Sitting of 20 July 1981

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  GREATER LONDON COUNCIL (GENERAL POWERS) BILL
  Read the Third time, and passed.
  MILFORD DOCKS BILL [Lords]
  As amended, considered; to be read the Third time.
  EAST SUSSEX BILL [Lords]
  As amended, considered.
Clause 1

  CITATION AND COMMENCEMENT
  Amendments made: Page 2, line 38, after "1" insert "(1)"
  Page 2, line 38, leave out from "Act" to end of line 39 and insert—
  "1981.
  (2) This Act shall come into operation on the expiration of three months after the passing of this Act.";—[Second Deputy Chairman of Ways and Means.]

Clause 2

  INTERPRETATION
  Amendments made: page 4, line 8, leave out "295" and insert "329";
  Page 4, line 9, leave out "1959" and insert "1980";— [Second Deputy Chairman of Ways and Means.]

Clause 3

  APPOINTED DAY
  Amendment made: Page 4, line 19, leave out "1st January 1981" and insert
  "the commencement of this Act";—[Second Deputy Chairman of Ways and Means.]

Clause 26

  TREES, ETC., IN HIGHWAY
  Amendment made: Page 22, line 40, leave out
  "section 82 of the Act of 1959".
  and insert
  "section 96 of the Act of 1980";—[Second Deputy Chairman of Ways and Means.]

Clause 33

  GRASS VERGES, ETC.
  Amendment made: page 31, line 3, leave out
  "section 70 of the Act of 1959"
  and insert
  "section 71 of the Act of 1980"—[Second Deputy Chairman of Ways and Means.]

Clause 51

  INTERPRETATION OF PART X
  Amendment made: Page 44, line 9, after "59" insert
  "(Exemption of premises from Part X) of this Act"—[Second Deputy Chairman of Ways and Means.]
  To be read the Third time.

Oral Answers to Questions
  INDUSTRY

    Leicester (Electronic Engineering)
    Mr. Greville Jannerasked the Secretary of State for Industry whether, in view of recent defence cuts, he will take steps to assist the electronic engineering industries in the city of Leicester.
    The Minister for Industry and Information Technology (Mr. Kenneth Baker): The Government will consider any request from electronic engineering industries in Leicester for assistance towards particular projects within the rules of existing schemes for industrial support. The Department is considering the provision of products and process development scheme support to electronics companies in Leicester.
    Mr. Janner: Is the Minister aware of the desperation experienced in the deeply troubled city of Leicester over the potential loss of jobs—due to defence cuts—in the two Marconi factories in my constituency? Will he consult the Secretary of State for Defence to see what can be done to help that company in its difficult position?
    Mr. Baker: I regret that the difficult decisions that are made to meet essential defence requirements within the limits of prudent public expenditure have inevitable consequences for employment in particular places. I appreciate the hon and learned Gentleman's concern. The choice of radar in these contracts is for the Secretary of State for Defence to make. However, in this and all other public purchasing decisions full weight will be given to the long-term consequences for British industry as a whole. I undertake to bring the hon. and learned Gentleman's comments to the notice of the Secretary of State for Defence.
    Mr. Latham: On that point, do the Government have an essential "Buy British" policy for Government-purchased public equipment? If so, would not the Marconi affair be a particularly good case in which to show that they have one?
    Mr. Baker: The Government are developing a whole series of public purchasing initiatives. This subject has been discussed several times from the Dispatch Box. I prefer to describe the policy as a "Think British, buy British" policy. However, important considerations are involved in the placing of contracts.

    Imported Steel Stocks
    Mr. John H. Osbornasked the Secretary of State for Industry what discussions he has had with the British Independent Steelmakers Association and British Steel Corporation about the volume and value of stainless, special, and tool steels imported and stocked in the United Kingdom, and the reasons why overseas competitors of the British steel industry are able to do this.
    The Secretary of State for Industry (Sir Keith Joseph): The Department keeps in close touch with both the British Independent Steel Producers Association and the British Steel Corporation about all steel imports. The Department has not discussed imports of special steels
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    specifically with either BISPA or BSC recently, but I know that BISPA keeps in close touch with its opposite numbers on the Continent and with the European Commission about the level of imports.
    Mr. Osborn: Does my right hon. Friend recall that he received first-hand information on this subject from the deputation that came to see him last week? Is he aware that the steel workers of Sheffield will not welcome the fact that there are no statistics—due to the Civil Service strike—to back up his case? Will he make representations to his colleagues in the Department when they next meet? Will my right hon. Friend bear in mind that Sheffield steel is concerned about unfair competition in relation to energy? Will he ensure that Ministers in the Department of Energy consider that when they next meet?
    Sir Keith Joseph: I note and heed all that my hon. Friend has said. I shall keep in touch with BISPA about the changing situation.
    Mr. Flannery: Will the Secretary of State accept that the plight of the special steels industry in Sheffield has nothing to do with any Civil Service strike? Will he accept that the import of special steels from the Continent and elsewhere is literally killing Sheffield's special steels industry? What will the Minister do to help the public and private sectors of the special steels industry—I make a plea for both of them—in perhaps the greatest area in the world for special steel production—Sheffield?
    Sir Keith Joseph: A whole range of agreements seeks to modulate the amount of special steels imports into this country. As the hon. Gentleman knows, at the moment an inquiry initiated by the Bank of England and the industry is being carried out into the future of the industry. We await the publication of that report.
    Dr. John Cunningham: Is the Secretary of State aware that the House will be somewhat surprised to learn that that important industrial issue has not, apparently, been discussed by his Department? I think that that is what he said. Is he aware that that is a major area of high value products on which not only Sheffield and Rotherham but major areas of British engineering are dependent? Were not the existing agreements within the EEC meant to act especially on exports? If the quota system is not working, what hope have we for the current discussions about future agreements within the EEC?
    Sir Keith Joseph: The hon. Gentleman could not have heard the full answer that I gave, that we keep in close touch with BISPA and the British Steel Corporation about all aspects of the industry, including special steels. There have not been specific discussions with BISPA recently. As my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) told the House, I have recently received a deputation from the industry.

    Research and Development (Government Support)
    Mr. Cadburyasked the Secretary of State for Industry whether he is satisfied with the level of Government support for research and development in key industrial sectors.
    The Under-Secretary of State for Industry (Mr. Michael Marshall): Yes. We are satisfied with the level of Government support for research and development in the main industrial sectors. The Government recognise the

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    importance of industrial research and development and they have increased the funds available. However, most of the money for civil industrial research and development comes from the profits of companies. The profitability of the industrial sector must therefore be improved to ensure adequate expenditure on research and development.
    Mr. Cadbury: I thank my hon. Friend for his reply. Is he aware that over 50 per cent. of the Government's research and development expenditure is devoted to defence and that less than 10 per cent. goes on industrial research? Does he agree that in view of the urgency to raise productivity and to keep our technological lead—in those areas where we still have a technological lead—there is a strong case for correcting the apparent imbalance in our research spending?
    Mr. Marshall: I note my hon. Friend's comments. If he brings together the various items under research and development, he will find that that goes rather wider than his 10 per cent. suggests. As an example, expenditure on space has wide-ranging implications for research and development and is a factor to be added to the figures that he has quoted.
    Mr. Frank Allaun: Is the Minister aware that today the heads of Ferranti, GEC Marconi Electronics and others are meeting to oppose the cuts on Salford university? If the Government believe in more research and development, why are they cutting Salford, Aston and the other universities—Salford by 44 per cent—which means the loss of 700 engineering students and 500 others? Will they reconsider that?
    Mr. Marshall: The hon. Gentleman will appreciate that much of what he is urging on us rests on decisions to be made by right hon. Friend the Secretary of State for Education. Taken overall, however, the number of science and engineering graduates for 1983 is expected to be at an all-time high.
    Mr. Henderson: Does my hon. Friend accept that there is a special need to encourage the development of telecommunications-oriented products to ensure that British manufacturers can take the fullest part in the liberalisation of the telecommunications regime?
    Mr. Marshall: My hon. Friend is correct. That is the purpose of the British Telecommunications Bill that I hope will be enacted shortly.
    Mr. John Garrett: Does the Minister agree that there could hardly be a more important sector for Government research and development support than ICL? When will the Government make an announcement about their future level of support for research and development in ICL? Until that happens the company is not sure of its future?
    Mr. Marshall: I recognise the importance of ICL. The Government are considering its circumstances. There is nothing I can say about that today.

    Business Opportunities Programme
    Mr. Colvinasked the Secretary of State for Industry what progress has been made on the business opportunities programme.
    The Under-Secretary of State for Industry (Mr. John MacGregor): The programme was launched on 5 May by my right hon. Friend the Prime Minister and my
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    right hon. and learned Friend the Chancellor of the Exchequer. Since then, publications on taxation, employment legislation and premises have been widely distributed, and Ministers have begun a programme of meetings throughout the country with local business men and their advisers. In the autumn and winter months there will be a series of major regional conferences, as well as many further smaller meetings.
    Mr. Colvin: I am sure that the whole House will join me in applauding what my hon. Friend the Member for Norfolk, South (Mr. MacGregor), the Minister responsible, is doing to promote the business opportunities programme. Does he agree that with the passage of the Finance Bill, which will add the greatly improved business start-up scheme to the loan guarantee scheme that is already in operation, the Government will have created one of the most encouraging climates for investment in the smaller business sector ever in the United Kingdom? Therefore, will he ensure that during the recess other Ministers will join him in promoting the business opportunities programme so that the rest of the country will appreciate that that is the Conservative answer to the need for real job creation and a major element in the Government's plans for bringing work back to the rundown inner cities?
    Mr. MacGregor: I am grateful to my hon. Friend for his remarks. He was correct in what he said about the schemes. In the business opportunities programme meetings that I have attended, I have found a warm welcome for the business start-up scheme and the changes, which have more than met all the criticisms made at the outset of the scheme. As always, it is important that such measures should reach down to the people expected to benefit from them. That is the purpose of the programme. I assure him that I shall be joined by colleagues in the autumn and winter months in ensuring that.
    Mr. Park: Does the Minister agree that there can be many schemes, but if the cost of borrowing is outside the reach especially of smaller businesses, all the confidence in the world will not put the icing on that cake?
    Mr. MacGregor: Obviously the Government are anxious that the cost of borrowing should come down as circumstances permit. That is the purpose of our policies, and that would not be helped by the policies being urged on us by the Labour Party. However, if the hon. Gentleman considers the loan guarantee scheme he will find that the existence of the scheme and the capacity to borrow matters more to many small, growing businesses than 1 per cent. or 2 per cent. on interest rates. Small businesses have shown that by their response to the scheme.

    Productivity and Output
    Mr. Gwilym Robertsasked the Secretary of State for Industry what changes have taken place in the productivity and output of British industry since May 1979; what steps he is taking to increase productivity and output; and if he will make a statement.
    Sir Keith Joseph: In the first quarter of 1981 manufacturing output was 20 per cent. lower than it was in the second quarter of 1979. Output per person employed was 8 per cent. below its level in the second quarter of 1979, but it rose by 1·9 per cent. between the last quarter

    7
    of 1980 and the first quarter of 1981. Output per head cannot fully reveal movements in productivity because it takes no account at all of changes in hours worked. By January of this year, for example, provisional estimates suggest that output per operative hour stood at a record level.
    Mr. Roberts: Will the Secretary of State now admit that, in spite of the incredible optimism in the supplementary question asked by the hon. Member for Bristol, North-West (Mr. Colvin), the figures reveal clearly that the Government's industrial policies are not working and that the only effect of the so-called slimming down process—apart from the human hardship it creates—is to destroy our industrial base?
    Sir Keith Joseph: No, I do not accept either proposition. Industrial countries as a whole have suffered a loss of industrial output during the last couple of years. We have suffered more than most because we were more over-manned and less competitive.
    Mr. Chapman: Can my right hon. Friend give any data on the movement of labour unit costs, which are crucial to this question? As the British Steel Corporation has cost the British taxpayer over £6,000 million in the last 10 years, can he say whether output and productivity are improving in that industry?
    Sir Keith Joseph: Yes, productivity is increasing, dramatically in some places, in the British Steel Corporation. We welcome that. In some cases, unit labour costs are falling, but that is after the huge increase in unit labour costs that followed the mad escalation of wage claims in 1980 which, as the House will remember, was unaccompanied by any rise in productivity or production.
    Mr. Arthur Lewis: Whether one is Labour, Liberal or Tory, for or against private or public enterprise, should not one accept that if we are not producing the cake we cannot argue about how it should be shared? We are not producing the cake. When will the Government do something to get back to the production that we had in 1979?
    Sir Keith Joseph: There is a limit to what the Government can do to secure the higher productivity and the better competitiveness upon which jobs depend. The House should recognise that that surge of high wage claims, unaccompanied by higher productivity, was to a large extent responsible for the dramatic rise in unemployment which immediately followed, as we warned.
    Mr. Stokes: Does my right hon. Friend agree that there has been a substantial increase in productivity per man? Does he agree that that is most encouraging and augurs well for the competitiveness of British industry when the slump eventually is over?
    Sir Keith Joseph: My hon. Friend is right that the gains in productivity, potential or actual, now being manifested will stand us in good stead as output recovers. However, we handicapped ourselves by those excessive wage claims without co-operation in productivity so that we have far further to catch up. Opposition Members totally mislead those whom they seek to lead by telling any different story. The future employment and prosperity of
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    the country depend upon good management and co-operation between work forces and management in securing profitable higher productivity and competitiveness.
    Mr. Orme: Output and investment are down and unemployment is rising. Is the Secretary of State aware that the CBI's figures in its June forecast show that 70 per cent. of firms have a smaller order book? Is he aware of the IMF's international forecast of a depression? What steps are the Government taking to create employment and industry? The right hon. Gentleman is the Secretary of State for Industry. When will he do something about it?
    Sir Keith Joseph: Nearly all our competitors are suffering a decline in manufacturing output because the growth in world trade has levelled off. We are suffering in particular for the reasons that I have already described—uncompetitiveness, low productivity and low profit. Those factors are closely and intimately linked with lack of co-operation, in many cases, between work forces and management to secure what is needed for more jobs.

    West Cumbria
    Mr. Campbell-Savoursasked the Secretary of State for Industry what representations he has received during the last month from leaders of West Cumbrian industry about industry in the area.
    The Minister of State, Department of Industry (Mr. Norman Tebbit): None, Sir.
    Mr. Campbell-Savours: Has the Minister received correspondence from the district councils and the county authority about the special development area status that we lost last year? In the light of the unprecedented level of unemployment, will he during the Recess either go himself or send one of his colleagues to West Cumbria to discuss with the local authorities the possible restoration of SDA status, specifically in the light of British Steel's recent redundancies?
    Mr. Tebbit: I gave the hon. Gentleman the answer to the question that he tabled. He now puts another question to me because he did not like that answer. Indeed, I have received representations from the local authorities. I have pointed out in reply that in my view the present status of the area is correct, and that Government action or subsidies do not create jobs but that they are created by the action of work people and management on the spot. I hoped that the hon. Gentleman might have learnt his lesson from the fact that it was due to the co-operation of Leyland's work force in his constituency that the Titan bus line was transferred there as opposed to the places where the work forces were less co-operative.
    Dr. John Cunningham: Will the Minister of State think again about the answer that he has just given? Under this Administration, West Cumbria has lost special development area status. It has suffered grievious closures in the steel industry, and in two small district authorities—Copeland and Allerdale—unemployment is unacceptably high, even by the Minister's standards. Is the Minister aware that such places have small resources, and representations would welcome the opportunity to discuss with him his ideas, which we might not accept, to try to find some way out of the unemployment morass?
    Mr. Tebbit: I do not wish to be unsympathetic. My right hon. Friend Lord Trenchard has met representatives

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    and visited the area. It must be said that there are brighter signs in the local economy in that area. For example, British Nuclear Fuels Ltd., Thames Board Mills and Leyland National are expanding in the Workington area. There are ample advance factories in the area. It is up to local people to make the effort to be more attractive to would-be employers and investors.
    Mr. Archie Hamilton: Does my hon. Friend accept that if the Opposition had their way virtually every town in the country would have special development area status?
    Mr. Tebbit: Indeed, and the call for ever higher Government expenditure goes ill with the call made earlier by the hon. Member for Coventry, North-East (Mr. Park) for lower interest rates.

    Nissan Car Company
    Mr. Hal Millerasked the Secretary of State for Industry if he will make a statement on the current stage of consideration of the Nissan project.
    Mr. Michael Marshall: Nissan's feasibility study team has not yet completed its analysis of the project. However, since it was agreed earlier that there would be a further meeting in July, the leader of the team is now visiting the United Kingdom to give an interim report about the progress of the study. We do not expect the study to be completed until the autumn.
    Mr. Miller: Does my hon. Friend agree that the acceptability of the Nissan project must depend on the extent to which there is genuine transfer of technology to enable our motor industry to become more competitive? Does he accept that the representations from the industry for a very high British content are designed to secure such a transfer of technology rather than the mere transfer of jobs in assembly and components from the West Midlands that would otherwise ensue?
    Mr. Marshall: There is a great deal in what my hon. Friend says. The acid test will be, as he says, not only in the United Kingdom or European component element but in the transfer of technology. We do not yet know the final proposition. The opportunity presented, for example, in robotics, is of the highest importance in the project.
    Mr. Barry Jones: Does the Minister understand that the desperate interest that we show in the project arises largely from the fact that some of our constituencies face horrendous rates of unemployment? May we assume that the project will be located in the United Kingdom rather than in Europe, either in Wales or on the North-East coast? When will constituencies such as mine be put out of their misery on the issue?
    Mr. Marshall: It is clear that Nissan prefers either a special development or development area for the site of the plant. Representatives of the firm have visited a number of areas, including Wales.
    Mr. Urwin: Can the Minister be more specific about the date on which information will be released about the decision? Between now and then, will he seek to ensure that at the forefront of the thinking of the people responsible for the Nissan project are the claims of the development areas and especially those of the North-East of England?
    Mr. Marshall: I should like to be helpful to the right hon. Gentleman, but I am sure that he will appreciate that we expect to meet Nissan representatives in the next few days. It will be for them to decide on the timing of an announcement. I have forecast an announcement in the autumn. I cannot add to that. All the arguments are well understood by Nissan.

    Bridlington
    Mr. John Townendasked the Secretary of State for Industry if, in view of the current level of unemployment, he will make a statement on development area status for the Bridlington travel-to-work area.
    Mr. Tebbit: I have written to my hon. Friend explaining that, having regard to all the statutory criteria laid down in the Industry Act 1972, I am satisfied that Bridlington is appropriately graded as an intermediate area.
    Mr. Townend: Is my hon. Friend aware that his reply will be greeted with disappointment in Bridlington, which is an intermediate area, because as recently as April there were no fewer than 50 special development and 51 development areas with lower unemployment rates than Bridlington? Despite the seasonal improvement, is the Minister aware that Bridlington still has a higher rate of unemployment than adjoining Hull, which is a development area? Does the Minister agree that the percentage of unemployed, rather than the numbers, shows the impact of unemployment on an area? Do not 100 unemployed in a community of 500 have as great an impact as 10,000 unemployed in a community of 50,000?
    Mr. Tebbit: My hon. Friend slightly overstates his case, since in June the unemployment rate in Bridlington was 13·4 per cent. while in Hull it was 13·3 per cent. The numbers concerned were 1,387 in Bridlington and 24,311 in Hull. One has to take account of the absolute numbers of unemployed, as well as the percentages, before one can come to the right conclusion.
    Mr. Allan Roberts: Will the Minister tell his hon. Friend the Member for Bridlington (Mr. Townend) that his constituents can greet the refusal to grant development area status for Bridlington with equanimity, because, even if that status were granted, unemployment would continue to increase dramatically unless the Government changed their economic and industrial policies? Is the hon. Gentleman aware that, if my experience in Merseyside is anything to go by, development area status for Bridlington would merely provide Ministers with the excuse of blaming the people of Bridlington for the Government's disasters?
    Mr. Tebbit: I should prefer not to take the hon. Gentleman's experience as my guide for anything.

    Small Businesses
    Mr. Richard Pageasked the Secretary of State for Industry what is the present progress of the recently introduced initiatives to help small businesses.
    Sir Keith Joseph: The loan guarantee scheme has received an enthusiastic response from small businesses. The Department has already issued 150 guarantees covering loans totalling £5·3 million. The business start-up

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    scheme has generated a great deal of interest from both small businesses and potential investors. The business opportunities programme is now well under way.
    Mr. Page: I thank my right hon. Friend for that most encouraging news about the loan guarantees scheme. As there is an obvious need for such finance, will he give the House an assurance that he and his Department will take further steps to expand the facility?
    Sir Keith Joseph: That would be going too far at this stage. We want to see how things go before we make any further decisions. There are resources available to let the first stage develop before we take further decisions.
    Mr. Edwin Wainwright: When will the right hon. Gentleman admit that the Government's policies are nothing but a sheer failure? The Government may be making a contribution to helping small businesses, but what results have been forthcoming? Is he aware that we could do with some help in the Dearne Valley area, where unemployment in the Mexborough district is 20·6 per cent.? When will the Government do something to provide jobs and to create a greater understanding between themselves, the banks, management and work forces, to make sure that we get out of the rut that we are in?
    Sir Keith Joseph: The hon. Gentleman is very fervent, but I wish that he would understand reality. People, many of them totally innocent, are suffering as the chickens come home to roost after years of Government overspending, patchy management and, in many cases, unco-operative work forces.
    Mr. John Wells: Will my right hon. Friend take steps to extend the system, particularly to the dockyard areas that may suffer becuse of projected closures over the coming years?
    Sir Keith Joseph: The system, as my hon. friend calls it, applies to the whole country and the dockyard areas are included in it.
    Mr. John Garrett: Does the right hon. Gentleman agree that two years of small business Government policies have had no effect on the survival or formation of small businesses? The policies were meant to be purely cosmetic and are inisignificant compared with the industrial collapse caused by the Government's other policies.
    Sir Keith Joseph: That is rubbish. There is strong evidence that, despite the climate of international recession and continuing high inflation, small business interest and foundation are increasing. We do not have precise statistics, but on the anecdotal evidence it is clear that all over the country small workshops are being snapped up by willing tenants in manufacturing as soon as they are provided.

