Sitting of 29 January 1981

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

  LONDON TRANSPORT (No. 2) BILL (By Order)
  Order for Third Reading read.
  To be read the Third time upon Thursday 5 February.

  GREATER LONDON COUNCIL (GENERAL POWERS) (No. 2) BILL (By Order)
  Order for consideration read.
  To be considered upon Thursday 5 February.
  BRITISH RAILWAYS (No. 2) BILL (By Order)
  BRITISH RAILWAYS (PENSION SCHEMES) BILL (By Order)
  BRITISH TRANSPORT DOCKS BILL (By Order)
  GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)
  LLOYDS BILL (By Order)
  LLOYDS BANK BILL (By Order)
  LONDON TRANSPORT BILL (By Order)
  Orders for Second Reading read.
  To be read a Second time upon Thursday 5 February.

Oral Answers to Questions
  National Finance

    Small and Medium-sized Businesses
    Mr. Wallerasked the Chancellor of the Exchequer what consideration has been given to the introduction of a scheme based on tax incentives to stimulate equity investment in small and medium trading businesses.
    Mr. Richard Pageasked the Chancellor of the Exchequer if he will give consideration to a speedy introduction of a tax incentive scheme to the individual specifically designed to increase investment in small and medium trading businesses.
    The Financial Secretary to the Treasury (Mr. Nigel Lawson): I regret that I cannot anticipate my right hon. and learned Friend's Budget Statement.
    Mr. Waller: When considering proposals for equity investment will my right hon. Friend and our right hon. and learned Friend take into account the fact that small firms have limited opportunities to raise non-interest paying capital, compared with public companies? Does he agree that proposals along these lines would help smaller companies, which have done a great deal in the past to build up Britain's trading position?
    Mr. Lawson: I agree with my hon. Friend. My right hon. and learned Friend is bearing those considerations very much in mind. My hon. Friend will recall that a measure of this kind was taken in last year's Budget under the venture capital scheme, which allowed relief for loss on equity investment by, individuals and small businesses.
    Mr. Page: Is my right hon. Friend aware that, in addition to providing much-needed equity capital for small businesses, a scheme of that nature will bring investment from professional and senior company executives and, with that investment, expertise in management and the skills that are so lacking in our smaller businesses because it is free of charge and by the personal nature of the investment?
    Mr. Lawson: I am keenly aware of all that my hon. Friend has done on the small business front and the close interest that he takes. I am sure that my right hon. and learned Friend the Chancellor has listened carefully to what he has said.
    Mr. Skinner: Will the Minister give the same consideration to the smaller businesses—and many of those that have disappeared as a result of the Tories' monetarist policies—as the clearing banks, under the guidance of the Bank of England, gave recently to the multinational Massey-Fergusson group and to Stone-Platt Industries about 12 months ago? The Government have assisted other large industries. If it is right for these large industries to be assisted in an interventionist way by the Tory Government, why do they consistently keep kicking the smaller businesses to death?
    Mr. Lawson: I am not sure whether the hon. Member is suggesting that the Bank of England should not attempt to bring people together where that would be helpful, or

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    whether he is suggesting that it should do so. I am sure that, on reflection, he will agree that this is a proper function of the Bank of England.
    Mr. Grylls: Will my right hon. Friend further consider the fact that a risk investment scheme would be helped if the Government would look at the idea of allowing a rollover of capital transfer tax? Most small businesses do not reach their optimum size in one generation, and if a rollover provision were introduced, the tax would be paid only when the investment was realised for cash.
    Mr. Lawson: There are various roll-over provisions on the statute book, but that is a budgetary matter, and my hon. Friend must be aware that I can make no comment on his proposal at the moment.

    North Sea Oil
    Mr. Douglasasked the Chancellor of the Exchequer if he will make a statement on the progress of discussions on changes in taxation on North Sea oil.
    The Chancellor of the Exchequer (Sir Geoffrey Howe): Consultations with the industry are in progress and are likely to continue for some time. Due regard will be paid to all representations made to me about prospective changes in the North Sea fiscal regime when I frame my Budget.
    Mr. Douglas: Will the Chancellor of the Exchequer accept that, because of the nature of the discussions and the time scale involved, certain substantial investments that should be forthcoming from companies as operators in the North Sea are likely to be held up, with considerable consequences for employment opportunities, particularly in Scotland and in British Shipbuilders?
    Sir Geoffrey Howe: The prospect of any fiscal change is bound to be one factor affecting investment intentions. In reaching my decisions and embarking on a process of consultation I shall do everything possible to strike the right balance between promoting investment and giving a fair reward to investors and securing a fair share of the proceeds for the citizens of this country.
    Mr. Woolmer: Is the right hon. and learned Gentleman aware of the growing feeling that our substantial and increasing North Sea oil revenues are proving a curse, instead of a blessing, to manufacturing industry? As the director-general of the CBI has asked why we cannot use North Sea oil revenues to restructure British industry, and as the chairman of Shell UK Ltd. has called for a Marshall Aid plan to channel oil revenues into industry, when will the Chancellor start listening to experienced people in industry and use the oil revenues to help growth, instead of financing unemployment?
    Sir Geoffrey Howe: The hon. Gentleman must understand that the revenues from the North Sea form part of the total revenues accruing to the Exchequer. They fall far short of the total being borrowed in the present year. Out of the expenditure of the Exchequer, substantial sums are already going towards restructuring British industry. I remind the House of the statement that my right hon. Friend the Secretary of State for Industry made about British Leyland earlier this week. The money is already accruing, is part of the Budget and is being used as best it may be.

    Public Sector Borrowing Requirement
    Mr. Wigleyasked the Chancellor of the Exchequer what is his latest estimate of the public sector borrowing requirement for the current financial year.
    Mr. Allan Stewartasked the Chancellor of the Exchequer what is the latest estimate for the level of the public sector borrowing requirement for this financial year.
    Mr. Meacherasked the Chancellor of the Exchequer what is his latest estimate of the public sector borrowing requirement.
    The Chief Secretary to the Treasury (Mr. Leon Brittan): I ask the honourable Members to await the Budget Statement.
    Mr. Wigley: Will the Chief Secretary confirm that when the Budget Statement appears the public sector borrowing requirement is likely to be about £10 billion to £12 billion, or even more if unemployment keeps increasing at the present rate? Will he accept that with the average cost to the Treasury of keeping someone out of work running at between £5,000 and £6,000 a year, it would merit the Government giving consideration to all schemes to take people into employment, either in the public sector or by helping small companies to take them into the private sector, rather than incurring the tremendous costs of unemployment, which are leading to the large PSBR?
    Mr. Brittan: I shall not comment on the hon. Gentleman's figures, because to do so would be to anticipate the Budget. The average figure in relation to unemployment is not £6,000 a year. That relates to a family man with two children. The average figure is probably nearer £3,500. However, it does not follow that by spending comparable sums it would be possible to create employment to the same extent. One would have to take into account all the consequential changes of spending money in that way in relation to inflation and everything else.
    Mr. Stewart: I congratulate my right hon. Friend on his appointment to the Treasury. Does he agree that a major cause of the Government's difficulties in controlling the public sector borrowing requirement is the high level of subsidies to nationalised industries and British Leyland? Does he agree that a substantial reduction in the level of those subsidies is essential if the Government's financial strategy is to succeed?
    Mr. Brittan: I am grateful for my hon. Friend's congratulations. There is no doubt that any substantial sector of public expenditure that one isolates can be regarded as making a major contribution to the PSBR. In terms of the increase that has taken place, borrowings by local authorities and public corporations, reflecting higher than expected expenditure and worsening trade conditions, have made a major contribution to the present situation.
    Mr. Shore: I do not understand why the Chief Secretary is being so coy about the figure. The Chancellor's statement in November anticipated a PSBR for the year of £11½ billion. The Financial Secretary added to that in a recent speech. We know that it is about £12 billion or more. Will the Chief Secretary at least confirm that the major causes of the overshoot this year are the

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    falling off of tax revenue and the increase in social security benefits owing to the massive rise in unemployment? Does he think that there is any sense in publishing long-term estimates for the PSBR? In the light of recent experience, will the hon. and learned Gentleman adhere to the published target for 1981–82, or not?
    Mr. Brittan: I am not sure whether the right hon. Gentleman is seriously suggesting that the forecasts published at the time of the Budget and under the Industry Act should not have been published. If so, that is a major change in Opposition policy. I said earlier that major factors in the increase are higher borrowing by local authorities and public corporations and an increase in Government expenditure on defence and as a result of the effects of the recession. Those are well-known factors, and they are the correct ones.
    Mr. Shore: It is not a question of the PSBR level being a forecast. It is one of the targets of the Government, with one or two minor variations, taking account of the real world—of which even the Government have to take account. It was put forward as a target. Will the Chief Secretary tell us whether he thinks that he is sensible and wise in continuing to target when he knows that a major cause of the overspend is the rise in unemployment? Will he also tell us how much of the overspend is due to that cause?
    Mr. Brittan: I do not intend to bandy words with the right hon. Gentleman about "forecast" and "target". It was necessary to give figures at the time of the Budget and under the Industry Act, but no one can guarantee that there will not be factors that will lead to the figures changing during the year. If the right hon. Gentleman thinks that any Government of whom he has been a member have been able to give such figures and never change them, his memory must be failing.
    Mr. Waldegrave: Does my right hon. and learned Friend agree that, even if the figures are as predicted by the right hon. Member for Stepney and Poplar (Mr. Shore), they would not be too disturbing in the depths of a recession? Will he confirm that they will not be a very high proportion of the GNP, and no higher a proportion than in other countries in a similar situation?
    Mr. Brittan: Other countries are not in the same situation as Britain. We all share the problems of the recession, but the results of unemployment, which have understandably been mentioned in this connection, differ in this country. We are suffering, as are other countries, from the recession, but, on unemployment, we are also suffering from the consequences of past excessive wage claims. I do not believe that such comparisons always take us far.

    Economic Prospects
    Mr. Winnickasked the Chancellor of the Exchequer when he now expects to see a substantial improvement in the economy.
    Mr. Dormandasked the Chancellor of the Exchequer if he is satisfied with the progress of the Government's economic policies.
    Sir Geoffrey Howe: Inflation has been substantially reduced and there are excellent prospects for a further
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    sharp decline. This is the key to sustainable recovery. There are indications that the fall in output may be coming to an end.
    Mr. Winnick: Is the Chancellor of the Exchequer aware that that, as usual, was a farcical answer? With unemployment at the highest level since the 1930s, with never-ending redundancies, closures and bankruptcies, with declining business investment, and manufacturing industry constantly being undermined, would the right hon. and learned Gentleman say that he has been a successful Chancellor?
    Sir Geoffrey Howe: The hon. Gentleman's question bordered on farce. We came into office at a time of mounting world recession and rapidly-growing inflation rates, and after a period during which unemployment had been mounting higher and higher. Unless the House understands that the way in which to address ourselves to unemployment is to address ourselves to what the Government are doing about the reduction of inflation, it does not understand the first premise. It is crucial that those who are engaged in pay bargaining should continue to recognise the part that way they can play in agreeing to moderate pay settlements as the best way to protect the prospects of jobs.
    Mr. Rippon: Does my right hon. and learned Friend agree that there is no hope of the investment-led economic recovery that we need while minimum lending rate remains at its present level? What is the intellectual case for any further issue of long-dated Government stocks at present interest rates, which assume double-figure inflation for years to come, and are adding enormously to the public sector borrowing requirements?
    Sir Geoffrey Howe: The case for the continued issue of gilts of that form is that this is one of the methods that have been sensibly and conventionally adopted for covering the Government's borrowing requirement. My right hon. and learned Friend is right to express his continued concern over the level of interest rates. That is one reason why effective control of the size and volume of public spending and public borrowing is so important.
    Mr. Richard Wainwright: When will the Chancellor of the Exchequer recognise the growing damage to our economy that is caused by the severe decline of profitable exporting? When will he take steps to discourage the inflow of foreign capital, which serves to increase the exaggerated value of the pound on the international exchanges?
    Sir Geoffrey Howe: The hon. Gentleman's question about the inflow of capital has arisen many times in the House. Experience in other countries, as well as ours, shows that it is not possible or sensible to try to stem flows of that sort in any of the ways so far suggested. The hon. Gentleman must also remember that the dominant cause in the decline of competitiveness has been the rising level of unit costs in this country over many years. By lowering that rate of increase of unit costs—this is the importance of sensible pay settlements—we can most effectively and surely offer the prospect of maintaining our position in export markets.
    Dr. Mawhinney: Does my right hon. and learned Friend agree that a substantial improvement in the

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    economy will be inhibited unless small firms have greater access to risk capital from the banks than they have at present?
    Sir Geoffrey Howe: I join my right hon. Friend the Financial Secretary in endorsing the importance of small firms, and in particular the part that they can play in creating new employment. One of the factors that they regard as important is that to which my right hon. Friend has drawn attention, and it is one of the factors that we have in mind.
    Mr. Shore: On the question of a substantial improvement in the economy, is the Chancellor of the Exchequer aware that unemployment is now running at over 2·4 million and that manufacturing output is down by about 15 per cent. since he took over? Has he seen the latest CBI survey, which predicts that profits in manufacturing industry will be lower this year than ever before and that that will continue through 1981? If he cannot give a precise view about when matters will improve substantially, can he say when he expects output in Britain to reach the level that he inherited in May 1979?
    Sir Geoffrey Howe: The right hon. Gentleman has not read the CBI survey thoroughly or effectively. It also states that the number of firms expecting an increase in unit costs is the lowest ever, which is a continuing improvement. The proportion of firms expecting an improvement in their prospects for new orders and in the volume of output and export orders has increased. Those factors are substantial and encouraging.
    Mr. Shore rose—
    Mr. Speaker: Order. It would be unfair for me to keep calling Front Bench speakers for two questions and not to do the same for Back Benchers.

    Budget Statement
    Mr. Canavanasked the Chancellor of the, Exchequer when he expects to make his Budget Statement.
    Mr. Dobsonasked the Chancellor of the Exchequer when he intends to make his Budget Statement.
    Sir Geoffrey Howe: I refer the hon. Gentlemen to the announcement made by my right hon. Friend the Leader of the House on 15 January.
    Mr. Canavan: In view of the appalling level of unemployment that was announced this week, in his Budget Statement will the Chancellor announce more public investment to provide more jobs? Is he aware that it is the economics of the madhouse that it is costing the Treasury over £12 billion to keep nearly 2½ million people on the dole? Is the Chancellor of the Exchequer so thick-skinned that he is unaware of the growing public opinion that we shall never get rid of rising unemployment until we get rid of this Tory Government, when I hope the Prime Minister and some of her Cabinet colleagues will take the place of the million people on the dole queue?
    Sir Geoffrey Howe: The hon. Gentleman's question is still founded on a fundamental misunderstanding of the problem. There is no prospect whatever of our being able, by increased Government expenditure, whether in public investment or anything else, to generate additional jobs that will survive in the long term. It is crucial to concentrate on the reduction of inflation and, as part of
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    that, to concentrate on reducing unjustified borrowing and spending. All our experience shows that unemployment is likely to rise if we follow the course advocated by the hon. Gentleman.
    Mr. Dobson: When he is considering his Budget Statement, will the Chancellor of the Exchequer consider the four reasons that he gave in his Budget Statement of 1980 for continuing to raise personal tax allowances in line with inflation? Will he stick to those reasons, particularly the one that shows that the heaviest burden from failing to raise the allowance would fall on the poorest in the community? Will he stick to that, or has that expired with his credibility?
    Sir Geoffrey Howe: The factors to which I drew attention in my Budget Statement last year are factors to which I shall have to pay attention in my Budget Statement this year. However, it is still right to remember that the percentage of taxes being raised by taxation on personal income is at a lower level than it was when this Government took office.
    Mr. Garel-Jones: Will my right hon. and learned Friend confirm that there are sectors of the nationalised industries that have perfectly viable investments that they wish to make but that they are inhibited from doing so by the impact that that will have on the public sector borrowing requirement? Will my right hon. and learned Friend tell the House what thought he has given to ways of relieving these potentially profitable sectors of the nationalised industries from that inhibition, and thus injecting much needed demand into the economy without affecting the public sector borrowing requirement?
    Sir Geoffrey Howe: It would not be right to regard any step in that direction as a method to be justified for the sake of injecting more demand into the economy for its own sake. It is right that we should look for ways to enable industries that are still in public ownership to raise capital under their own steam for specific purposes. It is our judgment so far that the best way to enable them to do that is to identify sections of nationalised industries that can be truly privatised, so that there is a direct link between the profits that they earn and the discipline imposed upon them, and the money raised.
    Mr. Joel Barnett: Given that we are now seeing the moderate pay settlements for which the Chancellor has asked, why does he think his policies are still creating higher and higher unemployment, which is likely to reach 3 million next year? Is he prepared to deny that, given those settlements, there will not be 3 million unemployed next year?
    Sir Geoffrey Howe: I am no more disposed than the right hon. Gentleman was to make or embark upon forecasts of unemployment. Nevertheless, it is true that the declining level of pay settlements, with probably the majority in the private sector well into single figures in recent months, is helping to fend off the continuing rise in unemployment. It is crucial that the declining level in pay settlements that is being achieved in the private sector, where fewer people are unemployed, should be matched by corresponding self-discipline and reductions in pay settlements in the public sector. It must always be remembered that pay settlements in the public sector are paid out of the rates and taxes that are provided by the private sector.
    Mr. Sims: When my right hon. and learned Friend considers his Budget, will he resist pressures to increase the already disproportionately high duty on spirits? Will he take into account not only the fact that that duty has reached the point of diminishing returns but that there is ample evidence that an increase in the ultimate retail price will not deter the committed alcoholic but only penalise 99 per cent. of the consumers of alcohol who do not abuse the product?
    Sir Geoffrey Howe: Far be it from me to comment on what may or may not deter the committed alcoholic. I note my hon. Friend's observations. They are to be placed alongside observations to precisely the opposite effect coming almost at the same time from other parts of the House.
    Mr. Cook: As the right hon. and learned Gentleman's leader has already made her own "Budget Statement" to the Lobby, may we tempt him to follow suit? In particular, will he give the House the assurance that now that the right hon. Lady has told him that he cannot increase tax rates he will not seek to increase revenue by the back door, by failing to uprate fully personal allowances, or does he intend to compound his previous performances, which have not only—as the Financial Secretary generously admitted in Zurich—increased the total tax rate, but—which he did not admit—have increased the tax burden most of all on the low-paid, who are least able to pay?
    Sir Geoffrey Howe: That is not the conclusion to be arrived at by the present shape of the tax system. I repeat the point that I made. The proportion of taxes now being levied on the personal income is lower that it was when we took office. Beyond that, I assure the hon. Gentleman that no decisions have been taken about the forthcoming Budget. There is therefore no question of leaks. I shall not anticipate my Budget Statement.

    Financial Secretary to the Treasury (Speech)
    Mr. Ioan Evansasked the Chancellor of the Exchequer if he will place a copy in the Library of the address by the Financial Secretary to the Treasury entitled "Thatcherism in Practice: a Progress Report" delivered to the Zurich Society of Economists on Wednesday 14 January.
    Mr. Lawson: Needless to say, I have already done so.
    Mr. Evans: Will the right hon. Gentleman admit that Thatcherism in practice is disastrous for British industry and the economy? With 2½ million unemployed, 6,000 companies going bankrupt last year and the Government increasing the overall burden of taxation, what has the sacrifice been for?
    Mr. Lawson: As I told the audience at Zurich, the rate of inflation was rising very fast when we took office. It is now falling rapidly. Indeed, it is falling more rapidly than in almost any other country in the world. That is one result of the sacrifices.
    Mr. Michael Morris: Is my right hon. Friend aware that those in industry who have read his remarkably frank speech have commented with some surprise that he made no mention of the pricing policy of nationalised industries, which is the main inhibiting factor to economic recovery? Will he encourage his right hon. and learned Friend to tackle that problem in his Budget Statement?
    Mr. Lawson: I am grateful to my hon. Friend for his encouragement to me to make yet another speech. Our policy is to move towards economic pricing for nationalised industries. The alternative is a further charge on the borrowing requirement and further upward pressure on interest rates, which I am sure he would not wish to see.
    Mr. Robert Sheldon: Will the right hon. Gentleman confirm that in his speech he said that the economy had more or less reached bottom and that better times were clearly in sight? Flow will those better times benefit the unemployed in the next few months?
    Mr. Lawson: I should have thought that even the right hon. Gentleman would know that better times will benefit the unemployed. I am not making predictions about the next few months. However, if he doubts whether there has been a turning point, I remind him, as my right hon. and learned Friend has already reminded the House, that the latest CBI survey of industrial trends also indicates that the economy has reached a turning point.
    Mr. Beaumont-Dark: Will my right hon. Friend accept that most of us consider that his speech in Zurich was on the right lines because it brought a sense of reality to the situation? Bearing in mind the importance of pay, may we have figures to destroy the myth that public sector pay has fallen behind private sector pay over the past five or 10 years? With the negotiations that many of my right hon. Friends have, should we not get rid of the idea that those who work in the public sector are deprived, when most of us know that the truth is the opposite?
    Mr. Lawson: My hon. Friend is on to a good point. If he tables a written question I shall be happy to see that he gets the figures.
    Mr. Ashton: Will the Minister give a one-line definition of Thatcherism? Is it not cutting jobs at the town hall to save money to pay out at the employment exchange?
    Mr. Lawson: No, Sir.

    Charities (Value Added Tax)
    Mr. Greville Jannerasked the Chancellor of the Exchequer whether he will now exempt charities from valued added tax.
    Mr. Lawson: Charities do not in general have to charge VAT on their charitable and welfare activities. As to VAT on their purchases, I refer the hon. and learned Gentleman to the answer that my hon. and learned Friend the Minister of State gave on 7 November to the right hon. Member for Manchester, Wythenshawe (Mr. Morris).
    Mr. Janner: As charities are bearing such an enormous weight of social responsibility which would otherwise rest on the public, is it not ludicrous to penalise them by levying VAT so that so many of them, great and small, are facing enormous financial difficulties? As the Government exist primarily on a diet of faith and hope, is not a touch of charity to charities now called for?
    Mr. Lawson: The law relating to VAT on charities is precisely the same as it was when the Labour Government were in office. The main difference is that in the Budget last year this Government introduced substantial benefits for charities, worth in all £30 million in a full year.
    Mr. Moate: Has my right hon. Friend seen the estimate by Dr. Barnardo's that in 1981 it will pay £450,000 in VAT, although half of its expenditure is for children referred to the organisation by statutory bodies mainly concerned with handicapped children? Will he reconsider the matter to see whether some concessions can be made?
    Mr. Lawson: We consider carefully how best to assist charities. As I said, in his Budget last year my right hon. and learned Friend introduced a range of reliefs for charities, worth in all £30 million, which is a substantial sum. We shall continue to keep the matter under consideration. We are not convinced that the best way to help charities is by a change in their VAT treatment.
    Mr. Ashley: Apart from being socially unjust, is it not economic nonsense to penalise voluntary associations that help to keep disabled people out of expensive institutions? Is the right hon. Gentleman aware that this is one instance where the Government can save money by spending it?
    Mr. Lawson: I know the right hon. Gentleman's deep desire, over many years, to assist charities and good causes. However, we consider carefully which is the best way to help charities. The Government whom he supported did not believe that his suggestion was the best way. It has to be borne in mind that much charitable income and expenditure, such as rents, the purchase of buildings, staff costs and grants, are not subject to VAT. The situation is rather more complicated than the right hon. Gentleman's question would suggest. The measures that we have taken so far are an earnest of our determination to assist charities.
    Mr. Jay: Judging by the results so far, does the Financial Secretary consider that the Government's first incentive Budget of June 1979 has been an unqualified success?
    Mr. Lawson: I am not quite sure what that question has to do with charities—unless the right hon. Gentleman is putting himself forward as one.

    Overseas Investors (Interest Payments)
    Mr. Foulkesasked the Chancellor of the Exchequer whether he will give consideration to the introduction of a tax on interest payments to foreign holders of sterling debt as a means of disengaging the domestic interest rate from the exchange rate.
    Mr. Lawson: I do not believe that a tax of the kind proposed by the hon. Gentleman would achieve the effect that he seeks.
    Mr. Foulkes: With overseas investors getting, effectively, a return of about 15 per cent., is not such speculative investment pushing up the pound even further, to the detriment of United Kingdom exporters? Will the right hon. Gentleman reconsider his answer and introduce a real interest equalisation tax, as in Switzerland and West Germany, which would bring in revenue and help exporters?
    Mr. Lawson: The Swiss and West German examples that the hon. Gentleman quotes were not, in practice, effective. Such a measure would be even less effective in this country, with our sophisticated financial markets and the difficulties produced by the existence of double tax agreements and the doctrine of sovereign immunity.
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    Furthermore, it is not at all clear how much interest rates affect the exchange rate. For example, at present the level of interest rates in the United States is considerably higher than it is here.
    Mr. Dykes: Can my right hon. Friend say what proportion of the monetary aggregates is represented by net inward flows on current and capital account?
    Mr. Lawson: It depends on where those net inward flows go. Inward flows as such do not necessarily add to the monetary aggregates at all.

    Unemployment Costs
    Mr. Ashtonasked the Chancellor of the Exchequer what is his estimate of the cost to public funds if unemployment were to rise to 2½ million.
    Mr. Brittan: The cost to public funds associated with increases in the level of unemployment depends on the factors causing the increase, on the characteristics of the unemployed and on subsequent developments in the economy. I regret, therefore, that I cannot provide an estimate which would cover every eventuality.
    Mr. Ashton: Is the Minister saying that he cannot do his sums and that he does not know the cost of unemployment? Is it not the Government's policy to cut public spending? How can they cut public spending if they are paying out about £12,000 million a year in unemployment benefit?
    Mr. Brittan: The hon. Gentleman should listen to the answer before reading his prepared supplementary question. The cost of unemployment in the sense of the hon. Gentleman's question varies according to different factors. If the hon. Gentleman will specify particular circumstances and particular sections of the economy that are affected, I shall attempt to give an answer. There is no general answer.
    Mr. Straw: Why is the Chief Secretary being so coy about this? Is he saying that within the Treasury there is no model of the labour market and no estimate of the total cost to the Treasury and this country of unemployment? If he is saying that, why, in a celebrated speech at Warwick last July, did the Minister of Agriculture, Fisheries and Food estimate that the cost of 1½ million unemployed was £7 billion a year. Is he aware that on that basis the cost today of 2½ million unemployed, at last year's prices would be £11½ billion? Was the Minister of Agriculture telling lies when he developed that estimate, or did it come from within the Treasury and from Cabinet papers?
    Mr. Brittan: What I said in answer to the question was quite simply that the cost varies according to the particular characteristics of the unemployed. Nobody is denying the fact, as I made clear in answer to a much earlier question this afternoon, that the cost to the Exchequer per unemployed person is very substantial. I indicated that the average figure was closer to £3,500 than to the £6,000 that had been mentioned. The total figure depends upon distribution and a whole variety of factors. But that in itself does not lead one to any conclusions as to the policy implications, as I also made clear earlier.

    Exporters (Tax Incentives)
    Mr. Adleyasked the Chancellor of the Exchequer if he is satisfied with the level of tax incentives available to United Kingdom exporters; and if he will make a statement.
    Mr. Lawson: A specific tax relief for exporters would be contrary to our international obligations, but, of course, United Kingdom residents working abroad and thereby contributing to our invisible exports may be entitled to some relief, depending on the length of their absence.
    Mr. Adley: Will my right hon. Friend therefore seek to discuss with his Community partners a method whereby such a tax would be in order in all countries, so that all countries in the EEC might gain equal benefit from all their exports to countries outside the EEC?
    Mr. Lawson: Quite apart from the fact that a proposal of the kind advanced by my hon. Friend would be in breach of international obligations, not only those imposed by the EEC, but those of GATT, and therefore considerable renegotiation would be required, it is not clear to me that distortions of this kind would be to anybody's advantage. It is far better in matters of taxation to give general tax incentives, and indeed that will be the policy of the Government throughout this Parliament.
    Mr. Newens: Does the right hon. Gentleman agree that British exporters face very serious disadvantages, particularly those that flow from the overvaluation of the pound? What is he prepared to do to assist people who face difficulties of that kind?
    Mr. Lawson: The hon. Gentleman will have to wait for the Chancellor's Budget Statement to see how he is taking into account, among other things, the present condition of industry.
    Mr. Cryer: Is it not a fact that a country such as Ireland, for instance, has inbuilt tax advantages within the EEC for its exporters? Is not that one of the inbuilt disadvantages of our membership of the EEC, which we cannot possibly get round because Ireland has a fundamental right to give those tax advantages?
    Hon. Members: Hear, hear.
    Mr. Lawson: I am afraid that I was unable to hear that question, owing to the burst of enthusiasm for the deputy Leader of the Opposition for the time being.
    Later—
    Mr. Cryer: On a point of order, Mr. Speaker. You may recall, Mr. Speaker, that following the answer to question 20 you called me to ask a supplementary question and the Minister said that he could not hear because of the noise—those were his words—made by the public school hooligans on the Conservative Benches and those are mine to describe the objects on the Government Benches. I am not going back over the same ground now, Mr. Speaker, because that would be difficult, but I suggest that when Conservative Members can shout down an hon. Member asking a supplementary question, which means that the Minister does not have to answer, it is a poor day for Parliament. I urge you, Mr. Speaker, that in future you give time for questions—
    Mr. Speaker: Order. I agree with the hon. Member for Keighley (Mr. Cryer) that there is a lot of noise when the
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    Minister to whom he has referred replies. Equally, there is a lot of noise when the Prime Minister is answering questions. If hon. Members could read the correspondence that I receive from throughout the country when our proceedings have been broadcast they would share the opinion that we would be wiser to listen to answers as well as questions.
    Mr. Dormand: On a point of order, Mr. Speaker.
    Mr. Speaker: Order. In any case, I do not take points of order from the Gangway.
    Mr. Dormand: I now apologise, Mr. Speaker. May I raise my point of order? I understand that my question—No. 11—was taken with an earlier one. It is the normal courtesy, and indeed the normal procedure, for the Department to notify the hon. Member concerned in such a case. Can the Chancellor tell me why I was not so informed? As you, Mr. Speaker, will know, I am a regular attender at Question Time and I am always in good time. Will the right hon. and learned Gentleman also use whatever influence he has to ensure that next time he answers questions I have question 1?
    Mr. Speaker: Order. I usually take points of order about Question Time at the end of Question Time, because what has just happened has taken one minute out of Prime Minister's Question Time.

    Prime Minister (Engagements)
    Mr. Allan Stewartasked the Prime Minister if she will list her official engagements for Thursday 29 January.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and held meetings with ministerial colleagues and others. In addition to my duties in this House, I shall be having further meetings later today. This evening I have been invited to speak at a dinner given by the Pilgrims Society.
    Mr. Stewart: In the midst of her busy schedule, has the Prime Minister had a chance to see the recently published Scottish Industrial and Commercial Property Review, prepared by Professor Mackay of Heriot-Watt university and other economists, which forecasts a continuing reduction in the rate of inflation and a steady economic upturn from late this year into the medium term? Does she agree that that reflects economic reality, and that in the midst of the recession there are increasingly positive signs for the future, in Scotland as elsewhere in the United Kingdom?
    The Prime Minister: I agree with my hon. Friend that that was a most interesting and excellent report from the economists at the Heriot-Watt university showing that there is considerable hope that inflation is coming down and that we can expect an economic upturn. I warmly support my hon. Friend in saying that the report was excellent and objective. Scottish economists are very good. They started with Adam Smith, and I am delighted to see the tradition continuing.
    Mr. Foot: Has the right hon. Lady had the chance today to examine the report—and can she confirm or deny it—that the Government's support for British Leyland is being submitted to investigation in Brussels by the EEC? Will she give an undertaking that this programme will go ahead whatever is said in Brussels?
    The Prime Minister: I thought that the right hon. Gentleman was in the House when my right hon. Friend made his statement about British Leyland. He said during the course of that statement—I think that I am right, but a quick check can easily be made—that it would of course have to be referred to the EEC under the rules of the Commission, which applied to the previous Government as to this Government. I do not anticipate any difficulty with its final decision.
    Mr. Foot: I did not myself recollect that the right hon. Gentleman said that to the House. If I am wrong, I shall happily put it right. But may I still press the right hon. Lady very strongly on this matter? We believe that it is essential that the backing for British Leyland should go ahead, and we believe also that the decision should be made by this House of Commons and not anywhere else.
    The Prime Minister: I tried to cover that point. I do not believe that there will be any difficulty with the final decsion of the Commission. I believe, therefore, that the backing for British Leyland will go ahead.
    Mr. Kenneth Carlisle: Does my right hon. Friend agree that the fact that last year saw the lowest number of working days lost through strikes since 1941 shows the realism with which the British people are facing this recession? Does she agree also that, if we retain that realism when we come out of the recession, not only will our productivity improve, but we shall be better able to compete, and thus create more jobs?
    The Prime Minister: I share my hon. Friend's view that that news was very welcome, that we have an excellent strike record that has not been bettered for 41 years. If we can get rid of the image of Britain as a strike-ridden country, it can only inure to the benefit of the many people who work in home trade and export industries.
    Mr. Park: Arising from this morning's announcement of over 500 redundancies at Talbot in Coventry, does the right hon. Lady accept that that is clear evidence of the fact that for some people to remain in work an increasing number have to be put out of work?
    The Prime Minister: Where there is considerable overmanning a firm may have to reduce its labour force in order to stay efficient, but I remind the hon. Gentleman that the penetration of the British car market last year by foreign imported cars was 57 per cent. That makes it clear that there is a big market for cars in Britain, and I hope that more and more companies that produce in Britain will fill that market with their products.
    Mr. David Steel: Does the right hon. Lady recall that, in the current issue of Conservative News she has written that, in 1981, business should be looking up? Does she think that it will be helped to look up if the Government go ahead with the proposal to transfer the responsibility for the first eight weeks of sick pay to employers?
    The Prime Minister: As the right hon. Gentleman will be aware, those small businesses and other companies that transfer their obligation will have a reduction in their national insurance contribution. A number of employers already take that responsibility, and my right hon. Friend will discuss these matters as the Bill goes through the House.

    Civil Service Department
    Mr. Bruce-Gardyneasked the Prime Minister if, in view of the evidence given by the Secretary to the Cabinet, Sir Derek Rayner and others to the Treasury and Civil Service Committee, she intends to proceed with the reabsorption of the Civil Service Department into the Treasury.
    The Prime Minister: I have studied the Treasury and Civil Service Committee's report on this subject closely, and shall be publishing the Government's response to it shortly. I can, however, tell my hon. Friend today that I have decided to strengthen and improve the existing organisation of the CSD rather than merge the two Departments.
    Mr. Bruce-Gardyne: I am most grateful to my right hon. Friend for that reply. In the light of that, can she tell us what we can do to restore to the Treasury that measure of control over good housekeeping by the great spending Departments of State which they lost when the Civil Service Department took charge of promotion at the top end of the Civil Service? Is it not less than coincidental that, since the establishment of the Civil Service Department, public expenditure has spiralled out of control?
    The Prime Minister: I should not necessarily agree with the coincidence to which my hon. Friend refers. I started off being marginally in favour of merging the two Departments but came to the conclusion that if we were to do that, all concentration would go on reorganisation rather than on dealing with the true problem, which my hon. Friend correctly defines as the effective control of public spending. The Select Committee's report had some suggestions to make about that, and we hope to take up some of them, because it is vital that we have that control. As for promotion, the topmost appointments come to both the Secretary of State for the Department concerned and to the Prime Minister of the day. It is important that we put in charge of those Departments people who insist on proper control of public spending and effective value for money.
    Mr. Skinner: Does that mean that "Yes Minister" has won again?
    The Prime Minister: I do not think that "Yes Minister" refers to my Administration.
    Mr. Wilkinson: As First Lady of the Treasury, does my right hon. Friend agree that the Treasury would be best pleased if the Ministry of Defence did not move 1,400 civil servants from London to Glasgow, at a cost of about £50 million, at a time when the Minister of Defence cannot for the time being support the development of the Jetstream 31 communications aeroplane in Scotland?
    The Prime Minister: There are always conflicting interests in trying to move civil servants from London to other parts of the United Kingdom. We have taken the view that it is right, in view of Scotland's economy, to transfer some posts. I believe that there are good reasons for the transfer to go ahead. Although I accept my hon. Friend's point that it will mean some increase in public spending, it will also give some hope to the people of Scotland.

    Prime Minister (Engagements)
    Mr. Whitneyasked the Prime Minister if she will list her official engagements for Thursday 29 January.
    The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.
    Mr. Whitney: Will my right hon. Friend, in the course of her busy day, find time to look again at the Government's recent Green Paper on trade union immunities? Does she agree that the latest alarming developments, which have demonstrated the ability of a small group of trade unionists to manipulate the Labour Party, show the need for a thorough-going review and reform of the unique system of immunities that has been conferred on the British trade union movement?
    The Prime Minister: I think that my hon. Friend's views on the role of the trade unions in certain leadership appointments are shared by people from a wide spectrum of political opinion. We are looking forward to consultations on the Green Paper on trade union immunities. My right hon. Friend the Secretary of State for Employment has allowed a considerable period for that. I agree with my hon. Friend that the immunities of trade unions in this country are unique in their extent. The decision that we take about future legislation will depend a great deal upon the representations that we receive.
    Mr. Heffer: Since the Tate and Lyle factory and its workers at Liverpool seem to meet the Prime Minister's criteria, in the sense that the factory is not overmanned, industrial relations are marvellous and productivity is increasing, can she explain why the factory is to be closed? Are her Government prepared to tackle the problem of the EEC, which is basically responsible for the closure? Is she prepared to help with Government money to keep the factory open?
    The Prime Minister: I seem to remember that the closure of that factory is tied up with the increasing proportion of sugar that comes from beet and the reducing proportion that comes from cane. [HON. MEMBERS: "The EEC."] I hear hon. Members murmuring "The EEC", but I seem to remember—perhaps the hon. Gentleman will check the precise figures—that the quota for beet sugar under the last Government was slightly larger than that which obtains under this Government, which, if correct, seems to suggest that even more sugar would have been refined from beet and less from cane.
    Mr. Myles: In view of the serious drop, of 24 per cent., in net farm incomes revealed in the agricultural review
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    White Paper, will my right hon. Friend think carefully before taking any decision that might erode the competitive position of our farmers in Europe?
    The Prime Minister: I know that my hon. Friend is always assiduous in putting forward the interests of his constituents in farming and that he is often successful in the degree to which he persuades the Minister of Agriculture, Fisheries and Food to give extra help to agriculture in his constituency. I am well aware of the contents of that White Paper. My hon. Friend will know that farming incomes vary greatly from commodity to commodity. He will also be well aware that, as the green pound is now, it gives farmers a good opportunity to export their products and to get a subsidy on those exports.
    Mr. Crowther: In view of the fiasco a few minutes ago when my hon. Friend the Member for Bassetlaw (Mr. Ashton) was told that the Government had no idea of how much unemployment was costing public funds, will the right hon. Lady today instruct her Treasury Ministers to find out? If they do not know, how can they justify their policy that it is better to pay people to be out of work than to put money into industry to keep them in jobs?
    The Prime Minister: If one had to pay to put everyone into work, and if their wages were higher than the unemployment benefit, that would obviously be a greater cost. With regard to the specific cost, my memory off the cuff is that this year the national insurance fund, which pays out the unemployment benefit, has estimated that the cost to it of unemployment benefit will be about £1·1 billion. To that is added a sum for social security, which I think is about £1·2 billion. [HON. MEMBERS: "What about tax?".] I hear hon. Members asking "What about tax?". If the Government have to pay people to pay tax back to them, there really is no benefit.
    Mr. Foot: In view of the right hon. Lady's reply, and in view of the somewhat contradictory replies that were given earlier, will the right hon. Lady ensure that before we have the extremely important debate on unemployment next Thursday—I am grateful to her and the Government for having arranged it in response to our request—we shall have a Government statement giving the full details of the cost of unemployment?
    The Prime Minister: If the right hon. Gentleman wants particular details, I am sure that if right hon. and hon. Members on the Labour Benches table the appropriate questions they will get all the statistics available. That is the customary way.

Business of the House
Mr. Michael Foot: May I ask the Leader of the House to state the business for next week?
The Chancellor of the Duchy of Lancaster, Paymaster General and Leader of the House of Commons (Mr. Francis Pym): The business for next week will be as follows:
MONDAY 2 FEBRUARY—Second Reading of the Education Bill and of the Insurance Companies Bill.
TUESDAY 3 FEBRUARY—Supply [7th Allotted Day]: Debate on the Opposition motion on poverty, which was postponed from Wednesday 28 January.
Motions on the Northern Ireland (Variation of Limits of Candidates' Election Expenses) Order 1981 and Fisheries (Amendment) (Northern Ireland) Order 1980.
Ways and Means and money resolutions relating to gas levy.
WEDNESDAY 4 FEBRUARY—Remaining stages of the Industry Bill.
THURSDAY 5 FEBRUARY—Debate on the economic situation.
FRIDAY 6 FEBRUARY—Private Members' Bills.
MONDAY 9 FEBRUARY—Second Reading of the Employment and Training Bill.
Mr. Foot: First, I thank the right hon. Gentleman for having arranged that next Thursday we have the debate that we requested on the terrible unemployment figures. We have constantly pressed that there should be a debate on the figures once a month in Government time, following their announcement. We are grateful to the right hon. Gentleman for having arranged the debate on Thursday, but will he tell us in what form the Government are proposing to have the debate? Will it take place on a motion supporting the Government's policy on unemployment?
Secondly, when is there likely to be a statement on the Government's response to the corporate plan of the British Steel Corporation? Will there be a debate before the Government make that announcement?
Thirdly, arising from the debate that took place this week on the Armitage report and the size of lorries, will the right hon. Gentleman give us an absolute undertaking that the House will have a chance of debating those issues and voting on them before the Government proceed to support an increase in the size of lorries, especially—as was emphasised in the debate—as on the last occasion when the House had a chance of voting on the matter it voted against larger and heavier lorries? Will he give us an absolute undertaking that before any step is taken to proceed in that direction the House will have the chance to reiterate its demand, if it wishes?
Mr. Pym: I am grateful to the right hon. Gentleman for his remarks about the arrangements that we have made for next Thursday. The Government regarded it as an appropriate moment to have a debate on the lines that he wanted. It is proposed that it should take place upon a motion. That will give the opportunity for amendment if the Opposition so require. The right hon. Gentleman referred to a debate once a month. Obviously I cannot possibly give a commitment of that sort. However, the right hon. Gentleman made the request last week and the week before, and we thought it appropriate to arrange the debate on Thursday.
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I am not able to say when a statement will be made on the British Steel Corporation, nor can I promise a debate, but this is a matter that we can pursue through the usual channels.
The House had the opportunity of expressing its opinions and views on the Armitage report on Tuesday. I thank the Opposition for enabling us to take that subject at short notice, following our decision to postpone the Second Reading of the British Nationality Bill. I cannot give the firm undertaking for which the right hon. Gentleman asks, that we shall have another debate on that subject before we proceed to a decision. However, I have noted his request and I shall again consider it. I should not like him to be unduly hopeful, because we have made arrangements effectively to give the House of Commons a day for the subject. I cannot give the right hon. Gentleman the promise that he seeks but I shall consider his request.
Mr. Foot: I am grateful to the right hon. Gentleman for the way in which he responded to what I said. We sought to help him and the House as a whole with the rearrangement of business and by our agreement at short notice to debate the Armitage report. If that resulted in the House not having a chance to vote on the issue, it would be a serious deprivation. I hope that the right hon. Gentleman will, on a matter of this importance, be prepared to say "Yes, of course, the House of Commons must decide this matter."
Mr. Pym: Effectively, a whole parliamentary day was given to the Armitage report last Tuesday. It was possible for the House to vote on that occasion. I merely say on this occasion that I have noted the right hon. Gentleman's representations and I shall consider them.
Mr. Ivan Lawrence: Will my right hon. Friend ascertain what can be done to review the procedure whereby the Leader of the Opposition can effectively monopolise Prime Minister's Question Time, now that he can be removed at the diktat of a handful of trade union leaders?
Mr. Pym: That is a matter for Mr. Speaker and the House, and certainly not for me.
Mr. Jack Ashley: Has the Leader of the House seen early-day motion 34, which calls for a strict code of practice on the marketing of baby food products in developing countries?
[That this House, concerned at the marketing practices of some companies selling baby milk products in developing countries, and at the death and disease which results from their indiscriminate use in unsuitable conditions, calls upon the Government to play a positive role at the World Health Assembly next May by supporting the initiatives of WHO and UNICEF in preparing a code of marketing; by encouraging its adoption as an international regulation; by seeking to ensure that the code is as specific as possible to exclude loopholes and by calling for a central office to be set up for monitoring compliance with the code.]
Does he know that the World Health Organisation, Oxfam and War on Want are deeply concerned about millions of children being adversely affected and disabled by current practice? May we have a debate on this matter next week?
Mr. Pym: Obviously this is an important subject. I can give no undertaking of a debate next week. My right hon.

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Friend the Secretary of State for Social Services is well aware of the issue and is in the course of consultation with his ministerial colleagues in other Departments. He will ensure that the matter is raised by the United Kingdom delegation.
Mr. Kenneth Lewis: Is my right hon. Friend aware that a tremendous number of orders on Northern Ireland seem to be being dealt with rather late at night? Is an extra amount of government going into Northern Ireland? Cannot Northern Ireland be governed by the same orders as those that apply to Great Britain?
Mr. Pym: I cannot give a detailed answer. The number of orders going through the House varies at different times of the year. There have been quite a number of orders, but on the whole they have been of an uncontroversial kind.
Mr. Kevin McNamara: Given the Government's reluctance to intervene in the National Union of Seamen's strike, could the right hon. Gentleman get one of his colleagues at the Foreign Office, or in the Overseas Development Administration, to make a statement to the House about the effect of the dispute on the ailing economies of some of the natural catastrophe-hit islands of the West Indies? Perhaps one of those bodies could use its good offices to bring about a reconciliation. The economies of the islands could then be saved and the position of the shipowners and the National Union of Seamen could be maintained.
Mr. Pym: I shall draw the hon. Gentleman's remarks to the attention of my right hon. Friend the Secretary of State for Trade. I am doubtful whether a statement would assist. However, we all hope that the dispute will come to an end.
Mr. Hugh Dykes: May I remind my right hon. Friend that one of his duties is to undertake the scrutiny procedures for EEC legislation? Given that the new Standing Committee on European Community Documents has commenced its work, will my right hon. Friend consider allowing time for a debate on the question whether access to the House should be given to European Members of Parliament in a proper and institutionalised way?
Mr. Pym: I am not sure whether that would be an appropriate step to take. However, I have it in mind to consider whether there are any ways in which we can improve liaison.
Mr. Harry Ewing: Is the Leader of the House aware that Scottish Members from all parties face great difficulties because of the proposed closures of colleges of education? Is he further aware that the Secretary of State for Scotland is no longer answering letters sent to him by my colleagues and me, although he has invited the board of governors of the colleges to discuss the mechanics of the proposed closure. As the Government suffered a humiliating defeat in the Scottish Grand Committee of 9 December, does not the Leader of the House agree that they are under an obligation to hold a debate on the Floor of the House, in the Government's time, on the future of those colleges?
Mr. Pym: My right hon. Friend the Secretary of State for Scotland has made the position clear and has made a statement about it. I do not have anything to add to what
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he said. I regret that it would not be right for me to give an undertaking about providing time for a debate on the Floor of the House. That is not a possibility that I can envisage, at least in the foreseeable future.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call those hon. Members who have been rising in their places.
Mr. Michael Latham: Does my right hon. Friend envisage an early debate on the Middle East, in view of its immense importance to British interests and to the new American Administration?
Mr. Pym: As I said last week, I should like to be able to arrange a debate on foreign affairs in the reasonably near future. I cannot foresee a date in the next few weeks, but I am looking for an opportunity, as I am sure that the House would welcome such a debate.
Mr. Clinton Davis: Is the Leader of the House aware that last week he intimated to my right hon. Friend the Leader of the Opposition that he would tell the Secretary of Stale for Trade that a statement was called for on the seamen's dispute? He mentioned that again today. Given the damage done to the economy, does not the right hon. Gentleman feel it necessary to put some pressure on the Secretary of State? The dispute should be resolved through the agency of arbitration. Will not the right hon. Gentleman do more than just mention this matter to his right hon. Friend? Will he put pressure on his right hon. Friend so that the House can be made aware of the Government's position?
Mr. Pym: The real question is what will prove most helpful in bringing the dispute to an end. It is not always the case that a statement made in the House contributes to that end. I agree that it sometimes does. As I said, I have discussed the matter with my right hon. Friend. If a statement seemed appropriate and would prove helpful, it could be arranged.
Mr. John Wilkinson: Would my right hon. Friend consider introducing, in this Parliament, a Green Paper on the reform of the other place? Given the marked move that the Labour Party has made towards the authoritarian Left, will he ensure that the Green Paper follows the line of a Private Members' Bill that was introduced by my hon. Friend the Member for Kensington (Sir B. lays Williams)?
Mr. Pym: I have no plans to take that step at present.
Mr. Dennis Skinner: Will the Leader of the House ensure that either he or the Secretary of State for Transport makes a statement on the part-time adviser to the Secretary of State for Transport, as reported in the Financial Times and the New Scientist? The adviser applied for another part-time job with an Oxford group and told the group that if he did not get the job the group would not get any Government contracts. Is this not a bit like the other scandal, in which the Tory Government were handing out grants to various firms and saying "Come on, give us some of the money back"?
Mr. Pym: The hon. Gentleman likes the possibility of a scandal. I doubt whether a statement would be appropriate, but it can be considered.
Mr. Gary Waller: Will my right hon. Friend give the House an opportunity to

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decide whether it wishes to make the experimental rule that applied during the last Session a permanent feature of our procedure? During the last Session all speeches during the two hours before the winding-up speeches were limited to 10 minutes. Has my right hon. Friend noticed that on the Second Reading of the Transport Bill, in a space of two hours, three speeches lasted for nearly 20 minutes, and one speech lasted for about 25 minutes? Does not my right hon. Friend agree that such a reform would be a useful addition to our procedure?
Mr. Pym: I have that possibility under consideration. On the whole, the experiment commended itself. [Interruption.] It did not commend itself to everyone. That would be an impossibility. However, I am considering the matter.
Mr. John Prescott: Does the right hon. Gentleman accept that although he said that he would consult his colleagues about the dispute involving the National Union of Seamen—a union of which I am a member—it has not led to any statement? Is he aware that the dispute is becoming increasingly bitter? He may not care whether the dispute affects the British economy but I must tell him that it certainly affects the West Indian economy. The shipowners are not prepared to go to arbitration, unlike the National Union of Seamen.
Mr. Pym: That highlights the fact that such exchanges in the House do not necessarily help towards finding a solution to the dispute. However, I note what the hon. Gentleman said.
Mr. Ernest Armstrong: Will the Leader of the House arrange an early debate on the
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Macfarlane report, so that the House can consider the urgent question of education for the 16 to 19-year-old age group?
Mr. Pym: This is an important matter. I should like to find an opportunity for a debate, but I do not think that I shall be able to in the near future. I hope that the House will be able to hold the debate at some time.
Mr. Greville Janner: Is there not an urgent need to hold a debate on foreign affairs, as a result of the resumption of the security conference in Madrid? Should not the House debate the Soviet Union's failure to respond to pleas from many nations, including the United Kingdom, to account for the disappearance of the heroic Swedish diplomat, Raoul Wallenberg, as well as the disgraceful reduction in the number of Soviet Jews being allowed to emigrate, and their harassment?
Mr. Pym: It would be helpful to have such a debate, but time is the problem. Many pressing demands have been made. We shall look for a later opportunity.
Mr. Joan Evans: As the Secretary of State for Industry's statement on investment in British Leyland now has to have the sanction of EEC Commissioners, and as that has a bearing on the debate on the Industry Bill, which debate is to take place on Wednesday, will the Government make it clear before the debate that they intend to go ahead with the investment? Failing that, will they make a statement on their attitude to the Commissioners?
Mr. Pym: I have nothing to add to what my right hon. Friend the Prime Minister said a few moments ago from the Dispatch Box. We are following the procedure that successive Governments have had to follow since joining the EEC.

