only proper to postpone the debate until the Report stage. At the Report stage it was made perfectly clear in the speech that I made to your Lordships that this was not an alternative much to be desired; it was an alternative only because the Government would not concede the much more desirable course of retaining the registrar's powers and duties in this respect.
At Report stage—and I hope that I correctly paraphrase the noble Minister, Lord Trefgarne—when this amendment was reached, the Minister said that he accepted the principle behind the amendment, he accepted the spirit of the amendment, but that the

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Government might have to go a little further or possibly a little less far. If the amendment were withdrawn the Government would try at Third Reading to put forward their own amendment along these lines. If of course they were unable to do so, then that amendment would be before another place.
As your Lordships would expect, with the Minister's customary observance of his undertakings and his customary courtesy I heard from the Minister a little while ago—a matter of only days ago—that the Government had been thinking about this amendment and that there were certain difficulties in regard to it. The Government were therefore considering not a pre-registration procedure but a post-registration procedure. I emphasise the word, "considering", because it was made abundantly clear that the Government had not made up their mind.
I was invited to attend a meeting which the Minister chaired and at which some of his colleagues were present, and certainly some of his officials. At that meeting there was a full discussion in which I endeavoured, to the best of my ability, to tell the Minister and all those present that a post-registration procedure was certainly not within the principle of my amendment and within the spirit of my amendment. It walked into the obvious difficulty that after a company had been registered and after that company had got its name—because it was not the same name, and was not objectionable on other grounds and had therefore been admitted by the registrar—and after that company had prepared all its stationery, its advertising, its communication with its suppliers and its customers, the company would always have at the back of its mind, "Is there going to be an objection? If there is an objection to be considered by the Minister, I wonder what is going to happen? Am I going to be told that I can no longer have my name or not?"
Those of us in our professional and business dealings like always to be dealing with people who are as reputable as we think we are. But it is our experience, unfortunately, that in professional, business and industrial life we come across people who have less integrity than we think we have. Can your Lordships imagine the situation of a company that has gone to all that expense and suddenly has a telephone call, or a letter—it so happens that I read out such a letter at Committee stage to your Lordships—to say: "Look, it so happens we have got a company. We were going to commence business through it, but we could, I suppose, for a very good consideration decide not to. It bears a name very similar to yours, and our advisers have told us that we ought to object to your name. It is going to take an awful long time for the Minister to decide this. There will be cross-observations from both sides, and you will not know where you stand and we will not know where we stand. In those circumstances, we are prepared to waive our commencement of business through this company in consideration of your kindly letting us have a cheque, I would hope, by return."
These are situations which are obvious. I did not get, as I did not anticipate getting, an immediate decision of Government policy at that meeting, but the Minister well understood the objections that I made and further consideration, he said, was going to be given. I ought frankly to tell your Lordships that
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here are lots of views about this amendment. I must say that in all frankness. Everybody that I know of, all the professional organisations, say, "We would prefer the registrar to continue with his present functions, and we think he could do it, and there is no reason to doubt that he could do it." They are not worried about the question of his exercising some sort of judicial process. He has been doing it for goodness knows how many years, and doing it very well. Anyway, the Minister in a post-registration procedure would be exercising the self-same judicial function, or quasi-judicial function.
What they say is, "Of course we would want that to happen and that to continue; the registrar's present use of his functions. We would want that protection to be given to the whole community. But, if we have to look to an alternative, then we can see difficulties in this amendment". I must tell your Lordships frankly that my own Law Society has itself said, after a brief consideration of the alternative, that it can see difficulties in this amendment. The main difficulty it sees—and it said so in a memorandum sent both to the Minister, and, in its courtesy, to me, which arrived only this morning—from its point of view, is the burden that is cast upon people to have to look at lists of names in order to ensure that when they register a company they are not adopting a similar name.
I face the fact that there is that onus put upon people. I say—and I hope that this will commend itself to the House—that I think it is less of an onus than having no protection at all. What I say to your Lordships is this: I took the trouble to phone, just before I came to the House, the chairman of the Companies Committee of the Law Society, having received this memorandum. I have his permission to quote him, otherwise I would not be doing it.
I said to him, "Take it for granted that the pre-registration procedure that is suggested by this amendment does create some problems in the sense that it imposes upon people the duty, before they apply to register a company, looking through the Gazette week by week in order to see that there are no similar names. Would you say that it would be better, rather than have no protection at all of this nature, to have both the pre-registration procedure and then, if something is slipped through accicentally, you have always the right afterwards to go to the Minister? "
The chairman of the committee authorised me to say that he could see no objection at all to the joint procedure of pre-registration advertisement and looking through it—if something slipped through, then the Government were considering the post-registration procedure—provided, he said, that it was not looked upon as being an objectionable item so far as the applicant or respondent were concerned when they came to the post-registration appeal to the Minister: it had in fact slipped through the observation of somebody who had registered the company and who had not seen a name that had been advertised in the Gazette. I should not have thought that presented any difficulty at all. I therefore hope that the Law Society will not be quoted against one of its loyal members in this debate by the Minister, in that the sense that the main objection is one that I dealt with and the Law Society has said that if both were there they could see no objection to it at all.
This is the last time that this House will be able to consider the matter before this Bill goes to another place. I put the issue before the House very seriously because one can use exaggerated terms, although they do not go down very well in this Chamber; we are a very equable and moderate Chamber always. But, as I have said before, this is not only endangering those who value their good name and who have a right to their good name as a result of honest trading, who suddenly find that their name is being filched from them—either mistakenly or otherwise. They are people who do not want to go to the Law Courts, or they are small companies who cannot afford to go to the Law Courts over what is a complex passing-off action. We cannot leave them undefended, and this amendment comes before your Lordships this afternoon very properly on the basis that the amendment was here at Committee stage and at Report Stage and it was only withdrawn on the basis of the undertaking given by the Government which I hope I have fairly paraphrased and which I am sure the Minister will admit having given.
Lord Mottistone: My Lords, I support the tenor of the remarks made by the noble Lord, Lord Mishcon. I would also confirm to the noble Lord that the amendment which he has put before us is not ideal, but I am delighted to see it on the Marshalled List because I believe that it is indeed unfortunate that the Government have not managed to make up their minds about the amendment which, as has been stated, my noble friend Lord Trefgarne promised to us at Report stage. I hope my noble friend will allow me to say that I wrote to him suggesting that it would be a courtesy on the part of the Government if they were to allow this House to complete its business with this amendment rather than rely on the fact that the Bill will go to another place, so that we would have an opportunity to resolve the matter once and for all here. I consider it extremely unfortunate that for one reason or another—although we now hear about a meeting at which, perhaps, certain advances were made—nothing has been put before us.
Therefore, we find ourselves with the amendment tabled by the noble Lord, Lord Mishcon, which is not ideal—although I am advised by the CBI that they would certainly recommend its acceptance in default of anything better. As there is no alternative, we do not know whether the alternative is better. From what the noble Lord, Lord Mishcon, has said, it sounds as though the Government are not thinking along the same lines as business is, of pre-registration of names, but of post-registration—and I would implore my noble friend to forget that as an alternative.
Any solution that my noble friend produces needs to be on the lines of the amendment that is now before us and the ones which were similar to it which the House took at an earlier stage. I shall find it extremely difficult to decide whether to support the Government if this particular amendment comes to a Division.
3.55 p.m.
Lord Somers: My Lords, may I just say from this Bench, as someone who is very ignorant of the matters of trade but who possesses a modicum of common
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sense, that I certainly support this amendment so far as it goes. I agree entirely with the noble Lord, Lord Mottistone, when he says that this matter should have been attended to but has not been attended to. This being our last chance to insert this amendment, I believe it should certainly be accepted. If there is anything undesirable about the amendment it is perfectly obvious that it could be put right in another place. I am not expert enough to say what is or what is not undesirable about the amendment, but I certainly believe that the basis of the amendment is very desirable and I do hope that your Lordships will support it.
Baroness Elliot of Harwood: My Lords, I have spoken in these debates because I have a very close association with consumer organisations—not with business as such but with all the consumer organisations which cover the whole country. It is a very wide spread of organisations and people who are deeply concerned with honesty and getting fair play for both the consumer and for the business person. I had hoped very much that the Government would put forward an amendment which we should all be able to support—including, I am sure the noble Lord, Lord Mishcon—and it is a disappointment to me that that has not happened.
I cannot express any further views on this amendment because it is a technical matter but it does seem to do something to continue the registration of business names so that people will be able to track down just what is happening. I think it would be a great pity if they could not do that.
Lord Trefgarne: My Lords, a good deal was said at the Committee and Report stages on this question of similarity between company names. I gave certain undertakings on behalf of the Government then and I should like to repeat them now. The Government are persuaded that there is a genuine problem here, and we accept that something has to be done. The noble Lord, Lord Mishcon, tabled his amendment at the Report stage. I said that the Government accepted the principle and I undertook,
"that the Government will bring forward amendments embodying the spirit … of what the noble Lord has proposed".
Very rightly and properly, the noble Lord, Lord Mishcon, quoted what I said at that time in the terms which I have repeated today.
It may be helpful if I begin by reminding your Lordships of the rationale for making any change at all in the law on company names. Very simply, it is that the present provisions of the 1948 Companies Act require a subjective decision to be taken on the desirability or otherwise of every proposed company name. This reponsibility is one which has proved virtually impossible to discharge satisfactorily, given the very large number of names already registered and the steady growth in new company registrations and applications for change of name. Accordingly, Clause 22 was designed to put the whole question on a much more objective basis, so that companies and company promoters would be able to judge from the terms of the statute the names which were likely to be unacceptable.
I concede at once that this approach was inadequate in so far as it could not deal with the problem of association and similarities. The public concern on

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this matter has been emphasised while the Bill has been before your Lordships' House. I do not now believe that any objective formula could be devised which would indicate whether one name was so like that of another company that it should not be allowed. Inevitably this must be a subjective judgment. Therefore, the Government have—and I want to emphasise this—accepted the principle of the noble Lord's proposal that a judgment by the Secretary of State must be reintroduced into company law.
The noble Lord's scheme has the immediate attraction that this judgment would fall to be exercised in a very much smaller number of cases; only those in which someone had seen an advertisement and registered an objection to a proposed company name. Such a scheme would of course impose new responsibilities on the department, with corresponding demands on resources, but these should be less than those entailed in administering a comparable discretion in respect of every application.
I hope the noble Lord will accept that we took his scheme up in good faith to translate into statutory form. In so doing, the department sought advice, as is normal, from those who are professionally involved in the incorporaton of companies. Consultation on this matter was inevitably curtailed. My honourable friend the Parliamentary Under-Secretary for Trade was able to discuss the proposals with the Law Society's Standing Committee on Company Law on 14th April and representatives of the Bar Council. Officials of the department have also been in touch with the Association of Company Registration Agents and the Institute of Chartered Secretaries and Administrators. Such organisations are, rightly, concerned not so much with the streamlining of administration within the Department of Trade as with the practical implications for companies themselves and their professional advisers.
As I have already indicated privately to the noble Lord, Lord Mishcon, the response to the proposed scheme for the pre-advertisement of a company name has been far from encouraging. The Government have been strongly urged to reconsider the scheme and find some alternative means of dealing with the problem of similarities. It has been represented to us that the advertisement scheme would be rigid, costly, would provide inadequate protection for existing company names and would delay the incorporation of new companies to an unacceptable extent. The department has studied in detail the nature of the provisions which would be required; this certainly demonstrates the complexity of the statutory provisions that would be needed to introduce a pre-advertisement phase into the process of registration when filled out with the necessary procedural rules and provisions for exceptional cases. The Association of Company Registration Agents consider that the procedure would be "expensive, unfair, confusing and time-consuming".
The Law Society's Company Law Committee have pressed the Government to deal with this from the opposite tack, along the lines of the provisions in Clause 24 of the Bill, and only this morning I received a letter from them reiterating their views, which of course they copied to the noble Lord, Lord Mishcon. In other words, instead of the promoter having to advertise a name before the company was incorporated,
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he would be entitled to register a company by any name which did not offend against the general principles of Clause 22; for example, he could not adopt a name which was identical to that of another company. If thereafter the name was found to be too like that of another company, the Secretary of State would be empowered to direct a change of name. Just as in the noble Lord's advertisement scheme, a company which felt its name was prejudiced would he free to draw the facts to the attention of the Secretary of State, but its opportunity to do so would not be limited to a short pre-registration period.
In the light of the representations that have been received, I do not believe it would be a responsible act on the part of the Government or of this House to amend the Bill at this stage by introducing a procedure in respect of which so many doubts have been expressed, and without making a further attempt to improve it. So far, the time for consultation has been very short—there have been no more than 14 working days since the Bill was reported—and we need to obtain the views of a wider constituency before coming forward with considered proposals. I very much regret that in the circumstances it has not been possible to table amendments by Third Reading, but I gave warning on 6th April that this might be unavoidable. I repeat my undertaking that the Government will amend the Bill in another place in respect of "too like" company names.
The noble Lord, Lord Mishcon, has asked me to say whether the Government agree that proposed names should be scrutinised before the company is registered. There is little I can add to what I have already said on that point. The point of principle which the Government have accepted is that a company whose name is already on the index should be able to take the initiative in objecting to a new name and be entitled to a decision by the Secretary of State on whether, in his opinion, the new name is too close to its own to be allowed. I hope that with the repetition of an assurance I gave at an earlier stage and the further amplification of the Government's position which I have given, the noble Lord will not press the amendment.
Lord Mishcon: My Lords, I should be doing less than my duty were I to concede to that request by the Minister. I do not wish to repeat the argument. I have already said that we should not put at risk the business community of this country, including the small business which we are all anxious to look after, especially at this stage, in such a way that they must deal—after they have been incorporated and started business (I have been through the various stages)—with somebody who says, "Your name is very much like mine and I am already on the register. I am now communicating with the Minister". To allow that situation is, in my view, impossible.
Does the Minister agree that when you say you are in agreement with the principle of an amendment which deals with pre-registration procedures, that means you will produce an amendment which will have, as its main purpose, protection pre-registration and not post-registration? That is how I construed the noble Lord's remarks. If they are capable of any other construction, I am sure he will point to the English that he uses with such felicity and tell me where my interpretation of that language is wrong.

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I got no such offer. I did not receive an offer which could be communicated to your Lordships that there would be an amendment in another place which would provide for pre-registration protection. In those circumstances, I have no alternative but to try to protect our business community, in particular small businesses, and to ask the House to express its view.
4.8 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 86; Not-Contents, 94.

CONTENTS

Airedale, L.

Lloyd of Hampstead, L.

Alport, L.

Longford, E.

Amulree, L.

McNair, L.

Ardwick, L.

Mais, L.

Aylestone, L.

Mersey, V.

Banks, L.

Meston, L.

Beaumont of Whitley, L.

Milne, L.

Beswick, L.

Mishcon, L.

Birk, B.

Morris of Grasmere, L.

Blease, L.

Mottistone, L.

Boothby, L.

O'Brien of Lothbury, L.

Briginshaw, L.

Oram, L.

Bruce of Donington, L.

Peart, L.

Byers, L.

Phillips, B.

Clancarty, E.

Ponsonby of Shulbrede, L.

Cooper of Stockton Heath, L.

Ritchie-Calder, L.

Cudlipp, L.

Robbins, L.

David, B.

Rochester, Bp.

Diamond, L.

Rochester, L.

Elwyn-Jones, L.

Rugby, L.

Gaitskell, B.

Sainsbury, L.

Gladwyn, L.

St. Davids, V.

Goronwy-Roberts, L.

Saint Oswald, L.

Gosford, E.

Seebohm, L.

Greenwood of Rossendale, L.

Sefton of Garston, L.

Hale, L.

Segal, L.

Hampton, L.

Shackleton, L.

Hanworth, V.

Shannon, E.

Henderson, L.

Simon, V.

Houghton of Sowerby, L.

Sligo, M.

Howie of Troon, L.

Somers, L.

Hylton-Foster, B.

Spens, L.

Ilchester, E.

Stamp, L.

Jacobson, L.

Stedman, B.

Jacques, L.

Stewart of Alvechurch, B.

Jeger, B.

Stewart of Fulham, L.

Kilbracken, L.

Stone, L.

Kinloss, Ly.

Underhill, L.

Lauderdale, E.

Wallace of Coslany, L.

Lawrence, L.

Wedderburn of Charlton, L.

Leatherland, L.

Wells-Pestell, L. [Teller.]

Listowel, E.

Whaddon, L.

Llewelyn-Davies of Hastoe, B. [Teller.]

Wilson of Langside, L.

Wootton of Abinger, B.

NOT-CONTENTS

Alexander of Tunis, E.

Cottesloe, L.

Auckland, L.

Cranbrook, E.

Avon, E.

Crathorne, L.

Bellwin, L.

Cullen of Ashbourne, L.

Belstead, L.

Daventry, V.

Bessborough, E.

de Clifford, L.

Bolton, L.

De Freyne, L.

Broadridge, L.

De La Warr, E.

Caccia, L.

Denham, L. [Teller.]

Carrington, L.

Drumalbyn, L.

Chelwood, L.

Dulverton, L.

Chesham, L.

Ebbisham, L.

Cockfield, L.

Eccles, V.

Cork and Orrery, E.

Effingham, E.

1288

Erroll of Hale, L.

Newall, L.

Exeter, M.

Noel-Buxton, L.

Faithfull, B.

Northchurch, B.

Falkland, V.

Nugent of Guildford, L.

Ferrers, E.

Orr-Ewing, L.

Ferrier, L.

Pender, L.

Fortescue, E.

Penrhyn, L.

Fraser of Kilmorack, L.

Redmayne, L.

Gainford, L.

Renton, L.

Gisborough, L.

Rochdale, V.

Glenarthur, L.

Romney, E.

Glenkinglas, L.

St. Aldwyn, E.

Gormanston, V.

St. Just, L.

Gowrie, E.

Sandford, L.

Greenway, L.

Sandys, L. [Teller.]

Gridley, L.

Selborne, E.

Hailsham of Saint Marylebone, L.

Selkirk, E.

Sempill, Ly.

Hawke, L.

Sherfield, L.

Henley, L.

Skelmersdale, L.

Home of the Hirsel, L.

Soames, L.

Long, V.

Stradbroke, E.

Lyell, L.

Strathspey, L.

Mackay of Clashfern, L.

Swansea, L.

Macleod of Borve, B.

Swinfen, L.

Mancroft, L.

Teviot, L.

Marley, L.

Thorneycroft, L.

Massereene and Ferrard, V.

Trefgarne, L.

Melville, V.

Trenchard, V.

Merrivale, L.

Vaux of Harrowden, L.

Milverton, L.

Vickers, B.

Morris, L.

Vivian, L.

Mowbray and Stourton, L.

Young, B.

Murton of Lindisfarne, L.