    Small Firms Counselling Service
    Mr. David Huntasked the Secretary of State for Industry if he is satisfied with the small firms counselling service.
    Mr. MacGregor: Yes. I have authorised an increase in the number of counsellors because of the substantially rising demand for their services. An independent evaluation has also confirmed recently that counselling is a highly cost-effective and practical way of providing a business managemet advisory service for small firms.
    Mr. Hunt: May I thank my hon. Friend for that answer? In view of the success of the start-up scheme and the improvements to that scheme and the loan guarantee scheme, does he feel that the small firms counselling service should be extended to ensure that the necessary management skills are present for small businesses to take advantage of all the new initiatives?
    Mr. MacGregor: I am grateful to my hon. Friend. He is right in saying that small firms counsellors, as well as small firms' managers, can assist in propagating the advantages of the various schemes to small businesses. However, as I have recently announced an expansion, and have extra facilities available this year to carry it out, we must wait to see whether that expansion of the service is sufficient.
    My hon. Friend may wish to know that in his region the number of appointments made by counsellors in the first six months of this year was substantially up on the first six months of last year. That demonstrates some of the burgeoning small business activity that is taking place.
    Mr. Ioan Evans: Are we getting a feedback, through the counselling service, from small firms? Many have gone into bankruptcy or closed and those who remain are having extreme difficulty with their order books and getting business. They put the problem down to the Government's industrial policies.
    Mr. MacGregor: We have been getting a feedback through the counselling service. There are difficulties with order books because of the world recession and the general level of economic activity, but much of the feedback coming through is of enthusiasm in the small business sector. A large number of people are starting out on operations. That is where small firms counsellors can assist in guiding them.
    Sir Bernard Braine: How does my hon. Friend define a small business, as opposed to a large or medium-size business? In considering ways of helping small businesses, has my hon. Friend any evidence that aspects of the Employment Protection Act 1975 are preventing small businesses from employing additional labour even when some face the prospect of expansion?
    Mr. MacGregor: The question of definition is always difficult and different measures apply to different types of small firms. Broadly speaking, a small firm is one that employs fewer than 200 people. My hon. Friend may like to know that the small firms counsellors tend to counsel firms employing fewer than 25 people, but one aspect of the scheme which, through a pilot project, I am looking at this year is whether we can go further up the range beyond 25 employees. The evidence is that the Employment Protection Act is a good deal less of a bar to small firms that it was previously, because of the changes that the Government have made to the Act. The task is to let small firms know that those changes have taken place.

    Micro-technology
    Mr. Teddy Taylorasked the Secretary of State for Industry what progress there has been in the application of micro-technology in British industry.
    Mr. Kenneth Baker: About 30 per cent. of manufacturing companies are using, or are planning to use, micro-technology in their products and processes

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    according to a survey by the Policy Studies Institute, to be published shortly. This compares with 5 per cent. in the Department's survey in 1977. While encouraging, this is still not enough, and the Government have several initiatives to encourage United Kingdom companies to keep up with their international competitors in this very important technology.
    Mr. Taylor: As the application of micro-technology, correctly applied, can make firms more competitive, do the Government feel that they have a role in promoting or encouraging the further use of micro-technology and would the Minister care to specify what that role might be in practice?
    Mr. Baker: We certainly have a role. As I said, more than 50 per cent. of companies do not use micro-technology. Perhaps their most modern product is an electric typewriter. About £33 million has been committed to the microprocessor application project and a further £50 million to the microelectronic support programme. The funds are available to stimulate research and development and product and process development.
    Mr. McNamara: What co-operation does the Minister's Department have with the Department of Employment in ensuring that in retraining programmes and work opportunity programmes initiated by the Department of Employment young people have an opportunity to train not in out-dated techniques and technologies, but in microprocessing, word processing and other technologies?
    Mr. Baker: I have frequent discussions with my colleagues in the Department of Employment on this matter, and we have taken various initiatives. The Manpower Services Commission has an excellent range of courses in computer studies and services, and we have launched the "Micros in Schools" scheme which has been an outstanding success. We have had 1,000 applications since June.
    On the general employment consideration, may I draw to the attention of the House today's announcement by the Hewlett Packard company of its intention to build a major plant in the Bristol area, using high technology to make computer memory discs? It is a major new investment in high technology and will provide more than 1,300 jobs by the mid-1980s. It is clear proof that the United Kingdom is an excellent base for companies in the high technology sector, and it will bring jobs to us.

    Telecommunications Monopolies
    Mr. Richard Shepherdasked the Secretary of State for Industry, in proposing changes to the telecommunications monopolies, what assessment he made of the likely effect on standards of service received by the customer.
    Mr. Kenneth Baker: My assessment is that the introduction of competition will lead to a significant improvement in standards of services.
    Mr. Shepherd: What effect does the Minister expect that liberalisation of the monopoly will have and for instance, on telephone waiting lists, does he know what the waiting lists are?
    Mr. Baker: One of the first fruits of the liberalisation programme is that BT's marketing edge has already been
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    considerably sharpened. I am glad to say that the waiting lists have come down significantly. If my hon. Friend is interested, I shall let him have the figures, but I can tell him that waiting lists have come down significantly in the two years during which we have been in office.
    Mr. Gregor MacKenzie: Will the Minister of State comment on the statement made by the chairman of British Telecommunications that an early acceptance of the Beesley report would cost residential telephone sub-scribers an additional extra £300 million a year? How can that possibly assist telephone subscribers?
    Mr. Baker: Exaggerated claims have been made about the effect of liberalisation on the revenues of BT. In the Beesley report, it was estimated that by 1983–84 the cost, in all, might be about £100 million. Even lower estimates have been made. At the recent conference organised by my Department on the subject of Beesley, BT was taken to task for making such exaggerated claims by the champion of the consumer, Dame Elizabeth Ackroyd.
    Mr. Henderson: Does my hon. Friend accept that the full benefits of liberalisation of the telecommunications regime will come about only if British companies accept the opportunities that are presented to develop new products and services that will be of benefit to the customers?
    Mr. Baker: I entirely agree with my hon. Friend. There is evidence that the three major British manufacturers already engage in substantial cost reduction exercises on their products and are introducing new products. That is what happens when people are given choice.
    Mr. Les Huckfield: Cannot the hon. Gentleman accept that while the proposals, as we understand them, may purport to offer a wider range of services to communication facilities between big city centres, whether or not he accepts the precise figure provided by my right hon. Friend the Member for Rutherglen (Mr. MacKenzie), they will inevitably lead to an increase in telephone bills for the vast majority of consumers? Does he further accept that these proposals could potentially pose the biggest threat to those living in rural areas, because of his right hon. Friend's threat to close many sub-post offices?
    Mr. Baker: These are complicated matters and it will therefore be simpler for me now to refute what the hon. Gentleman said. On another occasion I shall be happy to refute what he says in considerable detail. He should rest content for the moment with the fact that he is wrong.

    Steel Industry (Capacity)
    Mr. Hooleyasked the Secretary of State for Industry if he is satisfied that the current capacity of the steel industry, public and private, is sufficient to meet home and export demand over the next five years.
    Mr. Michael Marshall: Yes, Sir.
    Mr. Hooley: Is the Minister aware that steel is being imported which, given the capacity, the British Steel Corporation could easily make? Is he aware that the capacity in West Germany is 68 million tonnes, and that the capacity in Spain and Italy is greater than that of the

    15
    United Kingdom and is expanding? In such circumstances, what is the rationale of cutting back the United Kingdom's capacity to make steel?
    Mr. Marshall: The rationale is that the United Kingdom production of between 16 million tonnes and 18 million tonnes of liquid steel is, in the judgment of those involved in the industry, more nearly related to the market situation. In Europe, as the hon. Gentleman is well aware, there is 30 per cent. to 40 per cent. excess capacity. It is now up to other countries to move in the same direction as this country has moved.
    Mr. Hal Miller: Is my hon. Friend satisfied with the division of our present capacity between the public and the private sectors? If so, how will he maintain it, in the light of the considerable subsidies that are still being afforded to British Steel?
    Mr. Marshall: No, I am not satisfied with the division. I look to the increasing opportunities of moving down the Phoenix route to bring more capacity to the mixed public/private Phoenix pattern.
    Mr. Orme: Will the Minister say something about the negotiations in the EEC and the proposed quotas? From what we hear they will not be very advantageous to the British steel industry.
    Mr. Marshall: This is a complex matter. We shall have an opportunity to debate it soon, when I am sure that the right hon. Gentleman will wish to pursue the matter. My hon. Friend, who has been deeply involved in these matters, will look forward to giving a full account of the situation. We have steered a course aimed at getting the best possible deal in difficult negotiations.

    Industrial Improvement Grant
    Mr. Easthamasked the Secretary of State for Industry whether, in order to maintain manufacturing capability in industrial areas, he will introduce a system of industrial improvement grants for the refurbishing of buildings and equipment.
    Mr. Tebbit: No. I am satisfied that sufficient incentive for such activity is already provided through the present tax system and in the existing Department schemes.
    Mr. Eastham: Does the Minister realise that, while industries in some of the old towns and cities are suffering, many old and out-dated houses in those areas receive grants from other departments for their improvement? The same encouragement is not given to industry. We realise that section 7 of the Industry Act 1972 makes some allowances, but the provision is very vague. Is it not time that clear criteria were made available so that industries need not move out of established factories into special development areas, thus causing further trouble in cities?
    Mr. Tebbit: The hon. Gentleman is wrong to say that the Industry Act 1972 is vague. It clearly specifies that repairs in the shipbuilding, marine, aerospace, locomotive and railway stock industries, and the repair of any plant or machinery designed for use in a manufacturing process can be a qualifying activity. In addition to that, regional development grants are available to assist in the refurbishment of factory premises. In general, the repair of factories should be undertaken by companies out of their profits—from their profitable trading activities.
    Mr. Chapman: Will the Minister say what has been done to increase building allowances? For example, does my hon. Friend accept that an up-to-date modern factory or warehouse is just as important to a business for the purpose of increasing productivity as the modern up-to-date machinery that it clothes? Whatever level of industrial investment the nation can afford, will my hon. Friend look sympathetically at applications, because I believe that there are special cases in which it could be beneficial to the country in the long term?
    Mr. Tebbit: I assure my hon. Friend that I always view these matters with as much sympathy as I can. On the other hand, in general, we have an adequate supply of factory space, and it would be better, in those cases where we are giving assistance, to assist with the purchase of up-to-date machinery to put into those factories.

    Northern Region
    Mr. Radiceasked the Secretary of State for Industry if he is satisfied with industrial progress in the Northern region.
    Mr. MacGregor: No. The international recession has had its effect upon the Northern region, as elsewhere. That is why it is important that the Government continue with their policies to encourage enterprise and to reduce inflation, Government spending and interest rates, and for those in industry at all levels to increase our industrial competitiveness.
    Mr. Radice: In view of the appalling increase in unemployment—over 90,000 in the Northern region since the general election—and in view of the collapse of many of our industries, and the riots that have taken place in our streets during the past fortnight, is it not time that the Government announced the abandonment of their faith in Adam Smith, and gave a great deal more help to the regions? Will the Government send a team of Ministers during the recess to the Northern region to see what is happening?
    Mr. MacGregor: We must face the fact that, just as Britain's insidious but persistent decline has taken place over many years, so it is bound to take time to bring about a turnaround and deal with the chronic problems of uncompetitiveness, and so on. It should not, therefore, surprise the hon. Gentleman that there has not been a rapid improvement in progress. It will take time. His remedy of further increasing aid to the Northern region which, as he well knows, benefits more than any other region, can only be at the expense of higher Government spending, which inflicts harm on industry and on more profitable firms throughout the country. In answer to the hon. Member's question about sending a team of Ministers, although he may not regard me as a team, I shall be visiting the Northern region during the recess.
    Mr. David Watkins: While I appreciate the Minister's little lecture, can I ask him to say when we shall see the much forecast upturn in the national economy, which is supposed to do so much for the Northern region in the absence of any coherent Government policy?
    Mr. MacGregor: As my right hon. Friend has made clear today, and as is clear from international reports that are before the nation today, the problem is world-wide. There is a world-wide recession, and that is bound to have an impact on our own economic recovery.

    17
    I hope that the hon. Gentleman will not ignore the fact that, in so many parts of the country and in so many industries, as output recovers, the potential productivity improvements that have been gained over the past two years will be immensely beneficial.

  ATTORNEY-GENERAL

    Shoplifting (Private Prosecutions)
    Mr. Greville Jannerasked the Attorney-General how many representations he has received regarding private prosecutions for theft from shops in the metropolitan and Northumbria police districts.
    The Solicitor-General (Sir Ian Percival): The Attorney-General has received no representations regarding private prosecutions for theft from shops in the Northumbria police district.
    Since 12 January 1981, when I replied to a similar question tabled by my hon. Friend the Member for Christchurch and Lymington (Mr. Adley), one letter has been received referring to a private prosecution for theft from a shop in the Metropolitan Police district.
    Mr. Janner: Is it not correct that the Metropolitan Police and the Northumbria police are the only police authorities that still refuse to prosecute for what they choose to call petty theft or shoplifting? Has not the time come when all prosecutions for these offences should be brought on behalf of the public by the police? Will the right hon. and learned Gentleman undertake to study the excellent arrangement already in force in Essex, where the police prosecute for these offences, where the person accused is old or ill or is a child, only after proper investigations have been made into the best way of dealing with the case?
    The Solicitor-General: It is a fact that the Northumbria and Metropolitan Police districts are the two that leave it almost entirely to private prosecution.
    It is perhaps interesting to remember, in that connection, my answer to the substantive question. There have been no complaints about Northumbria, and very few about the Met.
    I shall, of course, look at the Essex case and, if the hon. and learned Gentleman cares to send me more details about it, I shall be happy to look at them. He will also have in mind what was said by the Royal Commission on criminal procedure in this report, which is currently being considered. Now is a suitable time for any representations to be made to the Minister responsible, namely, my right hon. Friend the Home Secretary.
    Sir Bernard Braine: Will not my hon. and learned Friend agree, however, that distressing cases emerge from time to time where there should have been no prosecution? Would not it be appropriate to have some new machinery to deal with allegations of shoplifting when elderly people are involved who have no previous convictions?
    The Solicitor-General: My hon. Friend probably has in mind exactly the case that I have in mind, and it has made quite an impression upon me. It concerned an elderly lady who was so shocked and ashamed that she did not tell anyone, even her daughter. Therein lies the trouble. If she had confided in someone sooner, help undoubtedly would have been available and would have been given. If that is the case that my hon. Friend is thinking about, I am happy
    18
    to think that once that elderly lady told people of the trouble that she was having, there were those very ready to help her.
    Mr. Jeffrey Thomas: Does the Solicitor-General agree that that is one of very many distressing cases connected with so-called shoplifting charges? Will he arrange to meet the Home Secretary at the earliest moment to discuss the report of his advisory committee that has been looking; into cases of shoplifting for many months?
    The Solicitor-General: I agree entirely with part of the hon. and learned Gentleman's question. There are some very distressing cases. Usually they involve people who have not given themselves the opportunity to receive help. There are some cases where, far from seeking help, accused people have tended to shut the door on those who would help them.
    I am not so sure that I agree with the other part of the hon. and learned Gentleman's question in which he said that there are a lot of such cases. It does not lesser the importance of each case that arises, but, happily, there is no evidence that the number is very large.

    Coroners (Dismissal)
    Mr. Meacherasked the Attorney-General when the Lord Chancellor last used his powers to dismiss a coroner.
    The Attorney-General (Sir Michael Havers): In March 1944.
    Mr. Meacher: Does not that show that the supervision of coroners is somewhat lax? Is not the right hon. and learned Gentleman aware that there is a great deal of dissatisfaction with the manner in which coroners conducted certain recent highly politically sensitive inquests, such as those into the killing of Blair Peach, the Iranian Embassy affair and, above all, the New Cross-Deptford fire? Is not it right that this small minority of highly politically charged cases, where coroners clearly are out of their depth, should be heard before a High Court judge and that all the relevant evidence, including the police investigators' report, should be made available to both sides and not, as at present, be confined to one side?
    The Attorney-General: The fact that no coroner has been removed since 1944 does not indicate that the system is lax. It indicates that, by and large, coroners do their job very well.
    As for the remainder of the hon. Gentleman's question, I have read with interest his two questions to the Home Office on 9 July, and I have nothing to add.
    Mr. Lawrence: Does not my right hon. and learned Friend agree that public confidence in the coroner system is essential and that, although there is generally considerable public confidence in 90 per cent. of coroners' cases, there is a narrow area of recent cases that have shown some public disquiet? Is not it time that more attention was given to the legal qualifications of coroners and that an attempt was made to divorce some of the activities of the police from the organisation of coroners' courts, which exists in cases where police action is in dispute? Generally, is not it time for a closer look at the Brodrick recommendations that were made nearly 10 years ago, very few of which have been implemented?
    The Attorney-General: As my hon. and learned Friend will know, the Broderick report involves

    19
    considerable manpower and financial problems. I read with interest the suggestions made by my hon. Friend the Member for North Fylde (Sir W. Clegg) on Second Reading of the Supreme Court Bill. Like everything else to do with coroners, this is a matter that is always kept under review.
    Mr. Archer: May I press Mr. Attorney a little further? Does he accept that the major purpose of the coroner system is to ensure that matters of public concern are fully ventilated? Does he accept, further, that some cases these days perhaps arouse greater public attention and occasion greater public anxiety than in 1971 when the Broderick inquiry reported? Since some cases are bound to be conducted in a highly emotive atmosphere, does the right hon. and learned Gentleman accept that someone should have power to order that an inquiry in a specific case should be made before a High Court judge and that there should be a wider range of options about the possible findings?
    The Attorney-General: With respect to the right hon. and learned Gentleman, the real function of the coroner's jury is not to deal with a matter of public interest. It is the more limited one of inquiring into the cause of death and not to attribute blame. But, as I said to my hon. and learned Friend the Member for Burton (Mr. Lawrence), any suggestion for improving the system of coroners' courts will always be considered. If there are genuine complaints about it, we must put them right.

    Law Centres
    Mr. Steenasked the Attorney-General if the Lord Chancellor will review his guidelines for law centres.
    The Attorney General: If my hon. Friend has any specific suggestions in mind, my noble Friend will be happy to consider them. In the meantime, however, the guidelines at present in force have received general acceptance with all the interested parties, and any change would have to be renegotiated.
    Mr. Steen: Will my right hon. and learned Friend say whether the Lord Chancellor's guidelines approve the use of public money to finance the representation of trade unions by law centres? Is he aware that the Association of Clerical, Technical and Supervisory Staffs instructed the Central London community law centre to act on behalf of 45 staff of a London charity at interlocutory hearings and industrial tribunal hearings? Does he believe that it is a proper use of taxpayers' and ratepayers' money that unions should be represented in this way by law centres?
    The Attorney-General: The matter has been, and remains, under consideration by the Lord Chancellor. The inquiries of which I know do not support the view that this was an application by a trade union taken up by the law centre but rather an application by a number of individual members of a trade union.
    Mr. Archer: Will the Attorney-General tell the House when we may expect the report of the inter-departmental working party on law centres, appointed following the Benson recommendations?
    The Attorney-General: I think not for some time, but if I can obtain any further information I shall write to the right hon. and learned Gentleman.