Motor Industry
The Minister of State, Department of Industry (Mr. Norman Tebbit): With permission, Mr. Speaker, I would like to make a statement about the motor industry.
The Nissan Motor Company has approached Her Majesty's Government to seek their views upon the company's intention, subject to a feasibility study, to establish a substantial car manufacturing operation in the United Kingdom. The Government have given a warm welcome to Nissan's proposal and are prepared in principle to give them their approval and support.
Nissan's proposals are to start building a car manufacturing plant, including an engine manufacturing facility, in a development area or special development area in 1982 and to begin production at the end of 1984, reaching the full figure of 200,000 cars a year by 1986.
It is Nissan's intention to achieve a very high local content involving United Kingdom and other EEC suppliers. The local content at the start of production would be 60 per cent. and the company's objective would be to increase this to 80 per cent. as soon as possible after full production is reached. The company is confident of achieving a high level of exports from the United Kingdom.
The feasibility study is expected to last four months and to cover a range of matters, including location. Two matters of special importance in Nissan's decision will be the competitiveness of local component manufacturers and the prospects of establishing a good structure for industrial relations.
The Government wish the company well, and hope that the study will reach a satisfactory outcome.
Mr. Stanley Orme: This is an extraordinary week. On Monday the Secretary of State made a statement on support for British Leyland to the tune of £1,000 million of British taxpayers' money, and on Thursday the Minister of State is forced by a press leak to make this statement. All that hon. Members have, however, is a one-page statement in which the Minister states that a feasibility study is to be carried out.
We wish to ask a number of important questions. Is the Minister of State aware that many members of senior management in British Leyland will be dismayed by this statement because of the possible consequences upon British Leyland? Will the Minister say whether Japan will use this route to avoid any possible import controls, voluntary or otherwise? What will be the effect on the discussions that are taking place in Tokyo?
What effect will this development have on the assisted areas that already have car plants, namely, Halewood and Linwood? Will production by this Japanese company have any effect on the agreement already reached between Honda and British Leyland? Will the joint organisation be producing a car in the same range as Honda and British Leyland which could have a direct detrimental effect on that production? [Interruption.] Conservative Members should recognise that we are dealing with tens of thousands of jobs in British industry. It is obvious from the two statements this week that Government policy is in confusion. What will be the effect on other firms based in Britain, namely, Ford and Vauxhall? How will the consultations take place? Who will be involved in them?
When the Minister says that a large proportion of the product will be produced in Britain which the company
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hopes will include engines, starting at a production level of 60 per cent. and rising to 80 per cent., what guarantee can he give that there will be a British content in any such production? How tough will the Government make the agreement? Will it include a request for the Japanese to remove their restrictions on British exports into Japan, which is basically a closed market to us? How many jobs is it envisaged will be created? Can the Minister give an assurance that the British-based car industry will not be injured by these proposals?
Mr. Tebbit: I think that those looking for jobs from foreign investment coming into Britain will be deeply shocked and dismayed by the churlish reception to this good news that I have been able to give to the House. I should like to deal as briefly as I can with the points in the long list mentioned by the right hon. Gentleman.
British Leyland has known of this proposal for some time and has raised no objection to it. Clearly vehicles that are built in Britain will not be subject to import controls. I would have expected the right hon. Gentleman to tumble to that. I think that this announcement will have no effect on the discussions going on between the British and Japanese motor car manufacturers concerning the voluntary restraint arrangement.
The right hon. Gentleman asked about the effect on other assisted area firms. Since over 57 per cent. of the British market is at present supplied by imported cars, representing over 800,000 cars a year, one would have expected that these 200,000 would do more to replace those than to replace other British products, provided that the British products are competitive and up to the mark. The arrangement has nothing to do with the Honda-Leyland arrangements. I have dealt with the matter of the effect on Ford and Vauxhall.
The right hon. Gentleman asked about consultation. I do not know anything about any consultations. I have told the House that the company will be conducting a feasibility study. There is no question relating to the installation of British engines in these motor cars. If the right hon. Gentleman heard my statement—I hope that he did—he would have noted the reference to the intention to build an engine manufacturing facility as part of the deal.
There is the question of restrictions by Japan on British exports to that country. My announcement does not concern exports from Japan to Britain, so there is clearly no effect. This is a question of setting up a manufacturing establishment in Britain. I am sorry that the right hon. Gentleman does not seem to want us to have the jobs.
Sir Albert Costain: Does my hon. Friend appreciate that when Ford of America decided to build a factory at Dagenham there was exactly the same opposition? Should Ford decide to close that factory, does he anticipate a similar howl of protest by Opposition Members?
Mr. Tebbit: My hon. Friend is correct. We have these displays of instant xenophobia, but gradually they fade away. The right hon. Member for Salford, West (Mr. Orme) was very adept at giving large sums of money to foreign motor car manufacturers in Britain.
Mr. Stephen Ross: Will the hon. Gentleman accept that we on the Liberal Benches warmly welcome the statement? I hope that results from it will

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materialise rapidly. Is it not a fact that if the company did not come here it could go to the EEC and we should lose it just as we lost Mitsubishi? Will Northern Ireland be looked at as a possible site? Will he assure the house that the quota for Datsun imports will be reduced by the cars manufactured in the United Kingdom and that this will answer some of the points put by the Opposition Front Bench?
Mr. Tebbit: The question of where the plant will be sited is a matter that will be a subject of the feasibility study. It is not for me to discuss that matter at this stage; it is for the company. One hopes that the Nissan motor cars that will be built in Britain, if the scheme goes through, will be competitive, and that there will be no need for large importations from Japan. Clearly it will not cover the whole model range, but it will go to the heart of the number of imported motor cars.
Mr. Peter Hordern: Does my hon. Friend accept that this application should be given the widest appreciation? It cannot do anything but good for the country, bringing as it does an improvement in technology and in much-needed employment. However, will he stress to the Japanese that it would be as well for them to give as generous a welcome to British investment in Japan as we propose to give to them?
Mr. Tebbit: That is a matter for the British Government to put to the Japanese Government when discussing investment in Japan. Equally, it is for us in this Chamber to welcome this instance of Japanese investment in Britain, because it will be good for our economy if we can secure it.
Mr. Donald Coleman: Will the hon. Gentleman make it clear that this development is very much welcomed in this country, and that any means of providing employment for the British people is welcome? Will he draw the attention of the Japanese to South Wales and, in particular, my constituency of Neath, bearing in mind our involvement in the motor industry, both in components and parts? Will he make it clear to the Japanese and to everyone that this investment is welcome to us?
Mr. Tebbit: I am extremely glad to have the hon. Gentleman's support. I believe that he speaks for the electorate on this matter. Location is a matter that has yet to be resolved. Wherever the factory goes, it will bring great benefits to the components industry, which will have an opportunity to supply components to the factory.
Mr. Hal Miller: Will my hon. Friend accept that, while any new investment and jobs are indeed welcome, there are still a number of questions that his statement has not fully answered? In particular, will he note, in the context of United Kingdom components, that 60 per cent. is an inadequate figure from which to start, because it is not possible for components manufacturers later to recover lost ground that being one of the main objections to the British Leyland-Honda deal?
Will the hon. Gentleman also note that there is concern about the continued imports of completed cars from Japan? Therefore, should not undertakings be sought from Datsun in this respect once the factory is on stream? Will he also bear in mind that there is over-capacity in the
1084
European industry already and that concentration of manufacturers is expected to take place by the time the factory comes on stream? What view does he take at this stage of the prospects for European volume car manufacturers in that year?
Mr. Tebbit: My hon. Friend says that the 60 per cent. proportion of components is too little to start. Surely he will understand from his knowledge of the motor industry that it would be very difficult for the company to guarantee to do better than that at the start of the operation. The company made plain its intention to reach 80 per cent. as soon as possible after the full output of 200,000 a year is reached.
It must surely be clear that cars which are manufactured here will substantially replace imports unless our own manufacturers throw in the towel.
On over-capacity in Europe, another matter has to be considered. It is about time that we in Britain brought our manufacture of motor cars up to the levels that we had a few years ago. Let us have some of the over-capacity on the mainland of Europe cut back instead of always cutting back here.
Several Hon. Members rose—
Mr. Speaker: Order. I hope that questions will be brief. That will enable me to call more hon. Members than otherwise will be possible. This is not the time to debate the matter.
Mr. Geoffrey Robinson: Four questions arise out of the statement. I shall put them briefly.
Mr. Speaker: Order. I merely indicate that that will cut out a supplementary question from somebody else.
Mr. Robinson: Will the hon. Gentleman give us an assurance that he will try to limit the continuing import of Japanese cars, even if this project goes ahead? Will he declare that this will involve no Government spending—in other words, that the Japanese will be spending money in this country? Will he give an undertaking that it will have no bearing on the Talbot plant in this country? Lastly, will he ensure that we have a real transfer of technology to our own workpeople and engineers? That is the most important aspect of the whole arrangement.
Mr. Tebbit: This proposal cannot affect the course of the voluntary arrangements between the two industries. It is not a part of those arrangements.
On Government spending, of course the company will be eligible for grants in the development areas, just as any other company, whether British or foreign, is eligible for them. There is no direct Government investment in the company as such. To a large extent, the workers in the Talbot factories hold their future in their own hands between now and the time that this arrangement comes into effect.
On the transfer of technology, it can only benefit British technology to have an extremely advanced factory in Britain, with British workers and engineers operating, repairing and maintaining robotic systems.
Mr. Michael Grylls: It is clear that the House welcomes the Government's success in attracting Nissan to Britain because of the benefits in jobs and increase in British-made vehicles that will result. Will my hon. Friend bear in mind that, unlike the Government's

1085
recent decision on the funding of Leyland, it is important that the Government should resist any more funding that Talbot, formerly Chrysler (UK), may seek?
Mr. Tebbit: I thank my hon. Friend for the compliment that he pays the Government on their success. I pay tribute to the work that was done by my noble Friend Lord Trenchard, who was involved in these negotiations long before I came to the office that I now hold. Investment in Talbot is a matter for future consideration. No decisions have been made. The Government have not been asked directly for investment.
Mr. Gordon Wilson: In view of the Minister's last reply, will he confirm that the British Leyland announcement and the investment that is likely to be incurred in the Nissan development will not prejudice any investment help being given to Talbot at Linwood? Secondly, in view of the reports that South Wales has already been earmarked for the purpose, will he say how open the choice of location is? If the matter is still open, will he draw the attention of Nissan to the need for employment in Scotland?
Mr. Tebbit: The company will make its decision on the basis of the site that is most likely to lead to a successful and profitable operation. That is as it should be. Talbot is a separate matter and will be dealt with on its own merits.
Sir Julian Ridsdale: Despite the damp enthusiasm shown by the Opposition Front Bench for the scheme, will the Minister give every encouragement to further joint enterprises? High technology industries produce greater employment, as in this case.
Mr. Tebbit: I can give my hon. Friend the assurance that he seeks absolutely and without qualification.
Mr. Donald Anderson: Will the Minister make clear to this very progressive company that, whatever hesitation there may be elsewhere, it will be most welcome in South Wales? To show how objective I am, may I suggest that Neath is a remarkably apt location for the site? It has an adept work force, excellent communications and proximity to two major steelworks which are in difficulties.
I have two other quick things to ask. Will—
Mr. Speaker: Order. Those two quick things will also deprive another hon. Member of the opportunity to ask a question.
Mr. Anderson: Will the steel be bought in this country? Would Nissan be considering this choice if we were not part of the EEC?
Mr. Tebbit: I note what the hon. Gentleman says about the suitability of Wales, and I am glad that he welcomes the project. Certainly I imagine that one town that will not be considered for the investment will be Salford, and I hope that the constituents of the right hon. Member for Salford, West (Mr. Orme) will be pleased about that. I hope that the British Steel Corporation will be ready, able and willing to supply the steel at competitive prices and will get the contracts.
Mr. Michael English: On a point of order, Mr. Speaker. We have all heard the Minister intimidate my right hon. Friend the Member for Salford, West (Mr. Orme) by suggesting that a particular project
1086
will not be put into his constituency because of what he has said in the House. I hope that that remark will be withdrawn immediately, because—
Mr. Speaker: Order. It was an expression of opinion. I did not notice the right hon. Member for Salford, West (Mr. Orme) looking as though he had been intimidated. Does the Minister wish to finish his statement?
Mr. Tebbit: I am certain that were we not a member of the EEC we would not be in the position of hoping to receive this investment.
Mr. Peter Emery: Will my hon. Friend consider that, with the unity of the Welsh Members, certain Cardiff constituencies might obtain the investment? Will he make it clear that if the Japanese car industry is to produce outside Japan, Britain is as good a place as anywhere for the factories to be set up, as in so doing it will not only be able to replace imports into this country but will be able to begin exporting to Europe and elsewhere?
Will the Minister tell the House whether the proposed new arrangement means that Nissan's arrangement with Alfa Romeo has fallen down, and that it will be replacing the negotiations that Nissan was having in that respect?
In the discussions that the Minister's Department has already had concerning the plant, there must have been a range of figures mentioned. Will the minister—
Mr. Speaker: Order. The hon. Gentleman is taking even longer than the hon. Member for Swansea, East (Mr. Anderson).
Mr. Tebbit: The tentative conclusion—and I must emphasise that it is a tentative conclusion—of the company is that Britain is the best place in which to make the investment. The study remains to be made and I hope that it will lead the company to a definite conclusion.
The arrangements between Nissan and Alfa Romeo are entirely a matter for the two companies and nothing whatever to do with me.
It is the intention of the company to export motor cars from Britain.
With regard to amounts of aid, since we do not even know where the factory will be, or how much it will cost, it is much too early to talk about those matters.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call three more hon. Members from each side.
Mr. Giles Radice: Accepting that there are some problems with the project, if Nissan comes here, will the Minister consider very seriously the claim of the Northern region in view of the very high unemployment, the good industrial relations, and the long tradition of engineering skills in the region?
Mr. Tebbit: I am sure that the company will take all those factors into account in its consideration. The great improvement in industrial relations and the much better strike record over the past year have helped to convince the company that it may well come to Britain.
Mr. John Bruce-Gardyne: Has the Department of Industry really thought this through? Is it not conceivable that the project could involve taxpayers' subsidies running into hundreds of millions of pounds to enable the company to compete directly with British

1087
Leyland, to which we have just given £1,100 million, with De Lorean, to which we are just giving £80 million, and with Talbot, to which we are about to give another £100 million?
Has the Department considered the furious resentment that the project will cause in France, and the possibility that it will lead to the rejection by the Commission of our application for approval of the grant to British Leyland?
Mr. Tebbit: Apart from the grants which would be made available to any company, British or foreign, choosing to come to a development area in Britain, there is no public money involved. This is a case—which I should have thought my hon. Friend would welcome—of a private enterprise company staking its own money. I certainly welcome it.
As to the possible furious reaction from France, I am concerned to precisely the same extent as my French colleagues are concerned at furious reactions which sometimes come from Britain over the actions of the French Government.
Mr. Sydney Bidwell: Will the Minister accept that in view of the appalling rate of unemployment in Britain under the Tory Government, the attitude of my hon. Friends from South Wales is very understandable, that the trade union movement is concerned about the formation of foreign capital in Britain, and that decisions to close the undertakings in the course of time can be taken miles away from this country?
Mr. Tebbit: The decision to open or close factories is taken by customers who either do or do not buy the goods.
Sir Anthony Meyer: Is my hon. Friend aware that the investment—which is, of course, dependent on British membership of the EEC—would be as welcome in North Wales as it would be in South Wales?
Mr. Tebbit: I am certainly gaining that impression.
Mr. J. W. Rooker: For the avoidance of doubt, will the Minister confirm that when he talks about the percentage of local input—the 60 to 80 per cent. range—"local" means the United Kingdom plus the rest of the Common Market countries, and that he was not talking about British suppliers? Does the figure of 60 to 80 per cent. include the machine tools that will go into the factories? Will there be jobs for British tool makers and British designers, rather than just for assembly workers?
Mr. Tebbit: The jobs will not be just for assembly workers. Who will get the jobs and who will get the contracts, whether here or on the Continent of Europe, will depend on who puts in the competitive tender and who can deliver on time.
Mr. Iain Mills: May I assure my hon. Friend that many of us welcome any means whereby British-built cars will be able to compete equally with the products of our EEC partners in this country and abroad? Will he assure me that he will reconsider a point that I have made to his predecessor on many occasions—that the Government's regional policy therefore precludes any possibility of the factory being sited in the West Midlands, particularly in the Coventry area, near my constituency, which has all the skills and traditional abilities that would aid the enterprise?
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Will the Minister take note that, with engineering approval being a difficult matter, it is often difficult to achieve figures of 60 to 80 per cent. local content? Will he therefore consider becoming involved in that aspect?
Mr. Tebbit: The Midlands will receive a fair proportion of the £1 billion which will be going to British Leyland, so I do not think that the Midlands should feel unduly hurt about the matter. It is, of course, up to the component companies in the Midlands to make sure that they get themselves sharpened up to the extent that they are able to get the contracts.
Mr. Orme: I do not need lectures from the Minister on unemployment and on industry. We are concerned about creating permanent jobs, and we want to see a successful British-based industry. I appreciate that my hon. Friends from South Wales and the North-East want jobs in their areas and want to see this development take place. My probing of the Minister was intended to ensure that when the firm comes here it will be on a permanent basis and that the jobs will be guaranteed. That is what we are concerned about.
We are looking at the industry as a whole—at British Leyland, at Ford and at Vauxhall—and we want to see a successful car industry. We want to create more jobs. We do not want to transfer jobs from one part of the country to another. We want jobs in South Wales, in the North-East and in the rest of the country.
Mr. Tebbit: I understand that the right hon. Gentleman did not want a lecture from me, but it would seem that he needed it. During the course of the questioning he has begun to modify his attitude and to accept that the development—if we can secure it—will be as welcome as Ford and Vauxhall. I remind him that no jobs are permanent or guaranteed; they depend upon the customer.
Several Hon. Members rose—
Mr. Speaker: Order. The hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) wishes to raise a point of order.
Mr. Harry Ewing: On a point of order, Mr. Speaker. It would be very easy to permit the Minister's comments about Salford's not being considered under these proposals to pass as though it were a light-hearted throw-away remark. Have not hon. Members in all parts of the House the right to ask probing questions about any statement that is made by any Minister without having to suffer interference by the Minister with their parliamentary duties? Should not the Minister of State withdraw that remark?
Mr. Speaker: Order. The whole House heard the exchange. The Minister is responsible for his own statement.
Mr. David Winnick: On a point of order, Mr. Speaker.
Mr. Speaker: Order.
Several Hon. Members: rose—

Royal Assent
Mr. Speaker: Order. I have to notify the House, in accordance with the Royal Assent Act 1967—
Mr. Dick Douglas: On a point of order, Mr. Speaker.
Mr. Harry Ewing rose—
Mr. Speaker: Order. Nothing can interrupt me when I am reading the Acts that have received the Royal Assent. I will take the point of order afterwards.
I have to notify the House, in accordance with the Royal Assent Act 1967, the the Queen has signified Her Royal Assent to the following Acts:

1. Social Security (Contibutions) Act 1981

2. Bearsden and Milngavie District Council Order Confirmation Act 1981

3. Churches and Universities (Scotland) Widows' and Orphans' Fund (Amendment) Order Confirmation Act 1981

4. Cumnock and Doon Valley District Council Order Confirmation Act 1981

5. Dunfermline District Council Order Confirmation Act 1981

6. Peterhead Harbours Order Confirmation Act 1981

Mr. Ewing: Further to the point of order that I raised earlier, Mr. Speaker, I had hoped that the Minister would at least show the humility that befits a Minister from time to time and withdraw his remarks. However light-hearted these remarks may seem when they are made by word of mouth, when they are read in the Official Report they do not appear by any means to be light-hearted. Surely the Minister must, in honesty, withdraw his remark. If he does not, he is a disgrace to the House.
Several Hon. Members rose—
Mr. Speaker: Order. There is no breach of order, and it is therefore no good hon. Members saying to me "On a point of order" when they want a statement from the Minister. Therefore I shall take no further points of order on that question.
Several Hon. Members rose—
Mr. Michael Foot: On a point of order—
Mr. Speaker: Order. I am not taking points of order from anyone on the matter that I have already dealt with.
Mr. Foot: I heard what you said, Mr. Speaker, and I am sure that you are right that it is not a point of order. It is, however, surely a matter of good manners, even though we do not—
Mr. Speaker: Order. Even the Leader of the Opposition must obey the Chair. I must tell the House that this is not a point of order. It is a matter of disagreement between both sides.
Mr. Bob Cryer: It is disgraceful.
Mr. Douglas: On a point of order, Mr. Speaker—
Mr. Speaker: It is not a point of order. We come to the ballot for notices of motions for 16 February.
Mr. Cryer: You are not a dictator, you know. You are a Chairman.

Royal Assent

  BALLOT FOR NOTICES OF MOTIONS FOR MONDAY 16 FEBRUARY
  Members successful in the ballot were:

  Mr. Robin Squire

  Mr. Ivor Stanbrook

  Mr. Ivan Lawrence

  Several Hon. Members rose—
  Mr. Speaker: Order. I am not taking points of order on the matter with which I have already dealt. If they concern something different I shall take them.
  Mr. Winnick: It is for you, Mr. Speaker, to decide which points of order you take and which you do not. That is your right. I trust that we have the right, as hon. Members, to raise what we consider to be an important issue. If, therefore, Mr. Speaker, you wish to say, in effect, that what I am saying is not a point of order, you must do so.
  My point of order is this: I thought that we hon. Members had the right to put our points of view. However, if by putting our points of view we can be subject to intimidation by a Minister, who will say, in effect, that because of—
  Mr. Speaker: Order. The hon. Gentleman is quite clearly trying to keep alive an issue with which I have already dealt.
  Mr. Cryer: On a point of order, Mr. Speaker—
  Mr. Speaker: Order. I shall regard it as a gross discourtesy to the Chair if anybody persists in raising the question upon which I have already ruled. I warn the hon. Member for Keighley (Mr. Cryer) that I shall regard it as such.
  Mr. Cryer: This is an important issue, Mr. Speaker, and it is different from the one upon which you have already ruled. You may recall that I was a Minister at the Department of Industry. The legislation under which grants are made to the assisted areas is the Industry Act 1972, modified by the 1975 Act. That legislation does not allow a Minister any discretion. I would have thought that if the Minister announced publicly that he was going to use his discretion in a way that was against the law, that would be an occurrence that you should prevent, Mr. Speaker.
  Several Hon. Members rose—
  Mr. Speaker: Order. I have not heard such a statement.

  BILL PRESENTED
    REDUNDANCY FUND
    Mr. Secretary Prior, supported by Secretary Sir Keith Joseph, Mr. Secretary Younger, Mr. Secretary Edwards, Mr. Leon Brittan, Mr. David Waddington, and Mr. Peter Morrison, presented a Bill to increase the limit imposed by section 109(2) of the Employment Protection (Consolidation) Act 1978 on the aggregate amount which may be borrowed by the Secretary of State for the purposes of the Redundancy Fund: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed [Bill 56].
Orders of the Day
  SUPPLY
  [6th ALLOTTED DAY]—considered

  Public Accounts
  Mr. Dick Douglas: On a point of order, Mr. Speaker.
  Mr. Speaker: Order. I am not taking points of order at the moment. I have already embarked upon the business of the day.
  Mr. Douglas: On a point of order, Mr. Speaker—
  Mr. Speaker: Order. The hon. Gentleman and the House know what to do if they are not prepared to accept my ruling. Mr. Joel Barnett—
  Mr. Douglas: On a point of order—
  Mr. Speaker: Order. I am not taking a point of order, and I must ask the hon. Gentleman to resume his seat.
  4.26 pm
  Mr. Joel Barnett: I beg to move,
  That this House takes note of the Eighth, Ninth, and Eleventh to Thirty-Fifth Reports from the Committee of Public Accounts in the last Session of Parliament, and of the Treasury Minutes and the Northern Ireland Department of Finance Memorandum on those Reports and on the Fifth, Sixth, Seventh and Tenth Reports presented in the last Session of Parliament (Cmnd. 7925, 7962, 7992, 8066, 8067 and 8125).
  Before turning to the reports which we are about to debate, I hope that I shall be allowed to pay a number of tributes, as is the custom, as the Chairman of the Public Accounts Committee.
  First, I want to give my personal thanks to the members of my Committee, who supported me so admirably throughout last Session. I am most grateful to them for their hard work and for the support that they have given me. At the same time—I am sure that hon. Members who were on that Committee will wish me to do so—I thank the Clerk of the Committee, Helen Irwin, who, with a very small staff—her assistant and one other assistant—did a remarkable job throughout the Session. Both in volume and quality of work, we were fortunate in our staff.
  I pay a personal tribute—which I am sure will again be supported by my Committee—to Sir Douglas Henley and his staff. Sir Douglas Henley, the Comptroller and Auditor General, will be retiring later this year. I worked with him in the Treasury when I was Chief Secretary and then as Chairman of the Public Accounts Committee. At a time when civil servants are generally under attack it is right that I should say that that gentleman has given an enormous amount of first-class service to this country in all the duties that he has performed. I know that I carry members of the Committee—and I hope also hon. Members in the House—with me in wishing him a healthy and lengthy retirement.
  I add a tribute to the Northern Ireland Comptroller and Auditor-General, Mr. Sythes, who has also retired. Whilst offering thanks, I should also include all the witnesses who have appeared before us, including Joe Carey from the Treasury, who, as always, has been assiduous in his
  1092
  attendance, even if his answers and those of the witnesses were not always to the liking of the Committee. We appreciate the answers that they have given, and where we disagree with them we shall indicate from time to time. Generally speaking, both the Treasury witness and the other witnesses give us first-class and positive responses to the questions that we put to them.
  The Session has been busy and historic, at least in terms of the number of reports which we have issued. Thirty-five reports were issued, some of which have been debated. We are now debating 27 reports on the relevant Treasury minutes. All the reports were unanimously approved by the Committee.
  On 1 May 1980, when we last debated the Public Accounts Committee report, we discussed six reports of our Committee and eight previous ones. At that time I said that it would be impossible for me to refer to all those reports. With 27 reports before us today, I hope that the House will forgive me—I am sure that it will—if I do not refer to them all.
  I must go along with the tradition of not referring to the Northern Ireland report, even though I should place on record my appreciation of the kind remarks of the hon. Member for Belfast, South (Mr. Bradford) in our last debate, when he said that he would have liked me to comment on Northern Ireland affairs. I have decided, however, that it might be better to abide by tradition on this occasion as well.
  Although I am not able to refer to so many of the reports, I hope that I shall not be thought in any way discourteous, or that it will be concluded that any of those to which I do not refer are not important. All the reports are important, but I am governed by time.
  There is a common thread running through all the reports—an all-party desire to have the most cost-effective and efficient way of spending the huge sums of public money that we are discussing, and to ensure that we get the best possible value for money. That is not a party political issue, regardless of the level of public expenditure. To paraphrase what I said in a previous debate, one Department's waste of public expenditure is another Department's cut—or, indeed, its own cut.
  The small number of reports that I want to refer to have one aspect in common. The subjects covered by them will certainly be coming up again repeatedly in the years ahead. That is inevitable. They are subjects that are constantly coming before Departments and, therefore, the PAC. In no respect is that more the case than with the sixteenth report, relating to the Ministry of Defence. I want to refer to two most important issues in that Department. One is Sting Ray, but I must utter a passing word on cash limits, which I shall return to in the case of the carry-over of cash limits on the twenty-seventh report.
  The PAC strongly supports the Treasury in reducing the Ministry of Defence's cash limit by £72 million in 1979–80 on account of the 1978–79 excess. The overspend, we now understand, is continuing. It continued into 1979–80, and again into 1980–81. I hope that the Financial Secretary will be able to give us some indication that no further overspend is expected.
  I turn now to the Ministry of Defence report and welcome the steps that the Department has taken to improve estimating and control of development work, which includes greater attention to estimates at the project definition stage, the improvement of internal procedures

  1093
  and relationships with contractors, and a better cost recording and reporting system in the naval weapons directorate.
  On the other hand, the Committee was far from satisfied with the position on Sting Ray, which is an air-launched anti-submarine torpedo being developed under contract by Marconi. There is no foreign participation in the project, and, so far, no prospective overseas customer. The project definition stage of development began as long ago as 1969, but the development programme had to be completely revised in 1976 after technical problems were encountered. At that stage, Sting Ray was preferred, subject to a later review, to an improved version of the United States MK 46 torpedo, which offered some of Sting Ray's characteristics, with an earlier in-service date, for about half the cost.
  The further review in 1978 indicated a widening in the price difference between Sting Ray and the United States torpedo, but Ministers decided at that time that Sting Ray should proceed, because of its potentially better operational performance. The latest cost estimates that we were given, at September 1979 prices, are £920 million for the development and production of Sting Ray—so one assumes that it is now in excess of £1,000 rnillion—compared with £200 million for meeting the requirement by modifying the Ministry's existing MK 46 torpedoes and buying some of the improved version from the United States.
  These are huge sums, and there are huge differences in cost. We in the PAC commented on two aspects of this project. The first was the justification for preferring Sting Ray to the improved MK 46 torpedo. We felt bound to say that on the evidence available to us we were not convinced by the Ministry's case for spending the additional £720 million that Sting Ray will cost compared with the United States torpedo. We suggest, in view of the technical issues involved, that the Select Committee on Defence should look into that aspect of the matter. But if the Ministry's confidence in the latest timetable for Sting Ray and in the cost estimate is not justified I certainly hope that it will be reviewing the project's cost effectiveness in terms of the resources still required to complete it. That is certainly the view of the Committee.
  I was interested to note the views of the Government in the Treasury minute. I know that Treasury minutes are most carefully drafted, so I noted the wording with particular interest. They recognise the problem involved, but I note that the Government have in mind that they may need to consider the matter again if other factors arise in the next year or so. I hope that the Financial Secretary will give us his observation on whether anything has happened that could possibly mean that Sting Ray will not be proceeded with.
  Of course, I and the members of my Committee recognise the great problem created by the understandable desire, which I share, to buy British, and the huge differential in cost between the two torpedoes. We recognise also the problem with highly technologically advanced weapons of this kind. However, when there is a difference as large as this one must look at it again. One could buy a great many British goods, providing more employment in Britain, with the £720 million that might be saved by purchasing the MK 46 torpedo. I hope, therefore, that the Minister will be able to tell us more about that tonight.
  1094
  The next item that I wish to refer to in the MOD report may also have consequences for the future. It is International Military Services Ltd. and the effect on IMS of the Iranian situation. Its contracts with Iran have accounted for most of its business, and the company is running on a tight margin with only very small reserves. When we were discussing the matter it was down to £2 million in relation to a turnover of £246 million in 1978. The 1978 accounts, showing a loss of £12·4 million, were filed only shortly before the Public Accounts Committee hearing in February 1980, with an audit opinion which was heavily qualified for the understandable reason concerning the uncertainties surrounding the Iranian contract.
  The Ministry told the Committee that IMS's order book was recovering and that it expected to trade at a profit again. We criticised the Ministry for failing to tell the PAC of the qualified audit opinion on IMS's 1978 accounts. We were left to discover it from a copy of the accounts supplied after the Department had first given evidence. Since then, however, a newspaper article has appeared making severe and serious criticisms of IMS and the Department, all of which, I am glad to say, has been rebutted by the Department, which has denied them categorically. If they were true they would be very serious allegations. The Committee will have a number of searching questions to put to the Department in due course on the whole subject.
  I turn to another report that has serious consequences for the future and getting value for money from our public expenditure. I refer to the twenty-fourth report and the vital question of special employment programmes, not very pleasantly described as YOP and STEP—the youth opportunities programme and the special temporary employment programme. I should make it clear that neither I nor members of my Committee are seeking to make a party political point out of the matter because the high levels of unemployment that face the country now have been and will be with us for a considerable time. We want to ensure that the limited resources that are available to cope with the serious problem through the Manpower Services Commission are used to the best possible advantage.
  It is all too easy to criticise the Manpower Services Commission and the Government because of the understandable concern and worry that everyone in the House has about the high level of unemployment. It is too easy to criticise them simply for throwing money at the problem. Large sums of money are being "thrown" at the problem. I do not mean that the Manpower Services Commission is not conscious of the need to be careful about the way in which money is being spent. I am pleased to see that there have been some improvements in control of the administrative costs, particularly those on such schemes as STEP.
  We also welcome the Manpower Services Commission's assurance on the need for tighter guidelines and an improvement in the quality and the number of monitoring visits. That would mean a small increase in costs, but we hope that it would be much more cost-effective than not having monitoring visits.
  We are told in the Treasury minute that the Manpower Services Commission will continue to watch all aspects of these matters. So shall we in the Public Accounts Committee, for everyone's interests, not least those of the young people who are, tragically, unemployed, are at

  1095
  stake if we are to see money wasted which could otherwise be spent on saving valuable jobs and providing training for young people.
  I turn to the report to which I referred earlier, that on the Ministry of Defence, the DHSS and the Department of Transport. It is the twenty-seventh report on the carry-over of cash limits at the end of the financial year. The parliamentary cash control system requires an annual cutoff of expenditure at 31 March. We have all heard, and we are concerned, about the effects of that on sound financial management of some of the Government's major expenditure programmes. In our constituencies and elsewhere we hear from time to time of money being wasted because there has been a rush to spend it before 31 March, because of the fear of those spending it that they will not receive the money the following year. We thought that that argument was worth considering.
  The PAC took the initiative of inquiring into the effects on the three Departments most involved; the MOD, the DHSS and Department of Transport. It is interesting that none of those Departments supported the view that the present system resulted in wasteful spending at the year end. They would have liked to see some flexibility in the cash limit system, which was also interesting. I should be interested to hear how the Financial Secretary has dealt with those views in his discussions with the Departments concerned. Indeed, I should like to hear about many of the discussions that the Financial Secretary has had with the Departments.
  In order to be certain of keeping within the cash limit, a Department must aim to spend substantially below it when the expenditure flow cannot be controlled accurately. Even 1 per cent. underspending on a large programme can be substantial in cash terms. The Treasury was considering a scheme for a 5 per cent. carry forward of underspending on capital programmes, such as roads and the MOD procurement programme. The cash limit for the next year would then be adjusted accordingly. Departmental views differed about whether such a scheme would work.
  In the Public Accounts Committee we were sympathetic in principle to such a scheme, subject to the need for strict controls over its application and to Parliament's being kept informed of the details each year. We suggested that a controlled experiment would be helpful. I note that the Treasury was perhaps a little concerned about a few of the words that we used, and that a less censorious attitude to occasional unavoidable overspending might be an acceptable development of the cash limit system. But I emphasise that we said that any overspending should mean an automatic reduction in the limits for the following year. That does not appear to have happened in the Ministry of Defence in the past year or two.
  I was surprised at the comments in the Treasury minute that tell us that it cannot support or condone any relaxation of cash limits. At that time, we in the Public Accounts Committee were talking about a Treasury scheme. I understand that it was not an agreed scheme but a proposal or an idea concerning one way of dealing with flexibility. In the light of the Treasury minute's comments it would be interesting to know whether Treasury Ministers agree with Treasury officials—I know that that is a lot to
  1096
  ask—because to imply that our report supported a relaxation in cash limits is far from the truth. Indeed, we specifically said in our report:
  "although any overspending should mean an automatic reduction in the limit for the following year."
  We said that we would be interested in an experiment to see how it worked, because, like the Treasury, we do not want to see serious harm done to a system which we believe is in the best interests of control of public money. However, there seems to be some difference of opinion if it is thought that the Public Accounts Committee was seeking to relax the system of cash limits in a major way. We are not seeking to condone overspending of cash limits.
  I turn to the twenty-eighth report. Among other matters in that report we examined the adequacy of parliamentary accountability and sanctions within the European Economic Community. We asked for more comprehensive statements on the EEC budgets, United Kingdom contributions and receipts and the corresponding out-turn figures for reconciliation with the Consolidated Fund accounts. I am delighted to be able to welcome what I consider to be a constructive response from the Treasury, in that it will be publishing figures which I hope will be helpful to the Committee and the House.
  Since then the Public Accounts Committee has looked briefly at these matters in relation to the points that we discussed in the previous report—not because we pretend that the United Kingdom system of control is perfect but because we are concerned to see, for example, whether the Court of Auditors is exercising an adequate degree of control over Community spending in other countries and in the Community. That is under the direct control of the Community. In the current Session we propose to look at that aspect of EEC matters. In due course I hope that our report will be of interest to the house.
  I now turn to the thirtieth report, on Rolls-Royce. We examined the Department, the NEB and, exceptionally, the chairman of Rolls-Royce, on the loss of £58 million disclosed in the company's 1979 report and accounts. The chairman's statement had indicated the loss arising from RB211 sales, priced in United States dollars, on which the company had expected to benefit from a fall in sterling against the dollar. But the exchange rate had moved the other way. In addition, contract prices had escalated in United States price indices but United Kingdom inflation had out stripped that in the United States. The chairman had claimed that the NEB and Government Departments had accepted the exchange rate assumptions used by the company in calculating its offers. Rolls-Royce had not protected its United States dollar receipts by selling forward in the currency markets.
  The Department told the Public Accounts Committee that it had accepted the assumptions in the context of the company's five-year forward plans. Neither the Department nor the Treasury agreed that they had accepted them in relation to the offer on particular contracts. The Department had thought that individual contract pricing and the question of forward sales were matters for Rolls-Royce management. With hindsight, it thought that there were lessons for its new monitoring arrangements.
  The PAC accepted that Rolls-Royce had taken the fully considered decision to operate in the spot market and should not be criticised with the benefit of hindsight. We noted that the company was now adopting the normal commercial practice of avoiding undue currency risks, but

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  we considered that the monitoring arrangements of the NEB and Department were open to criticism for failing to disclose the misunderstanding about exchange rates and the company's reliance on the spot market. However, having regard to the assurances of Government support for Rolls-Royce, we considered that the Department should have been aware of the possible financial consequences of the company's policies.
  Rolls-Royce informed the Committee of its proposals for supplying information to enable the Department to undertake monitoring. The Committee thought that, as a sound starting point, it was important that the Department should have full information about the financial implications of policies and, in certain cases, instances where there are departures from them. I am pleased to note from the Treasury minute that the new monitoring arrangements are in operation, and I look forward to hearing from the Financial Secretary how they are proceeding.
  The thirty-second report is an important one, relating to the Departments of Industry and Energy and the Property Services Agency. I wish to deal with only one aspect, namely, private finance for nationalised industries and publicly owned companies. Our report raises some fundamental issues about the rationale and remuneration of private sector finance obtained for nationalised industries and similar public sector bodies.
  The Committee considered the Department of Industry's decision to ask Rolls-Royce to secure substantial fixed interest finance from the private sector in 1980 and the Department of Energy's announcement that private capital would be introduced into the BNOC. We stressed, and I emphasise again, that we were not concerned with the political aspects of such investments or with the separate question of selling parts or the whole of nationalised concerns to private owners. We were concerned with the financial impact on the Exchequer.
  We drew attention to the fact that there could be no risk of capital being lost to private investors because the industries were fully backed by the Exchequer. If the private capital took the form of fixed interest lending we saw no reason why the industries should pay more by way of interest than the Exchequer would pay on comparable gilt-edged securities. However, that would seem to have no particular attraction for investors. If the capital took the form of equity, only profitable industries were likely to attract private investors, and the question arose, how much the industries and, at one removed, the Exchequer, should be prepared to pay by way of dividends in exchange for the advantages seen in a greater stimulus to efficiency that private participation might be thought to bring.
  We considered that Departments monitoring public bodies should ensure that they received information that revealed to the Government the financial consequences of using private sector fixed interest finance and we hoped that the Government would bear in mind the likely effect on the Exchequer of seeking private equity capital. Essentially, we were asking the Government to clarify the situation.
  The Treasury minute gave the Government's approach. It is a lengthy document and I refer to only one reply, namely, that on the important question of equity issues for Exchequer-backed bonds. I am pleased to note that the Treasury accepted the PAC's view, but the issue of shares in subsidiaries was not ruled out and the Government were
  1098
  not averse to a substantial take-up of equity capital in freestanding enterprises within the public sector where market forces would operate because Exchequer credit would not be at stake. By necessity, we had to deal with the matter briefly, as did the Treasury minute. However, it is a question of growing importance and I hope that the Financial Secretary will clarify the situation and the Government's views.
  I turn to a report that is not specifically on expenditure, but, rather, on revenue. However, if anything, it has even more serious consequences than do most of the reports on public expenditure. I refer to our twenty-ninth report, dealing with the black economy.
  The latest estimate of the chairman of the Board of Inland Revenue is that the income that is going untaxed is £12 billion, on which the loss of revenue could be £3 billion to £3½ billion. The PAC said that the black economy dwarfed all other problems facing the Department. Were we not so cautious a Committee we might have added "and the nation". The problem of dealing with the black economy and the loss of so much tax revenue dwarfs many of the problems that we face.
  I note the careful choice of words in the Treasury minute, which refers to the need for a constant review. I agree that the detection of evasion is, as the Treasury has said, a difficult and cost-intensive matter. But it is also a dangerous issue. If it is allowed to continue to grow as it has been growing it will pose grave dangers to the structure of our democratic society. On the other hand, I am bound to recognise, as do the PAC and the House, that the method that we choose to deal with it will also pose serious problems, because in the lengths to which we go to deal with the problem we could be in danger of infringing the personal liberties of the democratic society that we seek to defend.
  We need to have a careful balance, and I was pleased to note from the Treasury minute that an investigation is being carried out by Lord Keith into the whole question of how we might be better able to deal with the problem. I wish Lord Keith the best of luck. It is a serious and difficult problem and I hope that the Financial Secretary will be able to give us some indication when we might expect the results of the review. I hope that they will be made public as soon as they are available.
  I apologise for not being able to refer to many of the reports. That emphasises the need for more frequent debates on the Floor of the House on these important matters. The issue of the control of public expenditure will not go away. Whatever the level of public expenditure under any Government, questions of waste, efficiency, effectiveness and value for money will be of growing importance.
  That brings me to the role of the Comptroller and Auditor General and to the Government's Green Paper. I said in our previous debate on 1 May that I hoped that the PAC would be able to report fairly quickly. I do not apologise for the time we have taken on this important matter. The issue is too important to rush, but we have nearly completed our report and I hope that we shall be able to publish it in the first week in March. I should like to take the opportunity to thank again the members of the PAC, who have had an enormous burden to carry and a huge volume of papers to consider. I hope that the report, which we see as a major report, will be helpful to the

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  Government, the House and the country, and that we will be able to get a better control of public expenditure than has yet been achieved.
  I should like an assurance from the Financial Secretary, though I know that it is not entirely in his command, that we shall have an opportunity to debate our report in the House before a Government decision is taken. Does it remain the Government's intention to legislate as soon as possible, by which I assume they mean next year? It only remains for me to ask the House to note the reports and, with them, the vital need for improved control of public expenditure.
  5 pm
  Mr. Peter Emery: First, I congratulate the right hon. Member for Heywood and Royton (Mr. Barnett) on the way in which he introduced a vast number of reports, the ease with which he was able to cover the many subjects, and the considerable work that his Committee has carried out. I am sure that all hon. Members would wish to congratulate him.
  I wish to deal with two reports that were not mentioned by the right hon. Gentleman. They affect the Manpower Services Commission, the underwater training centre, Shenley Trust Services, a company of which I am chairman, and me. Obviously I declare an interest.
  I wish to make one personal matter clear. I have always held, and still hold, that it is of great use to the House and to the Government that Members of Parliament should have interests outside the House. It allows Members to bring a wider experience into the House. Persons who are able only to make judgments on party political experience or experience as a Member of Parliament cannot contribute as much as those with a wider experience. I am delighted that my constituency demanded that the Member that it adopted, when it adopted me, should have interests outside politics.
  With regard to the report on the underwater training centre, I am particularly concerned that the Select Committee, in examining this unique and considerable advance in technology, saw no way to praise what had been achieved. It is the first school in the world to have been set up for training divers in mixed-gas techniques and with a lock-out facility. The centre has been successful. It is worthy of note and praise, to the extent that it is being copied by Norway and Canada.
  There are two criticisms in the report of the Public Accounts Committee which I must answer. I had hoped not to have to do so directly, because, although I have argued that Members of Parliament should have business interests and declare them, I feel that they should not use the House as an instrument for carrying them forward. It is because I have not been able to get the Manpower Services Commission to correct certain information that I cannot let the matter pass in this debate.
  My first criticism is direct, the second indirect. The first is set out on page XIII of the twelfth report. Basically the Committee accepted a criticism that in carrying out the management of the underwater training centre, Shenley Trust had adopted too remote an attitude. That is a serious criticism. I quickly put to the House three items of information. First, a feasibility study was written by Shenley and adopted by the MSC, and when the centre was created a unique aspect of consultation was set up. As well
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  as a board of control there is an advisory board composed of 16 people representing North Sea oil interests, diving and other industries concerned with training for underwater work. They are divers, people from the oil industry, medical people, people from the Ministry and others who can make a contribution. That council meets two or three times a year and its sole concern is to ensure that the centre is not remote in attitude. It advises the centre on modernising its techniques, updating its operation, and so on.
  In addition, the criticism was substantiated not by evidence but purely by a statement made in cross-examination. It is remarkably strange that the Manpower Services Commission is willing to stand by that criticism when it nominates three of the five members of the board of control of the UTC. One of them is Mr. Bill Reed, the TGWU area organiser for Aberdeen, to whom I pay tribute for his considerable amount of help and work in the buildup and successful operation of the underwater training centre. The second is the civil servant—there have been three different persons in the life of the UTC—who is responsible within the MSC for the liaison and operation of the centre. Thirdly, the chairman is Mr. Duncan Dewdney, who was chairman for all but three months of the committee's considerations. He was appointed by the Manpower Services Commission and for much of the period he was the deputy chairman of the MSC.
  One would have thought that if that criticism was to stand up to examination it would have been voiced by the representatives of the MSC at some stage during the 23 meetings of the board of control. Not once was that done. It therefore casts some doubt on the fact that the criticism was made by the present chairman of the MSC who has been to the centre only once, and has never attended a board meeting. Perhaps when that evidence is put before the House it will make people believe that the criticism was facile.
  My second point arises indirectly. In the twelfth report, the Public Accounts Committee suggests that:
  "The contract allowed Shenley a margin of 70 per cent. profit over the attributable cost."
  The public and the press took an interest, which is not surprising where a Member of Parliament is concerned. One hears only certain hon. Members below the Gangway jeering about 70 per cent. profits. I and the company submitted to the Public Accounts Committee evidence, which is published fully in the thirty-fifth report, stating that that level of profitability was wrong and inaccurate.
  While the matter was being considered, the PAC never once invited Shenley—which was managing the underwater training centre—or me to give evidence. It was at my suggestion that evidence was submitted to the Public Accounts Committee. At a press conference to introduce the thirty-fifth report, the Chairman of the Public Accounts Committee stated that at no time had Shenley disagreed with the figures of the Committee. Three times, on pages 1, 2 and 3 of the thirty-fifth report, we say absolutely that the 70 per cent. profit is wrong.
  Mr. Joel Barnett: The hon. Gentleman was present in the room. I do not believe that what I said was in any way inaccurate. The difference of opinion between us is on the question where the total profit, or surplus, if the hon. Gentleman prefers, should be attributed and not the actual figures.
  Mr. Emery: I am certain that the right hon. Gentleman would not wish to mislead the House. The third line on page vi of the thirty-fifth report states:
  "neither the MSC nor Shenley have disputed the factual accuracies of the figures of profit derived".
  We have denied this, and I shall quote exactly where and how.
  Mr. Michael Morris: My hon. Friend is tempting the House to mislead itself. The point of difference is not on the actual pounds spent—the attributable costs and the margins available—but on the percentage figure.
  Mr. Emery: That is correct. If I may continue with my speech, the House will see exactly the relevance. One can obtain percentage figures only by having basic and proper facts on which to base them.
  The history of the way in which the contract was obtained is important when considering the submission of evidence to the Committee. The Shenley Trust was not requested to undertake the feasibility study. It did it off its own bat. In September the MSC intimated that it wished to invite Shenley to contract to create the underwater training centre.
  Mr. John Prescott: While Shenley may not have been asked to do the job by the Government, I and others asked for a school to be set up, and I approached the hon. Gentleman who was then the Minister responsible.
  Mr. Emery: Ever since the Hewett field came into existence, many of us have considered it was necessary to have British diving training. However, nobody specifically requested the feasibility study.
  The feasibility study recommended that the capital for the school should be provided privately. After we had been asked to proceed, the MSC suddenly intimated that it wanted all the capital to come from the Government and asked us to continue with the turnkey project. That project was accepted, and negotiations went ahead in which the fees and heads of agreement were settled. On 19 December there was a press announcement that the Government had agreed to the proposal to provide capital for the centre; that the centre should be located in Fort William; and that they had asked Shenley Trust, a merchant bank group, to establish the centre in conjunction with the Training Services Agency.
  The important point is that a fee was established only to deal with the turnkey project. Only in January, after the announcement, was Shenley asked whether it would be responsible for the continuing management on completion of the turnkey project. The two separate matters were negotiated separately, although a single contract was agreed by lawyers.
  Shenley has always argued that the manner in which a percentage fee is arrived at in corporate financial organisations is as a percentage of the capital cost involved. I have experience of such matters, and 10 per cent. is not unusual. I have recently taken advice from BNOC. Those involved in the North Sea tell me that fees there run to 15 to 17 per cent. of the capital cost.
  The PAC rejected Shenley's evidence. That is somewhat strange, as Shenley had cleared the evidence with the members of the MSC responsible for the underwater training centre. Other than depreciation, which
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  does not affect the argument, those representatives said that there was nothing in principle with which they disagreed in our evidence.
  A letter was sent to the Chairman of the PAC by Mr. Duncan Dewdney, ex deputy chairman of the MSC, who carried out the negotiations for the Government. He has nothing to do with myself or Shenley Trust. He stated:
  "I was Deputy Chairman of the Manpower Services Commission at the relevant time, charged by the Commission with responsibility for these arrangements. I have to say that the Public Accounts Committee is wrong.
  A contract was negotiated for the design and supervision of the Centre for a fixed fee. At my request the fee was reviewed by the Treasury and the Public Works Department and found…to be reasonable in their view. At the Commission's request, this fee was paid in several annual instalments. The construction of the Centre was set in train. There then arose the question of how to manage it. Various management agencies were considered but in the event the responsibility for day to day operation was given to the same contractor, who asked for reimbursement of his out of pocket costs plus appropriate overheads.
  The arrangements were drawn into a single document by the Commission lawyers. To relate one arrangement to the other and particularly to think of one as profit on the other is entirely without logic. If you pay the Gas Board to install a boiler and subsequently pay to have it maintained, you do not regard the one payment as the Board's profit on the other.
  Apart from the injustice in the Report to the contractor and to Mr. Peter Emery M P., there is the inference that I myself was wildly irresponsible in the application of public money, a suggestion which is equally without foundation."
  Irrespective of that, we have to consider the method by which the PAC worked out its 70 per cent. profitability. It needed all the financial information as a base. Therefore, disregarding the previous factors, the main point to be cleared up is the alleged profit of 70 per cent. Let us reject the Shenley approach to the contract and consider the calculation of percentage profits as used in the PAC report. The major consideration is that the PAC has not been given all the figures on which to make its calculations. The information was never given to the Committee by the MSC or the Comptroller and Auditor General, and the PAC has never asked Shenley for it. That is perhaps surprising when Shenley stated clearly in its evidence in July—page 2, line 11 of the thirty-fifth report—
  "statements are made that a 70 per cent. profit was obtained…On the information given to the PAC, those observations are…incorrect because all of the facts were not provided."
  Attributable costs were £270,000 and fee payments were £209,000 for the period in question. That is set out at lines four and five of page xii of the twelfth report. The Manpower Services Commission has accepted in writing that Shenley had major expenses in preparing the feasibility study, in the financial costings and in the collection of evidence, which arose during 1974 and prior to 1 January 1975
  Those costs were not reimbursed. Nor was it the intention of the Manpower Services Commission that they should be claimed as attributable costs. Contrary to the PAC's statement in paragraph 6 on page vi of the thirty-fifth report, it is not true that the Manpower Services Commission
  "bore all Shenley's overhead costs and expenses".
  That statement becomes true only if one adds the words "after the start of the contract on 1 January 1975". Then, indeed, it is correct. Never had Shenley been asked by the Manpower Services Commission, by the Comptroller and Auditor General or by the PAC what expenditure prior to the signing of the contract had to be met out of the fees earned by that contract. The major expenses of all of the

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  work in 1974, which was the primary cost period for Shenley, were never repaid as attributable costs because they arose before the start of the contract.
  Mr. Michael Morris: Does my hon. Friend wish to apply that argument to all preliminary new business costs that contractors in the United Kingdom enter into in order to get public service contracts? They are highly competitive, and half a dozen different contractors may all enter into major negotiations. Five of them are bound to have to write off the costs. Is my hon. Friend saying that in the future we in the Public Accounts Committee and the House should consider those costs to be attributable costs for a new contract?
  Mr. Emery: I am not saying that. I am saying exactly the opposite. I am saying that those costs have to be set against the fee. One therefore cannot take the total fee and set it in proportion against the attributable costs.
  Mr. Douglas: Really.
  Mr. Emery: Not "really" at all. It cannot be correct to suggest that the profitability on a particular contract does not have to take into account all the costs that arise out of the creation of the feasibility study and the carrying out of the contract.
  The costs which had to be met by Shenley arising from the feasibility study of the UTC prior to the date of the contract, which were not reclaimed from the Manpower Services Commission—nor do I suggest that they should have been—amount to more than £144,000. Using the PAC method of calculation, the percentage profit therefore works out at 13.9 or 14 per cent., not 70 per cent. The project was undertaken at risk, with no certainty of payoff. If MSC had not proceeded to a contract, Shenley would have had to bear the loss or set that amount against fees obtainable from other contracts.
  Mr. Douglas: That is normal business practice.
  Mr. Emery: No one is suggesting that it is not. Perhaps the hon. Gentleman will not interrupt from a sedentary position. I am making it absolutely clear that, even using the PAC method of calculation, which is not one that we would use, the profit figure would be 14 per cent. There is no getting away from that.
  My criticism of the PAC is that, in my view, none of this would have arisen if Shenley or myself had been called to give evidence to the Committee. It cannot be natural justice that people can be condemned by a Committee, which may have serious effects upon them and their business, without having a right of reply. If the inquiry had been carried out by The Sunday Times "Insight" team, it might have been slightly more accurate. But if they had made the accusations made by the PAC, one could have gone to law and sued The Sunday Times and, I am told, obtained considerable damages.
  The Public Accounts Committee, however, is protected by parliamentary privilege. Nobody would suggest that that should not be so, but it seems absolutely unreasonable that accusations against private bodies—not public bodies—should be made without those bodies, those people, or those partners having the chance of reply. It is a very strange situation.
  Mr. Joel Barnett: Is the hon. Gentleman prepared to say which figure in our report is incorrect?
  Mr. Emery: It is the figure for the total costs which have to be set against the fees.
  Mr. Peter Hordern: I understand the importance that my hon. Friend attaches to this matter. But if he attached so much importance to it, why on earth did he not submit it in his long and detailed letter to the Committee on 24 July last?
  Mr. Emery: That is a perfectly fair question. The reason is that, when one submitted the evidence of the way in which we calculated the fee—and this was backed by the Manpower Services Commission—one did not believe that it would not be accepted by the Public Accounts Committee. As is pointed out by Mr. Duncan Dewdney, one believed that its method of calculation was incorrect. We believed that it would be absolutely accepted, because the way in which the Public Accounts Committee calculated is not the way in which the normal accounts are kept in the corporate finance department of the company.
  It was therefore more than a surprise that the Public Accounts Committee did not accept the evidence. It was only after the Committee had not accepted it that it became necessary to take this action. I therefore say that it is an unusual position for the Public Accounts Committee. I myself serve on the Select Committee on Industry and Trade. At the moment we are investigating the costs of Concorde. In considering that matter, we do not take evidence only from the civil servants. Only yesterday we had before us representatives of Rolls-Royce, British Aerospace and British Airways. We shall also have the Minister and the civil servants.
  I understand that that is not the way in which the Public Accounts Committee has operated in the past. I also understand that the PAC is very loth to have to call on Ministers, because Ministers are often attempting to avoid the criticisms that the Committee makes. But Ministers are represented by their officials and by the accounting officers. An accounting officer, or, for that matter, the Comptroller and Auditor General, cannot be expected to represent a private individual or a private company, particularly in certain instances when it may be in the interests of the civil servants to shed blame from themselves on to a private company.
  In another instance, a Public Accounts Committee report concerning certain architects made major allegations which could have ruined that company. Those allegations proved to be wrong, but the partnership was never called to give evidence. It never had any way of defending itself. The matter was corrected by the Department of Health and Social Security. It was never cleared up by the Public Accounts Committee.
  The only reason why this present matter can be dealt with is that I am a Member of Parliament. If I were not, the whole matter would be brushed to one side. I cannot believe that in natural justice it can be correct for extremely harmful recommendations of this kind to be made by a Committee when the body concerned has not been given the opportunity, or been called before the Committee, to answer the allegations being made.
  In conclusion, if the Public Accounts Committee will not move to ensure that when accusations are made against private individuals, those individuals are seen, or at least that evidence and questions are asked of them, and if it will not alter that procedure I believe that it is essential that the Procedure Committee should consider the procedure for

  1105
  the calling of witnesses. I am delighted to see that I am not the first person to suggest this. My hon. Friend the Member for Folkestone and Hythe (Sir A. Costain) did so in the last debate on this matter.
  Mr. Douglas: I concede that the hon. Member has a fair point about natural justice, but the crux of the Committee's reports relates to a view of attributable costs and the costs of his company. Nowhere in the body of his remarks or in the time scale that we have had to deal with this matter has he really contradicted the view taken by the whole Committee on this matter. He has made suggestions about some background costs or overheads, which all companies have to bear when they submit contracts. They may or may not seek to recover all or part of those costs in their contract negotiations, but that has nothing whatever to do with the figures which were available to the PAC and the considered judgment which was made.
  Mr. Emery: I thank the hon. Member for making that point, but if he examines the evidence he will see that it destroys his point. The PAC actually asked the MSC what other costs had to be set against the fee in the contract period. The figure of £12,000 was given. The hon. Gentleman has asked a fair question, and there is nothing wrong with it, but if one is going forward with the percentage calculation, that figure should have been not £12,000 but £152,000.
  We stated clearly, as I said earlier, that the figures were not presented to the Committee. On the figures which were presented, I can see how the Committee made the assessment that it did, but if a body is not asked what its expenditure is, how can one expect the MSC or the Comptroller and Auditor General to put forward those factors? They have never been to inquire. How can one have the proof when a civil servant is being asked to represent the matter without contact with the company, as happened in this instance?
  It is therefore imperative, as a matter of justice, that when there has to be criticism, severe or otherwise, of a non-public body or person, that person, as is the case with every other Select Committee, should have the right to be represented at or to give evidence to the PAC.
  Mr. Prescott: This matter involves a number of us and the hon. Gentleman has made a fair point that he wants his case to be dealt with fairly. However, as chairman of this company he was involved in the negotiation of the assets of the diving school. If the House is properly to assess whether the company made a fair return it would be easier if we knew what the terms of the compensation were likely to be for the assets which are at present available for disposal. The Department involved has not yet implemented the new scheme for the school, primarily, I believe, because the compensation terms are excessive. I do not know whether that is true, but I wonder whether the hon. Member, who negotiated the terms, could give us some indication. That is a point which I asked to be dealt with in the letter to the Committee.
  Mr. Emery: I can quickly clear that up. All the assets of the centre are the property of the MSC and not of Shenley or anyone else. The assets and their value continue to he the property of the MSC. Secondly, at the conclusion of the contract period, there is no compensation at all for Shenley. It is quite simple to clear up both those points.
  5.34 pm
  Mr. William Hamilton: The hon. Member for Honiton (Mr. Emery), in a speech lasting nearly as long as that of the Chairman of the PAC, seemed to me to be protesting too much about his special case. I hope that he noticed that four members of the Public Accounts Committee are sitting behind him—members of his own party. They took part in the presentation of a unanimous report to the House, after the hon. Member's company had had all the opportunities to present its written evidence to the PAC, reacting to the twelfth report to which he has referred.
  It is important to put on record the unanimous view of the PAC after it had considered all the facts. I quote from page vi of the thirty-fifth report:
  "We further note that neither the MSC nor Shenley"—
  that is the hon. Member's company—
  "have disputed the factual accuracy of the figures of profit derived from the fee and of 'attributable costs' reimbursed to Shenley."
  We went on:
  "We observe that the Treasury Minute refrains from suggesting a fair relationship between the profit and any other project figure; and that Shenley submitted no evidence on the level of profits normally made by a consultant in relation to his costs. In these circumstances we"—
  the whole Committee, including the four members of the hon. Gentleman's own party—
  "see no reason to change the views which we expressed in our Twelfth Report."
  A great principle is involved here—
  Mr. Emery: Hear, Hear.
  Mr. Hamilton: —and the hon. Gentleman had better face it. He was a Minister in the Department of Energy. Almost immediately on relinquishing that post, on the defeat of the Tory Government in 1974, he took private business directly related to the Department of Energy.
  Mr. Emery: Untrue.
  Mr. Hamilton: I assert that that is what he did. The important public lesson which must he learnt from this is that if, on relinquishing office on the defeat of their party in Government, Tory or any other Ministers then go to private industry and seek to use all the expertise that they have obtained in the Departments in which they were Ministers for their own private profit, they are looking for trouble. That is what the hon. Member for Honiton has got himself into and that is why he has protested, to the length of a speech lasting more than half an hour this afternoon.
  Mr. Emery: rose—
  Mr. Hamilton: I do not want to make a half-hour speech.
  Mr. Emery: I was a director of an oil company before I was a Minister. I had many invitations to go back into that field and I turned down every one of them, so that I would not use the knowledge that I bad as a Minister on the lines suggested by the hon. Gentleman—much to my loss of income. The subject of diving was something over which I had no control whatsoever as a Minister.
  Mr. Hamilton: I leave the matter there, but I hope that my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) will speak, because he can reveal facts about the hon. Member which I am not in a position to reveal.