Resolved in the negative, and amendment disagreed to accordingly.
Clause 29 [Disclosure of names of persons using business names]:
4.16 p.m.
Lord Mishcon Lord Mishcon moved Amendment No. 2:
Page 37, line 16, at end insert:—
("and
(c) lodge a copy of the information referred to in this subsection with the Local Authority in whose area the business is carried on.").
The noble Lord said: My Lords, having, I hope with sufficient respect, already expressed my views on the observations made by the Deputy Leader of the House, I propose, with your Lordships' leave, to proceed with my amendment. The existence and the continuance of the Registry of Business Names has been debated at great length in this Chamber, and I should not have thought that your Lordships would have welcomed another full debate involving precisely the same issues. Indeed, that would have broken the whole of the principle to which I was hoping to have adhered in the exchange that took place earlier.
For the purpose of the Third Reading debate I must accept that the Business Names Registry is to cease to exist. I must further assume that any central form of registration must cease to exist. The amendment now before your Lordships deals with an attempt to protect the public—to protect, above all, the consumer, and to protect creditors, and to do so by way of a procedure completely different from anything ever suggested in your Lordships' House in connection with the Bill up to this very moment.
The procedure is as follows. There having been imposed the duty upon a firm to have the particulars,

1289
including the addresses, of the proprietors displayed at the main place of business, under the amendment it would also be the duty of the firm to see that a copy of the particulars is sent to the local authority in whose area the business conducts itself. This is a very simple amendment. Instead of having to travel to the business concerned, hoping that the door will be open and that there will be a welcoming courtesy if one wishes to inspect the particulars that ought to be displayed somewhere on the wall, or taking it for granted that one might not get from the firm which is behaving suspiciously, for example, as expeditious a reply to a written request for those particulars as one might want, one now has the simple task, under this amendment, of applying to the local authority, which will have kept an index of the particulars which are registered with it—particulars very easy to supply, because they are merely a copy of what ought to be exhibited at the place of business.
One might have thought that this carried implications of a yet further burden of debt either upon local authorities or nationally. Your Lordships will see from this amendment that it does not, because the charge for that registration is to be left to the local authority, with the proviso that it must make such a charge as will make this service at least self-paying.
My Lords, I do not pretend for one moment that this has the same advantages as other matters and other procedures which have already been debated in your Lordships' House, and I am scrupulously avoiding any discussion in regard to those debates. Again, it will be the last opportunity that your Lordships will have in this House of protecting the public in the way that the Consumers' Association want it protected, as does every public body that I can think of connected with trade and industry, and every professional body; and I hope your Lordships will feel that a short speech on this subject is as effective as, if not more effective than, all the long ones we have had upon another matter, another procedure, which, as I have said, we are not debating today. I beg to move.
Lord Trefgarne: My Lords, these amendments—I am referring, of course, to this one and the following one—give rise to issues both of substance and of administrative detail. First, we on this Bench consider that the proposed requirement for registration of information about business names with local authorities is unnecessary, as our own proposals for disclosure by the traders concerned will provide all the information which the public and the trading community need. As a result, what is proposed involves an unnecessary and undesirable extension of local bureaucracy, imposing still further costs by the public sector on private industry and commerce. It would also, of course, increase local authority manpower and costs for work, which bears little relationship to the general duties of the local authority. I note that it is proposed that fees should be charged to cover these costs; but if the proposed fees turned out to be inadequate, the deficit would have to be borne by the ratepayers. It would have been of interest to know whether the noble Lord had any communication with local authorities and their representative organisations before proposing to impose this additional statutory duty upon them.
The costs of a service provided by a local authority
1290
is bound to vary from local authority to local authority, and thus a proposal that the cost to individual authorities should be recovered by an appropriate level of local fees is bound to lead to considerable local variation. This seems certain to be confusing and to cause resentment among the traders affected. On the other hand, there would be obvious difficulties in determining a nationally applicable scale of fees which could be guaranteed to meet the cost of all local authorities.
What is proposed would involve an extension of public sector activity. As your Lordships are well aware, a major objective of the present Government is to push back the frontiers of the state. The amendment is of course technically defective, as noble Lords with more experience than I have of local government will have already perceived, in that it does not specify which local authorities are to undertake these new duties. Or, perhaps, had the noble Lord envisaged that the new duties would be undertaken concurrently by the counties and the districts? Surely it would be even more undesirable to require traders to register twice or more where their business straddles boundaries. There are 66 counties (or regions) in England, Wales and Scotland (including the three island authorities), whereas there are 422 district authorities (including the London boroughs). Whichever tier of local authority were to be chosen, the Government departments responsible for local government as well as the Department of Trade would have to find additional staff in order to provide guidance to the local authorities concerned and advice on the inevitable representations to Ministers.
Lord Mishcon: My Lords, I wonder whether the noble Lord the Minister will forgive me, but it might make the discussion rather easier if I were to intervene. I especially did not define the local authority because I did not want to be hoist with my own petard by it being said, "The county councils cannot do it hut, of course, the district councils could". So I deliberately left it in general terms, trying to get the principle through, and I thought the Minister would understand that. The local authority could be decided upon quite easily thereafter.
Lord Trefgarne: My Lords, I understand that the noble Lord was trying to persuade us to accept the principle, but the fact is that he tabled specific amendments to this Bill, and it is those that we have to consider, not the principles which are in the back of the noble Lord's mind and which he hopes will cover the deficiencies of his amendments.
Again, the amendments require local registration in every area where business is "carried on". This will mean that where business is done by travelling salesmen or mail order, multiple registration seems to be required in each area where customers are approached and contracts made. This will impose an intolerable burden on small businesses. If the noble Lord responds that it is only meant to require registration where there is a place of business in an area (which is not, of course, the effect of the amendment), even that will require multiple registration for many businesses. And for what purpose, where the information will be available anyway on demand under the Government's

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own proposals and there will be no necessary connection between a creditor and the place of business in question? Given that we have evolved what we consider to be a fully satisfactory alternative to the present unsatisfactory registry, I would ask the noble Lords to think again as to whether they should continue to press their amendments, which would impose considerable expense on industry and commerce at large as well as upon the public.
Lord Ponsonby of Shulbrede: My Lords, if I may make just one brief comment on the remarks of the noble Lord opposite, I thought that, in raising the objections which he did to the amendment set down in my noble friend's name and in my own name, he in fact himself made a very good case for the establishment of a central registry of some sort, and I found him a very powerful advocate in that cause. Of course, this amendment is not concerned with the establishment of a central registry but with the establishment of a local registry. But what I would hope is that the Government would realise the very great concern by the business community as a whole that there should be some form of registry. We have accepted, as has been made clear by my noble friend Lord Mishcon, that the old Registry of Business Names under the 1916 Act is quite dead. We accept that situation, but I think there should be some form of registry. I would hope that the House would look with favour on the amendment which my noble friend Lord Mishcon has moved, as it attempts to establish the principle of some form of registry.
Earl De La Warr: My Lords, I should be very grateful if at this stage I could ask a question about practicality. The noble Lord has said that he does not want to go over old ground again, and I do not think it is necessary to do so, but from what the noble Lord, Lord Ponsonby, has said it appears that he is looking for a register of some sort, even though it be (if you like) departmentalised geographically and spread around the country. What is not clear to me is whether he is talking about an attempt to get a 100 per cent. registry—that is to say 100 per cent. of existing business names registered somewhere. This is where there is a link with past debates. If I may say so, what was dealt with inadequately in previous amendments was that those who argued them never said how they would attack the question of getting up-to-date the existing, tattered, probably only 50-per cent-accurate register. It was on the problems of updating that it seemed to me the arguments fell down in terms of practicality. I am seeking for comments from the noble Lord. Is he trying to finish up with a register, though it be a series of local registers all over the country, which is up-to-date? Is he, therefore, going to demand that there be a sort of process of re-registration of existing businesses right across the country; so that we may end up with a series of local registers which will add up to 100 per cent. instead of the 50 per cent. to which it adds up now? If he can answer that question, then I think the House would be in a better position to assess the validity of his case.
Lord Mishcon: My Lords, with the leave of the House—and I am not now answering the debate, but answering a question—may I tell the noble Earl that the idea of this amendment is, I think, precisely what he has in mind. Under the Bill there will be a requirement for certain particulars to be shown at the place of business. That will be an obligation of everybody conducting a firm because the old Register of Business Names will go under the Bill. We will start off with a new registration of those particulars. A precise copy of those particulars will go to the local authority. Therefore, throughout the country, there will be, or ought to be, observance of this new provision; and this will mean that there will be (although scattered throughout the country) 100 per cent. correct, up-to-date registration of the particulars of firms.
Earl De La Warr: My Lords, I am grateful to the noble Lord for elucidating that point. All that I can say is that the mind boggles at the amount of work that will have to go into creating this 100 per cent. re-registration of all the 2·6 million existing businesses. I am sure that this is a real objection.
Lord Mishcon: My Lords, I find that the short winding-up speech that I promised will deal largely with the last point made. If to send a carbon copy of something, which you are obliged by an Act of Parliament to prepare in any event, is so onerous, then we are, all of us, saddled in our daily life with obligations so onerous that one would have thought it almost impossible to attend this House at all as a result of them. All that I ask for is merely a copy of what is already there to be sent to the local authority. This is a straightforward issue. I do not intend to complicate it. It is the last opportunity of those who are fearful of doing away with all registration of business names available in any public place for people to search and apply for copies. It is the last opportunity that this House will have to try in some measure to protect the public in this way. I can put it no higher; but I certainly put it no lower. I regard it, if I may say so, as the duty of all those who have favoured this principle in past debates to decide to support this amendment now.
4.35 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 67; Not-Contents, 101.

CONTENTS

Amulree, L.

Gaitskell, B.

Ardwick, L.

Galpern, L.

Aylestone, L.

Gladwyn, L.

Balogh, L.

Goronwy-Roberts, L.

Banks, L.

Gosford, E.

Beaumont of Whitley, L.

Greenwood of Rossendale, L.

Beswick, L.

Hale, L.

Boothby, L.

Hampton, L.

Briginshaw, L.

Hanworth, V.

Bruce of Donington, L.

Henderson, L.

Byers, L.

Houghton of Sowerby, L.

Cooper of Stockton Heath, L.

Howie of Troon, L.

David, B. [Teller.]

Jacobson, L.

Diamond, L.

Jacques, L.

Elliot of Harwood, B.

Jeger, B.

Elwyn-Jones, L.

Kilbracken, L.

1293

Leatherland, L.

Sefton of Garston, L.

Listowel, E.

Segal, L.

Llewelyn-Davies of Hastoe, B.

Shackleton, L.

Lloyd of Hampstead, L.

Simon, V.

Longford, E.

Sligo, M.

Mais, L.

Somers, L.

Mishcon, L.

Stamp, L.

Morris of Grasmere, L.

Stewart of Alvechurch, B.

Nathan, L.

Stewart of Fulham, L.

Oram, L.

Stone, L.

Peart, L.

Strauss, L.

Phillips, B.

Wallace of Coslany, L.

Ponsonby of Shulbrede, L.

Wedderburn of Charlton, L.

Ritchie-Calder, L.

Wells-Pestell, L. [Teller.]

Robbins, L.

Whaddon, L.

Rochester, L.

Wilson of Langside, L.

Sainsbury, L.

Wootton of Abinger, B.

St. Davids, V.

NOT-CONTENTS

Ailesbury, M.

Long, V.

Aldenham, L.

Lyell, L.

Alexander of Tunis, E.

Mackay of Clashfern, L.

Alport, L.

Macleod of Borve, B.

Avon, E.

Mancroft, L.

Balfour of Inchrye, L.

Marley, L.

Bellwin, L.

Massereene and Ferrard, V.

Belstead, L.

Merrivale, L.

Bessborough, E.

Milne, L.

Bolton, L.

Milverton, L.

Caccia, L.

Montague of Beaulieu, L.

Carrington, L.

Mottistone, L.

Chelmer, L.

Mowbray and Stourton, L.

Chelwood, L.

Murton of Lindisfarne, L.

Chesham, L.

Newall, L.

Cockfield, L.

Noel-Baker, L.

Cork and Orrery, E.

Noel Buxton, L.

Cottesloe, L.

Northchurch, B.

Craigavon, V.

Nugent of Guildford, L.

Craigton, L.

O'Brien of Lothbury, L.

Cranbrook, E.

Peel, E.

Crathorne L.

Pender, L.

Cullen of Ashbourne, L.

Penrhyn, L.

Daventry, V.

Redmayne, L.

de Clifford, L.

Renton, L.

De La Warr, E.

Rochdale, V.

Denham, L. [Teller.]

Romney, E.

Drumalbyn, L.

Rugby, L.

Dulverton, L.

St. Aldwyn, E.

Ebbisham, L.

St. Just, L.

Exeter, M.

Sandford, L.

Faithfull, B.

Sandys, L. [Teller.]

Falkland, V.

Seebohm, L.

Ferrers, E.

Selborne, E.

Fortescue, E.

Selkirk, E.

Fraser of Kilmorack, L.

Sempill, Ly.

Gainford, L.

Sherfield, L.

Gisborough, L.

Skelmersdale, L.

Glenarthur, L.

Soames, L.

Glenkinglas, L.

Spens, L.

Gormanston, V.

Strathspey, L.

Gowrie, E.

Swansea, L.

Greenway, L.

Swinfen, L.

Gridley, L.

Teviot, L.

Hailsham of Saint Marylebone, L.

Thorneycroft, L.

Trefgarne, L.

Hawke, L.

Trenchard, V.

Henley, L.

Vaux of Harrowden, L.

Home of the Hirsel, L.

Vickers, B.

Hylton-Foster, B.

Vivian, L.

Ilchester, E.

Young, B.

Lawrence, L.

Resolved in the negative and amendment disagreed to accordingly.
[Amendment No. 3 not moved.]
Clause 42 [Certain assistance for acquisition of shares prohibited]:
4.43 p.m.
Lord Noel-Buxton Lord Noel-Buxton moved Amendment No. 4:
Page 46, line 17, after ("acquisition") insert ("by another person").
The noble Lord said: My Lords, I am sure that the House is grateful to the noble Lord, Lord Wedderburn of Charlton, for drawing attention at the Report stage to the article entitled "Section 54 and all that" written by Mr. Ralph Instone of counsel. Mr. Instone has been kind enough to help me in the drafting of the amendments standing in my name on the Marshalled List. I hope that it will be for the convenience of the House if I address myself to all my amendments at once.
I move the first amendment standing in my name (Amendment No. 4) with a view to avoiding incompatibility with Clauses 44 and those that follow which empower a company to purchase its own shares, to which Clause 42 itself is complementary. The need for an express cross-reference to Clause 44 and those that follow (which for the first time empower a company to purchase its own shares, whether redeemable or not, as contrasted with mere redemption) is entailed by the substitution in what I shall call the new Section 54 of the generic term "acquisition" for the more specific "purchase or subscription". In the 1948 Act there could be no incompatibility between Section 54 and Section 58, whereas there plainly will be between the new Section 54 and Clause 44 and those that follow unless there is proper dovetailing together.
Regarding the second amendment, No. 6, subsection (2)(b) in particular is surely unsatisfactory as drafted, although the concept which appears to underline it is itself unobjectionable. Paragraph (b) begs the question of whether an "instrument or resolution" is required at all. What if a managing director of a large company authorises expenditure on a fixed asset within the limit which he is allowed to purchase on his own authority, knowing that the vendor intends to buy shares in the company? It would be reasonable to require two conditions of validity, but not those of paragraphs (b) and (c) as now drafted. The correct pair, I would submit, are those in my amendment. If, however, the Government are not insisting on express authorisation, an alternative formulation would be:
"(b) the thing is done in good faith in the interests of the company; and
(c) the doing of it is a proper exercise of the power in pursuance of which it is done".
I now refer to the next amendment standing in my name, No. 7. The phrase "employed in good faith" at subsection (3)(c) is misconceived. What must be meant is that the person has a genuine job, not just a fancy label to qualify him as a borrower. "Employed in good faith" will surely not do as a translation of "bona fide in the employment of", the phrase used in Section 54 of the 1948 Act. It is the job and not the fact of being employed which has to be genuine. If we must use the vernacular in accord with the present conventions of parliamentary counsel, I would prefer "genuinely in the employment of".
I now address myself to Amendments Nos. 8 and 9. I drafted them as one amendment; the latter is consequential on the former. I now appreciate that the word "by" has been left out after the first word of

1295
line 43. Even so, I would suggest that my wording has the merit of brevity.
Addressing myself now to my Amendment No. 10, I accept that this subsection is in essence already on the statute book and implements a second directive obligation. I am disturbed, however, by the antithesis between "balance sheet net assets" and "actual net assets". Counsel is of the view that you do not have to undertake an assets revaluation every time you contemplate a distribution in order to see whether it is lawful under the 1980 Act. Such a view would be absurdly impracticable in the case of large companies, as Clauson, J. said in Drown's case in 1937. The use in Section 40(1)(a) of the 1980 Act of the word "amount" rather than "value" reinforces this view.
Coming now to reductions of capital confirmed by the court, I do not take the Government's view that there is no doubt but that reductions of capital should free amounts for distribution. With respect, I would suggest this is just plainly wrong. When a reduction of share capital or share premium account is confirmed, a capital reserve is created which is not distributable until it has been realised (Section 39(2) of the 1980 Act). I attach more importance to adding express references to confirmed reductions of capital and share premium account (and to lawful dividends in subsection (5)) in subsections (4) and (5) than to any others of my suggestions. This is absolutely crucial in my view.
May I now address myself to Amendment No. 12. This amendment addresses itself purely to the matter of express reference to confirmed reductions of capital and share premium account and to lawful dividend, about which I have already spoken. A dividend may be a gift for the purposes of subsection (5)(a)(i); it is certainly caught by (ii). Again, the subsection must cover confirmed reductions of capital and share premium account. It is essential that all legitimate dividends should be expressly freed from any taint of illegality; otherwise, for example, ICI could never pay a dividend without first satisfying itself that no shareholder was currently buying more ICI shares. I beg to move.
4.52 p.m.
Lord Wedderburn of Charlton: My Lords, perhaps it would be useful if I say two or three sentences on these amendments, the noble Lord having made reference to my speech in Committee. I followed him with some sympathy in his early amendments from 4 through 6 to 7, but gradually as he came to what he himself called the most important part of the list of amendments he certainly lost my sympathy. My sympathy dwindles into opposition, if I may say so, when he comes to his amendment to subsection (5), because there he tries by way of a list to free certain specific transactions. One of the reasons why I wish to put this point is that I said in Committee that I thought the list approach—that is that financial assistance be unlawful except for a specific list of transactions—was still possibly an avenue to pursue. On reflection, I came to think it was not possible to pursue it, and that is why I have my name to the amendment which the noble Earl will move later.
The reason especially why I think one should not
1296
pursue it is that given in the noble Lord's Amendment No. 12, because if there were ever an easy way for the rogue to get round what he has understandably called the new Section 54, it would be a statute which allowed each of these transactions a dividend out of distributable profits or repayment of paid-up share capital or share premium account confirmed by the court, certainly in terms of the dividend paid by distributable profit. The rogue could plainly use that, in ways the noble Lord would not wish any more than I, as a way round the prohibition of financial assistance for the purchase of shares. I once thought the list would work. The noble Lord's list is really very short because it is all approved by the court except for the payment of the dividend. But that is his Achilles heel, and that is why I would oppose these amendments as a composite whole to the clause.
4.54 p.m.
Lord Mackay of Clashfern: My Lords, I should first like to thank my noble friend Lord Noel-Buxton for bringing forward these amendments and for the great courtesy he afforded me in giving very considerable notice of them some time ago so that we have had a considerable opportunity to think them over.
Before I deal with the detail of the amendments my noble friend has proposed, it might perhaps be convenient if I explained our present position with regard to Clause 42. The matters covered by our new Clause 42 are of very considerable importance to the business community. On the one hand, it is important that innocent transactions should not be inadvertently struck at by the new clause, and it is equally important that transactions which might be used in a sinister way by crooks or rogues, to use the term of the noble Lord, Lord Wedderburn, should not be allowed either. Accordingly, to strike the correct balance is by no means easy, and we thought it right to present to your Lordships at Report stage the Government's present position as regards Clause 42; to bring it out so that your Lordships could see how far we have got in this difficult matter.
The Government had been consulting for some time upon this matter with the bodies principally concerned, with a view to amending Section 54 in this Bill. We certainly do not claim that Clause 42 as it stands at present is our final position upon this difficult subject. The various bodies which have an interest in this matter have seen Clause 42, and some have seen Clause 42 in an earlier draft before it was put into the Bill. They are still considering in some depth our proposals in these matters. For example, we are expecting to hear shortly the considered views of the Law Society on this. We think it would he premature to reach a final conclusion on the precise form of this clause until these views have been expressed, and I hope your Lordships may feel that discussions today as these matters have been further focused would be useful, and then it would be right to allow the Government to consider further what should be done.
To illustrate how difficult it is to reach final views on this matter, could I underline the fact that the noble Lord, Lord Wedderburn of Charlton, who is very experienced in this area, has indicated that since we last discussed this matter he has, on further reflection, felt that to pursue the list approach has turned out