Tenerife Air Disaster
3.30 pm
The Secretary of State for Trade (Mr. John Biffen): I wish to make a statement on the accident to Dan-Air Boeing 727 G-BDAN at Tenerife on 25 April.
An agreed English translation of the report of the Spanish commission of investigation into the tragic accident to a Dan-Air Boeing 727 at Tenerife on 25 April 1980 is to be published today in Spain and in the United Kingdom.
The House will recall that the accident has already been the subject of two separate statements made by my predecessor last year on 28 April and 10 June. Even so, I think it appropriate to make a further statement in the light of the published report.
The accident, the worst in the history of British aviation, has been the subject of an exhaustive investigation in which my Department's accidents investigation branch and the American National Transportation Safety Board actively participated. There was a full and free exchange of information between the United Kingdom investigators and the Spanish commission of inquiry.
Briefly, the accident followed an ambiguous radio transmission to the aircraft from Tenerife air traffic control. That resulted in the commander becoming disorientated and caused him to turn the aircraft towards an area of high ground.
The Spanish report places responsibility for the accident firmly on the aircraft commander. Although it is true that final responsibility for maintaining a safe altitude must always rest with the commander, the report seriously understates those inadequacies of the Spanish air traffic control organisation which contributed to the accident. I have, therefore, decided that an addendum should be published to the report which sets out the following additional points that need to be made in order to achieve a balanced assessment of what happened.
First, the information transmitted by Spanish air traffic control about the holding pattern at a particular radio beacon was ambiguous and contributed directly to the disorientation of the crew. The transmission by the commander that the aircraft was taking up a holding position at that radio beacon was acknowledged by air traffic control, and not queried. That amounted to a tacit approval of the action proposed by the commander and implied that it was what air traffic control required.
Secondly, on the basis of the standards set out by the International Civil Aviation Organisation, the United Kingdom investigators consider that the minimum safe altitudes for entry into, and holding in, the pattern at the beacon in question are 2,000 ft and 1,000 ft higher respectively than the figures produced by the Spanish authorities. It became apparent during the investigation that no minimum safe altitudes had been calculated prior to the accident. As no holding pattern at that beacon had been published, the crew understandably accepted air traffic control clearance to descend on the assumption that those calculations had been made. If that clearance had not been given, the aircraft could have been expected to have maintained height and the accident would not have occurred.
Finally, the safe theoretical aircraft track for the area portrayed in the Spanish report is not practicable. An
22
aircraft would not be able to fly around the sharp angles drawn. A more realistic track would take the aircraft towards the area of high ground to the south west of the airfield. That factor must be taken into account when calculating minimum safe altitudes.
I am sorry that it has not been possible to reach full agreement with the Spanish authorities on the importance of those three points, and that the addendum has therefore been felt necessary. The Spanish authorities have agreed to attach the addendum to their report.
I am sure that both sides of the House will once again wish to join me in expressing Parliament's distress at this tragic accident, and our greatest sympathy to the relations and friends of all those who were killed.
Mr. Clinton Davis: Is the Secretary of State aware that the Opposition join him in expressing condolences to all those bereaved as a result of this appalling tragedy? Is he aware also that we believe that he and the accidents investigation branch are to be applauded for insisting on publication of the addendum, for the sake of fairness and accuracy, and to rectify grave inconsistencies between the findings and conclusions in the report, there being no suggestion in the conclusions of any culpabilty on the part of the air traffic controllers, despite strong evidence to that effect in the findings?
Is the right hon. Gentleman aware that it is appropriate to raise a series of further grossly disturbing features that have accompanied the report, to prevent their recurrence? First, there was the undesirability of the leakage by the Spanish authorities of portions of the report. Secondly, there were the baseless allegations by them of political interference by the British Government, and, by implication, the accidents investigation branch, in the investigations. Will he convey to the Spanish Government the view, which I am sure is held by all sections of the House, that such actions impair the impartiality that is an essential prerequisite if there is to be effective co-operation in accident investigation work, not only with our branch, but with organisations throughout the world?
Will the right hon. Gentleman say what specific lessons are to be learnt from the tragedy, and whether he believes that any recommendations should be made for action by the ICAO.? Does he agree that the report reinforces the view that a clear burden lies on air traffic control to be explicit and unambiguous, especially where a familiar routine is disrupted or an unusual holding pattern is issued at short notice?
Will the right hon. Gentleman comment on the desirability of having radar installed, which at least diminishes the scope for error by air traffic controllers? It might have averted the catastrophe had the controllers had a better picture of the position.
Has the right hon. Gentleman received any message from the Spanish authorities about whether any remedial action is being taken at a time when hundreds of British passengers are going to Spain on their holidays, so that there is no possibility of that situation occurring again?
Mr. Biffen: I thank the hon. Gentleman for many of his remarks, especially his kind reference to the accidents investigation branch and the importance of publishing the addendum so that we may have a fully balanced view of the evidence.

23
The question of using radar was raised on both previous occasions when a statement was made from the Dispatch Box about the crash. I am advised that the absence of radar is not thought to be a material factor to the tragedy.
On the question of the safety of Spanish airports and holiday traffic, a study of the report and the addendum will show that the problems were essentially those of human error, rather than of any alleged mechanical defect. That should be placed on record, in view of the possible anxieties of those who are travelling to the Mediterranean.
The hon. Gentleman asked whether I intend to have discussions about the premature disclosure of the report and other closely related matters. It is my intention to approach General Iniquez, the Director General of Air Transport, to ascertain whether he can help in explaining how there was early release of the Spanish report and of the cockpit voice recorder tapes, which featured subsequently. These matters fall within Spanish sovereignty, and we must proceed with the proper proprieties. I have deferred making an approach until after my statement, because I believe that it will be helpful if I can indicate that the sentiments that I express are widely shared in the House. The same goes for the more general discussion about what action can be taken to profit from this miserably unhappy affair.
I propose to discuss with the Civil Aviation Authority an approach to the International Civil Aviation Organisation with a view to discussing with the Spanish authorities what improvements in aircraft procedures might be undertaken in the light of the Tenerife report and its addendum.
Mr. Cranley Onslow: It is crystal clear that the first and fundamental cause of the accident was inadequate air traffic control procedures on the Spanish side. As the Spanish inquiry fails to bring that out, how can anyone rely on a nation that is not interested in a full and impartial inquiry to bring out all the relevant facts taking the necessary action to prevent this sort of thing happening again?
Mr. Biffen: I am not sure that the addendum will bear out what my hon. Friend has said. It will bear out human frailties rather than mechanical failure.
Mr. Charles R. Morris: Is the Secretary of State aware of the sense of outrage felt by the dependants of those who lost their lives in this tragedy over the report brought back by two distinguished visitors who visited the site on 12 March of this year, about 12 months after the crash took place, that clothing, handbags, suitcases, shoes and debris were still strewn about the site? That appalling insensitivity must be brought to the attention of the Spanish authorities.
Mr. Biffen: I take note of what the right hon. Gentleman says. He speaks not only with feeling, but with a record of deep involvement in the tragedy since it occurred. I think that he will accept that the factors that he has described do not fall within the ambit of the investigation.
Mr. Kenneth Warren: Will my right hon. Friend accept that the human frailties to which he referred have involved the deaths of many hundreds at Tenerife airport? The ambiguities of instructions issued by the air
24
traffic control authorities have resulted in the world's worst air accidents occurring at that airport. Does he agree that it would be wise to contact the Spanish Government immediately and ask them to ensure that the air traffic controllers issue only set instructions, and do not use their imagination, which is what is costing lives? Finally, I suggest that my right hon. Friend should consult the International Federation of Airline Pilots Associations, which has compiled a record of bad practices in the maintenance of the limited landing aids that are available at Tenerife airport.
Mr. Biffen: I note what my hon. Friend says. It is important to keep in mind that some of the other tragic air accidents that have occurred at Tenerife airport have not necessarily been the occasions of failings on the part of the air traffic control. I do not think that we necessarily improve our case by overstating it. I shall ensure that the other matters to which my hon. Friend referred are brought to the attention of the Spanish authorities when I make my approach to them.
Mr. Alfred Morris: It is made pikestaff plain in the United Kingdom accredited representative's addendum that, without his quite severely critical comments, the Spanish report is neither balanced nor acceptable. Ought not the addendum to be used to secure urgent reconsideration of the recommendations on page 29 of the report? Is not this a striking example of the case for a standing international commission to investigate all air disasters? What is the right hon. Gentleman doing to advise families that may be considering legal proceedings in Spain? Is it not time that the Government gave official advice about the comparative safety at least of European airports to those who travel to and from them?
Mr. Biffen: The right hon. Gentleman will know that air safety is primarily the function of the CAA. I believe that the system that it operates involves an assessment of each airport according to its particular characteristics. It does not involve the league table approach that is sometimes advocated. None the less, it is a system that commands wide public support in the United Kingdom. It is a long-established practice that the published evidence and conclusions resulting from investigations into accidents are held not to be available for legal preceedings.
Several hon. Members rose—
Mr. Speaker: Order. I propose to call those who have been rising in their places to question the Secretary of State.
Mr. Michael Colvin: Is my right hon. Friend aware that it has been suggested that 15 months is an inordinately long time for the inquiry? Does he agree that by world standards that is about average? Secondly, does he agree also that in the premature statements and disclosures it was regrettable that the Spanish authorities saw fit to blame pilot error for the cause of the accident, before any investigation had taken place, and that, by world standards, this is something that should not be allowed to happen?
Mr. Biffen: If the Spanish authorities attributed the accident to pilot error before ever an investigation had been undertaken, that was profoundly regrettable. I have no reason to believe that the authorities made such an allegation, although I can well understand that there was

25
press speculation in Spain to that effect. Although the time taken for the investigation may seem to many to have been inordinate, it is by no means unusual.
Mrs. Gwyneth Dunwoody: Is the hon. Gentleman aware that the families of the crew were deeply affronted by the suggestion that the crew were responsible for the accident, and that those families will welcome the addendum? As this is the second major accident at Tenerife airport in which failure to communicate has been a strong contributory cause, is the right hon. Gentleman satisfied that the Spanish authorities are doing enough to ensure that their air traffic controllers use only acceptable international phrases and adhere to the proper procedures?
Mr. Biffen: I am grateful to the hon. Lady for her comment about the role of the addendum in enabling the relatives of the pilot and crew to feel that there has been some equity and justice in the inquiry. I realise that without it there would have been a strong sense of injustice. I have to recognise that the matters raised in the second part of the hon. Lady's question are essentially within the authority of the CAA. That is why I am suggesting that, in the light of the report, it might approach the International Civil Aviation Organisation with the object of reviewing the procedures that have been operating at Tenerife. At the end of the day, however, we must recognise that these are matters essentially within Spanish sovereignty.
Mr. Kenneth Lewis: Does my right hon. Friend agree that in all grave accidents of this kind—which, fortunately, do not happen very often—there ought to be a more independent form of inquiry? Does he agree also that one of the reasons why this matter has taken so long is that the Spanish authorities were involved in it themselves? Should there not be international discussions on this issue?
Mr. Biffen: I shall consider my hon. Friend's suggestion, but I should have thought that, almost to a man and woman in the House, there would be a belief that our accidents investigation branch is without equal. If one deserts the existing standards, one has to be certain that the replacement will be every bit as acceptable.
Mr. Fred Silvester: I thank my right hon. Friend for publishing the addendum. In an emotional atmosphere, it is a very valuable addendum to have. It confirms the generally held view about evasion on the part of the Spanish authorities. Will my right hon. Friend therefore use this small opportunity in the House to underline to the Spanish authorities, when he sees or speaks to them, the sense of outrage that has arisen as a result of their performance in this case? Will he outline to them that the attitude of British travellers to Spain will depend very much on the behaviour of the Spanish authorities in the future?
Mr. Biffen: I have no doubt that British travellers and British tourist organisations will make their own judgments, and, in a sense, their own representations to the Spanish authorities about what accidents of this kind do for tourist business between the two countries. I must proceed on the assumption that there is good faith in these matters, even though there is a difference of interpretation in commonly accepted data. I hope that my hon. Friend will allow me to proceed in that fashion and therefore tailor my language accordingly, in the hope that it will be none the less effective.
Mr. Hal Miller: Will my right hon. Friend accept from me, on behalf of the relatives of the dead commander of the aircraft, their thanks for his probity and courage in publishing the addendum to the inquiry? It will go some way towards relieving the deep pain, even if it cannot relieve it entirely. There has been great anxiety, and they have been put to some expense in trying to commission their own independent inquiry, in view of the widespread suspicions about the lack of progress and the direction that the original inquiry was seen to take.
Mr. Biffen: I thank my hon. Friend for putting the matter in such generous and personal terms, but I suggest that the House of Commons would not have been prepared to accept anything less than the report plus the addendum.

Middle East
Mr. Tony Marlow: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the crisis in the Middle East".
At 11 o'clock on Friday 17 July seven aircraft of the Israeli Air Force unleashed a savage bombardment on the Beirut suburb of Fakehani. It is estimated that 300 people were killed and 800 injured. The raid was concentrated on an area containing the offices of the PLO, the umbrella organisation through which 4¼ million disinherited, displaced and, in many cases, impoverished Palestinians seek legitimately, and in a variety of ways, to advance their nationhood.
The majority of the casualties, however, were civilians, Lebanese and Palestinian, young and old, women and children. Fakehani is an area containing jerry-built, multi-storey tenements, teeming with population, many themselves refugees from the violence in Southern Lebanon, and saturated with shops, hand-barrows, and the necessary paraphernalia of busy city life. It is easy to imagine the mayhem that such an attack would have caused.
The raid was ordered by Menachem Begin, the same man who ordered the slaughter of British soldiers and British civilians at the King David hotel. Old terrorists never die; they merely become more arrogant and inhuman.
The pretext for this onslaught was the attack by Palestinian Katyusha rockets on Kiryat Shimonah, in which three Israelis died—300 against three. This attack itself was a meagre gesture of defiance against massive Israeli raids which preceded it. It seems that Mr. Begin—
Mr. Speaker: Order. The hon. Gentleman must direct the attention of the House to why he thinks that there should be an emergency debate of the House. He is not free merely to make an ex parte speech, which might call for a reply.
Mr. Marlow: I was just setting out the specificity of the matter. The urgency follows from the fact that the Lebanon is not merely a far-away place, purely of moral concern to Britain. It is the siren that lures the United States on to the rocks of injustice and alienation from
28
moderate opinion in the Middle East. It is the cauldron that could start a chain reaction to world war. It is a daily slur and insult to Arab pride and dignity, which in turn could produce as yet undreamt of dislocation to the world economy.
I believe that hon. Members in all parts of the House support the European initiative—[HON. MEMBERS: "No."]—to bring peace to the Middle East. I believe that the peace and prosperity of this country is to a large extent dependent on this initiative succeeding. It is fundamental that we should have a debate on the issue, which has created massive shock waves in the Middle East and is a massive threat to peace in the world. It is a second Guernica. It is an atrocity to rank with Lidice and Oradour-sur-Glane. It should be seen as such. It is incumbent upon the House to debate the matter without delay.
Mr. Speaker: The hon. Member for Northampton, North (Mr. Marlow) gave me notice before 12 o'clock midday that he would seek leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the crisis in the Middle East."
The House has listened with anxiety to the remarks of the hon. Gentleman about a dangerous and difficult situation. As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the order but to give no reasons for my decision.
I have given careful consideration to the representations that the hon. Member has made, but I must rule that his submission does not fall within the provisions of the Standing Order, and therefore I cannot submit his application to the House.

Middle East
  BILLS PRESENTED
    SEX SHOPS (CONTROL)
    Mr. John Wells presented a Bill to enable local authorities to register and control sex shops: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 193.]
    EDUCATION IN PRISONS
    Mr. Harry Greenway presented a Bill to require the provision of educational facilities in prisons and other custodial institutions, and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday and to be printed. [Bill 189.]

European Community Budget
[Relevant Commission documents:
Preliminary draft supplementary budget No. 2, 1980
(Document No. 12085/80). Draft supplementary budget No. 2, 1980 (unnumbered). Modifications and amendments by the European Parliament to the draft supplementary budget No. 2 1980 (Documents Nos. 12547/80 and 12489/80). Decisions taken by the Council on the European Parliament's amendments and modification to draft general budget, 1981 (unnumbered explanatory memorandum of 11th December 1980).]
3.59 pm
The Financial Secretary to the Treasury (Mr. Nigel Lawson): I beg to move,
That this House takes note of the Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981 and the Preliminary Draft General Budget of the European Communities for 1982.
Mr. Speaker: I have selected the amendment in the name of the Leader of the official Opposition.
Mr. Lawson: On Thursday of this week, 23 July, in Brussels, the Council of Ministers will be meeting for the first time to consider the European Commission's preliminary draft amending budget No. 1 to the general budget of the European Communities for 1981, and the preliminary draft general budget for 1982.
The purpose of the debate is to give the House an opportunity to comment on the Commission's proposals before they are discussed at the Budget Council on Thursday, at which I will preside and my hon. and learned Friend the Minister of State will represent the United Kingdom. The House may be assured that he will take fully into account the comments made during the course of this debate.
Unlike other manifestations of the Council of Ministers, the Budget Council is unique in having to maintain the closest possible mutual understanding with the European Parliament, which has the power to amend within limits and, indeed, to reject the Council's budgetary proposals.
The Budget Council will accordingly be meeting representatives of the European Parliament on Wednesday, the day before the Council meeting, for an initial discussion of these matters, which will, I hope, get things off to a constructive and reasonably harmonious start. My hon. and learned Friend, who is an expert in these matters, will know that this initiative of meeting the representatives of the Parliament the day before the Budget Council is entirely new and I hope that it will prove helpful. Of course, all this is merely the beginning of a lengthy procedure which will, I trust, lead to the establishment of a satisfactory budget for 1982 by Christmas, or even a few days before.
As the motion indicates, various other documents are relevant to the debate, but I hope that it will be for the convenience of the House if I concentrate on the Commission's proposals for an amending budget for 1981 and for the main budget in 1982, and then perhaps to say a word on the report that was recently published by the Commission on the crucially important matter of
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restructuring the Community budget. Finally, I propose to deal briefly with the amendment in the name of the Leader of the Opposition.
The main purpose of the 1981 amending budget is to provide a political solution to the continuing dispute over the legality of the 1981 budget, pending the resolution of which three member States—Belgium, France and Germany—have been withholding a part of their budgetary contributions.
The main feature of the proposed amending budget is a reduction of over £300 million in provision for the CAP, largely as a result of the higher than expected level of world food prices, offset by a slightly smaller increase in spending on other items, in particular the regional fund. I have no doubt that the Council will seek to modify these proposals, looking in particular for a rather larger net reduction in expenditure than the Commission has proposed. I very much hope that on this sensible basis it will be possible, with the agreement of the European Parliament, to bring to an early end the outstanding dispute over the 1981 budget, whose legality would then be accepted by all member States. It is clearly in the interest of the United Kingdom and the Community alike that that should be so.
I come now to the 1982 budget. The full details of the Commission's proposals are set out in the documents that are available to the House and are summarised at length in the Treasury's explanatory memorandum of 26 June. The net effect would be an increase in payments over 1981—after taking into account the proposed amending budget for that year—of about £1½ million, or about 16 per cent. Within that figure, expenditure on the CAP is assumed to rise on the same basis by 8·3 per cent., and expenditure on the non-agricultural parts of the budget—of which the regional and social funds are, of course, the most important—by about 37·6 per cent. I want to make it absolutely clear that these are proposals made by the Commission. When the Council considers them, I have no doubt that it will inevitably have in the forefront of its mind the domestic budgetary preoccupations of the various member States of the Community. Most of them are engaged at present in a protracted and painful process of belt-tightening at home, and would expect there to be a widespread awareness of the fact that one cannot justify austerity at home and expansiveness abroad.
That is not the only constraint on Community expenditure. Happily, the Community budget is obliged to be in balance and, thus, expenditure is rigidly tied to revenue. Both the Council and the Parliament will be keenly conscious of the inexorable approach towards the ceiling on the Community's resources imposed by the 1 per cent. limit on the VAT contributions to Community revenues. The 1982 draft budget comes closer than ever to this limit, with an implied VAT rate of 0·95 per cent. Some may consider that to be a trifle too close for comfort, but in any event it is already clear that the discipline of the 1 per cent. ceiling is having a salutary effect.
Mr. Tony Marlow: What would happen to the 0–95 per cent. of VAT if there were a massive lowering of world food prices? Would it become higher? Would there be a problem? How would the Community budget then cope?
Mr. Lawson: My hon. Friend may benefit from listening to all my remarks. I was about to say that there