  1107
  I want to turn to one or two of the other reports. My right hon. Friend the Member for Heywood and Royton (Mr. Barnett), the Chairman of the PAC, made the sort of speech that Chairmen of the PAC have to make—a non-partisan, consensus speech. I shall not even attempt to make such a speech; it would be against my temperament. This speech will be highly partisan, from beginning to end. I think that there would be better attendances at these debates if we had less consensus politics, because there is a wealth of party dynamite in these reports. One can take one's pick over the whole field, and I have taken my pick.
  The eighth report deals with the subject of tax avoidance and evasion, which is probably our only major growth industry at the moment, often assisted and advised—I am glad that the Minister of State, Treasury has taken his seat, because I read the next words from my notes—by gentlemen now occupying prominent positions in the present Government.
  The eighth report deals with the taxation of business partnerships, the taxation of earnings from offshore employment—principally North Sea divers—and the taxation of private woodlands. Tax avoidance is taking place on a large scale in business partnerships. The PAC's report for 1977–78 revealed that in 13 cases that had been examined a total of £12 million had escaped assessment for tax purposes. The plea in mitigation made by the Inland Revenue was based on a shortage of staff of 300 to 400. It claimed that it could not investigate every case. It appears from what it examined that it had uncovered the tip of an ugly iceberg.
  There are genuine difficulties surrounding the taxation of divers' earnings. There are foreign-based employers of divers in the North Sea and it is difficult to secure their co-operation in assessing divers' earnings for tax purposes. From the facts given to the PAC it appears that the cumulative tax loss in early 1980 was about £40 million from 5,000 to 8,000 people working in this sector. We were told that a legal appeal was in train which was to be heard in the High Court early in 1981. I do not know whether that appeal has been heard. It will be interesting to ascertain from the Treasury whether it has been heard and whether any progress has been made towards the resolution of the problem.
  I refer briefly to the taxation of private woodlands. This is interesting in the context of that which the Government are proposing for the Forestry Commission. They intend increasingly to hand over the assets of the publicly owned Forestry Commission to private woodland owners. By legal manipulation of the tax system—the hon. and learned Member for Dover and Deal (Mr. Rees), the Minister of State, Treasury knows a great deal about the manipulation of the tax system because that was his profession before he became a Minister—private woodland owners can and virtually do avoid paying all taxes.
  The case was spelt out in the eighth report and by my hon. Friend the Member for Durham (Mr. Hughes), who spoke from the Opposition Front Bench last Monday on Second Reading of the Forestry Bill. The estimated loss is between £8 million and £10 million a year. Those were the figures given to us. It is worth quoting the report, which states:
  "The three Inland Revenue subjects dealt with above—
  those are the three to which I have referred—
  1108
  "have several features in common. In each case substantial tax losses are occurring".
  Paragraph 23 of the report states:
  "At a time when the Government are seeking substantial reductions in public expenditure, we think it particularly important to guard as far as possible against avoidable losses of revenue. We accordingly recommend that the Inland Revenue Department should seek to identify any further unintended loopholes in the statutory provisions which are leading to appreciable losses of revenue where legislative remedy could be applied; and that the Government should report to Parliament the increased tax yield that might be obtained by closing such loopholes and the additional administrative cost of doing so."
  That was the Committee's recommendation. The response in the Treasury minute, Cmnd 8067, was as follows:
  "They are"—
  that is, the Treasury—
  "not persuaded however that a general conclusion can be drawn from the three cases cited by the Committee."
  After considering the course that we recommended the minute continues:
  "to follow the course of action proposed by the Committee would be unlikely to shorten the time before a legislative remedy could be introduced, and might well lengthen it."
  Paragraph 7 at the bottom of the page adds:
  "They"—
  that is, the Treasury—
  "do not think that the difficulty would be solved, or indeed diminished, by the adoption of alternative Parliamentary procedures."
  In other words, the Government said "We are not going to do anything." There is to be no action and the Government are preparing under the terms of the Bill that received its Second Reading on Monday, to seek to increase the amount of tax avoidance by handing over to private owners more woodlands now in public hands.
  I turn to the report that I desperately hoped my right hon. Friend the Member for Heywood and Royton, as Chairman of the PAC, would refer to. He deliberately kept it—I think that he did so for parliamentary effect—to the last few minutes of his speech. I refer to the twenty-ninth report, on the black economy. It deals with various forms of tax avoidance and evasion. It refers to the taxation of individuals and partnerships under schedule D—mainly small businesses. The evidence that was given to us indicated that only a minute proportion of such businesses is examined. I think that the figure was about 2–5 per cent. I am not blaming the Inland Revenue for that. It pleads a lack of inspectors. It takes three years to train an inspector, and there is a short supply of those with the right qualifications. No increase in the number of inspectors is contemplated.
  The understatements of profits by those engaged in small businesses in 1978 and 1979—only a minute proportion of the total number of such businesses was examined—were 79 per cent. and 82 per cent. respectively. Seven or eight of every 10 individuals, or private companies under schedule D, whose accounts were examined had profits that were found to be more than they had indicated. In 1977 £5 million in taxes was reclaimed. In 1978 it was £12 million and in 1979 it was £14 million.
  My right hon. Friend the Member for Heywood and Royton put on record certain interesting facts. He drew attention to the very low taxable incomes declared by many schedule D taxpayers. In 1976 905,000 of the schedule D assessments were on declared incomes of less than £1,500 a year. Nearly half a million—437,000, to be exact—were less than £500 a year and 183,000 declared

  1109
  incomes of £500 to £1,000. If we move higher up the scale, 254,000 had declared incomes of between £2,000 and £3,000.
  When my right hon. Friend asked for information and wanted to know how those figures related to average earnings at that time, a note was provided that appears in a footnote in the report on page 21. It shows that in 1976–77, when private firms and individuals in business were putting in returns, the average earnings of a full-time worker were £3,370. It shows that 60 per cent. of schedule D taxpayers—small businesses—said that they were earning less than average in that year.
  As Sir Lawrence Airey, the chairman of the Board of Inland Revenue, remarked at the time:
  "on the face of it it is very surprising that people should want to be self-employed if their level of earnings is so low."
  Hon. Members may refer to question 4729 for that quotation.
  Conservative Members claim to be the champions of small business and of the thrusting entrepreneur. My noble Friend Lord Houghton is a great expert on tax matters. Several years ago, he said that there were two ways of paying tax in Britain—pay-as-you-earn, and pay-as-you-like. How true. That has given rise to a lot of disquiet among ordinary workers. They know very well that under the pay-as-you-earn system every penny of tax is taken from them before they catch sight of a penny in their pay packets.
  Workers cannot avoid tax, but many others pay as they like. That is shown by the facts that I have placed before the Committee. My right hon. Friend the Member for Heywood and Royton has quoted the figures for the estimated loss of revenue. The Inland Revenue estimated that loss of revenue to be between £2,000 million and £2,500 million per annum. That evidence was given in answer to question No. 4641. When Sir Lawrence Airey was pressed on that point, he said that he might settle at a figure of about £3,500 million.
  A pamphlet entitled "Whose pocket are they picking?" has been produced by trade unions in the Civil Service. It was produced by highly responsible and knowledgeable Civil Service trade unionists who know what they are talking about. They put the figure at a very conservative £3,000 million per annum. That tax is not being paid, although it should be. The unions said that if that tax, or even a sizeable fraction of it, could be collected, the National Health Service could be completely modernised. Every hospital could be modernised. The salary bill for nurses in the Health Service amounts to £2,000 million. If we could collect that £3,000 million, we could increase every nurse's salary by 50 per cent. at a stroke. Who could say that that would be money wasted?
  I understand the difficulties involved in collecting the money. The trade unions faced up to that point. Moonlighting is often mentioned. By "moonlighting" I mean the activity involved when a fellow takes a part-time job on the side. He may be a plumber, electrician, or fireman who goes window cleaning, gardening, cleaning a car or mending a television set. But the amount of money involved in moonlighting is chicken feed compared to the amounts of money that hon. Members can make from the House, or that accountants, doctors, lawyers and others can make from fees. It is not a class problem. It is spread across the board. If under-the-counter cash transactions are involved, they are difficult to discover. It is a complex problem.
  1110
  The payments that businesses make to casual workers are more important. As the trade unions said, that represents a double loss to the Exchequer. There is a loss from the recipient—who often cannot be identified—and further loss results from the exaggerated claims that unscrupulous firms employing such casual labour make for tax deductions. The trade union pamphlet quotes a Financial Times article of 9 October 1979, in which Mr. Roy Tucker and Mr. Ronald Plummer estimated that between 1972 and 1978 the Rossminster group—which was closely associated with the hon. and learned Member for Dover and Deal, who is now Minister of State, Treasury—made £5 million clear profit out of tax avoidance activities alone. I gather that the hon. and learned Gentleman was Rossminster's legal adviser. All of that tax avoidance may have been legal. I am not accusing the hon. and learned Gentleman of any dishonest activities. He was acting in a legal capacity and was advising the Rossminster group on how to stay within the law and still avoid paying tax. That is perfectly proper.
  Mr. Hordern: The hon. Gentleman said that my hon. and learned Friend was closely associated with Rossminster. It is quite clear that he was not. I do not know how the Rossminster group acted. I suppose that it asked my hon. and learned Friend—along with other lawyers and barristers—for technical advice. In no way was my hon. and learned Friend associated with it. In courtesy to the House and to my hon. and learned Friend, the hon. Gentleman should withdraw those remarks.
  Mr. Hamilton: I said that the hon. and learned Gentleman gave the Rossminster group legal advice on how to avoid paying tax while remaining within the law. It was entirely proper for him to give legal advice on how to evade or avoid tax and remain within the law. [Interruption.] I should have said "avoid". Some companies carry out such practices. Many of their practices are legal, but, as the trade union pamphlet says,
  "Legal avoidance involves a widespread and sophisticated industry employing some of the best brains the country has to offer in a field considered bey many to b thoroughly objectionable…where legal avoidance teeters on the edge of, and sometimes goes over the brink of criminal evasion."
  Special offices try to deal with tax avoidance. In the year until 31 October 1978 four offices, including one that had been set up in 1978, had recovered £11·6 million of tax that would have otherwise been lost. The offices are clearly cost-effective. As my right hon. Friend the Member for Heywood and Royton said, we are concerned about cost-effectiveness in terms of public expenditure. The trade unions fairly ask why there are not more offices. I asked that question, too, and the answer was "Well, it is difficult to get the staff to man them and to hold the staff. Each office has about 12 to 14 people in it. It takes three years to train them. We just cannot have one office in every region of the Inland Revenue."
  One special office in each of the 15 regions of the Inland Revenue would mean an extra 108 or 110 staff, according to the evidence that was given to us. The calculation made by the Revenue was that each of those offices could save 15 times their salary cost if they were set up. That is a very good reason why every effort should be made to set up and expand the number of offices. Few sounder investments could be made by the Government than to speed up the recruitment and training of more tax inspectors and put them on the job of tackling this big problem.

  1111
  A leading article in the trade union magazine "Taxation" dated 8 March 1980 said:
  "At the present time, pressure is being exerted to reduce the cost of Government agencies. This is wholly commendable but if it results in a real fall in net revenue, the whole exercise becomes self-defeating. Where increased expenditure…does result in a greater yield from tax collection, common sense must surely prevail at the expense of political dogma."
  Our Committee expressed similar sentiments in its recommendations, found in paragraph 23 of the report. The Treasury minute, Cmnd 8125, says about our report on the black economy:
  "The Treasury and the Board of Inland Revenue note the Committee's views about the importance of the 'black economy', and will ensure that the area is kept under constant review"
  Those expressions are well known to hon. Members. Our recommendations are "noted"—a deadly word in the House. They are kept under "constant review"—two equally deadly words. It is "difficult". It is "cost-intensive". It requires "special techniques". We need go no further. No action will be taken that is worth while. The £4 billion—other figures of £2 ½ billion, £3 billion and £3½ billion have been quoted—of tax avoidance a year is dismissed in eight lines of print in this Treasury minute.
  The reaction of the Government to this problem is very different from their reaction to social security fraud. A big article appeared in New Society, a non-political magazine, on 22 January called "Scroungermania again at the DHSS". When certain hon. Members talk about poor people and inarticulate people on social security benefits—it might be a one-parent family, an unemployed man or an old-age pensioner—they use all the emotive language that they can lay their tongues to. Such words as "scroungers", "malingerers", "layabouts" and "workshy", which are particularly heard at the onset of an election, are not used about the people that I have been talking about, the people in Rossminster or their clients, or the Vesteys. No one ever accused the Vesteys of being scroungers, but they have taken millions out of the taxpayers' pockets for years and years. They are never accused by Conservative Members of being scroungers.
  A year ago the Government decided to clamp down not on the Vesteys but on the unemployed and those on social security by appointing I do not know how many thousand extra specialist staff, not to save £3,000 million but in the hope that an extra 1,000 Gestapo-type investigators would save £50 million to be taken out of the pockets of social security beneficiaries. A magazine called the "Fraud Investigator's Guide" is now sent out to these people. A caveat in the magazine warns this new Gestapo:
  "Take care to avoid any approach which could lay you open to the accusation of pressurising the claimant into withdrawing his claim."
  According to a union, referred to in New Society, it goes on to say that social security claimants—not the Vesteys, for none of those people is subject to these procedures—are being visited where there is only a suspicion of fraud or abuse, and investigators are being asked to conduct interviews with the aim of persuading the people concerned to withdraw their claim. The union has dubbed the exercise the "knocker campaign". That is what we have got in this great civilised community of ours.
  We have 1,000 extra investigators, not of the Inland Revenue but of the DHSS, knocking at doors where a woman might be left on her own. The investigator comes, perhaps late at night, and says, "You are claiming social
  1112
  security benefit. We have reason to think that you are falsely claiming it. Can I come in and discuss it with you?" Terrified, the woman allows him in. He asks questions. The pamphlet says:
  "The benefits are being withdrawn on the basis of allegations or evidence that the DHSS knows would not hold water in a court of law."
  People are being frightened not into withdrawing their claim for benefit but, worse, from applying for it in the first instance. When people get to know that this might happen to them, even though they may think that they are entitled to benefit they are not claiming it.
  I put those two cases in juxtaposition. I have shown how the amount of money that could be saved if we could get these tax avoidance people can be counted in thousands of millions of pounds a year, but the Government do very little about it. To save £50 million a year from people at the lower end of the income scale the Government are prepared almost overnight to find 1,000 special investigators who are going round Merseyside, Scotland and other parts of the country terrifying people into withdrawing their claims for supplementary and other benefits within the DHSS scheme. There truly is a law for the rich and a law for the poor. I hope that I have drawn attention to them.
  6.9 pm
  Mr. Peter Hordern: I shall not follow the hon. Member for Fife, Central (Mr. Hamilton) in what he said.
  Mr. Douglas: Why not?
  Mr. Hordern: Because I am going to make my own speech. I wish to say one word about the intervention of my hon. Friend the Member for Honiton (Mr. Emery). I believe that from time to time the Public Accounts Committee is faced with a serious dilemma. That dilemma occurs when a public Department that comes before us has been involved in a plain over-expenditure of money compared with the Estimates.
  When that Department has a contract with the private contractor, it sometimes happens—not in the case that my hon. Friend raised—that the Department itself is in dispute with the contractor and that the facts are therefore not able to be agreed beforehand. But in the case of my hon. Friend, and in other cases that I recall, it is of the essence of the matter that the Manpower Services Commission should have done its very best to agree with my hon. Friend the facts of the case before it ever came before the Public Accounts Committee. I criticise the Manpower Services Commission for not doing that.
  My hon. Friend put his case extremely well. I only wish, for his own sake, that he had included in the written evidence that he gave to the Committee the figures that he gave the House today. I shall say no more on the subject.
  There is a difficulty here. The Public Accounts Committee is not a court of law, and yet the statements that its members make can have a considerable effect upon private individuals and private firms. It is therefore of the essence that where agreement can be reached upon the evidence, that agreement must be reached before the case reaches our Committee.
  I thank the right hon. Gentleman for his skilful and adept chairmanship of the Committee. I have known him for a long time. I only say that I should have expected nothing less.

  1113
  I want to refer to two or three matters in the reports that we produced, and to a point of principle. The right hon. Gentleman mentioned the role of the Comptroller and Auditor General. As the House knows, we are shortly to produce a report on his role, so I shall say no more on that subject. However, I have always thought that the Comptroller and Auditor General should carry out a role that is strictly more than a simple accounting one. By that, I mean that he should seek to ascertain whether the taxpayer is getting good value for money. That is a most important function. However our report is treated, I hope that that is what eventually will emerge.
  Let me give one example to illustrate why I think that that should happen. It is true that Ministers have the right to examine closely the operations of their Departments and call for reviews, but I notice that from time to time these reviews tend to be internal reviews, and that nothing much seems to emerge from them. It is true that Sir Derek Rayner can be invited by a Department to examine its work, to look at some small element of its practices, and to report and recommend. That, too, is a step forward. But the essential point of principle is that while it is one thing for Ministers to run their Departments efficiently it is also the responsibility of the House to see that taxpayers' money is properly spent. In my view, we do not exert that function simply by passing, on the nod, a large block of expenditure that comes before the House from time to time. For that reason, the task of the Comptroller and Auditor General should be to make a running survey of all the Departments of State to see whether we are getting value for money.
  Too often, in cases that come before the Public Accounts Committee, it is plain that the public are not getting good value. Let me give one example. It does not involve hundreds of millions of pounds; in fact, it involves only a few million pounds. Year after year, we find these examples of waste. In the case of the National Health Service we found that savings of about £15 million a year could have been found from co-ordinated purchasing requirements. That was our view 18 months after the Department itself had recommended that a supply council be set up. But that was not the only occasion. Previous reports show that the Public Accounts Committee was given assurances by the Department time after time, spreading over 25 years, that it would have a central purchasing supply organisation. Yet nothing has happened.
  Money is wasted when there is no co-ordinated policy for purchasing computers by the same Department, or for the standardisation of hospital design. That is not all. One might think that these were isolated lapses, but they were not. Nor does it involve the decentralisation of responsibility that the NHS has carried out. It indicates an insufficient management control of the Health Service. I yield to no one in my understanding of the difficulties that must be involved in managing a service of this kind. However, I shall give one other fact.
  The huge shift of employment from the private to the public sector over many years is particularly evident in the Health Service. In 1961, there were 575,000 people employed in the Health Service. In 1980, the figure was 1·22 million. It could be said, of course, that this does not take into account the effect of the reform of the Health Service in 1975. Lest that be said—certainly, there was a transfer from the local authority departments looking after health matters in those days—let me say that the numbers
  1114
  lost were made up by the local authorities within two years, and the Health Service has never stopped growing since. Last year, for example, it increased by about 25,000, at a time when the Government were seeking to make great economies in the public service.
  I do not believe that the mechanism is sufficient to ensure control of recruitment. I wish it could be said that recruitment consisted entirely of doctors and nurses and those who were giving a service to the patients, but that is not so. Year after year, administrators and clerks are recruited to the Health Service. I know—the Department has given me considerable assistance in this respect—that it does not believe that central control, or central knowledge of recruitment and what the various health authorities are doing throughout the country, is an essential part of its job.
  The figures plainly show that there should be some sort of proper management control. The effects on the country are enormous. During the past three years the wages and salary bill of the NHS has risen from £3·3 billion to £5·24 billion. My right hon. Friend the Financial Secretary to the Treaury—I congratulate him on his appointment; I should have done so earlier—will, I know, be searching for ways in which to reduce the borrowing requirement. All I can say is that the best and easiest way to do that is to have close control over recruitment in the public sector, particularly in the Health Service.
  There is one other matter that I want to mention briefly, namely, Sting Ray. In case I make myself unpopular with those of my colleagues who are interested in defence matters I should point out that I have no wish to criticise the efficacy of this weapon. I have no knowledge of how it performs. I take it to be beyond doubt that it is better than any other similar torpedo in the world. All that I say is that at a cost of £920 million it certainly should be. I cannot understand how, of all the NATO countries, it should be our unique responsibility to have a deterrent of that kind. Before any such programme is embarked upon in the future the customers should be lined up first.
  The same is true of joint production. That did not happen in this instance. With the possession of both Trident and cruise missiles, which I entirely favour, I believe that the Government should have laid on some customers before this torpedo got as far as it has. I must bear the oppobrium of my colleagues for saying so.
  Finally, I shall say a word about the Polish shipbuilding order. It is a classic of its kind. We were told that the purpose was to provide employment in the shipbuilding yards. With ill grace on my part, I accepted that that was the case. I never thought that it was a good deal, and I shall shortly remind the House why it was not. But that was the evident purpose of the expenditure. Now we find that half the ships ordered by Poland—for which we had provided assistance totalling £28 million from the shipbuilding fund—were being built in yards that British Shipbuilders had subsequently scheduled for closure altogether. So there could not have been a requirement of this kind. Furthermore, the Department has paid out or offered a further £57 million up to February last year, and I understand from the Treasury minute that even larger sums are envisaged.
  The plan was that the sums of money to which I have referred were to be advanced to the shipbuilding yards and that they in turn were to build ships for a company the ownership of which was to be fifty-fifty as between ourselves and the Poles. But in subscribing the capital to

  1115
  this joint venture—for such, I suppose, it can be called—the Poles had to part with only £25,000. For the expenditure of £25,000, the Polish merchant marine had a fleet of ships built for it at a cost of at least £28 million—we are now told that a further £57 million will be spent—with which it could compete directly with our own merchant marine. If that does not appal the hon. Member for Kingston upon Hull, East (Mr. Prescott), who takes a great interest in seafaring matters, I do not know what will.
  Mr. Prescott: The hon. Member makes a very interesting point, but I have always been against giving a load of money to the shipowners who order two-thirds of their ships from yards in places such as Taiwan, with which it is impossible for even the efficient German yards to compete. It is crazy to pour out public money in this way to the shipowners. We should find some other means of ordering.
  Mr. Hordern: I do not think that the hon. Gentleman has quite followed me. I would not have minded if it had been a subsidy for our shipowners, but it was a subsidy for the Polish shipowners, which enabled them to compete with our own merchant marine. I hope that we shall not engage in any similar trading ventures with Poland, or anybody else, in the future.
  6.23 pm
  Mr. Barry Jones: The hon. Member for Horsham and Crawley (Mr. Hordern) should sleep soundly in his bed tonight and should not worry about Sting Ray, because he spoke the truth.
  Thanks should go to our Chairman for his very shrewd and cheerful chairmanship of the Public Accounts Committee throughout the year.
  The PAC more than justified its existence when it summoned senior civil servants from the Treasury and from the Ministry of Agriculture, Fisheries and Food on the subject of Britain's financial contributions to the general budgets of the Common Market.
  The estimated contribution for 1980 was over £2 billion, but there is no clear exposition of the complex arrangements for determining how much we pay into the Common Market for each year's budget. No Member of Parliament and no citizen can easily establish what part of our national funds is paid into the Brussels cashbox. We were right, as a Committee, to examine the senior officials from Whitehall about the Government's accountability for the use they make of the powers granted under the European Communities Act 1972.
  The Ministry of Agriculture, Fisheries and Food estimated that the current effect of the common agricultural policy on the United Kingdom's retail food prices was to increase them by about 9 per cent., or by £2¼ billion a year. That makes no allowance for the costs that would otherwise have been incurred in providing alternative forms of support for British farmers.
  With regard to the imbalance in the United Kingdom's net contributions to the EEC, it is stated that the United Kingdom's contribution, after allowing for adjustments, exceeded its budgetary receipts by £626 million in 1978 and by £845 million, provisionally, in 1979. The initial budget estimate for 1980 suggested that the excess would increase further, to £1,310 million.
  1116
  In each of the three years, the United Kingdom was the largest single net contributor, with Italy the second largest in 1978, and Germany in 1979 and in 1980. The Treasury attributed this obvious imbalance in the United Kingdom's net contribution mainly to lower than average receipts in the Community, but partly to higher than average contributions.
  With such huge sums of taxpayers' money as are involved each year, and which are paid over to the Common Market, it is clear that hon. Members need information about the EEC budget which is not on the current ad hoc basis and which is not in the present confusing variety of forms. The Government should present a statement to Parliament, giving the details of the EEC budget and Britain's contribution towards it and the receipts from it, in the clearest possible manner. That is the least that the Government can do for the people of Britain, who, it is no exaggeration to say, are now very disillusioned with our membership of the Common Market. The figures point to this conclusion, and so does the decision in 1980 by the Council of Ministers to reduce our 1980 and 1981 contributions by approximately £400 million in each of the two years.
  As the CAP is now constituted it is a major scandal. It is hugely to Britain's disadvantage. It is clear that in the Common Market's net budget transfers, France in 1979 received CAP payments of £1,326 million. In that same year Britain received CAP payments of only £340 million. It is clear that overall the French lost to the extent of £120 million in their European budget, while Britain lost £845 million in that year.
  I do not think that Britain would begrudge, say, the Dutch being in the black in their EEC payments, but why should the French find themselves only marginally in the red, while Britain is £845 million out of balance? We are carrying too big a burden for a nation with almost 2·5 million people out of work. The Government should act speedily to get a long-term and a more obvious and better deal.
  6.28 pm
  Mr. Michael Morris: Having spent my first year on the Public Accounts Committee I can say how much I welcomed the opportunity to question our witnesses and to take part in the proceedings of the Committee.
  I should like to comment on six of the reports. First, I should like to look at the Committee's eighth report, on the Inland Revenue, and particularly at the review of tax avoidance and evasion among those employed in the North Sea. Several hon. Members have already referred to this issue.
  It is worth reminding the House of the scale of the problem that we face in the North Sea, where between 14,000 and 18,000 people are employed in United Kingdom waters. At the time that we took evidence it was reported to us that between 3,000 and 5,000 of the United Kingdom residents and between 2,000 and 3,000 of the foreign residents working in the area were not paying PAYE. The loss at that time, on a cumulative basis, was about £40 million. The continuing annual loss was between £10 million and £20 million.
  A problem of that scale should be considered. We questioned the Treasury witnesses and were told that a number of exercises had been carried out to investigate in

  1117
  what way that avoidance could be prevented. The conclusion reached was that none of the schemes that were considered was worth it.
  That constitutes a major problem. Not only is there an unfair balance with mainland taxpayers; there is an unfair advantage—we draw attention to that in our report—over the legitimate operators in the North Sea—who are co-operating with the Treasury and whose costings and employment conditions cover the normal way of operating—by the pirate operators who are not meeting the terms of the law. In the Treasury minute the response says:
  "The Treasury and the Board of Inland Revenue note the Committee's views and recommendations to which they are giving full and careful consideration."
  I venture to suggest to my hon. Friends that this is not acceptable. I hope that when he responds my right hon. Friend the Financial Secretary will be able to draw the attention of the Chancellor of the Exchequer to this major loophole and that attention will be turned to it in the Budget on 10 March.
  I now turn to the seventeenth report, which deals with Thames tidal defences. Hon. Members on both sides of the House should be united on this matter. It is fundamental that we should prevent London from suffering the risk of major flooding. There is no argument about the need for the Thames tidal defences.
  Hon. Members know that this sort of project is costly. The initial budgeted figure was £230 million, in 1973, which by 1979 had risen to £600 million—not insubstantial sums. Of that increase of £370 million, £280 million was due to inflation and a not insubstantial £90 million was due to a number of different factors.
  It took a long time for the relevant Department to get round to appointing an independent three-man team to advise on the progress of the barrier. In our report, we said:
  "We were pleased to be informed that the team had made significant and helpful contributions to the project in a number of ways, including the identification of future problems and suggestions for improved project management and financial control."
  I hope that the Department of the Environment and the other major Departments of State that are undertaking substantial capital schemes will not have to learn the same lesson each time. This is not the first major project upon which the House of Commons has voted, and it is not the first one that has gone wrong. I hope that in future we shall insist that these three-man teams or their equivalents are automatically appointed to projects of that scale.
  The twenty-third report deals with advances to the Housing Corporation and to housing associations. This report revolves around the question not of the absolute borrowing limit for the Housing Corporation but on how the payment of interest due on any advances that were deferred up to a period of five years was to be attributed.
  When we took the evidence in the report I was greatly surprised that there was this area of argument between the Department of the Environment and, presumably, the Treasury, on the question whether this interest should be counted against the overall borrowing limit. That argument went on for some years. In the end it was agreed that that interest was just as much capital borrowing as anything else. Again, we were dealing with not insubstantial sums—the figure in question was about £30 million. When we are dealing with such sums we should know that there are firm rules on the way in which transactions are to be attributed. That loophole has now
  1118
  been closed. I hope that the Financial Secretary is ensuring that any similar loopholes will be closed in other Departments of State.
  I now turn to a report to which the Chairman referred—the twenty-seventh report, which deals with cash limits and the roll-over of programmes. Parliament has taken a great step foward on cash limits. It recognises that when controlling the Departments within the cash limits it is difficult not to want to ease the situation.
  I agree 100 per cent. with my hon. Friend the Member for Horsham and Crawley (Mr. Hordern), in his comments on Sting Ray, but the Ministry of Defence made an important point when it said that the present operation of direct cash limits was preventing it from planning properly and was militating against value-for-money purchasing. Therefore, I support the request by the right hon. Member for Heywood and Royton (Mr. Barnett) that an experimental scheme should be set up so that we can consider how to ally the obvious benefits of cash limits to a sensible arrangement for buying on a value-for-money basis.
  I now turn to the thirtieth report, by the Department of Industry, in relation to Rolls-Royce. On this matter I questioned the witnesses at some length. We received evidence on what assumptions were made about the value of sterling. We must recognise that Rolls-Royce is selling to a country that is almost a monopoly buyer. The United States is and will remain the chief buyer of Rolls-Royce engines in the civil market.
  The Committee concluded that there was some confusion between Rolls-Royce, the NEB, the Department of Industry and the Treasury about who held ultimate responsibility for the assumptions on the current and future exchange rates in respect of future deliveries of engines. In the end we were not able satisfactorily to pin down who should have held that responsibility. We know that it went badly wrong, and because it went wrong the company made a major loss. In the evidence we were told that with the removal of exchange control restrictions at the beginning of the Government's period of office much of the problem was alleviated.
  I say to my right hon. Friend the Financial Secretary—I congratulate him on his appointment—that there is a real lesson to be learnt. The major nationalised industries must clear with the Treasury their assumptions on exchange rates. The House has heard the announcement, this week, of the Government's agreement to the BL corporate plan. About £990 million is to be allocated to that nationalised industry. I understand that the plan involves a forecast depreciation in the rate of sterling over the next few years. I believe that that is an incorrect assumption, although I may be wrong. I should like to be assured by my right hon. Friend the Chief Secretary that BL's assumption is one with which the treasury concurs. If it does not, my right hon. Friend should remember that it is for the House and the Government to pick up the tab.
  I turn finally to the thirty-second report, about the Property Services Agency's disposal of the Effra site, in Vauxhall. A number of hon. Members have views about the agency's operations in many spheres, and not many of those views are complimentary. The evidence in this case, however, is a lesson for all of us.
  The saga started in 1967, when the site was purchased. For eight years a number of propositions were put forward to the planning committee of the relevant local authority and, presumably, to a number of Departments. However,

  1119
  after that period—surprise, surprise—nothing happened. There then came the periodic and fairly predictable request from the Government that the PSA should make its contribution to a cutback in spending. The agency had to sell surplus land and buildings. It responded, and decided that the Effra site should be sold. Its value had risen to £2·5 million. It was sold for £4·25 million, making a loss on the transaction of £1·5 million.
  The surprising thing—although perhaps it should not surprise us—was that the strategy in the PSA was, first, to raise its share of the savings and, secondly, to follow another Department's policy on the dispersal of civil servants. We found from the evidence that one month after the sale of the site the policy of dispersal was changed and the site was, in theory, needed again. That is the ridiculous position. We now find that the PSA agrees with us in principle that it is better to own than to rent offices. There is, however, the problem of how it can make its contribution in the future.
  Our conclusions have not had a satisfactory response in terms of the Treasury minute. They were

  "(i) to devise a clear and cost-effective policy of increased Crownownership in the provision of government office accommodation;

  (ii) to avoid undeveloped sites being held unproductively for long periods at a high cost in interest."

  In terms of the millions of pounds involved, this issue is not of the scale of other matters that the PAC examines. However, the combination of time, covering more than 12 years, and an almost Pavlovian response to Government policy when that policy changed a few days after decisions were made, make it a matter that should be taken on board.
  6.44 pm
  Mr. Dick Douglas: I shall take up some of the points raised by the hon. Member for Northampton, South (Mr. Morris) because I do not necessarily wholly agree with his interpretation of some aspects of the reports. It has become evident during the debate that—to use a trite phrase—the PAC is a broad Church. We seem to contain all shades of political opinion, and that leads to the most unusual PAC debates. My experience of the PAC from 1970–74 and, subsequently, to 1979 is of muted occasions on which hon. Members from time to time exchanged pleasantries. It is no bad thing that my hon. Friend the Member for Fife, Central (Mr. Hamilton) and others have indicated the deep concern that is felt in the House and reflected in the country about the topic that we are discussing, namely, the essential importance of the House in the control of public expenditure and accountability for it.
  The House is divided not just on the basis of those who want more or less public expenditure. It is divided also about the uses to which public money should be put. None of us, on either side, should be complacent when public money is misused or misapplied.
  I express my praise for my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) for his excellent chairmanship of the Committee. I have not totted up the value of all the reports before us, but they may constitute our contribution to ensuring an increase in the public sector borrowing requirement. My right hon. Friend has managed to guide the Committee and obtain information from witnesses in a most pleasant and congenial way.
  1120
  One of the most difficult areas for modern government concerns the interrelationships between Departments of State and industry. Key aspects of these relationships are concerned with the question of where Government money goes. It is therefore the policy of the Comptroller and Auditor General to follow its use by techniques that ensure public accountability. In modern terms this means much more than the traditional financial and reliability approach. It now must mean adopting a value-for-money approach, including an examination of the effect of this and the efficiency of the expenditure.
  If that approach is coupled with the fact that the Government, in one guise or another, may be the sole or dominant shareholder in an enterprise, the danger is all too prevalent that the Committee or the Comptroller and Auditor General may try to second-guess the management of these enterprises. We should try to avoid that danger.
  I have one or two examples to illustrate what I consider to be the problem of second-guessing. I take as my text, as it were, the words of Sir Arthur Knight, who was chairman of the National Enterprise Board, in his lecture to the Institute of Fiscal Studies on 11 November last. He said:
  "Government must find it difficult to take good industrial decisions not only because it has less access than businessmen to all the facts, but also because those taking the decisions do not have the prospect of gains which accompany success or the penalties of failure. Moreover, their decisions are influenced by other pressures not relevant to the industrial issue."
  The country wants to know, from the debate and the reports, where the responsibility lies for misuse—I use that loose term—of public funds. Who bears the penalty?
  I use the example cited by the hon. Member for Northampton, South, namely, the Rolls-Royce issue. The report refers to the family of the RB211 engines. It states:
  "The annual report and accounts of Rolls-Royce Ltd. show that in 1979 the company incurred a pre-tax loss of £.58·4 million. In the report the chairman stated that the most important factor affecting the 1979 trading result had been the continued weakness of the United States dollar against sterling."—
  in a phrase, the North Sea oil syndrome.
  The evidence shows that during the earlier period the company had made a profit because the exchange rate went the other way. For the first time in my experience we took evidence from the chairman of the company, and it was most revealing. On all such matters we have to be careful, when ascertaining the facts, that natural justice is served. We should try to bring into the orbit of the Committee all the details and relevant evidence when determining who are the most appropriate people to give evidence. We questioned the then chairman of the company, Sir Frank McFadzean. We were all but persuaded that it was a difficult decision to take about exchange rate considerations.
  The shareholders of the company, who were the NEB, the Treasury, and the Department of Industry, were all aware of the exchange rate assumptions being used by the company. For the period from 1978 to 1982 Rolls-Royce had assumed and used an exchange rate of $1.92 to the pound. In the same period, the NEB had suggested a rate of $1.82, going down to $1.67 to the pound.
  Different assumptions had been made in 1979 by Rolls-Royce, the NEB and the Treasury, but the downward trend was not in dispute. A problem for all of us is how far one guides and persuades managements in such decisions. What is disturbing to me is not the fact that the company got it wrong—exchange rates are difficult to gauge for six months ahead, far less over a five-year spread—but the

  1121
  method of approach of the NEB, the Department of Industry and the Treasury. That led us to say, in paragraph 32:
  "Nevertheless, it is normal commercial practice to protect corporate earnings and net assets by seeking to avoid undue currency risks and Rolls-Royce now intends to follow this practice"
  It is able to follow that practice partly because of alterations that are taking place in exchange controls and further discussion with the Bank of England.
  It is difficult to be hypercritical of the company, but I cannot be satisfied with what I consider to be stonewalling evidence by the Treasury witness, in this case Mr. Carey. I refer to page 42, question 5668. That is a masterpiece of stonewalling. I do not think that the Committee or anyone else got anywhere near an understanding of the discussions that took place between the company, the NEB and the Department of Industry, which arrived at a consensus about the downward trends of exchange rates without any of the parties knowing what assumptions about exchange rates would be used. I find that unsatisfactory. That is a major difficulty for the Government and their relationship with a company engaged in a highly difficult and capital-intensive venture.
  My second example is what I choose to call the Portavadie saga. That concerned a village—if I may dignify it as such without offending hon. Members who come from the West of Scotland—called Pollphail. In March 1978 the sum of £3·3 million was spent on building workers' accommodation. It may be difficult for the House to grasp that it had been the practice of the Public Accounts Committee not to participate as other Select Committees have tended to do, or to see the situation on the spot. The workers' accommodation was built on land owned not by the relevant Department but by the platform constructor who was concerned with a building lot adjacent to the workers' accommodation site. The matter has been the subject of much public comment in the Scottish press, and I am concerned to know where responsibility lies.
  In The Scotsman of 14 January we are told that on Christmas Eve a gentleman called Mr. Iny paid £175,000 for the village and a few days later sold it for £450,000. It may be said that that is good business. The Financial Secretary nods his head. I digress to refer to a matter to which I have referred in the House previously. The Ministry of Defence owned houses in my constituency and sold them to an Edinburgh builder for £720,000. There were 300 houses, at a rock-bottom value of £2,000 per house. The houses are being advertised in the Dunfermline press at £9,000 each. I shall ask the Comptroller and Auditor General to examine that.
  I am not knocking public servants or chastising them, but the public are entitled to know what happens when such mistakes are made. It is all very well our debating such subjects where we have lovely guarded Treasury minutes, but the public want to know what happens, for example, to the promotion prospects of an individal in a Department, or whether he is censured. Those are disgraceful happenings. In terms of total public expenditure the sums involved are not large, but we took further evidence from Mr. Gillett and Sir Jack Rampton which was a marvellous exercise in passing the buck.
  I can accept the Treasury view that if the building dock, which cost well over £11 million, had not gone ahead, there might have been a loss of orders. However, the Offshore Supplies Office and the Department of Energy
  1122
  were much too close to the oil company at that time. There was a clear case of that at the public inquiry in connection with Kishorn. Individuals from the Department and the OSO were asked about projecting the demand for concrete production platforms for the North Sea. Invariably they said that their evidence came from the oil companies, but the companies never appeared at the inquiry.
  Massive sums of public money, totalling £14 million, were spent, but I suggest that no positive use will be found for that building dock. We have seen £3 million of public money spent on accommodation for which the legal entitlements of the Secretary of State and the nation were not safeguarded.
  The third example of the horror stories appears in the twenty-fifth report, which deals with the Royal hospital for sick children in Glasgow. In 1971 the hospital cost £4 million, but now we are told that it will not be fully operational until 1982 and that the estimated cost of the remedial work necessary to make it operational will be £7¼ million. The mystery is that all but £32,000 of the contract price was paid for buildings that are totally unsatisfactory. Whose head rolled? Where is the public accountability? The public want to know the answers to those questions.
  Next, I want to know what happens when we fund nationalised industries or alter their funding, albeit for political purposes. In the thirty-second report we look at the Government's tentative proposal for injecting private finance into the BNOC—a proposal that has not been fully explained. On the upstream sector of the BNOC it is being suggested that some form of bond, "Granny" or otherwise, will not mean that the BNOC will have to pay more for its capital.
  I hope that the Chief Secretary will explain how the proposal to privatise the upstream sector of the BNOC can fail to involve the corporation in having to pay more for its capital, and will not give numerous people any title to ownership of the North Sea oil resources.
  I accept that there is a balance to be achieved and that it will be difficult to achieve it. We are not over-rigorous and over-critical in the examination of public expenditure, particularly when it relates to industrial matters. If we give the impression that no one in public corporations can undertake that task, we shall diminish initiative. All too often we avoid probing the political and economic benefits that were in the minds of Ministers and civil servants at the time. There is a greater danger in our being too slack in our examinations.
  I do not want to trespass on the report that we have been compiling on the role of the Comptroller and Auditor General, but we have to be careful that in putting more power into his hands we do not put him into the position of feeling that he is trying to second-guess the companies in which public money is invested.
  Those are all vexing and difficult subjects. My plea is that individuals who want to reduce or advance public expenditure, particularly those in the policy-making bodies of our major parties, should read our reports, particularly those that we have been discussing today. If they did so they would have a much more sober and realistic view of what happens to public expenditure, and they would appreciate that in the present context it is difficult to call people to heel for the misuse of public money.
  7.7 pm
  Mr. Michael Shaw: I welcome the chance to follow the hon. Member for Dunfermline (Mr. Douglas) because, like me, he has returned to the PAC, which seems to be even more fully occupied than it was during our earlier presence at its deliberations several years ago.
  Judging by the past 18 months, the amount of work that we have got through—and I hope that the debate shows that we have been delving fairly deeply into a number of subjects—makes one wonder how any recommendations that we make will be fitted into a programme that already seems so heavy. Nevertheless, I am sure that ways will be found of doing that.
  In spite of all the new Committees that have been set up in the House, the work of the PAC is as important as ever. We may develop a new role, but we shall have the same relationship with other Committees and with the House as in the past.
  I add my congratulations to those paid to the right hon. Member for Heywood and Royton (Mr. Barnett), the Chairman of the PAC. He has worked hard, because he has had to do so much preparation before the meetings. We have had to read a lot, but he has had to read much more. He has done his work well and efficiently, and has led us through a great deal of useful work in the past 18 months. Of course, we should also congratulate the staff who have worked with him.
  I wish to deal first with the twenty-eighth report on the United Kingdom contribution to the EEC. I do not want to discuss the amount of the contribution, because this is not the debate in which to do that. In considering the report and our discussions it is clear that we have to think carefully about how we are to keep a proper control over the money that goes into Europe.
  We cannot think alone in this matter. No doubt other countries are wondering the same sort of things that we are wondering. The Community, the Commission, the European Parliament and, above all, the Court of Auditors are wondering how this control is to be kept. The spending of the money is being carried out in so many different countries under the authority of so many different people, yet we all have a vital interest in ensuring that the money is well spent. There must grow up a working relationship between ourselves, the other countries of the Community and, above all, the Court of Auditors. I hope that it will be part of our duty in the future to seek that relationship so that we can better monitor the moneys that we pay into the Community.
  It has been said that, unfortunately, we have too much consensus politics. Perhaps that is so in the House, but I hope that it is not a criticism made of the Public Accounts Committee. That is one of the great things about the PAC. We do not sit in ranks opposite each other. We sit around the table and discuss. To a large extent, party differences do not exist, and I hope that that continues. If we have to break it here, so be it. I go along with the hon. Member for Fife, Central (Mr. Hamilton) in saying that I shall seek a consensus with him about speaking for less than half an hour. He did not keep to his bargain, but I hope to keep to mine.
  I wish to discuss two matters, which have been touched on before, as have most matters. The twenty-seventh report deals with the possibility of carry-forwards. As explained in our report, the budget calculation—the
  1124
  estimates for the annual public borrowing requirement—can make allowances for any known under-spending in the previous year, provided it is still considered necessary to spend the money. Now that we are using cash limits, under spending in any one year cannot be offset in the following year. In assessing the matter, all had the feeling that the Treasury had accepted that there were certain advantages from some form of carry-forward provision. It was fearful that in acknowledging that it might at the same time give an opportunity for releasing control over spending—control that it feels it is at last managing to achieve.
  Some form of carry-forward provisions should be achieved, by means of money which has been authorised but not spent, or delayed for one reason or another. That could not be done generally. In a wide area of Government expenditure—salaries, routine every-day expenditure, and so on—it is clear that there is no such need. There are other areas where it is impossible to forecast exactly when expenditure will become due—for example, in defence, where there are complicated contracts for provision of new products, ships, weaponry, research, and so on. The time period in which the money is to be spent cannot be exact, but must upset any planning if no provision for carry-forward is made. For instance, with regard to transport, some winters are mild and some are severe. Sometimes road building works go ahead even faster than the contract allows but others are held up for months because of bad weather conditions. In building bridges unforeseen problems may arise and therefore delays may take place. Good planning demands some provision for carry-forward.
  What are the problems—the facts—of not having a carry-forward scheme? The first fact is that rather than risk exceeding cash limits, Departments always deliberately aim to spend substantially below their limits because otherwise they would be in difficulty. That might lead to a Department seeking a large limit so that the actual shortfall will leave them with their real expenditure estimates. It may be argued that that is the normal form of haggling between Departments. Surely it is better to plan on a real estimate of what is intended to be spent and a figure that can be accepted by both sides, instead of people making allowances and deliberately juggling the figures in order to arrive at a final solution. A limited measure of carry-over would be helpful.
  I congratulate my right hon. Friend the Financial Secretary, and refer him to the financial regulation of 21 December 1977 of the European Community. In that, provision is made under article 6 for such an occurrence. It states:
  "In the case of the appropriations referred to…the Commission shall submit to the Council and shall forward to the European Parliament before 1 May, the requests to carry over appropriations, duly substantiated, made by the European Parliament, the Council, the Court of Justice, the Court of Auditors and the Commission itself."
  That is because they all have separate budgets, But, more important, it continues:
  "Unless the Council, acting by a qualified majority after consulting the European Parliament, decides otherwise within one month, the carry-over of these appropriations shall be deemed to have been approved."
  That is the right way with which to deal with these carryovers. They should be regarded as being normally acceptable and accepted. Only in exceptional cases will