1297
not to be a particularly good idea? If a person as expert as he finds it necessary to reconsider his point of view, it is no wonder that I should find it difficult to avoid reconsideration.
May I turn now to the particular amendments. It will be appreciated that a great deal of what I have said applies to the amendments to be spoken to later on the same clause. Amendment No. 4 seeks to make clear that a payment of the redemption of purchase price in respect of a company's own shares would not fall within the definition of "financial assistance" in the clause. Our present view is that this may be already clear, but so far as the result is concerned we have very much the same point of view about the matter, although the precise relationship between Clause 42 and the clauses on purchase of own shares is a matter which requires further consideration. So from that point of view there is not a great deal between us and, as at present advised, we think that the clause as it stands is probably all right; but we shall be happy to consider it further in the light of what my noble friend has said today.
Amendment No. 6 seeks to simplify the drafting of sub-section (2)(b) of the clause and to link the proper purpose doctrine of subsection (2)(b) with the requirement that an action be done in good faith in the interests of the company by requiring that the action be expressly authorised by a resolution of members or directors of the company. We fully acknowledge that the drafting of our Subsection (2)(b) has been found difficult. It is often easier to understand a clause if you started off knowing what the clause is aiming at than reaching a conclusion about it when it is presented to you as a reader. We have had quite a lot of reaction from readers suggesting that they have not found this easy. For example, my noble friend Lord Selkirk expressed that view on the last occasion. We shall certainly take account of that point of view.
I think my noble friend was asking: does one require an authority at all? He gave an illustration of a director making a transaction within the limit of his authority. I suppose that in that case the manner in which his authority was limited would be the relevant instrument. However, we believe that there is a distinction which is worth drawing between paragraphs (b) and (c) of subsection (2), as some actions could meet one condition but not the other. We consider that the clause requires all three conditions of subsection (2) to be met, if a transaction is to be treated as exempt. I found impressive the alternative suggestion that my noble friend made in the course of his remarks, and we should certainly like to consider further whether that would help us to improve the clause.
So far as Amendment No. 7 is concerned, there are obviously differences of view as to whether "good faith" or "bona fide" is the better expression. On the whole, we have tended to go for the vernacular or for simplicity in this area, and we agree with the view that the question is whether the job is genuine. But I think that is probably accurately expressed by saying that the person requires to be "employed in good faith"; in other words, there is a bona fide employment or the person is, in fact, employed in a genuine or good faith manner.
Amendments Nos. 8 and 9 seek to improve the drafting of the last line of subsection 3(c). At the
1298
moment, we are not convinced that this represents an improvement, though we are grateful for the suggestion and will continue to consider it along with all other suggestions that may be made in the course of the discussions.
As regards Amendments Nos. 10 and 12, I find myself very much in line with what the noble Lord, Lord Wedderburn, said about these. There is, perhaps, a difference of policy between my noble friend and ourselves on this matter. At present, the Government do not share my noble friend's view. As regards the cases that he described, we believe that the test of sole or principal purpose is the important determinant of the lawfulness of a proposed payment. Such payments were thought by the Jenkins Committee normally to be innocent—and I emphasise "normally"—based on their view that the dangers arising from a company giving financial assistance were for minority shareholders and creditors only. However, the Government believe that this view is mistaken, and that to allow such a payment would undermine very much of the function of the Section 54 prohibition and the matter at which the new clause is aimed.
Permitting otherwise lawful dividends would, for example, allow a "predator" to borrow sufficient funds to acquire control of a cash-rich company, in the knowledge that he could then declare a lawful, substantial dividend from the assets of the company and repay funds borrowed from this dividend. This might well be art extremely undesirable commercial activity and we think that the prohibition should be able to catch it in such circumstances. The Jenkins Committee concluded that if the acquirer had to rely on the assets of the company to achieve acquisition, it was likely that the interests of minority shareholders and creditors would, at least, have been put to unacceptable risk, or that the company would have been made to part with assets for illusory consideration. But the objections to such activities go wider than this. Breaches of Section 54 have been significant features of many cases of asset stripping or share puffing, revealed in a series of companies inspectors' reports which have been produced over the years.
I thought it right to give our present views on the amendments which my noble friend has very carefully proposed. But I hope, in view of that explanation, and in the light of our overall approach to this matter and the open-minded attitude which the Government are taking up upon the point, that my noble friend may feel able to withdraw his amendment.
Lord Noel-Buxton: My Lords, I am very much obliged to my noble and learned friend for that very full response to my series of amendments. I am particularly obliged to him for making the points on lawful dividends, which I had not fully appreciated; and, of course, for the remarks of the noble Lord, Lord Wedderburn of Charlton. In recognition of the desirability of keeping the basis of the Government's discussions with interested parties consistent, and, of course, in view of what my noble and learned friend has said, I have no hesitation in begging leave to withdraw my amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Viscount Simon): My Lords, I have to inform your Lordships that, if Amendment No. 5 is agreed to, I shall be unable to call Amendment No. 6.
5.5 p.m.
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 5:
Page 46, line 21, leave out subsection (2) and insert—
("(2) Subsection (1) above shall not prohibit a company from doing anything if—

(a) it is done in good faith in the interests of the company and not for any collateral purpose; and

(b) it is authorised before it is done by the instrument or resolution conferring the power in exercise of which it is done; and

(c) it is authorised before it is done by a resolution of the directors stating that it is not done for the purpose of or in connection with financial assistance rendered unlawful by subsection (1) above; and

(d) it is done not less than fourteen days after either—

(i) the making of a statutory declaration by one or more directors specified in such resolution stating that it is not done for the purpose of or in connection with such assistance, or

(ii) the passing of a special resolution of the company in general meeting stating that it is not done for the purpose of or in connection with such assistance; and

(e) it is a transaction no party to which knows or ought to know that it is likely to be or to give rise to such assistance directly or indirectly.

(2A) (a) Where a person enters into a transaction with a company in good faith in reliance upon a declaration made in accordance with paragraph (d)(i) or a resolution passed in accordance with paragraph (d)(ii) of subsection (2) above, nothing in this section shall prevent that transaction being enforced by him unless he has reasonable cause to believe that the requirements of any of paragraphs (a), (b), (c) or (e) of that subsection have not been satisfied.
(b) Without prejudice to any liability imposed otherwise than by this section, where a company acts in contravention of this section a director who is in default shall be liable (jointly and severally with any other person so liable)—

(i) to indemnify the company for any loss or damage resulting from that contravention; and

(ii) to indemnify a person who has entered into a transaction enforceable by reason of paragraph (a) above for any loss or damage resulting from his entering into that transaction to the extent that that person is not so indemnified by the enforcement of that transaction against the company.").

The noble Earl said: My Lords, in moving Amendment No. 5, I should also like to speak to Amendment No. 11, which goes with it. I am grateful for what we have heard from the noble and learned Lord the Lord Advocate. He now tells us that this is an important subject. That is a very remarkable statement. It was not mentioned at all in the Bill as presented to the House. He now finds that it is important. I am delighted to hear that it is important, particularly when one remembers that what he said on the last occasion was that
"Section 54 has been criticised over the years as an unnecessary inconvenience to the honest and as being widely ignored or circumvented by the unscrupulous".—[Official Report, 7/4/81; col. 470.]
It strikes me as very odd that nothing amending that former Act was put into the original draft as presented here. Here is a clumsy piece of legislation, which is inhibiting the proper investment of money, because people are afraid of being caught up in business and the Department of Trade did nothing, nothing whatever
1300
to put that on a proper basis. We should congratulate ourselves that, at least, they are now alive to it and realise that they must do something about it, about which I am extremely glad.
I moved an amendment on this at Committee stage. The noble Lord said that the Government did not like it and would put in another clause at Report stage. The House was universal in saying that it did not like that either. So it seems to me that, as we are a revising Chamber, we ought to try to do something better. I, at least, encouraged the noble Lord, Lord Wedderburn, to have talks with the clearing banks in London to see whether those two sides could be brought together. There is nothing political about it. But it is foolish that perfectly legitimate loans in the ordinary course of business should not be made, without running into dangers which would lead into illegitimate channels. It ought to be within the wit of man to do that.
I felt that a combination of the very wide experience and deep study which the noble Lord, Lord Wedderburn, has done on those cases which came to court—in other words, the cases where something had gone wrong—and the London clearing banks, who are dealing with things which have gone right, would be valuable. There is no doubt whatever that the amendment which I put down, and which is also in the name of the noble Lord, Lord Wedderburn, is indeed very much better, and that it is a step forward.
May I explain what it does? It takes out a lot of the woolly words which were in the Government's amendment: words such as "principal purpose"; the astonishing word "contemplated" and "material extent" at the end. It lays down five fairly clear conditions. The first is that the company making the application must act in good faith, and say that it is in the interests of the company to borrow the money. Secondly, they must be empowered to do this. Thereafter, there must be a resolution by the company as to what they want to do, and they must not do anything which would be considered improper in the purchasing of shares. There could then be an interval of 14 days, which would follow either a general meeting of the company or a resolution of the directors, followed by a statutory declaration. This is to allow things to happen and, if necessary, objections to be raised.
One of the points which is particularly made by the Government is that they still want the banks and other lending organisations to be a kind of watchdog. They do not want to let them off at all. Therefore, we come to the next subsection to which I should like to draw the attention of your Lordships. It means that the banks should not get off the hook altogether. It makes it quite clear that if a situation arises in which the banks know or should know that any of the conditions laid down to which I have referred are being breached, they will not then get the benefit of the indemnity which would follow if all those conditions had been fulfilled. It places a very real responsibility upon them. These words are repeated in subsection 2(a):
"… he has reasonable cause to believe that the requirements of any of paragraphs (a), (b), (c), or (e) … have not been satisfied".
This goes a very long way towards trying to make a clear distinction, which I believe is very necessary, to enable the banking system to work to its full extent.
The noble Lord has made a great deal of play about consultation. I will tell him my information about that. No consultations are proceeding at present; no consultations have taken place in the last year; in fact, no consultations worthy of the name have taken place in the last 10 years. I am not going to say that letters have not been exchanged, but the truth is that no serious efforts have been made by the Department of Trade to put this into proportion. They have allowed it to slide on. It may be a difficult question, but I really do think that something is required. In this amendment I believe we come very near to resolving what is always a very difficult decision. It is important for the economy of this country. I hope that the Government will be able to accept the amendment or that they will give a very full undertaking that they will bear in mind what we have said. I beg to move.
Lord Seebohm: My Lords, I support this amendment purely from a practical point of view, having been in the seat of lending money for very many years and having had to contend with Section 54 and its predecessor in the 1928 Act for a very great number of years. If a company decides to buy another company, it will very probably be necessary to borrow part of the purchase price from its bankers.
If Clause 42 remains in the Bill in its present form, the branch manager will still be in considerable difficulties. The branch manager will need to satisfy himself that repayment will not come from any transfer of assets from the new subsidiary. On the other hand, the usual reason for such a purchase is the rationalisation of a group to bring a new subsidiary into the scheme. If this happens and any money from the subsidiary is used to reduce or repay the group bank borrowing, then there will have been a breach of Section 54, or its successor.
No time limit is specified after which the purchasing company or the bank are in the clear. This must be contrary to public policy, which is surely to encourage rationalisation, as is demonstrated by the fact that one can transfer group assets from one company to another within a group with considerable concessions on stamp duty. We have heard today that the Government are not satisfied with Clause 42 as it stands. They said at the Report stage that they would introduce a new clause.
I am also under the impression that the Government believe that the kind of case which I have described occurs only occasionally. Let me say that there are many hundreds of cases every year when care has to be taken not to offend under Section 54, with the result that various tortuous schemes such as the liquidation of a subsidiary have to be adopted. I am not entirely satisfied that this amendment gives to the banks as much as they would like, but common-sense surely dictates that this minimal protection is in the national interest and in no way helps the criminal who will be even further deterred under our amendment than he would be under Clause 42 as it now stands. Therefore, I strongly recommend the amendment.
Lord Boothby: My Lords, I think that the arguments put forward by the noble Earl, Lord Selkirk, are quite unanswerable. He has proved convincingly that action is required now because it has not been taken for
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years and should have been, long ago.
Lord Mais: My Lords, I hope that the Government will give favourable consideration to this amendment. As the position is now, a finance institution or a clearing bank makes a loan quite innocently in a situation which may ultimately prove to be a prohibited transaction. As it stands now, if my interpretation is correct, they would not be able to recover their loan under any circumstances. This seems to me, quite apart from the effect on the financial institutions, not to be in the interests of industry as a whole. I should have hoped that the Government would have been able to accept the amendment.
5.16 p.m.
Lord Wedderburn of Charlton: My Lords, before the noble and learned Lord replies to the mover of this clause, may I put to him that while I find it a compliment that he should put upon a slight emphasis of my mind the importance that he ascribed to it, nevertheless it cannot allow the Government—I say this without hostility to them, at least on this occasion—to escape from the fact that this is a legislative Chamber. If the Government come forward with a Companies Bill and say, "We haven't quite made up our minds", then they cannot ask this House not to make up its mind if it comes to a view.
Having heard the experience which lay behind the remarks of the noble Lords who have already spoken, I need say no more about the bad situation in which the law finds itself in terms of hitting the innocent, particularly when there is a case to be made (I am not sure it is a very big case) that this is some kind of legal impediment in the way of provision of capital that would otherwise be provided. I am not sure how big an impediment it is, nor of how much research has been done upon it. But that there are such cases I am sure the noble and learned Lord will not deny. That is why the Government decided, plus the fact that they had their purchase of own shares clauses, to do something with Section 54.
If I may touch upon one or two of the legal merits which would assist the innocent and which would be more likely to catch the guilty in regard to financial assistance for purchase of own shares, in my submission this would rest first upon the fact that although it uses the same definitional approach as the Government's subsection, the new subsection (2) contains many advantages, especially in relation to the new subsection (5). As the noble and learned Lord is obviously going to reply to this discussion, I submit that the omission of the words "to a material extent" in subsection (5)(a)(ii) is important.
Secondly, it drops the test—this the noble and learned Lord has already told us this afternoon is a central point of the Government's clause—of principal purpose. In dropping it, it inserts instead the test of knowledge, actual or constructive. In the phrase of the Master of the Rolls, Lord Denning, the directors are the very mind and will or nerve centre of a company. That is why I said that the rogue in the boardroom could manipulate the purpose but he cannot manipulate that which the company knows or ought to know, which is much more open to evidence attributable in terms of a prosecution.

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Thirdly, I believe that our clause is superior in replacing the Government's subsection (2)(b) relating to that which is contemplated. It is replaced by something which must be authorised but it is something which must be authorised before it is done. On that I would lay considerable stress, because it does not allow for any retrospective authorisation and it must be done in the interests of the company and not for a collateral purpose. Here I join with the noble Lord who spoke to the previous amendment, in that he wanted something which must be done in the proper exercise of a power. It is a well-known phrase in company law, accepted on all sides, that it must not be done for a collateral purpose other than the purpose of the best interests of the company, which includes the authority. Therefore, I would ask the Government whether they do not accept that this is a slight improvement.
Fourthly, there are the two requirements in regard either to the statutory declaration by the directors or to the special resolution with the fortnight cordon sanitaire, as it were—14 days in which people can object to this, be they shareholders or others. Lastly, there is in my submission a very important point which has not been mentioned to your Lordships this afternoon on this amendment. It tries to give some certainty to innocent third parties; as the noble Earl has suggested, and others with more experience of the banking world have suggested, the new subsection (2A) would allow the innocent third party to enforce transactions once he surmounts these hurdles. After all, what is he being asked to surmount? He is being asked to surmount a hurdle which says that he will rely upon the resolution or the declaration, and he has no reasonable cause to believe that any party to the transaction could know, or is likely to know, or ought to know, that it was likely to give rise to the prohibited effect. If we add subsection (2A) to subsection (2)(e)—I am sorry, the noble and learned Lord is looking at me in astonishment; the new subsection (2A) refers back, of course, to subsection (2)(e).
Finally, the new subsection (2A) also includes in paragraph (b) a civil remedy expressly—and this I would urge upon the Government as a reason for accepting this amendment this afternoon at the last moment. Why is it that Parliament constantly puts on the statute book sections which say, "Thou shalt not do" X, Y or Z, and if you do X, Y or Z you will be prosecuted, and then of course the courts have to look to see whether it was Parliament's intention that the person injured by the doing of X should have a civil remedy by injunction or damages. I know it has been said in your Lordships' House not too long ago that the tortious civil liability for doing damage by unlawful means does not really exist; but of course the courts are at it every day and developing that liability, and recently in the Court of Appeal, and only today in the Privy Council, the noble and learned Lord, Lord Diplock, delivered a fascinating judgment in The Times law reports on this very subject. So that it does exist, and of course the case in this area—the Belmont Finance Corporation case—was a conspiracy to use unlawful means; that is, to break Section 54 by giving financial assistance for the purchase of company's own shares, which gave rise to a civil action.
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It was a civil conspiracy to use unlawful means.
So while retaining, as we do, in this amendment all the existing civil liabilities without prejudice to them, why not say that the person (it may well be the bank) who has surmounted all the conditions in paragraph (a), lent the money and then found, despite all, that someone in the middle of it (after an inspector's report, no doubt) has broken the fundamental obligation not to allow his company to finance the purchase of these shares—a third party who has got himself into this position—has a civil remedy?
I should feel less strongly about this if we had a sensible and co-ordinated and coherent body of enforcement machinery for our company law, but of course we do not have that. It is not necessarily anybody's fault but from the Council for the Securities Industry, the Take-Over Panel, the Department of Trade, the fraud squad, the Director of Public Prosecutions, the inspectors to a host of other people, nobody quite knows what anybody else is up to. This is perhaps the odd case where the civil case in the courts ought to be encouraged, and I see no reason at all why this House should not express its view. Even on this particular point I would urge noble Lords to vote for this amendment, because this is something which urgently needs to be said, that people who break this sort of obligation in regard to the damage that they cause to that sort of innocent party ought to be obliged to compensate them in the courts. I hope that noble Lords will support this amendment.
Lord O'Brien of Lothbury: My Lords, I gave my strong support to an earlier amendment tabled by the noble and learned Earl, Lord Selkirk—an amendment which was not satisfactory to the Government. I was extremely pleased that that did not mean that the subject was then put to bed with what I would take to be the wrong answer and that further consultations and thoughts have been given to this very important subject, resulting in the amendment which is now before your Lordships. It seems to me to be no inconsiderable achievement to have an amendment put forward by the noble and learned Earl, Lord Selkirk, joined by the noble Lord, Lord Seebohm, and the noble Lord, Lord Wedderburn of Charlton, and I should have been very happy for my name to have been added to those. When we have the noble Lord, Lord Mais, also adding his voice in favour of this amendment I hope the Government will take it very seriously.
I was glad to hear from the noble and learned Lord the Lord Advocate that the Government's mind is not closed on this matter, as indeed on other matters in connection with this Bill, and certainly I should be sorry if satisfaction was not given to those who in my opinion, are justly concerned about the missing of an opportunity to put right a position which has prevailed for far too long under the Companies Act.
It is true, of course, that if the noble and learned Earl does not get satisfaction this afternoon he may put the matter to the vote, and possibly then party loyalty will overcome common sense and we may get the wrong answer. I hope, however, that the Government will at least keep the matter in being. I should like them to accept this amendment, but if they do not accept it I hope they will give assurances satisfactory to the noble and learned Earl which will enable the matter