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can be no increase in the 1 per cent. VAT limit except on a unanimous basis. All member States must agree. As I was about to say, Her Majesty's Government have made clear their determination to keep the ceiling in place, as have the German Government.
Mrs Elaine Kellett-Bowman: Will my right hon. Friend also seek to keep in perspective the proportions that the Commission has suggested? Would he not be in favour of retaining the proportion of plus 8·3 per cent. to agriculture and plus 36·7 per cent. to regional and social spending, because the regional and social funds are immensely advantageous to this country?
Mr. Lawson: My hon. Friend is a Member of the European Parliament and a great expert on these matters. I assure her that I shall be dealing with the question of the balance between the various parts of the Budget; indeed, I am asked to do so by the Opposition amendment.
As I was saying, the own resources ceiling imposed on the Community's budget is the sort of financial discipline that is imposed at home by the limits to which member Governments can tax their people or borrow. To raise the ceiling as soon as it was reached would not be consistent with the present need for economy and restraint. The Community budget can no more do without financial discipline than can our domestic budget. Any increase in Community public expenditure has precisely the same economic consequences as does any increase in national public expenditure. What is just as important is that one major incentive to improve the working of the CAP would be removed if the ceiling were increased, since the way would then be open for a further uncontrolled increase in agricultural expenditure by the Community.
There are no automatic stabilisers under the CAP—nothing to shield the net contributor countries in particular from the consequences of any collective extravagance. On the contrary, the more that expenditure rises on that, the greater the budgetary imbalances become, with the position of the net contributor countries correspondingly worsened.
Therefore, within the resources available, it is my hope that member Governments will accept the need to restrain the provision for CAP expenditure. Otherwise, there can be no hope of, and no scope for, developing new areas of expenditure—for example, on industry and employment measures. We have to shift the balance of the budget since there is no possibility of finding large amounts of new money to spend in those other areas, however worthy they may be.
Within the overall proposals contained in the 1982 draft budget, provision for the European agricultural guidance and guarantee fund, as it is called, accounts for over 60 per cent. of total expenditure, as the Opposition's amendment points out. That is certainly less than in previous years, but still the lion's share.
Since the Community is so close to the limit of its revenue, it is all the more important that we should ensure that estimates in all areas, not excluding the CAP, are tightly drawn. During the Budget Council discussions we shall, therefore, be looking very carefully at the Commission's estimates included in the 1982 preliminary draft budget to see whether savings can be made in those proposals.
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Within the possibilities for increased expenditure, as compared with last year, the United Kingdom intends to urge that priority be given to the regional and social funds. We have been a significant net recipient from those funds in the past, and that has enabled us to finance a higher level of expenditure in the United Kingdom in those areas that would otherwise have been the case. In any event, those are the most important areas of so-called non-obligatory expenditure since they are directly concerned with improving employment prospects and alleviating regional imbalances.
I now turn to the United Kingdom's net contribution to the Community budget and to the whole question of restructuring the budget, of which this is a vital part. As the Treasury's explanatory memorandum makes clear, the preliminary draft budget for 1982 included £867 million by way of provision for refunds to this country to implement the end-May 1980 agreement relating to this country's net contributions to the Community budget.
The Conservative Administration can take considerable satisfaction from the fact that the Budget now includes specific provision for refunds to this country. Successive British Governments have argued continually about our budget contribution, but this is the first time that we have seen money in the bank. We owe that achievement to a great deal of persistent negotiation, notably by my right hon. Friend the Prime Minister, leading up to the agreement concluded on 30 May last year. We have so far received about £645 million and expect more later this year.
I concede that this is only the beginning of the road. The next step must be to build on the 30 May agreement to achieve an improved and lasting solution to the budget problem. The agreement guarantees us a second year of refunds, which will come mostly in 1982. Thereafter, it commits the Community to a radical reform of the budget—to "restructure" it, in the jargon. If this cannot be achieved in time to affect the 1982 budget, the United Kingdom special refund will be extended.
Mr. Denzil Davies: The Minister has explained that some money will be coming as a result of the 30 May 1980 agreement, which relates only to the 1981 budget. Will he tell the House, as his explanatory memorandum does not, what will be Britain's net contribution in respect of—I choose my words carefully—the 1982 budget? He tells us that the gross contribution will be £2,700 million.
Mr. Lawson: The net contribution this calendar year will be a little more than £500 million. With regard to next year, with the leave of the House, I hope to be able to reply to the debate and I shall certainly give the hon. and learned Gentleman the best estimate, but it will be roughly of the same order.
The Community is now committed to a radical reform of the budget. My right hon. and learned Friend the Chancellor referred to this in his speech at The Hague on 3 June, when he set out the Government's general approach to the whole issue. He argued that the Community must in future take conscious decisions on the overall effect of the budget on individual member States and that those decisions should be based upon objective criteria, such as relative prosperity and population size.
Since then, as hon. Members will be aware, the Commission has produced its initial proposals in

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pursuance of the mandate entrusted to it. Its report clearly recognises the need both to improve the operation of the CAP and to correct the United Kingdom's inequitable budgetary situation. It makes some interesting suggestions as to how to achieve those aims. In particular, it suggests that some continuing correction should be made for the United Kingdom's low receipts from the CAP.
I am sure that hon. Members on both sides will understand that it is far too early to say what the precise effect on the United Kingdom would be. There are no figures in the Commission's report. The effect of its proposals would clearly depend upon all kinds of details which have yet to be discussed within the Community. None the less, it is helpful to have proposals on the table and we look forward to examining them sympathetically with our partners.
Mr. Marlow: My question is purely for clarification. The Minister said that in 1981 the net budget contribution would be about £500 million. We pay some money this year and we get some back next year. Is he saying that at the end of the calculation it will be £500 million, or that the cash flow effect of our membership of the Community in terms of budget contribution this year will be £500 million? If it is more than that, will he tell the House?
Mr. Lawson: With the exception of a small amount in advances, we get the flows in arrears. That is to say, the refunds in respect of 1980 are received in 1981 and those in respect of 1981 will be received in 1982. Indeed, the mechanism is such that our precise entitlement can be calculated fully only at the end of the year in question. It is therefore inevitable that the refunds should be paid afterwards. There is no lengthening lag, as it were. It is simply that, with the exception of the advances, payment is in arrears.
Mr. Donald Anderson: Will the Minister give an assurance that any formula accepted by the Government will be no less favourable than the current formula negotiated in May last year?
Mr. Lawson: We shall certainly negotiate hard for the most favourable formula that we can secure. These are negotiations, however, and I am sure that the House will not wish—as on some occasions, although certainly not all the time, as was apparent in the earlier negotiations—to put the Government at any disadvantage in the conduct of the negotiations.
The Commission's approach, of course, is not the only possible one. It could have cast its net a little wider in its search for solutions. It could have followed the lines suggested by my right hon. and learned Friend the Chancellor in his speech at The Hague. The problem of budgetary imbalances is not merely a British problem. The 30 May agreement makes it clear that the aim is to avoid an unacceptable situation for any member State. It is also clear that the Community needs a durable solution. The Commission's proposals are rather more limited. The scheme that it suggests would be temporary and confined to the United Kingdom.
One of the main questions that we and other member States will have to ask is whether the Commission's proposals might be adapted to provide a broader and permanent Community solution. The European Council has agreed that the issues must be examined intensively in the second half of this year. We, as the Presidency during
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that period, shall do our best to make progress. Needless to say, it will not be easy. Nevertheless, we may take heart from the fact that very considerable progress has been made in the past two years. The nature of the problem is now well understood, as it was certainly not when we took office, and it was officially recognised when the 30 May 1980 agreement was concluded. We must now build on that.
I turn finally to the Opposition amendment. I must say that this is one of the most brazen pieces of impudence to have sullied the Order Paper. They complain that the budgets before us today
"make no basic reform in the EEC Budget arrangements or in the Common Agricultural Policy".
Even the Opposition must surely be aware, as I have already pointed out, that this is precisely what the restructuring exercise is about. That is made absolutely clear in the Commission's recent report. It also makes clear that this will now be carried forwards by the Foreign Affairs Council, under the chairmanship of my right hon. and noble Friend the Foreign Secretary and by the European Council under the chairmanship of my right hon. Friend the Prime Minister. I shall seek to ensure that the 1982 budget is consistent with that objective. That is a great deal more than could be said for any of the EEC budgets regularly commended to the House by Labour Ministers when they were in Government.
Secondly, the Opposition complain that the budgets before us
"fail to achieve a broad balance between the United Kingdom's contributions and receipts".
That complaint comes from a party which, when in office, huffed and puffed a great deal but at the end of the day achieved precisely nothing in mitigation of the imbalance. In 1978, the Labour Government's final year of office, the United Kingdom's net contribution to the EEC budget was £804 million—or about £1,100 million at today's prices—and was on a sharply rising trend. This year, as a result of the tough and successful negotiations that we concluded on 30 May last year, our net contribution is expected to work out at £574 million—half what it was during the Labour Government's last year in office.
Thirdly, the Opposition complain that the 1982 budget makes:
"inadequate provisions for regional, industrial and social policies".
The House will be interested to know that the total provision for such policies in the 1982 budget is £1,129 million, which is a record figure.
The Opposition further complain that the 1982 budget commits:
"over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy".
I assure the right hon. Member for Battersea, North (Mr. Jay) that that is perfectly true, but in 1978—Labour's last year of office—it was 80 per cent.
There is only one word for the Opposition's amendment—humbug. To say the least, it is also a disingenuous amendment, because the whole House knows what really lies behind it. It is not a desire to reform the Community budget at all, nor to secure justice for the United Kingdom within that budget, both of which are at the very heart of the restructuring exercise on which we and the rest of the Community have already embarked. What lies behind it, although they seem curiously reluctant to come clean about it, is the fact that the Labour Party is now firmly committed to total United Kingdom

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withdrawal from the European Community, regardless of the consequences for United Kingdom industry and British agriculture. [Interruption]. I note that Labour Members cheer at the consequences of withdrawal.
Mr. Teddy Taylor: If, as my right hon. Friend says, the Labour Party is now advocating withdrawal and he is saying that this would have serious consequences, is it not about time, as I and other hon. Members have urged, that we had an authoritative independent study of the economic consequences of the United Kingdom's membership of the EEC? Why will not the Treasury or anyone else get down to it?
Mr. Lawson: Many figures are published, probably too many, but this is not merely a question of figures. In any event, if my hon. Friend were to ask British agriculture and British industry where they thought their advantage lay, he would get a clear answer, and they should know what they are talking about.
When in office, Labour gave the British people the choice in a referendum — a choice that the people exercised in no uncertain manner. No doubt the people were influenced by the eloquence and the experience—[HON. MEMBERS: "Of Mr. Roy Jenkins."] No, it was not just Mr. Roy Jenkins. I think that they were influenced rather more by the then Labour Prime Minister, the right hon. Member for Huyton (Sir H. Wilson); the then Foreign Secretary, the right hon. Member for Cardiff, South-East (Mr. Callaghan); and the then Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey). All of them agreed most vigorously and argued that it was vital that we remained within the EEC. Where do they now stand in relation to the Labour Party's new policy?
The Labour Party is for total withdrawal without even so much as a referendum. Why does it want to get out? I assure my hon. Friend the Member for Southend, East (Mr. Taylor) that it is not for the reasons that he would like to get out. The Labour Party wants to get out because it believes that the Socialist policies of a future Labour Government would not be possible within the framework of the European Communities.
Mr. Anderson: What about President Mitterrand?
Mr. Lawson: As the hon. Gentleman has just pointed out, we have a Socialist President and Socialist Government in France who are committed to the most far-reaching Socialist measures, including nationalisation on a massive scale. Yet President Mitterrand is confident that what he seeks to do is compatible with the framework of the EEC, and there is no talk of France wishing to withdraw.
It is clear that the Socialism of President Mitterrand—this is the only conclusion that one can reach—must be a very mild brew indeed compared with the extreme policies to which the Labour Party is now committed, although it says little about them. The mind boggles, but the nation is warned.
On many occasions the House has debated the Community's financial problems. Legitimate concern has been expressed about the balance of expenditure in the Community budget between agriculture and non-agriculture programmes, about financial control in the
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Community and about the effect of the budget arrangements on the United Kingdom. None of those problems can be easily solved, but I believe that we are beginning to see distinct progress.
As to financial control, there is now distinct evidence that the approach of the 1 per cent. ceiling is creating a new mood in the Community. The Commission, the Council of Ministers and the European Parliament are all being forced to take hard decisions about priorities and value for money. The old attitude of settling the policy regardless of its cost is fast disappearing.
There is the special United Kingdom problem which is of great concern to all hon. Members. During 1981 we have received substantial refunds. Provision for further refunds is included in the draft budget for 1982. Following the 30 May agreement, the Commission has made a proposal in its report for solving the problem in the longer term.
I concede that none of these are revolutionary developments. None of them fully dispose of the anxieties expressed in the House on many occasions, although they dispose of the Opposition amendment. I have no doubt whatever that we are slowly progressing towards a saner Community budgetary policy, and on that basis I commend the motion to the House.
4.26 pm
Mr. Peter Shore: I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
"calls upon Her Majesty's Government not to approve the Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981, nor the Preliminary Draft General Budget of the European Communities for 1982, as they make no basic reform in the EEC Budget arrangements or in the Common Agricultural Policy, fail to achieve a broad balance between the United Kingdom's contributions and receipts, make inadequate provisions for regional, industrial and social policies and continue to commit over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy."
Having read the motion, I can well understand the Financial Secretary's sensitivity. I can well understand why he should worry about returning to the whole question of the proper contribution which the United Kingdom makes to the EEC. Like the right hon. Gentleman, I shall work my way through these volumes of documents and shall attempt to deal with most of these questions in a reasonable order.
This is the first debate on Community affairs since the United Kingdom took over the Presidency of the Council of Ministers at the beginning of July. I can only hope that the Government will use whatever facilities that office provides to reinforce the British case and will not use it to arbitrate between British and Community interests. Frankly, I am not terribly impressed and encouraged by the thought that the right hon. Gentleman will preside over the budgetary Council and that the Minister of State will advocate British interests under his guidance and chairmanship.
I expected the Financial Secretary to make some play of the proposed increases in the 1982 preliminary draft budget on non-agricultural expenditure, and he did not disappoint me. However, he was absolutely right to point out that there is a world of difference between what the Commission proposes and what the Council of Ministers disposes. Indeed, it is optional expenditure as distinct from non-optional expenditure and, as we know, optional

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expenditure can easily be the first casualty in any major tussle between the Assembly and the Council of Ministers or when economies must be made.
As the right hon. Gentleman and the House well know, agriculture remains at the heart of the EEC budget. The guarantee section of the CAP will take just over 61 per cent. of the budget total in 1982, compared with about 63 per cent. in the amended budget for the previous year, which is also before us. The guidance section of the CAP will take a further 3½ per cent.
The fall in the percentage that has gone to the CAP in the last two years does not reflect positive decisions by the EEC to cut down on its allocations for the common agricultural policy. Indeed, the decisions of the Council last April on agricultural prices resulted in an increase of nearly 500 mua in support of agricultural prices and other related programmes. The decrease in total expenditure, as the Financial Secretary indicated, came about largely from a rise in world prices. If world prices were to fall substantially, there would be a total budgetary catastrophe and financial ruin would befall the EEC as it approaches the margin of the own resources.
There are, I understand, two savings. The first is that when world prices rise, the cost of the enormous expenditures that the EEC undertakes in the form of export restitutions, the subsidising of otherwise high-cost surplus EEC agricultural production and the subsidising of those surplus exports on world markets inevitably falls. The other factor, I am told, that contributes to the saving is the high rate of positive monetary contributions—compensation amounts—that are charged in the accounts of the budget as negative expenditure. We in Britain are now making a substantial contribution in that form since we have very large positive MCA payments.
Nevertheless, these developments have made possible some savings in the amending budget of 1981 and also some additional proposed expenditure under the regional, social and industrial chapters for the draft budget of 1982. While the specific policies are to be increased under the Commissions proposals by, I think the Financial Secretary said, 38 per cent.—although some of the figures may represent a difference between commitment and appropriation of 50 per cent.—it should be remembered, as the Commission's document observes, that
"in absolute terms the total funds involved"—
regional, social and industrial—
"are small compared with the importance of these projects for the future of the Community."
Indeed, they are.
The argument and underlying purpose are stated in the first sentence in volume 7A—the dominating volume of the whole batch of documents of the Commission's preliminary draft budget. It says that
"in drawing up the 1982 budget the Commission has sought particularly to enable the Community to respond as effectively as possible to the demands placed upon it by the continuing economic recession".
The economic recession has indeed deepened, as hon. Members will recall from the document that was submitted to the recent European Council meeting in Luxembourg as a background paper. In the Community as a whole, GDP in 1981 is expected to be minus 0·4 per cent. Unemployment, which was 6·1 per cent. last year, is running at 7·7 per cent. in 1981. This means that more than 8 million men and women are unemployed in the EEC as a whole. The position in Britain, of course, is far worse than the Community average. It is not 7·7 per cent.
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unemployment for us; it is 10·5 per cent. While the Community average shows a decline of 0·4 per cent. in GDP, our decline is no less than 2·2 per cent. Yet again, while the EEC as a whole expects to raise its GDP by around 2 per cent. next year, our own GDP, if the forecasts are correct, will at best rise by about one half of 1 per cent.
Mr. Arthur Lewis: My right hon. Friend says that unemployment in this country is 3 million while in the EEC as a whole it is 8 million. That is a difference of 5 million. We are told every day, from the Prime Minister downwards, that our unemployment is due to wicked workers receiving too-large wage increases, that they will not work, and so on and so forth. If the figure for the rest of the EEC is 5 million, is it the case that its workers are also getting too much money and will not work?
Mr. Shore: Of course not. My hon. Friend knows the answer to his own question. There are two separate factors. There is indeed a world recession. Other countries in Europe are experiencing its effects in terms of unemployment. One can only hope that those who manage the affairs of the larger industrial nations meeting in Ottawa at this time will show greater wisdom in tackling this problem than they have shown in the past. Quite separate from that is what I would describe as the Thatcher factor in British unemployment. There is no doubt that the peculiar and special policies pursued by this Government and by Treasury Ministers have done extra damage to the economy of our own country.
The main point is, unhappily, that unemployment has risen and is likely to rise further not only in Britain but in the EEC as a whole. Against this background we have to assess the increase in expenditure or proposed expenditure on social policy, regional policy and industrial policy. It is here that matters must be seen in proportion. Regional policy in the 1982 preliminary draft budget is increased for the whole of the Common Market by £250 million, if that is approved. The social fund is raised by approximately £170 million and the whole range of industry, energy, transport and research policy by some £75 million. The sum of all these increases is rather less than £2 per head per annum for the 250 million people in the EEC—a programme equivalent of an increase in expenditure of £100 million in the United Kingdom.
Mr. David Myles: Will the right hon. Gentleman accept that an element of the common agricultural policy budget is directed towards social policy in the countryside, and especially the less favoured areas?
Mr. Shore: There are some such expenditures. I can only say to the hon. Gentleman that we certainly pay for them.
Mr. Anderson: Will my right hon. Friend speculate on the amount that we shall get from the pot when the much poorer Iberian countries, with their high populations, enter the EEC in 1984, demanding their own portion from a relatively small source due to the constraints of the VAT own resources ceiling?
Mr. Shore: If regional policy, which is pretty inexact, reflects differences in GDP in various parts of the EEC, it is bound to be the case that funds will be allocated to those countries with the lowest GDP. Portugal, Spain and Greece must therefore be among the main claiming areas of the European Community.

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It is difficult to believe that the amounts that I have listed will make any noticeable difference to the economic performance or employment prospects of the EEC and the countries and regions within it. With the guarantee expenditure due to rise by a further 12 per cent. on the CAP and with the guidance section continuing, and totalling together some 64 per cent. of total Community expenditure, the EEC remains what it has always been—a customs union with a common agricultural policy. As the House knows and as the Financial Secretary properly put it to us, the EEC is approaching the ceiling of its so called own resources. Agricultural levies and customs duties go automatically to the Commission, but VAT, under the 1970 agreement, is limited to 1 per cent. of the total yield. In the budget now being discussed for 1982 the call-up of VAT will reach 0·95 per cent. of the authorised 1 per cent. Even this year supplementary expenditure could take the EEC to the limit of its own resources and beyond.
Next year for certain the EEC budget will rise well beyond the 1 per cent. ceiling. The much-heralded crisis of Community finance will break. Given the closeness of the budget appropriation to the ceilings of revenue, it is extraordinary that in its general comment on the 1982 draft preliminary budget the Commission makes no reference to this matter. Nor does it confront the problem of what it will be obliged to do if, through supplementary provisions, perhaps caused by a fall in world food prices, the ceiling is reached and breached this year.
The next major matter raised in our amendment is the continued and unacceptable net contributions that this country pays to the EEC. The 1982 draft preliminary budget and the 1981 amending budget both record and reflect the agreement reached by the Prime Minister in May 1980. It was and remains our contention that it is ludicrous and unacceptable that the United Kingdom should be the second largest net contributor to the EEC budget. During 1979 this House, without a Division, twice supported an Opposition motion calling for an agreement which would ensure that the United Kingdom's receipts were at least not less than the United Kingdom's contributions. It was the Prime Minister herself who, during that period, took the lead in demanding a broad balance. The Chancellor of the Exchequer "marvelled" at his own modesty in making such a demand. It is a very different tune that we have been hearing since then from the Government Front Bench.
In the event, we have had to settle for payments in 1980–81 and 1981–82 which are little less than half the peak figure which was paid in 1979–80. We have had to accept, in short, somewhere near that half a loaf that the Prime Minister rejected before the deal was concluded. Although we shall still be paying, in current terms, over £l billion in net contributions for 1980–81, the budget documents reveal just how insane were the original agreements that were made in relation to the United Kingdom's contributions when the right hon. Member for Sidcup (Mr. Heath) signed the Treaty of Accession.
As the table on page 96 of the 1982 budget so clearly shows, the own resource system bears extremely harshly on the United Kingdom. We pay substantially more than any other EEC country, through levies on imported agricultural products. We again pay more in customs duties than any other EEC country, with the exception of Germany, whose payments are only just above ours. In
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payment of VAT we are the third largest contributor, with Germany first and France second. The total United Kingdom payment of our own resources is higher than that of any other country except Germany.
I confess that while I judged from the start that the agricultural levies and customs duties would have this massively adverse effect upon our position as a contributor, I am surprised that the 1 per cent. VAT payment does not reflect more closely the relative gross domestic products of the United Kingdom, France and Germany. If German's GDP is twice that of the United Kingdom, and if France's GDP is now 50 per cent. higher than ours, it is, on the face of it, surprising that Germany's VAT contribution should be only 23 per cent. larger than ours, and that of France only 9 per cent. larger than ours. If the Financial Secretary has any explanations to offer on that matter, I shall be interested to hear them.
Nevertheless, whatever the explanation may be, under the own resource system, Britain, with some 16 per cent. of the total Community GDP, makes a gross payment, of about 21 per cent. of the total, and although our gross contribution is about 21 per cent., our share of gross receipts is only about 9 per cent., reflecting above all the relatively small expenditures of agricultural support in the United Kingdom.
We are all conscious of the fact that the May 1980 agreement was not the permanent settlement upon which the Prime Minister had originally insisted but a temporary device to last for two or, at the most, three years. The difficulty and dangers of this kind of arrangement are well illustrated in the 1982 preliminary draft budget.
As the House will recall, the arrangements that followed the agreement of May 1980 led to two regulations providing for a reduction in the United Kingdom net budget contribution. The first was to provide for a partial refund under an amended version of the original financial mechanism negotiated in 1975. The second regulation provided for Community contributions in respect of certain United Kingdom public investment programmes under a scheme of so-called supplementary measures for the United Kingdom.
The original financial mechanism was seriously defective—as some of us, as the Financial Secretary might note, said at the time. We made that one of the principal reasons why we rejected it and took the position that we did in the referendum, when the Financial Secretary and all those others who are now, as it were, teasing us, were only too happy to lend their voices to those who proclaimed that we had the most satisfactory result, that all was well and that Britain was, happily, now a member of the EEC. That was not the view that we took, as the Financial Secretary knows perfectly well, and we argued against it.
Mr. Lawson: As the right hon. Gentleman has repeated what he said at the time, perhaps he will say what his right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said at the time, when he was Foreign Secretary and was in charge of those matters for the then Government, and subsequently became Prime Minister.
Mr. Shore: The then Foreign Secretary said at the time exactly what the present Financial Secretary said at the time—that he was in favour of it. What we are now arguing about is between those who were in favour of the 1971 and 1975 settlement and those who denied it and argued against it from the start. I have never accepted it.