  1125
  they be turned down. In that way we can get a better estimation of expenditure, and things will work more smoothly, without the Treasury losing any real control.
  The other point that I wish to make has been touched on quite a bit in the debate. It concerns the Sting Ray project, referred to in the sixteenth report. The details have been spelt out. The project has gone on for a long time. I and, I believe, others have been criticised by hon. Members whose interests lie in defence for raising the matter on the grounds that it is knocking the Navy or is no help to our prospects of future sales of Sting Ray. However, under the terms under which the PAC acts we have to consider such developments.
  Ten years ago, the scheme was estimated to cost £82 million; by October 1978 it was estimated to cost £700 million, and by September 1979, £920 million. We made it clear that cash was not the only criterion. Our report spells that out. We stated:
  "We feel bound to say on the evidence available to us, we were not convinced by MOD's case for spending an additional £720 million,"
  which is more than the alternative.
  "However, the decision to procure Sting Ray depends not only on the cost of the development and production programme as compared to that of alternative systems but also on the technical capabilities of the different weapon systems…Without a balanced technical assessment it is impossible to come to a final judgment about the value being obtained from the money spent and committed to Sting Ray. We therefore suggest that the Defence Committee of the House investigate the capabilities and cost effectiveness of the two weapon systems."
  There is a danger that if people read only our criticism of the advance costs there will be an adverse reaction. However, we go on to say that the Defence Committee must make the final assessment. We should not be deflected from doing our duty on the PAC by the fact that the media and others pick up only parts of our report. In a free society we have a duty to report and those who comment on our report have a duty to consider the whole of it. It is an important matter. Some people do regard our action as disadvantageous to them, but I believe that we were entirely right in our report.
  Like my hon. Friend the Member for Honiton (Mr. Emery), I regret that we did not hear earlier the information that we heard today. We must continually reassess the way that we take evidence in the PAC and the people from whom we take evidence. We must be as fair as possible. Having listened to the debate, I am sure that we shall continue to consider how we can improve matters.
  Mr. Douglas: I am sorry that the hon. Member for Honiton (Mr. Emery) is not in the Chamber. Even had we had the information, I do not see that we would have come to a different conclusion on the figures. The hon. Member for Honiton is in a privileged position. He attended the press conference and has had time since December to include other information, although he has not done so.
  Mr. Shaw: In fairness, he has.
  All members of the Committee will agree that the matter should be reconsidered in the light of the debate. I hope that the results of our deliberations have been duly noted and that our reports will be found to be of use.
  7.25 pm
  Mr. George Foulkes: I am only the second non-member of the PAC to have participated in the debate. That is a pity. It is no critisism of the Chair. It is perhaps a criticism of other hon. Members. It is a vital
  1126
  debate, concerning important matters. The other non-member, who was from the Conservative Benches, spoke at length on his personal interest. My interest is a constituency one. I believe that we are elected to represent our constituency interests and not our personal interests.
  The eighteenth report covered the work of the Scottish Development Agency and the Scottish Economic Planning Department. I welcome the opportunity to consider the PAC's comments on the Stonefield vehicle company and the Treasury minute that purports to reply to the report. The Stonefield vehicle is Scottish-designed. It was produced by Jim McKelvie, the sort of entrepreneur who Conservatives constantly tell us we should be encouraging. It is a useful cross-country vehicle, just a bit bigger than and a step up in the capability of the Land-Rover. Until recently it was built in Cumnock, in my constituency. The company was effectively a subsidiary of the SDA. That fact is important in the context of my later remarks. The SDA had close control over the management of the company.
  The vehicle was proceeding naturally through the development stage of any such sophisticated vehicle, when, unfortunately, the general election was called. 3 May 1979 is one of the black days in the company's history. The other is 1 August 1980, when it went into receivership. That was one week after the production of the PAC's report. I do not suggest a cause and effect. The reason that it went into liquidation was simply the Government's decision. First, they changed the guidelines of the SDA and required Stonefield to bring in a private partner to invest in the company at a difficult time for any investment, let alone a risk investment.
  Sir Albert Costain: To which report dealing with private enterprise is the hon. Gentleman referring?
  Mr. Foulkes: The change in the Government guidelines of the Scottish Development Agency, a specific act of Government policy, is referred to in the eighteenth report. I am glad to see that the hon. Member for Folkestone and Hythe (Sir A. Costain) put his name to that unanimous report of the Public Accounts Committee.
  The second part of the Government's decision which adversely affected Stonefield Vehicles was the limitation of finance. Money, was requested by the Scottish Development Agency and Stonefield Vehicles earlier last year, but the full amount was not given to the SDA.
  I have given a brief history of the matter. I now wish to analyse the views expressed by the PAC and the reply given by the Treasury. The Public Accounts Committee report rightly criticised the Government. Quoting the Scottish Development Agency, the report said:
  "The SDA pointed out that the requirement to bring in a private sector partner had undoubtedly caused delay and thus some detriment to the project, particularly to its marketing and sales efforts."
  The unanimous conclusion of the Public Accounts Committee, having heard all the evidence, was as follows:
  "But we judge that the Department's decision that the SDA should adopt the revised policy in the new Guidelines"—
  that is the answer to the hon. Member for Folkestone and Hythe—
  "for this particular project has had a marked effect on the pursuit of the company's sales efforts which without doubt are the key to the success of the whole project."
  No one denies that. The Committee then said:
  "We can only regret"—

  1127
  that is a fairly strong expression of opinion from the Committee—
  "that there was not sufficient flexibility in the provision of public finance to enable the successful development of this vehicle to proceed smoothly to the production phase, in order to safeguard the substantial investment of public funds already made."
  What was the Government's and the Treasury's reply?
  Mr. John Home Robertson: As I am sure my hon. Friend is aware, Stonefield Vehicles is not unique in being affected in this way by the new guidelines imposed by the Government on the Scottish Development Agency. Another extremely important firm, a manufacturer of electric motors called LEMAC, in my constituency, is subject to the same problems. That firm has been affected in exactly the same way but, fortunately, still has its head above water. The point raised by my hon. Friend therefore has wide implications.
  Mr. Foulkes: My hon. Friend is quite right. There are a number of other cases. I am glad to see my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) present, because he, as a Scotsman and as Opposition spokesman for industry in Scotland, repeatedly pointed out the deleterious effects of the change in the guidelines. It has affected firms in every way. Stonefield Vehicles is one of the worst affected. That is one reason why I have highlighted it today, although clearly I also have a strong constituency interest.
  I turn to the Government's reply to the strong criticism of the Public Accounts Committee. I hope that later in the debate there will be a further explanation of this from the Minister. The first point in the reply was as follows:
  "In reaching his decision not to approve the commitment of further substantial funds, the Secretary of State judged that the Agency could not by itself obtain the necessary expert marketing, sales and other support which would be essential for the success of the project".
  That is the purported reason. It was given in the report and I have heard it elsewhere. But this small company already had inquiries from Malaysia and from Kenya for what is undoubtedly a world-beating vehicle. Subsequent events have shown that, even in receivership, the company received inquiries from the Government of New Zealand for a quotation for that vehicle.
  Secondly, only a few months prior to going into receivership a marketing director had been appointed by Stonefield Vehicles with the knowledge and agreement of the Government. That marketing director, although he was appointed with the Government's knowledge and approval, was not given much chance to get moving. I hope that the Public Accounts Committee will give further consideration to this matter. It could certainly be examined in much greater detail. I am sure that that marketing director, who was in the process of producing a marketing development plan, could give some interesting and revealing evidence to the Public Accounts Committee.
  Mr. William Hamilton: Does my hon. Friend believe that even at this late stage the project can be retrieved, assuming that the PAC reinvestigates it? Does he not also believe that at this critical moment in the venture the Scottish Office ought to have a senior Minister on the Government Front Bench to brief the Treasury on this matter?
  Mr. Foulkes: I believe that it can be retrieved. I see a Whip making a very quick exit. He looks more like an athletics blue than a boxing blue as he departs from the Chamber. It is because I believe that the situation can be retrieved that I am working as hard as possible, as are other people, to try to achieve that end. In reply to my hon. Friend's further point, as a matter of courtesy I informed the Under-Secretary of State for Scotland—the hon. Member for Edinburgh, North (Mr. Fletcher)—earlier this afternoon that I should be raising this matter in the debate.
  Even if my first two points are not accepted, it is possible in any case to contract in marketing, sales and service—if they cannot be provided fully in a small company—without the need for private investment as the Government required. That was never even considered. That is my reply to the first part of the Government's reply to the Public Accounts Committee.
  The answer given by the Treasury minute is different from answers given elsewhere by other Government spokesmen. The reason given elsewhere for the Government's decision was not one of inability to get marketing, sales and service support, but a change in guidelines to the Scottish Development Agency. That has been conceded elsewhere—and indeed, in an Adjournment debate—by Ministers. The other—this is very revealing—is that when the Under-Secretary of State for Industry visited my constituency, in speaking about this very matter in Girvan he attacked me for raising the subject and looking after my constituents.
  The Under-Secretary of State said, in a revealing statement, that perhaps the Stonefield vehicle was rather like Concorde: it might be technically advanced and a world beater but there was no market for it. I shall not enter into the merits or otherwise of that argument, but it is very different from the answer given in the Treasury minute and elsewhere.
  Thirdly, the Government allege in their reply that substantially more time was allowed to find a private partner. That is new information—quite different from what was said when the Public Accounts Committee looked at the matter. But in reality the £600,000, which was much less than the £2 million that was requested, gave only six months, additional time to Stonefield Vehicles to try to find a private partner at a time when investment was declining rapidly in any case in every sector of the economy and when Government-induced uncertainty surrounded the future of Stonefield Vehicles. That is certainly not substantially more time.
  The Treasury's main witness in evidence in its reply was the company TKM—Tozer, Kemsley and Millburn—who took an option to purchase the stock. That is the private company that is not mentioned by name. The Treasury's reply says that the subsequent decision not to purchase "would appear"—that is a cautious statement—
  "to vindicate the Department's judgment."
  In this case, as in many others, appearances are deceptive.
  One of the things that the reply does not say—it is very short—is that TKM maintained a strong interest and maintained inquiries in Stonefield Vehicles after it decided not to take up the option. Why did it maintain interest? Was it perhaps because it thought that in those circumstances it would get the company at a bargain price? Was that a strategy of TKM?
  I accept that the judgment is always fine between safeguarding the previous investment of a few million pounds by the Government by a further trances of money

  1129
  and cutting their losses and pulling out, but I ask hon. Members to remember that the SDA was set up to take calculated risks. Other institutions exist to make commercial investments. The SDA was given a wider responsibility and it had a social purpose as well. Also Stonefield was at a crucial stage in a logical development when the plug was pulled by the Government.
  Mr. William Hamilton: My hon. Friend will want it to be put on the record that the Scottish Whip went out when I drew attention to the fact that no Scottish Minister was present. He obviously went to seek one, but so far one has not arrived. Does my hon. Friend not think that it is an absolute contempt of the House that in a critical matter of great Scottish interest no Scottish Minister is here to brief the Treasury?
  Mr. Foulkes: I cannot but agree. As I said, I warned the Under-Secretary earlier in the day that I would be raising this matter. I am sure that the Government Whip can confirm that. This is not unusual in the case of Stonefield. Despite repeated requests, neither the Secretary of State nor the Under-Secretary has visited the factory or come to see the vehicles, although Opposition spokesmen have done so.
  The people of Scotland, of Ayrshire and in particular of Cumnock are now comparing recent events. I welcome the Government's decision to invest £990 million in British Leyland, but cannot help comparing that sum with the £2 million which would have kept Stonefield Vehicles going.
  Another comparison is with a somewhat more dubious investment. A newspaper that I do not oftern read, The Daily Telegraph, under the headline
  "Car Company Seeks More Aid",
  said:
  "The De Lorean Car Company, which has already been guaranteed £67 million in taxpayers' money under a controversial deal…is appealing for more State aid. It has applied to the Northern Ireland Office for help with a 'short term working capital requirement'".
  So one can compare the few million pounds needed by Stonefield with the tens of millions of pounds already given, with a request for more, by De Lorean Cars in Northern Ireland. One must also compare the products—one a sports car, a luxury product, hardly vital to the development of our economy; the other a useful vehicle which has already been tried by public utilities and, with a little public expenditure, would have been bought by fire and ambulance authorities throughout the United Kingdom. The comparison is disgraceful. Scotland and Cumnock are getting a poor deal from the Government and the Scottish Office compared with the treatment of Northern Ireland.
  I should like to deal now with what has happened to Stonefield Vehicles since 1 August, when it went into liquidation. I pay a great tribute to the former work force who have set up the Stonefield action group and have been campaigning valiantly to save their jobs. They have even offered to work for nothing if necessary to keep the company going; not many people would offer to do that. I pay tribute also to the Cumnock and Doon Valley district council, which has also been campaigning.
  There has been a great deal of publicity for the Stonefield vehicle, all of it favourable, saying what a marvellous vehicle it is and how disgraceful it is that it should have been allowed to go under. There have been
  1130
  further expressions of interest from potential purchasers—from New Zealand, although the company is in receivership, from Nigeria and from other countries.
  I pay tribute also to the receiver, Mr. William Brownlie, who has done a good job in trying to find purchasers, given the unfavourable economic climate and the Government's damning action.
  However, I am not so full of praise for the Scottish Development Agency. It has devoted a great deal of time to the matter, but I have some doubts about its commitment. I wonder whether, in the back of their minds, the SDA and the Scottish Office have thought that if Stonefield proved successful under some new arrangement their operation of it would be seen to have been open to criticism.
  All of us who have been concerned with this vehicle desperately hope that it will succeed. As my hon. Friend the Member for Fife, Central (Mr. Hamilton) said, we hope that it will be given a last chance. It was not helped by the Government's action. I hope that, even at this late stage, they will have second thoughts and perform a U-turn. The Secretary of State for Industry agonises over British Leyland. I hope that the Secretary of State for Scotland will, in the light of the things that I have said today, have an agonising rethink about Stonefield, and that the company will be back in operation again, producing vehicles which can go out into the field and help to build up our economy.
  If the worst comes to the worst and nothing comes of the future of the vehicle, I hope that the PAC, whose work I continue to commend, will have another look at the matter and learn some lessons from the saga of Stonefield to ensure that it does not happen again.
  7.48 pm
  Sir Albert Costain: I think that this is the twenty-first debate on reports by the Public Accounts Committee in which I have taken part. I was appointed a member of the Committee 20 years ago and have served under five Chairmen.
  This debate has been fascinating. I was fascinated by the hon. Member for Fife, Central (Mr. Hamilton). One could see the glint in his eye when he said "There is a lot of political stuff in this and we must make the best of it". But the hon. Gentleman forgot—or did he?—that what the reports criticise is a period when his Government were in power. It is his Ministers to whom these reports refer, but one never knows with his party from which side of the fence he would be criticising.
  The PAC has been in existence for 120 years, and one of the traditions is that the ex-Chief Secretary becomes Chairman in Opposition. I pay a terrific tribute to all the Chairmen, not least the present one. For the first year or two years during which the Chairman holds office, he is the Chairman of the court that is prosecuting him. I am sure that nowhere else on earth does that happen. However, the PAC is so free, or was so free, from political bias that no one has ever objected to that. I can produce no evidence against the present Chairman to show that he has not been critical of himself. He has managed to get the entire Committee to agree to the criticism of himself. I doubt whether some of our learned judges could do that.
  I shall not go into all the details of the reports. It has been clear throughout all the PAC debates that I have attended that they are the best way to clear the House of Commons. In the Chamber at present we have the

  1131
  members of the PAC and one or two hon. Members with an interest. The hon. Member for South Ayrshire (Mr. Foulkes) rightly referred to his own constituency. He talked as if he were criticising the Government. If he had read the report he would have learnt that it refers to events two years ago.
  Mr. William Hamilton: No.
  Sir A. Costain: Let us get it right. I do not think that the present Government were in power in March 1979.
  Mr. Foulkes: The hon. Gentleman should have read to himself more of the March 1979 quotation.
  Sir A. Costain: I do not want to quote the entire report.
  Mr. Foulkes: In March 1979, under the Labour Government, the Scottish Development Agency, In accordance with the policy of the Labour Government, became the major shareholder in Stonefield and put a substantial sum into the company to allow it to go into the development stage. If the hon. Gentleman reads the report he will find that the black day for Stonefield came during the period of office of the Conservative Government.
  Sir A. Costain: The hon. Gentleman is saying that subsequently it transpired that the Labour Government had made a rotten investment. It is no good blaming the present Government because the company could not sell the vehicles that it produced. That is what it is all about. If a person buys a company and he cannot sell the product, he cannot blame the Government. I know that it is jolly good political stuff for Opposition Members to blame the Government for every failure when companies cannot offer products at a competitive price. We are now discussing the PAC's reports and I do not want to make political points.
  The hon. Member for South Ayrshire is one of the few Members who has intervened in a PAC debate to put up a case for his own constituency. In doing so he did a jolly good job. I am sure that his local newspaper will revel in what he said tomorrow morning. It will be delighted and the hon. Gentleman will have a happy weekend. Let us get down to facts. In the previous five PAC debates in which I have participated I have said that if we are to criticise individuals and companies outside Parliament we should in fairness take evidence about them. That is coming through fairly clearly.
  It is generally forgotten that the PAC was formed primarily to criticise the accounting officer. He is the chappie who is put in the dock. It is something of an anomaly that a man who controls a staff of some 70,000 or 80,000 should be responsible for some of the silliest litle things as well as some of the bigger things. He cannot possibly know of everything that is going on. He has to delegate. He has to give evidence to the PAC and he has to learn what is going on in the Department, as does the Minister. The civil servants know that if they step over the line they will find eventually that the issue is brought before the PAC and it will travel all the way up and down the Department. Of course, that is a very good thing.
  I do not agree that members of the PAC should refer to individual reports. All that they are doing is transferring into Hansard what we have said in the reports. After all, other Members of the House are not listening to them. The debate would be much better if the Chairman made his
  1132
  statement, the Treasury Minister replied and non-members of the committee made constituency points, as did the hon. Member for South Ayrshire. That is what it should be about.
  In the past two years we have established many more committees. We have many more Select Committees, and I know it. I sit on the Committee of Selection. It is the best way of making enemies and friends of which I am aware. One makes more enemies than friends. These Committees take an enormous amount of time for any hon. Member. I spend between 10 and 20 hours a week—mostly at weekends—in preparatory work for the PAC. The other Committees on which our colleagues are sitting make the same demands.
  We shall find that the PAC debates become less and less well attended. However, we shall continue to hold the debates because the Committee is that sort of beast. We feel that our work is so well done that we should have a larger audience. That is like amateur dramatics in my constituency. It is necessary to whip up support. From an expenditure point of view it is right to have these debates, but I wonder whether there is the need to give the parliamentary time that we demand for them.
  7.57 pm
  Mr. John Prescott: I did not intend to participate in this debate. Indeed, I indicated to one of the Ministers involved in the Fort William project, in which I have a long-standing interest, that it was not my intention to speak. However, when I saw the hon. Member for Honiton (Mr. Emery) rise to make a statement on the Fort William centre—a controversial issue with which I have personally been involved—I felt that it was necessary to make my own statement on the facts as seen by the Public Accounts Committee. The hon. Member for Honiton disputes the conclusions drawn by the Committee in not only the consequential thirty-fifth report but the twelfth report, the major report on this development.
  My interest in the subject is as a seaman. My union organises the divers, and I have a certificate for deep sea diving. The hon. Member for Honiton was aware of that and he used to invite me to the receptions that he gave, as a Minister, for those involved in North Sea diving and safety and training. There is controversy about the contracts and terms of the diving school, but it has made a contribution to reducing the tremendous number of deaths among North Sea divers. I do not think that there is any doubt about that. We are pleased that the institution was established and has contributed to saving the lives of men who are engaged in the most dangerous of occupations.
  My major concern is to press on the Government, and especially on the Treasury, that if there have to be contract arrangements, as presumably there have to be, the school should be reformed or financially reorganised so that it may continue to train divers and make a proper contribution to the saving of lives in an extremely dangerous occupation. Certificates and regulations are on the way, but the diving school continues to be at the heart of the problem.
  In his evidence to the PAC, the hon. Gentleman made clear something for which I pressed in 1972, namely, that it is essential that divers are certificated. It was and is

  1133
  essential that no diver should be diving who does not have the proper qualifications. In that respect the school plays a crucial role.
  The hon. Member for Honiton said in evidence to the Committee that whether the school would be profitable would depend on whether it could be guaranteed that divers would be sent there. The cost of training a diver is about £4,000 or £5,000. If companies can avoid paying that amount, they will do so, and have done so. Inevitably the State had to step in through the Manpower Services Commission and provide public money so that training in the most profitable sector of industry could be carried out. That is a condemnation of the oil industry, which resisted a training levy.
  I have been most interested in the Public Accounts Committee's investigation. Indeed, I pressed for that investigation. As the hon. Member for Honiton knows, when the contract was first awarded in 1975 I protested to my right hon. Friend the Member for Doncaster (Mr. Walker), who was then a Minister in the Labour Government. I disapproved of the way in which the contract had been given to Shenley Trust, because it involved an ex-Minister. That ex-Minister, the hon. Member for Honiton, and I discussed the matter. He asked me whether I would be interested in joining him and helping to establish the training school. I retorted that I did not believe that Members of Parliament should get involved in business interests. I said that they should stay out of business. This affair more than bears out that judgment. That is one reason why I was most concerned about the terms of the contract that was given in 1975.
  I have some sympathy with the point made by the hon. Member for Honiton. When a Select Committee investigates a matter, hon. Members will sometimes be involved. The Select Committee will sometimes have to make judgments about those hon. Members. That is a difficulty if one is involved in business. I do not say that if an hon. Member has business interests he should automatically be consulted by a Committee. However, the Manpower Services Commission informed the Committee that the Minister had agreed the contract. That was untrue. When we protested, the Committee corrected the information. Indeed, I was glad to see that in the report. The Committee heard only the evidence of the civil servant. That was quite proper. However, it meant that hon. Members were being confronted with facts that were wrong but that were printed. I am sure that members of the Committee will consider those procedural difficulties.
  After protest, the Committee reconsidered the matter. It received protests not only from the hon. Member for Honiton but from my right hon. Friend the Member for Doncaster and myself. I was concerned not only about the factual correctness of the way in which the contract had been awarded—it was not agreed by a Minister of the Labour Government, although it was given—but about the terms of the contract. I was worried about the likely cost to the taxpayer. The taxpayer will still have to pick up a further bill. I hope that the Treasury will direct its attention to that.
  The Treasury has made a number of comments about the contract that bear out the arguments of the Committee rather than those of the hon. Member for Honiton. The dispute concerns the terms of the contract and how that contract was awarded. The hon. Member for Honiton made it clear that three parties were involved in the contract at that time, namely, Dundee university, the
  1134
  Underwater Engineering Group and Shenley Trust. The hon. Gentleman was a director of Shenley Trust. He said again tonight that he believed that the project could have been financed privately as long as certification ensured that divers attended the school.
  The contract was awarded in October 1974, shortly after the hon. Gentleman ceased to be a Minister. The hon. Member for Honiton said that the contract had not been awarded by his Department. That is correct. The Department of Employment was involved. However, as the hon. Gentleman knows, civil servants from the Department of Energy were involved in the decisions and made decisions with the Department of Employment. I am not suggesting that that is an improper process.
  Mr. Emery: I do not agree with the hon. Gentleman's general thesis. However, if he checks on the details, I think that he will find that the contract was awarded by the Manpower Services Commission—which had a right to do so—and not by the Department of Employment. However, I accept that the Manpower. Services Commission is responsible to the Department of Employment.
  Mr. Prescott: The point that I was trying to make was that civil servants of the hon. Gentleman's former Department made the decision about the contract. They made recommendations about who was the best bidder. I think that they used the phrase "the one closest to the North Sea experience". The contract was awarded on those terms, although I accept that the MSC actually awarded the contract.
  The civil servants said in evidence to the Committee that they would have been most surprised if the Minister had not endorsed the contract. The Public Accounts Committee asked for information and was given a paper that substantiated the fact that the Minister had not endorsed the contract. At that time some alarm was caused because the contract had been given on the basis that private money would be used. That was the purpose behind Shenley Trust's bid. Obviously, Dundee university could not offer money unless it was purely for a management organisation contract. As the hon. Gentleman knows, the Underwater Engineering Group was making a loss. For a year or two before that, I had been talking to that company about the work that it carries out in Rothes pit. That is one of the deepest shaft areas for diving trials.
  Mr. Emery: It was not Underwater Engineering Group Trials that put in for the contract but the Underwater Engineering Group. That group is entirely different from Underwater Engineering Group Trials and is not connected in any way with Fort William or the Rothes test centre.
  Mr. Prescott: I do not wish to weary the House with the details of all the transactions that went on between the Underwater Engineering Group, the Underwater Training Group, Shenley Trust and Shenley Trust Services. However, I am well aware of the distinctions. The way in which the companies changed is relevant to the argument about the amount of money that taxpayers will be forced to pay in compensation. I hope that the Treasury will bear that in mind.
  The contract was awarded. Shortly afterwards the MSC said that public money should finance it. At the time I told my right hon. Friend the Member for Doncaster that it should not be a private project and that there should be a

  1135
  levy on the industry. However, even today the industry resists proper funding not only for diving training but for the hyperbaric centre and the other essential things that we should provide for those lads in the North Sea. The most wealthy sector of our industrial community has constantly resisted a levy. Nevertheless, public money was invested. This is a matter to which the House and the Public Accounts Committee have to address their attention.
  The answers to questions that I had put to the Government in December show that Manpower Services Commission grants to this company for the Fort William centre by December 1980 amounted to about £ 1·8 million. Its losses up to March 1978 were £498,000. Loans from the MSC amount to over £400,000. There are many outstanding debts and loans that someone will presumably have to pay or it goes bankrupt and finishes.
  I want the school to continue. It is therefore relevant to know who will pay the debts if another organisation is to take over this institution. It should also be borne in mind that the contract given to the hon. Gentleman's company was for five years. That contract has since finished. According to parliamentary replies, a new contract is being agreed from 1 January this year on four months, notice. I wonder whether the new contract reflects the same amount of fees that the Public Accounts Committee has criticised.
  The Treasury, in its comments, says that fees
  "should not be related to the level of attributable costs but rather to the size of the Underwater Training Centre and to the complexity and unique nature of the managerial task involved."
  Did the Treasury, in making this comment, continue the same policy on fees or did it impose a new contract that presumably reflected what it thought was a more proper procedure to be adopted? The Financial Secretary could perhaps give some indication on the second point made in the document. It says:
  "Although the setting up of the Centre had many unique aspects the Commission will ensure that standard tendering procedures are followed should similar circumstances arise in the future."
  What caused concern to the Treasury about tendering procedures? The Public Accounts Committee has not thrown any doubt on the fact that the contract was awarded to Shenley in preference to the other two. What are the tendering procedures that the Treasury believes should be changed? I am not in a position to judge whether, according to the terms of contract, the profit is 70 per cent. or, as the hon. Member for Honiton explained, from his point of view, 14 per cent. I am, however heavily persuaded by a Public Accounts Committee, comprised of hon. Members from both sides of the House, looking at the facts on two occasions, which comes to the same conclusion.
  The Treasury, in its recommendation, does not give its endorsement. It says that the whole procedure should change. This presumably means that the Treasury does not endorse it and is not satisfied with it and how it operated in this controversial matter. I am persuaded in those circumstances that too much money was paid in fees.
  The Minister, answering questions that I put in December 1980, assured me that the Shenley contract would eventually be finished. It was simply a matter of getting a new contract for the Fort William centre. That contract is apparently being discussed with members of the industry—both the oil producers and the diving contractors
  1136
  themselves. I understand that agreement has not been reached, that there are still great difficulties and that negotiations have broken down. I have been trying to find out why they have broken down. I believe that this may be related to factors of compensation. The matter should certainly be considered.
  I turn to the compensation arising directly out of the contracts that were drawn up. The hon. Member for Honiton knows that the contract that he had with the Manpower Services Commission for the management of the centre was for five years, hence the reason for the short contract that he now has on four months' notice. The same period of contract was not given to those who own the assets. The assets of the company, namely, the pier on which it is based, the towing equipment and other associated things, are owned, I believe by Underwater Trials Limited, originally purchased by Shenley Trust, the other company. The hon. Gentleman, a director of Shenley, was originally also a director of Underwater Trials, I understand. He negotiated a contract in both circumstances. He was the one who had to get the assets and negotiated a 25-year contract with this company, in which he was also a director, that held the assets. Having a five-year contract for the centre, he then negotiated a 25-year contract, not knowing, presumably, whether there would be a further extension of his own five-year Shenley contract.
  Mr. Emery: That was done at the request of the board of control, which wanted to ensure that in setting up the capital cost—it had nothing to do with Shenley—there was a permanency to enable the centre to go on, irrespective of who was the contractor, who was running it or managing it.
  Mr. Prescott: I accept what the hon. Gentleman says. I notice that the trade unions were not on the board of control.
  Mr. Emery: They are.
  Mr. Prescott: I withdraw that.
  I want to make one point about public money. If at the end of a five-year contract it is decided to give the contract to someone else, the obligations for the assets will either have to be included in a new contract or compensation will have to be paid for the assets if they are not to be retained. The assets are considerably greater than are warranted for diver training at the present time. There is a break clause in the contract which allows for three-year compensation payment, and, taking the yearly accounts of charges that can be reviewed, it will be about £350,000.
  If loans and compensation are to be paid to the company of which the hon. Member for Honiton was a member—that connection has ceased, but at the time that the contract was negotiated he was a member of both companies, and was therefore liable to receive compensation—if a new contract is to be drafted and the liabilities of the old arrangement are to be established, and if the industry is to take over, I imagine that it will refuse to meet those debts. It will probably say "That is something from the past. Write off those debts, or give us further grants, or pick up the bill for compensation if we do not want the assets embodied in the 25-year contract."
  Clearly there are difficulties in new contracts. I hope that the Treasury will be able to assure us that they are not causing unnecessary delay in providing an adequately

  1137
  financed school to train divers. The Government should make sure that divers are properly trained for the North Sea. My main concern is to get the school on a proper financial footing. I hope that the Treasury will tell us tonight how it intends to arrange the terms of contracts in future.
  8.17 pm
  Mr. Robert Sheldon: We have in front of us 27 reports. I do not know whether that is a record, but it certainly deserves to be, It is an indication of both the range and extent of the work that is done by the Public Accounts Committee. That work has been extremely well done, and I congratulate my right hon. Friend the Member for Heywood and Royton (Mr. Barnett). I served with him for many years on the Public Accounts Committee. I served for nine years, on and off, as Financial Secretary and, before that, as a member of the Public Accounts Committee. It is a Committee with which I have had a long and close connection.
  Although the Financial Secretary is a member of the Public Accounts Committee his work is not particularly arduous. He normally attends the first sitting each year and thereafter merely receives the large amounts of paper that come from the Committee.
  I pay my respects to Sir Douglas Henley and his officers, and express my admitration for them. I also congratulate the members of the Public Accounts Committee on the hard work that they have done—and do—in the long and detailed examination of many intricate and complicated matters. The Exchequer and Audit Department examines a wide range of accounts. There are about 450 accounts in all, totalling more than £50 billion. One fact that is not widely recognised is that it has inspection rights over a number of other accounts, including those of the British Standards Institution and the Royal Society for the Prevention of Accidents.
  We are at a formative stage in the development of the work of the Exchequer and Audit Department. We await with great interest the publication of the report dealing with the role of the Comptroller and Auditor General. As my hon. Friend the Member for Dunfermline (Mr. Douglas) said, I hope that we shall move a little more in the direction of an effectiveness audit.
  One thing is clear—the effectiveness and importance of the Public Accounts Committee. The seriousness with which civil servants prepare themselves to come before the Public Accounts Committee is an indication of the respect in which it is held. I have known civil servants spend many late nights prior to coming before the Committee—where they sit in the famous horseshoe—in order to ensure that they had as much information as they felt they might need to answer the many intricate questions that would be put to them.
  Under the right hon. Member for Chelmsford (Mr. St. John-Stevas) there have been important developments in regard to other Select Committees, but the Public Accounts Committee still has its crucial role to play, and will continue to have it as long as the various matters fail to achieve the perfection for which we always strive.
  As the hon. Member for Folkestone and Hythe (Sir A. Costain) said, it may seem odd to outsiders that we have in the examination of these matters a former Chief Secretary to the Treasury, who examined and probed the accounts. He comes to the House to explain the errors that were made in his Administration. Speaking for the
  1138
  Opposition, we have a former Financial Secretary, who deplores the mistakes and some of the overspending., and we shall have the present Financial Secretary to the Treasury regretting the errors that he was condemning when he sat on the Opposition Benches.
  The civil servants are not usually the ones who were responsible for the accounts which they defend. When the accounting officer comes before the Public Accounts Committee, as likely as not he will be defending the actions of a previous Permanent Secretary who has moved on somewhere else.
  Some people might regard all this as a fix and a fraud, but they would be wholly wrong to take that view. The system works—and in my view it works extremely well—only because of the unanimous desire in all parts of the House, in Government and in Opposition, and among civil servants as well as Back Benchers, to make sure that we get efficiency in the public service.
  I recall that when the right hon. Member for Taunton (Mr. du Cann, was Chairman of the Public Accounts Committee he talked about an alliance between the Treasury and that Committee. That is not a bad term to use, because they have a common interest. I would go further and say that the common interest goes much deeper and wider than that. We make political decisions and ask the Civil Service to carry them out. The Government propose them, the House of Commons dispose, and the Departments and the civil servants implement them. However right or wrong the decision may have been, all agree that its implementation ought to be efficient.
  In looking at the accounts that are presented, and at the report of the Comptroller and Auditor General as it comes before the Public Accounts Committee, we have to be very careful, because we have the enormous advantage of hindsight in these matters, and that is more valuable than all our other senses added together.
  The Civil Service frequently works under great pressure. For political reasons, it may be forced to take premature decisions or hurried ones. We need to exercise a certain amount of charity in assessing the competence of others when we look at the work that went before.
  If we are over-censorious we may constrain too closely the need for action and the way in which action is implemented. The danger in all these matters lies in having a Civil Service that is so obsessed with never putting a foot wrong that it seldom puts a foot right. This is understood fully by the Public Accounts Committee, and the moderation of its language is widely recognised. Historically it has always been the same, indicating its concern in this respect. But that does not prevent the Public Accounts Committee from making its examination, criticising where criticism is necessary, and trying to achieve the improvements in the public service which are its aim.
  In deciding which reports to highlight we must bear in mind that many of them will not be discussed in the House. The Public Accounts Committee has examined them, and the fact that they are not being discussed in every detail is not an indication of their lack of importance. In these matters the House of Commons is conducting something of a spot check. It gives its views on the more serious matters and expresses its confidence in the Public Accounts Committee. Therefore, the Committee is able to return to its work refreshed, and with the plaudits of the House of Commons rightly ringing in its ears. Long may that be so.

  1139
  In considering these reports we are concerned with two cases. The first concerns the question of where most money is involved and the second arises when an important principle is involved and when lessons are to be learnt.
  First, I turn to the case where substantial money is involved. Usually, that means the Ministry of Defence. That is not a criticism of the Ministry. That Ministry spends money under pressure of innovation, trying to be a jump ahead of the competition and of our potential enemies. It has very much in mind the development of various systems of the highest and most advanced technology.
  My right hon. Friend referred to the overspend on Sting Ray, which is likely to cost us just over £1 billion, when the Mark 46 torpedo was an alternative option. These large sums must be carefully considered, and we must find some way of being able to assess such escalations of cost before they reach such levels.
  There have been four large projects on underwater weapons, totalling over £1,600 million, with increases in cost, from the initial stages to the development of the weapons, ranging from about 55 per cent., in real terms, up to 150 per cent., with a six-year slippage in one case.
  I know the problems of the Ministry of Defence in trying to incorporate advances as they are discovered. However, there comes a time when one can try to incorporate so many of the latest advances that when all the money has been spent one still does not have an up-to-date piece of equipment, because much of it has been overtaken by events. Sooner or later the design and cost must be settled, and one has to use existing instruments to produce something that will be of use and which is not too far away from the Estimates.
  In the twenty-seventh report, the Public Accounts Committee had an important discussion on this matter and made recommendations for a controlled experiment on a carry-over of money to the following year. Everyone must always be concerned about the great danger of some loss of Treasury control. However, it is right that we should be able to see how far we can go in allowing that underspend to be continued to the following year. In the case of overspending, any relaxation here must accompany a most careful examination during the following year to make sure that there is an automatic reduction in cash limits when there is this overspend, so that some control of the kind that we demand may still be exercised.
  I now turn to the twenty-fourth report on the Manpower Services Commission. The commission is not concerned with the same amounts of money, but it is concerned with important principles. Paragraph 12 says that by May 1979 the commission's internal auditors had visited 136 projects under the special temporary employment programme and the project-based work experience scheme. It seriously criticised 30 out of those 136. Ten of those 30 were in financial difficulty and 20 were in a financial muddle.
  This is a serious criticism. The sums concerned are not very large, but as long as public money is involved we have a right and a duty to demand a much fuller accounting for the moneys that are handed out. Paragraph 20 of the report says:
  "On the risk of sponsors using schemes to subsidise their own costs, the MSC said that every sponsor had to answer specific questions bearing on that point and to satisfy their officers that
  1140
  the projects would not have gone ahead without support. If they subsequently found that the rules had been transgressed, they would not hesitate to close the project down at once.
  It concludes:
  "We welcome the MSC's assurances on these points."'
  It will be necessary not to leave it at that but to ensure that we keep a close watch on this expenditure of public funds. The work that the commission is doing is essential in the limitation of the disastrous consequences of the high levels of unemployment, but we all need to be satisfied with the monitoring of this expenditure.
  I come next to tax avoidance and evasion, which is mentioned in the eighth and twenty-ninth reports. The importance of this is the discussion of the extent of the black economy, the scale of which is described in the twenty-ninth report. It is estimated at between 0 per cent. and 15 per cent. A middle figure suggested by Sir Lawrence Airey is 7½ per cent., which fits in with the figure quoted by Sir William Pile some time before that. The Central Statistical Office produced a figure of 3½ per cent., and I note that a committee under Lord Keith will examine the Revenue's powers of investigation.
  I look forward to that, but I cannot say that I am expecting all that much. The Government, like all Governments, have been rightly concerned to collect the tax due to them, but when we look at the problems of collecting between £3 billion and £3·5 billion—the figure mentioned in question 4660—we see a whole sub-culture, from which it will be difficult to extract the money. However, the attempt must always be made. We must always attempt to ensure the fairness without which it will be very hard to run a proper taxation system.
  We cannot assume indefinitely that our people, who are taxed under PAYE, without any choice, under the most rigorous tests, and who have to meet their obligations week by week in such a way that even their most basic expenditure cannot be set against tax, will accept that there should be a whole range of activities on which no tax is payable. I do not think that there is any doubt that there has been a decline in morality. I do not think that it has a great deal to do with the levels of taxation. Since the Government brought down the rates of tax I have not noticed that the problem has eased.
  Mr. William Hamilton: It has increased.
  Mr. Sheldon: I see the problem continuing and even, as my hon. Friend says, increasing.
  The other problem is avoidance. The eighth report highlights loopholes in the legislation concerning woodlands. We learnt from question 118 of the way in which a syndicate of high-rate taxpayers meets to avoid paying tax. The complications of the tax system have allowed this kind of operation.
  The question that we have to ask ourselves, and the question that the Public Accounts Committee poses, is how the loopholes can be stopped. The House will be with the Committee in suggesting that alternative legislative arrangements should be considered to facilitate the enactment of measures to close loopholes in existing statutory taxation provisions. That question is difficult.
  In the office of the chairman of the Board of Inland Revenue, in Somerset House, there are shelves containing all the Finance Acts. It does not come as a surprise to be told that they are growing at an exponential rate. An increasing amount of space is taken up each year. But more interesting are the instructions that go with each of

  1141
  the Finance Acts. Every one is accompanied by detailed instructions to inspectors of taxes on how to interpret the various legislative arrangements that the House has passed.
  The instructions have grown at an even greater rate. For the years round 1840 there is, typically, one volume covering a decade. For the 1900s there is about one volume a year. For the immediate pre-war years there are several volumes a year, and for the past year or two an entire shelf is taken up with instructions for one Finance Act.
  There are a number of consequences, but the most obvious are the complications that one has in attempting greater fairness. One tries to close a number of loopholes, but the increasing complexity that arises from these desirable attempts makes an intricacy and a complication that provides opportunities for those who look for new ways through the maze of complications. Those new ways become more and more profitable every year. That is what has been happening. Schemes for avoidance are growing as the tax system becomes more complicated. We know that schemes for avoidance were being sold and were not picked up by the Inland Revenue until large sums of money had been lost in taxation. We can legislate to close loopholes, but a great deal of money can be lost by then. We can legislate to close loopholes by backdating the legislation to the time of the announcement of the Government's intention. That is the method that is used frequently today.
  But even that is not enough in present circumstances, because the time of starting such arrangements is so picked that it is some time before the Inland Revenue becomes aware of what is going on—by which time large sums of money will have been lost to the Revenue.
  One can backdate legislation to the time when such devices were first made. There are obvious difficulties. The Labour Government examined them. But the problem is how long the people of this country will pay PAYE, the most certain form of taxation, when they read articles in the papers that carry out investigative journalism which show that people much better off than they are handling large sums of money on which little or no tax has been paid. However great those difficulties are, action must be taken.
  It will become impossible to act in these matters unless we act as a united House. We should not have successive Governments legislating, repealing, or having different views on the problem. Surely we should be able to devise a common attitude. The Labour Government tried, but were not successful. If the Financial Secretary asks the House for increased powers to deal with avoidance we shall be prepared to give him a sympathetic hearing. We urge him to consider such an approach.
  The thirty-second report deals with private finance for nationalised industries. The problem in producing such finance is that it has so many of the characteristics of gilt-edged stock. The Government are behind it, and once they take that stance it is not so much in the nature of private equity capital, with a risk element involved; it has the certainty of Government backing.
  The arguments for private equity capital in such cases are not nearly so great as long as the Government have money that they can lend. We should take a much more relaxed attitude towards the part of the PSBR that is used for such industrial and technical investments. That would save all the nonsense of trying to introduce private capital
  1142
  at no particular advantage to either the nationalised industries or the investors, who would be prepared to accept gilt-edged stock.
  The work of the PAC is central to the reputation of our administration and its control by the House. My right hon. Friend the Member for Heywood and Royton has done a notable job as Chairman of the Committee. I never expected anything less from him, and I am delighted to note the results of the Committee's work and to thank it for its endeavours.
  8.41 pm
  The Financial Secretary to the Treasury (Mr. Nigel Lawson): I echo the congratulations offered by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and others to the right lion. Member for Heywood and Royton (Mr. Barnett) on his outstanding chairmanship of the PAC and the fecundity with which he has bestowed such worthwhile reports upon us in the past year. I also join the tribute that the Chairman paid to other members of the PAC, the staff of the Committee, the Comptroller and Auditor General, Sir Douglas Henley, who is now approaching retirement after a distinguished period in that high office, his staff and the Northern Ireland Comptroller and Auditor General and his staff.
  My hon. Friend the Member for Folkestone and Hythe (Sir A. Costain) made a point that was echoed by the right hon. Member for Ashton-under-Lyne. It is curious that the new Chairman of the PAC has been scrutinising and criticising vigorously and without fear or favour expenditure and decisions that, to a large extent, were taken when he was Chief Secretary to the Treasury. That shows the immense difficulty involved in the process of public expenditure control. If it were not so difficult, the right hon. Member for Heywood and Royton, who was a good Chief Secretary, would not have had so much material to criticise and so many of his own decisions with which to find fault. The fact that control of public expenditure is so difficult makes the work done by the PAC all the more important.
  Last year's debate was a hybrid occasion, because some of the reports involved were the product of the previous PAC under the chairmanship of my right hon. Friend the Member for Taunton (Mr. du Cann). Today, it is all the work of the right hon. Member for Heywood and Royton. Nevertheless, it would be unfair, despite his fecundity, to measure the effectiveness of the Public Accounts Committee—the House's most potent instrument for the restraint of waste and bureaucracy—simply by the volume of paper that it produces. Its claim to a unique status within our parliamentary framework has always rested, on the quality rather than the quantity of its work. This time, the right hon. Gentleman and his colleagues have given us both quality and quantity. I can think of several possible explanations for that. One is the right hon. Gentleman. Another element is my hon Friend the Member for Folkestone and Hythe and his unique experience of work in the Public Accounts Committee under five different Chairmen. Yet another reason is the contribution of all the members of the Committee. Whatever else is the case, and whatever the attention given in the press to some of the other, newer Select Committees, there is no doubt that the oldest Select Committee in the House is alive and well and shows all the signs of being a growth industry.
  Reference was made by the right hon. Member for Heywood and Royton and by other hon. Members who

  1143
  have spoken in the debate to the special and very important inquiry into the role of the Comptroller and Auditor General, which has occupied the Committee for most of the past six months. It would not be right to comment on that at this stage. Whatever emerges from the Committee's report and from the subsequent debate about it, the end result will be a further enhancement of the prestige and effectiveness of the Public Accounts Committee. The right hon. Gentleman asked me about the debates. I shall come to that in a moment.
  Many points have been raised on both sides of the House about the various matters on which the Committee reported. Before dealing with some of those points—and it is inevitable that I can deal only with some—I should like to try to answer a question that is implicit in much of what has been said today, although perhaps it has not been put in so many words. Is there any real, hard, evidence for thinking that the Public Accounts Committee has the unique impact and effectiveness that is so often claimed for it, and which most hon. Members are happy to assert that it has?
  To use an industrial analogy, what return are we getting from this growth industry? It is a difficult question to answer because by far the greater part of the Public Accounts Committee's influence is as a deterrent: the very possibility of a PAC inquiry and report strikes terror into the heart of a Department that might be thinking of taking action which perhaps, on reflection, it should not take, and forces it to take remedial action where remedial action is called for before the matter sees the light of day. But, inevitably, it follows that the most important results of the Committee's work are not visible to this House, and the 30 or more reports that we are debating today are just the tip of the iceberg. Although we cannot measure the return that we get from the Committee, it would be a mistake to say that these reports, important as they are, are the only return. They are simply the tip of the iceberg.
  There is another reason why the question about effectiveness is difficult to answer. The reports that hit the headlines are not necessarily those that make the biggest or the longest lasting impact on the efficiency with which public money is spent. I give an example that is of special interest to the Treasury. In addition to some interesting conclusions and recommendations about computer purchasing, the Committee's ninth report also recommended more standardisation of computer-based financial systems within Government. This modest-sounding suggestion has attracted virtually no comment in today's debate, and I did not really expect that it would.
  However, the matter is of direct relevance to the common-sense but difficult improvements in standards of financial management that this Government are in the process of bringing about. It is not the kind of recommendation that leads to quick or easily measurable results. What it can, and I hope will, do is to pave the way for more economic and efficient administration by changing the attitudes and priorities of managers at all levels. That is one small example of a modest recommendation which has had no acclaim but which will do a great deal of good.
  The right hon. Member for Ashton-under-Lyne made a number of points about tax evasion. I note what he said about general anti-evasion measures. I do not want to go into that tonight. However, I should like to say something
  1144
  about one form of avoidance. We have examined the question of the exploitation of the present schedule D rules by partnerships, which the Committee reported on in its eighth report. It is not a new problem, as the former Chief Secretary who is now Chairman of the PAC well knows. There is no simple answer. We need to be satisfied that any measures taken are equitable and do not impose unacceptable administrative costs. This is a highly complex area of tax legislation, and the Government have decided that it would be appropriate for interested parties to be given an opportunity to comment before legislation is introduced. The Revenue has therefore been authorised to issue a consultative document on the matter later in the year.
  The right hon. Member for Heywood and Royton raised a number of points about defence measures—and two in particular. He asked whether I could give an assurance that there would be no further overspending in defence. There are signs of further overspending this year, and spring Supplementary Estimates will be presented to the House next month. However, I can confirm that the general practice is that overspending should be offset by a corresponding deduction in the following year.
  Mr. Robert Sheldon: Can the right hon. Gentleman give an indication of the sums involved?
  Mr. Lawson: The House will be informed in due course.
  The other defence matter mentioned not only by the right hon. Member for Heywood and Royton but by other hon. Members was Sting Ray. Perhaps, sometimes, too easy a comparison was made between the cost of Sting Ray and of NEARTIP. They are two very different kinds of weapon, with very different operational capabilities and cost-effectiveness. Sting Ray is very much more advanced technologically. There are many dimensions to the matter other than cost. It is highly proper therefore that the matter should have been referred by the Public Accounts Committee to the Defence Committee for it to make an evaluation of the other factors, which I certainly am not competent to evaluate. The House will, no doubt rightly, wish to have the Defence Committee's report before taking a view on the matter.
  The current position is that development is proceeding satisfactorily and Sting Ray is expected to enter service in the early 1980s without further delays and without any revision of the estimated cost reported to the Committee. Of course, if, contrary to expectations, there should be any significant further increase in the estimated cost or further delay the Government will not hesitate to look again at the project's cost-effectiveness.
  The right hon. Gentleman, in common with my hon. Friend the Member for Northampton, South (Mr. Morris) and others, raised the question of the endyear carry-over of cash limits. I know that this, again, is a matter in which the right hon. Gentleman was deeply interested when he was Chief Secretary, even though, despite his interest, he was unable at that stage to give birth to any scheme. It is, of course, a highly complex matter.
  In the light of the Committee's comments, the Government are considering the possibility of introducing a scheme for carry-over of unspent funds. We certainly agree—I do not think that anybody could disagree—that there are managerial attractions in the scheme, but we must also consider whether we can afford the additional

  1145
  spending that would almost certainly result in the following year. There is no point in deluding ourselves about this; there would be additional spending. It is impossible to put a precise figure on it, but it could be substantial.
  I am extremely sorry if the Treasury misinterpreted the Committee's suggestion in paragraphs 21 and 22 of its report that the Government might consider whether, for certain limited categories of expenditure, a less censorious attitude to occasional overspending might be an acceptable development. I am very glad that that misinterpretion was cleared up by the right hon. Member for Heywood and Royton making it absolutely clear that the Committee, as ever, is at one with the Treasury in our determination that cash limits should and must he a firm and effective control over public spending.
  I turn to another point raised by the right hon. Gentleman, and, indeed, echoed by his right hon. Friend the Member for Ashton-under-Lyne—namely, private finance for the nationalised industries. The right hon. Member for Heywood and Royton asked whether I could clarify the Government's position. A very full statement of our approach was given in the Treasury minute. Although no two cases are the same, we have tried to say as much as usefully can be said on general issues. As I believe the right hon. Gentleman recognises, there was a good deal of common ground between the Public Accounts Committee and the Government on this.
  An interesting sideline, or oblique view, on the complexity of this problem was provided by the speech of the hon. Member for Dunfermline (Mr. Douglas). Although he was concerned about the consequences of the privatisation of the BNOC he also pointed out vividly the difficulties that arise when industrial firms are owned by the State. I believe that in taking a decision we must consider all the dimensions, many of which the hon. Gentleman mentioned. But we are hopeful that we can make progress in this direction.
  Mr. Douglas: On the specific question of the BNOC, it has been reported that the Government's proposals would involve a higher charge for capital on the BNOC if "Granny" bonds or some other scheme were used. How does the Minister reconcile that with the actuality?
  Mr. Lawson: I am sorry that I do not have sufficient time to go into this. I hope that the hon. Gentleman has not confused two different things—the privatisation of the BNOC, and the issue of revenue bonds. I think that he will have to see the details of the scheme in due course and make his own judgment.
  The right hon. Members for Heywood and Royton and for Ashton-under-Lyne—it is nice to see them, as ever, ad idem, singing in close harmony even though they are a few Benches apart now—both referred to the black economy. As the Treasury minute indicates, the Inland Revenue fully recognises the importance of tackling this problem. Attention is being given to identifying those areas of the black economy which would most repay attention and to devising the most effective means of dealing with them. The black economy is by no means a single monolithic and homogeneous phenomenon. It includes many different and various types of tax evasion by many various and different types of people, and they all call for different approaches from the Administration.
  For example, moonlighting, which I suppose in terms of total quantity is the biggest example, is especially
  1146
  difficult to deal with, partly because of the relatively small size of each case and partly because of the lack of information. The question of the scope of the Revenue's existing enforcement powers, to which the PAC also referred, is currently under examination by a committee under the chairmanship of Lord Keith, and it would not be appropriate to comment on that aspect at present.
  The Revenue has had considerable success in recent years in improving its effectiveness in dealing with evasion. The changed system of accounts examination in the business area is more effective than the old system and the special offices have looked at a number of areas which were previously untouched. The amount collected in investigation work has risen from about £22 million in 1976 to about £91 million in 1979—more than a fourfold increase over a period when the total revenue collected increased by only about 80 per cent. That is some sign of a serious and successful attempt to get to grips with this problem.
  The right hon. Member for Heywood and Royton asked me when we can expect the results of Lord Keith's review. As I said in a written answer—which the right hon. Gentleman may have missed—to my hon. and learned Friend the Member for Denbigh (Mr. Morgan) on 13 January, Lord Keith expects his committee's inquiry to take about two years. That is an inevitable reflection of the complexity of the subject and the need for the most thorough treatment of it. The right hon. Gentleman, I think, said that we had given a large task to Lord Keith; now he knows how long Lord Keith expects that task to take.
  I turn now to the specific questions that the right hon. Gentleman asked me about the role of the Comptroller and Auditor General, and in particular about the report to which the right hon. Gentleman is about to give birth, early in March, on this matter. I entirely share the right hon. Gentleman's hope that there will be an opportunity to debate that important report. If necessary, I will gladly use what little influence I may have with the Leader of the House to make that possible within the present Session.
  I have to be a little more cautious about the right hon. Gentleman's request for legislation. First, we have to know what changes the PAC will recommend and we must have a chance to make up our minds about them and to gauge, following the debate that I hope we shall have, the opinion of the House. Secondly, we must be cautious because space in the next Session's legislative programme is even less in my gift than debating time in the present Session. However, I shall certainly draw those matters to the attention of the appropriate authorities.
  The right hon. Gentleman and other hon. Members also discussed the problems of Rolls-Royce. The monitoring arrangements establibed by the Government need to strike a balance—this was mentioned by the hon. Member for Dunfermline—between the Government's need to discharge their responsibilities as the sole shareholder of the company and their desire not to encroach on the day-to-day management authority of the board, which is expected to carry out its duties in a commercial way and, as far as possible, to act like the board of a privately owned company established under the Companies Acts. Nevertheless, action has been taken to ensure that, among other things, the Government are kept fully informed about the company's exchange rate assumptions.
  Rolls-Royce, as a matter of policy, is covering itself forward in the foreign exchange market. The chairman of

  1147
  Rolls-Royce explained the difficulties with which companies are faced in making decisions of this sort in the evidence that he gave to the PAC. There had been a different situation hitherto and there was no forward exchange cover. The fact that such cover now exists may make a considerable difference. The arguments advanced by the PAC and by hon. Members during the debate have been and will be well taken both by the Department's concerned and by the company.
  Mr. Michael Morris: May we have an assurance that the same degree of surveillance will be available for British Leyland's corporate plan?
  Mr. Lawson: I shall draw my hon. Friend's remarks to the attention of my right hon. Friend the Secretary of State for Industry. If my hon. Friend has recovered from that response, I shall turn to another of the pertinent points that he made—namely, the taxation of earnings from offshore employment, principally by those engaged in North Sea activities.
  The PAC commented in its eighth report that to a significant extent PAYE was not being applied properly to North Sea earnings. My hon. Friend echoed that and expressed some concern. I am glad to be able to tell him that since the report was made there have been two important and favourable developments. First, the Inland Revenue has been successful in the courts in establishing the obligation of employers, especially foreign—based employers, who operate PAYE.
  Secondly, with the co-operation of the oil industry, the Inland Revenue last year carried out a survey of employment in the North Sea. The result of the survey is still being analysed. However, it is alrady clear that the tax loss in this area has been substantially reduced since 1978, when the original estimates that formed the basis of the Committee's report were made. In view of these developments, we do not consider that there is a pressing need for legislation along the lines suggested by the Committee. I assure hon. Members that we shall continue to keep the position under careful review.
  I come towards the end of my remarks and the end of a long, full, but worthwhile debate. I turn to the passionate constituency argument which was advanced by the hon. Member for South Ayrshire (Mr. Foulkes), which was devoted to Stonefield Vehicles. As he knows, the future of the company is in the hands of the receiver. However, if a viable proposition is put to the receiver by a suitable private sector interest that would revive operations in Cumnock, the Government will be glad to consider its eligibility for the normal range of financial support.
  Mr. Foulkes: It was good of the Financial Secretary to reply to my constituency interest in what has been a long debate. Of course, he has said nothing new. What he said was said by the Minister in the Adjournment debate that I raised on the subject. In the light of changed circumstances, especially the Government's change in attitude towards BL and a number of similar instances, is the Financial Secretary able to give me a simple assurance that he will take the issue back to his colleagues and that, together, they will reconsider it to ascertain whether the Government can act more positively instead of taking a
  1148
  passive role and waiting to see whether someone comes forward? That is no more than asking him to return to his colleagues. If he is able to give that assurance, it will be a small ray of hope.
  Mr. Lawson: I appreciate what the hon. Gentleman has said. I cannot give him the assurance that he has asked for in quite those terms. Although there was not a Minister from the Scottish Office on the Front Bench when he referred to this matter, there was a Scottish Whip on the Front Bench. The hon. Gentleman can be sure that the message has been carried to those of my colleagues who have direct responsibility for this matter. I am sure that the hon. Gentleman's eloquence has not fallen on deaf ears. It remains to be seen whether it has fallen on fertile or stony ground.
  I see that the hon. Member for Kingston upon Hull, East (Mr. Prescott) is fixing me with his beady eye. He is a great expert on the underwater training school at Fort William. He spoke very knowledgeably and at some length about it. As the hon. Gentleman knows, it is a matter for the Manpower Services Commission, which is the responsibility of the Department of Employment. I understand that the hon. Gentleman has been pursuing the issue with the Department of Employment. I am sure that he will continue to do so. It is the right way of dealing with it.
  Mr. Prescott: I agree that it is the responsibility of the Departent of Employment and of the Manpower Services Commission. However, in its reply to the Public Accounts Committee the Treasury said that it was not satisfied with the terms of the previous contract. Is it making any attempt to ensure that the new cotract, which is now being negotiated, will be different?
  Mr. Lawson: The Treasury and the Department of Employment are not unaware of what has happened. They will seek to ensure that any new contract that is signed is made on a satisfactory basis. At present, I understand that the MSC is continuing its discussions with the industry on the basis that the industry itself will take over the financial and management responsibilities for the underwater training centre. Compensation for the existing contract—another matter that the hon. Member raised—would arise only if the centre were closed. That is a hypothetical point and it would not be right to say anything now.
  The debate has covered a lot of ground. I am conscious that I have not been able to cover all the ground, which in itself was less than that covered by the reports that the right hon. Member for Heywood and Royton has proudly resting on his knee. It has been a very good debate. Once again, I congratulate the right hon. Gentleman and his colleagues on having instigated the debate and on havng fulfilled the function with which they were charged under our constitution in a most admirable and thorough way.
  Question put and agreed to.
  Resolved.
  That this House takes note of the Eighth, Ninth, and Eleventh to Thirty-Fifth Reports from the Committee of Public Accounts in the last Session of Parliament, and of the Treasury Minutes and the Northern Ireland Depertment of Finance Memorandum on those Reports and on the Fifth, Sixth, Seventh and Tenth Reports presented in the last Session of Parliament (Cmnd. 7925, 7962, 7992, 8066, 8067 and 8125).