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to be further considered, with a result which, in the end will give satisfaction at least to me and to others who feel strongly about it.
Lord Mackay of Clashfern: My Lords, I should like to join in the congratulations which have already been expressed in what I might call the assembly of this team—my noble friend Lord Selkirk, the noble Lord, Lord Seebohm, and the noble Lord, Lord Wedderburn of Charlton. I think we are all agreed about the importance of this subject. Certainly I have always taken the view that it was an important matter and a matter which the Government wish to take the earliest possible opportunity to deal with.
I should like to deal first with a matter raised by my noble friend, suggesting that there had been no consultation. The situation, as I understand it, is that the Committee of London Clearing Bankers—and I mention them particularly because I understood that he was in consultation with them—in February of this year received a very full account of the department's first thoughts on the scope for amending Section 54, which set out the view that an exemption should be provided for an action which did not have as its sole or principal purpose the giving of financial assistance.
The committee also received a first draft of the department's new clause, and comments from the committee were received. Consultations are still continuing with the various bodies that we have already consulted. I mentioned the committee particularly, but also the CBI, the Law Society of England and Wales and the Law Society of Scotland, among others, have been consulted. I should like to make it abundantly clear on behalf of my right honourable friend the Secretary of State for Trade and the other Ministers in his department that they would welcome any further consultation or representations upon this matter that the Committee of London Clearing Bankers would seek to put forward. What we are attempting to achieve is as much satisfaction to everybody as it is possible to achieve. There are, of course, difficulties in satisfying everyone, as we all know.
Therefore, my Lords, the situation is that the consultations are continuing and an open invitation is extended to anyone who wishes to participate in them on Clause 42, and as my noble friend Lord Noel-Buxton, said, there are advantages in a continuing consultation of this sort in keeping them on the same basis; in other words, that people know what they are referring to and can take account of new or different ideas as they are put forward.
Lord Boothby: Yes, my Lords, but may I ask the noble and learned Lord how long these consultations are going on? They could go on for years.
Lord Mackay of Clashfern: My Lords, the object of putting this clause forward at the Report stage in this House was so that the matter would be dealt with satisfactorily in the course of this legislation. Therefore, the consultations will certainly be concluded in the course of the completion of this legislation through its stages in the other place; hopefully, we will complete our consideration of this Bill this afternoon. So that the time limit is, as it were, the preparation of this legislation, and consideration of it now in the other
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place, with, of course, the opportunity for this House to consider again amendments which are made to the Bill in the other place. Therefore, I do not think that there is any force left, whatever force there may have been in the past in the point about delay on this matter. The department is certainly seeking to consult now and seeking to have the views of all interested parties as soon as possible in order that this matter should be finalised.
I turn from these more general matters to some of the matters about the amendment which has been proposed. My noble friend has explained his reasons for doing so. The first particular proposal that has caused us a certain amount of, perhaps I should say, surprise is the new provision at subsection (2)(e) at the top of page 3 of the Marshalled List:
"it is a transaction no party to which knows or ought to know that it is likely to be or to give rise to such assistance directly or indirectly".
My noble friend explained that one of our concerns was that people might be able to close their eyes to difficulties, in relying, say, on a document. I certainly accept that this clause goes in the opposite direction to that, but it seems to go extremely far in that direction. How could a banker know that no other party to the transaction "knows or ought to know that it is likely to be or to give rise to such assistance directly or indirectly"?
Lord Wedderburn of Charlton: My Lords, if I may intervene, it would not be his job to surmount that burden of proof. Would the noble and learned Lord not agree that he would have to have, under the next subsection, (2A), no reasonable cause to believe that?
Lord Mackay of Clashfern: My Lords, I have tried in my general consideration of this matter to take account of (2A) to which the noble Lord is now referring. My difficulty is to see how one could form any reasonable view. Let us say the situation was the payment of a dividend by a company with a very large number of shareholders. If I am concerned in that transaction in some way, how have I got the remotest basis for finding out whether a shareholder who is going to receive the dividend may use it to purchase shares in the company? I quite understand that subsection (2A) is intended to deal with this point, but my great difficulty is understanding how it does so. I should certainly be glad to hear an explanation from anyone who wishes to offer it as to how this is supposed to work. That is a very fundamental matter.
Of course, I can see that the desire to make sure that this clause is sufficiently all-embracing to catch all the bad transactions has prompted something of this sort. If I were allowed to guess the authorship I could perhaps do that, but I will not press my luck too far. The difficulty about it is how does the other party in a transaction which involves perhaps hundreds, thousands of parties, have a way of starting up to find out whether or not there is any such thing?
If I can go on to say a little more about (2A)(a), it allows someone to rely either on a statutory declaration or on a resolution, because there are two branches to (d) on the previous page, (d)(i) dealing with a statutory declaration and (d)(ii) dealing with a resolution of the company. I can see the possible use of a statutory

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declaration in assuring people of a state of facts, because you have the oath of the person making the statutory declaration, and, depending on who he is, it might be worth something; it might be that you have something to rely on. But I have considerable difficulty in seeing how a resolution has anything to do with a state of facts; merely because a company resolves to say something does not make it a fact, unless we are dealing with Alice in Wonderland.
The third point I make about the amendment is on paragraph (2A)(b), and the noble Lord, Lord Wedderburn, attached importance to this provision. I have found it hard to understand how this provision works. Again I would be happy to have my difficulties resolved. First, it seems to assume the possibility of liability in relation to this matter apart from this section; it opens in that way. And then it talks about "a director who is in default". I have difficulty in being certain of what is meant by that, although I am able to form some view that it is somebody who is in some way participating in the transaction knowing that it is not right, or something of that sort. Then it says "shall be liable (jointly and severally with any other person so liable)". I cannot understand at the moment what the "so" refers to, how the other person is to have the same sort of liability as the director who is in default, unless he is also a director in default.
Then, if one comes to the second paragraph of (b), that is (b)(ii), there seems to be a liability "to indemnify a person who has entered into a transaction enforceable by reason of paragraph (a) above"; that is, that the man in question is entitled to enforce his transaction and get the benefit of the transaction. But if he has any loss at all this person responsible under (b)(ii) is going to be bound to indemnify him. Does that mean—because at first sight it would seem to mean—that if a person makes a bad bargain of this kind but he is entitled to enforce it, just because it happens to be a bad bargain commercially, he can pass the loss he has sustained on to the person who is to give this indemnity, because as far as I can see so far there is nothing to prevent that particular construction? It may well be that I have not understood it right, and if so I have to apologise for that. But these are our preliminary thoughts upon this particular matter.
There is also a matter with regard to the definition of transactions involving deferred payment—this is Amendment No. 11 particularly—which are to be treated as financial assistance under the clause. These would be extended to include transactions involving transfer of something other than cash as payment. This is a point which we approach with considerable sympathy. We shall certainly take it into account in our further consideration of the clause. The amendment would make explicit that the assistance to which sub-paragraph (ii) of paragraph (a) refers includes assistance given otherwise than by the payment of money. We consider the expression used in the clause as presently drafted—"other financial assistance"—is quite wide enough to include such assistance, and so we do not at present see that this change is necessary. But this is a matter which we shall certainly be glad to consider further.
Thirdly, such "other financial assistance" is to be
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extended to include any assistance which reduces the company's net assets. This is the most important of these changes because it eliminates a significant feature of the new element of the definition of "financial assistance" contained in Clause 42; that is, that the qualification that assistance other than those types of arrangement explicitly defined as financial assistance in paragraph (5)(a)(i) should be regarded as financial assistance only if it reduces net assets to a material extent.
As I explained in the debate on Report, the purpose of this provision, which would be frustrated by the amendment, as I think the noble Lord made clear, is to allow companies to rearrange their assets in order to facilitate a takeover or group reorganisation, or to provide assistance to someone wishing to acquire its shares by provision of information or payment of minor costs associated with the acquisition, so long as there is not a significant reduction of assets. This is a liberalisation of Section 54, which the Government believe will afford a useful degree of flexibility to companies without opening up new scope for abuse. It is consistent with Article 23 of the Second Directive on Company Law in that the net asset reduction test does not apply to financial assistance of the kind prohibited by Article 23. It might be worth adding that net assets in this context are not to be arrived at by reference to the balance sheet, but by reference to the actual value of the underlying assets and liabilities.
Having said all that—and I am sorry that it has taken a little time, but I do so out of respect for the amendment and to indicate that we have endeavoured to consider it—I should like to suggest to your Lordships, and particularly to those noble Lords who have supported this amendment, that the right course would be to allow us to continue with the process which I have outlined. I undertake to your Lordships that we shall take the fullest account of all that has been said today in support of the various aspects of these amendments, and we shall see whether, on balance of the consultation, we can incorporate all or any of the features which have been put forward as improvements in the approach that we have already taken.
Lord Wedderburn of Charlton: My Lords, before the noble and learned Lord sits down—and I intervene because I know that the noble Earl, Lord Selkirk, will reply to the debate and therefore this is the only way in which I can ask a question—will he perhaps reconsider his castigation of the subsection and paragraph on civil liability on page 3 in paragraph (b), in the light of the fact that any other liability plainly would include liability for conspiracy in the cases which I mentioned in my speech; that anyone otherwise so liable would obviously include such a conspirator or, indeed, a director who was liable as a constructive trustee; that the words "in default" are adopted because they are in the Government's own subsection (7), and this amendment adopts the words "a director who is in default" as the Government put them forward themselves?
The other point that the noble and learned Lord made, that this does not work, might well be answerable by simply saying that the transaction remains illegal even though enforceable under the new subsection (2A), and therefore anyone who suffered loss from it would receive compensation.
Lord Mackay of Clashfern: My Lords, perhaps I may answer that question. I should not like to have my remarks characterised as castigation; I certainly did not intend them to be construed in that light—not at all. I intended them simply to indicate difficulties that had occurred to me in a fairly preliminary consideration of the amendment. I am certainly glad to hear some of the explanations that the noble Lord, Lord Wedderburn, has given. So far they have not entirely satisfied me that I was completely wrong. For example, I do not think he has explained why it is "so" liable; indeed, his explanation would seem to be that it was not "so" liable but liable in some other way, but that is by the way. I certainly did not want to give any impression that I was treating these amendments in any way that could be appropriately described as castigation. I should perhaps also point out that "in default" in subsection (7) is in relation to criminal liabilty.
The Earl of Selkirk: My Lords, I should like very warmly to thank noble Lords who have supported this amendment. I should particularly like to thank the noble Lord, Lord Wedderburn, who I know has spent a great deal of time and trouble putting this amendment together. I am very grateful to him and I think that the House should be grateful to him.
The noble and learned Lord, Lord Mackay, has criticised this amendment in many ways. I would venture to think that any amendment dealing with this subject will always be open to some degree of criticism, and there is not much to be gained by arguing the points of law in detail. I am worried about this because the Department of Trade has shown a great deal of prevarication here. I am suddenly told that it is an important matter, but the department did nothing at all about it in the original Bill as it came to this House. With regard to consultation, there may be different interpretations; whether or not one letter makes a consultation is a matter which we can all consider. Let us be frank, this has been here for 50 years; it has remained untarnished on the statute book for 50 years. What was the Department of Trade doing during that time? They knew perfectly well the difficulties that were taking place. Will the noble and learned Lord give an unqualified undertaking that the Government will amend Section 42 before it comes back to this House? If he can give that unqualified undertaking, I shall not ask your Lordships to divide.
Lord Mackay of Clashfern: My Lords, it is a little difficult to give an absolutely unqualified undertaking, but it certainly seems to me to be in the highest degree likely that we shall have to amend this clause. I do not wish the House to think that I can say in what directions exactly, or to what extent exactly, the clause will be amended, but I certainly believe that the clause will be amended. I think I can undertake that the Government will propose an amendment to this clause in the other place.
The Earl of Selkirk: My Lords, I think we should accept that as an undertaking beyond belief that an amendment in another place will be proposed. In those circumstances, I think that we have brought the Government to a position to which they did not
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necessarily want to come, and I am extremely glad to have done so. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.48 p.m.
Lord Noel-Buxton Lord Noel-Buxton had given notice of his intention to move Amendment No. 6:
Page 46, line 27, leave out paragraphs (b) and (c) and insert—
("(b) the thing done is a proper exercise of the power in exercise of which it is done; and
(c) it is done in pursuance of a resolution of the company in general meeting or of the directors of the company passed in good faith in the interests of the company and which expressly authorises the thing or a class of things which includes it.").
The noble Lord said: My Lords, we have already dealt with this amendment.
[Amendment No. 6 not moved.]
[Amendments Nos. 7, 8, 9, and 10 not moved.
The Deputy Speaker (Baroness Wootton of Abinger): My Lords, I have to point out that if Amendment No. 11 is agreed to, I shall not be able to call Amendment No. 12.
[Amendments Nos. 11 and 12 not moved].
5.49 p.m.
Lord Trefgarne: My Lords, I now rise to move that this Bill do now pass. In commending this Bill to your Lordships on the occasion of its Second Reading, I referred to the significant contributions which it makes within the field of company law to a number of broad policy objectives: helping small firms; reducing unnecessary burdens on companies; streamlining Government administration; countering crime and misconduct. I venture to suggest that, tested against these objectives, the Bill to which your Lordships have just given a Third Reading is an even better Bill than the Bill which we first debated some two months ago.
We have made a number of valuable technical improvements to the accounting provisions. We have found a certain amount of common ground in the field of company names. We have had more than one vigorous debate on the question of business names, and, while I would not claim that we have identified so much in the way of common ground on that subject, the House has rightly subjected the issues and arguments to the closest scrutiny. We have made some useful amendments and additions to the miscellaneous and supplemental provisions of the Bill. I would mention in particular the new clause which is designed to achieve the good consolidation of the Companies Act that all concerned so earnestly wish. Above all, perhaps, we have incorporated into the Bill the clauses that will enable companies to purchase their own shares—a major advance in company law which will be of direct benefit to many companies in the future.
As is to be expected on a Bill such as this, the Government have also accepted the responsibility of tabling additions to the Bill in due course to meet points which have been made in debate in this House. Paramount among these commitments is the Government's declared intention to bring forward proposals to amend the law relating to the disclosure of interests

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in shares, including provisions to require disclosures by concert parties. My Lords, this is a large Bill, a wide-ranging Bill and indeed a reforming Bill. I beg to move that it do now pass.
Moved, That the Bill do now pass.—(Lord Trefgarne.)
5.51 p.m.
Lord Ponsonby of Shulbrede: My Lords, in moving that this Bill do now pass the noble Lord said that he thought it was a better Bill than when it entered your Lordships' House. It is certainly a larger Bill than when it entered your Lordships' House. I think that our initial debate at the beginning of the Third Reading today showed one of the reasons for the dissatisfaction of the House at the way this Bill has proceeded through the House. The Bill which your Lordships have before you today is a Bill of 131 pages with 79 clauses. When it was brought before the House at Second Reading it had only 109 pages and 62 clauses. It has increased by 25 per cent. during its passage through this House. There have been 17 new clauses added to the Bill since the Second Reading.
I consider that there is an element of discourtesy to the House in bringing before your Lordships a Bill in a fairly undigested form, to the extent that it is necessary to table a large number of Government amendments during Committee stage and Report stage. Indeed, the noble Earl, Lord Selkirk, in moving the last amendment made specific reference to this. I should have thought that the Government should be the master of their own business, and should be able to treat this House with sufficient respect that when they bring business before the House that business is in the shape and form in which this House wishes to consider it, and on which the Government wish the House to do its duty in revising the legislation put before it. Only in this way can we in fact do our job properly.
However, having said that, I should like to take the opportunity of paying tribute to the courtesy of the Government Ministers involved in the passage of this Bill. I know that they have often found themselves labouring under great difficulties in a number of these fields. But so far as the Opposition is concerned, we have certainly received continuous courtesy from the Government Ministers, and I should like to thank them for that.
On Question, Bill passed, and sent to the Commons.

ECC 11th Report: Environment
5.54 p.m.
The Earl of Cranbrook The Earl of Cranbrook rose to move, That this House takes note of the report of the European Communities Committee on environmental assessment of projects (11th Report, H.L. 69).
The noble Earl said: My Lords, I move that this House take note of the report of the Select Committee on the European Communities, the 11th Report of this Session, on the environmental assessment of projects. The document under consideration by the Select
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Committee was the draft directive issued under reference 7972/80 or, under the Commission's reference, (80)313, which was forwarded to the then President of the Council on 16th June 1980. The draft directive is an element of the Community's environmental action programme, which has been the subject of an earlier report from the Select Committee, the fifth of this Session, and has also been debated in your Lordships' House on 6th April.
The aim of the present directive is to ensure that member states apply common procedures in the prior assessment of the environmental effects of proposed development projects. To attain this end the directive prescribes in some detail the procedures to be adopted in undertaking an assessment, including the nature of the information to be sought and the general form in which it is to be presented. It specifies the consultations that must take place and provides for public information on all issues.
The draft directive was reviewed by Sub-Committee G of the Select Committee, with the assistance of Mr. Brian Clark as specialist adviser. I should like to record the warm thanks of the Sub-Committee to Mr. Clark for his effective and valuable help. I should also like to record my personal thanks to Mr. Clark and to Mr. David Beamish, the clerk, for the odd and often uncongenial hours at which they were prepared to work in the final throes of drafting this report.
In the preparation of the report, oral and written evidence was received from sources which included the Department of the Environment. It also included European and British environmental and industrial groups; three firms of consultants with experience in the practice of environmental impact assessment, and also the national associations of local planning authorities. In addition, written evidence was received from one individual and from some 14 organisations of various kinds, presenting the views of a broad selection of affected interests, including planners, developers and other land-users, ecologists, and conservationists. On behalf of the sub-committee, I should like to express thanks to the witnesses for the time and trouble they took in coming before us.
With some small exceptions (in these cases the relevant papers are placed in your Lordships' Library) the evidence is printed with the report. The result is a bulky document of some 166 pages. I draw your Lordships' attention to the fact that also printed with the report is the text of the draft directive itself. Without this, committee members felt that items of detailed comment and criticism contained in the report and in associated evidence might prove hard to understand in practice. As it is, I feel that these red covers now contain material from a sufficiency of diverse origins, and presenting a wide range of viewpoints, and I hope that it will serve as a useful appraisal and as a background reference in the further discussions of this important proposal: not only those discussions taking place here tonight in your Lordships' House but others that will undoubtedly follow inside and outside this House.
I propose to concentrate in these few minutes on certain issues that seem to me sure to be raised again in the course of future debates on this draft directive, (80) 313. I should like to mention certain of these issues and to summarise the committee's views on