41
I come to the financial mechanism. I said that it was seriously defective. But it is remarkable that, with the experience of the inadequacies of the 1975 mechanism, the revised financial mechanism, which was negotiated by the present Treasury team, has shown itself to be equally defective. As the preliminary draft budget for 1982 reveals—and it really is a joke—
"the financial mechanism will not be triggered in 1982: calculations from the latest figures suggest the United Kingdom's contribution to the 1981 Budget will not be more than 10 per cent. higher than it would have been if the member State budget contribution were a function of their share in Community GDP."
That all sounds rather like gibberish, but this is one of the trigger mechanisms of the financial mechanism as revised, with all the skill and knowledge of the Financial Secretary and his colleagues.
The trigger will not work. That is mainly because the rise in the value of sterling relative to the ECU has increased the United Kingdom's share in Community GDP. So, as we have become poorer, in statistical terms we have become richer, we have a larger share of the GDP, and the financial mechanism so carefully examined, re-examined and redesigned, with all the skill which the Financial Secretary could bring to this task, has been shown to be totally inadequate and incapable of being used.
In order, therefore, to meet the obligation under the 30 May agreement, the Commission has placed the total refund under the heading of "Supplementary Measures", which is the alternative route to repayment. That is not a simple matter. The refund to the United Kingdom through the supplementary measures is itself governed by the conditions laid clown in the relevant regulations. The £800 million involved can be spent only on capital projects undertaken by public authorities that fulfil the following criteria, laid down in Commission regulation No. 2744/80.
The first criterion is that they must contribute to the economic and social development of the United Kingdom. The second is that they must contribute to Community integration. The third is that they must ensure, in a diversified manner, the development of economic and social infrastructures. The fourth is that they must not be incompatible with a Community policy. The fifth is that they must not give rise to distortions of competition. The Commission has the right to invigilate the programmes and must not contribute more than 70 per cent. of the annual expenditure cost of each sub-programme.
The amounts paid to the United Kingdom, are, as we know, to be paid in the following year. But if the United Kingdom wants advance payments it will require a qualified majority in a vote on the proposal from the Commission in order to obtain it.
The next point is a good one. The United Kingdom, in agreement with the Commission, is to take the necessary steps to ensure that "suitable publicity" is given to the assistance granted under this regulation. I emphasise the phrase "suitable publicity". No doubt that is why, all over the country, particular projects are publicly identified as reflecting the benefit that the United Kingdom obtains from membership of the EEC and the generosity of its partners. The truth is that our money is simply coming back to us. Even then, only a part of the amount that we are forced to pay comes back.
Mr. Tim Renton: Given the right hon. Gentleman's vehemence, are we to assume that he is coming to the heart of the matter? Is it now the right hon.
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Gentleman's view that come what may—budget restructuring or no—the United Kingdom should get out of the EEC? Is that also the view of his leader and deputy leader?
Mr. Shore: I shall come to that point later, because I am now discussing the budget—[HON. MEMBERS: "Answer the question."] I shall answer the question.
When the House discussed the agreement of 30 May 1980 the Chancellor of the Exchequer made his main claim not the reduction in the extortionate sums that we would otherwise have been paying but the agreement that had been reached to make a fundamental review of Community policies, so that "unacceptable situations" would not arise in the future and particularly in the period in which these temporary arrangements came to an end. As the House will recall, the Commission was required urgently to study the problem and to report not later than 30 June 1981. It was our strongly expressed view at the time that the Commission's terms of reference were seriously if not fatally limited by the instruction to examine the development of Community policies
"without calling into question the common financial responsibility for these policies which are financed from the Community's own resources or the basic principle of the Common Agricultural Policy."
Since the principal problem of the budget is the extraordinary mix of taxes that form "own resources", and since the principal imbalance in the budget expenditure is the structure and basic principles of the CAP, it seemed to us then that the possibilities of major reform were remote.
We now have the Commission's report on its mandate. Indeed, the Financial Secretary referred to some of its features. In the preliminary draft budget for 1982 the Commission acknowledges that it was unable to incorporate the conclusions of the study, which was published on 22 June. However, it obviously believes that the balance in the 1982 budget—particularly the reduced share going to the CAP guarantee section—is "a step in the right direction". It rather optimistically offers to amend its proposals for the 1982 preliminary draft budget if recommendations on its mandate are given immediate effect by the Council. I must say that I find the Commission's report on its mandate extraordinary and unsatisfactory.
I do not know whether hon. Members have had an opportunity to read the document. If they have not, I hope that they will make an early appointment with themselves to do so. Out of 28 pages of prose, the Commission devotes itself to only two pages on the United Kingdom's unacceptable situation. It is not surprising—knowing the Commission—that it has taken an opportunity to read a moral lesson to the nation States of the EEC. It has taken an opportunity to restate its old belief in the further integration of member States and, in particular, in the great goals of economic and monetary union that it has proclaimed since and even before 1972.
When at last the Commission reaches the CAP—I believe on page 12—it endorses its three main principles of market unity, Community preference and financial solidarity, and makes proposals for reform which have an all too familiar ring to most of us. Of course, it draws attention to the necessity of narrowing the gap between Community prices and the prices of its main competitors in the outside world. It believes in the modulation of guarantees in line with Community production targets and

43
in an active structures policy. It calls for tighter financial control by the Community in the management of its CAP expenditures, and for stricter discipline in relation to national aids to avoid undermining Community policies.
As all of us who have studied these things—going back to the days of Mansholt—will recall, this is familiar stuff. What the Commission proposes to remedy the "unacceptable situation" of the United Kingdom is, against this background, no more than an extension, with a new formula, of the existing special arrangements. Since, according to the Commission, the main reason for our vast net contribution to the Community is that we do not obtain a proper proportion of the guarantee section expenditure of the CAP, and since it clearly believes—contrary to what it says elsewhere—that the guarantee section expenditure will continue to form the bulk of the budget, it proposes that the United Kingdom's future refunds should be based on a new mechanism, which compares the United Kingdom's share of Community gross domestic product with its share of receipts for CAP expenditure.
As the Financial Secretary rightly pointed out, no exemplifications are provided, so we have no idea what the result of such a formula might be. However, the passages that I read did not contain a very positive or sympathetic note in relation to improving, or even sustaining, the level of refund that the United Kingdom has recently obtained. It was particularly interesting to note how it was proposed to finance the continuing cost of partial restitution of excess contributions by the United Kingdom. The Commission's first and most hopeful proposal for financing it is to breach the 1 per cent. VAT and to increase the totality of own resources. That is its preferred and clear solution and much pressure will be applied towards that end. Otherwise, it is said that it could be financed by other member States making an abatement on a percentage formula of their receipts from the CAP guarantee section.
The prospect of major changes in the nature, structure and workings of the CAP, as well as changes in terms of refunds from other member States is—based on all experience—remote. Far from being a permanent solution, the Commission proposed that the new measures should apply for a limited period, but long enough
"for the effects of the new guidelines it proposes to be felt. The position would be reviewed before the compensation system expires, notably when a decision is taken on creating the additional own resources needed to implement common policies."
Once again, there is a suggestion of tutelage. The Commission states:
"The funds made available to the United Kingdom should be used to finance activities in that country which accord with community policies and are designed to increase convergence of the economies."
I am sure that no hon. Gentleman would claim that we have a solution for the unacceptable situation that the Treaty of Accession and the structure of own resources and Community expenditures have imposed on the United Kingdom.
Mr. Russell Johnston rose—
Mr. Shore: I cannot give way.
Indeed, the Chancellor of the Exchequer's speech of 2 June made it plain that he would not accept an increase in "own resources" as a prior condition for working out a
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solution. That is something. It should be clear to everyone that the concessions won by the Government on 30 May 1980 were very limited, both in amount and in time. What is now proposed is a modification of that limited settlement. it is a modification that will carry forward all the opportunities for exerting further pressure on the United Kingdom to fit in with Community policies. There is a clear implication that we should join the EMS and support the enlargement of own resources when the ceiling has finally been reached.
In addition, there is the obvious and unacceptable continued invigilation of United Kingdom's affairs in order to justify the paying back of our own money in the years ahead. The adjustments that have been recommended to the CAP are modest. In any event, they are unlikely to be accepted by those who benefit from its existing provisions. There is no mention anywhere of the whole unacceptable doctrine and mix of taxes that comprise own resources.
Mr. Lawson: Will the right hon. Gentleman give way?
Mr. Shore: The right hon. Gentleman has had plenty of opportunity.
Mr. Lawson: Will the right hon. Gentleman give way?
Mr. Shore: The right hon. Gentleman's interventions have not been especially constructive, and he should allow me to complete my speech.
Mr. Lawson rose—
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The Minister should know that the right hon. Gentleman does not intend to give way and that he must resume his seat.
Mr. Shore: I have given way to the right hon. Gentleman already. He opened the debate and has the pleasure of winding up. I am not afraid of the Financial Secretary. I put it as directly and simply as that.
Mr. Lawson: Will the right hon. Gentleman give way?
Mr. Shore: The report of the mandate of the Commission of 22 June is to be discussed substantially at the November meeting of the European Council in London. It is crucial that the House has a full statement of the Government's approach to the proposals—I do not consider that what the Financial Secretary has said forms a clear statement—and a debate before the summit in late November. I give notice that we shall demand just such a debate when the recess is over. Beyond that, we look forward to the day when there will be no British contribution to the EEC Budget; to the day when, in a different and new relationship with our Continental neighbours, we in Britain are outside the whole crazy system of the EEC budget and own resources.
Today we are discussing the 1981 and 1982 draft budgets. For the reasons stated in my amendment and my remarks the Opposition will vote to reject them.
5.3 pm
Mr. Tim Renton: I have sympathy for and am in agreement with the right hon. Member for Stepney and Poplar (Mr. Shore) on one point—the sheer weight and volume of the documents that we were meant to read prior to the debate. I obtained them, as doubtless many other hon. Members did, from the Vote Office this morning. I weighed them. They weighed 1,620 grammes,

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or approximately 3½ old British pounds. While I have sympathy for what the European Commission is trying to do in its proposals, on the 1982 draft budget and its modest steps towards restructuring, I agree with the right hon. Gentleman that, by and large, much of what is contained in the papers is difficult to comprehend—to put it mildly. One has to dig deeply to find comprehension.
I declare an interest, in that I am strongly pro-European, both emotionally and intellectually. I have heard far too much from small firms in my constituency who are thriving on their export orders for engineering and electrical components from other Common Market countries. I have heard far too much from the leaders of major British companies such as Shell and ICI, who tell me that they would not be building new plants in Britain if we were not members of the European Community. I hear too much ever to believe that withdrawal from the Community is a reasonable option open to us. Ford would not have built its new plant at Bridgend, in South Wales, if we were not members of the Community.
However, I must make it plain that I am not one of those who are so blind in their love that they cannot see the warts or the delinquent tendencies of those of whom they are fond. That caution applies to the direction that the European Community is taking at present.
I was struck by a recent publication that I received, entitled "Facts", and published bi-monthly by the European Movement. The most recent edition, which I suspect all hon. Members received, has—[Interruption.] —I should be delighted to lend my copy to any hon. Member who did not receive one. The front page is headed
"Britain in Europe—a success story,"
and immediately underneath, in the second paragraph, there is the sentence:
"Our problem in Britain is widespread ignorance about the Community."
That strikes me as analagous to those who have put on a performance of "Macbeth". As the curtain comes down the actors playing Macbeth and Lady Macbeth tell each other that they were brilliant and that they had never played better, and that even Malcolm made the best out of a very boring part. Meanwhile, the audience is hissing and booing and throwing things at the curtain.
Mr. Arthur Lewis: No one is there.
Mr. Renton: In fact, everyone is there and watching. Who is right, the actors or the audience? At the end of the day the audience is right, because its members are the market. They are the people who pay. Unless they like a play they will not turn up and there will be no play in the future. It is against that background that I make my remarks.
Many of the documents are difficult to comprehend. The procedures of the Community must be simplified, and that goes for much of the paper work that is produced. I find it difficult to understand why the common agricultural policy, which in the past has taken as much as 80 per cent. or more of the European budget—even in 1982 under the revised procedures it will take 61 per cent.—is blamed by the dairy and pig farmers in my constituency in Mid-Sussex as one of the factors for their present distress, yet it is that policy that consumes so much of the Community's resources.
Farmers in my constituency, like those elsewhere in Britain, find that much of what goes on under the label "CAP" is incomprehensible in its documentation and the
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terms used. We are all deeply worried about such absurdities as the same consignment of butter passing backwards and forwards between Northern Ireland and the Republic of Ireland, drawing a subsidy each time until it goes rancid.
Such problems must be sorted out. The general aim of the Commission, supported by all the Ministers who wish to see it succeed, should be to ensure that over five years the expenditure of a far more comprehensive CAP is reduced to not more than 50 per cent. of the total European budget. There should be no commitment to increase "own resources" above 1 per cent. of VAT until that target and the means of achieving it have been agreed by all the Ministers concerned.
In the budget papers it is intended that 36 per cent. more should be spent on the regional and social funds in 1982. I welcome that development. It is clear that much more than is commonly recognised has been done by those funds in this country. For example, much money has been spent by the funds specifically on helping to create new jobs in new industries in the depressed steel towns of the United Kingdom. Unlike other hon. Members—who made noises against that earlier—I believe that when such money is spent there should be a clear requirement that the local community should know that some of the money has come from the European regional or social funds. Signboards should be put up.
Mr. Teddy Taylor: Will my hon. Friend give way?
Mr. Renton: No. My hon. Friend will have an opportunity to speak. I do not wish to take up much time.
Signboards should be erected explaining how much money has come from European funds to help build a new factory or motorway and to create more jobs on a local industrial estate.
Mr. Marlow: Will my hon. Friend give way?
Mr. Teddy Taylor: Give way.
Mr. Renton: No. My hon. Friends must not remain sedentary and interrupt me. l shall not give way.
When hon. Members protest about such signboards, I cannot help but believe that they are frightened and do not want people in our depressed towns and cities to know how much the EEC is doing for them. Let us clear that up. Let us have the signboards. I have seen such boards in Kenya and other parts of Africa, and they are a great help in making it known what the Community does.
Mr. Marlow: Where does the money come from originally?
Mr. Renton: I shall not give way to my hon. Friend.
Ministers could be more aggressive about letting the facts be known. I tabled a recent question to the Secretary of State for Industry. I asked him to comment on the statement in the Official Journal of the Council of European Communities that
"the Community regional policy in particular, which relies on aid from the ERDF, has helped create or maintain during the period in which the latter was in operation (1975–1979), 339,317 jobs in the Community as a whole, including 99,767 jobs in the United Kingdom."
Perhaps the Financial Secretary will pass on my comment to the Under-Secretary of State, because the reply, after two bites at the cherry, was so drawn by a civil servant that I was not certain whether the answer was

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"Yes" or "No". It would be better if the Government were a little more firm in giving credit and ensuring that the European—
Mr. Marlow: Will my hon. Friend give way?
Mr. Renton: I am attempting to talk to the Chair over the blond head in front of me. I hope that Ministers will be more firm in ensuring that the European regional development fund gets the credit for its help in job creation.
Mr. Marlow: Will my hon. Friend give way?
Mr. Renton: No. I turn now to the question of the European monetary system. It is covered in the budget documents by reference to interest payment made to the EMS. I confess that although I was enthusiastic about the EMS when it was first announced in 1978, I have, in the last two years, been a sceptic. However, I am now coming round to the view that, bearing in mind the desperate need in British industry for greater currency stability, we should positively consider in the next six months the question of joining the EMS.
Lord Lever's two articles in the Financial Times last week pointed out how much damage can be done to British industry by the speed with which hot money moves round the financial markets of the world and the speed with which currencies go up and down. If the EMS has made one positive achievement in the last two years it is that it has achieved relatively much greater stability for the currencies within it than sterling has experienced.
It is possible to think of the EMS not as the currency snake or super-snake that my right hon. and hon. Friends regarded it as two and a half years ago but more as a European snail that slowly and steadily takes movements in one direction—that of stability. Clearly, our currency has particularly suffered over the last two years because it was suddenly recognised as a petro-currency. Consequently, it went up by 30 per cent. against the dollar and came down by 30 per cent.
My right hon. Friend the Financial Secretary feels understandable caution and scepticism about the matter. I submit to him that we have got over our initial shock of having a petro-currency and that we are more settled back in our normal role of having a relatively poor industrial base and relatively high inflation but a good trade balance because of our oil. We might expect to remain in that position.
Mr. Hugh Dykes: Will my hon. Friend give way?
Mr. Renton: In all fairness, I shall not give way. I am impartial in my obduracy.
As sterling has fallen by about 7 or 8 per cent. in recent months against the main European currencies and against the European unit of account, this is the moment to take seriously the words of the Governor of the Bank of England. He said that we should participate fully in the EMS at the proper time. My right hon. and hon. Friends should think joining the EMS not just as a token of our commitment to Europe at the important time when we are holding the Presidency but because it would be of great practical value to British industry. After all, British
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industrialists are in business to export their modern products at competitive prices all round the world. They are not in business to have to be currency speculators.
I have asked for much more simplicity and a much better presentation of the European Community's documents, including the budget. It is important that in the difficult years ahead the British public should have a much better and clearer perception of what the European Community is doing for them.
With that said, there must also be a European ideal. Our Ministers, examining the budget in the six months ahead, must go to the relevant meetings not just thinking "What can I get out of this for my country?", but also "What can I put in for Europe's sake?"
It is significant that the one major initiative on which Community Ministers have managed to agree in the last few months is Afghanistan. That is a long way away and does not affect any of our internal interests. Ministers should address their minds to what they would do and how they would react if Russian tanks went into Poland and if West Germany then felt threatened with the Russian tanks so close to it. The Ministers should consider what would happen if the German mark then came under threat and developed great weaknesses. European Finance Ministers should consider the possibility of such pressures. That is what the European Community should be about.
If the discussion about budget reform is merely a squabbling ground for national interests it does not deserve to succeed. It it is a breeding ground for European interests and overall West European growth. It can, should and will succeed.
5.18 pm
Mr. Douglas Jay: I agree with the hon. Member for Mid-Sussex (Mr. Renton) that there should be more publicity about the EEC because the more that the British public know about the EEC the more they are against it.
The Financial Secretary today and the Treasury's explanatory memorandum on the 1982 EEC budget show that there is little change in the budget or the CAP mechanism, except that the total expenditure is becoming larger and larger. Total EEC spending on the commitments basis rises again in 1982 by over 10 per cent., to about £12 billion. The total cost of the agricultural guarantee fund—that is the CAP cost of storing surplus food and subsidising food exports to the Soviet Union and elsewhere—is to rise by another 12 per cent. from 1981 to 1982. That is presumably partly because of the surrender of our Minister of Agriculture, Fisheries and Food on food prices this spring, when he agreed to further rises. I understand that the CAP will continue to swallow between 60 and 70 per cent. of EEC expenditure in 1982. Perhaps the Financial Secretary will tell us precisely what the percentage will be in the Commission's present plans.
It also emerges from the Treasury paper that the gross contribution of the United Kingdom for 1982 will total 23 per cent. of the entire EEC budget at £2,700 million. There is not yet any information available about what refunds the United Kingdom will receive in 1982. We know that the gross payment will be approximately £2,700 million. The Financial Secretary has told us that there will be some belated refunds accruing to us in 1982 but we do not know so far what they are or what our net payment will be in that year. Perhaps we can at least be enlightened about that tonight.