  Education (Cambridgeshire)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thompson.]
  9.13 pm
  Mr. Clement Freud: When, in the early 1970s, it was realised from statistics that there would be a fall in school rolls, many of us who were passionately interested in education felt that there would be a great chance for education to improve. As there would be no diminution in the numbers of staff, we felt that one major section of Government would have a great opportunity to make a realistic improvement without becoming involved in greater expenditure in real terms.
  When that did not happen, it was a substantial disappointment to us. For the first time, we have a Prime Minister who was a Secretary of State for Education. Therefore, we were particularly bitterly disappointed when we discovered how little extra money would go to her old Department.
  Expenditure is a matter of priorities. Many of us would take issue with the priorities of this Government. There are people who would take issue with the priorities of any Government. I say this because I do not want the Minister to reply that there is no alternative. There is always an alternative. I would personally prefer blackboards to guns.
  I am talking specifically today about the problems of Cambridgeshire and perhaps shire counties in general.
  Any rural constituency with an abundance of small schools will find that due to county directives and less rate support grant they are told that there will have to be a cut of, say 1·9 per cent. in the number of teachers. They can make cuts of this sort only from the large schools. To impose a staff cut on a small school would mean closing it altogether.
  Before going into specifics, I should like to remind the Minister, with whom I have had many gainful debates over the years in Committee and in this Chamber, that things have changed enormously since the days of his successful headmastership of Highbury Grove. Most significantly, there is nothing like the spirit or the job satisfaction that formerly existed in teaching. If I were a doctor dealing in the diseases of teachers, the most common prognosis would perhaps be that of diminished resilience. This resilience can get a lift only through appreciation by employers and the joy of teaching rewarding kids. All of us are interested in achieving that.
  I want to talk, in the first instance, of the village schools in Cambridgeshire. It has always been my contention and perhaps that of all Liberals, or old-fashioned Liberals, that a community is based on four cornerstones. Those cornerstones, in whatever order one chooses to take them, are the school, the church, the pub and the shop. If one destroys any one of those cornerstones, one begins to wreck the community.
  I am unhappy about the criteria currently used for closing schools. I am privileged to represent an education system that was master-minded by Henry Morris, one of the great chief education officers and perhaps the first person to come out into the open and say that a school is not something that is open for so many months in the year, so many days in the week, and so many hours in the day, but is part and parcel of the community. Under Mr. Morris, women's institutes and British Legions stopped
  1150
  having separate meetings in separate huts, sold the huts or sites, and moved into the school. The school became part of the community.
  I should like to instigate the most careful Government surveillance before any further small schools are closed, especially those that play their part outside school hours. I talked about small schools to the Secretary of State the other day. He thought that I meant schools of seven, eight or 10 pupils. I do not. I believe that 25 is 'about the minimum figure for achieving viability in a primary school. If the school number were about 25, I would beg the Government to think most carefully before agreeing to sign a section 12 notice.
  The counties around Cambridgeshire have done two significant things. Suffolk has looked at the closure of seven schools and recommended the closure of four, keeping two open and partially retaining one. At a county council meeting on Tuesday evening it reprieved all seven.
  Essex, with infinite wisdom, decided that in view of the county council elections next May it would be wrong for the councillors to initiate legislation which would be implemented by their successors, or possibly even by them, if they kept their seats. That is a responsible way of dealing with an irrevocable issue. When one closes a school, there is no going back. I do not believe there is a school in the country which, once closed, has been reopened a few years later. Once a school is closed, that is the end. They go in only one direction.
  I urge the Minister to discuss the subject of village schools with his noble Friend the Minister of State, who, I think, has no great desire to speak to Members of this House. On two occasions, I have telephoned her office and written to her, but I have received no reply. The only way is to table questions. However, I shall forgive her if she will look with enormous care at the requests to implement section 12 notices in respect of schools that are in viable villages.
  Cambridgeshire—here again I take issue with the county council—has a structure plan which seems to work on the basis "If we can hit them, let's get them when they're down". It is the opposite of the Robin Hood syndrome: it is "take from the poor."
  In villages like Witcham and Pymoor, both of which have threatened schools, a new headmaster is put into the school, and noises are then whispered abroad about the school being closed because of the inability to find the right teaching staff. What then happens is that the structure plan allows no further building, not even infilling, which means that, with the best will in the world—and both villages are attractive and happy villages—it is impossible to bring in more people to bring up the school rolls. That is my plea for village schools.
  The second important point that I should like the Minister to consider is the state of education in North Fenland, particularly in Wisbech. Wisbech is a town of just under 20,000 inhabitants, with rather more from the surrounding villages. The system there might truly be said to be the worst possible system of education in the world. We have excellent primary schools which send all the children, at the age of 11, to single-sex schools—the Queen's boys school and the Queen's girls school. For two years, the single-sex schools are comprehensive—if it is possible to be comprehensive as single-sex schools—and at the age of 13 there is a creaming off to the grammar schools. That means that the boys are left behind in the boys' school and the girls in the girls' school. They feel

  1151
  that being left behind is a punishment for being academically less able than those who are selected and win co-education.
  As a result there has been exacerbated divisiveness in a town which has always prided itself on being the integrated capital of the Fens. The divisiveness is now clearer than ever. Unemployment in Wisbech is 12.6 per cent. with another 3 per cent. to come when Smedley's factory, which employed nearly 500 people, closes in April. It is obvious, in such a conurbation when few jobs are available for a lot of applicants, that the jobs will go to those with the best possible credentials and the best possible education. This means that with selection at 13—many would say rejection at 13—that is the age at which kids know that it will be extra difficult for them to find a job.
  Lord Redcliffe-Maud said that the ideal eduction system is a national service which is locally administered. The Minister may remember that when we were on an Education Bill Committee many years ago I argued in that Committee that whereas Redcliffe-Maud was absolutely right, there had to come a point at which central Government should have the right to overrule a decision made at county level.
  I think it was Leicestershire which at that time had suggested having seven-week Christmas holidays and three-week summer holidays in order to save heating in schools. That seemed to me to be an insane system, because it simply took the expense of heating from the public authority in order to ruin private families. As a bonus, it meant that very few children could go on holiday with their parents, who were not as elastic in their holiday arrangements as they would have liked to be.
  My contention is that the position in Wisbech is now so bad that it is time—and this is the only solution—for the Government to intervene.
  We very nearly succeeded in having an integrated education system until it was found that the Wisbech grammar school was a voluntary aided school. The trouble about voluntary aided schools is that, whereas the education authority is allowed to pay for them, the voluntary aided school governors are the ones who decide what goes on. The county could not even reduce the three-form intake to a two-form intake or a one-form intake. The only option that was open to the county was to cease to maintain it and to have a no-form intake.
  The education system in this case is not only bad but unsatisfactory and divisive, and Wisbech has, many feel as a direct result, one of the highest per capita rates in Britain for juvenile crime. There are other miseries, such as a minimal number of opportunities for youth entertainment, and few chances, because of the diminishing transport, for kids to get to towns such as Peterborough and Kings Lynn, where there is alternative joy.
  It is time that the Government sought to have powers to change a system which does as much harm to a community as the continued existence of an elitist grammar school does to the town of Wisbech. I do not blame the governors—they are there to protect the school and they are doing the best they can to protect it—but I blame the system, and I know the extent to which my constituents suffer as a result of it.
  1152
  There are three further points that I should like to make. The first concerns governors. There are people in this country, and there are certainly people in Cambridgeshire—the hon. Member for Huntingdonshire (Mr. Major), who represents the county south of where I am, will, I am sure, agree—who collect governorships and managerships of schools in the way that girl guides used to collect badges. It is high time, when new legislation is brought in perhaps to implement the Taylor report, so there is a limit on the number of such appointments that any one person can have.
  I suggest that a governorship of one school in the primary sector and two in the secondary sector—or perhaps the other way round—is really more than enough. But almost the worst of all is having the same person on the board of governors of the selective grammar school and on the board of governors of a single-sex non-selective school.
  My second point concerns teacher mobility. The Minister will remember from his days as a headmaster, and before that as a schoolmaster, that there are two ways of teaching in a school. I am talking not of teaching in laboratories but simply of teaching the arts or languages. Either the teacher has a room and the kids go to him, or the kids have a room and the teacher goes there. I should like to take this one stage further and have peripatetic teachers. Some counties use them.
  I should like great Government encouragement to be given on this matter. Far too often we hear that a one-and a-half-teacher or two-teacher or even three-teacher school is educationally not viable, because a child might fall out with the teacher on his first day at school and have a miserable life for the next six years. That may have been so in the dark 1930s and 1940s, when there were straight-through schools from 5 to 14. At that time some kids might have hated their teacher for the whole nine years of their education.
  With greater mobility now, surely it would make sense to have one-and-a-half-teacher and two-teacher schools where one of the teachers is a permanent fixture, and the other one comes from one of two, three, four or five other villages. Therefore, the argument could no longer be used that four-teacher schools are needed, because one teacher might have a talent for music and one for woodwork and one for metalwork. It would be easier and cheaper to put one teacher in a small car and pay a mileage allowance than to have a big bus to take the kids to the other villages waiting outside the school—a school which will be closed quite soon.
  My final point concerns not only Cambridge but most of the country. I have read, as far as one is able to read, the report of the Under-Secretary on 16 to 19-year-olds. Education must involve planning. My schools and my education authority are extraordinarily keen to be able to plan education for 16 to 19-year-olds. I hope that in the near future, instead of having a blancmange-like report which leaves all options open, genuine guidance will come from the Department in order to help the whole county.
  9.32 pm
  The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): I served with the hon. Member for Isle of Ely (Mr. Freud) on the 1976 Education Bill Standing Committee, where his sense of humour in the late hours of the day and in the early hours of the morning made that Committee more pleasurable for those who were

  1153
  there. I know of his concern for education. He was the education spokesman for his party when I first became a Member of the House. I know of his continued concern, because of the number of his questions that arrive on my desk from time to time.
  Before answering the hon. Gentleman's points—I agree fully with some of them, and shall comment broadly on others—I shall make a splendid beginning, with all guns firing. The hon. Gentleman referred to the pupil-teacher ratio. It is worth reminding the House and the parties represented here—the Conservative and Liberal parties at the moment—that in January last year we had the lowest ever pupil-teacher ratio, of 18.7. We shall be surprised if it is much different this year.
  On forward planning, we are still working on a presumption that the ratio will be about 18.7 If we made a table of the lowest pupil-teacher ratios compared with standards achieved—I know the difficulties of testing such standards, but I shall take O and A-levels or CSEs as an example—there would be no relationship at all.
  London, which spends more per child than anywhere else and has a low pupil-teacher ratio, has half the average ratio of the country in 0-levels. The calibre of the teachers matters. I think that the hon. Gentleman will agree with me on that point. We must use the opportunities that are available to raise the calibre of the teachers when we recruit.
  The hon. Member said that he preferred blackboards to guns. I do not disagree with him. However, sometimes we require guns to allow us to write what we want on the blackboards. Blackboards can be used for total indoctrination as well as for true learning. The guns are for the protection of the blackboards that the hon. Gentleman and I desire to continue in our society.
  I turn next to community colleges, specifically in the area of Cambridge. I was privileged to visit those colleges when I was last in residence, in 1964, at Corpus Christi, and I was much impressed with them. I think that Lord qutler said that they were a lovely and gracious experiment. The way in which they continue further education, uniting age groups, is an excellent achievement.
  I can claim some interest in the constituency of the hon. Member for Isle of Ely—and not only from speaking there twice at the last general election, obviously to little purpose. My forebears on my father's side lived in that constituency for many years, until the Industrial Revolution, when they went to Lancashire on the Grand Union Canal, with their cattle and pigs. Our houses in Haslingden are still named after villages like Wimelington, which I discover when I visit the hon. Gentleman's constituency.
  Last night we had a debate on village schools. There is concern about the continuance of these schools. We accept that where a village school can be kept open on economic and education grounds that should happen. the emphasis seems to be on having to prove that it is financially or educationally disadvantageous to close a school in order to save it. As the hon. member recognised, some schools become unviable. The birth rate is falling by about 29 per cent. Last night we had an argument about when the first census was held. It was in 1801. I said that it was 1811 and one of my hon. Friends said that it was 1841. I was nearer, and I got the prize. One does not need
  1154
  to get 100 per cent. for a first-class degree, and I achieved a 75 per cent. mark. The last census showed the biggest fall in the birth rate since censuses were first held.
  In 1976 there were 4–8 million children in primary schools, and by 1986 the figure is expected to be 3·4 million. In secondary schools this year there will be 4·1 million children. In 1991 that figure will be down to 2·9 million. That is a traumatic drop.
  It must be appreciated that the Government do not close schools. It is a national system, locally administered, and we can disagree with what the local authorities do. The decision, however, rests with them. We find that the small schools that are being closed are located in the inner cities. The depopulation of those areas is heavier than the depopulation of villages.
  Since the village school is part of the life of a village, with teachers serving for long periods, they should be kept open when that is possible. Until I was 11 years of age I went to a Church of England primary school on the Lancashire hills. The basic subjects were well taught. There were plenty of fields in which to play, with fighting and wrestling. It was a healthy environment. The local authorities are under pressure from the Government, who, in turn, are under financial pressure to balance the economy. With the financial run-over of the next three or four years we expect that about 750,000 school places will have to be taken our of use if the authorities are to work within their limits. It costs about £15 million a year in heating and lighting for every 100,000 places kept in being.
  We do not say that all village schools should stay, or that all should go. Each case must he looked at on its merits. If it is economically viable and educationally successful, the school should remain, but if it does not meet those criteria it will have to be looked at by the local authority concerned.
  Children are not born at the age of 5. If one is thinking of closing a school, one must have consultation long before the appropriate order is made. The first requirement is genuine—not artificial—consultation with parents and teachers.
  Mr. Freud: I agree with the hon. Gentleman, but he must realise that the moment that the first consultations regarding a school closure take place, parents in the village
  will send their children to another school. That is the great danger.
  Dr. Boyson: I am aware of that. My right hon. Friend the Member for Taunton (Mr. du Cann) raised that point in yesterday's debate. A blight hangs like a cloud over the school. But it is the chicken-and-egg syndrome. If a local authority did not consult, the hon. Member for Isle of Ely and I would be the first to complain. We agree that consultation must be genuine. If local people bring forward alternative proposals, they must be considered. Parents are concerned about their children and the continuation of the way of life of their village.
  Mr. John Major: The hon. Member for Isle of Ely (Mr. Freud) spoke with great feeling, and I share much of his concern. However, on the question of handling school closures sensitively I should put on record the experience in my constituency in Cambridgeshire. The education committee, and particularly the chairman, John Horrell, and the vice-chairman, Mrs. Emily Blatch, have handled most

  1155
  sensitively the cases in which there has been the possibility of a school closure—against great cash difficulties, because of the rate support grant.
  Dr. Boyson: I am grateful for that intervention. I know John Horrell and his vice-chairman and I shall ensure that my hon. Friend's comments are passed on to them. There will be pleasure in Cambridgeshire at the statements that have been made in the Chamber.
  Under section 12 of the Education Act 1980 an order made for the closure of a school must be circulated and posted in a public place. Local people have two months in which to object and the local authority has another month in which to collect the objections and send them to the Secretary of State with its observations. It is not a hurried process.
  I have seen many such cases go through in the past year and I know that my right hon. and learned Friend the Secretary of State considers with great care the objections made by local people and those that are often made in the House.
  I know how carefully my noble Friend the Minister of State examines such cases and the amount of time that she spends on them. It is often difficult to come down on one side or the other. Some areas must cut back and it is difficult to decide which schools should be closed.
  Some years ago a plan for Wisbech collapsed, for the reasons given by the hon. Member for Isle of Ely. The hon. Gentleman made certain generalities that I do not necessarily agree with. He would be surprised if I agreed with him, because I tend to be a reactionary on certain matters. I thought at one stage that I saw the hon. Gentleman reading Conservative Party literature. When he stood up I waited for a great announcement. One never knows what will happen these days, with "Gangs of Three" and "Gangs of Four" and surreptitious reading of Conservative Party literature on the Liberal Bench. That shows the hon. Gentleman's breadth of thought. We shall follow his intellectual consideration of the literature with interest.
  Mr. Freud: It shows more the carelessness of the posting methods of the Conservative Party. It arrived in the postbox of one of my hon. Friends.
  Dr. Boyson: That shows how desirous we are of spreading our bread widely on the waters, never knowing what return it may bring in the future.
  Mr. Harry Greenway: Some of my hon. Friends and I received a letter from the leader of the Liberal Party only a few days ago. Those things are happening in all directions.
  Dr. Boyson: I never receive letters like that. Everyone else is being offered transfers, and if they are as rewarding as football transfers it is no wonder. However, at present hon. Members are not moving as quickly as football managers. I put on record the fact that none of these goodies are coming my way.
  I would not dismiss single-sex education at the secondary level as easily as the hon. Gentleman does; nor would many parents in this country. Secondly, I do not see any link between the question whether education is selective or non-selective and the degree of crime in an area. It seemed that Wisbech had a heavy crime rate
  1156
  because it had selective education. There is much crime in Wembley, but in Brent, North we have a totally nonselective system, so I could then say that crime in Brent. North arises from a non-selective system. I had not thought of saying that before, and I would not say it. The hon. Gentleman's views are not entirely the same as mine, but we each hold them strongly.
  The hon. Member for Isle of Ely mentioned the question of intervening. There is no prospect of the Government's intervening in Wisbech. We have given power to the local education authorities. There are many different systems in the country. I am sure that the hon. Gentleman will agree that variety and experimentation are good. The community colleges and the Leicester scheme, to which the hon. Gentleman referred, were experiments. One such scheme was introduced in Waltham Forest when I was there. I would hate there to be one scheme only throughout the country. Variety is a good sign of a free and healthy society, in which the hon. Gentleman and I believe.
  If the local authority wishes to do something differently, it can put up its scheme, which will then be considered by the Government.
  Mr. Freud: The local education authority put up a scheme that was in the process of implementation when the governors of the voluntary-aided school found that they had the means to defy the local education authority. The whole county is on one side and the school is on the other.
  Dr. Boyson: That situation is like Jack and the Beanstalk or, more aptly, David and Goliath. As a Government we can act only on schemes that are put before us by local authorities.
  The hon. Member for Isle of Ely mentioned three points at the end of his speech. I shall not refer to the 16 to 19-year-olds, because I know that my hon. Friend the Member for Ealing, North (Mr. Greenway) wishes to raise another matter later, so I shall not take up time with that now. It is a debate by itself.
  The first question raised by the hon. Member for Isle of Ely concerned the appointment of governors. It is wrong to appoint one governor to a whole bevy of schools. The appointment is sometimes regarded as a local honours list, or a Cadbury's dairy milk medal. A man who does not get on to the council may be appointed a school governor. However, in some instances it is useful to have the run-through from infant school, junior school and secondary school. Being a school governor is a serious job. The appointment should not be handed out as an honour, or awarded for political service.
  The second point concerned teacher mobility. I have considerable sympathy with the hon. Gentleman's views and will see that they are passed to the Department and to the local area. Small children, particularly, should not be moved unnecessarily. It is easier and cheaper to move an adult. It requires only a car allowance. In addition, a large coach with a lot of children may involve a long time travelling, and may be subject to bad weather. The peripatetic teacher can bring variety to a school, like part-time teachers in small schools, without extra cost.
  One cannot keep village schools open at a capitation cost far higher than in the towns. It would mean that they were existing at the expense of the towns. However, a school with about 30 or 35 pupils, with one or one and a

  1157
  half regular teachers and a number of part-timers, is viable. The wife of the local vicar is often a trained teacher and others can come to teach music and other specialties, which can put life back into a village school without the large expense of full-time teachers.
  The hon. Gentleman sensibly took the matter further by asking whether the principle could be extended to other schools. In certain sixth forms in London that is now the practice. The hon. Gentleman was kind enough to mention my time at Highbury Grove. Staff can move between schools and travel round like missionaries, shaking the dust off their feet.
  It has been a pleasure to reply to the hon. Gentleman. I have been able to state our view on village schools and pay respect to the community college. I have also outlined the pupil-teacher ratio. I reiterate that governors appointed should be committed to serve their school faithfully and well. The appointment should not be made as a token office. My final point is that at a time of falling rolls and limited finance, local authorities should be encouraged to adopt flexible schemes, as suggested by the hon. Gentleman, to maintain standards and to keep certain schools open that would otherwise have to shut.

  Education Act 1980
  9.53 pm
  Mr. Harry Greenway: I count myself fortunate to follow the hon. Member for Isle of Ely (Mr. Freud). I wish to raise certain points that are linked to what he was saying.
  There is an urgent need to implement certain sections of the Education Act 1980. The father of Benjamin Disraeli, Isaac Disraeli, said:
  "The self-educated are marked by stubborn peculiarities."
  John Shedd said:
  "Self-education is fine when the pupil is a born educator."
  Those two remarks make out a substantial case for education. Generally speaking, children and adults are unable to educate themselves.
  I have received concerned letters voicing anxiety over the urgent need for implementation of key sections of the Act, on which we worked so hard in Committee. There is some confusion and misunderstanding about what is happening. I seek to help everyone to identify those concerns and also perhaps to encourage the Minister to make the position clear.
  The Act contains widely welcomed sections, referred to in the last debate, which provide for schools to have their own governing bodies and for parents and teachers to be elected to those governing bodies. These are important elements in the Government's commitment to the greater involvement of parents in the education of their children. It must be remembered that parents are continuing and constant consumers in education. It is most important that implementation of those provisions should not be delayed. I hope that the Government will confirm that their commitment to them is no less now than it was when the Bill was introduced, and that my hon. Friend will explain the Government's proposals for implementation of those sections.
  I note that the Churches are moving forward in a most interesting way. I understand that the Roman Catholic authorities and the Free Church authorities are proceeding in a manner similar to that of the Church of England Board of Education, which is working in co-operation with the Department of Education and Science and has developed a most interesting arrangement whereby existing Church schools, both aided and controlled, shall have instruments of government based upon a block diocesan instrument.
  This is a rather technical point, but it is worth making. The task of making instruments for 5,500 schools may be reduced to the making of only 50 instruments. Teachers' unions welcome this, and procedures are now in hand at regional diocesan level to consider the matter. The composition of the new governing bodies of the Church schools will be achieved after consultation with local education authorities, parents and teachers. I note that the Act lays down only minimum requirements about representation and there is plenty of local freedom for people to develop their own style of representation, membership and so on. That is exactly the type of theme that I so welcome as part of the Act and that I wish to see implemented.
  I wish to say a word, too, about school admissions and appeals. There are sections in the Act which, for the first time, give parents a clear statutory right to express their wishes about the education of their children and the schools that their children shall attend. Those are

  1159
  significant and welcome developments in the law of education in this country, because they help to clarify parental rights and to bestow stronger parental rights.
  An important aspect of those provisions is the right of parents to appeal to a specially constituted appeal committee if they are not satisfied with the school that their child is offered after their own choices have been considered. Another important provision requires local authorities to publish information about schools, including examination results. A great deal has been said about that. Those two proposals will do an enormous amount to open up local administration and to increase the availability of information to the public.
  Those who object to those provisions will make the usual claims that what is proposed is too expensive or too complicated and that they must have more time. Because of the great concern that parents and childen should have the benefit of those provisions as soon as possible, I ask the Minister to confirm that the Government have no intention of postponing the timetable that they have already set for implementation of those measures. It is very important that when parents choose a school for their children they should do so on the basis of the fullest possible information about all the schools available in their area, that they should have a statutory guarantee that their wishes will be taken fully into account and can only be overridden for very good reasons and that, if they are dissatisfied with the reasons, they should be able to state their case to an appeal committee.
  How can a parent make a valid choice of school without the maximum information about what other kinds of school is available—
  It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thompson.]
  Mr. Greenway: What valid choice can a parent possibly make without the maximum information? The publication of examination results will be crucial but the information must include the headmasters comments on the background of his school and be part of a general school prospectus. A way must be found acceptable to the schools if possible but certainly available to the whole community, for getting this information and all sortsof other information into the prospectus and into the hands of parents when they choose a school. I ask the Minister to assure me that he will push ahead and that something will be done as soon as possible.
  Another important element of the 1980 Education Act is the assisted places scheme. It will contribute greatly to the widening of parental choice, especially for the less well-off families, and to the breaking down of class barriers and prejudices about the use of independent schools. The Government have been courageous in pressing ahead with a measure which was promised in our manifesto, despite pressures on public expenditure. But those pressures continue. I hope that the Minister can confirm that the scheme will start as planned this autumn and that there will be no reduction in the planned level of provision.
  It is very important for the future health of our society that parents should be able to choose from different kinds of school. They should be able to choose single sex
  1160
  schools, denominational schools—they are threatened by the Labour Party in certain areas but parents should be able to continue to choose them—small schools, sometimes large schools, and certainly independent schools.
  There must never be a State monopoly of education. The ability to exercise choice in relation to a school should not depend solely on the length of the parent's purse. That his why the assisted place scheme is to be welcomed—because it seeks to make good schools more widely available rather than to destroy them.
  My practical experience in schools extends well over 20 years—my interest will continue as long as I live—primarily in the maintained secondary schools. I have a deep dedication to them. But the freedom of parents to choose the kind of school they want, in both the maintained and independent sectors, is crucial in a free society. I do not want to see polarisation between the maintained and independent school populations. That damages the very fabric of society.
  Iain Macleod said that the purpose of the State in education was to provide all people with an equal opportunity of proving themselves unequal. He spoke well and wisely, as he did so often on other matters.
  I hope to see a wide variety in the age of those who serve on school governing bodies. Like the hon. Member for Isle of Ely, I hope that people will not take on more than they can thoroughly manage. I hope that we shall see not only aged people on school governing bodies. There has been a tendency to have only rather senior people on some bodies in some areas. That is because they have the time available to do the job. I want to see a spread of age.
  I do not want to push out the elderly. They have the wisdom and experience of life behind them and have much to contribute. I want to see young parents and young teachers on the boards. I should not mind seeing pupils serving in some capacity, and the Act makes provision for that. I am not saying that they should always be full members, but they could be present. I want to see parents drawn from a variety of backgrounds, where it is possible to have more than one parent on the board. The Act provides only minimum criteria, so there can be a number of people involved in any area of service.
  The interests of governors or of those appointed to governing bodies is central. It is crucial that the school means everything to political appointees, parental appointees, teachers or any other category, and that they are prepared to go all out for it.
  Highbury Grove School has been mentioned by the hon. Member for Isle of Ely, who initiated the previous Adjournment debate. It is a school that I walked around with my hon. Friend the Under-Secretary of State when it was being built. We walked over the foundations together. We walked through the building before it was opened. We walked round it many times once it was functioning. I met the governing body. I have, of course, served on school governing bodies. At Highbury Grove and on other school bodies with which I have been associated, the concern of the governors for the welfare of the school and their devotion to it were crucial to the school's success. It was tremendous to see those on the governing body at Highbury Grove fighting for the very existence of the school last year and before. That is the sort of commitment that we want everywhere.
  I have spoken of Highbury Grove, and the schools with which I have been involved and the governing bodies on which I have served both as a practising teacher and as a

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  representative of my party. On the school governing bodies in Ealing we have, especially in the past two or three years, succeeded in encouraging on to the boards of every school—be they middle schools, first schools or high schools—people totally dedicated to the individual school. They have a pride in the borough of Ealing generally and a pride in the particular school concerned. That has enriched the life of the school and the life of the community. It is that sort of pressure that is behind my thinking. I urge my hon. Friend to do all that he can to implement the sections of the valuable Education Act 1980.
  10.9 pm
  The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): I am grateful to my hon. Friend the Member for Ealing, North (Mr. Greenway) for raising the issue of the implementation of the Education Act 1980. My hon. Friend was a member of the distinguished Standing Committee that spent about 130 hours in close examination of the then Bill's clauses. Before that he was a distinguished member of the teaching profession, especially' in the London area. It is not the easiest of areas in which to teach in comprehensive schools. He speaks with a commitment on behalf of his constituency and with deep knowledge of teaching standards and of the concern of parents that their children should get a fair start in life.
  The 1980 Bill was introduced by the Conservative Government because we believe that in education there are two principles that we must follow. First, we must always aim at high standards. Secondly, it is part of our philosophy to maximise, wherever possible, parents' choice of school. We believe that the ability of a parent to choose a school is part of our free society. A free society does not only involve voting every five years. It means living as free men and women day by day.
  If schools are responsive to parents, they will become accountable to the surrounding area. Like Her Majesty's inspectorate, that is one way of checking the results. Certain parts of the 1980 Act are already in operation. That is good news and in time further changes may result.
  I remember fighting the recoupment clauses in the previous education measure. The recoupment provisions of section 31 gives an authority an automatic right to reclaim from another authority the cost of educating children from that authority. Ealing and Brent are close to each other. My hon. Friend and I are near neighbours. One does not need a telescope to see from Ealing to Brent. In the past, if parents in Brent wanted to send their children to Ealing, they had to get permission from the authority. If they did not the authority would not be able to reclaim the cost of that education. If the children travelled from Brent to Ealing, Ealing could not reclaim the cost unless Brent had initially agreed to the proposal.
  The situation has changed. We have widened the market. Boundaries cross throughout London. Those who built schools did not know that in 1964 there would be a local government Act that would change London's boundaries. From this year, any parent whose child is accepted in a school in another borough will find that his borough will automatically have to pay the cost. The choice has been widened considerably. That is a major factor. Shortly, when section 6 has come into operation, parents from borough A will be able to send their children to schools that have vacancies in borough B without the
  1162
  agreement of either of the authorities. If there are vacancies, they will be available to any child in the area. Again, parental choice has been extended.
  I agree with my hon. Friend on the philosophy of assisted places. It widens parental choice. All the 220 schools involved have excellent sixth forms, which will give pupils a chance to be accepted for university training and so on. I give my hon. Friend the assurance that the scheme will start this year,—I was about to say 220 schemes, although I had in mind 220 schools. It could not be 220 schemes, because even my belief in the free society does not stretch that far. There must he a little order as well as anarchy in our society. Therefore, 220 schools are signing agreements. This year 5,500 pupils will take up assisted places. Of those, 950 will he sixth formers.
  The House may not be packed, but it is intensely interested. I am sorry that Labour Members are not here to hear my offer. If any Labour Members would like assisted places for their children—they might need to keep it secret from their party—they can be given a list by the Department of Education and Science and can apply to the school that they are interested in. Already 140,000 leaflets have been distributed. There is every sign that plenty of applications are coming in for the schools in the scheme. The scheme will give an opportunity to those who could not otherwise afford those places. Those independent schools exist and long may they do so. May they also be open for their academic excellence to be available to children from all parts of our society. What was done by the previous Government in saying that the schools would continue, but only provided that one's purse was long enough, was divisive.
  On the question of school government, my hon. Friend referred to the Churches. I am delighted to know that the Churches are discussing the question of block instruments of government. All this cannot be introduced immediately. My hon. Friend knows that we stated clearly that the 1980 Act would give power to the Secretary of State to enforce the minimum qualifications that we wanted for governing bodies when he wished to do so. To demand this instantly would mean 25,000 schools requiring new instruments of government. This is not simply a matter for local authorities. There would have to be approval right the way through. A pile-up would result. Easter is the time when it comes into operation, if my memory serves me correctly. Any school opening and any school changing its article of government must do so within the terms of the Act.
  Mr. Greenway: My first concern is for the scheme to get started. I am pleased to hear that it will start from Easter. My second concern is that there shall be completion and that all schools will have new instruments of government within a forseeable time and that it will not be too long.
  Dr. Boyson: I take that point. If it is found that the spirit as well as the letter of the Act on governing bodies is not being followed, the Secretary of State has the power—and he will exercise it—to enforce the minimum standards of the Act. We want to bring the worst practice up to the best. If it is found, over a period and when finance is easier, that this is not being done in certain authorities, the power will be exercised. The Secretary of State will act to ensure the make-up of the governing body,

  1163
  with one elected parent and one elected teacher and the rest, as provided for in the Act. We shall keep the situation under review and the powers will be used if necessary.
  My hon. Friend referred to schools admissions. Again, this is a matter of parental choice, like recoupment across boundaries. We believe, as a Government and as a party, that parents should have maximum ability to state a preference for a school and that if they do not get the school of their choice they should be able to appeal and state why they want their children to go to that school. The fact that this can be done has an effect. Every driver is not arrested for going above the speed limit. The fact that there is a speed limit and that some people are arrested affects the behaviour of other drivers. The fact that parents can appeal if they do not get the school of their choice and the fact that schools must provide information on what they are doing and local authorities must see that this is done automatically means that schools will be more responsive and accountable to parents. This is something in which I have always believed as a schoolmaster, a parent and an educationist.
  I can give my hon. Friend an assurance that I know will bring delight. This part of the Act will operate from admissions next year. This means that preparations will have to be made by the autumn for information to be given out to parents. It will be for local authorities to decide in their areas how this is done. Information will go to parents. Parents will indicate their preference. If they do not get the school of their preference, they will go to the appeal tribunal. This will operate from the intake of 1982.
  I know that some people do not like the idea of its starting then. I recognise that there are financial constraints on local authorities. We feel, however, that this is one of the best ways of raising standards in schools and involving parents in the education process. After all, parents will not support schools that they do not wish their children to attend. They will support schools which they have seen and to which they want to send their children.
  We have been having consultations about the minimum information that local authorities should have to provide. We are preparing a document and we hope that it will be published by Easter or the early summer, so that local authorities will know what the minimum information has to be—the name of the headmaster, the name of the chairman of governors, the type of discipline, and so on. Local authorities will then have plenty of time in which to prepare for the way in which they must operate in the following year.
  Mr. Greenway: I know that the Minister will be dealing with examination results, but I should like to add one other point to those that I have made. I hope that we shall see a variety of patterns of discipline in schools and not a single system of discipline, as is the case in some areas. Parents should be able to choose a particular pattern of discipline for their child. In some areas a local authority says that all schools shall observe a particular kind of discipline—either that all should use the cane or that none should use it. That is totally wrong. There has to be an element of discretion left to schools about what system of discipline there should be.
  Dr. Boyson: I agree with my hon. Friend's excellent intervention. Long may there be variety, as long as parents have choice within it. I once said that I do not mind
  1164
  Trotskyist teachers being in schools as long as they teach only the children of Trotskyist parents who have chosen to send their children there. In the defence of variety one cannot go much further than that.
  In the previous Adjournment debate, in reply to the hon. Member for Isle of Ely (Mr. Freud) I said that I did not want all schools to be mixed schools. There should be variety, with single-sex schools, mixed schools, denominational schools, and so on.
  My hon. Friend referred to discipline. It is a problem in many schools. It is tip to each school to define what it considers to be the right method of discipline and then to stand by it.
  The question of examination results is a contentious one. I always find it amazing that some people who are prepared to march on the question of freedom of information, with banners in front of them, are prepared, on the following day, to prevent parents from receiving information on the one subject on which they want to have it, that is, on whether their child is likely to get good O-levels or A-levels in a particular school. What is the use of sending a child who is mathematically able to a school in which no one has passed A-level mathematics in the previous year? Parents should be able to know what are the O-level and A-level results in any school.
  That is not, of course, the whole of education. There is also the matter of sport and the atmosphere in the classroom. There are voluntary activities, and the civilising influence of a school. All those items make up the pattern of the school. But children's chances are made or broken according to the academic standards of a school. At a time of intense pressure for university entry, obviously the parents of an academically bright child will want him to go to the school at which he will be most likely to succeed. As I said, minimum information on examination results should be published, and we stand by that.
  Mr. Greenway: Having been deputy headmaster at a school for 2,000 for seven years before coming here, every year I went through the process of answering all the questions that should be answered in the sort of brochure that is now envisaged. We sat in our schools all over London. Parents came to us—or we went to parents—and we answered all their questions. The objections that one hears and reads about are nonsensical, because we already have to give this information, and should give it.
  Dr. Boyson: I think that my hon. Friend drew the point out excellently. I am sure that his views will have a considerable influence not only on the Government but on the whole country, and we are glad to know that we have his full support.
  My hon. Friend has done a service to the House by initiating the debate and enabling me to put on record the fact that we are fulfilling the commitments that we made in the Education Act 1980. There has been no change from what we said in the Standing Committee and afterwards. The provisions are all coming into operation. My hon. Friend, like myself and many other people throughout the country, is convinced that by bringing the various sections into operation the educational standards of the country will be improved.
  Question put and agreed to.
  Adjourned accordingly at twenty-five minutes past Ten o' clock.

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

Homes Insulation Scheme
Baroness Fisher of Rednal: 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 difficulties are being encountered by local authorities in administering the Homes Insulation Scheme 1980.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, I assume the Question addresses itself to the availability of funds, in which case the position is that my right honourable friend the Secretary of State for the Environment recently allocated £24·6 million to authorities for grants under the scheme in 1981–82, an increase of 30 per cent. in real terms on 1980–81.
Baroness Fisher of Rednal: My Lords, I thank the Minister for that reply. I recognise that the majority of the excess was, of course, for the special needs and I compliment the Minister on that. But would he agree that the success of his department's advertising campaign has encouraged more applicants than can be provided with a grant from the money made available for local authorities to distribute?
Lord Bellwin: Yes, my Lords; I think that that is a fair observation. It is one of the reasons why we have allocated more money this time than we did previously.
Baroness Birk: My Lords, the Minister says that more money has been allocated this time than previously, but can he say whether, in view of the heavy restrictions on public expenditure, especially that of local authorities, he is satisfied that in every authority those people in special need are getting what they are entitled to under the legislation? Secondly—and I do not expect an answer to this question now—can he say how the ways in which local authorities are dealing with those who are not in special need, but for whom home insulation is very important, vary in different parts of the country? I remind the Minister, although I am sure he knows it, that this scheme also is an economy because it is a method of energy conservation.
Lord Bellwin: Yes, my Lords, it is a method of energy conservation and it is also a matter of great importance. I think that we have shown that we feel that way about it by the introduction of the home insulation scheme which we introduced in 1980 with the various adjust-
830
ments. I cannot tell the noble Baroness the position in each authority, because I just do not know what that is. But if at any time she, or any other of your Lordships, would like to bring to my notice any particular areas where there is a problem, we would always be glad to look at them.
Lord Tanlaw: My Lords, can the Minister tell us the average length of time between the application for a grant and its receipt?
Lord Bellwin: My Lords, I cannot give the exact time, but I can say that the time lag between applications being made for an allocation and the firm application for the grant itself has been one of the problems that have caused administrative difficulties. That is why we have now introduced what we call the four-month rule whereby if you apply and are given an allocation but do not take it up within four months, the money is made available elsewhere.
Lord Mowbray and Stourton: My Lords, is the noble Lord aware that many of us, although we know that there are financial constraints on local government, still hope that the Government will continue educating the public? I hope that the noble Lord, and the department which he represents so well here, will agree that when the public want something they are half way towards getting it?
Lord Lovell-Davis: My Lords, in that respect, is the Minister satisfied about the extent to which this scheme is being publicised? Can he give the House some idea of the steps which the Government are taking to publicise it?—because many of us must fear that a great many people do not know the details, or possibly even of the existence of the scheme.
Lord Bellwin: My Lords, there is a current advertising campaign to give publicity to what is available, and we are continuing with that campaign. If the noble Lord would like me to let him have details of the whole of the spending and of the direction in which it is going, I would be very glad to let him have them.
Baroness Fisher of Rednal: My Lords, in view of the need to conserve energy and to obviate the difficulty that the Government might be accused of misleading advertisement, may I ask whether I heard correctly that the Minister said that if there are local authorities which have waiting lists of applicants who want to benefit under the scheme, he would give consideration to them?
Lord Bellwin: No, my Lords; what I said was that if anyone wishes to draw to my attention any authority which is in particular difficulty at present, I would be glad to take the matter up.

Chemical Weapons Convention
3.6 p.m.
Lord Brockway: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will propose to the United Nations Disarmament Committee at Geneva that they give priority to the conclusion of an international convention to ban all chemical weapons, including nerve gas, and whether they will indicate their readiness to ratify such a convention without delay.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, the United Nations General Assembly has just adopted a resolution urging the Committee on Disarmament to continue negotiations on a chemical weapons convention as a matter of high priority. We supported this resolution. The Government remain committed to seek a comprehensive, effective and fully verifiable chemical weapons ban and will actively pursue this objective.
Lord Brockway: My Lords, while welcoming that Answer I should like to ask the Minister the following question: Is not the alternative to an international convention now very dangerous? Has that not been illustrated in recent speeches by our own Secretary of State for Defence, by the talks between officials—British and American—in New York, by the adoption by the Senate of a vote of 5 million dollars to build a plant for nerve gases and by its request to President Reagan to make a report on the production of nerve gas early this year?
Lord Trefgarne: My Lords, the prospect of the widespread or even the limited use of chemical weapons is, of course, an appalling one, as the noble Lord has said. But in considering our reaction to reports of manufacture of these facilities elsewhere we do, of course, need to bear in mind that the Soviet Union has a massive capability in this field.
Lord Goronwy-Roberts: My Lords, would the Minister care to remind the House that some years ago this country drafted a perfectly practical plan for the banning of chemical and allied weapons which was generally received as a very feasible proposal by the then members of the old Disarmament Committee in Geneva? Would he confirm that that draft is now with the Soviet Union and the United States Governments who have still to report upon its feasibility? Would he help to speed up the delivery of their comments to the present Disarmament Commission in Geneva, which would seem to most of us to be the quickest way of implementing what is already proven to be a perfectly practical plan for the banning of chemical weapons?
Lord Trefgarne: My Lords, it is indeed the case that since 1976, I think, there have been bilateral talks between the Soviet Union and the United States on this matter and that, indeed, the draft convention put forward by, I think, the noble Lord himself, is with them to assist them in their discussions. These bilateral discussions, which have taken place since 1976, have progressed very slowly, largely due to Soviet refusal to allow adequate verification.
Lord Gisborough: My Lords, while fully supporting any attempt to get chemical weapons abolished by all parties, may I ask whether my noble friend would agree that, so long as Russia has this massive capability, our own troops ought to have chemical weapons themselves as a deterrent against use by the other side?
Lord Trefgarne: My Lords, that is a view, but we certainly have no plans at present to acquire chemical weapons, or the capability to produce them, or, indeed, to base them in the United Kingdom.
Lord Goronwy-Roberts: My Lords, with the indulgence of the House, may I ask the Minister to confirm, as a good augury for the proposals relating to chemical warfare, that the biological warfare test ban convention has been acceded to, ratified, I believe, by the vast majority of the members of the United Nations, and seems to be observed in practice by them? That is a very good augury for the success of the chemical warfare negotiations.
Lord Trefgarne: My Lords, the noble Lord is quite right. The biological convention is, of course, now in force.
Lord Clifford of Chudleigh: My Lords, arising out of this Question on chemical warfare and the supplementary question, in view of the fact that it is known that at least 25 per cent. of the Soviets' ammunition is equipped for delivering chemicals and even if we are not to have chemical weapons ourselves, what plans do the Government have for defending our own troops and civil population against the possible use of chemical weapons by the Soviets?
Lord Trefgarne: My Lords, I do not think that the House would wish me to go into the detail of our defensive dispositions in this matter, but I can assure the noble Lord that we have the matter very much in mind.
The Earl of Kimberley: My Lords, will my noble friend not agree that, if, as we all hope, this ban may be possible to arrange in the comparatively near future, the ban by itself is no good? If it is to be a true ban, the chemical weapons which the Soviet Union possesses must be destroyed completely, otherwise the ban will be no good.
Lord Trefgarne: My Lords, as it happens, I think that a convention is already in force prohibiting the use of chemical weapons, and dates back to 1925. The ownership and manufacture of these weapons is the matter that is currently under discussion, and I have no doubt that the point raised by my noble friend will form part of any convention that is eventually agreed.
Lord Brockway: My Lords, although the verification of chemical weapons is difficult because they can be used for industrial purposes, is it not the case that the Soviet Union has accepted the principle of verification, and cannot this be followed by finding methods by which that verification can be carried out?
Lord Trefgarne: My Lords, I happen to think that such a convention without adequate verification procedures would be virtually useless. That is the line that we must pursue in these negotiations. The arguments about the difficulties of verification put forward by the noble Lord are the sort of arguments that we hear from the Soviet Union too often.
Lord Gore-Booth: My Lords, following on from previous questions, will the noble Lord confirm that it is good policy to point out that it is the reluctance of the Soviet Union to agree to any kind of verification that holds up this whole matter? It is important that the public realise this and realise that it is not due to Western countries.
Lord Trefgarne: My Lords, the noble Lord is, of course, quite right. We shall continue to press the Soviet Union to accept proper verification measures in Geneva and elsewhere.

Ministerial Papers: Confidentiality
3.14 p.m.
The Earl of Onslow: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether newly elected Governments are entitled to see pledges or undertakings given by departments to the public or to local authorities which have been given during their predecessors' term of office.
The Lord President of the Council (Lord Soames): My Lords, papers of the nature described by my noble friend would not normally fall within the long-standing convention that Ministers do not see any papers indicating the views of their predecessors of a different party.
The Earl of Onslow: My Lords, I thank the noble Lord very much for that reply because it clears the air considerably over a row that is going on at home. Can my noble friend now answer whether the replies given by the noble Lord, Lord Trefgarne, in a debate on Wisley airfield on 2nd December are not invalidated by the Answer given by my noble friend?
Lord Soames: My Lords, my noble friend Lord Trefgarne in fact made a Statement to this effect to the House immediately after that debate, which I think set the record straight.
Lord Paget of Northampton: My Lords, is the Minister really saying that if I reach a planning agreement with the appropriate department, as one does on occasions, a change of Government will mean that that department, with which I am agreed, is not to know that it has an agreement with me?
Lord Soames: My Lords, it means exactly the opposite to what the noble Lord has said. It says that the
834
incoming Minister can know of this fact. There are other matters which a Minister is not entitled to know on taking office. But that he is entitled to know, although of course he is not bound to pursue identical policies.
Lord Winstanley: My Lords, if the old Government that gave the pledge subsequently returns to office is the pledge, as it were, ressurrected?
Lord Soames: My Lords, long before that happens I have no doubt that the matter will have reached fruition.