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them so far as I can. First, there is concern at the apparently limited scope of the directive. There is concern, that is to say, that it somewhat narrowly focused by concentrating purely on environmental aspects, and does not extend sufficiently to cover factors of social or economic significance.
The committee recognises that the social and economic factors, together with considerations of national policy where appropriate, must of course be taken into account by the developer and by the planning authority. All these are significant elements in the decision-making process. But this directive is intended to harmonise and to facilitate the proper assessment of factors in the environmental sphere. The approach taken is reasonable. The directive is not invalidated by failure to place equal emphasis on economic and social resources. To accept an environmental directive now would be a reasonable first step, and to do so would not be to prevent at a later date the preparation and examination of other proposals for systems which could assist the formalisation of the review of the impact of non-environmental factors.
Secondly, reservations have been expressed concerning the scope and content of Annexes 1 and 2 of the draft directive. Taken with Articles 4 and 5, Annexe 1 defines projects where an assessment would normally be mandatory, and Annexe 2 defines projects where an assessment may be required at the discretion of the planning authority. The committee considers that the provisions of Article 4 are essential for the proper functioning of the directive. Under existing legislation in the United Kingdom, it is already expected that any large development project of the type listed in Annexe 1 would normally be subject to inquiry procedures which took into account the likely environmental impacts.
Minor alterations to Annexe 1 may be desirable but in principle it is acceptable. None the less, there are potential difficulties of application if the present draft is closely followed. For instance, too rigid an adherence to a list of projects could lead to absurdity on some occasions. In the committee's opinion it will be necessary in many cases to take account not merely of the nature of the proposed development itself but also the context; that is, the characteristics of the local environment, the sensitivity of this environment to pollutants, and to other detrimental factors. The draft directive recognises that exemptions may sometimes be desirable for Annexe 1 projects but the procedure proposed is both cumbersome and onerous. It is envisaged that in every case there will need to be a separate reference to the Commission. The report recommends that an alternative procedure be sought.
The concept of thresholds also requires elucidation. Purely quantative thresholds—whether in terms of cost, labour requirements, size, or some other notion—are likely to lead to unsatisfactory and artificial divisions; that is, divisions between projects requiring assessment and those not requiring assessment. In the view of the committee, a partially subjective description is required, both for the circumstances in which Annexe 1 projects could be exempted from assessment and for the circumstances in which Annexe 2 projects should or should not be subjected to assessment. It will also be necessary at some stage—preferably within the text of the
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directive under revision—to define more precisely the nature and scope of the simplified form of assessment that is to be performed when it is appropriate.
Another issue which I personally feel sure will receive further notice in the United Kingdom is the inclusion of certain agricultural projects in Annexe 2. In this country, as your Lordships know very well, ordinarily agricultural enterprises are generally exempt from development control. For example, planning permission is not normally required for buildings below a certain size. In fact this topic was not followed up in detail by the committee but I do feel that it was worth noting that only four rather closely-defined types of project are included. They are land reform, cultivation of natural areas and abandoned land, water management—specifically, drainage, and irrigation—and intensive livestock rearing. In this country land reform is not a relevant issue at present. Otherwise, I note that all these are projects which fall within Annexe 2, for which an assessment is at the discretion of the relevant authority. Moreover, appropriate thresholds would presumably apply, involving such criteria as size, the sensitivity of the local environment, and its value in terms of conservation or landscape.
Given these three suppositions, I believe it is fair to ask, is it not true that the remaining types of project—that is to say, those other than land reform—are exactly those which are now arousing the greatest public concern in Britain and for which successive Governments have seen the need to set up mechanisms for enquiry, public consultation, and even some sort of control?
I now turn to Article 6 of Annexe 3 of the draft directive. These place the duty of preparation of the assessment on the developer, drawing on the assistance of the planning authority where necessary. In the opinion of the committee, the requirement to include descriptions of "reasonable alternatives for the site and design of the project" is justifiable and not unduly onerous. Differentiation between the respective roles of the developer and the planning authority presents a somewhat more knotty problem. On the one hand, if there is too close a relationship there will be suspicion of collusion. On the other hand, if there is inadequate co-operation and interchange of information, the system could fail to function effectively. The committee considers that the overriding aim must be to produce an assessment that is as complete as possible, but one not padded with superfluous information. Again, the approach taken by the draft directive is reasonable and does not raise grounds for concern. Article 6, Clause 2, is explicit. It states that details specified in Annexe 3 are required only, and I quote:
"to the extent that they are relevant to the stage of the planning procedure and to the specific characteristics of the project and of the environment likely to be affected, and to the extent that the developer can reasonably be expected to obtain them, taking into account existing knowledge and assessment methods".
Thus, in operation, the process will not lead to the collection of extraneous and superfluous data. Articles 7 and 8 provide for consultation between authorities and for public participation. The committee attaches importance to the notification of neighbouring states of possible trans-boundary effects. The committee would like to see the home planning authority less ambiguously charged with the duty of communicating

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directly with its opposite number in such cases. The present wording is simply that the authority "shall ensure that the information … is sent". Surely it is a simplification and a clarification to require that the authority "shall send" the information?
The committee found it difficult to decide whether in practice the procedures of the draft directive would increase or diminish opportunities for consultation and public participation, but on the whole the committee feels that it would be a step forward. The committee also feels that the relevant provisions are sufficiently flexible and would not require a notable change in present practices in the United Kingdom.
I have kept until last the main question that your Lordships might think I should have discussed first of all; that is, the question, to what extent is this directive acceptable in the United Kingdom? On the basis of evidence received, the committee understood that primary legislation would not be needed to implement the directive in its present form. Its various articles would be largely provided for under existing powers of the Town and Country Planning Act 1971 or the European Communities Act 1972. As I hope I have indicated, by my small selection—which is, of course, by no means all-inclusive—there are several minor changes which the committee considered desirable before the directive is in a position to be adopted.
Overall, your Lordships' committee supports the objectives of the directive and would welcome its implementation. The directive strikes the right balance in administrative terms; it encourages procedures that seem likely to facilitate and accelerate decision-making processes; it promotes consultation between developers and planning authorities; it specifies the transfer of information between authorities, including those in different states; it could be an important step in reducing negative controls and antipollution regulations; and it ought to achieve its aim in reducing distortions of competition within the Community for reasons of variation in the nature and stringency of development control in different member states.
The general acceptability of the draft directive and its broad compatibility with existing United Kingdom planning law owes a great deal to the constructive role played during the protracted drafting stage by the noble Lord, Lord Northfield, and I am glad we shall have the opportunity of hearing him this evening. I also look forward to hearing the noble Baroness, Lady White, the Principal Deputy Chairman of Committees, who took the chair of Sub-Committee G on an occasion when I was unable to do so. I am also looking forward to hearing the noble Lord, Lord Ashby, a past chairman of Sub-Committee G who has taken a long interest in its activities, and to other noble Lords who will be taking part in the debate. I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on environmental assessment of projects (11th Report, H.L. 69)—(The Earl of Cranbrook.)
6.12 p.m.
The Principal Deputy Chairman of Committees (Baroness White): My Lords, as a former chairman of Sub-Committee G, I wish at the outset warmly to thank
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the noble Earl, Lord Cranbrook, for the lucid way in which he opened the debate, on a subject which is both complex in itself and which has been worked on, re-worked on and studied for a very considerable time indeed. It is no coincidence perhaps that the first three speakers on the list of noble Lords to take part in the debate have all been in the chair of Sub-Committee G during this prolonged period of gestation which has resulted in our now having as a definitive publication the twenty-first draft of this particular directive.
I warmly echo the appreciation which is undoubtedly due to the noble Lord, Lord Northfield, because frankly the early stages of the discussion led one almost to despair, since one felt that the proposals—though extremely well-meaning and with the objective of which we entirely sympathise—were couched in terms which would have been so rigid and inflexible that it would have been very difficult indeed for us to have adopted them as they were first proposed.
But is it not only in the United Kingdom that concern has been expressed for the wide-ranging provisions of the draft directive. Other organisations, as noble Lords will see from studying the evidence printed in our report, in other countries and at European level have also made their contribution, in particular perhaps the European organisations representing private and public industries in the Community—UNICE and CEEP respectively—and the environmental interests having been represented by the European Environment Bureau. Your committee became more closely involved than we usually are in the consultations prior to the publication of the draft directive for the reasons on which I have touched.
We should also pay our tribute of appreciation to the Commission's staff because they have laboured with intense devotion and dedication, first trying to understand and subsequently trying to meet the problems brought forward by your own committee and by a very large number of interested organisations in the other member states. I know they have endeavoured where necessary to reword or recast various proposals in a way which would make the draft directive more easily acceptable and applicable to established methods of planning administration. We owe a good deal to Mr. Stuffman, the senior official primarily concerned, who worked with complete dedication and the most friendly co-operation with those who brought forward proposals for possible change.
At this point we might also mention that we have heard—I might say, with some dismay—that M. Carpentier, the Director General of the Environment and Consumer Protection Service in the Community, is likely to be transferred to another directorate, that of energy. We in the committee have from time to time had our occasional differences of view with M. Carpentier, but our ideals and objectives for the environment have always been the same as his and we have never for a moment doubted his great ability, flair and dedication. We would wish to record our thanks and warm appreciation of his co-operation, which we are sure will be extended to the new field of responsibility he is about to enter.
To revert to the draft directive itself, it might be helpful to put it in perspective. First, it is concerned directly with projects, not with the wider aspects of

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planning. In other words, it is about development control in particular, rather than with land-use in general. Some of our witnesses, in particular Mr. Cusell, chairman of the UNICE Environment Committee, suggested that this was to start at the wrong end and that it was important to establish the land-use of zoning pattern first; if that went wrong, the specific development project could be wrong from the start. This point has since been emphasised to me by some very experienced practitioners in this country. Of course, in a sense they are absolutely right; we have our own hierarchy of structure plans and local plans, many of them more sophisticated than some continental zoning procedures. Nevertheless, the difficulties of reconciling the practices of different member states at this level seem overwhelming and I believe the Commission had no option but to base its work on the narrower issue of specific public and private projects.
Another general point so far as the United Kingdom is concerned is that the draft directive is a natural next step in the incremental progress made in our planning legislation since 1947. We sometimes forget that it is only since the Town and Country Planning Act 1968 that the public has been entitled as of right to examine plans submitted with applications for development consent, an advance which has made all the difference to the work of statutory and voluntary bodies interested in these matters. Certain areas of control are being loosened by the present Government, but the public's "right to know" is now firmly recognised. I know, from my position as president of the Council for the Protection of Rural Wales, that a great deal of our work is done precisely in this field in examining plans put forward for planning consent.
To extend the area of information required for major developments likely to have especially significant environmental effects is a natural progression, already largely observed in this country in practice. There is therefore every reason to welcome this initiative taken at the Community level, provided that certain details can be adjusted. In the view of your committee, as the noble Earl indicated, such outstanding problems are now really very few. Most of the apprehensions stressed by witnesses we believe need not arise at all, given good sense in administration and on the part of the developers concerned.
I was interested to receive, as no doubt other noble Lords have received, the latest comment from the Royal Town Planning Institute, which represents many of the professionals in this field, who go on record that the proposals in the draft directive in its current form offer significant advantages, and that
"the major perceptions of difficulties are fallacious"
or,
"have little force".
They are particularly concerned that the directive should be introduced at the same time in all member states without long time-lags, so that the advantages of harmonisation should not be lost by leaving weak control in certain states, which could have the effect of attracting migrant industry. They point out that many environmental impact assessments have been carried out in normal practice in the United Kingdom, even if they have not been called by that term. Incidentally, I think the term does not appear in the
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directive itself. They assure us that our experties in this field is in demand overseas and that they themselves are much concerned with ensuring that the appropriate training to enable professional people to exercise this skill should be made fully available. In other words, they indicate that we have every interest in securing the acceptance of the directive by Her Majesty's Government, however reluctant they may appear to be.
It would not be improper to point out that among its members your Lordships' Committee had the benefit of a wide range of direct experience in these matters, in the environmental, industrial and legal fields. We certainly remained concerned about a few remaining problems, to which the noble Earl, Lord Cranbrook, drew attention, and which are set out in the summary of conclusions, but in general we came down firmly in support of the proposed directive.
We recognised that there are still some apprehensions, but we were not convinced, for example, that the problem of dealing with "alternatives" could not be overcome. We had a considerable argument about this point with some of the witnesses who raised the matter before us. I am sure that all of us would be dismayed if we reached a situation where we in this country adopted methods of litigation which have been all too frequent in the United States of America in particular. I see the noble Viscount, Lord Colville of Culross, smiling. Of course his profession would benefit enormously if we went down that path, but I feel that even his professional interests would not allow him to succumb to the suggestion that that would be a desirable path to follow.
There are other difficulties. The proposal which still stands in the draft directive that there should be a reference to the Commission of indidivual cases qualifying for the simplified form of assessment did not seem to us to make practical sense, as I think the noble Earl, Lord Cranbrook, indicated. Then there seemed to be some misunderstanding about subsequent monitoring of consent conditions. Of course if this is a matter of pollution control, health control or safety, there are statutory authorities other than the planning authorities which should be responsible for ensuring that appropriate conditions are observed. If it is a question of changing a planning consent after it has been given—having second thoughts, so to speak—that can raise very considerable difficulties under our own planning legislation. I am not quite sure that that particular matter has been adequately cleared up.
As the noble Earl, Lord Cranbrook, said, we made no firm recommendations about the proposed inclusion of certain limited agricultural or forestry developments. Possiby we should have embarked on this rather contentious field, but it seemed to us to open up a very wide area indeed. As our debates, and the very close votes, on the Wildlife and Countryside Bill indicated, the time might well be approaching when some further consideration of rural developments which can have significant landscape and wildlife effects will be unavoidable. But, equally, the closeness of the voting showed that opinions are still very much divided and that further thought about reasonable ways and means is needed.
On the other hand, I think that it would be unrealistic not to recognise that in other member states of the Community these problems are perhaps becoming

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even more acute than they are in the United Kingdom. I have here, for example, a report from Brussels, dated 2nd April of this year, in which it is pointed out that the very considerable assistance about to be provided for farm improvement schemes in the West of Ireland, to the tune of not far short of a quarter of a million units of account, can raise considerable areas of conflict between agricultural and environmental interests. This matter has been a point of discussion between the respective offices in Brussels itself, with the environment service arguing with the Directorate General for Agriculture that irreversible ecological damage might ensure if the proposed methods of "agricultural improvement"—I put that term in quotation marks—took place. The reply apparently from the Directorate General for Agriculture was that,
"there is an inevitable amount of environmental damage caused by every redevelopment scheme. A new ecological equilibrium will be established after a period".
That echoes some of the remarks that we have heard fairly recently in your Lordships' House, which so far as I was concerned carried little conviction.
Finally, I think we should make clear that we could not follow the proposals in particular of some of the local authority associations that a code of conduct was all that was needed and that a draft directive was inappropriate for the problems that we face. We could not assent to the proposition that a code of conduct is a valid substitute for the directive that we are discussing this evening. We are given to national self-congratulation in certain fields, of which our planning system is one. Even if we are as good as we believe we are—and we are surely far short of perfection as any observer can see for himself—there are still the problems in some other member states which might not yet be so advanced as we believe ourselves to be.
I am sure that I was not the only Member of the House to have been deeply distressed by two items which appeared recently in The Times newspaper. I am sure that a number of your Lordships will have seen them for yourselves. They are about the lamentable state of affairs in the newest adherent to the Community, Greece, To anyone brought up to revere the Hellenic contribution to our Western civilisation, it was quite horrifying to read the article on 21st March about the deplorable effects of uncontrolled industrial development and pollution in the neighbourhood of Eleusis, illustrated by a photograph depicting a range of industrial chimneys pouring out toxic or particulate waste on to some of the most precious remains of antiquity. That was followed on 13th April by the moving letter from Sir Steven Runciman on the devestation being caused to Greek landscape and townscape by what he calls, "the free-for-all development mania."
In such circumstances a code of conduct would be impotent. Surely we owe it to our common civilisation, not only in Greece, but in some other threatened areas, to support a Community initiative which we believe would not be unduly onerous for us, but which could appreciably strengthen the hands of those struggling to maintain even minimum standards of development control in areas which must surely be precious to us all and which are visited by ever increasing numbers of our own citizens. We ourselves have been learning the hard way. We should be all the more eager to
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share our own experience. We look to our own representatives on the Council of Ministers to take a constructive lead.
6.30 p.m.
Lord Ashby: My Lords, it is a great pleasure to begin by expressing gratitude to the noble Earl, Lord Cranbrook, not only for opening this debate but for the enormous amount of patient work which he has put into the preparation of the report which is before the House. It is, I think, the most important single directive to come from the environment and consumer service of the Commission, because it covers far more than just abatement of pollution. I should like to put on record a compliment to that service, under the leadership of M. Carpentier, because there has been an enormous and dramatic improvement in the quality of the directives which have come from his service since he took office.
For a long time your Lordships' committee was unhappy that directives were put in front of the committee and Governments without adequate preparation. This one, as your Lordships have heard, is the 21st version of the draft. For a long time, also, your Lordships' committee was worried that the amount of expertise consulted by the service was not as good as it should have been, or as thorough, but this time there was called a symposium of people who had actually taken part in planning, and this, again, has greatly improved the quality of this directive. As one witness said to the committee, this directive as it stands is now, as he called it,
"an olive branch in the direction of British pragmatism";
and this, I think, is an accurate and fair description of it.
Of course, as the noble Baroness has said, there is nothing new about environment assessments and projects in Britain; it is just that we have not given them the rather pejorative name that they have received in the United States, nor gone to the enormous lengths of detail in which they have been put there. One particular directive which I saw last year, for a transmission line to cross Utah, reached 2,500 pages. That is not what is in mind in the directive which is now before your Lordships.
It has a very long history, going back before 1947, even. In fact, in the year 1602 Queen Elizabeth I issued a request for an environmental assessment. She asked the sheriffs of Hertfordshire and Middlesex to inquire whether a proposed aquaduct:
"would injure the inhabitants of the two counties, and whether it would diminish the flow of any navigable river".
Now a great deal of this has been done. There have been 25 directives of one sort or another in connection with the oil industry in Scotland, and there is even a 170-page manual of guidance issued by the Department of the Environment called Research Report No. 13. So all witnesses agreed, I think, that there is need for environmental assessment; their differences were about the means to be used for getting it. I should like to deal briefly, if I may, with some of the objections, and the reasons why I hope your Lordships and the Government will not be prepared to accept them.
The first objection was one arising out of the fact that we already have environmental assessments.