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The reliefs negotiated in May 1980 come to an end before the end of 1982. Though the Financial Secretary did not mention it, the Government completely failed to put forward any proposal of their own for basic reform either of the budget or the CAP thereafter. All we have as a result of the lack of proposals from the United Kingdom Government is the document from the Commission, dated 24 June this year, entitled "Commission Report on the Mandate of 30 May 1980".
Commission reports always read as if they were first drafted in Paris. This one is no exception. It is a most disappointing document—so disappointing that the Financial Secretary said little about it. It has no precision and no figures. but many Brussels clichés and dogma. Like the hon. Member for Mid-Sussex it would like to force everybody into the straitjacket of the European monetary system—that is one of the few things which are clear—which it calls "monetary stability".
The Commission is also anxious that the 1 per cent. VAT ceiling should be removed, to give it more revenue for more expenditure. The Financial Secretary did not mention that. Here the Commissioner's main thesis is wholly contrary to everything else that he said this afternoon.
The report then says about the CAP:
"the result of 20 years of the application of CAP is positive".
That is a remarkable judgment; but what does it mean? It reveals a remarkable state of mind on the part of the Commission. The report goes on to say that it is
"neither possible nor desirable to jettison the mechanism of the CAP"
It makes a few timid suggestions on adjustments for this year and continues:
"these guidelines for the reform of the CAP leave the principles on which it is based intact."
Indeed they do.
The future of the British budget contributions is mentioned only in a short passage near the end of the report, as my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) pointed out. Again, the proposals are vague and timid, with no figures, and they virtually depend on the 1 per cent VAT ceiling being removed. That is something which the Commission constantly assumes.
We are also told—believe it or not—that, in the words of the report, the new budget relief measures for the United Kingdom after 1982:
"shall apply for a limited period."
In other words, even if all this were adopted the British economy would be threatened with yet another guillotine when the later deadline was reached.
If proposals for reform start like that—before the French Government have spent their usual nine or 12 months obstructing, delaying, vetoing and mutilating them—we all know how they will end up when that process is over: with no material reform of the CAP or any lasting relief in the budget burden on the United Kingdom. The Financial Secretary's speech certainly did not encourage me to believe that he would negotiate with sufficient vigour to prevent that conclusion.
Therefore, those who continue the pretence that such fiddling reforms can remove the economic burdens of EEC membership on the United Kingdom are misleading the public and, incidentally, delaying still further the recovery of the United Kingdom economy.
The chief burden on the United Kingdom is not the budget but, first, the extremely high agricultural protectionism of the CAP, which must force up food prices
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against a food-importing nation such as the United Kingdom: and secondly the removal of all restraints on United Kingdom imports of manufactured goods. Both those basic policies are precisely the opposite of what our fundamental economic interest requires.
If the CAP raised food prices by only 5 or 10 per cent. above world prices that might be tolerable, though foolish. But EEC food prices have for years been, on the Commission's own figures, between 60 per cent. and 100 per cent. higher for grain, 100 per cent. higher for beef and lamb and 300 per cent. to 400 per cent. higher for dairy produce. On the most optimistic calculation, that means that the general level of retail food prices is at least 20 per cent. to 25 per cent. higher in the United Kingdom than would otherwise be the case.
Those excessive food prices work right through our economy and have been a major cause of rising pay claims ever since we adopted the CAP in 1973.
Mr. Arthur Lewis: And unemployment.
Mr. Jay: I shall come to unemployment in a moment. Ministers, particularly the Secretary of State for Employment, are fond of claiming in economic debates that retail prices and pay claims rose faster in this country from 1974 to 1979 than they did in the case of our Continental competitors. So they did; and the main cause was the imposition of the CAP on the United Kingdom economy between 1973 and 1978–79, as a result of the Treaty of Accession, which the Financial Secretary and most of his colleagues supported.
Ministers also claim from time to time that we lost export competitiveness in those years. That is true, arid one major cause is again what I have described. Those of us who opposed accession from the start always argued that it would have such effects on food prices, the cost of living and United Kingdom trade competitiveness.
There is no remedy now for this burden on prices and costs except to sweep away from the British economy the whole CAP mechanism of restriction and dear food and to restore the principle of free imports of food. Countries such as Australia and New Zealand would be more than ever glad to send us that food.
The second great folly of the 1972 treaty was the removal of all tariff restraint on manufactured imports from the Continent into the United Kingdom economy—incidentally, just at the moment when the CAP was forcing up our labour costs. For instance, it was the removal of moderate tariffs, which we had had for many years, on steel and cars in particular, which have devastated the British steel and engineering industries since 1974 and have probably added several hundreds of thousands, if not half a million, to our present unemployment figures.
It is no good people saying as they sometimes do, that those industries should have been able to stand that competition. If they could not stand it, it was folly to expose them to it. Some of us knew in advance that it should not have been forced on them until it was clear that those industries were able to meet it.
I think that Conservative Members have now at least grasped the fact that our present large oil exports to the Continental EEC, which have risen from about £100 million in 1970 to £4,000 million in 1980, have nothing to do with EEC membership, would have been much the same if we had not joined, and will remain much the same

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if we withdraw. Our EEC membership has affected, first, food prices and, secondly, trade in manufactured goods, on which tariffs were removed on both sides.
Mr. Arthur Lewis: If my right hon. Friend is right, as I believe he is, will the effect not be accentuated when the Greeks, the Spanish and the Portuguese come in?
Mr. Jay: It will be accentuated to some extent, certainly with imports of manufactures. Let me give the story up to date. The result of the mutual removal of tariffs has been a change from a United Kingdom export surplus to the EEC Six in manufactured goods of £100 million in 1970 to a deficit of £2,900 million in 1980—a colossal swing against us of £3,000 million in the balance. That has been a major cause of increased unemployment during that time. Interestingly enough, it has taken place in a period when our trade balance in the same goods with the non-EEC world swing in our favour by more than £3½ billion. Those two figures prove beyond serious dispute that the tariff changes with the EEC Six after 1971 were the main cause of that swing into deficit.
Even more pertinent, those figures make clear that if the process were reversed—if the distortion of our trade by EEC membership were removed and a moderate industrial tariff were restored both ways—in all probability the proportion would swing back. One remarkable lesson of the eight years of EEC membership has been the smallness of our total trade distortion, in spite of the loss of Commonwealth preferences and the reversal of previous tariff policies. The change in policy and the 10 years' experience has affected only between 10 per cent. and 15 per cent. of total United Kingdom trade. Even now, only about 25 per cent. of our food imports appear to come from the rest of the EEC.
In 1970, 70 per cent. of our total trade was with the non-EEC world and 30 per cent. with the EEC. Now, after all these distortions and 10 years, we still do about 60 per cent. of our trade with the non-EEC world and about 40 per cent. with the EEC. Even if withdrawal from the EEC meant the reimposition of a moderate tariff on manufactured goods both ways, we should not cease trading with the Continental EEC altogether, as is sometimes said, and as was implied by the hon. Member for Mid-Sussex. We should in fact return to nearer the 30 per cent. of our total trade which prevailed before, and the balance would swing back in our favour. That is the overwhelming probability on the evidence before us. Far from unemployment increasing, the swing in the balance would mean a large net gain for United Kingdom employment.
Mr. Anderson: Would my right hon. Friend care to detail the third markets where our manufactured goods are likely to beat the Japanese and other manufacturers?
Mr. Jay: If we abandoned the CAP we should lower our labour costs, and our retail prices would be lower. That would give us a distinct advantage throughout the whole world during a period which I think would be much shorter than the eight or 10 years that we have already experienced.
Withdrawal, accompanied by some moderate industrial tariffs on the levels now permitted by GATT which, after all, we apply to our imports from the rest of the world,
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would bring three immediate and decisive economic gains to the United Kingdom. First, free entry of food from the world's most efficient producers would hold down the RPI, restrain cost inflation, and improve our competitiveness, both at home and abroad. Secondly, a moderate tariff, at least for the time being—one would hope that it would not need to last indefinitely—on manufactured imports would save British industries from the near extinction that is threatening them today. Thirdly, a 200-mile exclusive fishing zone would be available to us instead of the almost total loss of any exclusive zone which is currently threatened. That is a vital matter, which we have not even discussed today.
Without at least the first two of those rescue measures, I do not believe that there is any possibility of a full economic recovery or a return to full employment for the United Kingdom economy.
5.38 pm
Sir Brandon Rhys Williams: I am sure that no one, however convinced a European, would seek to defend absolutely the present shape of the European Community budget. I shall certainly not seek to do so. In my opinion it is much too small an annual sum for the objectives that it sets itself—or rather, that are set for it. Moreover, it is obvious that it has suffered a great deal of distortion due to political pressure. However, it could have been a great deal worse if it had not been for the exertions of the European Parliament since the direct elections. I have played a small part in that, and I am proud to declare my interest in that respect.
An annual budget of this size is not competent adequately to tackle provision for capital projects such as the restructuring of agriculture and the long-term social and industrial reorganisation that we are seeking in the Community. That is one reason for the many valid grumbles that we hear about the money not achieving what we want it to do. Could a sum of less than 1 per cent. of the Community's total production really tackle all that we are asking of it on the capital side?
In my view, the European Community is still living in the Stone Age. We try to achieve our long-term objectives with annual budgets, and we cannot carry over our long-term projects from one year to the next except in very limited ways. We are like the people in the Stone Age, who could look ahead only to the size of the subsequent year's crop. They could not make plans such as a group of industrialised, capitalist democracies ought to do.
I do not join in the present clamour to increase the 1 per cent. ceiling to perhaps 1½ per cent. or 2 per cent., because that, in itself, would not be enough. We have to look for more important departures in the way that we attempt to finance the Community than simply edging forward through the 1 per cent., although I imagine that that will happen in due course.
I understand what my right hon. and hon. Friends are seeking to do in insisting on keeping to the 1 per cent. ceiling, so as to force fresh thinking, especially about the way that we support the agricultural policy, but I should like to see the opening up of facilities for investment as part of the Community's plan, and it should be done on an ambitious scale.
Mr. Nick Budgen: Is my hon. Friend advocating an additional tax—an additional form of revenue to be raised by the EEC?
Sir Brandon Rhys Williams: I am glad that my hon. Friend has given me an opportunity to clarify my position. For the time being, I do not think that we should seek to break through the 1 per cent. ceiling. We should support the Germans in the view that they take, that the 1 per cent. ceiling should be the limit, at any rate for the time being. But I should like us to attempt to develop a capital account in the same way as each of the member States within the Community has a capital account for its national projects. It is futile to expect the Community to succeed without having a proper capital account.
I do not want to expand the current account. I want to see the development of a thoroughgoing capital account for the Community, and I think that this would be a proper project for us to suggest while Britain is in charge of the Community during the current six months.
I recognise that the European Investment Bank does very good work and that it has expanded beyond all the ambitions of its founders. Good use has been made of the Ortoli facility, which might be regarded as a kind of pilot scheme to establish a capital account by the Commission, but only on a very limited scale.
We need, not only in the Economic Community but in all the Western industrialised democracies, the recycling of funds from the OPEC countries on a much larger scale than we are seeing at present; and the recycling that is taking effect should be carried out much better. Central bankers and the institutions pride themselves on the way in which they have carried out recycling since 1974, but it seems to me that too much of this money has been brought back into short-term assets, or for the purchase of existing assets which forces up prices in an inflationary way but does not contribute to the creation of wealth.
I should welcome a deliberate attempt at Community level to bring back our own savings from the OPEC countries so that they could be put into projects which would add to our own wealth as a Community.
We ought to use the capital account to redress the balance of contributions and real needs over the long term. I accept that the annual budget is bound to contain anomalies. However, especially through regional policy, many of the anomalies in the annual budget to which right hon. and hon. Members rightly object could be put right over the course of time.
We should use recycling consciously to provide finance for regional policy and also to back specific projects which at present are hanging fire. I have in mind, for example, the Channel link and energy substitution projects. I should like to mention, in particular, the Severn barrage, because I also have interests in South Wales. The economy of South Wales and the West of England would be transformed if the Severn barrage scheme were taken up and financed as a Community project.
There are many other industrial projects that need support, including the total reconstruction of our car industry, which the Japanese have shown is long overdue. That is another of the projects that I should like to see taken on by the Community.
Mr. Teddy Taylor rose—
Mr. Dykes rose—
Sir Brandon Rhys Williams: It was not my intention to speak for very long. I am delighted to have attracted so much attention, but I hope that my hon. Friends will
54
forgive me if I do not give way to them. They will undoubtedly have an opportunity to catch the eye of the occupant of the Chair.
There are two questions that we need to ask about a large expansion of the Ortoli facility or of the activities of the European Investment Bank. The first is how to service the debt. We have to recognise that the OPEC countries are wise to the fact that the paper currencies of the West are depreciating so fast that they actually are losing money by participating in investments in the West and do not preserve its real value.
I have not much use for its contraptions—the paper currencies—twisted toogether into new-fangled units such as the SDR or the ECU. They do not seem to add very much to the strength of the individual paper currencies that are twisted into them. I doubt whether large financial operations could be carried out now or at any time in the future on the basis of the SDR or the ECU; but we need to explore with the OPEC countries the type of long-term guarantee that they would recognise as being suitable to preserve their assets.
The Severn barrage, for instance, might be financed by giving guarantees expressed in terms of kilowatt-hours. The Channel link might be guaranteed on the basis of the cost of a container-mile. Individual industrial projects could be financed on the basis of value added, rather than by making commitments in paper currencies in which, increasingly, international investors have no trust.
The second question is how to keep the capital and current accounts separate. We have to learn to do that if we are to make a success of Community finance and not allow it to deteriorate into the kind of muddle that I am sorry to say the British Government's finances are in at present. Whitehall might learn a lesson by listening to the way in which, for instance, German officials seek to separate the current account and the capital account. We are trying to put capital projects on to our small annual budget, and that is a mistake. But we should not fall into the other mistake of using the capital account to subsidise current spending.
Those are the thoughts that I wanted to put to the House, and I am glad to have had the opportunity to do so. We must recognise that the creation of the European Community is a long-term project, which can succeed only on the basis of adequate long-term finance.
5.47 pm
Mr. Donald Anderson: We were to face a restructuring of the Community budget in any event because of the ever-nearing approach to the VAT ceiling. But it is clear that the end of May agreement reached between the Government and our partners has only accelerated that necessary restructuring. We had been saying for some time that an "unacceptable position" had arisen, and that was recognised at least in part by our partners in May 1980. Now it is clear that the Germans also are using the same argument, that an "unacceptable position" has arisen for them as well in the proportion of the EEC resources that they are contributing.
The question must arise whether, and to what extent, we and the Federal Germans now have a common interest in exercising a much greater discipline over the budget, and the response will depend in part on coalition politics in Germany and a series of other factors that we shall face.
Following the agreement of May last year, it was clear that there was a need to control the proportion of the total

55
budget going on the CAP and, if possible, to reduce it; ideally to find new areas of expenditure and to consider possible increases in resources. The permanent mechanism for solving the United Kingdom budgetary problem is necessary in any event, because of the pattern of our trade and because of the weight of agriculture in our economy.
The Commission was charged with the task of finding such a permanent solution. However, it is recognised on both sides of the House that the attempt thus far by the Commission has been too timid. It does not fill in the details. Even what the Commission proposes is only temporary. It is angled largely at the United Kingdom, when it is clear that the problem is more extensive than that of the United Kingdom and will extend to Germany and possibly to other countries.
The Government must make clear to the Commission the total inadequacy of the Commission's attempt to answer the mandate that it was given following the temporary budgetary arrangement for the United Kingdom.
To what extent has the Commission risen generally to the problem of restructuring the budget? We know that although there is an increase in total there will be less of an increase for agriculture and more for regional and social funds, which may marginally help us. Of course the base lines are so much greater for agriculture in any event. There has not been a radical restructuring, but perhaps that is impossible given the present configuration of political forces within the EEC.
What has happened is that there has been a turn of the wheel in the right direction—insufficient in itself either to justify the doubters, who say that the EEC is incapable of reformation, being the cornerstone of the EEC achievement, or to cheer the optimists, who say that because of the possible new London-Bonn axis the way is clear for a change in the EEC budget more on the model of what would accord with our own United Kingdom interests.
As the Opposition amendment underlines, the CAP remains in excess of 60 per cent. of the total budget. The 1 per cent. straightjacket remains on "own resources" so that, because of the compulsory expenditure of the CAP, and with the addition of largely agricultural economies such as those of Spain, Portugal and Greece, a lower proportion of the total EEC budget will be available for the sort of provision that Britain needs, especially for regional and social funds.
The CAP itself may not be profoundly changed during the next few years. Nevertheless, it is probable that by 1983–84 the EEC will be substantially different from what it is today. That will be, in part, because of enlargement and the shock to the system, including the budgetary structure, that will result from that enlargement. There may be new political forces at work. That can be exaggerated. While it is not clear yet what difference, if any, there will be in the French attitude to the Common Market in general, no one can doubt that President Mitterrand will fight in his corner for his farmers as vigorously as did his predecessor.
During the next two years it will be vital to watch how the EEC as a whole responds to the common crisis faced by all its members, especially in the area of unemployment. Figures have already been given for the projected increase in unemployment in all European countries. As the hon. Member for Mid-Sussex (Mr.
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Renton) said, the play may be good and the actors may be ready to congratulate themselves, but the audience may be profoundly dissatisfied with the performance. That is the most worrying feature about the future of the EEC.
Increasingly, the concerns of the peoples of the Community are about jobs and the living conditions around them, whereas the concern of the EEC itself appears basically orientated towards agriculture—something that is not at the centre of the concerns of the people. We have just seen the recent survey on responses to the EEC, which has shown that the poorest areas in the United Kingdom are those least in favour of our continued accession. That is hardly surprising.
Mr. Myles: Will the hon. Gentleman concede that a stable supply of food is the main aim of any Government and any society, especially for the poorer areas?
Mr. Anderson: Of course that is a major concern of any Government. If it were clear that the sources of supply of food in the world were decreasing, the stability and security offered by the EEC would become that much more important. I hope that the hon. Gentleman will agree that more and more at the centre of the political stage will be a concern about unemployment and regional development, although there are links with what he said. If the EEC does not address itself to those problems, and with the current constraint in the budget it can hardly do so, it will be seen by more and more people as irrelevant to their needs. That is the real challenge facing the EEC, and the question is whether it can face it.
Apart from the question of popular acceptance, whatever sums come to Britain and whatever notices are put up saying "Gift of the EEC", the current position of the Government is not to make the expenditure additional but, rather, to make it part of the Government's general assault on public expenditure. Britain was on its own at the Luxembourg summit a month or two ago when considering how to respond to the employment crisis and the job creation proposals. All the commentators suggested that in response to monetarist policy there was a congruence of interest and approach by Chancellor Schmidt and the Prime Minister. However, on general job creation measures Britain was on its own. That hardly bodes well for our response to the challenge. If the EEC turns its back on the major concern of our people, it will deserve to fail.
What should be the British response to the present EEC position? I know that at its last conference the Labour Party pledged to withdraw from the EEC. In my view, it would be wholly premature to suggest that. Many of the arguments are made on assumptions that may or may not be valid by 1983–84. We cannot, as my right hon. Friend the Member for Battersea, North (Mr. Jay) regularly seeks to do, put back the clock to 1970 and put Humpty Dumpty together again. The world has changed substantially during the past decade.
The questions remain: can we hope to retain our share of exports to the EEC—43 per cent. or 45 per cent., including the oil element—if we withdraw? Can we be confident that in the tight competitive position that we have in the world we can find alternative markets elsewhere for any markets that we may lose within the EEC? Because of possible protectionism within the EEC, Japan and other new suppliers would fight us hard for any markets outside the EEC. Are we really confident that we