The NHS: Number of Employees
3.16 p.m.
Lord Boyd-Carpenter: 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 how many people are employed in the National Health Service as at the latest convenient date; and what were the comparable figures in 1970 and 1960.
Lord Cullen of Ashbourne: My Lords, the number of people employed in the National Health Service in Great Britain as at 30th June 1980 is provisionally estimated at 1,162,000. The equivalent figures for 1970 and 1960 were 719,000 and 550,000 respectively. These figures, which include both full-time and part-time employees, are based on a return made to the Department of Employment by all National Health Service employing authorities.
Lord Boyd-Carpenter: My Lords, do not those figures confirm the impression that the National Health Service is the biggest growth industry in the country? Do they not also indicate to my noble friend that there is room for some retrenchment there without any diminution in the effective service given to the patient?
Lord Cullen of Ashbourne: My Lords, there is no doubt that this is a growth industry, and successive Governments have given increased resources in real terms to the National Health Service as a matter of policy. However, I make no apology for the continued increase in National Health Service manpower. If the country wants the benefit of medical advances, more intensive use of hospital facilities to reduce waiting lists and a better community health service for an increasingly elderly population, National Health Service staff numbers will continue to grow.
Lord Wells-Pestell: My Lords, is it not a good thing that it should be a growth service? Is it not true that over the last few years our hospitals have dealt with more out-patients and in-patients than ever before, and that it is highly desirable that they should continue to do so?
Lord Cullen of Ashbourne: My Lords, I entirely agree with the noble Lord. There have been great

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medical advances and much more complicated treatments are given; and it is impossible to do this very labour-intensive work without increasing staff.
Lord Hale: My Lords, as one who has recently been attending a much loved and close relative in hospital under the Health Service, does the noble Lord know that if he visited that hospital—the name of which I can give him—he would find young nurses working brilliantly, devotedly and with infinite good temper on older patients, and following in the finest steps of the nursing profession, and that they are over-worked rather than under-worked?—as most of the staff appear to be.
Lord Cullen of Ashbourne: My Lords, I am grateful to the noble Lord for that observation.
Lord Boyd-Carpenter: My Lords, do my noble friend's comments also seek to justify the very substantial increase in the administrative services and administrative staff which—partly, no doubt, as a result of successive re-organisations—have greatly grown?
Lord Cullen of Ashbourne: My Lords, I am afraid that all groups of staff in the National Health Service have grown, but in 1976 the previous Government started an exercise to reduce the proportion of management costs and they have now been reduced from 5·6 per cent. The target was 5·25 per cent. and it is actually down to 5·05 per cent., which is, I think, satisfactory. There has also been a small decrease in ancillary staff.
Baroness Gaitskell: My Lords, could not the Government take heed of these figures and take heart from these figures, and, instead of boasting about not taking a U-turn, not only take a U-turn but do a somersault when thinking about unemployment?
Lord Cullen of Ashbourne: My Lords, I am not sure that I am sufficiently active to do a somersault.
Lord Beswick: My Lords, can the noble Lord give us a figure of increase following the reorganisation which took place on the basis of the report made by the American efficiency expert brought in by the Conservative Government?
Lord Cullen of Ashbourne: My Lords, I wonder whether the noble Lord would say that again? I could not quite hear him.
Lord Beswick: My Lords, can the noble Lord give us a figure of increase due to the reorganisation which took place based on the report made by the American efficiency expert brought in by the previous Conservative Government?
Lord Cullen of Ashbourne: My Lords, I imagine that the noble Lord is going back to 1974. There was certainly a considerable increase there and I think many members of the Government have said that, although many of the things in the 1974 reorganisation
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were very well received, the introduction of area health authorities was not a good idea. As the noble Lord will know, we are now doing away with those.
Lord Kaldor: My Lords, will the noble Lord confirm that, despite appearances, this country has one of the cheapest health services in the world, and that the national expenditure on health as a proportion of the national income is lower here than in most other developed industrial countries?
Lord Cullen of Ashbourne: My Lords, the noble Lord is quite right, and I believe the figure is now 5·5 per cent. of the gross domestic product.
Lord Leatherland: My Lords, would the noble Lord agree that increasing numbers of our people are now living to a ripe and happy old age? Is this not in fact largely due to the National Health Service? Therefore, should we not stop nagging about it?
Lord Cullen of Ashbourne: Yes, my Lords.
Lord Segal: My Lords, can the noble Lord give the House an assurance that the overriding consideration will always be the interests of the patients, and that any intended cuts in personnel will never be made at the patients' expense?
Lord Cullen of Ashbourne: My Lords, that is the whole point of Patients First and the reorganisation by the last Health Services Bill.
Lord Hunter of Newington: My Lords, will the Government take this into account in the reorganisation with which we are now faced, and give an undertaking that this sort of problem will be constantly under review, because there is no doubt that there are other ways of delivering medical care than the one we have used in the last 20 years? We must prepare for the 21st century and a streamlined Health Service.
Lord Cullen of Ashbourne: Yes, my Lords, it is permanently kept under review. So far as the worries which I know many noble Lords have about the number of unnecessary people, in their view, working in the National Health Service, cash limits do exercise a considerable discipline on area health authorities.

The Nissan Motor Company: UK Project
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Gowrie will, with the leave of the House, repeat a Statement that is to be made in another place on the motor industry.

Interpretation of Legislation Bill [H.L.]
Lord Scarman: My Lords, I beg to introduce a Bill to make provision for certain additional matters to be considered and principles to be applied in interpreting Acts of Parliament and other instruments. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a.—(Lord Scarman.)
On Question, Bill read 1a, and to be printed.

Criminal Justice (Amendment) Bill [H.L.]
Report received.

Social Security (Contributions) Bill
3.25 p.m.
The Minister of State, Department of Education and Science (Baroness Young): My Lords, I beg to move that this Bill be now read a third time. When moving the Second Reading of this Bill I said that it was an essential feature of the Government's economic strategy. This is because it is designed to achieve the following effects: first, it will raise considerable extra revenue and hence help to ease the pressure on the public sector borrowing requirement; second, it will bring about a very necessary adjustment in the balance of responsibility for financing the national insurance system; third, it will help to ease the pressures on industry by providing that employers' national insurance rates will not rise and their total contributions will reduce, in real terms; and fourth, it will restore the value of the National Health Service contribution.
It will achieve these effects by three means. Clause 2 will reduce the Treasury supplement to contributions, producing a reduction in the public sector borrowing requirement in 1981–82 of £529 million. The Government's case for this has been subjected to particularly searching scrutiny. The case for the readjustment in the balance of responsibility for financing the national insurance scheme, and for providing a measure of flexibility for the future which Clause 2 will bring about, has, I think, been made. Clause 3 will increase the element of national insurance contributions paid towards the cost of the National Health Service. Your Lordships will now be familiar with the case for this provision. The Government are determined to maintain the NHS spending programme and the clause is essential to this aim.
Clause 1 provides for increases in contribution rates to take account of the changes in Clauses 2 and 3 and of the expected increased demands on the national insurance fund from rising unemployment. Overall, in the case of the primary Class 1 employee contribution, the increase will be one percentage point. The increase of the self-employed contributions equates to the increase of the primary Class 1 rate, except that the self-employed will not be required to pay additional contributions to take account of higher unemployment because they do not qualify for unemployment benefit.
The noble Lord, Lord Spens, subjected the self-employed contributions to critical examination. I should like to stress, once again, that the position of the self-employed in the national insurance scheme will not be eroded by the changes in the Bill. It treats them as they have been treated in the past. Consideration of whether changes should be made to the method of calculating their contributions cannot take place until the response to the Government's consultation document is known.
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The effects and provisions of this Bill, which I have briefly outlined, have been exposed to lengthy and detailed examination, both here and in another place.
I recognise that there are differences of opinion—very strong differences of opinion—about this Bill, but I believe that the Bill is necessary for the success of our economic policies and that the increase in contributions, though not welcome, will be accepted as necessary by employees and employers alike. I commend the Bill to the House, and I beg to move that the Bill be read a third time.
Moved, That the Bill be now read 3a. (Baroness Young.)
3.29 p.m.
Lord Wells-Pestell: My Lords, it was my intention to apologise to your Lordships for running the risk of being criticised for making a Second Reading speech at Third Reading. But as my noble friend—and I say that advisedly—has done so, there is perhaps no need for me to apologise. There is a very good precedent, if I may say so, for anyone who wishes to review a Bill at this particular stage. I can recall having introduced into your Lordships' House some five years ago the Health Services Bill which came as a tremendous shock to noble Lords opposite. They contested it not clause by clause, but line by line. They were so upset about it that on the very last stage of the proceedings, when the Motion before your Lordships' House was that this Bill do now pass, the noble Baroness who led for the Conservative Party in your Lordships' House got up and made a speech and was followed by no fewer than 12 others. They took 2 hours and 24 minutes. It is not my intention to take quite that long today. However, I think it right to raise a matter on a Bill which causes at least some of your Lordships grave concern, and this stage of the passage of the Bill provides a legitimate opportunity to look afresh at what has been done, and I propose to do that, although I shall not take long over it.
I want in particular to deal with an amendment I tabled dealing with a 1 per cent. increase. Noble Lords may remember that I tried to persuade the Government to charge an increased contribution of 1 per cent. on those earning over £200 a week. In other words, I wanted them to pay an extra £1 for every extra £100 earned over £200. That seemed to me then, as it seems to me now, of supreme importance, but it made not the slightest impression on the Government, despite their continued protestations that all their policies are designed in the best interests of the community and, we are told, with the object of being fair.
My amendment to raise an extra 1 per cent. to be paid by those earning over £200 a week would not have been the end of the world for people earning that amount of money. However, with the usual approach of Conservative philosophy, the Government decided to squeeze the last penny out of those earning less, and they concentrated on those earning between £27 and £200 a week. It is not the amount but the principle that matters. The case for accepting my amendment could not have been stronger, and I want to say—and I want to be careful how I say it—that it was perfectly scandalous of the Government to resist that proposal.

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It may not have brought in more than £40 million to £50 million, but the Government's attitude showed, as their record shows, a clear determination to cushion the highest paid people in our society from any form of increase in taxation, however it is employed. Perhaps that is understandable, considering that the Government draw most of their support from those earning over £200 a week. That extra 1 per cent. of insurance contributions now falls exclusively on those earning less than £200 a week.
I submit that there should be a sense of fairness in these matters. When moving my amendment I conceded that the Government must raise money. As a society, we are spending £5,000 a year for every unemployed person, and with 2½ million unemployed we are spending £12½ billion for no return to keep people idle. We who are in work—I use "we" in a general sense—are pleased to make a contribution, but that contribution should be made by the whole of the community and not by a small percentage, by those earning £200 a week or less.
Throughout the lifetime of this Government we have experienced one cut after another and there is not a noble Lord opposite who can point to where those cuts have affected people who are not hard up; they have fallen in the main on the shoulders of the have-nots while the haves have been able to get away without making any real contribution. I hope nobody will say, "Yes, but the higher income group pay increased taxation". Of course they do; but the amount of taxation paid by somebody earning between £27 and £200 a week is such that it falls more heavily on their shoulders than on those earning over £10,000, £15,000 or £25,000 a year. And we must bear in mind that the very first action of this Government was to give away billions of pounds in income tax relief to the higher income group. I am sorry to go on like this but it is a matter of supreme importance.
Lord Boyd-Carpenter: Really!
Lord Wells-Pestell: I know noble Lords opposite do not like it, my Lords, because the truth is hard to bear. We all know that, but it is sometimes very good for us. I am surprised at how many noble Lords opposite who I respect and admire and know well can just sit there and accept this sort of thing without bleating about it. How they can do that is a matter of great concern and surprise to me.
Lord Derwent: My Lords, would the noble Lord remember that the truth is many-sided?
Lord Wells-Pestell: It depends entirely on what kind of person you are, my Lords.
Lord Derwent: Hear, hear!
Lord Wells-Pestell: In any event, my Lords, one can take some comfort from reading in the newspapers this morning that some 20 Conservative Members in another place are getting so fed up with the Conservative Party that there is a suggestion that they might be joining the Council for Social Democracy.
Lord Boyd-Carpenter: What about the noble Lord's friends?
Lord Wells-Pestell: We arc in the right party, my Lords.
Lord Boyd-Carpenter: Where is it?
Lord Wells-Pestell: Looking at you. My Lords, I appreciate that we joke and try to carry on our affairs in a friendly manner in this House, but I urge noble Lords to look at this legislation. There is nothing we can do about it now; the noble Baroness and the Minister have taken good care to see that we cannot do anything about it, so we must accept it. But for how long can we, as part of the Houses of Parliament, expect people outside to go on putting up with a constant erosion of their standard of living when day by day they see extreme wealth walking hand in hand with some considerable poverty? That is not the kind of society I want. Nor do I believe it is the kind of society some noble Lords opposite want. For the Government to have resisted an amendment which sought merely to take a bit more each week—£1 out of every extra £100—from those earning over £200 a week was petty, paltry and quite scandalous.
3.40 p.m.
Lord Banks: My Lords, during our debate on the Bill we have had considerable discussion about the Government's case that the Treasury supplement to the national insurance fund has increased at a greater rate than national insurance contributions since 1975–76, and despite all that has been said about that from the Government Front Bench, I still feel that that argument is not valid and that the figures which were given in another place by the Secretary of State would not have suggested that had they not covered the period during which the new earnings-related pension scheme was introduced in 1978.
If one takes the figures from 1975–76 to the year before that scheme was introduced, one will not find any disparity; and if one takes the figures from that year to today one will not find any disparity. It is only because of the change in the whole system in the middle of the period under review that it appeared as it did. In my view there is no disparity, but I do not think that it would be right for me to develop that argument any further this afternoon. We have from these Benches sought to make clear during our discussions that we do not agree with seeking to reduce the public sector borrowing requirement by means of increasing national insurance contributions for personal contributors.
Lord Spens: My Lords, I am most grateful to the noble Baroness for the mention that she made of my fight on behalf of the sell-employed, but I feel that I must say a final word about the matter before we put the Bill to rest. What surprises me, and disheartens me considerably, is the fact that there has been no support for the self-employed from Government Benches, and when this morning I looked at the records of what happened in another place I found that there had been exactly the same situation there; there had been no support for the self-employed from Govern

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ment supporters. There was quite an argument from the official Opposition at the Committee stage about the Class 2 and Class 4 contributions, but there was no mention from Government Benches of the problems which those contributions bring.
We do not fight the Class 2 contribution—that is the flat-rate contribution which all self-employed people must make unless they have a very small income—even though under the Bill that contribution is to be increased by 36 per cent., from £2·50 a week to £3·40, whereas the Class 1 employee's contribution is to go up by less than 15 per cent. However, we do object to the additional Class 4 contribution which self-employed persons who make profits of more than a very small amount will have to pay besides their Class 2 contribution. Under the Bill they will find that they will be charged an additional 5·75 per cent. on their profits between the lower band of £3,150 and whatever they make, provided it is not more than £10,000 a year, which is the upper limit.
Let us take the middle figure there: the man earning £5,200 a year in profits—and remember, my Lords, that profits are not the same as salary. Profits have to cover much more than the takeaway pay which an employee can do what he likes with once he has suffered the tax deductions at source. The man with a profit of £5,200 a year is in fact making a profit of £100 a week, and in about 18 months' time he will find that he is suddenly to be assessed by his inspector of taxes with an additional £100 a year for Class 4 contributions on those profits. We are told that the self-employed person has to be compared not only with the employee, but with the employer, too, in terms of rates of assessment, but the employer's share of an employee's contribution can be deducted from tax before the employer's profits are finally reckoned, whereas the self-employed person's contributions cannot be deducted from tax. I believe that if the Government were to decide to allow the self-employed Class 4 contribution to be deducted from profits before tax was assessed, that would go a long way towards helping the self-employed to accept this additional burden.
I am not talking about the firms of accountants, solicitors, and barristers at the top end of the scale. I have half a dozen clients of my own who are selfemployed—the owner of a small corner shop, a market gardener, a sheep farmer, a saddler, and so forth. They are the people who arc making profits of perhaps £5,000 a year. They are assessed by the inspector of taxes on those profits and they see that they have to pay income tax like everyone else. Then suddenly they see at the bottom of the assessment an additional assessment in regard to Class 4 contribution of another £100, and they turn to me and ask, "What is that for? What benefits am I getting from the Class 4 contribution that mean that I have to pay it?" I have to reply to them, "I am sorry—you are not getting any additional benefits at all. All the benefits that you receive from your national insurance contributions come from the Class 2 contribution. What you are doing by paying your Class 4 contribution is helping other people to get benefits".
That is not a very good thing to have to tell one's clients, and no matter how much we have been blinded by science, by the Government Actuary's reports, to
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the effect that it is absolutely fair that the figures should be assessed in this way, I feel that it is a bad assessment and that we should not have to put up with it for very much longer.
3.48 p.m.
Lord Drumalbyn: My Lords, I should like to say a word in reply to what the noble Lord, Lord Spens, has said. Of course, it is true that in this Bill the self-employed are being treated in the same way as everybody else. The calculations seem to work out against the self-employed, but this is because of their particular situation. I believe that the noble Lord is wrong in his complaint that he has not received any support from this side of the House. I suggest to him that if he looks back over the years, for example, to the occasions when my noble friend Lord Boyd-Carpenter and I had to deal with the up-rating, he will see that we were at pains to keep down as much as possible the contributions of the self-employed, because we recognised those arguments. I returned to being self-employed just at the time when the 1975 Bill was going through Parliament, and it was then that we were penalised so very heavily—absolutely astonishingly heavily.
However, this Bill is not seeking to deal with the self-employed as a separate case. I understand that that question is being considered separately at the present time; my noble friend will perhaps confirm that a committee is now sitting. I suggest that it would be absurd to anticipate the results of the consideration of the Green Paper that was published last October. A lot of evidence has no doubt been received with regard to that, and I suppose it will all be considered by the Government in the normal way. So I hope the noble Lord will not resent too much not being supported on this occasion. I think he will agree that he has often been supported by this side of the House, but he cannot expect to be supported every time. That, at any rate, is my experience.
As to what the noble Lord, Lord Wells-Pestell, has said, of course we understand his particular position in this, but anyone who has had anything to do with the running of this fund knows how very delicate is the balance to be kept, and it is for that reason that one has an upper and a lower limit. Aside from what is called the earnings-related element, people pay in accordance with their earnings, and they all get the same benefit in relation to that contribution. But, surely, at some point in a scheme of that kind you must have and keep an upper limit; otherwise, there is no end to it. You could go on charging I per cent., 2 per cent. or 3 per cent. on earnings over the limit; there is no end to it at all, and it is not right.
This is something which should be borne by the taxpayers as a whole under the normal Exchequer arrangements, and under the Budget. If the noble Lord felt as strongly as this, no doubt he would make representations in that regard, that the higher rates of taxation should be increased by, say, 1 per cent. for this particular purpose. I do not know how it would be received, but that would be the logical way to do it. However, it is not logical to do it here in this Bill, however strongly we may feel about it.
Lord Wells-Pestell: My Lords, may I ask the noble Lord whether I am right in thinking that the man who earns £200 a week will be paying, on the 7¾ per cent., £15·50 per week national insurance, which is precisely the same amount as the man earning £300, £400, £500 or £600 a week will be paying?
Lord Drumalbyn: My Lords, it is really a matter for my noble friend to answer, but I would have thought that if you express something as a percentage then it is a percentage in relation to wages.
Baroness Young: My Lords, I will be very brief because I think the points that have been raised in the course of this Third Reading were those which were thrashed out very fully at the Committee stage of the Bill. In particular, I am grateful to my noble friend Lord Drumalbyn for his intervention on this. I should like to say to the noble Lord, Lord Spens, that we on this side of the House are very conscious of the importance of the self-employed and the contribution which they make to our economy, and we should like to do what we can to help them. It is precisely for that reason that we issued the consultation document in the autumn; we have invited comments by the end of March; and they are canvassing certain possibilities, such as changing the balance between the Class 2 and Class 4 contributions, making the self-employed eligible for an increased range of benefits and making national insurance for the self-employed voluntary. We are asking for comments by the end of March of this year; and, as obviously the noble Lord is very knowledgeable on this matter, I hope that he and those he is working with and for will comment, so that we may take their views into consideration when this matter is reviewed by my right honourable friend in the spring.
Lord Wells-Pestell: My Lords, before the noble Baroness sits down, could we have a clear answer on this? Is it not true that a person earning over £200 a week will in fact pay the same amount of national insurance as the person earning £200 a week?
Baroness Young: Yes, my Lords; that, of course, is perfectly true. But that is the point of having the upper earnings limit. I think the noble Lord has made a great confusion about all this matter by describing the national insurance contribution as a tax. It is not it is a contribution towards a benefit, which is quite different.
On Question, Bill read 3a and passed.

The Nissan Motor Company: U.K. Project
3.55 p.m.
The Minister of State, Department of Employment (The Earl of Gowrie): My Lords, it may be to the convenience of the House if I now repeat a Statement being made in another place by my honourable friend the Minister of State for Industry. My honourable friend's Statement reads as follows:
"With permission, Mr. Speaker, I would like to make a statement about the motor industry.
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"The Nissan Motor Company has approached Her Majesty's Government to seek their views upon the company's intention, subject to a feasibility study, to establish a substantial car manufacturing operation in the United Kingdom. The Government have given a warm welcome to Nissan's proposal and are prepared in principle to give them their approval and support.
"Nissan's proposals are to start building a car manufacturing plant, including an engine manufacturing facility, in a Development Area or Special Development Area in 1982 and to begin production at the end of 1984, reaching the full figure of 200,000 cars a year by 1986.
"It is Nissan's intention to achieve a very high local content involving United Kingdom and other EEC suppliers; the local content at the start of production would be 60 per cent. and the company's objective would be to increase this to 80 per cent. as soon as practicable after full production is reached. The company is confident of achieving a high level of exports from the United Kingdom.
"The feasibility study is expected to last four months and to cover a range of matters, including location. Two matters of special importance in Nissan's decision will be the competitiveness of local component manufacturers and the prospects of establishing a good structure for industrial relations.
"The Government wish the company well, and hope the study will reach a satisfactory outcome."
My Lords, that concludes my honourable friend's Statement.
Lord Bruce of Donington: My Lords, I should like to thank the noble Earl, Lord Gowrie, for the brief Statement that he has repeated. He will of course appreciate that the matters, and indeed the principles, raised by this Statement are just as large as those raised by the Statement that he made last week concerning the future of British Leyland. I would therefore hope that the House will be afforded an opportunity to debate this whole question in very great detail. I had an uneasy feeling last week when I showered congratulations on the noble Earl in announcing his U-turn so far as British Leyland are concerned. I was a little suspicious at the time that there might possibly be a snag in it. Indeed, the snag has now emerged—the other side of the coin—because, of course, the Nissan Motor Company, the makers of Datsun, are apparently going to be accorded manufacturing facilities in this country.
A number of questions arise on this. It has been well known over a number of years that the Japanese have made very strenuous and successful efforts to penetrate into the United Kingdom market, and, indeed, into the EEC market generally. I am given to understand that negotiations have taken place with them with a view to the limitation of their imports into the EEC, and indeed into the United Kingdom, where there is a bilateral agreement already in force to that extent. I want to put it to the noble Earl: have the Government considered the possibility that this move may from the Japanese standpoint be merely one way of getting round the import ban on motor-cars into this

845
country? I am well aware that the Government, in the words of the Statement, are:
"confident of achieving a high level of exports from the United Kingdom".
I would assume also that the Government have taken into account such extra vehicles that will come on to the United Kingdom market itself.
We on this side are well aware that any effort that is made to increase employment in this country is most welcome, particularly in this time of rising unemployment. But it will be of no benefit to the United Kingdom if employment is increased within this particular establishment that it is proposed to make in this country if at the same time unemployment occurs in British Leyland, Vauxhall, Ford or Talbot, which are established English companies. We should like to know whether the Government have given some thought to that aspect of the matter.
The other aspect is that it is the apparent intention of this company to establish its manufacturing capability in a development area or a special development area. I take it—and I should be grateful if the noble Earl will reply to this—that that means the company will be entitled to the full range of financial aids that are available to companies that establish themselves in these two types of area.
He will appreciate that under the existing regulations, and under the existing Act that deals with this question, sums as vast as £50 million or £100 million could be paid out to the incoming Japanese firm as part of the normal operation of financial assistance in the developing areas, and more particularly in the special development areas. I should be glad if the noble Earl could inform us of any estimate that he or the Government have made of the net increase in employment.
I should also like to know whether he has had any expressions of view, or whether there have been any prior consultations with, for example, Sir Michael Edwardes. After all, Sir Michael Edwardes has produced a plan for the production of BL cars and other vehicles covering the next four years. Was this one of the contingencies that was disclosed to Sir Michael Edwardes at the time that the plan to finance the BL operation was agreed? If the Government knew when they were having their talks with BL that they already had this other item up their sleeves, I wonder what the reaction of Sir Michael Edwardes would have been. Suffice it to say that in so far as we have been able to make contact with BL executives, the information there is one of considerable anxiety concerning the step that the Government have taken.
It is not proper on this occasion to delve into further detail because it would take too much time; but I trust that the noble Lord realises that we are dealing here with a very serious and important matter which extends far beyond the immediate relations between ourselves and Japanese industry.
4.4 p.m.
Lord Rochester: My Lords, we on these Benches should like to join in thanking the noble Earl for having repeated this Statement. We too wish to give it close study; but our first reaction is to welcome in general terms the prospect of more employment in a development or special development area, and to welcome also the intention expressed by Nissan to achieve a high
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local content, as the Statement has it, involving the United Kingdom and other EEC suppliers, and also a high level of exports from the United Kingdom.
There are some who will oppose this proposal because of its effects, real or imagined, on the British car industry. However, we on these Benches with our free trade background are in favour of having as few curbs as possible on international competition; and I would express the personal hope that this development will act as something of a stimulus to our own car manufacturers to improve productivity and, until such time as we can have an agreed long term incomes policy, for pay increases not to outstrip that productivity.
I have two questions to ask, both of which are related to the comments which have already been made by the noble Lord, Lord Bruce of Donington. We too have noted that there is no reference in this Statement to the question of money. Apart from the particular point made by the noble Lord, Lord Bruce, in relation to grants available to employers in special development and development areas, may we take it that the absence of any reference to money in this Statement means that, at least in the preparatory stage, during the course of the feasibility study, no question of Government expenditure arises? If it does, perhaps the noble Earl will quantify it so far as he is able.
The second question is really to pin down a little more closely what the noble Lord, Lord Bruce of Donington, was saying, as I understood it. Do the Government have in mind somehow to ensure that the actual construction of this new plant, if that is to take place, should be made conditional on Japanese cars in future being imported into the United Kingdom only if that is done in strict accordance with an agreed quota?
4.7 p.m.
The Earl of Gowrie: My Lords, while I certainly agree with the noble Lord, Lord Bruce of Donington, that this is a serious and important matter, it takes a certain perverse genius on behalf of the noble Lord to look upon it as a snag. I can only say "Some snag"! He asked for an estimate of what the employment effects might be if, as a result of a feasibility study, this project were to go ahead. It is very hard to quantify and I think that I might mislead the House if I tried. But let us say that I would certainly expect it to be in excess of 20,000 jobs, which is a considerable amount in any industry at this time.
The noble Lord, Lord Bruce, raised the issue of British Leyland and wondered—to put it in shorthand—whether we might not be robbing Peter to pay Paul in this regard. I do not think that this could be the case, for with car production at its lowest for 23 years and with import penetration at a record 57 per cent. it would seem to me that there is plenty of room in this country for them both. From all I know of Sir Michael Edwardes, he is the last man to be afraid of competition. He is in any case, as is known, already in collaboration with another Japanese manufacturer, Honda. Indeed the whole nature of the motor car industry nowadays is for very considerable cross-border and cross-national competition.
Both noble Lords referred to the effects of this project, if it goes forward, on the inter-industry agreements

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about the limitation of Japanese manufactured motor cars. The Government continue to attach great importance to the continuation of voluntary restraint on direct imports and we monitor these all the time. There is no reason for any change in this as a result of Nissan's intentions to invest in the United Kingdom. On the question of Government financial assistance, again, these are early days with the feasibility study, which will be paid for by Nissan, to quantify what that might be. It would be the same as any inward investor or any British company, and of course the whole structure of regional aid is geared to achieving substantial net benefits. I do not think there should be too much concern there.
Of course I recognise that there has been much criticism of the level of Japanese imports into Europe and of the tendency of Japanese industry—from which we have a great deal to learn—to operate centrally and with great speed and adaptability. In this case I think I can say that Nissan is responding in the best possible way because its proposed development is to become a fully-fledged European producer, and that I think we can only welcome.
The Earl of Lauderdale: My Lords, since it is more than two years since I left the board of Datsun UK and therefore I have no interest to declare, may I ask my noble friend whether he would not agree that this means not only new investment but new jobs, new exports and a new stimulus to the industry as a whole? May I also ask him whether the 20,000 jobs to which he has referred represents 20,000 in direct employment or 20,000 direct and indirect together?
The Earl of Gowrie: My Lords, I very much welcome my noble friend's robust reception of this and his recognition that this is thoroughly good news—the best news for a long time. I want to back-pedal a little bit on the figure of 20,000. It could well be more, but it is not direct employment: that would be substantially smaller, though still on a significant scale for today. The figures in the higher thousands, if I may put it that way, are based on the intention to achieve a very high local content in this new European manufacturer, but that of course depends on other things being equal and other things going well, upon the state of the components industry, the state of industrial relations, and so on. But, as I say, we hope this will come off and the Government can only wish this project, now in its early stages, every good fortune.
Lord Glenkinglas: My Lords, would my noble friend not agree that it is to some extent natural that at this moment there should be some people in the country who will be worried, whether it is Japanese or German industry coming into this country? I have no doubt that at the beginning of the last century, if there were American imports coming into this country after the War of Independence, there would have been resistance to that too. Would my noble friend not agree, however, that the vast impact of overseas investment, whether it comes from America or any other place, has had a terrific impact on this country, not only on employment but on all sorts of trade union and management problems, and has done nothing but good? Would he
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not agree that we have to accept these things and hope to grow with them?
The Earl of Gowrie: My Lords, I very much share the view of my noble friend. These things do represent a two-way traffic and Britain is a very substantial investor overseas and we earn much of our living through overseas investment. I would hope, as I have said on many occasions, that now there is a new spirit of realism, to use shorthand, within British industry we would attract a great deal more inward investment. It seems an excellent time to come into this country, and I am very glad to see that this is the largest proposed Japanese investment ever in Europe.
Lord Bernstein: My Lords, would the noble Earl confirm what he seems to have been telling us, that there has been no budget prepared of the total expenditure of Her Majesty's Government and the amount they might have to put into this enterprise, however good or bad it is? We have not had an answer to any of the questions that have been asked. I am not commenting on the total benefit but it would be interesting from the national economy point of view to know how much money Her Majesty's Government are investing in this one project.
The Earl of Gowrie: My Lords, with great respect to him, I do not think the noble Lord understands the nature of regional aid in this country. It is only ever possible to achieve regional aid if, in the Government's judgment, there should be a benefit accruing; and that is the same whichever Government arc in office. The other point which I do not think he has altogether taken on board is that at the moment we are talking about a feasibility study. Obviously Nissan have to decide whether to go ahead on the basis of feasibility and so have the Government.
Lord Roberthall: My Lords, may I just add one word of welcome for the Statement made by the Minister? In particular I think we should welcome the mark of confidence in the industrial future of this country which is so badly needed at the present time.
Lord Fraser of Kilmorack: My Lords, may I just add my strong support to the information given in the Statement by my noble friend Lord Gowrie, declaring an interest as a director of a British-owned company that has operated in Japan for at least 10 years? This is not a one-way movement. We live in an extremely flexible world and we must recognise that. I believe this is an encouraging thing, in so far as we know what it is about. On the evidence of my own company, one can grow in other places as well.
The Earl of Gowrie: My Lords, I am grateful for the point made by my noble friend, with which I partly agree and I am also grateful for the point made from the Cross-Benches by the noble Lord, Lord Roberthall: this is a very substantial vote of confidence in the industrial possibilities of this country by a major industrial country. Also, of course, it follows other substantive Japanese investments in other branches in this country; so it is a vote of confidence based, I would say, on experience.
Lord Lucas of Chilworth: My Lords, if I may also add to the general thanks which have been—
The Earl of Avon: My Lords, on a point of order I think that at this stage we should have only questions to the Minister and not statements.
Lord Lucas of Chilworth: My Lords, may I ask my noble friend whether he can he totally assured that the local content, not only of labour but of materials, can be sustained? May I also ask what kind of assurances those are? Would he not agree that anything below 80 per cent. of material content at the start would be extremely damaging to our own components industry, which is already in decline and employing 350,000 persons? Can he also say whether or not the design centre for the new product is to be based in this country and at the place of development? Were it elsewhere—in Japan, for example—would he not agree that much of the advantage would be lost?
Finally, what assurances can he give to substantiate the rather vague estimates of employment, in so far as we know that a new motor assembly plant will be almost totally automated, so reducing the labour content?—and in such circumstances it would inevitably employ highly-skilled labour from the parent company where the technique is already well-known and practiced.
The Earl of Gowrie: My Lords, I have noted, though it is not really a matter for me, the great interest in this Statement and also in the Statement I made earlier during this week on British Leyland. Perhaps it might be better if these issues were taken on in a debate, although that of course is not a matter for me. If I may just answer my noble friend's points very quickly and in outline, we would find it perfectly satisfactory for a 60 per cent. initial local content, with the objective of increasing this to 80 per cent. I cannot answer the design point, but I will look into it.
Lord Kaldor: My Lords, does the noble Earl agree that it would be a mistake to impose more rigorous conditions in permitting Japanese firms to establish subsidiaries here, than we require from, for example, American firms? Particularly in some of the engineering industries, such as the motor industry, the Japanese are now much ahead of the Americans and, indeed, the American industry is very severely threatened by Japanese competition in America itself. It is clearly very much in this country's interest that we should have efficient Japanese-owned enterprises here. There will be a fall-out effect from that, which can only have a good effect on British industry.
The Earl of Gowrie: My Lords, I am delighted to hear that from the noble Lord, Lord Kaldor, as he is—I am sure often unfairly—sometimes associated with trade wars, protectionism and the like. Of course Japanese companies are welcome here. They are already here. But this proposal of their most substantial investment in Europe so far, on the same terms as other foreign firms and on the same terms as our own domestic firms, is generally for the good of everybody.
Lord Swansea: My Lords, can my noble friend—
Lord Skelmersdale: My Lords, will my noble friend give way? This is rapidly becoming a debate. I think it would be to the convenience of the House if we moved on.

Royal Assent
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I beg to notify the House, in accordance with the Royal Assent Act 1967, that Her Majesty the Queen has signified her Royal Assent to the following Acts:

Social Security (Contributions) Act,

Bearsden & Milngavie District Council Order Confirmation Act,

Churches and Universities (Scotland) Widows' and Orphans Fund (Amendment) Order Confirmation Act,

Cumnock and Doon Valley District Council Order Confirmation Act,

Dunfermline District Council Order Confirmation Act,

Peterhead Harbours Order Confirmation Act.

Disused Burial Grounds (Amendment) Bill [H.L.]
4.23 p.m.
The Lord Bishop of London: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, that the House do now again resolve itself into Committee.—(The Lord Bishop of London.)
On Question, Motion agreed to.
House in Committee accordingly.
[THE LORD ABERDARE in the Chair.]
Clause 1 agreed to.
Clause 2 [Disposal of human remains]:
The Lord Bishop of London The Lord Bishop of London moved Amendment No. 1:
Page 2, line 29, leave out from ("body") to ("and") in line 30.
The right reverend Prelate said: I hope, for the convenience of the Committee, that I may speak to all four of the amendments, since the substantive amendment is No. 3 and Amendments Nos. 1, 2 and 4 are merely consequential upon it. These amendments neither add to nor subtract from, in any way, the powers and intentions contained in the Bill. What they do is to make clear a point which is already in the Bill, but which is not quite as clear as otherwise it might be.
As the Bill is drafted, the fact that it also applies to a subsequent owner of a burial ground, which was formerly owned by a church or other religious body, emerges only rather obscurely as a subsection of Clause 2, which deals with the disposal of human remains. The purpose of the new clause and the

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amendments is to bring this important point out into the open, so that it can be readily seen and understood by the reader and, therefore, to remind him clearly of a subsequent owner's rights, powers and duties. I beg to move.
Lord Strabolgi: As the right reverend Prelate has said, such an important matter as this one merits a clause on its own, and from this side of the Committee we agree with the right reverend Prelate that the present wording is a great improvement on the old.
The Earl of Avon: The Government also see no objection to these amendments and, like the noble Lord, Lord Strabolgi, see them as improvements to the Bill. As the right reverend Prelate has pointed out, the new clause would not alter the substance of the Bill in any way. It aims to cover more prominently, and more precisely, a provision which is at present tucked away. The new clause would make it quite clear that, if a church sells a disused burial ground before carrying out the procedures laid down in the Bill, the new owner will have to complete them before building can take place. We would agree that the words which the right reverend Prelate proposes to delete in Clause 2(3), about the position of subsequent owners, are, in consequence, otiose.
On Question, amendment agreed to.
The Lord Bishop of London The Lord Bishop of London moved Amendment No. 2:
Page 2, line 34, leave out subsection (4).
The right reverend Prelate said: This amendment is consequential. I beg to move.
On Question, amendment agreed to.
Clause 2, as amended, agreed to.
The Lord Bishop of London The Lord Bishop of London moved Amendment No. 3:
After Clause 2, insert the following new clause:
(" Rights, powers and duties of subsequent owners
. Where a church or other religious body disposes of an interest in a disused burial ground, then the owner for the time being of that interest shall have the same rights and powers and be subject to the same obligations, restrictions, duties and liabilities conferred or imposed by this Act on that church or other religious body, as if that interest had not been so disposed of.").
The right reverend Prelate said: I have already spoken to this amendment and I think that I have fully explained the reason for it. I beg to move.
On Question, amendment agreed to.
Clauses 3 to 6 agreed to.
Clause 7 [Determination of questions]:
The Lord Bishop of London The Lord Bishop of London moved Amendment No. 4:
Page 4, line 30, leave out ("3") and insert ("4").
The right reverend Prelate said: This amendment is consequential on what we have already decided. I beg to move.
On Question, amendment agreed to.
Clause 7, as amended, agreed to.
Remaining clauses and the schedule agreed to.
Title agreed to.
House resumed: Bill reported with amendments.

Representation of the People Bill [H.L.]
4.28 p.m.
Lord Lloyd of Kilgerran: My Lords, I beg to move that this Bill be now read a second time. This Bill is intituled:
"An Act to require every elector to be treated, for the purpose of the right to vote in parliamentary and local elections, as resident at his main residence only".
This is a very short Bill to remedy a serious defect in the law on the voting rights of citizens of Great Britain in local and parliamentary elections. The present state of the law gives unfair and unjust advantages to a limited class of persons in this country; namely, those who are able to maintain two or more residences, one of which is usually referred to as their main or principal residence, and a second home, which is often termed the holiday home or the weekend cottage.
Under the present law, which is based on the Representation of the People Act 1949, a person with a second home, or holiday home or weekend cottage, is legally entitled to be entered on the register of electors for voting purposes, in each of the districts where these homes exist, at local as well as at parliamentary elections. I shall refer to this legal right, to be registered in more than one district, as the right to dual registration. I hope to satisfy your Lordships that in these modern times this legal right requires to be modified, as it can result in a gross abuse of voting rights. It tends to undermine the democratic rights of those citizens who normally live in many districts where second homes exist.
I shall contend also that the right to dual registration is politically and morally wrong. As usual, I choose my words carefully. I say that it is based on property rights in such a way as in effect to constitute an outrage upon the modern democratic and political rights of citizens, as exercisable at Parliamentary and local elections.
This Bill has as its object to require every elector who has a second home to choose or to declare which of these is his or her main or principal residence. He or she will then be entitled to be entered on the electoral register in relation to that one residence and that one residence only. At the present time the procedure is that the owner of a second home is required in advance to enter the names of persons residing at that second home on a qualifying date, usually about 10th October. If the form is not returned by the owner of the second home, the usual practice is that the local authority's returning officer leaves the entries as they are on the previous register without further investigation.
There is plenty of evidence to show that most owners of second homes are not themselves resident at their holiday or weekend homes on the qualifying date, although they may have entered their names and in many cases those of their relatives on that form. The signing of this form gives all the people on the form the right

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to be registered on the electoral register, subject to objections being raised. These are usually very difficult to maintain. Many holiday homes are sublet to other residents who themselves are probably denied the right to vote because it is the owner of the premises who is obliged to complete the initial registration form.
This kind of dual registration is becoming more and more common. I have here a copy of a statement by the housing officer for North Cornwall, as reported in the Cornish Guardian of 13th September 1979. This statement says that if the present trend continues there will be more than 3,500 holiday homes in North Cornwal alone by 1984. In that area, second home ownership is increasing by 4 to 5 per cent. each year. This trend is followed in many areas of Scotland, England and Wales. It is well known that many of these second homes remain empty for many weeks in the year. In some of our villages they constitute a large percentage of the housing accommodation. The lack of available housing in many rural and seaside areas is often due to the high number of these second or holiday homes. As your Lordships will be aware, in parts of Wales in recent months, there has unfortunately been a considerable amount of militant action against such homes.
I am not concerned today with the social consequences arising from lack of housing which may be accentuated by second home ownership. I am concerned with the injustice which arises from dual registration which enables a limited class of person, those who have holiday or weekend homes, to exercise voting rights, if they so choose, in an area where they do not themselves reside for most of the year and cannot therefore have much knowledge of local conditions because their main residence is situated elsewhere.
Extensive research has shown that there are in general two types of elector with dual registration. The first type comprises those who do not let their second homes commercially. These properties may be empty for 40 weeks a year. Alternatively, they are often let to friends and relations. Usually they are empty for most of the winter months. Some are occupied only for a limited number of weekends in the year.
The second type of second home comprises those let or advertised for letting during the periods when the owners are not in occupation and who therefore, by their letting contract, could not, even if they wished, occupy the dwelling at election times. There is also considerable evidence to show that some owners advertise their second homes to let, even over the registration period. Many estate agents have confirmed that that is the position. Checks have been made in many places which show that visitors are in residence over the registration period, or that the property is empty at that period. In some areas there are regularly hundreds of objections to the registration of electors with second homes. As soon as the electoral register is published there is a statutory right to object within a given time. It is very difficult to secure amendments to the register, but in 1980 I am told that 700 objections were raised to the registration of persons with second homes in North Cornwall and that 300 of those 700 were accepted and the names struck off the register. Such dual registrations are still accepted without investigation on the signing of the standard form claiming residential qualification. Application to the
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courts in these matters is notoriously expensive to pursue.
I think it is fair to say that in general it would not occur to many second home owners to register for electoral purposes in the district of their holiday or weekend home, but in marginal seats there are many cases of political agents regularly writing to second home owners asking them to apply for registration in the district of their second home. These political agents are often very helpful, because they even supply the owner of the second home with a copy of the requisite form to fill in.
Although dual registration occurs widely, there is little evidence of dual voting. This is difficult to check. I am not in any way suggesting that any political agent of any political party does other than sometimes actively to promote dual registration in certain areas. In my submission, it should be the main concern of all political parties, as a matter of basic principle, to limit entries on the register to the district of the person's main residence and not to permit dual registration, as at present. As I have said, in my view it is morally wrong that persons who are absent for much of the year should be permitted to vote, if they so choose, or if they are pressed to do so, in a district where they cannot have adequate knowledge of the locality because it is not their main residence. The right of a limited number of persons to dual registration because they have second homes can cause distortion of the true electoral position in a district.
With your Lordships' permission, I should like to read a short letter that I have received from a person living in a village just outside St. Ives in Cornwall. The letter is dated 13th January 1981. If the noble Lord, Lord Belstead, at any time wishes to see it, I can make it available. The writer is first kind enough to congratulate me and give me support in putting forward this Bill. He says—and I quote:
"It is in my opinion, and I know it is the opinion of many Cornish people, a reform long overdue. We are sick and tired of having our democratic rights as a distinct part of the United Kingdom undermined by those who only live among us for a tiny portion of the year and therefore cannot possess adequate knowledge of our local needs and conditions. A case in point is within this very village—Lelant—where a particular house is occupied for one month of the year only, this being only one case out of several locally but probably the most irritating because of the shortness of the actual stay of the owners, who presumably have the usual voting rights".
Then he thanks me for putting forward this Bill.
I will now revert to the terms of the Bill, which are quite short. The first clause amends the Representation of the People Act 1949, and says:
"Where, apart from this Act, a person would fall to be treated for the purposes of sections 1 and 2 of the Representation of the People Act 1949 as resident at more than one place, he shall after the passing of this Act be treated for those purposes as resident at his main residence only".
I pause there because I realise that there may be some Committee points—some problem arising out of a definition of "main residence". My advisers on this Bill and I discussed the position of students, and we feel that if there is a question as to what is the main residence of a student at university, that is a matter which can be dealt with quite adequately at Committee stage. I should also like to remind your Lordships of something that you probably know quite well. The term "main residence" is well known in the

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field of capital gains. However, so far as this Bill is concerned there is no hardship in somebody declaring what is his main residence for registration on the electoral register.
Clause 2 of the Bill has three subsections. One is its Short Title, that it shall be called the "Representation of the People Act 1980". Subsection (2) says:
"Nothing in this Act shall affect the validity of the electoral registers in force at the passing of this Act".
Then the third subsection deals with the extent of the operation of the Bill, and says:
"This Act shall not extend to Northern Ireland ".
In my view, now that the numbers of second homes have increased so considerably, the time has come for the right to dual registration to be abrogated. Persons should be registered on the electoral register in respect of one place of residence only, as is the practice for the majority of citizens in the United Kingdom. There is no hardship in this matter, as it seems to me. No serious administrative problems should arise. A person must decide what is his main residence and then he can get on to the electoral register in that way. In conclusion, may I say that the well-known democratic principle of "one person, one vote" should not be allowed to deteriorate and perhaps be sullied by lapsing into "one house, one vote" for a limited class of persons, namely, those who maintain a second home. I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord Lloyd of Kilgerran.)
4.46 p.m.
Lord Underhill: My Lords, I first have to apologise on behalf of the noble Lord, Lord Boston of Faversham, who should have been speaking on this Bill from the Dispatch Box, but he has intimated that, unfortunately, he has been detained elsewhere. I am grateful to the noble Lord, Lord Lloyd of Kilgerran, not only for putting forward this Bill but for explaining it so lucidly and so effectively putting forward the democratic principle that is involved. Concern has been expressed by large numbers of people for a long time that it is possible for a person to be included on electoral registers for more than one constituency, where-ever that person has a residential qualification. We know there are instances where some persons have a London flat, a residence outside London and, also as the noble Lord has said, an additional holiday home which is used for occasional visits and for holidays. There may be other persons who have a number of residences in various parts of the country. I emphasise quite clearly that legally these persons have a complete right at present to be registered in more than one constituency where they can claim to have a residence.
It may be argued, why should we worry about it because the law makes quite clear that a person may vote in only one constituency at a general election? I thought the noble Lord, Lord Lloyd of Kilgerran, made a very good point when he stressed the position of holiday homes. There have been a number of election courts which had to be convened to deal with the question of holiday homes and as the noble Lord has said, there is considerable concern among other
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residents about the position of the Parliamentary vote in those constituencies.
As one who has been involved in running elections all my life and trying to get the maximum vote, I know what can be done in a marginal constituency. To make it quite clear, there have been some constituencies in which large numbers of persons have registered at their holiday homes and have affected the result in a marginal constituency, because persons may decide in which constituency they will exercise their vote if they are registered in more than one constituency. Of course, a sensible person says, "Where can my vote best serve the party I want to support"? So, even if it is only a holiday home which he visits for only a few weeks a year, that is the marginal seat in which he will vote. Whether he is Liberal, Conservative or anybody else, that is where he will exercise his vote.
There is a deeper point involved. Say a person has, legally, three electoral registrations in three separate constituencies. I know that in the last twelve months we have been very fortunate in that we have been free from by-elections but there could be a Parliamentary by-election in each one of those three separate constituencies and a person may legally vote in each by-election even though he cannot vote in more than one constituency at a general election. That would mean that a person would have three votes for a representative in Parliament. Surely that cannot possibly be justified by anyone and therefore in that respect the Bill is a further step towards fairness in parliamentary elections which I am sure all your Lordships will support. The whole point of our election law is to try to bring fairness and the maximum amount of democracy into our elections.
I have said that election courts have been held to consider objections and claims. The test, of course, is whether a person has a room or a house which he is entitled to occupy as his own and to which he can go at any time. It is on that principle that persons have more than one registration and residence is not even broken by being away for some time.
That brings in the question which was raised by the noble Lord, Lord Lloyd of Kilgerran, as to the position of students. We are concerned with the position of students because it happens now that a student has a proper registration in the university or college town where he or she is studying and does not know that the parent has included his or her name on the household form "A", so he finds himself registered in more than one constituency. So he or she decides in which constituency he or she will exercise the vote. Most students are at their university town or college town for longer periods than they are at what might be termed their main residence. This is a point which should not prevent us supporting the Second Reading of this Bill, but it is a point which can properly be dealt with in Committee. I hope that is the course that your Lordships will decide to take.
I have not the slightest idea what attitude the noble Lord, Lord Belstead, will take on behalf of the Government. It may well be that he will put forward the position of registrations for local government. If a person is qualified by residence to be on the register, it could be argued that, therefore, that person must be a ratepayer, because the house is occupied, and he has a

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right to be registered in more than one local government area. By law although a person may vote only in one constituency at a general election he may vote in as many local authority areas as he can reach by car from one place to the other. In fact we know of persons who have been members of a county council and also members of more than one district council, quite legitimately. This is a point that might be put forward in opposition to the Bill. But I would argue that this is another point which we can deal with quite easily on Committee.
Under the present law Peers who cannot vote for Parliament are on the electoral register with the letter "L" beside the name, which indicates that they cannot vote at a parliamentary election. The same system could be adopted if it is felt that this local election argument is an important one. Therefore, despite these two provisos which can be dealt with adequately, I believe the noble Lord has put forward such a powerful case for the democratic principle of one vote only, and one registration only for a parliamentary election, that I hope the House will support the Second Reading of the Bill.
4.53 p.m.
Lord Balfour of Inchrye: My Lords, I rise to oppose this Bill, which I think is a bad Bill, for reasons which I hope to give in a very few moments. It extends beyond the acceptance of the principle of one man, one vote. It lays down where that man should exercise his right to vote and it says it must be his main residence. I think that is unfair in certain cases. It raises a question, which I will touch on in a moment, on what is a main residence.
Let me take the first instance where it is unfair. A man has a house in London; he owns it. At the same time he has an interest in Scotland, he has considerable agricultural interests, but his only residence there is a small crofter's cottage. The Government of the day come along and make some extreme proposal as regards Scotland. According to this Bill, if you accept that the man's main residence is in London he is not able to exercise the right to vote on some great Scottish national issue, or on important local Scottish issues, because Scotland is not his main residence. Yet it may be very much more important to him, and possibly to the country, that his single vote should be exercised where his greatest interests lie; his interests not only of his personal pocket and his agricultural land, but also what he feels is right for the country. Let us remember that Caithness and Sutherland was once a constituency with a margin of, I think, three or four votes when Mr. Gandar Dower beat Sir Archibald Sinclair, as he then was. I cite that as an instance of where the single vote of a man entitled to vote by reason of his large property interests has a national importance which he should be free to exercise, and which he could not exercise under this Bill.
The other point I want to raise concerns main residence. Who defines what is a main residence? So far as I am aware, the only body in this country that exercises the right to endeavour to define what is a main residence is the Inland Revenue, when property passes from husband to wife. There is no capital gains tax, but the capital gains tax is assessed and comes
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into operation when the wife dies. Who is to say that the small property the man owns in London should be subordinate to his much larger Scottish interests with only a small crofthouse? I think it is a new proposal to put into law, a main residence without any definition of what such residence is. When the man comes to cast his vote under the present principle of one man, one vote but with the restriction of locality which this Bill proposes, I think it will be very unfair on the man. I sincerely hope that if this Bill gets a Second Reading today it will die a natural death during the course of its endeavour to reach the statute book.
Lord Mishcon: My Lords, before the noble Lord sits down, and only because his speeches are always so clear, may I ask him to clarify two points he made? First, is it not a fact that where a taxpayer owns two residences he can at this moment elect with the Inland Revenue to choose one of them as his main residence? Does not that answer one of the noble Lord's points? Secondly, would he not agree that if the gentleman who lives in London and has the great landed estates in Scotland does not own the crofter's cottage but stays at a local hotel, under the present law he would not be able to vote in Scotland even though his landed interest in Scotland was a very pertinent electoral issue?
Lord Balfour of Inchrye: No, my Lords, I am afraid I would not agree. We are not in Committee, so I will not take the argument further. I may add that I think there has been far too much talk by the mover of the Bill about holiday homes. I am thinking of people who have great interests in two places, the greater interest not being in the small home he has in London which may or may not be defined as his main legal residence.
5 p.m.
Lord Glenkinglas: My Lords, I should like to say a word or two about this Bill because I think, as in so many cases, it is highly confusing, and a great deal of what has been said so far this afternoon has merely added to my confusion. I find it most extraordinary that we should be starting this Bill in this House. I know that we complain that Bills far too often start the other end and then come up to us. But here we are starting a Bill in this House on people voting in general elections when not a single Member of your Lordships' House has a vote in a general election. Therefore, we are really fishing in waters which ought to be quite different.
However, I slightly object to the theory that you have to choose your main residence because if you happen to have a second home you might vote in the second home either because you happen to be there or for any other reason and you did not really know anything about it. I know thousands of people who have only one residence or who might indeed choose a residence as their main residence, and who do not know anything about it either. If you are going to try to say that your residence is the basis of your intelligence, I find it difficult to comprehend!
Other points have been made that seem to me to be equally odd. For instance, one such point was made by the noble Lord, Lord Underhill. I know that the