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It was that it is not necessary for us, therefore, to adhere to a directive. As one of the witnesses said—it is Question 248 of the report:
"I am not convinced that the British people will welcome a directive if it is only to put the affairs of Europe right. Europe must learn from us".
The witness may not have intended this, but the impression it certainly gave to me was one of a parochial and complacent attitude, quite inconsistent with the present Government's view about co-operation with Europe and (I think I may say so as a new inhabitant of this perch in your Lordships' House) quite inconsistent with the people who sit on this Bench.
A second objection was that it was said by witnesses that any mandatory environmental assessment would delay decisions. If it does delay some decisions and they are wiser, that is no bad thing. But it is arguable as to whether this is even true. The experience of British Gas was that by taking an immense amount of trouble before putting in planning requests, the time for processing those requests was shortened greatly: indeed, in one particular instance, from an average of two years before they began their new technique to 21 months now.
A third objection was that environmental assessments would increase the costs. Of course they will. So also do all measures to preserve the amenity of the environment. But, again, when one looks at what few data there are about the amount of cost increase one sees that it is not very alarming. The land use consultants—and this is on page 30 of the report to your Lordships' House—estimated the costs of environmental assessments as being between 0.2 and 0.6 per cent. of the total development costs. In a table given by the Department of the Environment about costs of assessments in Scottish work, they range from £7,000 to £24,000. These are not very alarming figures considering the size and permanent impact of the projects concerned. I therefore hope that your Lordships will not attach much weight to objections of that kind, and I hope the Government will not attach any weight at all to them.
Then there were some other difficulties which were mentioned by the noble Earl in his opening speech and which are difficulties which need careful consideration. There is the mandatory list of projects at the end, and the need to refer to the Commission any requests for exemption. These rigidities would in fact make the whole thing very tiresome, and I am wondering whether it is possible to make an informal suggestion which Her Majesty's Government might wish to take into account and which I think would remove this need for rigidity. There would, I think, be a great deal more flexibility if, as is already laid down in Article 5, reports are sent back as to decisions taken and if there could then be a roving inspectorate of people from the member states who would go from one country to another, attend public inquiries, notice the techniques and—and this is the important thing—publish their results, so that there would gradually grow up a body of experience as to how to manage this extremely difficult operation of making environmental assessments which are not only wise but are acceptable to the public in a pluralistic democracy.
I now turn to what I think are really much more difficult and serious problems, and they are the ones
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which will have to be tackled if (and I hope it is "when" rather than "if") this directive is accepted by Her Majesty's Government. Several witnesses were apprehensive, and I think rightly so, about how this directive would be fitted into the planning laws. There seem to me to be two problems which will have to be settled, and the first is this. Precisely what is to be the competent authority, and how is it to act? The second question is: At what stage and how are the public to be involved in considerations of this kind?
One assumes—and there is no reason to doubt the assumption—that the competent authority should be the present planning authority, but if environmental assessments are to become an integral part of planning then there will have to be participation by bodies which one can describe as the statutory curators for the environment—the bodies responsible for administering the Public Health Acts and the Clean Air Act; the Alkali Inspectorate if it concerns the works which would be registered under that inspectorate; and, of course, the regional water authorities in England and Wales, the industrial pollution inspectorate in Scotland and the river purification boards there.
At present, as I understand it, planning authorities are not obliged to consult these statutory curators of the environment except in certain very restricted cases. It is not mandatory for them to do so. Circumstances can and do arise when a planning authority would like to give planning permission to some project which the Alkali Inspectorate or the regional water authority would have great apprehensions about. Circumstances also arise and have arisen when a planning authority wants to place more severe restrictions upon the operational project than would be needed by the regional water authorities, on the one hand, or the Alkali Inspectorate on the other. This would lead to difficulty if the developer and the planning authority employ private consultants who turn out to have given advice which cannot be accepted by the statutory curators of the environment who have to approve before the project (even if it has planning permission) can be allowed to proceed. In practice, there is a great deal of informal discussion. It would be an unwise developer who went forward without consultation with the Alkali Inspectorate or the regional water authority, but it sometimes happens. The point that I want to make, because it is relevant to the reaction to this directive, is that there is at present no obligation, no obligatory part in this procedure.
All this informality has worked reasonably well in our typically British pragmatic style, but if the environmental assessment becomes a statutory part of the planning process, these curators of the environment will have to be involved more officially and the risk then would be that they will become loaded with an enormous amount of bureaucratic work which they are unable to accept with their present small staffs. It is for those who have far more expertise than I to work out how this might be overcome; but if I might make an informal suggestion, it would be that in the preparation of an environmental assessment under the planning law that we have at present, the regional water authority should be approached at some stage by the developer and by the competent authority and be asked to give an informal opinion as to the consents it would allow for discharge into the river and as to

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the supplies of water that it would be able to provide for a new project. Similarly, if it is a works to be registered under the Alkali Inspectorate, they should be asked beforehand to give, again informally, a presumptive standard for the emissions and that these would be accepted by the Secretary of State if he had to call this in for inquiry as being adequate statements from experts that that amount of exploitation of the environment would not damage it. Therefore, I hope that the Government will spell out the precise ways in which the competent authority together with the statutory curators for the environment will handle these affairs.
Finally, I come to what is politically the most sensitive part of the operation and, in the minds of some of us, one of the most important parts. That is the degree of participation by the public. There are some witnesses who dislike having to put up with participation by the public at all. One piece of evidence on page 50 of the report reads:
"Article 8"—
that is the article requiring information to be given to the public and then that the public be consulted—
"must not add to existing United Kingdom provisions for public information and participation …".
Obviously, developers and planning authorities must be protected from irresponsible litigation, from such charges as that the environmental assessment has not been properly prepared or has omitted things; but it would be folly in the light of the measures that have been taken in other countries—and I think in particular of Sweden, the Netherlands and Canada—to adopt an obscurantist attitude towards involving the public in these decisions about the environment.
I am sure that I am pushing at an open door when I ask the Government to encourage planning authorities to take a constructive attitude towards the involvement of public interest groups, particularly in environmental issues. There is nothing new about this. It is 12 years since the Ministry of Housing and Local Government commissioned an inquiry by Skeffington which was published as People and Planning. One of his main recommendations was:
"Participation involves doing as well as talking and there will be full participation only when the public are able to take an active part throughout the plan-making process".
I believe that the Conservative Party Manifesto for 1959, talking about environmental issues raised over energy developments, said very much the same thing, that:
"the fullest possible participation in major new decisions will be arranged"
The trouble is that we have not yet got a proper procedure for involving the public in participation and we tend to run into the deplorable incidents that occur over such discussions as were had over Windscale and over some motorways. The difficulty about Article 8 of the Commission's directive is that it is not a good guide because it appears to bring in the public at much too late a stage. I should like to make the plea that we have the opportunity, in considering this directive and how it is acted upon, to have the courage in this country to try out some of the techniques which have been successfully tried out in Canada. To mention one example, there was the inquiry by
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Mr. Justice Berger for putting a pipeline down the Mackenzie River. At a very early stage, the Berger Commission consulted the public informally. They held hearings all the way up the Mackenzie River in school halls, Indian villages, hunting camps and outposts. The Canadian Broadcasting Commission published summaries of the hearings in French, English and in six Indian languages. The result of this, the lesson to be learned, the reason why I suggested it was a success, is that it was not so much the wisdom of the decision—that is something that only experts could judge—but that it was a remarkable revival of confidence in Canada in the methods of public inquiries and the way in which experts are used. It has done something to restore confidence in the planning process.
Of course, one has to be hardheaded about this. One of the most compelling things about the Berger Commission was that it did offer money to finance objectors but it put tough conditions on this. The objectors had to have a clearly ascertainable interest, they had to have an established record of concern in the subject and they had to put the case on paper. But the psychological result was very dramatic. I suggest that the disenchantment at present with the whole processes of representative democracy in matters of this kind can be more serious than a delay in the siting of a power station or a reservoir. There will be sceptics who will continue to say that there is nothing much to be gained by appealing to the public. If there are any such sceptics in the House now, I should recommend that they read the report of the chief alkali inspector for 1970. The British Steel Corporation ran into difficulties in one of its plants over the control of oxide fumes. It was not practicable to shut down the process. The Steel Corporation took space in the local newspaper and local broadcasting and explained to the public what the difficulty was and what they were doing about it. What was the response? I quote from the 1970 report:
"… no complaints at all were submitted and the works manager received shoals of letters thanking him for letting the public know what was happening".
This is surely an encouragement to work out methods of taking the public into one's confidence when environmental assessments are made. I hope that we may have an opportunity for a major examination of the parts that will be played by the developer, the local authority, the planning authority, the authorities that are curators for the environment, and the public themselves in these measures for protecting the environment.
6.50 p.m.
Lord Nugent of Guildford: My Lords, I feel honoured to follow the noble Lord, Lord Ashby, to whom I always listen with both pleasure and enlightenment. I should like to add my congratulations to my noble friend Lord Cranbrook on this report and his speech in introducing it which I thought was most masterly in its lucidity and analysis. I should also like to congratulate his clerk on the tremendous work that they did in getting the report out.
I have to make an apology for being a very poor attender at Sub-Committee G and my inability to make any contribution to the report, especially as I am going to make a suggestion which is not quite in line with the general burden of the report. I am very interested in

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this subject because in all these post-war years I have been a member of my county planning committee first and then, for nearly 20 years, chairman of the regional planning structure in the London and South-East Standing Conference of Planning Authorities and I am very familiar with the planning scene. I agree with the noble Baroness, Lady White, that our system of planning is good. It is rather complicated, but I think that it is a pretty effective one.
I welcome the idea of an environmental impact assessment—no one could do otherwise. As has already been said by other noble Lords, the process is not new to us. For major projects it has been employed for some time. But this draft directive will of course make the process mandatory and that is a very major step from the informal process which we now have. Of course, it would be an additional safeguard for the environment of Europe, and the noble Baroness, with her account of what is happening in Greece, makes one shudder. I very much sympathise with her. I am going to express an anxiety which I feel should be expressed in this debate about the cost and delay which could occur if and when this system is introduced. My withers have been slightly wrung in advance by the noble Lord, Lord Ashby, on this score, because I should like to see it working in practice before believing that it is going to work out at such small figures as he dramatically gave us.
The fact is that in Britain we are short of new development. But we are long on bureaucracy. This Government have succeeded in reducing the apparatus for planning by eliminating one tier, and we must make sure that this directive does not add another new one. I was not surprised to see that some anxiety was expressed in the evidence by the Department of the Environment and the CBI. I share that anxiety. New developments must be helped and not hampered. As has already been mentioned, the draft directive proposes two different classes of projects to be subject to the EIA in Annex I and Annex II. In my judgment, the projects in Annex I are of such magnitude and importance that they would normally be subject to an informal process of assessment of the impact on the environment, if for no other reason than in order to ensure that when they were presented to public opinion at a public inquiry—which would be virtually certain in such cases—they would have a reasonable prospect of being acceptable. I feel that if Annex I is made mandatory, we would not be adding seriously to costs, time, et cetera, and we would be ensuring that our precious environment is adequately safeguarded and, equally important—perhaps more so—that all other member states will conform in the same way.
However, Annex II projects are in my judgment another matter. They are of lesser magnitude and that is why the procedure for them is proposed differently. As has already been mentioned by the noble Baroness and other noble Lords, the agricultural section is a highly contentious field. The experience in this noble House on the Bill on wildlife illustrated that very clearly. There is an area here where we as a nation have to resolve our minds. There is no doubt of course that some agricultural developments injure the environment. Whether it is enough to say that they should not be proceeded with, is something we really have not worked out yet. I must say that
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before making any mandatory control in this field I should like to see us as a nation resolve our own minds on this matter and proceed with national legislation rather then bringing it in here by a side wind.
Accordingly, my advice would be that the introduction of this draft directive should be phased, as is tentatively suggested in paragraph 80 of the report. This would give all member states the opportunity, to start with, to introduce the new mandatory process of EIA for the Annex I schedule for the major schemes only. This phased introduction would enable both Government and local government to develop the scheme in the most economical and efficient way to deal with the very important technical points which the noble Lord, Lord Ashby, made in the relationship with these statutory authorities which are responsible for important parts of the environment and in various other ways. In any event, this is for projects which obviously require such treatment. If, after a sufficient trial period, experience proves that EIA can be operated without significant extra costs and time, then the next phase of Annex II, with or without amendment on the agricultural aspects, could be proposed for introduction.
Lord Northfield: My Lords, would the noble Lord allow me to interrupt? I wonder whether he is under a misapprehension. The draft directive makes it very clear that the projects listed in Annex II are to be subject to assessment in a discretionary way. It is only whenever their characteristics so require leaving discretion entirely in the hands of the competent authority. Secondly, it even leaves them with the discretion to have a simplified form of assessment after having decided whether to have them at all. There is nothing really mandatory about Annex II.
Lord Nugent of Guildford: I thank the noble Lord. My Lords, I have given careful thought to that. I am not under a misapprehension. I have studied it carefully and thought about it. I believe that it would be better not to introduce Annex II even in this qualified form at this stage. I believe it would be better to proceed with Annex I, which in my opinion makes an unanswerable case, and see how experience works out with that. There is quite a bit to learn for the planning authorities, and quite a bit to learn for all who are going to be concerned. If that works out successfully, then I would be in favour of bringing in Annex II projects as well, either with these qualifications or perhaps on a straight mandatory basis. I offer those thoughts which I hope may be helpful to my noble friend.
6.59 p.m.
Lord Llewelyn-Davies: My Lords, before I speak on this subject, I should declare my interest. I am a member of the Royal Town Planning Institute. As the head of a planning and consultants firm based in this country, I have been and expect to be in the future involved in environmental assessment. Indeed, as our firm is international, I am involved in work overseas as well as in this country and have even prepared environmental impact assessments in the United States. It is therefore as a professional that I have

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studied this report and will be speaking about it tonight.
I should like to start by expressing very warm admiration for the report of the Select Committee. I have read it with close attention and am most impressed by the depth to which the committee has been able to probe and by the logic of their arguments and recommendations. In general, I am in agreement with their conclusions and with the modifications they propose, as so clearly explained to us by the noble Earl, Lord Cranbrook. I hope the recommendation of the committee will be endorsed by your Lordships' House and, in due course, by the Government.
I was not originally very much in favour of the proposed directive. I started, as I believe many thoughtful people would, with the view that British planning procedure in its present form is adequate to deal with environmental issues, and that the last thing we want is to add to a possibly already over-elaborate planning framework. I believe that British planning has reached a point of development when we need to redefine its aims and to simplify the mechanisms by which it operates. Therefore, at first sight, the addition of a new set of requirements seems to be pointing in the wrong direction. But as I studied the evidence, the discussion and the conclusions of the committee my view changed and I now feel able to support the committee's conclusions. I should like to take a short series of points to illustrate why.
The first question must be: Do we wish, wherever possible, without disadvantage to ourselves, to avoid blocking proposals supported by other members of the Community? So long as we are members of the Community, the answer to this must obviously be "yes". Before we decide to reject a proposal we need to feel that there is a substantial disadvantage in accepting it. The fact that it would involve us in some administrative inconvenience or that we do not need it because we are managing perfectly well, thank you, is not necessarily a sufficient reason for rejection.
This leads to the next question: Does the acceptance of the directive raise real difficulties for us? The main difficulties that have been foreseen seem to me to be three. There will be additional costs, there could be worse delay in starting projects and there might be the risk of litigation in the courts, as occurs so frequently in the United States. These risks are carefully discussed and eventually discounted in the committee's conclusions, and have been further dealt with very effectively by the noble Baroness, Lady White, and the noble Lord, Lord Ashby. Nothing so far said tonight in the debate has changed my view, and so I accept that the disadvantages to us in accepting the directive are too insubstantial to warrant its rejection.
But there are more positive reasons for going along with the committee's conclusions, and one of them is related to my own concerns and interests. It arises from the need to review and revise the role of planning in Britain today. British planning is under very heavy attack from many sides. Developers tell us that it blocks their efforts to meet the public's need. Preservationists from the opposite side denounce it for condoning greedy commercial development at the expense of traditional architecture and urban quality. Sociologists claim that it is destructive of family and traditional
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social groupings. Hardly anyone has a good word to say for its achievements. I would love to enter into a vigorous defence, for most of this criticism is nonsense; but this is not the occasion. And planning is not blameless: it has brought some of this criticism on itself by a woolly, if well-meaning, set of aims and a belief that by manipulating land-use it can achieve economic and social purposes that are not in fact within its powers.
I believe that land-use and development control are an absolutely vital public need. Five years' recent work in the city of Houston, Texas—a city which glories in having no restraints whatever on the private use of land, and where land is to be used in accordance with the phrase "the highest and best use", which means that which leads to the maximum return to the land-owner irrespective of the externalised costs the community or the blight on neighbouring sites—has fortified this belief by direct experience.
But if we are to be effective in the future we must concentrate our minds on the real role of planning and development control in our society and improve our skills in dealing with those matters which are truly within its powers. Of these, I believe that environmental issues are one of the most important, and they grow in importance every day. The advance of science and technology is making these issues more vital and more difficult to resolve as every day goes by. There are real and serious difficulties in balancing the pros and cons of environmentally significant developments. The nation's need for cheaper energy may conflict, and does conflict more often than not, with environmental quality. I believe these are conflicts which are not suited for resolution in the courts by judges, as they are in the United States, due to the lack of any systematic systems or enforced systems of development control or planning. But I do think that my profession and the practice of planning have not concentrated adequately in Britain on these questions, but have wasted much human effort and public money on preparing the sort of plans which can never be used. I think that a switch in emphasis to environmental concerns is one—it is only one but it is the one which concerns us tonight—of several changes in direction which would actually help to restore British planning to a more useful and needed role, and in due course help it to regain public esteem.
This problem is not entirely new. In the United States I heard that when Moses approached the Red Sea, pursued hotly by Pharaoh and his forces, he appealed, as was his wont, for help to the Diety and after an appropriate pause received the following message:
"Moses, I have both good news and bad news for you. The good news is that I can dam up the Red Sea and give you a dry-shod passage across. The bad news is that before I can start the project you will of course have to file an environmental impact assessment".
My Lords, I believe there are vital and positive reasons for your Lordships' House to support the conclusions of the Select Committee.
7.7 p.m.
Lord Craigton: My Lords, I too thank my noble friend Lord Cranbrook for his most excellent introduction and I should like to add my thanks to those

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expressed by the noble Baroness, Lady White, and the noble Lord, Lord Ashby, to M. Carpentier. When M. Carpentier had been in office for a very short while I went to see him and suggested that we might form in Europe the equivalent of CoEnCo in this country. He warmly received the suggestion and gave not only moral but physical support. He gave some money, with the result that the EEB was formed and that is one of the organisations which gave evidence to Select Committee G. So I am speaking tonight very strongly on their behalf and also on behalf of the CPRE and other members of CoEnCo who are concerned in this matter.
I, too, of course welcome the report. I am glad to see that the Select Committee has broadly endorsed the proposals of the EEC draft directive. We support the recommendation that major industrial developers should give detailed information on a range of possible environmental consequences should the project go ahead as planned, and that these consequences should include a list of ecological factors and also possible alternative sites.
We support the suggestion that the information necessary for assessment should be available for public comment, which would probably mean a public inquiry; and I do welcome and support the wise words of the noble Lord, Lord Ashby, concerning the tremendous advantages of a correct approach or presentation to the public. The EEB tell me that the procedures set out in the draft directive are needed by most EEC member states. Furthermore, we all feel that the environmental assessment of major industrial projects is particularly important, given the omens described in the World Conservation Strategy, Global 2000 and the Brandt Report.
My noble friend Lord Bellwin knows that I am a great admirer of the DoE, but I must record that, in written and oral evidence to the Select Committee, the EEB contested sharply the DoE's strictures about the draft directive. The DoE objected to the listing of project types being subject to EIA. The DoE said that it would be impossible to define precisely the technical thresholds and criteria with which individual assessments must comply. Thirdly, they said that prescribing EIA procedures in law would invite "nuisance" litigation by objectors wishing to slow down projects. To counter-balance, the EEB proposed ways in which each of these difficulties could be overcome, and I am glad to record that the Select Committee upheld their views on each of these three points.
However, there are three more points about which we are concerned. First, we consider that there should be provision within the draft directive for consultation with the public, in advance of the preparation of an assessment. There is some British precedent for this; for example, Leicestershire County Council's wide consultations on the issues which they ought to have in mind in deciding their attitude to the Vale of Belvoir coalmine project last year.
Secondly, we do not share the Select Committee's confidence that "alternatives" to the project in question will be able to be canvassed effectively under the early stages of the EIA procedure. We feel that the "competent authority" may not be expert enough to detect what relevant information is not being made available. There is no substitute, in the EEB's view,
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for vigorous examinations of alternatives at a later public inquiry—realising, of course, the cost—perhaps by third parties using rival expert witnesses and full cross-examination. We think—and I hope I am wrong—that the Select Committee has been over-optimistic in accepting the draft directive's expectations as to what the early stages of the assessment procedure might achieve.
Lastly, various agricultural projects may be included in Annex 2. This is, of course, most welcome as it recognises formally that agricultural developments can be environmentally damaging. However, the implications of this recognition for the United Kingdom are considerable. So I am concerned—and, after the Wildlife and Countryside Bill, with some justification—about the extent and effect of any pressure brought by the MAAF in this matter.
7.13 p.m.
Lord Sandford: My Lords, at this stage of the debate, I have only two points that I want to make. I certainly do not want to say anything of a comprehensive nature about the report, except to express my gratitude to our chairman for his conduct of our scrutiny and to say what a pleasure it was to serve under him.
The first point that I want to make is about the process of the scrutiny itself in this case. The noble Lord, Lord Ashby, said—I think rightly—that it is probably the most important proposal to come before Sub-Committee G, and I shall go on to say that think it is probably the most sustained piece of scrutiny that any sub-committee of the Select Committee has undertaken on any proposal from the Commission. Our terms of reference allow us to consider any proposal coming from the Commission, and we stretched the terms of reference in this case to consider the proposal before it had actually emerged into the light of day, and before it was a formal proposal at all. I think that we have been considering this matter for something like four years—about twice the time that is actually recorded formally in the report.
I recall that we first noticed that something was going on back in 1977. I had occasion to be in Washington myself in that year, where I was able to confirm our suspicions that the drafts which we were looking at then were much too close to a crib from the Environmental Protection Agency, and that we were in serious danger of suffering from all the defects which the noble Lord, Lord Llewelyn-Davies, has enumerated before us. By 1979, we were on the tenth draft. We were instrumental in persuading the Commission to hold a symposium in Brussels, based on a later draft. The consultations early in 1980 were on the eighteenth draft and this report is based on the twenty-first. That sounds very laborious and so it has been, I want to add my tribute to the skill and patience of the Environment Service, M. Carpentier and Mr. Stuffman in all these deliberations.
On the other hand, I think that the effect of this sustained servitude has been beneficial and I should like to instance one or two examples of that effect. One of the effects—not, perhaps, the direct causal effect—is that during that process the presidents of the various national planning institutes within the Community decided to confer together, and to form a forum to which the Environment Service can refer