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can have a "quickie" divorce, or will it be a more messy affair, with retaliation from our erstwhile partners? Can we be sure that we will retain our attractiveness for inward investment? We would not have a chance of the Nissan investment were we not a member of the EEC. I come from South Wales—a part of the world that has attracted one-third of the total of Japanese investment in the United Kingdom. Those investments would not be there were it not for the wider market offered by the EEC.
Before we reach a final conclusion about membership, I should like an area-by-area and industry-by-industry survey of the job impact of any such withdrawal. Can we hold our own with the weight of a single economy with a population slightly over 50 million in international trade negotiations? What would be our voice at Ottawa today if we were a single market with fewer than 60 million people?
I hope that we shall make our judgments on facts and not on emotion. I fear that by the time we come to the next election the EEC may have changed, and yet we shall have drifted into an anti-EEC stance, which will be shown by a commitment to withdraw on the part of the Labour Party. The possible continued dislike of the EEC within Britain may, by the time of the next election, force the Conservative Party to adopt a "me, too" attitude.
In my view the prudent course is to wait and see. Will the EEC succeed or will it have a sort of middle-age burn-out? It will have such a burn-out if it does not address itself to the concerns of our people. Given the new political and economic configuration, there is no better opportunity to seek reform and to work for change. We must work for a change that will link our contribution more closely to our proportionate GDP within the EEC. If there is no will to succeed on the part of our partners, and if the proper interests of Britain are ignored by our partners, we cannot remain a member of the club. It would be premature to reach such a conclusion now, and the prudent course remains to work for change.
6.3 pm
Mr. Maurice Macmillan: I have no doubt that the budget and the common agricultural policy should be considerably reformed, as my hon. Friend the Member for Kensington (Sir B. Rhys Williams) explained so well. In the reforms that it proposes the Opposition amendment seeks to throw out the baby with the bath water. Indeed, the official Opposition and some Opposition Members want to kill the baby. They made a fine effort to abort it and they are now making a strong effort to destroy it. In common with other Opposition Members, I think that they are wrong to take that course.
Important though the budget operations are, they are small when set against the totality of what membership of the Community means and can mean in future for the benefit of Britain and its people. By 1980 the general budget was about 0·8 per cent. of the Community's GDP and about 1·7 per cent. of the combined member Government's expenditure. In 1980 agricultural spending represented 0·47 per cent. of the Community's GDP and between 1·1 per cent. and 1·4 per cent. of total agricultural spending by member Governments within the Community. I agree with the hon. Member for Swansea, East (Mr. Anderson) that we must shift the balance from agriculture to manufacturing industry. However, I remind the House that the proportion of the Community's spending on agriculture, when expressed as a percentage
58
of its GDP, is roughly the same as in Japan and the United States of America. Possibly, therefore, the proportion is not as distorted as we have all been led to believe. The Japanese and the Americans spend about 1·5 per cent of their GDP on agriculture.
In public expenditure terms the United Kingdom's net contribution will be £530 million for 1981–82. That is in contradistinction to about £5,300 million that we are spending on industry, energy and trade and about £1,000 million on aid.
The right hon. Member for Battersea, North (Mr. Jay) has a gloomy view of our economy if he thinks that this contribution will remain an insuperable burden. He seems to take the view that Britain will be permanently the sick man of Europe and that we must ensure that we receive better treatment than any other European country because we are less well able to look after ourselves. Part of the right hon. Gentleman's cure was rather odd. It would expose the United Kingdom, for the sake of reducing unit labour costs by bringing down the retail price index, to unrestricted imports from more efficient manufacturing countries. I imagine that the right hon. Gentleman had in mind countries such as Japan.
The Community's gross domestic product is larger even than that of the United States. It has been suggested on occasions during these debates that we should benefit, like the Japanese, outside the Community. Alas, our GDP is not like that of the Japanese—$1·46 billion. If it were more like that we might be in an economic position to be independent like Japan. The GDP of the United States is about $2½ billion, but that of the EEC is $2·790 billion.
The EEC gives us a great opportunity. We have a surplus on visible trade with the Community of about £709 million. Our trade with the Community is growing faster than our trade with any other market. Even our miserable rate of economic growth has been marginally better since we joined. It is true that our competitiveness is terrible. Our competitors' wages costs increased by about 12 per cent. over the past two years while ours increased by about 40 per cent. It takes the Germans about twice as long as the Japanese to make a motor car. It takes the Americans about twice as long as the Germans and we take about twice as long as the Americans. Those are not the precise figures but they indicate that our productivity is appalling. However, we have done better in the Community than outside.
The much-vaunted idea of standing on our own feet outside the Community is not very impressive if we test it against one measure of performance—the percentage of imports covered by exports. In 1974 it was 47 per cent. for Japan; by 1980 it had sunk by nearly half, to 28 per cent. In 1974 it was 82 per cent. for North America; by 1980 it has sunk by about one-quarter, to 66 per cent. But for the EEC it was 84 per cent. in 1979 and in 1980, 86 per cent. On balance, the Community has been of great benefit to manufacturing industry. The figures that I have quoted relate solely to manufacturing industry.
We have shown our incompetence in the face of the Japanese and the Americans, and even, alas, the Spanish, the Portuguese and the Greeks. The proportion of the imports from those countries that we have covered in exports has decreased by about one-third in the past six years. Our incompentence in the face of other competing countries has been mitigated by the advantages of being a member of the Community. I have a nasty feeling that part of that mitigation is due to the fact that we provide

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a fairly cheap place in which to invest for the Americans and the Japanese, and to use as a base for their penetration of Community markets. That investment would not be so enthusiastic if we did not provide such a base. If that were so, I fear that they would change from manufacturing to finishing off semi-manufactures in Britain as a means of increasing their output in the United Kingdom market.
We shall do better by addressing ourselves to how we can overcome not only the immediate problems of the budget but some of its longer-term workings. We must move towards an energy policy. We must have some method of helping developing countries with their energy requirements, including developments based on the French nuclear initiative.
We must do something with the rest of Europe and get the European Community to act as such in trying to get some of the Arab money into the developing world. It is essential to world recovery. What is wrong is that the massive savings represented by Arab wealth are not being invested in productive industry. The EEC could do much better by moving in that direction than any country could by itself—co-operating, of course, with Japan, Canada and the United States.
We need new methods of developing investment from the rich countries, both into Europe and into the developing world, including the Arab States themselves.
My hon. Friend the Member for Mid-Sussex (Mr. Renton) suggested that it would help if we joined the EMS, thereby getting a degree of economic stability. I am a little sceptical whether the EMS goes far enough. I do not believe that it is possible for world trade and world economic policies to develop successfully for very much longer when we have no measure of changing currencies in the world, apart from what my hon. Friend the Member for Kensington called matching paper with paper.
There are attractions in the EMS, but, as a distinguished French economist remarked, if we have a lot of apples, some of them good and some of them bad, and put them in the same basket, we tend to end with a basket of rotten apples. There are limitations that we should seek to overcome.
I should like to see the European Community making a great deal more effort to try to get a degree of standardisation in matters such as defence equipment. It is ludicrous that we cannot shoot each other's bullets out of each other's guns, and achieve a good deal more co-operation in the more expensive forms of defence research and development.
I have tried briefly to make a few suggestions about what the British Government could do to improve the Community in the longer term, as well as to alter the short-term budgets and common agricultural policy. Of course we must fight our corner as hard as we can, but there is a little more to it than that. I beg the Financial Secretary and the Government, when they are fighting our corner, to remember to fight also for more effort by the Community as a whole in the longer-term development and to look to the future for the peace as well as the prosperity of this country.
6.12 pm
Mr. Russell Johnston: I should like to start by referring briefly to the official Opposition's amendment, which refers to the failure of the proposed budget
"to achieve a broad balance between the United Kingdom's contributions and receipts".
The expression "broad balance", as the right hon. Member for Stepney and Poplar (Mr. Shore) reminded us, was coined by the Prime Minister in an uncharacteristically non-astringent moment. It turned out essentially to be a euphemism for the juste retour. It is, in my judgment, a definition of the Community budget that I find unacceptable. It runs completely contrary to the ideals of convergence of economic opportunity and social conditions which go to the very heart of what the founding fathers of the Community wished to work towards.
However imperfect the practice—and I am the first to admit that it has been imperfect—if we turn our back on the redistribution of wealth within the Community we turn our back on its fundamental ideal.
Mr. Marlow: Will the hon. Gentleman give way?
Mr. Johnston: I do not want to give way at this stage, because many hon. Members wish to speak. I prefer not to give way, although I should like to do so in order to bat down the hon. Gentleman.
If we turn our back on the principle of the distribution of wealth we turn our back on a fundamental ideal. If we say that every country must be in broad balance—which is what we are saying if we say that Britain should be in broad balance—that means that we can throw out of the window any attempt at common industrial, regional or social policies. We go back to the simple principle "We are out for ourselves and what we can get, and forget everybody else." If Britain is to be in broad balance for ever, so must Germany, France and all the existing members. So, indeed, must Greece—and soon Spain and Portugal. That means that all the proud words about supporting democracy through enlargement would be quickly seen as empty and windy verbiage, and no more than that.
Mr. Marlow: Will the hon. Gentleman give way?
Mr. Johnston: If the hon. Gentleman will be brief.
Mr. Marlow: I am grateful to the hon. Gentleman. He mentioned the redistribution of wealth. Will he agree with me that the great problem at the moment is that wealth is redistributed in the Community, but from the poor to the rich?
Mr. Johnston: To some extent I would agree with that, but the hon. Gentleman's solution, and the solution proposed by the Opposition amendment, is not really a solution; it is a suggestion that would only make things worse.
The Opposition amendment goes on to speak of
"inadequate provisions for regional, industrial and social policies"
and criticises the commitment of
"over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy".
That is contradictory on two grounds. First, even if the balance is changed, very little money is released—certainly not enough to do very much—and it increases the number of people unemployed in agriculture. The hon. Member for Northampton, North (Mr. Marlow) may say

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that the CAP in one sense is Europe's job creation scheme. Perhaps we need job creation schemes at this moment. Does it make sense to release a great many people from agriculture to join the dole queues of the cities? I do not think that it does.
Secondly, without a real increase in the budget—which under present methods would mean increasing the VAT ceiling, as Roy Jenkins suggested when he gave up the Presidency of the Commission—I do not think that anything significant can be done in this area. The Opposition's amendment represents a negative and aimless approach.
In the Opposition amendment I am surprised to see no mention whatever of the EMS, to which various Conservative Members have referred. I should have thought that the Opposition would want to make some reference to it, either negative or positive. The Liberal position—and, indeed, the Social Democratic position—is that we should like to see Britain joining the European monetary system. It was one of the main achievements of Roy Jenkins, whose performance in the Warrington by-election at least demonstrates that close association with the European Community is no disadvantage electorally, for no one has been more clearly and definitely linked with the European Community than Roy Jenkins.
I admit that these are not encouraging times for those of us who remain deeply committed to the European Community. None the less, the Commission's draft proposals represent a realistic first step in the necessary reshaping of the budget. As has been said by a number of speakers, even from within the straitjacket of an unwillingness of the majority member States to exceed the 1 per cent. VAT ceiling, it sketches some road ahead for the Community. My Liberal colleague, Gaston Thorn, has done his utmost.
There was reference to the United Kingdom financial mechanism. It is temporary, but it is something. A rejection of broad balance, by the way, does not in any way mean an acceptance of an unfair contribution arrangement. We see a CAP adjustment. We see proposals to concentrate the regional fund effectively.
In this regard I should like to ask two questions of the Financial Secretary. I should be obliged to him for his attention, because the tradition on these occasions is that very few answers are received to questions asked. The non-quota section is referred to on page 54 of the preliminary draft general budget, where it says that
"The reason there have been no commitments from the non-quota section of the Fund … is that the Council did not approve the measures until 7 October 1980."
That was a two-year delay. Why was the implementation delayed, and what position did Her Majesty's Government take? Secondly, now that it is implemented, what is the arrangement? It is only 5 per cent. of the regional fund. It is a pittance. [Interruption.] It is far too small, as the hon. Member for Lancaster (Mrs. Kellett-Bowman) interjects. But how is it approved? It has to go through the Council of Permanent Representatives. Is that by unanimity or by majority? It is not entirely at the hand of the Commission.
It is bogus for the right hon. Member for Stepney and Poplar to complain about the small amounts of money available for regional and social development and be unprepared to pay a penny towards it. That makes no sense whatever. There is reference in the budget to the elimination of existing non-tariff trade barriers, which
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should be welcomed. Finally, there is emphasis on research programmes for energy, environmental protection, nuclear safety, and so on. As I said, the Commission has done its best, but it is insufficient.
It was surprising that in a few desultory remarks the right hon. Member for Stepney and Poplar referred to the need to link VAT payments to GNP. That is an important suggestion, which is equally attractive for those who believe that there should be a link between payment and the ability to pay. However, essentially, the right hon. Gentleman does not believe in that. He would not give more to the central pool to help Greece, although I suspect that he would take anything that Germany would give him. That is the fundamental contradiction in the Opposition's position.
We must look carefully at the new criteria for paying, but we should do so on the basis of an acceptance of some increase in the Budget. I once thought that the Labour Party believed in redistribution and not in national advantage. I once thought that it also believed in trying to develop with other democratic countries co-operation in tackling common problems. However, if the speech of its spokesman, the right hon. Member for Stepney and Poplar, is the basis of its approach, it no longer believes in those things. He made an arid, negative and spiritless speech, without a positive word in it.
The arguments for entry into the Common Market that were advanced in 1973 and adduced again in 1975 are as strong now as they ever were. Alone we shall not overcome our economic problems or unemployment problems—to say nothing of the political potential of membership. The right hon. Member for Stepney and Poplar rather uncharacteristically, because he is a polite man, refused to give way to me at one point. I was going to ask him about the word "tutelage", which he quoted in a resentful way from the Commission document. That is the sad thing about his approach and, to an extent, that of the Financial Secretary—he does not accept that anyone can teach him anything. I think that the economic and social performance of this country since the war shows that we have a lot to learn.
6.23 pm
Mr. Teddy Taylor: The hon. Member for Inverness (Mr. Johnston) has at least been consistent, but those of us who have listened to his speeches on the Common Market over the years have probably gained the impression that if Britain had 99·9 per cent. unemployement and mass starvation the hon. Gentleman would say that it would have been worse without the benefit of EEC membership.
I am sorry that the Financial Secretary is to reply to the debate. Those of us who are critical of the Common Market and want structural change regard him and his team as allies. If the Government had the same determination on EEC spending as they have on national spending—if the Financial Secretary approached the EEC budget as he approaches spending in the United Kingdom—we might have a healthier Community and certainly the money would be better spent.
Before making some general comments, I put three specific points to my right hon. Friend in view of his invitation for suggestions for the meeting later this week. First, is there any way in which the United Kingdom Chairman of the Council of Ministers can sort out some of the appalling waste that does more damage to the EEC's

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image than anything else. I believe that he knows what I mean. The Government and the Council of Ministers have no control over the spending of the so-called European fund. There is a gentlemen's agreement whereby the Parliament does not ask about the Council of Ministers' spending, and vice versa. I am sure that if my right hon. Friend, with his long experience of Treasury matters, had the opportunity of getting stuck into the expenditure of this so-called Parliament there would be major changes.
Secondly, I should like to ask him about the information machine of the EEC and its various outfits. It was interesting to hear my hon. Friend the Member for Mid-Sussex (Mr. Renton) say that we should perhaps spend more time and money telling people what a grand institution the EEC is. Far too much money is spent in that way. It is designed not to promote information but simply to put across rather bogus propaganda.
How much money in the budget will go, for example, to that spendthrift propaganda organisation known as the European Movement? In its publications it says that it does not receive any public funds, but it was disclosed in a recent answer to Mr. Ken Lomas that the organisation and its associated bodies received in 1977, 1978 and 1979 a total of £25,659, £68,616 and £33,315 respectively from EEC sources. I was astonished to discover from the paper published just the other day, called "Supply Estimates"—which is the Financial Secretary's own document—that this year we are to give £30,000 of British money to the European Movement without any check on how it is spent. There is a little mark against the money to show that, unlike other grants, even the Treasury and the Comptroller and Auditor General will not check on how it is spent, and, if it is not spent, the organisation can keep it anyway.
In Southend on Saturday I visited Viking House. About £100,000 has been raised by voluntary donations to make it a day centre for the mentally handicapped. The building is complete, but it is standing empty because the county cannot find the necessary funds to staff it. It makes me sick to think that the Government can spend money on a scandalous propaganda machine, which is churning out an immense amount of literature, inviting all and sundry for free and expense-paid trips and spending on a shameful, lavish and extraordinary scale.
My third point concerns a matter raised by my hon. Friend the Member for Mid-Sussex, who asked why we did not spend more money telling people about the grand money that we are getting from the EEC for bridges and other extra things to help people. I tried to interrupt him. If there is to be propaganda it should be fair. It is a simple point, but every pound of money that we get to spend on such things as bridges and roads costs the British taxpayer £1·95. That fact was stated in a written answer that I had from the Financial Secretary a few weeks ago, when he told me that since we joined the EEC we have put into it £6,720 million and received in grants and subsidies £3,651 million. Those figures are up to 31 December 1980.
Mr. Lawson: If I remember rightly, my right hon. Friend asked me for figures from the very moment that we joined the Community, and that is what he is quoting. However, he will be aware that there was a substantial improvement in the ratio as a result of the 30 May agreement.
Mr. Taylor: I accept that the situation has undoubtedly improved because of the renegotiation and the 30 May 1980 agreement. The gap is not so broad. However, I believe that the Minister will accept that, since we joined, for every pound that we have received we have paid £1·95. Even this year, our net contribution will be £500 million.
My hon. Friend the Member for Kensington (Sir B. Rhys Williams) wants new bridges and tunnels, but we could have more in Wales, Scotland and England if we paid for them ourselves. It is rather like putting British pound notes in a washing machine. They shrink in the wash.
We should approach this budget in the same way as we would approach a British Budget. The important thing is to ask how will it affect jobs. Jobs are our biggest problem. In considering this budget and the associated documents, we should ask ourselves how the budget and all that goes with it will affect jobs in Britain. This is the kind of aspect that the Treasury should consider. All the peripheral evidence is there. There is the situation in countries which did not join the EEC. Small countries such as Austria and Norway, which had about 1 per cent. unemployment in 1973, now have 1½ per cent. or 2 per cent. unemployment. Supporters of the EEC will immediately say that that is different because they are small and we are big, but in 1973, too, they were small and we were big. The countries which did not take on the burdens and restrictions of EEC membership have performed remarkably well.
What about Britain? How will the budget affect jobs here? First, we shall have to pay a substantial net sum to the EEC. That money would otherwise be available to the Treasury to cut taxes or to provide jobs. The sum this year is about £500 million. I hope that the Financial Secretary will at least give a clear commitment that in the current renegotiations he will not accept any arrangement that is worse than the 30 May agreement. It is frightening to think of the effect on jobs in Britain of the £3,000 million that we have been paying into the EEC since we joined. Certainly, that must account for a large number of jobs.
The second damaging effect is the CAP. The Secretary of State for Industry said today that unemployment was terrible, and would continue to be so until Britain became more competitive and could produce cheaper goods, which people wanted in the world market. I suggest that a crucial factor in our total production costs is the cost of food. It is basic, for example, in the context of wage bargaining. It is a major factor in determining total costs. What is the difference here? Some would suggest, based on the written answer by the Minister of Agriculture to my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) some time ago, that the net difference is about £3,000 million per year. That is £5 per week per British family. Others say that that does not tell the whole story. We know, however, the taxes that we have to charge on food as a direct result of this budget and the CAP. In a written answer on Tuesday 14 April, the Minister of Agriculture himself informed me that we must charge import levy of 60p per pound on butter, 61.14p on cheese, 67p on beef and 27p on lamb. These extra taxes add to the cost of food for the British housewife and the British worker, thus contributing to higher costs. Surely the Financial Secretary accepts that the existence of the CAP adds to industrial costs in every way and thus helps to destroy jobs in Britain.
The third factor to be borne in mind is the effect of trade upon jobs. We all know—there is no hiding it—exactly what has happened. The Secretary of State for Trade stated

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in an answer on 29 June that in the eight years before we joined the EEC we had a profit in trade and manufactures with the Common Market of £300 million per year. In the eight years since then there has been an average annual deficit of £1·3 billion. That is a massive change. I ask the Financial Secretary again what is the effect of that upon jobs. How many jobs have been lost in Britain as a direct consequence of that massive shift in manufacturing trade from a regular profit to a regular massive loss?
Mr. Dykes: Not true.
Mr. Taylor: My hon. Friend says that that is not true. That was the answer given by my right hon. Friend the Secretary of State for Trade on 29 June.
Mr. Dykes: My hon. Friend's argument today would be more appropriate coming from the Opposition. He is putting the classic arguments of the Labour Party approaching the proposal to withdraw from the EEC. Does my hon. Friend also wish to withdraw from the Community? Apart from changes in the CAP, the ending of the Community budget system as we know it could not be achieved without such withdrawal.
Mr. Taylor: My hon. Friend is trying to divert me. As I have said to him publicly and privately, I am a member of an organisation called the Conservative European Reform Movement, which has put forward four specific suggestions for trade change. If those four suggestions were fully accepted we should be very happy to remain in the EEC. One of our proposals is the abolition of the present CAP. As my hon. Friend knows, that is possible and, indeed, practicable within the Treaty of Rome, which merely calls for a common agriculture policy, not the one that we have. It is a habit of my hon. Friend, when we reach a sticky point which perhaps upsets him and some of his silly friends in the various organisations which lash out money on pamphlets, to attempt to divert the debate.
We should be talking about jobs. I have mentioned the effect of the CAP and of trade. Some may say that these effects result not from the Common Market but from the fact that British workers are no good and British industry is uncompetitive. If that is so, why has our trade with the rest of the world improved dramatically while our trade with Europe has gone wrong?
A fourth factor which affects jobs can be discovered in the budget. I refer to the money spent on the anti-dumping procedures. We are well aware that jobs are being destroyed daily because goods are being dumped in this country from Eastern Europe, the Far East and, indeed, all other parts of the world. In the past when this problem arose and textile and footwear firms were being forced to close we could take prompt action. Unfortunately, since the changeover to the EEC we can no longer do that. We can only refer the matter to Brussels, where it is dealt with by a slow, cumbersome and ineffective procedure. Those are not just my views; they are the views of the CBI and the European employers' organisations which have made representations about this.
The fifth factor affecting jobs is the freedom of movement of people. In considering the amount spent on administration, one relevant factor is the number of people from the EEC who work in this country and the number of British workers in the EEC. The last figure that I was given in an answer by the Secretary of State for
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Employment was that there were 410,000 EEC employees in Britain and 80,000 British employees in other parts of the EEC.
We must also consider the effect of Britain's attitude to these and other rules. The Italians have brought in import deposits. That is totally against EEC rules, but the system continues to exist and to disrupt trade. The whole picture shows that, by and large, we play by the rules while others do not.
I therefore hope that in replying to the debate the Financial Secretary will at least concede that there is a prima facie case for saying that the effect on jobs has been devastatingly bad. That is why we must go not just for tinkering reform but for the kind of reform that I suspect many people in the Treasury would like. That means doing away with the present CAP, which is covered in the budget to the extent of 60 per cent. That is perfectly possible within the Treaty of Rome, which calls only for a CAP, that is fair to consumer and user alike, with each country doing its own thing, supervised by the Commission. We must have equality of contributions and national control of anti-dumping procedures.
It is impossible to identify all the factors which have led to the tragic level of unemployment in the United Kingdom, but few who examine the evidence rationally would deny that entry into the EEC on the terms on which we joined has had a devastating effect on employment in this country. We must put that right. We shall achieve that not by the simple procedure of breaking off or getting out but by approaching reform in such a way that we demand major changes and not just cosmetic ones.
6.40 pm
Mr. Denzil Davies: The hon. Member. for Southend, East (Mr. Taylor) was quite right to point out that membership of the EEC has cost thousands of jobs in Britain. Our massive deficit in manufacturing trade has closed factory after factory, not only in the development areas but throughout the country. I hope that in the autumn we shall be able to debate this issue so that we car, extract from the Government the number of the jobs that have been lost as a result of EEC membership.
Today's debate is a narrower one and covers the documents that are now before us—in the main, the draft Community budget for the calendar year 1982. When one reads these documents and the explanatory memorandum one is forced to the conclusion that they make a depressing start to the United Kingdom's Presidency of the Common Market over the next six months.
The documents show—and the explanatory memorandum sets it out—that the United Kingdom will be contributing almost one-quarter of the total gross revenues of the Common Market budget—a total payment of £2,700 million. In other words, 23 per cent. of gross payments will go from the United Kingdom to the EEC, and that despite the fact that our GNP per head of population is the fourth lowest in the Community. That is the clear point revealed by these documents.
The Financial Secretary will correctly point out that what matters at the end of the day is the net contribution when the gross payments have been balanced against the receipts. However, nowhere in the explanatory memorandum does it state what the net contribution will be. When pressed, the right hon. Gentleman muttered something about £500 million, but he does not know; neither does the Treasury. If the Treasury knew what the net contribution