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noble Lord has the most enormous experience in running elections throughout the country. I have had only a certain amount of experience as regards running an election in one particular constituency. One of the factors was that we had a great many people who were non-resident in the large county of Argyll. In the areas where they were most prevalent—I think that perhaps the Island of Tiree would be the one that had most croft houses owned by families living in Glasgow, Canada and other places—their average voting percentage was about 17 per cent. So, I find it difficult to believe that holiday cottages swing votes to any very great extent.
I think that we are on a number of pretty bad points. The fact is that it is perfectly right in our democratic system for people to say, "I want a Liberal Party or a Conservative Party or a Socialist Party elected at this election. Where can I go that gives my wishes the biggest chance of success?" I know that the noble Lord, Lord Underhill, would entirely agree with me that if he could help in an issue of that kind he would do so in order to help his candidate—
Lord Underhill: My Lords, I should like to interrupt for one moment. It is quite true that under the present law I would do so because the law is there. But that does not make the law right; it ought to be abolished.
Lord Glenkinglas: My Lords, it does not make it right to change it. What the noble Lord is then saying is that what you have got to do is vote for a Member of Parliament and not for the Government. Perhaps I am biased, but looking back over the last 20 years I think that the calibre of the candidates, and therefore of the Members of the other place, has deteriorated quite enormously. It might well be that I would want to vote much more for the party than for the local Member who was standing for election, and I see no reason why I should not do so. For those reasons and indeed many other reasons, which are mainly Committee points, I think that this is an ill-thought out Bill, and I certainly do not think that it should start in this place.
5.4 p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, I am grateful to the noble Lord, Lord Lloyd of Kilgerran, for the clear way in which he has introduced this Bill, the purpose of which, as he has described, is to prohibit multiple registration of electors in Great Britain.
The noble Lord is establishing something of a reputation in this House on electoral matters. In this Parliament the noble Lord has already seen on to the statute book the Representation of the People Act 1980, dealing with the voting arrangements for spouses of service personnel residing in the United Kingdom and for the correction of the electoral register after it is published. That was something which all of us very much welcomed. But, despite the habitual persuasiveness of the noble Lord this afternoon, I cannot offer the same degree of enthusiasm with regard to this measure. My noble friend Lord Glenkinglas in his speech just now said that we were on to a number of pretty bad points. The speech which I have in
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front of me says, rather more gently perhaps, that this is, we think, an undesirable change in our electoral laws and one which could present certain practical difficulties.
As the House will know, the persons entitled to vote at an election in Great Britain are those British subjects and citizens of the Republic of Ireland who are 18 years of age or over on election day, are entered on the electoral register and are not otherwise disqualified from voting. This franchise is common to Westminster and to the European Parliament elections and to local elections.
It is entry on the electoral register which is the key factor with which we are concerned now. We are all familiar with cases where, despite considerable publicity, people who are otherwise qualified simply have not checked—perhaps they have not taken very much trouble—and then find that on election day they are not on the register and cannot vote. Such cases, affecting as they do the most basic rights of the citizen, are deeply regrettable. We all very much hope that, as a result of the earlier Bill of the noble Lord, Lord Lloyd of Kilgerran, going on to the Statute Book, this situation will happen far less frequently.
Overall, however, I think that there would be widespread agreement on the general integrity and accuracy of the electoral registers which we have in this country. That accuracy is something which is all-important, not only because of the effect on the essential rights of individual citizens to have their entitlement to vote protected, but also because the canvass for the electoral register is our only annual survey of population in this country.
I should like to stress that the Government really are not complacent about the quality and the accuracy of our electoral registers. As part of the secondary legislation necessary to implement Lord Lloyd's earlier Bill, to which I have referred, the Government have proposed substantial changes to the various electoral forms which are in use, to make them more readily comprehensible and easier to use. In conjunction with the British Youth Council we have conducted publicity campaigns to encourage young people, eligible for the first time, to ensure that they are entered on the electoral register and we have done other things besides.
At first sight, this Bill which the noble Lord is putting before your Lordships' House may seem consistent with that policy to which I have just referred—the policy of trying to see that the register is as good as we can possibly make it. By providing that an elector will henceforward be registered only in respect of his main address this Bill would—so the noble Lord is arguing—apparently eliminate multiple registration and make registers of electors a more accurate reflection of the true electorate.
But, if I may say so, I fear that the noble Lord's argument begs two questions. First, is it right that a qualified person should only be able to be entered on one register? Like my noble friend Lord Balfour of Inchrye I shall argue that this is not such a self-evident proposition and that in certain cases multiple registration is arguably desirable. Secondly, in imposing this first requirement of registration only at the main residence, is there not a danger that the essentially simple process of electoral registration will be complicated so as to make the end result more inaccurate? If I may, I shall argue very briefly that if the noble

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Lord's Bill were implemented less, rather than more, accurate electoral registers in Great Britain could very well be the result.
But, on the first question of the statutory entitlement to be registered on more than one electoral register, I should point out that it is, of course, necessary that the electoral registration officer should be satisfied that a person claiming to be entitled to be registered was resident on the qualifying date—10th October in Great Britain and 15th September in Northern Ireland. But the term "resident" is not defined in any statute, but is decided on the facts of each case by the registration officer according to principles established in case law. And, against all decisions of a registration officer there is a right of appeal to the courts.
It has been established in successive judgments that while a person is not to be registered for an address where he or she is staying temporarily on the qualifying date, a person is to be registered for his normal place of residence even though he may be temporarily absent from it on that date. The term "constructive" residence has also been used in several judgments to denote where someone's residence at an address is not interrupted by mere absence if he intends to return and has the right to do so at any time—for example, if he goes away on a business trip.
One principle which has underlain judgments on residence is that a person may be able to claim residence at more than one address. If you are not resident continuously for the whole year at a particular address, the present law allows you to register by virtue of establishing constructive residence both at that address and at one or more other addresses which you may habitually use. It is that opportunity—of registering at more than one address—which, of course, the noble Lord's Bill would remove.
In his speech the noble Lord told us of the registration officer in Cornwall rejecting some 300 out of 800 applications for inclusion on the register. If I may say so, that shows that the correct principles were being applied by the registration officer. But this Bill strikes at the concept of constructive residence on which our electoral registration legislation is built.
There are, after all,—and we are talking in practical terms—several groups of people who might legitimately claim to reside in more than one place. There are students, for whom this Bill could cause particular difficulty, although of course I go along with what the noble Lord, Lord Underhill, said, that many matters can be looked at closely in Committee, and of course always are in this House. However, I think that the Bill would create some very real difficulties for students. There are people who have perhaps temporarily left home, which they still regard as their base and to which they return regularly, to look after sick relatives or to assist in a family business. And there is the group which the noble Lord and, I think, other noble Lords have had in mind; they are the people who own, or who rent, or who otherwise are occupiers of two homes. I am sure that the noble Lord, Lord Lloyd, will acknowledge that there is a very clear law in this country against double voting in elections to the same authority. It is unlawful for any person to vote more than once in a general parliamentary election, no matter on how many electoral registers he is entered. Indeed, the noble Lord very fairly recorded this in his
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speech. There is thus, if I may say so, no elite group—as the noble Lord also suggested in his speech—based on property, of parliamentary electors in the sense of persons who have more than one vote. I think that we would agree that there is no suggestion of that.
However, let us look for a moment at local elections, to which the Bill also applies. My noble friend Lord Glenkinglas said that perhaps we were fishing in waters in which we ought not to fish at all because we are talking about general elections in this Bill. This Bill talks about waters in which your Lordships can fish, when there are local elections when we do have a vote; and I think that, therefore, we take particular interest because this Bill also applies to local elections. There we find that electors may vote in separate elections to different authorities so that, for example, a businessman living both in London and Devon is entitled to vote in both local authority elections. Again—I am afraid that I am robust about this—I do not think that that is necessarily undesirable. Yet it would be prevented if this Bill became law. An elector who lives in two different places—and many of us who work in politics have to live in two different places—will use local services and will be personally affected by the administration of local matters. I think that many of us would consider it a retrograde step if such persons were simply to be deprived of the local franchise. Any reduction in the capacity of informed people to involve themselves in local affairs is, in principle, undesirable.
However, the noble Lord's Bill would confine any elector's right to registration to his main residence; and this is, I would suggest, a more complicated change than has been suggested so far this afternoon. For, if the franchise is to be restricted in this way—and certainly this business of the main residence has been criticised by my noble friends—then someone will have to decide whether a person's application for registration is truly in respect of the main residence.
The noble Lord has perhaps overlooked the fact that in our present system the registration officer relies to a considerable extent on the forms submitted to him by householders. It is not every individual elector who actually submits the registration form. Thus, it will apparently fall to the householder to determine whether or not persons in the household are being entered in respect of their "main" residence. Of course, I acknowledge that, in the case of a family, that is absolutely straightforward. But in other cases, involving landlords and tenants or large residential institutions, it will not be so simple. Difficulties cannot easily be resolved by the registration officer. He may notice that a person has been left off the form in comparison with previous years; but is this because the person is no longer qualified, or has left the area, or because the address in question was never his main residence?
In case I may sound as though I am starting to nit pick, this point was made by the Working Party on the Electoral Register, which reported in 1977. A very distinguished member of that Working Party—before we had the pleasure of welcoming him to this House—was H. R. Underhill, the noble Lord, Lord Underhill, to whom we always listen so carefully on these occasions. The working party, of which he was a member, felt that the prohibition of multiple registration, as

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provided in the Bill, would conflict with the registration officer's statutory duty to register all persons in the district appearing to him to be qualified. I agree with the conclusion which the noble Lord and his colleagues on the working party reached. I would only add that in our view the noble Lord's Bill would certainly complicate the registration officer's job and make the process of electoral registration more difficult and more expensive.
The working party to which I have referred went on to make another criticism of the proposed prohibition of multiple registration, which I think is also worthy of consideration before we complete this Second Reading. The working party said that:
"Enforcement [of such a provision] could be difficult without some process of correlation between different registers, which itself could involve questions of compatibility between different computer-held records".
It is certainly difficult to see how a ban on multiple registration could effectively be enforced. Unlike Northern Ireland, there is, of course, no centralised registration record in Great Britain. Only by having precise advance knowledge could a dual registration be discovered. Although in Northern Ireland, where of course multiple registration is prohibited, it is relatively easy to cross-check several entries on one register, that would not be possible for the 400-odd registers in Great Britain. In any case, the fact of dual registration would not necessarily be conclusive evidence that there had been a deliberate offence. It is quite possible for a householder to put on the registration form names of tenants and others without their being involved in any way.
Therefore, it is precisely for the practical reasons which I have described that the Government believe that the noble Lord's Bill would introduce a complicating and, I must say, I think an unnecessary factor into our electoral legislation. It would make more difficult the task of electoral registration officers, on whom of course there is the statutory duty to see that the register is made up properly. It would, in certain instances, impose onerous tasks on individual householders. It seems to the Government that the mischief against which the noble Lord believes his Bill to be directed is, at least in local government terms, not a mischief at all; and, in parliamentary terms, is certainly only an arguable and not, I submit, a proven case. Therefore, I cannot undertake that the Government will support or assist the passage of the Bill, although I thank the noble Lord for the opportunity which we are having to debate what I think is an important matter.
5.20 p.m.
Lord Lloyd of Kilgerran: My Lords, may I first of all generally thank all noble Lords who have contributed to this interesting debate, which the noble Lord the Minister has said is a very important matter. I should like to thank the noble Lord, Lord Underhill, for his support. He is, of all noble Lords, the most expert in these matters as the one-time national agent of the great party to which he belongs. I think that he paid a great tribute to the Bill, for which I thank him, when, to use his words, he said, "This is a further step in the progress of parliamentary democracy. It brings fairness and maximum democracy to our land."
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He very fairly raised two points, which I have always had in mind and which are Committee points, as he accepted, and they related to the position of students, and also to the point raised by the noble Lord, Lord Belstead, in regard to multiple voting, and multiple registration therefore, at local elections. I think it is agreed in this House that both of these are important points which can be dealt with on the Committee stage.
I was most interested in, and grateful for, the powerful contributions by two distinguished Peers of the Realm from Scotland. I am grateful to the noble Lord, Lord Balfour of Inchrye, for the example he gave of a problem arising with a man who had a house and lived in London and interests of the kind he indicated in Scotland. There again, I think that perhaps he was asking that this Bill should not apply to Scotland. Again, this is a point which can be dealt with in Committee. He also referred to the definition of "main residence". As the noble Lord, Lord Mishcon, was good enough to interpose, it is for the person concerned to elect to the Inland Revenue for capital gains purposes what is his main residence. Also the question of what constitutes a main residence arises when you try to get mortgage arrangements in respect of loans in regard to a house.
The noble Lord, Lord Glenkinglas, was good enough to say that perhaps I was completely out of step in encouraging your Lordships to consider this matter in this House. But the very fact that we are not allowed to elect at a general election would appear to me to justify our taking up this point, because how could there be clearer objectivity in discussing a matter of this kind when none of us has any interest of whatsoever kind. But I entirely agree with him that there is this problem regarding local government. Again this can be dealt with in Committee.
I am grateful to the noble Lord the Minister for his kind words about another Bill in which I was concerned, and which eventually came on to the statute book, in regard to the form of entry on the electoral register of spouses of members of the armed forces. The noble Lord referred to a commission which discussed matters a couple of years ago, of which the noble Lord, Lord Underhill, was a member. He quoted from the report of that commission, saying that it would appear that certain aspects of the present Bill were objected to by that commission. I console myself that the same argument was raised against me in the Bill on the representation of the people as regards services' spouses, and happily I was able to overcome the objection raised on the basis of that commission's report.
I think all noble Lords who have participated in this debate have indicated that most of the points they have raised arc points which could be dealt with in Committee. Therefore, I am not going to go into detail to deal with all the points raised, and I hope that the noble Lord, Lord Belstead, will not think I am being discourteous at this stage in not endeavouring to deal with the substantial points he has raised on behalf of the Government. In these circumstances, I beg to move that this Bill be read a second time.
5.25 p.m.
On Question, Whether the Bill be now read 2a?
Their Lordships divided: Contents, 46; Not-Contents, 77.

CONTENTS

Airedale, L.

Kilbracken, L.

Auckland, L.

Kirkhill, L.

Avebury, L.

Llewelyn-Davies of Hastoe, B.

Aylestone, L.

Lloyd of Kilgerran, L. [Teller.]

Balogh, L.

Banks, L. [Teller.]

Lockwood, B.

Barrington, V.

Longford, E.

Beaumont of Whitley, L.

Melchett, L.

Birk,B.

Mishcon, L.

Boston of Faversham, L.

Noel-Baker, L.

Brockway, L.

Peart, L.

Collison, L.

Ponsonby of Shulbrede, L.

Cooper of Stockton Heath, L.

Rochester, L.

David, B.

Segal, L.

Davies of Leek, L.

Shinwell, L.

Foot, L.

Stone, L.

Gaitskell, B.

Strabolgi, L.

George-Brown, L.

Underhill, L.

Goronwy-Roberts, L.

Whaddon, L.

Gosford, E.

Wigoder, L.

Hale, L.

Winstanley, L.

Jeger, B.

Winterbottom, L.

Kaldor, L.

Wynne-Jones, L.

Kennet, L.

NOT-CONTENTS

Abinger, L.

Hornsby-Smith, B.

Allen of Abbeydalc, L.

Hylton-Foster, B.

Ampthill, L.

Ilchester, E.

Armstrong, L.

Killearn, L.

Balfour of Inchrye, L.

Kinnaird, L.

Belstead, L.

Lauderdale, E.

Bessborough, E.

Lindsey and Abingdon, E.

Boardman, L.

Long, V.

Boothby, L.

Lyell, L,

Caithness, E.

Mancroft, L.

Cathcart, E.

Marley, L.

Chesham, L.

Merrivale, L.

Cork and Orrery, E.

Mersey, V.

Cottesloe, L. [Teller.]

Middleton, L.

Craigavon, V.

Morris, L.

Cullen of Ashbourne, L.

Murton of Lindisfarne, L.

Dacre of Glanlon, L.

Renton, L.

Daventry, V.

Rochdale, V.

de Clifford, L.

Sackville, L.

De La Warr, E.

St. Aldwyn, E.

Denham, L.

Salisbury, M.

Derwent, L.

Shannon, E.

Elles, B.

Sharples, B.

Elliot of Harwood, B.

Skelmersdale, L.

Energlyn, L.

Somers, L.

Faithfull, B.

Spens, L.

Falkland, V.

Stanley of Alderley, L.

Ferrers, E.

Stradbroke, E.

Fraser of Kilmorack, L.

Strathclyde, L.

Gainford, L.

Strathspey, L.

Gisborough, L.

Sudeley, L.

Glenkinglas, L. [Teller.]

Swansea, L.

Gormanston, V.

Swinfen, L.

Gridley, L.

Teynham, L.

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

Vickers, B.

Vivian, L.

Wakefield of Kendal, L.

Hanworth, V.

West bury, L.

Hawke, L.

Wootton of Abinger, B.

Holderness, L.

Resolved in the negative, and Motion for Second Reading disagreed to accordingly.

Trees (Replanting and Replacement) Bill [H.L.]
5.34 p.m.
Lord Somers: My Lords, I beg to move that this Bill be now read a second time. With the exception
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of a few details, this is very much the same measure as that which I introduced towards the end of last Session and which was passed by your Lordships but too late for it to reach the House of Commons. I am introducing it again with a few minor changes, and it is those changes about which I wish to speak. I have reinserted the words at the end of Clause 1:
"of the same genus and of the same or a similar species".
I will explain why I have done that. The noble Lord, Lord Lloyd of Kilgerran, was kind enough to write to me explaining his opinion on this, so I know he is opposed to it. I must point out that the whole reason originally for introducing the Bill was that I wished to stem the gradual decline in the number of hardwood trees—
The Earl of Cork and Orrery: I apologise for interrupting, my Lords, but did I hear the noble Lord refer to the noble Lord, Lord Lloyd of Kilgerran? I think he meant to refer to the noble Lord, Lord Kilbracken.
Lord Somers: Yes, my Lords, and I beg the noble Lord's pardon; I was of course referring to the noble Lord, Lord Kilbracken. The whole purpose of introducing the Bill was to stem the gradual decline in the number of hardwood trees which in normal circumstances would not be replanted by local authorities because they are so slow growing, and naturally they wish to see a fairly rapid return on their work. As a result, it is practically impossible for the average person to get hardwood—I expect it is more available for professional users—and of course trees such as the oak, ash and beech are such a typical feature of the English countryside that they should be preserved. I have reinserted words so that if a tree of that variety is destroyed, a tree of similar species will appear in due course. The only other alteration to the Bill is the insertion of Clause 4, which I think is the nearest one can get to a penal clause. I have had legal advice on this and I believe that as it stands it will prove strong enough. It is not absolute, but it should prove strong enough to make the average local authority respect it. There is little else to say, except that I hope your Lordships will give the Bill a Second Reading and that it will not be too mutilated in Committee. I beg to move.
Moved, That the Bill be now read 2a.—(Lord Somers).
5.38 p.m.
The Earl of Cork and Orrery: My Lords, I do not have a great deal to say about the Bill, except to say a cheerful hallo, to give a welcome return to an old friend and to wish the noble Lord, Lord Somers, success with it. He has pointed out the alterations he has made since a similar Bill was before us last Session and how he has retained certain amendments that were made on its first appearance. The noble Lord, Lord Kilbracken, and I had a hand in tabling some amendments, some of which were successful and some were not from our point of view, and as the Bill stands now I feel quite happy with it.
I sometimes wonder a little whether the noble Lord is in fact attacking the right enemy. I entirely applaud his intention. I think that the noble Lord. Lord Kilbracken, feels a little more strongly on this than I

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do, but I do not know whether local authorities are at fault to any great extent in not replanting trees. On the whole, in many cases to my knowledge they do exceedingly well. I am quite prepared to believe that there are some local authorities, possibly many, which do not; but I simply do not know about that. However, local authorities are probably not the greatest culprits in this area.
I suspect that the private developer, who cannot be caught by this Bill, nor probably by any other, is a greater culprit. He is able to cut down large numbers of trees in order to build something, whatever it may be, and he escapes; he is not compelled to replant. Perhaps the greatest culprit of all (if no one takes exception to that particular noun, as applied to it) is the Forestry Commission, which is constantly planting conifers, which I personally do not care for very much, the soft woods, all over the place, and the hard woods disappear, as the noble Lord so justly complained. However, there it is, and to say that a more worthwhile target might have been selected is not to complain about the one that the noble Lord has selected—that is to say, the local authorities. For that reason I hope that your Lordships will agree to give the Bill a Second Reading.
5.41 p.m.
Lord Kilbracken: My Lords, the noble Lord, Lord Somers, should be congratulated—even if he got my name slightly wrong—upon persevering with this Bill, which had a somewhat protracted passage through your Lordships' House last year, in the course of which it was changed, and I hope improved, as a result of amendments put down by the noble Earl who has just spoken and myself. One of those amendments left it free to the local authority to decide what species, or indeed what genus, of trees were to be planted as replacements, and now the noble Lord has returned the Bill to its previous form. I hope that he will think about it again, first, because I think that the local authority should not be hampered in its choice of trees, but in particular, because, as I have often found, one can plant a particular species and then find that for some reason or other it is quite unsuitable for that piece of ground. That is obviously often the case with poplars, which need rather wet ground. If a number of poplars—to give only one example—have to be felled because they are failing, it would be ridiculous to plant more poplars. Perhaps those words cannot be left out of the Bill altogether, but I feel that the wording has to be changed. There are also one or two other minor points which I should like to raise at the Committee stage, with the sole hope that when the Bill goes to another place, as I hope it will, it will be even better than it is now.
There is not much more to say, except to mention that I await with interest the remarks of the noble Earl, Lord Avon, and I very much hope that this time the Government will see fit to give the Bill something of a fair wind in its journey towards the statute book. Last year the earlier version of the Bill reached another place, despite the Government who seemed to think, as the noble Earl, Lord Cork and Orrery, has suggested might be the case, that it is unnecessary. I wish I thought that it were unnecessary.
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Of course, there are many local authorities which are very scrupulous in this matter, which mind about trees and plant as many as they should in places where trees have to be cut down. But it is not for them that one is legislating. I think it is a very great mistake to say merely that most local authorities are pretty good about this, and therefore we need not bother about it, because I believe that there are a great many local authorities, just as there are a great many individuals, who do not care about trees, who cut them down in a most deplorable way, and do not replace them. Therefore, I feel that this is not an unimportant nor an unnecessary Bill, and I very much hope that the noble Earl will be able to indicate some degree of Governmental support. With those words I wish the Bill a fair passage.
5.45 p.m.
Lord Birkett: I am afraid that I cannot give the Bill in its new form any warmer welcome than I gave it last time. I am well aware of the deep concern for the landscape of this country which motivates the noble Lord, Lord Somers, in introducing the Bill, and I cannot believe that there is one of your Lordships here today who does not share his concern. Yet I cannot believe that the Bill will do the cause any good. I should explain that I work for a local authority, the Greater London Council. Indeed I am the council's director of recreation and arts, and therefore I have within my sphere of influence what used to be the old parks department. So I have a great deal to do with a very large amount of open space in London. I should also explain that I do not in any way this evening speak for the Greater London Council, but only for myself.
I say that I cannot welcome the Bill because, unlike the noble Lord, Lord Kilbracken, I believe that it is unnecessary. I believe that, by and large, local authorities do very well without enforcing legislation. They certainly do very well without being compelled to keep additional records. I feel that that clause of the Bill in particular is especially unwelcome at a time when most authorities are struggling to maintain their open spaces with ever decreasing manpower numbers, and that an additional bureaucratic burden of this kind is particularly uncalled for at this time.
I should also like to echo the objection of the noble Lord, Lord Kilbracken, to the inserted phrase about trees being of the same genus and preferably of the same species. I recently had an experience of exactly the kind that he described. It was on the North border of Wormwood Scrubs, where we are trying to plant a large tree screen. We tried a number of hard -wood trees in the slightly pathetic hope that they might take, although the soil is extremely unsympathetic. Not entirely to our surprise, we found that they did not take, and we have now resorted to other forms of trees which have a better chance. Had this Bill been an Act and been in force, I would have been compelled for ever to repeat my mistake, and I do not think that that is a tolerable situation.
I am also slightly alarmed by the very nature of the mathematics involved. I can see basically the reason for replanting two trees where one is felled. Indeed, in many cases we plant more. But as I explained on the previous appearance of the Bill, there are times

869
when this is simply illogical. For example, it is often the case that in planting an avenue, one double plants it early in its life because one knows that the mature spacing of large trees will perhaps be 20 feet; but until they are mature a 20-feet spacing will look particularly "mini". The avenue will be rather a sad spectacle in its early life, so one double plants it, and at some point, depending on the growth of the trees, every other one is chopped down. If the Bill were passed, every time that process took place one would have to plant another avenue and quite soon one would run out of places in which to plant trees. So I cannot believe that that proposal is even remotely logical.
I cannot believe in even the period of one year as proposed in the Bill. If one cuts down, let us imagine, a large area of trees because it is a desert, it is one of those neglected areas which requires total reclamation, re-landscaping and replanting. If that is done in September, then according to the Bill, one is obliged by the following September to have replanted two for one all over. But that effectively gives one not until the following September, but until the end of March, because lifting and planting for anything except container-grown trees—and by and large in this sort of quantity we are talking of nursery-grown trees—has to be carried out within the planting season. It may well be that the land needs not merely much more work on it before replanting, but also fallow time. It might need chemical treatment and the clearance of all kinds of undesirable weeds and undergrowths before replanting starts. In many cases a year simply will not be enough; it will not be possible to comply with it.
Finally, it seems to me quite illogical to say that even if trees are felled because they are a danger or a possible source of danger to traffic or pedestrians, they must nevertheless be replaced. I understand quite well that there are certain circumstances in which the danger arises merely from the condition of a tree. It becomes old, it becomes dangerous, and you have to cut it down to prevent damage. But if the very siting of the tree is the cause of danger, if indeed it is a danger because you cannot see traffic round it, or the very place in which it is set is automatically a danger, then it is clearly absurd to be obliged to replant it.
Lord Kilbracken: My Lords, if I might interrupt the noble Lord, the tree does not have to be replanted in the same place as the other one was felled. That is under Clause 2, I suppose.
Lord Birkett: My Lords, I appreciate the point that the noble Lord is making, and that is quite true, of course, but there are plenty of circumstances in which the only planting area one is talking about is the same planting area. Obviously, one could go and plant two more trees quite elsewhere, if that were the case; but it still seems to me an illogical provision. Therefore, I must say that I believe the Bill is unnecessary in general and, in detail, is restrictive, and I cannot honestly hope that it will receive a Second Reading.
5.52 p.m.
Lord Strathspey: My Lords, I apologise that I did not put my name down to speak, but I wonder whether I may be permitted to say a few words. Having had a
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considerable interest in forestry for most of my working life, this Bill interests me. With the greatest respect to the noble Lord who has introduced this Bill, and to his intentions behind it, I am afraid I could not support it. I agree, in the main, with the views expressed by the last speaker, the noble Lord, Lord Birkett. I do not think that the local authorities are in any way largely to be blamed for the lack of trees in the urban areas which they own. I think that to a great extent local authorities are very good at replanting trees wherever it is possible to do so.
The loss of trees in general in the British countryside is not due to the work of local authorities, or even to the work of developers who build factory sites, houses and so on, because very often trees are planted on those sites, generally by order of the planning authority when giving their planning permission. They say that certain trees have to be preserved, and that other trees have to be planted. I think that, in the main, the loss of our trees—and I am talking about arbori cultural trees, and not silvi cultural trees—is due to two things. One is disease. In my area we have suffered an enormous loss of trees in the last two to three years from Dutch elm disease. They were stupid enough, in years gone by, to have Dutch elm trees planted—I am sorry; to have elm trees planted. I am sorry I said "Dutch elms", because there are 32 different varieties of elm, I believe. Their loss has caused a great loss of shade and appearance.
The other loss of trees in the countryside is due to the disappearance of hedgerows and the cutting of hedgerows by mechanical means, which has made quite sure that young trees which grow up to replace the old dead ones in the hedgerows cannot survive, because they are cut off by these machines. Of course, farmers do not want trees, generally, in their hedgerows because they take up space and cause shade, and land is intensely valuable now; and you cannot always regard them as being of use for shelter belts, such as you have to have in more windy areas further north and in our upland areas. So, on those general lines, and with the greatest respect to the noble Lord who has introduced this Bill, I am afraid I cannot support it because I do not think it is necessary, nor do I think that it covers the problem.
Lord Peart: My Lords, before taking part in this debate, may I first of all declare an interest? I am a member of the Economic Forestry Group. Coming to the Bill, I applaud the Bill and I am glad that the noble Lord, Lord Somers, has brought it back again. It has been amended, and it will be changed even now, probably, in Committee; but I believe it is basically a good Bill. It will help considerably in the countryside. I know that the noble Lord, Lord Birkett, has strongly criticised it, but when I think of my own area of Cumberland in the North, and the rural authorities which are affected very much by forestry, I think of Bassenthwaite, in particular, near where I live.
This Bill will, I think, make people realise that our forestry heritage is important. That is why I thought that, in his opening remarks, the noble Lord, Lord Somers, hit the nail on the head. He said that we have to think of reversing the decline in hard wood trees, and he went on to talk about the difficulties of oak, ash and the beech, and our typical countryside. What

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ever arguments we may have, and whatever pre-judices, I still believe that this is a good, positive Private Member's Bill. I am not going to take up any more time; I wish it well.
5.57 p.m.
The Earl of Avon: My Lords, it is a welcome addition to the Wildlife and Countryside Bill to be talking today on the Trees (Replanting and Replacement) Bill instead. Having earlier today talked about the sites for burial grounds being unused, I felt that this Bill might be rather applicable to that Motion as well. While the Government are very keen that a great many trees should be planted both in urban areas and in the countryside, we do not believe that this Bill is the right way of achieving this objective. The Bill is similar to the one introduced by the noble Lord, Lord Somers, in the previous Session. Certain changes have been made which are an improvement on the original Bill, but I would remind your Lordships of what was said by my noble friend who was standing at this Dispatch Box on that occasion, my noble friend Lord Mowbray and Stourton, in the Committee stage last May. He said that we in the Government do not see much point in trying to turn this measure into one which we can support, because at the end of the day we shall probably not be supporting it.
Our main objection, as previously, is that it runs counter to our policy of reducing the statutory duties of local authorities. We believe that authorities should have as much discretion and flexibility as possible in matters such as these, and I should like to take the new Clause 4 as particularly running counter to this policy. I agree with many of the things that the noble Lord, Lord Birkett, said from the Cross-Benches, and I wonder, perhaps, whether he would not like to move behind me to support us on this particular measure.
We believe that this Bill is unnecessary because most local authorities already plant a substantial number of trees each year. Here I think we agree with my noble friend Lord Cork and Orrery. Although it is the Government's policy that local authority expenditure should be kept down, we have seen no evidence to indicate that authorities are cutting back drastically on their planting programmes, and I hope and believe that they will take a long-term view and continue to provide a reasonable level of resources for this work. Perhaps if the noble Lord, Lord Kilbracken, has some examples to the contrary, he might like to give them to your Lordships when we come to Committee stage.
However, what the Bill would do is to cause local authorities to spend resources on the unproductive work of recording all the details about trees felled and planted in accordance with Clause 3—a point which was made by the noble Lord, Lord Birkett; and the Bill now has an enforcement provision which would involve central Government in monitoring the local authorities' work, and in taking action in cases of apparent non-compliance. As I said just a minute ago, it is our policy to reduce bureaucracy, not to increase it—as this Bill does.
Another objection that we have to the Bill's provisions is that, by specifying that replacements have to be of the same genus and of the same or a similar species,
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it unnecessarily restricts local authorities in their choice of replacement trees. If the Bill gets to a Committee stage, I am sure that the noble Lord, Lord Kilbracken, will put down an amendment. I have some examples here in that many authorities may have too high a proportion of trees of a particular genus or species or types of trees involving a heavy maintenance responsibility in urban areas, and when they fell these trees they may well want to replace them with other genera. The subject of elms has already been brought up. As my noble friend Lord Bellwin said in the Second Reading debate on 16th April (at col. 395 of Hansard):
"We want to encourage the planting of as wide a range of species as possible, in order to give greater variety to our environment and to lessen the chances of diseases spreading".
For these reasons we cannot support the Bill.
However, I should like to take this opportunity of reiterating our support for the extensive planting of trees and for our support for the national tree campaign launched last year by the Tree Council; a campaign which aims to have planted one tree per head of population by 1983. Last November, on the occasion of National Tree Week, there was a very interesting debate on tree planting in another place. I am sure that many of your Lordships have read the report of this debate. My colleague in the department, the Parliamentary Under-Secretary of State, Mr. Hector Monro, and the originator of the National Tree Planting Year in 1973, the honourable Member, Mr. Sidney Chapman, who has done so much to arouse interest in trees, referred then to the valuable part being played by public bodies. But, as they indicated, tree planting needs the active involvement of the whole community. Much valuable work is already being done—and I should like to encourage even greater effort in the future—by civic societies, school-children, naturalist trusts, other voluntary groups, and by families and individuals. The private sector can be most effective when working in co-operation with, and using the advice of, local authorities with their conservation branches and parks departments.
While I have sympathy with what the noble Lord, Lord Somers, is trying to do, I believe that an extensive tree planting programme can best be achieved by the sort of community effort and co-operation to which I have referred, and not by imposing statutory requirements on local authorities, as in this Bill.
6.3 p.m.
Lord Somers: My Lords, I should like to thank all those who have taken part in this debate. I must confess that some noble Lords do not seem to have read the Bill thoroughly. The noble Lord, Lord Birkett, raised the point that if you plant an avenue and had to plant the trees close together, once they had grown the trees in between would have to be chopped down. But what about Clause 7? It says:
"This Act shall not apply where, in wooded areas, thinning of the trees is necessary ".
I should have thought that that applied to that.
Lord Kilbracken: My Lords, surely an avenue would not be a wooded area.
Lord Somers: I think that is making it over-difficult. It could be so defined that any wooded area is an area

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which has more than one tree, presumably. Regarding Lord Kilbracken's objection to the same species, without that this Bill would be completely pointless. That is the whole reason why I introduced it, as I said in my opening speech. It is these hard wood trees which are not being replanted.
The noble Lord should imagine himself on a local council, having to replant trees. Would he advise the tree planter to plant trees that he was not going to see during his life? If so, he is a great deal more farsighted than many local councils, I am afraid. Without that provision, the Bill is a normal tree provision Bill. There is no need for that. Local governments have their own perfectly good tree protection provisions and I would not think of trespassing on them. There are some which are not quite so responsible, certainly; but the vast majority of them have excellent tree protection provisions. I cannot say that I think the objections to the Bill are very valid, but I must leave it to your Lordships to say whether you wish to have the Bill read a second time.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

Pet Animals Act 1951 (Amendment) Bill [H.L.]
6.7 p.m.
Lord Houghton of Sowerby: My Lords, I beg to move that the Bill be now read a second time. This Bill proposes to amend the Pet Animals Act of 1951 in one particular only. The 1951 Act regulated the sale of pet animals. Its main purpose was to do with the licensing of pet shops, laying down proper conditions for keeping and caring for animals on sale in pet shops. It provided for inspectors to see that these conditions were complied with, the inspectors being officers of the local authorities. Another provision was that pets were not to be sold to children under 12 years of age.
The section of the 1951 Act which I propose to change relates to the sale of pet animals in streets or public places. The Act of 1951 made it an offence to sell pets in the street or any public place except from a stall or barrow and by a person who had been granted a licence to do so by the local authority. My Bill seeks to revoke street trading altogether. I want to remove the trade in pets from stalls or barrows in streets or public places from the licensing provisions of the 1951 Act.
I want to stress that this Bill does not affect pet shops or anything else in the 1951 Act except that. While there are probably other provisions in the principal Act in need of attention, I am deliberately confining this Bill to one reform only. It is pressing and I think that it should come first. I must also keep in mind that if your Lordships see fit to pass this Bill it has still to find a place in the business of the House of Commons. Before it can become law it must of course pass through both Houses. I have referred previously to the curious situation in which your Lordships' House always finds a place for a Bill which comes up from the House of Commons, but the House of Commons do not always find a place for Bills which go from the House of Lords. I wish to
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make the task of sympathetic Members of another place easier by confining this Bill to this one clause.
Moreover, there is another good reason why I am doing this. It is that the pet shop proprietors have now formed a pet trade association. They have their own channels of approach and recommendation to the Home Office on matters which concern them; so they prefer that I should not extend the scope of this amending Bill any further than I have done, in order to leave them free to pursue their concerns through channels which are open to them. They are neutral on this Bill because some of their members are stall-holders as well as pet shop proprietors.
I do not wish to detain your Lordships for too long, but I think the history of this legislation will be of interest, especially when Governments say, as they often do, that they have no intention of introducing legislation to bring about some reform or other. It does not mean they are not interested, but that they are probably willing to let a Private Member do it. The original Act of 1951 was a Private Member's Bill. It was the work of Sir Ronald Russell, who was the Conservative Member of Parliament for Wembley, South. He tried first to introduce this Bill to regulate the sale of pets in 1949, but failed through lack of time; but in 1951 he was successful and his Bill was passed in June 1951. It became operative from April 1952.
It is interesting to note that the Bill, when introduced into another place, was moved by the late Sir Ronald Russell and was supported by our colleague in this House, Lord Greenwood of Rossendale, by the noble Lord, Lord Pargiter, and by the noble Lord, Lord Reigate. No fewer than eight members of the Standing Committee which dealt with that Bill in another place are now Members of your Lordships' House. I think it is interesting, as I say, to recall their part in formulating a Bill which has done so much good over the last 30 years. I notice the noble Baroness, Lady Hornsby-Smith, is in her place; she was one of the supporters. Others were the noble Viscountess, Lady Davidson, the noble Baroness, Lady White, the noble and learned Lord, Lord Elwyn-Jones, and the noble Lords, Lord Holderness, Lord Boyle, Lord Pargiter, and Lord Cooper of Stockton Heath.
By 1969 Sir Ronald Russell was of the opinion that his Bill of 1951 did not in this respect go far enough, and he introduced an amending Bill which, unfortunately, made no progress in another place through lack of time. This Bill which is now before your Lordships' House is exactly the same Bill as the one Sir Ronald Russell sought to introduce in another place in 1969. There is, therefore, nothing very hasty about what it is proposed to do. Sir Ronald became badly disabled in his last Parliament, 1970–74, and he died in 1974: otherwise I am sure that this Bill would have come from another place to your Lordships' House on his initiative. Anyway, it falls to me to introduce the Bill almost by proxy.
Now for the merits of the matter. I want to preface my remarks on them by reflecting on the change in public attitudes towards animal protection and welfare during the 30 years since 1951. Public interest and concern for all animal life has increased enormously during that time. What was acceptable in 1951 may not be acceptable today. Since then we have had

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legislation on standards in boarding establishments and kennels; we have had legislation for the protection of birds; we have before the House at the present time a Bill for the protection of laboratory animals—the first to be passed by either House on this subject for a hundred years. Other Bills on animal welfare are coming forward. Political parties are now pledged to bring about reforms in this field. The present Government are probably more committed to improving the conditions for animal protection and welfare than any previous Government at any time; and that is to their credit.
Public interest obviously has been met and stimulated by more television and newspaper coverage of animal life than ever before. Such people as David Attenborough have made a very big contribution to this. Young people with a passion for change and for a better society frequently express themselves in noisy demonstrations and occasional breaches of the peace. They are impatient with the slow pace of parliamentary business and they complain to me that nothing gets done here—it is all talk; there is no action, only delay and frustration; everything takes too long.
My Lords, it is no good ignoring the young people when trying to gauge public opinion, because they are part of it and they are the people who will count in the years to come. When I was at Club Row last Sunday morning a number of young people were demonstrating there, but it was not for my benefit because they have been demonstrating outside this marketplace every Sunday morning for the last 11 months. It appeared to need a number of police officers there to see that everybody behaved properly, and I thought it probably took more than a little courage on the part of some of the stallholders to be carrying on their business to the din of incessant barracking. That is how it looked to me.
But before condemning these demonstrators—and I am sorry that the noble Earl, Lord Halsbury, is not present, because this is his obsession—I think we have at least to be thankful that these young people are never football hooligans or drunken louts at closing time; they are not rapists, muggers, burglars or pickpockets. They are not even pickets, trying to intimidate other people into stopping work. They may do wrong but they are never evil. Call them extremists if you will but, like it or not, they are part of the present climate of opinion on animal welfare—an active, vocal, noisy and even militant part, but they cannot be suppressed.
In this field, as in many others, if moderate leadership bears fruit, extremism can be contained: if it does not, then more militant action follows. It is those who say "No" to demands for moderate change who have to pay the higher price in the end. These young people are sweeping into the animal welfare societies. They are taking them over, and many of them are making heavy personal sacrifices for the work they are doing. I admire them in so much of what they are doing; I only wish I was young so that I could live with them to see it through.
However, I think I ought now to turn to a cool, objective look at the street trade in animals, and at what it is about it that we think justifies the proposals in this Bill. One consideration is: Does this assist
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responsible pet ownership? There are strong doubts as to whether this form of selling pet animals is conducive to responsible pet ownership. Too many puppies and kittens are bought by children in a passing fancy, or because they fall for the appealing look of an engaging creature whose attractions are irresistible.
But the glamour can wear off, and pets can be a chore and an expense. As they grow up, they lose some of their endearing qualities and may become a bore or a nuisance; and probably the adult members of the family want to get rid of them. There is a danger that these animals may be eventually turned out, rejected, dropped on a motorway—anything. It is amazing what terrible things people will do to animals which they have called their pets.
I think that people, who would buy a pet or acquire one, should be encouraged to go direct to breeders, to licensed pet shops, to the RSPCA or to a reputable animal rescue centres, where a purchaser has a positive and premeditated purpose in mind, and will not buy on impulse or on a wave of sentiment. Sales in open markets tend to be to the passer-by, and the likelihood is that a person who has to enter premises to buy will be a more responsible pet owner.
The next point we have to consider is: what about responsible selling? Responsible selling is not likely to be found in street market trading, and it will not be up to the high standard we expect from licensed pet shops and others who are running bona fide establishments. There are kennels, breeders' premises, voluntary societies and the rest. I ask your Lordships: Would you buy a pet from a stall in the street? If your answer is No, then it is my answer, too. I do not think that this kind of selling should be encouraged.
The main risk, of course, is on health grounds, and it is on that that I have received most complaints. I have had complaints about the pedigree and condition of pets. Many people who acquire pets in this way very frequently find that they have to take them to the vet very shortly afterwards, because they are sickly and probably fatally ill. Vets have been critical of the number of people who have gone to them, having acquired pets in this way, without proper safeguards about the health of the animal they were buying.
There are also complaints—very occasional, I must say—of kittens and puppies being dumped on the rubbish heap at the end of the day. Kittens have been found. I have photographs here of kittens which have been picked up from the rubbish heap in an open market. Last Sunday, when I was at Club Row in Tower Hamlets, a woman came to me with a picture of a collie and asked "Have you seen this dog in this market"? I had not. She was looking for a dog which she had lost and had gone to that market believing—hoping, probably—that she would see it on sale. Some people have bought animals from these market places, not because they wanted an additional pet or were particularly attracted to what they saw, but because they took compassion on an animal which they thought was in a very uncomfortable condition.
Another point is that dealers frequent open markets much more frequently than they go into pet shops. Some of them are known to be supplying research laboratories, and the sooner we stop research laboratories from going out into the streets, here and there, to get their animals, and require them to get them

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from bona fide breeding establishments, the better.
I have a letter from an RSPCA superintendent, who has given me an account of what he thinks is wrong with an open market such as Club Row. He mentions that that,
"area is perhaps one of the principal outlets in the country for illegal trade in wild birds ".
He also says:
"It is suspected that pet stealers dispose of their ill-gotten gains at the market to innocent members of the public".
He said that at that time last year when he wrote the society had two pending prosecutions against those responsible. He said:
"Traders sell or attempt to sell puppies and kittens at too early an age".
They should, of course, have been weaned, but there is no strict condition as to how that is to be determined. He went on:
"Some licensed traders occasionally trade in exotic animals, including fox cubs".
But they are perfectly entitled to do that. The superintendent continued:
"The market creates a serious problem in relation to contagious feline and canine diseases, i.e. distemper, hard pad and enteritis. As I am sure you will appreciate, at the time of the sale an animal may appear to be"
well, but it soon becomes sickly.
The Evening Standard of 17th November disclosed a new danger in connection with open markets; that is, in the certification of vaccination. It published the name and the photograph of a vet who was signing blank forms of certificates of vaccination. This vet said "The animals were examined all right. There is no doubt about that. But I could not spend all Saturday afternoon, when I wanted to look at a football match on television, filling in the details. So I signed the forms, handed them over to the dealers and they had to put in the details".
Part of the difficulty is that on Saturday all this trade builds up for the Sunday morning, and we can understand the problems of the concentration of work on a Saturday, in order to open a stall on the Sunday morning. The period of vigilance is a very difficult one. It is too short to see all that is going on. I think that the Evening Standard and the Star newspapers have done a public service in drawing attention to much that they have seen in this and other market places.
I now come to the next heading of our examination of this problem: the conditions in open markets. As I said, I went to Club Row last Sunday. It is primitive and scruffy. It was a fine Sunday morning with little wind, though rather cold. But what if there had been a blizzard, a high wind or pouring rain? There were plastic covers to the stalls, blankets hung at the side and Calor gas heaters looking rather dangerous amid so much straw. It was not a very pleasant sight.
The conditons in these markets are the responsibility of the local authority. They lay down the conditions and it is their responsibility to enforce them. But the RSPCA superintendent complains that, owing to the laxity of oversight of the conditions, it falls to the RSPCA to do it for them. There is an officer of the RSPCA on duty at that market all the time. I do not see why the voluntary societies should
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undertake a job which is proper to the local authorities or to the police.
I did not like what I saw, but I cannot say that in those conditions I saw anything which made me feel deeply angry. Nevertheless, I came away fully convinced that a street market is no place to sell pets. It is a relic of the 19th century, when shops were few and markets flourished. But it will not do today. The risks, under all the heads that I have mentioned, are too great. Living animals are not merchandise. They are flesh and blood and have feelings and emotions.
I have to ask noble Lords whether in all the circumstances they feel that this is a Bill to stop the sale of animals in open market places. The question we have to ask is whether we are justified in ending altogether this trade and having done with it. My answer to that question is, Yes. Quite apart from public opinion, I think our own attitude towards animals should enable us to reach a judgment. I have not received a single letter saying that these markets should be kept open: not one. I have seen scores of letters, and the evidence with them, in which the writers complain bitterly about the conditions they have seen. The RSPCA strongly support the Bill and the British Veterinary Association warmly welcome it. Both are sources of respectable support.
Finally, would the total ban on this trade cause unjustified loss of freedom and income to those who trade in open markets? Are we justified in interfering, or are we content merely to doll it up? I think we are justified in ending the trade. Since 1951 the pet shop business has grown enormously. So far as animals are concerned, street markets are a thing of the past. They are probably on the way out. In Club Row there are 35 licensed sites for stalls to sell animals, but last Sunday only five were being used. Not more than seven or eight appeared to be in pretty frequent use. Some of these stallholders already have pet shops. Some of them claim to be breeders. I do not think they require that kind of retail outlet.
We cannot escape the possibility of hurting somebody if in the interests of the animals themselves we are to make a change. The Government are pledged to follow a reformist path, but so far they do not have a great deal to show. They will soon have to produce something, or their election pledges will not look quite so attractive as they did. This Bill gives them a bit of a boost. On a higher plane, if human beings are striving for the attainment of noble ideals, then we must persevere in promoting an enlightened and compassionate relationship with the animal kingdom in all its diverse forms. I beg to move.
Moved, That the Bill be now read 2a.—(Lord Houghton of Sowerby.)
Lord Beaumont of Whitley: My Lords, I rise to give a welcome from these Benches to the Bill. We shall give any support we can to the noble Lord, Lord Houghton of Sowerby. The noble Lord has covered the whole field. It will take me, at the very most, only a couple of minutes to endorse what he has said.
In this country there is now a major problem about pets. More and more people are becoming aware of it. More and more people feel that they have a responsibility. It is too easy to buy pets on impulse, too

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easy to keep them without licences, too easy just to let them loose to roam the countryside, abandoned to do what damage they may, to cause what accidents they may, to die in misery as they may.
The numbers involved are very large. It is estimated that there may be a million dogs at any particular time which are not under complete control or without homes, and that every year probably at least half a million are killed as surplus, abandoned. This is in addition to any which are killed because they are ill or because they are old. These numbers are quite horrifying. It is time that there was a proper look at the problem and a proper reform of the system. I hope that this Government, or a future one, will turn their minds to the problem before it is too late. In the meanwhile, we have a one clause Bill which stands, I hope, some chance of becoming law. It will tackle just one small facet of the problem.
There is no doubt that, despite all the efforts of the RSPCA, there is considerable, mainly minor ill treatment in some of the markets where pets are sold. Nobody in your Lordships' House would like it to continue. The markets tend to be too hot in the summer and too cold in the winter. The risks of cross-infection can be very high. They are not subject to the same kind of control as are individual shops. As a result there can be a high incidence of disease. Sometimes there is minor deliberate cruelty, as a result of which animals are left unfed and unwatered in order to reduce fouling which might possibly reduce sales.
There is no good reason why these markets should be retained but there are a number of very strong reasons why they should be done away with. I wish the Bill a very speedy and successful passage through both Houses.
6.37 p.m.
Lord de Clifford: My Lords, I, too, would like to join the noble Lord, Lord Beaumont of Whitley, in welcoming the Bill. It is one which is greatly needed. There are many others, particularly to do with dogs, which are not within sight.
In this market Bill everybody is looking at urban areas. The Bill concentrates upon street markets. I come from what might be termed a deep rural area. There are markets all round us, but not street markets. They are well organised. In those markets, apart from cattle and sheep, you find poultry being sold and also animals which could well be classified as pets. Dogs are sold in those markets.
My wife and I went to the market in Tenbury to sell some geese. What did we discover? We discovered in a wire cage, with nothing under them, three little puppies which could not have been more than seven weeks old. The conditions in which they were being kept were disgusting. It was just a wire cage, with no bottom to it and with about seven strips of straw in it. We could not find the owner or anybody who was prepared to take any responsibility for those puppies, but they were there to be sold by auction. There is another market, not so far away, in which are sold geese, ducks, chickens and guinea fowl. Ferrets, rabbits, goats and other items like that are also sold there.
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In those markets you find people walking around with very nice puppies and young dogs under their arms. I am not saying that in every one of the markets there is ill-treatment. This Bill, if I have the wording correctly, refers to selling animals in any part of a street or public place or a stall or barrow in a market.
What I should like to ask the noble Lord, Lord Houghton, is, first, where do we draw the dividing line, other than with dogs? What is a pet, and what is not? Some ferrets are kept as pets; some rabbits are kept as pets; some goats are kept as pets. Where do we make the division? When we come to a well organised market and we find such things as I have described to your Lordships, are we in a public place, to which this would apply? At the moment this is not very clear to me.
I am a supporter of the Bill and I am not trying to stop it, but I should like some clarification of this matter because everybody has been looking at the urban areas, where the matter is quite simple; but when we go into the rural areas it is not quite so simple. Perhaps a little later we might clear up these small matters, while not preventing this Bill from going to another place, with all the difficulties which we know are liable to arise.
6.42 p.m.
Lord Peart: My Lords, I think we should all congratulate my noble friend Lord Houghton of Sowerby for introducing this Bill. He has really made his name in the defence of animals and we all wish him well in his campaign. I believe that this small Bill will be an important step forward. I agree with everything that my noble friend said in his speech and I suspect that he also has had a communication from a friend who has given me evidence, picked up by the RSPCA, showing what happens in that part of the market that we have been talking about. They say that the RSPCA have been very concerned about Club Row for many years, and quite rightly. As my noble friend said, many of the animals sold there are sick and diseased. There appears in the report that I have here the words:
"Contagious feline and canine diseases, such as distemper and enteritis are rife".
Many animals are sold with incomplete or false vaccination certifications and pedigree certificates This is really a terrible situation and therefore I think action must be taken.
This situation is not confined only to Club Row. I understand that similar conditions exist in many parts of the country, so I hope that this Bill will go through, and so again my noble friend will be praised for getting animal welfare forward a stage further. Without further ado T wish him well with this Bill, and I hope we shall all see that it is not impeded.
6.45 p.m.
Lord Belstead: My Lords, with characteristic modesty the noble Lord, Lord Houghton, gave credit to others for the history of previous legislation in this field in the last 30 years or so, but I join with the noble Lord, Lord Peart, in acknowledging that, although on occasion I am in a position where I have to disagree with the noble Lord, Lord Houghton, none the less I recognise always the motives of the noble Lord in wishing to help animals; and he is this evening seeking

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to persuade your Lordships to agree to the Second Reading of this Bill. Having said that, I think it is worth bearing in mind that the sponsor of the 1951 Pet Animals Act, the late Sir Ronald Russell, made three attempts to amend the 1951 Act between the years 1969 and 1974 in another place and there are reasons, which I am going to deploy now, to show why I think there are problems in trying to do this.
This Bill seeks to effect a small but nevertheless significant amendment to the 1951 Act. But, as with many things, it needs to be seen in perspective and, if I may, I should like to say a few words on that particular aspect. Section 1 of the 1951 Act requires any person carrying on a business of selling animals as pets to obtain a licence from the local authority. By virtue of Section 2 the carrying on of such a business in any part of a street or public place is prohibited, except at a stall or barrow in a market. Market traders are therefore permitted, under licence, to sell pet animals. Before issuing a licence, the local authority is required to have regard to a number of matters in the interests of the animals' welfare. These include the need to secure that at all times the animals will be kept in accommodation suitable as respects size, temperature, lighting, ventilation and cleanliness; that they will be supplied with suitable food and drink; and that mammals will not be sold at too early an age.
Local authorities are required to attach such conditions to the licences they issue so as to ensure that these objectives are met. And of course they may refuse to issue a licence if they are not satisfied that the conditions will be met. Licences are issued for up to 12 months only and must then be renewed. There are also provisions for inspection, for the penalties of fining and imprisonment and for cancellation of a licence and disqualification of a licence holder. I have ventured to refer to the provisions of the 1951 Act in a little detail because I suggest that in considering its amendment we need to keep fully in mind the mechanism and the checks which Parliament has established to regulate the selling of pet animals, including those sold from stalls or barrows in market places.
I should like to draw attention to two other Acts which are relevant to the welfare of animals in market places. First, the Protection of Animals Act 1911 makes it an offence to cause any unnecessary suffering to a domestic or captive animal, whether in a market or elsewhere. Second, it is an offence under the Abandonment of Animals Act 1960 for the owner of a domestic animal to abandon it in circumstances likely to cause it unnecessary suffering. I agree absolutely with what the noble Lord, Lord Houghton, said on this particular aspect of the subject this evening.
I turn now to the Bill and to the reasons which I know have prompted it. The noble Lord, Lord Houghton, referred to Club Row, which has been designated a market for the purpose of lawful street trading and is licensed and controlled by the London borough of Tower Hamlets. I believe I am right in saying that there has been an open street market round about that location for several centuries. The situation at Club Row has on a number of occasions given rise to concern. The noble Lord doubted whether it could be possible for the general standards required by the 1951 Act in the interests of animal welfare to be met there when the animals are exposed to the vagaries of the weather.
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Furthermore, concern has been expressed that Club Row is one of the principal outlets for illegal trafficking in wild birds; that it is a centre for the disposal of stolen pets; that there have been frequent attempts by members of the public to sell or abandon their pets in the market; that the market represents a serious problem in relation to contagious cat and dog diseases, in the way referred to by the noble Lord, Lord Peart; and the unlicensed traders are operating there.
I have made it my business to find out what the view of the police is because the noble Lord, Lord Houghton, very fairly recorded, when he paid his recent visit, that the police were there, and very evidently there. I understand the local police commander believes everything possible is being done by his officers to prevent contravention of the law. There are, however, particular difficulties in enforcing the law in this kind of situation, and I admit that. In addition to a police presence at Club Row, however, RSPCA officers are also in regular attendance.
The noble Lord, Lord Houghton, was critical in his speech of the Tower Hamlets Borough Council Environmental Health Department, which is immediately responsible for the licensing arrangements. They do, of course, have a central role in this situation. They are fully aware of the situation, and their evident concern has, I understand, prompted the Tower Hamlets Borough Council Environmental Health Department to impose from this month stricter conditions on licensees which they believe will be in line with the recommendations of the British Veterinary Association in their booklet Pet Animals Act 1951: A Guide for Local Authorities.
This, therefore, is the general picture, if I might add to what Lord Houghton has given us at first hand, of the situation at Club Row. It is a situation about which much is known because it has attracted a good deal of attention and criticism. The position at all the other street markets throughout the country which the noble Lord mentioned is of course not so well documented. I acknowledge that the RSPCA consider that at a good number of these there are similar problems. Nevertheless, it is Club Row Market rather than the others which has been the focus of particular criticism.
The solution advocated by the noble Lord in this Bill is to ban the sale of pet animals in all street markets throughout the country and make it an offence. I do not seek to minimise the concern about the welfare of animals at Club Row in particular or at any other street market where there are problems. But it should be recognised that the sort of ban which would be in this Bill if it were to pass into law would be total. It would hit far more than its target. It could put out of business also all those street traders who are properly licensed to sell animals and who are going about their work in accordance with the requirements laid down about the welfare of the animals in their care. In these circumstances, and given that the 1951 Act is aimed at safeguarding the interests of animals sold at market places and that those interests are further safeguarded by the Acts of 1911 and 1960 which I mentioned, some observers might reasonably ask if the drastic solution proposed in this Bill is really necessary.
It is a question which deserves an answer, because