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matters on which it wants their professional advice. That is surely a substantial gain. We have been able, by taking note of this proposal at such an early stage, to effect adjustments in the approach of the Environment Service to this problem to a degree which has not been possible in other cases, and to prevent them inflicting on the Community much too heavy and undiluted a dose of Environmental Protection Agency philosophy, which would have been very bad for us if it had occurred.
Then there is the change in professional attitudes and understandings. I do not really need to elaborate on this, because we have had it all from the noble Lord, Lord Llewelyn-Davies, who is himself a professional planner. In addition to what he has described, we have witnessed—though not, alas!, among all our witnesses—a new understanding of the different state of affairs prevailing in the art of planning across the 10 members of the Community. We have witnessed a welcome change in the understanding of the beneficial changes that have been made in succeeding stages of the drafts that have come before us, and more people are now prepared to give credit to the Environment Service for the changes which they have made since picking up these ideas from the United States.
Fourthly, we have seen a growing understanding of the value to the United Kingdom of some equivalence in environmental standards, from the point of view of our ability to compete on fair terms with other industrial plants elsewhere in the Community. All this has required time and it has allowed time for our professional planners to see that there are considerable advantages, from their point of view, in other countries and other members of this Community adopting the standards involved in this directive. In fact, some of my more cynical friends have welcomed the directive for the inducement that it provides to our planners to go and work somewhere else. In short, it has all been a useful lesson in taking our time over this process of scrutiny and getting into the act at an early stage.
I should now like to turn to the only other point on which I want to dwell. It has been raised by a number of noble Lords already; namely, the implications in this directive for agriculture and forestry in the United Kingdom. Noble Lords, and other readers of this report, will see that we received extensive and valuable evidence from a very wide range of industry on this directive. We received very little—in fact, none—from either the agricultural or the forestry industries, and a mere three paragraphs from the Country Landowners' Association bearing on the effects of the directive on the countryside. The CLA's third paragraph ended with the words:
"We are concerned that an EEC Directive could impose new constraints and could upset present arrangements which are now working well".
That was Mr. de Salis in September, 1980.
As the noble Lord, Lord Nugent of Guildford, said, such a view could scarcely be sustained today after the revelations arising from our four months on the Wildlife and Countryside Bill. The brief which some of us have received today from the Country Landowners' Association does not now attempt to make such a bland and broad claim. Mr. Williamson, who is its
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author, refers instead to new arrangements now at last established to deal with the very serious problem on Exmoor, which is just one example of the impact of agriculture on a sensitive piece of countryside. I am among those who hope that those arrangements will work successfully.
Mr. Williamson of the Country Landowners' Association goes on to call in aid paragraph 87 of the Countryside Review Committee report, entitled Conservation in the Countryside and dated 1979, in which that committee rejects the imposition of development control on agriculture and forestry in the United Kingdom. I must say that I am against imposing United Kingdom development control on agriculture and forestry in this country, and I am glad that development of that sort is at present exempted by the general development order. But Mr. Williamson, in giving us that quotation in his brief, does not notice, or if he does notice he chooses not to quote, the preceding paragraph 86, in which the view of the Countryside Review Committee is that it is operations such as the intensification of agriculture, the afforestation of hare land and the drainage of wetlands, for which planning permission is not required, which are causing more impact on the landscape and on wildlife than petrochemical plants and mineral extraction, which do require planning permission. The next two pages after that paragraph are concerned with a search for more appropriate ways of assessing and mitigating the impact of processes such as those.
We have moved on since 1979 and, thanks to the initiative of Her Majesty's Government in the Countryside Bill, some progress is now being made in this field. For instance, there is now a general acceptance that we must have a statutory system of advance notification of certain agricultural improvement, afforestation and land-drainage proposals in certain sensitive areas such as SSSIs, national parks and so on. There is widespread support and acceptance from the Government of the principle that their Agricultural Development Advisory Service should have a wider role and embrace considerations to do with the conservation of wildlife and its habitats, with the conservation of the landscape and with public access to it. I personally was glad of just enough support in this House—two votes—for an amendment which would put the application of agricultural grants in certain areas in some circumstances in a context wider than that of mere food production.
So there are three strands of development policy which are favourable in the area that we require. My belief is that if these approaches are carried forward in the United Kingdom wholeheartedly, briskly and with vigour and imagination, as the noble Lord, Lord Nugent of Guildford, was urging they should be, it will prove possible for the United Kingdom Government to demonstrate to the Commission under Article 5 of this directive that in the United Kingdom, agricultural developments, land drainage developments, forestry developments—all the items contained in paragraph 1 of Annex 2—can continue to be given planning permission under the general development order because we shall have devised positive, dynamic and watertight arrangements of our own for complying

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with Article 4—the article which calls for proper environmental assessment to be undertaken on such projects.
On the other hand, it is quite clear to me that unless we find effective means of our own for assessing and mitigating, where necessary, the impact of agricultural technology, land drainage, afforestation and intensive livestock production on the landscape and on wildlife and its habitats, particularly in our sensitive areas, then United Kingdom agriculture and forestry will have to come to terms not only with the full rigours of an EEC directive on environmental impact assessment but also with United Kingdom planning legislation and control. I trust that a view of this prospect will serve to concentrate the minds of the Country Landowners' Association and the National Farmers' Union before it is too late.
7.26 p.m.
Viscount Colville of Culross: My Lords, I apologise for not having put down my name on the list. I also have to apologise, as a fairly recently co-opted member of the sub-committee, for the fact that I was able to put in, I am afraid, very few attendances because of various preoccupations at home and overseas. Nevertheless, it is a subject with which I have had some professional concern in the past, and I suppose I ought to declare an interest in that it is possible that I may have a professional concern with it in the future.
There are two points which I should like to draw to your Lordships' attention. First, when I saw the draft directive I was a little worried about the provisions in Article 7, which seem to indicate that the competent authority, which I take to be the local planning authority, would only start to consult the various bodies concerned in environmental matters at a stage after the planning application had been put in. I am bound to say that it seemed to me at first instance that, if that was the moment that they first started the consultation, there was a good deal to be said for the point of view that the directive would lead to massive delays.
However, upon reflection I do not think that this is really going to be a very formidable problem. Having been involved in two major exercises which involved exactly this sort of preparation, I do not believe that any developer with a grain of sense would leave it to the stage of the planning application before he approached all the people that the local planning authority would consider to be relevant for the purposes of Article 7. Consequently, all the necessary consultation would in practice have been done a long time before that stage and, indeed would have formed part of the preparation for the formulation of the planning application itself. Therefore the requirement to consult would be no more onerous in practice than that which applies under the general development order, anyway, for various consultations of a formal nature to take place and for formal representations to be made.
The second point to which I have attempted to apply my mind is the one which the noble Baroness, as it were, directed at me: the question of legal challenge. I do not think that she need worry too much about lawyers wishing to acquire to themselves new avenues of approach to the courts or extra methods of earning
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their livelihood. Projects of the size that we are talking about here are quite sufficient to engage the occupation of learned counsel for a perfectly satisfactory period of time without anybody wishing to extend it. On the contrary, I believe that the legal profession may on occasion be actually capable of reducing the time that is taken if it is consulted early enough.
I think that the problem which has been exercising the department of my noble friend Lord Bellwin is the way in which people might make use of Article 6 and Annex 3 of the draft directive so as either to spin out or to have adjournments of a public inquiry, or possibly, in addition, to take the matter up on appeal on the ground that the proper procedures as laid down by some subordinate legislation which we are anticipating have not been followed through. I would only very tentatively suggest this to my noble friend Lord Bellwin. Far be it from me to enter into all the technicalities, but I would make this suggestion: the provisions which one finds in Article 6(2) are such that, whatever seem to be the specific characteristics of the project and the environment likely to be affected, the extent to which the developer can reasonably be expected to get information, taking into account existing knowledge and assessment methods, is something which has to be decided by somebody at some time. I would suggest that there is no necessity to leave this all that long. I would tentatively put it to your Lordships that it would hardly be very harmful if, at some stage in the process leading up to the planning application, the local planning authority were to say, "Yes, in our opinion the ground has now been covered and you have dealt with the matters that are required under Article 6(2) and Annex 3 for the purposes of this application".
Alternatively, if one wanted to postone the thing a little further, if the matter was one that was going to be called in by the Department of the Environment, I suppose it would be possible to reserve powers to the Secretary of State whereby he could say that he was satisfied on the material before him at the time when he wrote the call-in letter that the necessary material had been collected for the purposes of Article 6(2). I think that would put paid to two lines of legal challenge. First, it would not be possible for objectors at the public inquiry to say that the full process of the collection of information and the examination of the issues that was statutorily required as a result of the directive had not been complied with, and therefore the inquiry must be adjourned until it was, because the letter, or the certificate, or whatever it may be, of the local planning authority or of the Secretary of State saying that he was satisfied, would be enough to fulfil the requirements of the directive.
Secondly, I should think it would make it quite impossible for anybody to appeal the matter under the legal appeal provisions of the Town and Country Planning Act, because if that certificate or letter had been issued, then for the purposes of the subordinate instrument that brings this matter into the scope of the planning acts, the procedure would have been fulfilled and that would have been an end of it.
My noble friend Lord Craigton said—he was quite right—that if that was done at that stage it might emerge at a later stage in the course of the inquiry that there was some other environmental issue which needed to

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be examined. So be it. That is perfectly possible. There is no reason whatsoever why it should not be examined. If it emerges as being relevant at a later stage the developer will, at his peril, refuse to go into it or to take the necessary steps to satisfy the inspector that the matter has been properly considered and taken into account. But that need not necessarily mean that one has to attack the perfection of the initial analysis undertaken by the planning authority or by the Secretary of State, of what they thought, at the relevant stage, were the necessary matters that had to be considered. So one gets the best of both worlds: one could have, as it were, an unchallengeable system, which I think the subordinate legislation would be able to lay down, but at the same time there would be sufficient flexibility to take into account some issue—no doubt a very important issue—which arose later and required proper examination. It would get that proper examination and no harm would be done. In those circumstances, I cannot see where the scope for major legal challenges leading to delay and to appeals will come.
The only last thing that I would say to my noble friend Lord Bellwin is that if there is any doubt about the final stage, which is the appeal to the High Court about procedures, I think the moment is coming anyway when the department will have to say—probably in legislation—who has the right to take these matters to the High Court. At the moment it is an extremely dubious point and there are various judgments and authorities which are not wholly consistent. The probability is that it is the applicant, the local planning authority and anybody upon whose land the development is going to take place. The latter can be extremely difficult in the case of coal mining, since one may go underneath a number of people's land; but merely to say that objectors are those who can take matters on appeal to the High Court, I think, is stretching the existing law a good deal further than it goes.
If there is a real fear that completely outside objectors, who are allowed by the inspector's discretion to take part in the inquiry, are in fact those who it is feared will take the matter to the High Court on appeal, that is a general matter which applies not only to this directive and to the affairs which this debate is dealing with, but in general terms to all planning matters; it is something that, if it is a fear of the Department of the Environment, ought to be dealt with. In the circumstances, I am very happy to be able to support the conclusions of the committee, and I particularly draw attention to the wise words of paragraph 83, which I have been attempting to expand and spell out.
7.36 p.m.
Lord Northfield: My Lords, as in a previous debate on these subjects I begin by declaring an interest as a part-time adviser to the Commission; indeed, I have been so close to the drafting of this particular directive, for so long, that I am not quite sure how equipped I am now to debate it. Noble Lords have said how many drafts it has been through and I am almost at the stage where, in No. 21, I am not sure whether I can still see the wood for the trees. However that may be, I should like to say first of all that I was glad that my noble friend Lady White and other noble Lords have paid a particular tribute to the work of
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Monsieur Michel Carpentier, the Director-General.
It is sad that in debating this very important directive tonight we are in fact saying goodbye to him. And it is ironic that having built up the service of the environment, and having been given a personal upgrading to the rank of Director-General, and having now had that crowned in recent days by having the service made into a full Directorate-General for the first time, the Commissioners have chosen this moment to move him to energy. I suppose it happens to all of us in these jobs that at the height of our achievement we are moved on. But I feel we should say that we know how hard he worked in this field, with wide knowledge, with immense dedication, with a great capacity for hard work, with qualities of balance and flexibility that are a delight to see in an international civil servant. It has been a privilege to work with a man who has these immense qualities and is also an Anglophile on a huge scale. I think he appreciates more than any international civil servant I have ever met the United Kingdom pragmatic approach to these problems, and it ought to warm the hearts of your Lordships when I say that he is a fervent reader of every one of your Lordships' debates on these matters concerning draft directives on the environment, and he goes out of his way to pay tribute to the work done by your Lordships' committee.
The issue we are debating tonight will come to a head during the period of the United Kingdom's presidency of the Community, beginning, I think, in the latter part of this year. Therefore I think it is important to find out how the Government now stand. So I want to base my remarks on paragraph 30 of the committee's report in which the committee indicates the questions which were worrying Her Majesty's Government.
The first issue is whether the system proposed in this draft directive would be more effective—this is what the Government said to the committee, I think—than present arrangements in the United Kingdom. Here we are up against the need to understand the basic features of this draft. Indeed the question is almost inappropriate. This is not a statutory procedure being laid down by directive to change in detail our British approach to planning applications. As the committee goes out of its way to say on two or three occasions—I quote from paragraph 1 and others—the directive is no more than an attempt to introduce a common procedural framework. It is not a set of detailed ways in which every planning application has to be handled. The discretions are enormous. The flexibility is apparent in section after section. Indeed, the noble Lord, Lord Ashby, quoted the statement of one of the most important witnesses that the whole draft can be characterised as an olive branch towards British pragmatism.
So it is a wrong question to ask whether it would be more effective than what we do now, because in fact the procedure in the United Kingdom will be hardly altered at all by the draft directive. After all, one might think—and this is perhaps the difference between draft 21 and all the others that went before it—that the draft directive itself had been built on United Kingdom experience. The developer has to give as much detail as possible about the environmental effects in his initial application. I agree with the noble

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Viscount, Lord Colville, that there is no reason at all why that should exclude his consultation with people affected in making that initial assessment. On receiving it the competent authority has to give the application proper publicity and go in for proper consultation. There has to be a decision by the competent authority in the light of the consultation. And after all this is over and the decision is announced there have to be subsequent checks on the effects on the environment of the project, to see whether public authorities need to do more to protect the environment from its effects.
So nowhere in this document are the words "environment impact assessment" ever used. The whole approach is to indicate that the effect is to encourage a pragmatic approach to checking on the effects on the environment by a logical, flexible, largely discretionary system of planning control that fully accords with what we have in the United Kingdom. The Commission has run away as hard as it can from those early drafts which indicated perhaps that we were going too near in this draft to something modelled on the United States' experience. British terms abound, even "planning permission" which had perhaps hardly been known in some member states. This is another olive branch towards us. British pragmatism shines out in words like" discretion "to" competent authority". It all has a familiar ring about it, and I cannot understand why anyone should at this stage think that one needs to pretend that this involves great alterations in our system.
The noble Lord, Lord Llewelyn-Davies, who is so distinguished in this field, made the key remark when he said that when a system like this is needed and wanted by other member states, if it involves pretty little disturbance for us why in heaven's name should we object to it? I believe that is the key question to ask.
Secondly, I think it is quite impossible to have a recommendation as opposed to a directive. This would be evaded in some countries and would not get the results that the directive requires. Indeed I quote, if I may, from paragraph 81, to sum up what I have to say on this first issue. The committee say:
"… the committee believe that the present draft directive strikes the right kind of balance: it provides a framework of common administrative practices which will allow member states with effective planning controls to continue with their system, possibly with some modifications of detail, while containing enough detail to ensure that the intention of the draft cannot be evaded".
Of course, that is the whole purpose of the flexibility and pragmatism that we have managed to get into the draft at this stage.
In those circumstances, I think the alterations to United Kingdom law will be minimal, if needed at all, and mainly will be needed in terms of secondary and not primary legislation, and probably mainly by regulations. Our system is fully compatible with this framework. I wonder whether, when one reads the work and the views of some of the witnesses who came before the committee, they were in fact still talking about the earlier drafts. In some cases that is perfectly evidently the case; they had not adapted their thinking and their reaction to the early drafts, which had not been so flexible and pragmatic, and there are contradictions in some of their remarks.
Despite that overall approval of the principle of the draft directive, I realise there can be detailed objections to parts of the approach. Article 4 is
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the main difficulty, I know, where the system of exemption for small projects is set out. The committee, I hope, has made the right suggestion, that it would be quite intolerable to go to the Commission on every case and say, "This one is so small. Can we let it off?" That would provide interminable delay and bureaucracy. Much better, as the committee have suggested, that the circumstances for exemption should be embodied in legislation and then reported to the Commission, so that the Commission can simply be satisfied that a proper system of exemption exists and that projects are not being exempted in some backward countries, if I may use that phrase without offence, by administrative discretion which borders on the improper. So, surely, the fact that we are on Draft 21 shows that all details of this kind are highly negotiable. I hope the Government are not going to start saying that because details of this kind are still unacceptable they are going to oppose the whole principle.
Secondly, there is the objection about major land uses being in Annex 2. I must repeat what I said to the noble Lord, Lord Nugent, namely, that this is discretionary, and even then the competent authority can indicate that only a simplified form of assessment is needed for such projects. So I think we have hardly anything to fear in Annex 2, given that we would in our planning system call many of the projects in for consultation, public inquiry and so on, before giving final planning permission.
I come now to the Government's second question, and I wrap it up with the third one, in paragraph 30 of the report. They ask: Will this system run the risk of increasing delays and costs of planning applications, and have other economic disadvantages? First, we must recognise that this has a very restricted application. These are major projects, as the noble Viscount said, and most of them anyway—field day for lawyers as they do provide—would be subject to the kind of procedure in the draft directive. There are 35 kinds of projects in Annex 1. I draw the attention of the noble Lord, Lord Bellwin, to the fact that one eminent witness estimated that the number of planning applications which would actually be involved as a result of Annex 1 was only in double figures, certainly not in three figures. My goodness! that shows how restricted in effect the system will be in catching large projects.
Let us now look at the question whether any evidence of extra delay would be caused by this system. Paragraphs 34 and 35 of the committee's report set out some of the evidence this way and that way. But in paragraph 53 the committee reaches a firm conclusion when it says:
"… a structured process … would speed up and rationalize, rather than delay, the decision-making process".
That after carefully hearing all kinds of witnesses.
Secondly, if there is delay, it might be at the consultation stage, but I go along with the noble Lord, Lord Ashby, in saying that we still have to improve our own system of consultation in this country, and I do not think that it is necessarily the case that a little extra time spent on some of the consultation would be a bad thing. Indeed, as witnesses suggested, it will save later delays when people begin challenging because

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there has been inadequate first consultation. I quote from Question 95 where it was said that:
"In terms of time British Gas feel they have saved several months on each planning application"
by going through the kind of process that is set out in this draft directive. That is a very good example. After all, the authorities have great discretion as regards the details of the way in which this consultation is to be carried out. So there are no overall rules that should lead to enormous disadvantages.
Secondly, could there be litigation? The noble Viscount, Lord Colville, has said a good deal about that. I should like to add just one point; that if anyone reads this directive, he will see that throughout it gives discretion wherever possible that can be laid down to the competent authority, so that no one can then challenge it in the courts. I give one example where, in tact, there was a slip up; the draft still says that the planning application shall be sent to relevant competent authorities for comment. I could well foresee a case in which people go to court to say that, this and that relevant authority was not consulted. Therefore, one of the minor amendments that is still needed to the draft is to say that those who shall be asked to comment shall be the ones who the competent authority believes to be relevant. I see the noble Viscount nodding his head. But there are other ways in which this can be tightened up to prevent unnecessary litigation. So far as possible, steps have been taken to prevent it.
I want to make two final points. Will there be extra costs? This is the other part of the Government's second question. The noble Lord, Lord Ashby, or perhaps it was another noble Lord, quoted the figure given by eminent consultants that in their experience it it between 0·2 per cent. and 0·6 per cent. of normal costs of a big development project. Here again I quote the Gas Board. Although they feared the detailed drafting of this directive, and I think were mistaken in thinking about earlier drafts, nevertheless it is revealed in part of this report that the Gas Board say that they have saved £30 million over 10 years, partly as a result of quicker authorisation of planning applications, after following the kind of open procedures set out in this document. Therefore, there is a good deal of evidence of' saving of time and of costs in carrying out the draft directive's intentions.
Finally, there is a cost advantage to the United Kingdom in having this legislation. It is the case that our planning legislation is better than that of some other members of the Community, and so in some countries our competitors do not have to go through so many costs and so many hoops in order to get planning permission. This is a direct cost disadvantage for some United Kingdom industries. So, as the report says, this draft directive would help to reduce distortions of competition in Europe that are working to the disadvantage of the United Kingdom at the moment.
I come to my final remarks. I hope, from the way in which this directive has proceeded from draft to draft with immense flexibility, gaining momentum of pragmatism inside its boundaries, that we have reached the stage where we can ask the Government to move from their opposition in principle that was voiced to
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the committee in its early stages. We have reached the point—and I say this openly to the noble Lord, Lord Bellwin—where surely this is the sort of framework directive for which they are always asking. Time and again from that Box, Ministers have asked the Community to stop making detailed legislation, but to give us a framework within which we can work. After all, this is a framework of common procedure which is fully compatible with the British system.
Therefore, I hope that, as in every sense the committee has supported the Commission in finding their case proved, and has shown that it is moving flexibly forward in matters like this, the Government will say that, given the resolution of detailed difficulties that still remain—and they are only details—in principle they will no longer oppose this draft directive.
7.56 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, I should like to begin by thanking my noble friend Lord Cranbrook for initiating this debate and straight away, as others have done, to say that we are indeed grateful to the Select Committee for producing this report, and for the opportunity that it gives your Lordships' House to discuss this very important subject.
Before I go any further, I should like to add the Government's own endorsement of the point which was made initially by the noble Baroness, Lady White, but which was touched upon by just about all other speakers, regarding the appreciation to M. Carpentier, who, we acknowledge, and we should like to put on record, brought an enthusiasm and personal dedication to the Community's environment policies which I submit is recognised throughout the Community. Of course, we wish him well in his new post in the Energy Directorate. On a personal note, I entirely took the point made by the noble Lord, Lord Northfield, that that is exactly the time when someone is moved on—just when he is at his very peak.
This subject is important because the subject of environmental assessment has attracted worldwide attention and interest over the last decade. It has been discussed and studied by practically every international organisation one could care to name. A number of countries have adopted systems of environmental assessment, not least one which some may call the birthplace of the idea, the United States.
It is also important because the draft directive, the subject of the report, is a significant element in the European Community's environment programme. This marks the first step in the Community as a whole in the direction of trying to prevent environmental damage rather than to cure or alleviate it. It is an ambitious step and one with important consequences for the future direction of environment policies in the Community. I am sure that everyone who has spoken and everyone in your Lordships' House will agree that we must be sure that it is sound.
We must, therefore, approach this proposed directive with caution and examine its implications carefully. I congratulate the Select Committee on the amount of work that it has put into examining the proposal. Anyone who has listened at all this evening could not fail to have been impressed by the great knowledge and

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one would say dedication of all those who have been involved with this. I unhesitatingly express my admiration for what they have done.
The committee has followed the proposal closely for several years through its unusually long gestation. The committee has collected evidence from a wide range of sources. It has analysed it in the painstaking manner which has deservedly earned the reports of the Sub-committee on Environmental Matters the high standing which it holds in this country and in the Community.
However, I regret that I cannot share all the committee's conclusions; not because the committee has, for the first time, disagreed with the Government's views on this draft directive. There has to be a first time for everything, and it is the committee's duty to tell the House when it considers that the Government have something wrong. I think it is fair to say, however, that the committee has disagreed with the preponderance of evidence presented to it and in particular the views put by industry, both public and private, by the professional institutes, and by the local authority associations. I find it highly significant that the three associations representing the local planning authorities, who would be involved in implementing the directive, should be unanimous in their doubts about it. The weight of this evidence must give us cause for thought, and at all events makes me less abashed than I might otherwise be in dissenting from the committee's conclusions.
There are three basic question which we must address: First, do we need assessments of the potential environmental effects of major development projects? Second, do we need specific legislation in this country to require such assessments to be carried out? Third, is this a suitable object for Community legislation? Let me make the Government's position clear. Our answer to the first of my questions is a wholehearted "yes". It is implicit in our whole system of planning control over development that the environmental implications should be taken into account in deciding whether to authorise projects. I was pleased to see the unanimity of all who gave evidence to the committee on this point, particularly industry. I think everyone is agreed in particular that in the case of major developments the potential effects in terms of environmental pollution must be fully evaluated, along with the technical, economic, social and employment considerations. In fairness to the Commission's proposals I think there is merit in the idea of a framework within which these effects can be considered together early in the life of a project.
The pollution of our rivers and of the air, the deposit of wastes, the disturbance and destruction of habitat, are all issues that rightly concern people and deserve to be given due weight in development decisions. Any approach that better enables these factors to be considered in a systematic way is to be welcomed. It strengthens the planning system in the eyes of those whom it aims to serve—the developer who wishes to see the benefits of his project realised quickly; the local community who may be anxious to safeguard their local environment; the wider public who expect to see national interests given due weight. And it helps to highlight environmental opportunities, as well as problems.
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But environmental assessment is not some new miraculous diagnostic instrument. It is an approach which is inherent in all decision-making on environmental matters and is indeed inseparable from the process. In one way or another we have been doing it ever since the Town and Country Planning Act 1947. As to special exercises and studies, over 25 major assessments have been carried out in Scotland alone, in particular in relation to offshore developments. Within England, major assessments were commissioned by the National Coal Board for the proposed Belvoir and Park coalfields, by the North West Water Authority for reservoir proposals, and by British Nuclear Fuels Limited for proposals to extract water from Wastwater. This is quite apart from the studies forming the basis of public consultations and inquiries in connection with motorway proposals.
My noble friend Lord Cranbrook referred to the question as to whether the directive would require amendment of main legislation. I say to him, yes, it would, though possibly through regulations under the European Communities Act. The fact is that the directive would impose on developers obligations not enactable solely by regulations under the planning Acts. So we accept the general need for environmental assessment and the need for special exercises in major cases. Properly conducted assessments can lead to quicker decisions, but equally a rigid mandatory system can add further bureaucratic hurdles, and can lead to delaying objections and to litigation.
I now turn to the question of whether it would be right to legislate for it, and it is instructive at this point to consider the particular provisions in the draft directive. First, we have the broad provisions of Articles 1 to 3 which lay down the general need for assessment of projects with significant environmental implications and the general factors to be taken into account. Then we have Article 4 which prescribes an assessment for all projects covered by Annex 1 unless, with the agreement of the Commission, the competent authority have exempted it. Then we have a requirement that projects of the kind listed in Annex 2 should also be the subject of an assessment if they are caught by certain thresholds and criteria to be established by member states themselves.
Going on from that, we have Article 5 which provides for joint Community review of these criteria and thresholds, and Article 6 which with Annex 3 prescribes the main items to be covered in assessment. In the remaining articles we have provisions covering consultation and public participation on the results of studies, a requirement for the competent authority to give its own statement of conclusions when reaching a decision, and a duty to monitor compliance with the terms of any consent given and even to consider the imposition of fresh requirements.
I do not want to comment in detail on all the individual elements in the draft. I will concentrate only on key features. Article 4 of the draft directive, as the noble Lord, Lord Northfield, so fairly said, introduces quite a considerable bureaucratic hurdle, as indeed the committee have pointed out. This article requires that the prior agreement of the European Commission has to be sought before any individual project can be exempted from the assessment procedure. This means that every time a planning application is made for a

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small insignificant project of a class listed in Annex 1 of the directive we would have to apply to Brussels and say, "This is only a small one. Would you please exempt it? "The committee suggest that this problem could be overcome by member states agreeing beforehand with the Commission criteria for exempting small projects. That would certainly help, but it would get us into the vexed problem of defining criteria for particular types of cases. It leads us also into the wider problem of deciding in advance what projects should require an assessment.
In our view it is impossible to draw up a comprehensive logical list of projects which would always require an assessment, as Annex 1 of the draft directive purports to do. The noble Lord, Lord Northfield, suggested that the number of Annex 1 proposals would be in less than double figures each year. With great respect, I wonder whether this can be true, in that the exact number must surely depend on the thresholds of the criteria that are fixed. At the moment this is unknown, and I should have thought that this was an essential difficulty of the proposal.
No doubt we can all think up a short list of projects that might be generally considered to pose complex environmental projects. But one very soon starts having to make qualifications, and runs into the problems of thresholds and criteria. One has only to cast one's eye down Annex 1 to see the difficulties. For example, is all extraction of solid fuels to be covered, or only major projects? Is all metal manufacture, or only the more substantial cases? And how are airports and harbours to be defined, bearing in mind that these are also in Annex 2? One has to start making arbitrary and artificial decisions about what would make a project significant. Its size? Its cost? Its output? And then try to place a figure on it. I am pleased that the committee recognise the problems in this concept of thresholds. And of course, once it is accepted that a project needs an assessment, one is face to face with the problem of identifying all the statutory aspects for study. Although one is required only to consider particular aspects in so far as they are relevant, there is inevitably scope for dispute and litigation on what may or may not be relevant.
There are other aspects of the draft which concern us. First, it is a long established principle of town and country planning law that, subject to certain exemptions, agriculture and forestry should be exempt from statutory planning control. By the same token we would think it wrong to legislate for environmental assessment of changes in agriculture and forestry which are at present outside statutory control. We believe—as reflected in current arrangements for consultation on forestry proposals and in the current Wildlife and Countryside Bill—that in so far as it is desirable to assess the environmental implications of such changes, this is best done by voluntary arrangements.
Second, there is a risk that the provisions for consultation and participation will extend what is already a prolonged planning process in major cases. In some cases it may be right to have a study completed, published and circulated before a public inquiry. In others, it may be sensible for the inquiry itself to be seen as part of the process of appraisal.
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Thirdly, there is a risk that the requirement for the competent authority to make its own statement of environmental implications could turn into another source of delay. Fourthly, we see problems in any requirement that, having given permission for development, one should subsequently consider tightening up the conditions subject to which it was originally granted.
Lord Northfield: My Lords, the noble Lord has said this twice. Yet it is not said at all in the directive. What the directive says, in Article 11, is that the competent authority should check that the conditions are being complied with and whether they are still adequate; whether other provisions to protect the environment are being obeyed; and whether the competent authority needs to take further measures to protect the environment from the effects of the project. There is nothing there to say that the article is leading to additional burdens being put on the developer at that stage.
Lord Bellwin: My Lords, I can only say that our interpretation of what is certainly a far from easy directive is as I have said, but perhaps I can return to that point at the end of my remarks because I should like first to reply to some of the other comments which have been made.
It may be said—and I would agree—that at least some of these matters can be put right by amending the draft proposals and that they are not a necessary part of any package. The draft directive is of course currently being considered by the Council's environment working group and I trust that your Lordships will recognise that I cannot at present comment on those discussions; they will be brought before the Council of Ministers at some later stage and I cannot anticipate that report. I may say that, so far, those discussions have not assuaged our doubts about the proposals. There remain aspects of the draft which involve basic difficulties—and I refer in particular to the problem of defining the classes of case for assessment and of defining the items to be covered by assessment. The essence of the matter is that what is desirable by way of assessment varies essentially from case to case across the whole spectrum—from projects such as nuclear power stations or motorways at one end, to manufacturing extensions at the other. It may be said that the directive could be amended to give member states discretion over which projects require assessment and the scope of that assessment. That would, of course, produce an entirely different document from that which is under consideration. I do not know whether that approach would be acceptable to other member states, but I do know that it is that one the Government would consider very carefully.
My Lords, there is no neat way of dividing sheep from goats and of saying that some types of project require a prescribed form of assessment and others do not. Nor is there any neat way of defining those factors which may call for evaluation in any particular place. So much depends on the circumstances and so much depends on the scale of what is proposed. It may be suggested that we should not object to the directive listing activities when we have lists in our own general development order and use classes order—but

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these are very different types of list and your Lordships will recall the controversy over the GDO in deciding which projects were insignificant enough to be permitted. How much more difficult it will be to decide which projects will be environmentally significant in all the circumstances. We believe that in controversial cases, as things are, all the incentive is on the developer to demonstrate the environmental acceptability of his project. We doubt whether it is necessary to reinforce this motivation with further legal requirements.
I now turn to the third issue, which is that of the Community dimension. Is this a suitable subject for Community action? There are two arguments here. The first is that prevention is better than cure; that a Community instrument in this field will provide better protection for the environment of Europe than a host of negative controls and anti-pollution policies. The second is that harmonisation of procedures is required; that different procedures for authorisation of development can impose barriers to trade. As it is based on Article 100 of the Treaty of Rome, the legal justification of the draft directive derives from this second argument. However, one may doubt whether the directive is really required to remove barriers to trade. The directive proposes only to establish a common set of procedures. It does not—indeed it would not be possible—establish a common set of decisions. Furthermore, it establishes only a minimum set of procedures. There would be nothing to prevent any member state adopting more rigorous procedures, and I do not believe we should wish to prevent it from doing so if it wished. However, the Select Committee bases its support for the draft directive on the first argument—that it will protect the environment of Europe. Reading between the lines of the committee's report I think I detect some criticism of the Government for taking a parochial and self-satisfied approach in opposing this directive. If I understand the report's conclusions correctly, they argue that the directive will have little effect on the UK because we already have a good planning system, but it will be valuable in raising standards in those member states which do not share our good fortune; that in opposing the directive the UK is behaving like a dog in a manger.
I do not believe I need to repeat our wholehearted support for a positive and realistic community environmental policy. I hope that the Government's views were made clear in the course of the excellent debate in this House in March, but the key word here is "realistic" or "acceptable". We do not believe that this particular proposal is realistic or acceptable. Nor do we believe that the detailed changes suggested by the committee would remove the main difficulty: that is the difference between the Government—not to mention industry and the local authority associations—and the committee. The committee see the problems as being ones of detail, whereas we see the difficulties as being more basic. I am not saying that the amendments suggested by the committee are wrong. They are sensible and indeed they are helpful, but they do not overcome our central concern.
I said at the beginning of my speech that this proposal was a major and important departure in the Community's environment policy. It is important that we should get it right. The Government do not believe that the present draft directive yet gets it right. As
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first step in the new field we consider it to be over-ambitious and likely to fail in its intention. If it does fail, it could bring the environmental programme into disrepute and seriously harm future progress. We have only to look at the problems encountered in the United States when that country first introduced environmental impact assessment to see the pitfalls which exist. The Americans have, I believe, substantially revised and improved their procedures, but the early teething troubles seriously soured attitudes towards environmental assessment and cast a cloud over environmental policies.
In fairness to the European Commission they have made great efforts to avoid the pitfalls experienced in the United States. Nevertheless, for the reasons I have given, their proposal also has its problems. It has become a constant concern of my right honourable friend the Secretary of State for the Environment to speed up the planning system and remove gratuitous sources of delay. In our present economic condition we cannot lightly add to the burdens on industry by introducing new requirements. I say this despite the very persuasive arguments which the noble Lord, Lord Northfield, so ably put when he suggested that this would not happen. We want to avoid legislation which could be difficult to enact, hard to implement and—by virtue of its uncertainties—be a source of litigation and dispute. I am grateful to my noble friend Lord Nugent of Guildford, who seemed to share my concern about this aspect of the matter, at least.
Before I sit down, I wish to say this. Of course we will listen and consider very carefully all that has been said today. The debate has been on the highest possible level—not least those observations made by the noble Viscount, Lord Colville of Culross, whose great knowledge and experience on planning procedures must always command the closest attention. I assure him, as I assure the noble Earl, Lord Cranbrook, and the noble Lord, Lord Ashby, and the noble Lord, Lord Northfield, and everyone else who has spoken, that we do not lightly brush off this matter and that what I have said is not simply a negative to what has been proposed. It is not that at all. We consider this matter to be far too serious and important to deal with in a light way. I hope those remarks will be some consolation—if I can put it that way and with great respect—to the noble Lords who have argued the case in a way that can only command the respect of all who have listened to them. I have given the Government's point of view. I have spoken of our concern, and I have explained the reasons why we believe it is right to regard the Community directive as now proposed to be unacceptable.
8.20 p.m.
The Earl of Cranbrook: My Lords, I think we would all agree that the debate has been one of quality and extreme interest to all participants. I must draw the attention of the House to a small correction that is necessary to the report. It has been brought to my attention that we have not correctly reproduced the draft directive. On page XXIX in Article 3(1) we have omitted consideration of the vegetable kingdom; in other words, the word "flora" has not been copied from the draft directive. In fact, the directive requires attention to be paid to plants as well as animals.

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I was very interested indeed to hear the speech of my noble friend Lord Bellwin, and particularly to note that the areas of detail that concerned him were those which in every case, or in almost every case, had already been identified by the committee. That gives me the feeling that we are all working together and that our minds are running on very much the same lines. When my noble friend was discussing his second main point—is this the right topic for legislation?—I do not find any problems in the directive that have not already been discussed either in the report or by speakers in the course of this debate.
It was my role as chairman to present the views of my committee, but before closing I wish to make a small personal point. I am concerned that in this country today there is under the surface a sense of antagonism between what is seen as authority and what is seen as public rights and public processes. I feel that this antagonism is dangerously near the surface on many occasions. It expresses itself in the dissatisfaction of those who lose—the minorities who maybe feel they have not had the fullest opportunity to express their case. I felt that the opportunities for public participation, consultation and so on that were developed in the European Community's document, possibly illustrated a line that could profitably be followed in our inquiries into major development projects. I should like to feel that point could be followed up. Finally, I wish most warmly to thank all those who have participated in the debate.
On Question, Motion agreed to.

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