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we are talking about the welfare of animals. I do not think a wholly convincing answer in support of the Bill has yet been given, and that is the reaon why the Government have no plans to amend the 1951 Act. Nevetheless, this has been a useful debate in drawing attention to the trading of pet animals in street markets. It has given us an opportunity to consider the position specifically in relation to Club Row, but I do want to reiterate that the case for the Bill requires consideration in the light of the overall picture and not merely on the basis of certain particular examples where the situation leaves something to be desired. It is with that attitude that I will be speaking at any other stages which your Lordships may grant to the Bill if there is a Second Reading of it this evening.
Lord de Clifford: My Lords, before the noble Lord sits down, could he come away from Club Row and all those places? What is the position in the normal regular market? Is that a public place, in a rural market?
Lord Belstead: My Lords, all the other markets to which the noble Lord, Lord Houghton, referred, and indeed to which the noble Lord, Lord Peart, referred, are subject in the same way as Club Row to the provisions of the 1951 Pet Animals Act and the Acts of 1911 and 1960 which I mentioned.
Lord Houghton of Sowerby: My Lords, I am very grateful to the noble Lord the Minister for dealing with this matter in a moderate and quasi-sympathetic way. I will not take up more than a minute or two, because I hope your Lordships will give the Bill a Second Reading and I shall be very glad at Committee stage to go further into some of the points the noble Lord has raised. In particular, I hold in my hand a copy of the regulations introduced by the Tower Hamlets authority for Club Row as from the beginning of this year. They relate mostly to pet shops, and there are eight pet shops within the precincts of this particular market; it is the pet shops to which these regulations really relate. All the safeguards against fire and other contingencies which are mentioned in these regulations have nothing to do with the conditions in the market place. I can demonstrate that the conditions which inevitably prevail in the market place are really in contravention of the full intentions of the conditions laid down in these new rules—animals on the floor in the streets, with dust and paper; it is a rubbishy place. I believe that open market places and the barrows and stalls in streets, even though licensed, are not suitable places to sell young animals according to the standards of hygiene and of treatment of the present day.
The Protection of Animals Act 1911 deals with cruelty. I am not dealing with cruelty which would form the subject of proceedings or conviction under the 1911 Act. I am talking about ill treatment, discomfort, misery, due to the conditions under which animals are exposed for sale. I fully sympathise with those who are renting stalls in market places to sell animals, but is this a legitimate trade any longer from the point of view of animal welfare? That is the question.
Anyhow, I sincerely hope that your Lordships will give the Bill a Second Reading. I am quite prepared to undergo fresh questioning on this matter at the
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Committee stage. I would be quite prepared to offer a longer period of deferment of effective date of the Bill in order to make the transition easier. But, above all, I would sincerely hope that this Bill may go to another place in due course in order that it may he considered there by those who are more closely connected with markets in particular areas and who are anxious to have the opportunity of dealing with this Bill.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

Sugar from Commonwealth Countries
6.59 p.m.
Lord Walston Lord Walston rose to ask Her Majesty's Government what steps they propose to take to ensure continued access of raw sugar from Commonwealth countries under the Lomé Convention, in view of the closure of the Tate and Lyle refinery in Liverpool.
The noble Lord said: My Lords, I beg to ask the Question standing in my name on the Order Paper. In doing so I would like to make it very clear that I am not raising this matter in any way as a spokesman for Tate and Lyle, nor indeed am I raising it on behalf of the British Sugar Corporation, the two great giants which control the sugar destinies not only of this country but of others. But perhaps I should declare an interest in that, as I think some of your Lordships already know, I am a producer of sugar beet in this country. I should also make it clear that although I farm also in the West Indies, I am not a producer of sugar cane in that area and nor, indeed, does the island where I operate produce any sugar at all. So I hope that I can claim to approach the matter with a certain degree of objectivity.
The reasons why I thought it right to bring this matter to your Lordships' attention and to elicit, I hope, from the Government a satisfactory reply are as follows. My first reason is the serious increase in unemployment that inevitably will arise from the proposed closure of the Tate and Lyle plant in Liverpool—an area which your Lordships well know has already a frighteningly high level of unemployment. Secondly, I am a very strong and fervent believer in the Commonwealth and this matter has a very direct effect upon Commonwealth countries. Thirdly, I am an equally fervent believer in the importance of helping the less developed parts of the world and minimising, in so far as we are able, the gap in wealth that there is between the North and the South. And, fourthly, I believe very strongly, as I am sure all your Lordships do, that Governments, no less than individuals, should adhere both to the strictly legal interpretations of any undertakings that they have given and that this country has given, and also that they should adhere to the wider beliefs that lie behind those legal undertakings. Those are my reasons for raising this matter.
Having mentioned undertakings, I should like to remind your Lordships of the undertaking which was given by Mr. Geoffrey Rippon at the time of the negotiations for our entry into the EEC, he then being the Minister in charge of those negotiations. He said that there would be
"a secure and continuing market in the enlarged Community on fair terms for the quantities of sugar covered by the Common

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wealth Sugar Agreement in respect of all its existing developing countries".
He further went on to say that:
"If quotas for beet sugar production were increased in such a way that imports from Commonwealth countries were threatened, it would be a breach of the undertakings by the Community. The Community's regulations clearly laid down that production in excess of quotas must be disposed of on the world market, and therefore could not be a challenge to Commonwealth cane sugar".
Those were the undertakings given by Mr. Rippon and accepted by this House, by the other place, and by the country as one of the cardinal points in our negotiations for entry into the Common Market. Those are my reasons for raising this matter and reminding your Lordships of some of the past history.
There is no getting away from it—sugar is an enormously complex problem. It would be impossible even if I had the knowledge—which I do not claim to have—to go into all the ramifications of the world sugar market and the Community sugar regulations (let alone our own fairly complex system for sugar in this country) in the space of a reasonable speech to your Lordships. It would require not a long lecture, but a long book to deal with that matter. So, of necessity, I shall give only a very cursory view of the position.
Certain figures can make the situation reasonably clear. At present, the consumption of sugar within the United Kingdom is approximately 2·3 million tonnes per annum. Of that 1·15 million tonnes come from our own production of sugar beet. I ask your Lordships to remember that figure of 1·15 million tonnes and compare it with the 900,000 tonnes of sugar which was produced from sugar beet at the time of our entry into the Common Market. In other words, since that time there has been an increase of approximately 20 per cent., which is a significant figure. While that has been happening, our consumption of sugar for a variety of reasons, which I shall not go into now, has declined. In addition to the 1·15 million tonnes from our own sugar beet production we import between 150,000 and 200,000 tonnes annually from the Community—primarily, in fact, from Denmark and not, as many people think, from France. There therefore remains a market for cane sugar of 1 million tonnes in round figures. That should be compared with the 1·3 million tonnes under the Lomé Protocol or the 1·2 million tonnes or so which should come under the Commonwealth Sugar Agreement, and the Lomé Protocol as its successor.
As I understand it, up until now the capacity in this country—which as it happens is entirely in the hands of Tate and Lyle—for refining that sugar has been ample to cope with this amount of 1·1 million tonnes or 1·2 million tonnes. But, with the closure of the Liverpool refinery, that capacity is reduced to something slightly over I million tones—perhaps 1·1 million tonnes. In other words, there is a shortfall of refining capacity at this stage of at least 100,000 tonnes, assuming that the ACP countries, the successors to the Commonwealth Sugar Agreement countries, take up the full amount of their quota.
They do not always do that, because of the variations in climate in their countries. For example, Mauritius recently suffered severe damage from the weather, as a result of which the amount that they have been sending
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here has seriously declined, but only for one year. The actual amounts which have been coming in over the last two years—and there is some variation depending on how you assess the figures and which particular period of 12 months you take—have been hovering around 1·2 million tonnes or something of that sort; but they have been sticking pretty close to their 1·2 million tonnes. So we are now faced with the fact that as things are at present there is a shortfall of refining capacity in this country of at least 100,000 tonnes. Those are all facts with which I think the noble Earl the Minister will agree.
There are some other facts, which I think your Lordships should know to put this matter in the context of the effect of any difficulties in disposing of sugar on various of the countries concerned. I shall not go through the long list of those involved. There are quite a few Commonwealth countries that are very serious and major exporters of sugar to this country. I shall mention only three: the small country of St. Kitts, where 69 per cent. of its export earnings comes from sugar; Fiji, where 76 per cent. comes from sugar; and Mauritius, where 85 per cent. of its earnings come from sugar. So from those figures it is quite clear that any interference with the market for sugar inevitably must have a very serious effect upon the economies of those countries. Even more so, I think noble Lords will agree when I tell them that in Fiji and Mauritius one-quarter of the whole workforce is, in fact, engaged in the sugar industry, while in St. Kitts the figure is 43 per cent. Therefore, to these three countries sugar is of vital importance; it is also of very great importance to many other countries, including Swaziland, Jamaica and Trinidad, although it is not of such great importance as it is to those three countries.
Why has this situation come about? Why have Tate and Lyle been forced, for purely commercial reasons which I do not for a moment question, to close down their Liverpool factory? As I have already mentioned, it is partly because there has been quite a substantial decline over the years in the United Kingdom's consumption of sugar. Of course, there has also been the introduction of isoglucose which has been an additional factor which must be taken into account. However, there has also been this very significant increase in the United Kingdom's production of sugar, an increase of approximately 20 per cent.
Coupled with that—and it is of significance in this matter—there is the huge EEC surplus overlying the whole picture. We cannot divorce our own sugar beet production and our sugar beet industry from that of the Community as a whole. I fully agree that if the Community decides, in its unwisdom, that the quotas for sugar beet throughout the Community should be increased, there is no reason why the United Kingdom should be denied a share in that increased production. But the question that we must ask ourselves is: Why should there be any increase whatever in the amount of sugar which is produced within the Community? Let us remember those words of Mr. Rippon which I have already quoted:
"If quotas for beet production were increased in such a way that imports from Commonwealth countries were threatened, it would be a breach of undertakings by the Community".
Therefore, I suggest to your Lordships that it is essential—as your Select Committee underlined in their

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report last year—that the total sugar production in the Community as a whole should, if possible, be reduced and certainly should not be increased in any way; and there should certainly be no increase in the amount of quotas for the United Kingdom itself. I know that there are some people who say that this matter will soon disappear, that things will work out right because, after all, Greece is now a member of the Community and will undoubtedly take any of this surplus, because it is only a matter of 50,000 tonnes or 100,000 tonnes, so there is no need to get worried about it.
But although at times Greece has been a net importer of sugar, in fact for the last four years Greece has been, in a very modest way, a net exporter of sugar. In evidence before your Select Committee, which is contained in the report submitted to your Lordships, the representative of the Ministry of Agriculture made it quite clear that the effect of Greece would be no more than neutral in this respect. So I think that one can, possibly in advance, dispose of any argument that may be brought forward that all will be all right because of Greece.
I do not think I need say very much more. I hope the general point has been made that this is a serious problem and one of growing seriousness—one which will not go away simply because no action is taken. I hope that we shall hear the Minister say tonight that the Government still stand by Mr. Rippon's pledges—both those that I have read out—and that they accept that it is the responsibility of both the EEC in Brussels and Her Majesty's Government in this country to ensure the implementation of the pledge given at that time. It is not the responsibility of Tate and Lyle; it is not the responsibility of the British Sugar Corporation; it is not the responsibility of private enterprise. The responsibility must rest upon the EEC and upon Her Majesty's Government.
I should also like to make this final point. It is no good saying that this is only a matter of 50,000, 60,000 or maybe 100,000 tonnes, which can easily be absorbed by French refineries or elsewhere. I agree that on this occasion such surplus as has existed has been absorbed by other refineries, particularly in France. But there is no guarantee that that will continue. It may well be that the French will have a larger crop coming from their own departments overseas. It may well be that they have other ideas about it. So the problem cannot simply be fobbed off in that way.
What is more, one must realise that cane sugar refined in this country can only be sold satisfactorily and economically if it is sold within this country. Whereas some five or six years ago the share of British sugar beet was in the neighbourhood of 30 per cent. of the total market, it has now risen to nearly 50 per cent., which means that sale of cane sugar has dropped by the corresponding amount. That is a factor which must be taken into account in any proposals for improving this situation.
The fears in the Commonwealth countries and the Lomé Convention countries are very great indeed. They know that this is not just an isolated instance. It is not the thin end of the wedge for them, because the thin end has already been inserted. We must remember the closures that have already taken place since 1976; in the past four and a half years three
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refineries have been closed, and Liverpool has been reduced in its throughput. So this is a continuing process in the eyes of the Commonwealth countries and of those countries that depend so very heavily upon sugar. Their fears will not go away unless and until we hear, as I hope we shall, from the Minister tonight that those fears are true fears, are fears that he accepts and are fears that he and his Government will deal within in whatever way they see best. l hope he will say that they accept the responsibility for ensuring that at least 1·2 million tonnes of Commonwealth sugar beet can still come into this country and can still be bought under the undertakings given by Mr. Rippon, and that there need be no fear on the part of the Commonwealth countries as to their future ability to dispose of their sugar in that way.
7.20 p.m.
Baroness Elliot of Harwood: My Lords, I take part in this debate for the simple reason that I have been attending all the committee meetings that we have had on sugar, which were chaired so ably by the noble Lord, Lord Walston. I also take part to back him up in every way in the speech that lie has just made. He has in fact said exactly that which our committee is anxious for the Government to realise. It is an appropriate moment for him to put down this Question, because it was a year ago, at the time we were first discussing this question of the production of sugar and refineries, and so on, when we were warned when the noble Earl, Lord Jellicoe, was giving evidence to us from Tate and Lyle that, if the import of cane sugar went down any further, Tate and Lyle would be in the unfortunate position of having to close the factory.
That was slightly more than a year ago. Since then, as we all know, the problem has got a good deal worse. Further refining factories have been closed, culminating in what is a serious closure; the one that has just taken place in Liverpool. That is not saying that we blame Tate and Lyle in any way. They can only operate when it is a satisfactory and commercial enterprise. Therefore, it is not for that reason that I mention it, but simply because it is most important that we should all realise that our committee, and the noble Lord, Lord Walston, particularly, are trying to warn the Government that unless something is done now we may be faced with more problems in another year's time.
I should like to support everything that the noble Lord, Lord Walston, has said, about the ACP sugar. We are dealing with countries to whom we have an obligation as members of the Commonwealth, whose export of cane sugar is absolutely vital to them; far more vital than it is to the European countries. Therefore, it is essential that they should be assured, as the noble Lord has said, that we in this country, and our Government, are going to be certain to continue with the same imports of cane sugar for refining as we have up to the present time. If the ACP countries got that assurance tonight for a further period, that would be something which would give them great confidence.
When we were discussing this matter and interviewing different people with regard to the sugar situation I asked a question because I have always been worried about it. Noble Lords will remember that in 1974 there was suddenly a great shortage of sugar. Sugar went up in price. It was difficult to get. The

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consumers got thoroughly worried about it. People started to buy sugar and to store it, and so on. I inquired from the Department of Agriculture, who were giving evidence to us, whether such a thing could possibly happen again. The reply I got was:
"the difference between shortage and over-supply [in sugar] is very small indeed, and that was even so in 1974. Much depends on the behaviour of the big suppliers and the big consumers. If the Soviet Union becomes a big buyer in the market and the Cuban production has gone down, that changes things immediately from a state of over-supply to shortage. The other factor, of course, is that sugar production responds quite rapidly to a period of high prices, and this causes the supply to swing quite sharply."
That makes it very difficult indeed for the whole policy of sugar, and one wonders whether there is any possibility that at any period more sugar will be required in Europe, or in the world, which would of course be of enormous value to the ACP countries, and also of course to those who produce sugar beet. Whether that is possible or not is pure speculation, but it is something which was mentioned when we were asking the question of how much sugar can be consumed.
I have often thought on the EEC committees that we are always learning, or always hearing, about surpluses—mountains of butter, mountains of beef, or whatever it is—and not enough attention is given in the EEC among all the many producers on how you can sell; how you can dispose of the food that is produced. The consumer does not play a big enough part in EEC discussions. I may be wrong, but that is the impression I have when I go to Brussels. I hope that in this particular commodity we will study the consumer and the possibility of increasing consumption, even although at this moment it may not seem very possible. Certainly it would be of great advantage to the producers, whether they are producers of cane or whether they are producers of beet sugar.
In our discussions on our committee at one point we were talking about the question of the surplus. Again we felt in our discussions that the increase of beet sugar which has been allocated to European countries, more particularly Germany and France, and not allocated to the United Kingdom was something of which we did not approve. We said so in our findings. We do not think that there should be more beet sugar produced when at the moment there is a surplus. If that is granted to certain European countries and not to others, again it seems to us that it really is not fair.
One of our recommendations too in this last of our reports, the one that came out only the other day, was that we should encourage the British Sugar Corporation to join the International Sugar Agreement because all the production of sugar would then be under one umbrella, as it were, and that we feel would be a very good thing indeed. There is an important and big problem here. When we see the effect that something like the reduction is going to have on employment, for instance—certainly in Liverpool it will mean a big reduction in employment—and in other ways, it is extremely serious.
I am sure that the Government will respond to our report, and I hope that we shall get some assurance on the points that the noble Lord, Lord Walston, has raised and on which I entirely support him. I hope very much that we will get those assurances
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because we are extremely anxious that this crisis shall not continue, or if it does continue that we should be well aware of what will happen if it gets any worse. I hope that the Government will realise that we are most anxious to be helpful, but that we think it is important that they should realise that this is not something that is going to disappear in a night, and we have got to think of it as policy that is going to last for a long time.
7.28 p.m.
Lord Davies of Leek: My Lords, the House will be grateful to the noble Lord, Lord Walston, for introducing this debate. Despite the fact that it is a late hour and that the House is rather thin, nevertheless this matter is of vital importance. It is a classical example of how a hitherto prosperous country can export its own unemployment. The chairman himself has expressed as one of the saddest things in his life that this firm have had to close this factory down because of excessive losses.
The reality of existence is this: whether you like it or not, if you enter into the political field, whatever party you belong to, you cannot by a magic stroke and words create magical systems of society. We are dealing with Tate and Lyle, an historic firm, in which the investments of many people exist, and unless those investments show some return—this is a fact of life in the world in which we live, and we on this side are trying to find some answers to this historic problem—the organisation cannot carry on and will close down, and even trade union funds sometimes have to be put into organisations.
We must remember that the site of the sugar refinery in Love Lane itself creates difficulties in that it is not right at the dockside; lorries must be used to carry the raw material to the point of manufacture. Let us also not forget that the present situation has not arrived on the scene magically, simply to create headlines in the newspapers. In this connection, I was delighted when the noble Baroness, Lady Elliot of Harwood, quoted from the committee on EEC sugar policy, of which she is an assiduous member. Tate and Lyle were interviewed and they put forward a memorandum to Session 1980–81, and it appears in the 8th Report of the committee of which the noble Lord, Lord Walston, is the able chairman. In that memorandum the company said:
"In general, Tate and Lyle strongly opposes the latest proposals by the European Commission for the Community's 19801985 sugar régime".
The first fact to impress on us is that that régime in Brussels is, as they point out, from 1980 to 1985; there are issues of sovereignty and everybody knows where I stand on the Common Market, and I do not want to create any dissention in this debate. There are issues which we should be considering because we are faced with the problem that if the policy has already been set down in the Community and the régime for 1980 to 1985 has been established, what legitimate weapons or approaches have we within European law to change the situation so that a firm like Tate and Lyle would be in a position to process the cane sugar?
Let us remember that they did not come into this simply on a gentlemen's agreement basis for the Lomé

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Convention. In this connection, the House must remember that many many people changed their minds regarding the Common Market when we were given guarantees that parts of the hitherto British Commonwealth like Australia, New Zealand and other areas noble Lords have mentioned, would be protected in the various commodities produced by them. Indeed, Article I of Protocol No. 3 of 28th February 1975 says:
"The Community undertakes for an indefinite period to purchase and import, at guaranteed prices, specific quantities of cane sugar"—
mark those words—
"raw or white, which originate in the ACP States"—
that means the African, Caribbean and Pacific states—
"and which these states undertake to deliver to it".
I will give the list but not the figures because I do not want to bore the House. That refer to all parts of the hitherto British Commonwealth: Barbados; Fiji (which I know quite well, with between 163,000 and 164,000 tonnes; most of the employment there is concerned with this product and great railways have been built to deal with it); Guyana, Jamaica, Kenya, Madagascar, Malawi, Mauritius, the Congo, Swaziland, Tanzania, Trinidad and Uganda—all producing and in many cases dependent on selling cane sugar. I will not bore noble Lords by saying to what extent they are dependent on this crop. In some cases it is 25 per cent., in others 70 per cent. and in others 80 per cent. That is the reliance they have on it for their prosperity and standard of living.
It is no good blaming Tate and Lyle for the present unemployment problem because the warning was there months ago, and something needed to be done about it then. They say in their letter, and I will quote only parts of it to save time:
"This position may well imperil the Community's, and particularly the United Kingdom's, ability to absorb the tonnages of the ACP (African, Caribbean and Pacific) imports to which it is committed for an indefinite period".
Mark the words "for an indefinite period"; we used the word "indefinite" in the treaty. They continue:
"By the same token, if the proposals are put through, it will be difficult to avoid some further reduction in the UK's cane refining capacity, which"—
and here is the 64,000 dollar problem:
"if closed, would occasion further job losses in areas already suffering from very high unemployment. Finally, there must be doubts as to whether the level of guarantees to Community producers will enable the Community to engage in meaningful negotiations to join the International Sugar Agreement".
I would bore the House if I read more of that, and I will now develop my argument as a result of that quotation. The noble Lord, Lord Walston, made a constructive point when he said that we must search for a constructive answer to these problems, and the present Minister of Agriculture, Mr. Walker, has tried his best to get a new attitude towards them. Tate and Lyle have, as I have pointed out, made some constructive points, asking why they have the problem and why they have to suffer. They argue that the sugar régime of the EEC,
"was constructed to facilitate beet sugar production, which was the only source of sugar in five of the original six countries in the Community".
They argue:
"Although France had about 300,000 tonnes of cane sugar refining, this was used for cube manufacture and was of little significance compared with France's very large beet sugar produc
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tion. When Britain joined the EEC there was no framework for obtaining a good margin on cane sugar refining, and this position still persists".
I remind noble Lords that I am quoting from Tate and Lyle's own documentation:
"The result is that beet enjoys a margin which is up to £30 per tonne more profitable than cane…".
There right away is the worm in the apple of cane sugar production, that it is in a disadvantageous position compared with European farmers' sugar beet. We in Britain have had with sugar beet a bonanza in farming, as has been the case throughout the Common Market. If we believe in helping the third world, we should put more heart in trying to find answers to difficult problems of this kind, problems which will not be answered by Tate and Lyle, for example, saying, "We will run it, despite the fact that we are losing £10 million", or, We are in a disadvantageous position to the tune of £30 a tonne".
Are there any answers and are there any opportunities for Tate and Lyle to increase sugar refining? It must be admitted that they know their job; whether I like their politics does not matter because we are looking at the realities of the situation. The firm state what possibilities are considered:
"(a) Increase UK sugar consumption".
That is the difficulty. I was glad that the noble Baroness mentioned 1974. My dear wife was alive then, and whenever I was driving through a village she said: "Try to buy a pound of sugar on the way home". I nearly had to swap my motor car in one village for a pound of sugar. Then,
"(b) Win market share from British Sugar Corporation by aggressive marketing".
Well, by golly! we know what that means.
"(c) Persuade British Sugar Corporation to export 300,000 tonnes of beet sugar, thereby leaving room in the UK market for the Tate and Lyle surplus capacity to be used.
"(d) Reduce white sugar imports from continental Europe".
All those possibilities would have a rough effect on our neighbours in the Common Market.
I believe that we are forced to secure a top-level discussion on this problem—and it does not apply only to sugar; it applies to other commodities and other activities, too. I am interested in one part of the commodity world, which happens to be platinum, but that does not feed people. What I know is that there is an absolute need for those who support the Common Market, and even those of us who have been kicked screaming into it, to get down to the brass tacks of feeding the Western world, and, through feeding it properly, to keep our promise to those other parts of the world which have much lower standards of living.
I see that I have been speaking for 12 minutes, and I should like to trespass upon your Lordships' time for another minute or so. I do not want to reiterate the arguments that have been made before. I am trying to distil in the alembic of the politics that we use in this House some answers to this problem; and I believe that the answers need looking into.
The Economist puts one of the points quite neatly. I had better be sure of my facts, and so I shall quote the Economist:
"Four British sugar merchants are claiming that the price advantage which the EEC gives to beet sugar is enabling"—
this is not the Labour movement, nor Davies speaking—

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"the British Sugar Corporation to squeeze out its competitors. They fear that the BSC will soon have a monopoly".
I cannot go into the birth of the BSC; there is not the time. But this is a knowledgeable House, and your Lordships will know about the birth of the British Sugar Corporation. The article continues:
"…under Articles 85 and 86 of the Treaty of Rome"
there was an
" 'abuse of dominant position'.
"Until Britain's entry into the EEC its market was dominated by cane sugar imported from the Commonwealth. Three firms, Tate and Lyle and Manbre and Garton for cane, and the BSC for beet…".
Now the BSC has taken over completely and it has got rid of the merchant system. People working in the commodity market will know that merchants sitting down using the Telex and other things can do a lot to keep prices down. But in the sugar trade the BSC is being accused of eliminating the old merchant dealers who used to know their job and deal. That monopoly is a dangerous one, and four of the great merchant groups have asked for the Monopolies Commission to look into it.
I have spoken for 14 minutes, which is long enough at the end of a tiring week. All I wish to add is that I am quite sure that Tate and Lyle—whoever the firm may be, and whoever all their directors may be—do not look on this as something that they do willy-nilly. Much thought has been given to the matter. It has been pointed out to the Government, it has been pointed out to committees for a long time that this problem needs investigation. I beg of the Minister who is to reply to take this little debate seriously, because it is important to Britain, it is important to the Common Market, and in the name of heaven!, it is important to those little countries where 30 per cent., 50 per cent., 70 per cent., and 25 per cent. of their living depends on cane sugar. I thank your Lordships for listening for so long.
Lord Mottistone: My Lords, I should like very briefly to give my support to the Question that the noble Lord, Lord Walston, has put down. As befits a most excellent chairman until recently of Subcommittee D (which prepared the report to which so much reference has been made) he has covered the ground very fully and I have little to add, except to say that I hope that the Minister gives proper reply to the various points that the noble Lord, Lord Walston, made. I should also like very much to support the remarks of my noble friend Lady Elliot of Harwood, as well as some of the remarks of the noble Lord, Lord Davies of Leek. I shall not elaborate on where there is any difference.
I think that the key factors which really require an answer are these. First, is this the end of a rather disastrous situation, or is it just going to continue little by little as the European Commission develops its policies which apparently allow our European colleagues on the mainland of Europe to produce more and more beet sugar as time goes on? The point is made very clear in the 8th Report, to which reference has been made, that this is a danger which we see and which really must be halted, indeed must be reversed, if things are not going to get worse. That is the first point.
The second question is, if the process of increased
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beet sugar production in Europe is not halted, how can the Commission continue to maintain its obligation to the Lomé countries? That is the second big question, because that surely must be continued. Quite apart from the moral obligations that we have to those countries, there is also the undertaking given by the European Community, which cannot be reneged on, and it is not reasonable on anybody's part, even if they are Dutch, German or French farmers, to expect the countries of the Lomé Convention to develop alternative means of earning their living in the world market. The figures were given by the noble Lord, Lord Walston.
However, the principal point is that perhaps over a very long period of time these countries should develop a more diverse basis on which to earn their international living, but they cannot be expected to do it shortly, and it is extraordinarily unreasonable of the farming communities of the Nine—now the Ten—to go on developing schemes and arrangements which are working directly and positively against the wellbeing of these overseas countries, to whom we have these obligations.
Poor old Tate and Lyle—if I may say that in the presence of my noble friend Lord Jellicoe—is really the unfortunate jam in the sandwich in this particular business. They are getting squashed out of the edges of the sandwich, and their workforce is suffering. I think it is extremely hard on them. But in the long run what the Community must do is to ensure that its position in the wider world community is one that can be respected by all the other poeple in it, and that is a situation which will not continue if we go on producing too much of our own food in a selfish kind of fashion, as has been made clear in the many reports of the Select Committee relating to these matters. I very much hope that my noble friend will be able to provide positive answers to the three key questions which I have sought to underline.
7.50 p.m.
The Principal Deputy Chairman of Committees (Baroness White): My Lords, my non-conformist conscience will not allow me to remain seated without saying a word or two in this brief debate. I do so because to my mind, as has already been stressed by both my noble friend Lord Walston and other speakers in this debate, this is really a moral question as much as anything else. We are committed. I recollect very distinctly, when we were discussing in the early 1970s whether or not we should remain in the Community, that this question of our obligation to certain territories was one of the sticking points for some of us who had had long associations with certain parts of the world.
That was because we knew that, as the noble Lord, Lord Mottistone, has rightly emphasised, while possibly over a generation or two it might be possible for them to change the basis of their economy, in any short-term period that just is not possible for them; whereas it is possible for farmers in the temperate zone of Europe at least to grow some alternative crops. They are not absolutely bound to beet sugar in the way in which the cane farmers in the Caribbean, Mauritius or Fiji really have nothing else that they can produce which can be sold on the world markets. The most specific pledges were given, as my noble

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friend Lord Walston indicated, at the time. We were told, "Have no apprehensions, everything will be done; you need have no concern about this, it need not weigh on your conscience, because arrangements are going to be made", and so on.
I appreciate that the fact that in this particular respect the European Community has a collective selfishness, which is how it appears to me, makes it difficult for the Ministers in the United Kingdom to deprive our own beet producers of opportunities which are available to beet producers in other Community countries. But one would hope that Her Majesty's Government would take very seriously the anxiety and concern of so many people that we should be able to hold our heads high and say that we have done everything that we possibly can to make sure that the moral obligations on us towards countries which are far poorer than we are, and which have no viable alternatives, should be fully honoured; and that we should use every opportunity to endeavour to influence our Community partners, who may not have quite such close connections with those parts of the world, to recognise that if you are talking about North or South, or one world, this is one of the most striking examples of how one can try to carry out the obligations of our common humanity in the most practical ways possible, and if we evade this so strikingly significant moral obligation then I feel that we shall be failing in our international duty. I hope we shall be reassured by the Minister tonight.
Earl Jellicoe: My Lords, I wonder whether the noble Lord, Lord Goronwy-Roberts, would allow me to intervene for a brief moment. I did not put my name down on the list following Lord Walston this evening because I felt it really almost improper for me, as my interest in this matter is so patent, to itervene, however briefly. But I feel moved to spend just two minutes expressing my own feelings on this subject. First of all, I should like to make quite clear to your Lordships' House the deep sense of responsibility which, as chairman of the company concerned, I must feel towards the company, its management, its shareholders and, above all, its employees.
The noble Lord, Lord Davies of Leek, was kind enough to quote a warning which Tate and Lyle gave in the autumn to the sub-committee over which the noble Lord, Lord Walston, has so efficiently and effectively presided. Perhaps your Lordships will allow me to quote a warning which I personally gave to that same sub-committee over a year ago. It is very brief, and it is as follows. I was talking about the Commission's then proposals, which would have meant a United Kingdom beet sugar quota of 936,000 tonnes, and I said:
"If the Commission's proposals for the United Kingdom are not accepted, I find it very hard to see how it will be possible for us in Tate and Lyle to avoid the closure of yet another refinery, and that in an area of intolerably high unemployment. In the short time since I have been chairman of Tate and Lyle I have presided over the closure of three refineries and the severe curtailment of a fourth "—
that was Liverpool—
"and I find it very hard to reconcile myself to yet a further closure".
My Lords, I have found it very hard indeed to reconcile myself to yet a further closure.
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The second thing I should like to say very briefly to your Lordships is how much I agree with what the noble Baroness has said about our moral responsibilities and our political responsibilities to those developing countries which produce sugar. One can argue whether the guarantee which is embodied in the Sugar Protocol of the LoméConvention is a Community obligation or an obligation on Her Majesty's Government. My Lords, the answer is obvious. It is a dual obligation; not least of' Her Majesty's Government in view of the fact that those guarantees were an essential condition of our entry into the European Economic Community.
I should like to say only this in conclusion. If at this late hour it were possible for that original proposal, for that original United Kingdom quota, proposed by the European Commission, to be accepted, there would be no need for us to close the Liverpool refinery. If, alternatively, at this late hour it were possible for some arrangement to be worked out by which surplus beet sugar over that limit were exported, there would be no need for the closure of that refinery, with all that that means to the people of Liverpool, and to our employees. But if for any reason those suggestions, at this 13th hour, are unacceptable, I would implore Her Majesty's Government—and I do this (in the hallowed phrase) with all the force at my command, but I mean it—to do all within their power to ensure that there is no further erosion of the position. I say that bearing in mind the interests of our employees in Tate and Lyle and also bearing equally in mind the interests of the ACP sugar-producing countries.
7.58 p.m.
Lord Goronwy-Roberts: My Lords, it certainly would be no part of my intention, in my brief intervention, to criticise in any way the performance and the policy of Tate and Lyle. We all know that the noble Earl, who holds a position of high distinction and great respect in this House, is more concerned and more saddened than anybody by the possibility of the closure of the Liverpool refinery.
I think this debate has served to pinpoint our very deep and varying concerns about what may have to happen, and the first is this. Some of the oldest of our Commonwealth partners face the still further erosion of the major part of their economy. In some cases, as we have heard, a very high percentage of their life and of their economy turns upon the production of cane sugar, which is refined mainly in Britain. There is some refining done in Europe, but by far the greater part is refined in Britain. It is a major industry in Britain. So the first point is that we owe to these cane sugar producing countries the obligation to assure them of a market in this country for refining which will maintain their economy at least at the level to which the original agreement acceded.
The figures have been given. A matter of 268 million tonnes would about settle it. I think the noble Earl has indicated to the Government how this can be done with little difficulty and with far-reaching advantage to the countries concerned, and to Liverpool, and not least also to the refining industry which is a major industry of long-standing in this country. That is the first point.
The second point of concern is that we are all

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pledged to assisting the third world countries, the developing countries. But it seems to me somewhat the economics of madness to pour money very often into non-rewarding projects in some of these countries or pour in money at the rate of something like £700 million a year into these countries but with little effect or practical result and at the same time, as the noble Baroness showed, to cut the very roots of the indigenous prosperity of those countries. So the whole question of third world policy, of meaningful help from the North to the South, is under query because of this development in Liverpool.
The third point is that there is rivalry between beet and cane but they are both interdependent in the sense that if somehow a monopoly emerges it can only be at the expense of the housewife and it can only be at the expense of running the risk of seasonal shortages arising very often from climatic differences of the origins of supply. What affects supply in Lincolnshire is not the same factor that applies to the seasonal output of cane sugar, say, in Barbados. We have seen how both are necessary in proper proportion to maintain consistency of supply both to the domestic and industrial consumer without the ups and downs of scarcity and surplus and of rise and fall of prices.
While these countries may well find an outlet for their sugar in other parts of the world—and indeed through the Commonwealth—there is the constant uncertainty with which they are beset, the lurking doubt as to whether they will follow the New Zealand road. That was another cast iron undertaking we gave to an old and valued comrade in the Commonwealth which we have minimally observed. In the ACP countries, as I know from experience, there is always this lurking doubt whether this constant erosion of the guarantees will proceed so far that finally there is nothing left in Britain for them; that in fact anything is organised and directed towards Europe and nothing towards the old Commonwealth. There is no need for this. Insufficient attention has been given to the comity of production and distribution of both cane and beet sugar within Britain—the question of exports—so that all producers, whether indigenous to this country, in Europe or the ACP countries, can proceed with forward planning and have confidence in investment. Indeed, a confidence that they can undertake insurance out there because the Commonwealth countries are all very much more at the mercy of season and climatic hazard than we are here.
I want to put one or two questions to the noble Lord who will be replying. The first relates to Liverpool. Here is an area of very high unemployment indeed. Mr. Ogden, the Member for West Derby, has very kindly supplied me with certain figures because he and I worked together when he was my Parliamentary Private Secretary in the Department of Trade. So I imagine that Mr. Ogden knows his way round these kinds of statistics.
The total registered unemployed in Merseyside is 109,483. That represents 15.8 per cent. of the working population at the moment. This will increase to 20 per cent. if we add from the refining process, 1,600; from the transport services associated with Tate and Lyle in Liverpool, 200; from the docks, 700; and from other associated activities, 130. That would add,
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approximately, another 2,000 people and raise the percentage of unemployed to 20 per cent. One in five of the people of Merseyside may be unemployed not entirely because of this development but partly because of this development.
There is further unemployment at risk in the immediate environment of the refinery—the biscuit, confectionery, sweet and other comestible group of industries which draw heavily on Tate and Lyle in Liverpool. There is major activity related to machining and paper, transport, the manufacture of soft drinks, and so forth. That would add another 4,500 making a grand total as a result of this closure of an additional 6,500 and raising the percentage to over 20 per cent.
I make the Liverpool point because I think that there is growing in every part of the House and every part of the country a belief that there must be some modification of the rigid monetarism which so far the Government have conducted in the economic affairs of this country. Unless areas like Merseyside—already on the way to an unemployment percentage of 20 per cent.—are to be irredeemably ruined, and a population created which has no hope either there or in other parts of the country of useful work, there must be intervention.
I agree entirely that it is partly a Community matter and partly a matter for Her Majesty's Government. I cannot address myself to the Community; I hardly think that they would listen to me or to my noble friend Lord Davies of Leek. But I can address myself to the Government of the day and especially to the noble Earl who is to answer. He too is a man of deep compassion on these social matters and I have never considered him to be doctrinaire.
May I ask him first whether he will draw the Government's attention to the need to do in a minor way for Merseyside in this specific instance—which means the saving not of a firm but of the industry of refining—what they have quite rightly decided to do in a major way for the motor industry?
The second point is this: Will he take the sense of the House to the Government, that we expect them to honour their commitment to the cane sugar-producing islands? This is really an expectation that moral obligation, as my noble friend Lady White has pointed out, will be sustained by this country. If the Government do so, as we have every right to expect, they must preserve enough sugar refineries in this country to carry it out. This is not a question of doles; it is a question of making it possible for an industry, specifically in Liverpool, where it has been a flourishing industry employing thousands for 112 years, to continue.
So far I fear that what the Government have done is to agree to the EEC pursuing arrangements which have undermined the viability of our refineries. We could go into that, but we will not. In turn, the refineries have either closed down or reduced their labour force; and Liverpool is the latest example. I therefore make a plea for a major adjustment of policy designed to save an entire industry specifically in what is probably its home in this country—Liverpool. Thirdly, unless the process is arrested, unless we deal with the quota as the noble Earl, Lord Jellicoe, so reasonably suggested, are we not in danger of creating a situation of monopoly in this country, and may we

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not be in contravention of Article 86 of the Treaty of Rome?
This is a question which occurred to me as soon as I heard of the intention of the Government to allow this to go ahead, because its only final result could be a monopoly situation, meaning a higher price for domestic and industrial users leading to a contraction of demand, with redundancies in secondary industries using sugar and not simply in what is left of the refining industry—and, finally, in a primary industry of supply, sugar itself, which would be effectively a monopoly. So I join with my noble friends on all sides of the House in pressing the Government, first, to come to the aid of an area which is sorely beset by unemployment and one where the social effects of unemployment are to be seen every day, and getting worse; secondly, to save an old industry, an efficient industry, producing an excellent commodity; finally, and above all, to show to the world, and certainly to the sugar-producing world, that this country means to discharge its moral obligations to it.
8.14 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, I have found this debate of prime importance and, if I may say so, a sad debate, because it is a worrying situation all round the clock. That has been expressed by everyone this evening. I have found it a moving debate for the concern which has been expressed by all noble Lords on a whole variety of matters which are involved. We have had the privilege of hearing my noble friend Lord Jellicoe, who was a distinguished Leader of your Lordships' House and, if I may say so, a very agreeable one, and who is now the leader of a very distinguished company which finds itself in very difficult waters. It is his unenviable task to try to guide that company aright.
The noble Lord, Lord Walston, quite rightly, put down this Question which covers a matter of hugely important domestic Commonwealth and Community concern. When one sees closures of factories such as those which have primed this debate, that cannot be anything other than a cause of sorrow, regret and concern. And when one thinks of the unemployment which is involved in an area which the noble Lord, Lord Goronwy-Roberts, quite rightly referred to as an area of very high unemployment, one thinks of the personal hardship, sorrow and despair it can cause. This is a matter of great concern.
There is no simple answer to the sugar problem; it is a hugely complex answer and anyone who tries to find a simple solution to a simple part will merely find that that solution interacts against another part of it. I suppose that, in what I have to say, I should declare my interest in that I am a farmer and a grower of sugar beet. I hope that will not make your Lordships feel that I am necessarily biased to any degree in what I have to say.
I think I should begin by stressing that the Government, like their predecessors, continue to have the interests of the sugar exporting ACP countries firmly at heart. I shall come to this later on, but it is of absolutely prime importance and has been mentioned by a number of speakers. We are concerned to see that the Community commitment under the Sugar
900
Protocol to the Lomé Convention is fully implemented, and we will continue to strive to ensure that any decisions which are taken in the Community and which could, either directly or indirectly, affect that commitment are compatible with its fulfilment. I think I would carry every single noble Lord in the House with me on that.
The recent announcement by Tate and Lyle of the imminent closure of their Liverpool refinery is one which I, like the noble Lord, Lord Walston, find acutely distressing. Nevertheless, the decision was a commercial one and one which the company felt it had to make: if it did not do that it would risk putting the whole of its business in jeopardy. My noble friend Lord Jellicoe said that that decision caused him the greatest concern—those were not his words but that was his meaning. I can understand that.
In the context of the Question of the noble Lord, Lord Walston, the decision needs to be looked at from two angles: first, in respect of its effects on the United Kingdom situation and, secondly, with regard to its effects on the position of the ACP exporting countries. Perhaps I might be allowed to take the United Kingdom angle first. Sugar which is refined from imported raw cane sugar has long been an essential part of our supply, and it will continue to be so. It is true that the total United Kingdom consumption, nevertheless, has fallen over the last few years from 2·7 million tonnes in 1974–75 to 2·3 million tonnes in the year 1980–81. This, together with the loss of most of its refining business for raw sugar in the world market, has meant that Tate and Lyle have needed less capacity. I speak with some hesitation on these domestic matters of Tate and Lyle, when we have the advantage of my noble friend being here. I hope he will not consider that I am misinterpreting anything or in any way telling him or his company what should be done.
There are similar constraints as a result of reduced consumption which are imposing themselves on United Kingdom sugar beet producers. The optimistic aim of about 1·3 million tonnes of sugar which was to be produced from sugar beet—this was included in the White Paper Food from our own Resources, which was published by the Government of the noble Lord, Lord Peart, when he was holding a very distinguished position—and which was the target figure to which the British Sugar Corporation's recently completed capital investment programme was related, has now had to be revised in the light of the changed position. There is no longer a United Kingdom market of 2·7 million tonnes, of which United Kingdom production of 1·3 million tones—about half—was to be from beet.
So far as sugar beet is concerned—I mention this as it is a very relevant part of the issue, and my noble friend Lord Mottistone asked whether we find ourselves in the position of being part of the EEC's efforts to boost beet sugar production—we have made it clear that we are prepared to accept a reduced United Kingdom quota under the European Community's sugar régime. Our present quota is 1·326 million tonnes, which was agreed by the Labour Government of 1974. Her Majesty's Government are prepared to accept a substantial cut in the United Kingdom's quota, if reductions can be made for all member states on an equitable basis. My right honourable friend the Minister has indicated that in a satisfactory settlement

901
he would accept a United Kingdom quota of 1·15 million tonnes, which is about half our production potential. This should permit a reasonable balance between the interests, then, of beet sugar and cane sugar.
At present levels of consumption, and given Tate and Lyle's new capacity at that time which, with time and a certain elasticity could possibly be enhanced, our market would normally be supplied half and half as from beet sugar and cane sugar; the position in which we anticipated being when the market was at 2.6 million tonnes. There would not normally be any danger of a shortage with these three established sources of supply, if one includes the small element of European sugar which we import and which is a matter of only 150,000 tonnes.
Perhaps I may turn to what one might call the ACP angle. The noble Lord, Lord Walston, said that we must stand by our commitments to these developing countries when we joined the European Community. I think Mr. Rippon said at the time that the Community's offer to safeguard the interests of those countries, whose economies depended on sugar, represented a firm assurance of a secure and continuing market in the enlarged Community, on fair terms, for the quantities of sugar covered by the Commonwealth Sugar Agreement, in respect of all the existing developing countries. He went on to say that if quotas for beet sugar production were increased in such a way that imports from Commonwealth countries were threatened, it would be a breach of the undertakings. That was the fundamental platform on which the Lomé Convention for sugar was based and that still remains.
Important though Lomé sugar is to the United Kingdom as part of our balanced supply, it has a special importance, also, to the developing countries who supply it and who, as noble Lords have said, depend heavily on it for their livelihood. As the noble Lord, Lord Walston, knows, this was recognised under the original Commonwealth Sugar Agreement with its price and access guarantees. This is now covered by the sugar protocol to the Lomé Convention which, in the same way, has price and access guarantees, but which differs from the Commonwealth Sugar Agreement in that it is the Community as a whole and not just the United Kingdom which is the importing party.
This strengthens the position of the developing countries considerably, because imports no longer depend only on the United Kingdom; other European countries can, and do, take part in the Lomé total. Indeed, Tate and Lyle's contracts recognise this and allow a degree of flexibility to suppliers. if necessary, if a commercial contract cannot be concluded in any Community country, the Community is compelled to buy even into intervention any ACP raw sugar which cannot find a home. Obvously, no one wishes to see that happen, but it provides the ultimate guarantee of access of ACP sugar to the Community market, regardless of what happens in individual countries.
Many of your Lordships have expressed anxiety. The noble Baroness, Lady White, said that it is a moral obligation. So it is. It is a moral obligation to continue to undertake to fulfil the imports to the European Community, which the Lomé Convention permitted. If I may add this, those agreements of the Lomé Convention were indefinite, without finality,
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unless they were agreed to be altered by all parties. So I give your Lordships the assurance that the United Kingdom will do all that it can to see that the European Community continues, as it is bound to do, to fulfil the agreements of that Lomé Convention. In doing that, we shall have fulfilled what has been described as the moral obligation towards developing countries.
The noble Lord, Lord Goronwy-Roberts, said that we must honour our commitments to the developing countries and that we must not always think only of Europe, because there are other countries to consider as well. That will, in fact, be so. My noble friend Lord Mottistone asked specifically: Will the European Community renege on its undertaking to the developing countries? No one can say what others will do. All I can tell your Lordships is that we in the Government intend to sec that that Community obligation is kept.
The developing countries, the ACP suppliers, are of course accustomed to dealing with the United Kingdom and, in particular, with Tate and Lyle. Provided all the parties concerned give priority to ensuring that the traditional patterns of trade are maintained, I can see no reason why this should not continue. Tate and Lyle have themselves made a statement which I welcome in which they say that they will do their best to continue to take all the sugar for which they are at present contracted, possibly passing to other European countries any small quantity which they themselves may not be able to refine. The company's ability to fulfil this commitment will obviously depend upon their reduced capacity continuing to be profitable in the future.
I should like to emphasise that the Government are aware that it is important to the United Kingdom and to these developing countries that supplies of Lomé sugar should not be disrupted. For over 50 years, the United Kingdom market has relied on a mixture of home produced beet and ACP cane sugar to meet its needs. This arrangement has been satisfactory to both sides. For the importing country it has provided security of supply, since it is rare for both beet and cane crops to fail in the same year. For the exporting countries it has offered a guaranteed outlet for one of their major products, and that has contributed to the viability of their economies. These are very important facts in a difficult and awkward situation.
The noble Lord, Lord Goronwy-Roberts, said: Would the Government do to the sugar industry what the Government have done to British Leyland? By that I think he meant: Would the Government give money to keep this refinery going? Even if they did, it would not solve the problem. The problem is the diminished requirement in this country for sugar. I explained at the beginning that it was a drop of 2·6 million tonnes to 2·3 million tonnes. Merely to keep going an organisation would not necessarily be a right application of money. Whoever runs that business has to make a commercial judgment as to whether the business itself is viable for the operation which it has to do.
Lord Goronwy-Roberts: My Lords, in very precise and generous terms the noble Earl has given one part of the undertaking for which we have asked; namely, so far as Her Majesty's Government can achieve this, the European Community is going to honour its obligation to the ACP countries. Lomé is going to be upheld, and we are very grateful to him for being so

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definite on that point.
The second part of what at least some of us are after is this. We seek some kind of undertaking that the British refining industry is also helped so that it may continue. One can envisage the flow into the European Common Market of a certain amount of ACP sugar. The process of the erosion of the British refining industry has been going on for some time, partly because of the pricing arrangements. All this would need a separate debate to go into.
May I leave the point with the noble Earl in a twofold way. We welcome what he has said about the obligations of Europe, because the obligations of Europe are those of Lomé. We hope that he will bring out some of the arguments which have been put forward tonight in favour of assisting, strengthening, bringing back to its previous position the British refining industry, otherwise that, too, will go to Europe.
Earl Ferrers: My Lords, the noble Lord, Lord Goronwy-Roberts, has asked a very pertinent question and I will do my best to give him a reasonable and full answer. I will certainly look at it. So far as one can ever gauge what is likely to happen in the future—I have explained that even after what was done in 1974 the facts altered—half the requirements of this country for sugar should come from beet processing and the other half from cane refining. That is likely to be, in the fullness of time, 1·1 million tonnes of each, with about 150,000 tonnes coming in from the Community. I cannot give the noble Lord, Lord Goronwy-Roberts, any further guarantee than that. Indeed, it is not a guarantee because one cannot guarantee the future. However, this is the Government's hope and intention. Of course we want there to be a refining industry but we cannot guarantee its size.
I have tried to answer not all the questions—I think that would take too long—but the drift of the questions and to deal with the anxiety which has been expressed, and rightly so, this evening. The Government are always willing to discuss the problems of the ACP countries with them. My right honourable friend the Minister of Agriculture undertook in June of last year at a meeting with ACP representatives to hold further consultations with sugar supplying countries should a situation arise in the United Kingdom market which was harmful to their interests. Despite the anxieties which have been expressed, I do not think that at the moment we are in that situation and that any special measures are required to ensure the continued access of Lomé sugar to the United Kingdom. But if such anxieties are held by the ACP countries, then of course my right honourable friend will be only too happy to speak with them and to help them.
I conclude by saying that I am grateful for what your Lordships have said this evening. Considerable anxiety and disquiet has been expressed. That anxiety and disquiet is shared by the Government. I hope that we shall be able to see both a successful sugar beet part of the United Kingdom and a successful sugar cane refining position. The two are interlocked. I hope that will come about.

  MR. STEPHEN THOMPSON
  MR. STEPHEN THOMPSON
  MOTORWAY SPEED RESTRICTIONS
  MOTORWAY SPEED RESTRICTIONS
  MOTORWAYS AND TREE PLANTING
  MOTORWAYS AND TREE PLANTING
  MOTOR VEHICLES: LAMP REGULATIONS
  MOTOR VEHICLES: LAMP REGULATIONS