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would be it would have said so in the explanatory memorandum. However, nothing is said because the Government have no idea what the net contribution will be to the 1982 budget.
Indeed, based on these documents, I suggest that our net contribution could be about £1½ billion. The Minister shakes his head. In that case, he can say why he has not included a figure in the explanatory memorandum. I believe that it could even be higher than £1½ billion.
The Government cannot pray in aid the payments that have arisen as a result of the 30 May 1980 compromise agreement, because those payments relate to 1980 and 1981. They do not relate to 1982. There was no specific agreement about that year. All that we have is a vague statement by the Council of Foreign Ministers that if a permanent solution was not drawn up before 1 January 1982 the same kind of mechanism would apply.
Will the payments next year be £500 million or £1½ billion? In its latest document, which is not on the Table, the Commission sets forward certain mechanisms for changing the United Kingdom's budgetary position. But that document contains no figures. However, on the basis of the proposals it is possible to work out the United Kingdom's contribution in 1982 if all the countries agree to the proposals. That total would be about £850 million net, or £300 million more than the Financial Secretary hopes that we will have to pay in 1982.
This demonstrates that the Financial Secretary and the Government have no right to seek the House's endorsement of documents when they do not know how much British taxpayers' money will be paid across the exchanges into the EEC budget in the next calendar year. The right hon. Gentleman should take these documents away, and we should debate them again when he is able to give exact figures.
This shows how imprudent the Government were to accept the compromise of May 1980. Not only did they give away any chance of obtaining a fundamental reform of the CAP, not only did they betray the interests of British fishermen, not only did they give away the veto in the last agricultural price fixing; they lost for ever any chance of making a fundamental and radical reform in the Common Market budget.
Just as we were two years ago, we are again at the mercy of the other EEC countries. We are forced to go to them before the end of the year and beg them to give back some of our own money. The Government and the Financial Secretary have no idea how much money we will get back, nor have they any idea how much we will have to contribute. Will it be £500 million, £850 million or £1½ billion?
The preliminary draft budget for 1982 estimates that spending on the CAP may be about 60 per cent. of the total spending. I concede that that is a lower percentage than it has been for some time. However, the improvement is a superficial one because it is purely fortuitous and is not caused by any changes in the structure of the system. It is caused by factors which in the main are completely outsie the control of the Commission, the Council of Ministers and the whole Common Market mechanism.
As the Commission points out, the main reason for the reduction is the belief—it is only a belief, because this is an estimate—that the gap between world prices and EEC prices for the next 12 months or so will not be as large as
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it has been, therefore making it less expensive to dispose of food surpluses on world markets. In addition, there appear to have been favourable currency fluctuations and green currency changes. But, as the Financial Secretary knows, these can go either way, and next year or the year after there could again be a vast increase in CAP expenditure.
On page 25 of volume 7/A, the Commission clearly states:
"there is no way of predicting accurately the funds needed to meet the obligatons arising under the CAP".
Therein lies the fault of the system. There is no control over CAP expenditure. It is a totally open-ended commitment, and that is one of our basic objections to it.
Even if the Council of Agriculture Ministers were to freeze prices for a few years, there would still be no guarantee that expenditure would drop, because other factors could and would push up CAP expenditure. For example, world food prices could drop rapidly. To compensate for the lower prices, farmers would increase their productivity just as they have done in the past. A depression or a recession could reduce consumption. Even with a price freeze, there would be no guarantee at all because all those other factors might come together and prevent any lessening in CAP expenditure. Unless there is a fundamental change in the CAP—and that has been ruled out by the 30 May compromise—the CAP will always take an exorbitant amount of money from the budget and we in Britain will constantly be at a disadvantage.
I have referred briefly to the Commission's document. Because of the time, and as it is not on the Table, I shall not go into detail. That document makes some tentative suggestions about the CAP and the budget, and tentative and vague they are. I believe that there is general agreement in the House that they are quite unsatisfactory and that they do nothing to meet the problem.
There are rather woolly guidelines about the CAP, which the Commission calls "adjustments". Indeed, the Commission admits that the adjustments would have little effect on Britain's contribution. Therefore, the Commission's own proposals on the CAP, tepid as they are, would have no effect at all on Britain's budgetary contribution. The Commission goes on to suggest various ways in which our contribution could be reduced. But even on the best estimate those proposals would produce a net British contribution to the 1982 budget of £850 million—£300 million more than what the Financial Secretary hopes we will be able to get from the Council of Ministers.
I hope that the right hon. Gentleman will say again—he was fairly forthright in opening—that he condemns utterly the Commission's paper as totally inadequate to solve the problem. At least, however, the Commission has put forward some suggestions. We have heard nothing from the British Government. We heard nothing today from the Financial Secretary. We have heard nothing from the Foreign Office, which will apparently be negotiating these matters. The Foreign Secretary tours the world in search of a role. He travels to Moscow one day and to Riyadh the next. Yet nothing is heard about a fundamental problem relating to the British economy and the British taxpayer. There is complete and utter silence. It is clear that the Government do not have either the imagination or the courage to face the problem and are hoping that somehow, by 1 January 1982, the problem will go away.

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The Chancellor of the Exchequer made a speech in Holland recently—this was mentioned by the Financial Secretary—but it contained no radical initiatives. It was very lukewarm and negative in tone in relation to the CAP and the Budget. There will be no permanent and fair solution to the problem of the budget unless it is based on a number of basic and fundamental changes.
The Opposition believe that it is no solution to agree to an increase in the VAT ceiling of 1 per cent. and then to use some of the extra money to construct another grandiose common policy under the control of the Commission. Common policies that have to be applied to the different conditions and economies of 10 European countries are bound to be inefficient and wasteful, and to lead to the same kind of absurdities as those seen in the common agricultural policy. If, as is obviously the case, there is need to spend more money to reduce unemployment, to help the inner cities and to promote regional development, what on earth is the sense of doing it by transferring more British taxpayers' money to the Commission in Brussels for the Commission to hand some of it back and tell us where and how to spend it? It is a fairly fundamental proposition that British taxpayers' money should be spent in Britain at the behest of the elected Government of this country.
Secondly, as the amendment makes clear, the United Kingdom's contribution to the budget should not exceed our receipts. There should be a broad balance. That seems to me a perfectly reasonable proposition. The French have been in this position almost every year since they have been a member of the Common Market. Our national income is well below the average for the Community as a whole. Why should we have to make any contribution, let alone a major contribution, to the budget? Why cannot contributions be based on countries' different gross domestic product? The Benelux countries and Denmark are substantially wealthier than Britain. They are net beneficiaries from the budget. If they merely balanced their contributions and receipts—we are not asking for more—those four countries, probably the richest in Europe, would release £1 billion to the budget. Why should that not happen? Why should those countries and others have substantial receipts from the budget?
We also believe that the CAP should be gradually dismantled and replaced with national assistance to agriculture that can cater for the different needs and farming structures of member States. I do not believe that the future of Western Europe will be put in jeopardy by the demise of the common agricultural policy. In the meantime, while the Financial Secretary is dismantling the CAP, I suggest that he should at least try to ensure, and try to get other members to agree, that expenditure on the common agricultural policy should be subject to the same budgetary rules and constraints on expenditure as expenditure on the regional fund, the social fund and other expenditure.
It makes no sense at all. This so-called budget deals with only 30 per cent. of expenditure. The Financial Secretary, poor fellow, will be attending long meetings in Brussels almost up to Christmas but will nevertheless be dealing with only 30 per cent. of expenditure. The rest is completely out of control. One of the most fundamental reforms that should be made is that all expenditure in the budget should be controlled in the same way as the expenditure contained in that 30 per cent.
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The Opposition are not hopeful that the Government, despite holding the Presidency, and with all the ballyhoo that follows, will be able to obtain even one of these fundamental changes. If the Government fail I believe: that Britain and the British economy will continue to suffer from a system that is totally unfair and unjust to us. By passing the Opposition amendment tonight this House of Commons will at least make clear not only to the Government but to other member States that we reject the enormous contribution demanded by the draft 1982 budget and that, even if the Government lack the courage and imagination to act, the House of Commons is at least prepared to say "Enough is enough."
Mr. Lawson: The House has just listened to another tirade from the right hon. Member for Llanelli (Mr. Davies), who had the impertinence to try to instruct the Government on how they should negotiate a reduction in the net contribution. The right hon. Gentleman asked why the Government had not made a statement. He is in no position to tell us how to negotiate the matter. The Labour Government had the opportunity to negotiate, and achieved absolutely nothing. They achieved no reduction in the net contribution to the Community budget. I shall take no notice of the right hon. Gentleman's advice, helpful though it may have been intended to be, on how to set about achieving an improvement on the 30 May agreement and its extension into a permanent solution.
The right hon. Gentleman got rather muddled about the net contribution in 1982. The net contribution that Britain has to pay in 1982 is related to the events of 1981. The matter is one year in arrears, yet the right hon. Gentleman was not at all clear on whether he was talking about that or about 1983 and the payments of 1982.
Mr. Denzil Davies: I wish to make it clear, as I did in my initial question, that I was referring to net payments in respect of the 1982 Community budget. The right hon. Gentleman mentioned £2,700 million as the gross payment. What is the net payment in respect of that gross payment?
Mr. Lawson: The right hon. Gentleman is now talking about the net contribution in 1983 in respect of the 1982 budget. It is impossible to say at this stage. It depends on the restructuring negotiations that have just begun. This has been made clear. The undertaking that we got in the 30 May agreement was that the refunds on the existing system would run for two years—in 1981 in respect of 1980, and in 1982 in respect of 1981. I thought that it was that that the right hon. Gentleman was discussing earlier.
As for 1983, in respect of 1982, that should be superseded by the agreement on restructuring the budget, which is in the process that we are now going through. If it is not, there will be a further extension of the 30 May agreement. That is clear. It is impossible to say what will be the precise sum. Nor is it a factor in the Government's accounts in 1982. The right. hon. Gentleman is talking about the Government's accounts in 1983. There are many aspects of the Government's accounts in 1983 that cannot be stated with precision at present.
Mr. Jay: In that case, will the Financial Secretary now tell us precisely what will be the net contribution in 1982?
Mr. Lawson: It is possible to get closer to that, but not to be precise. We expect the refunds that we get in 1982 to be about the same as the refunds that we get this year.

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The net contribution is likely to be slightly in excess of the net contribution this year. It is impossible to say what will turn out to be the final figure. That depends on the 1982 Community budget, which has not yet been agreed. Indeed, the budget will not be agreed until the end of the year. The first round of discussions on the 1982 budget begin this week. That is why we are having this debate.
I should like to ask the right hon. Gentleman a question. He talked about a great saving and argued that agriculture should be supported nationally. How much would a Labour Government be prepared to pay on agricultural support nationally? That is an important question. The only way that Labour Members could get savings of the sort that they have spoken about would be by ceasing to assist the United Kingdom farmer.
Mr. Marlow rose—
Mr. Lawson: I do not have time to give way.
It is clear that until the right hon. Member for Llanelli and his party are prepared to say what form and what scale of national support they are prepared to give the farmer—perhaps nothing at all—
Mr. Ron Leighton rose—
Mr. Lawson: I shall not give way. I do not have very much time.
Unless Labour Members are prepared to say what form and what scale of national support they would give the farmer, it is impossible to believe their sincerity. It is equally impossible to believe their arithmetic. The offset against any saving that they are suggesting can be made would have to be made good by national aids to the farmer.
I have become tired of the right hon. Gentleman's gloom-mongering predictions, which are regularly falsified. We had a debate in the House on this subject a year ago. On 2 July 1980 the right hon. Gentleman said:
"I submit that if there is no fisheries policy by the end of the year"—
he was refering to the end of 1980—
"there will be no payment under the budget."—[Official Report, 2 July 1980; Vol. 987, c. 1678.]
The right hon. Gentleman assured the House that not a penny would be paid under the budget unless a fisheries agreement was concluded by the end of the year. We do not have a fisheries agreement. We are still fighting for British fishermen. Yet we have received every penny of the refunds that were due to us under the 30 May agreement. So the right hon. Gentleman has been proved to be wrong in that prediction, as he has been proved to be wrong in almost every prediction that he has made on economic or Community budget matters.
I shall try to deal briefly with some of the points that have been raised. I am sure that right hon. and hon. Members will forgive me if, in the little time remaining to me, I cannot deal with all of them.
My hon. Friend the Member for Southend, East (Mr. Taylor) raised a number of matters. I do not accept his statement that there has been a loss of jobs in the United Kingdom as a result of membership of the Community.
My hon. Friend also asked a question about the moneys paid for the European Parliament. Last year I expressed concern in the Council of Ministers at the amount that the European Parliament was, through, as it were, the gentlemen's agreement, voting itself. However, I am glad
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to be able to tell my hon. Friend that in this year's budget the increase for the European Parliament is only 5 per cent. in money terms, which is a reduction in real terms. That may well suggest that my concern last year that the sum was a bit too high was well founded. Nevertheless, my hon. Friend will at least be reassured to know that.
My hon. Friend the Member for Mid-Sussex (Mr. Renton) raised a number of matters, including that of the European monetary system. This is constantly under review. While it is true that currency stability is something that many business men would like, the great instability that we have seen, as my hon. Friend said, is between the European currencies and the United States dollar. It is not between sterling and the European currencies. Even if we were to be a full member of the European monetary system and part of the exchange rate mechanism we could not do anything about that major instability between the dollar and other currencies.
My right hon. Friend the Member for Farnham (Mr. Macmillan) rightly pointed out that our problems are not wholly due to the EEC. He was right to remind the House that it is always easy to use the Community as a scapegoat. We have problems, but that is not where the difficulties lie. My right hon. Friend suggested that we should take a wider look, rather than just look at narrow budgetary issues. We take a wider look, and we look at the wider issues and the longer issues—peace as well as prosperity. But we must still concern ourselves with the budget. It is important that we do that. It is my humble task to play a part in that, and it is a part that I intend to carry out.
This matter links up very much with what my hon. Friend the Member for Mid-Sussex said. He was right to say that British public opinion is not altogether happy about membership of the Community. [Interruption.] Opposition Members may laugh, but when this matter was put to the people of Britain in a referendum in 1975 there was a very clear answer, and I suspect that the answer would be the same today. I am sure that the more progress that we can make on the European budget question the less discontented that British public will be with the effects of membership of the Common Market. It is very difficult to justify the fact that we, with a standard of living below the Community average, are the second biggest contributor to the budget.
Finally, the hon. Member for Swansea, East (Mr. Anderson) made a very sensible and balanced speech, as he always does. He said that he was worried that the Labour Party was drifting into a committed anti-EEC stance. I regret to have to inform him— I know that other Opposition Members feel the same way—that it is too late. That drift has already reached the point at which, if one were to read between the lines of fine print in what the right hon. Member for Stepney and Poplar (Mr. Shore) said, it is apparent that the Labour Party is firmly committed to withdrawal from the Community. However, for some reason or other the Labour Party does not have the guts to come out into the open about it.
Does the right hon. Member for Stepney and Poplar deny that there is within the Labour Party an EEC study group—of which I believe the right hon. Member for Llanelli is a member—which is on the point of finalising—if it has not done so already—a lengthy document of 20 or more pages, which I trust will be published very soon, committing the Opposition to withdrawal from the European Community? When will it be published? Perhaps the House can be told. We shall be

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interested to know. Instead of the shadow boxing that we have had across the Dispatch Box tonight about how to reform this and that, and how to negotiate this and that, and the ridiculous amendment to the motion, why do not Labour Members come out in their true colours? I think that the House would then be able to reach a clear decision on this matter. The country will reach a clear decision on it when the time comes.
In the meantime, I invite the House to throw out the Opposition amendment.
7.7 pm
Mr. Tony Marlow: We are debating the budget for the European Community. Two years' budget could be as much as £2,000 million. This is a very important matter. It is the bill that we pay for our membership of the Community.
No doubt my right hon. Friend the Leader of the House will one day set aside time for a debate on the benefits of our membership of the Community. He need not worry about setting aside too much time. For 1981 the die is cast. For 1982 the budget is still a matter for negotiation and discussion. I am sure that my right hon. Friend the Prime Minister will be as adamant in British interests as she always is. She has said already that she will be requiring fundamental reform in the budget and the common agricultural policy.
We must look at the cost that we are paying now, despite my right hon. Friend's magnificent efforts last year. This year membership of the Community will cost us, across the exchanges, £530 million. My hon. Friend the Member for Mid-Sussex (Mr. Renton) suggested that we should let people know the facts about the Community, and that wherever the Community puts money into this country for investment we should, at the site of the factory, put up a notice saying that we have had so much money from the Community.
This £530 million costs the average wage earner 80p every week. I should like to make a simple suggestion, namely, that every week every wage packet should have a little item on it saying that the Community has cost the person involved 80p. We should let people know the facts.
We know that the European Assembly will cost us £120 million. That amounts to £½ million for each of its members. We also know that £7,500 million has been set aside in the form of guarantees for farmers. Labour Members are not keen on Trident, but in one year that is one and half times Trident's eventual all-time cost. We do not know that agricultural guarantees will cost 60 per cent. It is said that the figure will be 60 per cent., but if world agricultural prices drop, the figure will climb way above that.
I said that the budget was the bill that we paid for our membership of the Community. However, it is only part of that bill. Indeed, it is the smalles part of it. My hon. Friend the Member for Southend, East (Mr. Taylor) said that he had received an answer from my right hon. Friend the Minister of Agriculture, Fisheries and Food. The cost of the CAP to the British consumer is £3,000 million in any year. My right hon. Friend the Financial Secretary said that we would be bound to pay our own agricultural support. We know that we would be bound to do so and calculations have been done. That would cost us £1,500 million. Therefore every family in that land faces an
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additional bill of £2·50 per week over and above the cost of agricultural support, which, naturally, we all feel that we should sustain.
If my right hon. Friend the Financial Secretary should feel that the figure that I have cited is inaccurate I should be happy for him to intervene. Those are the calculations that have been produced. The Government have been asked for other calculations, but they have not been produced. It is important to bear in mind that there is a major disadvantage in belonging to the EEC. We are the only major food-importing country in the EEC. We import one-third of our foodstuffs from temperate climes. If we have a high-price regime and pay high prices to our farmers in need of agricultural support, that is fine. However, we are paying high prices to Danish, Dutch, German and French farmers. That is every bit as much a burden to our consumers as the budget is a burden to our taxpayers. I hope that my right hon. Friend is listening. When he goes into the budget negotiations, will he calculate the cost of the CAP to the consumer over and above the budget cost? That is a real cost and it is greater than that of the budget. That must go into the calculations.
I have already spoken about the cost of the CAP and that of the budget. Sadly, there is an even more savage cost, namely, the cost to jobs. Right hon. and learned Members have pointed out the savage effect that: our present situation in the Community has on jobs. In the three years leading up to the recession our balance of trade deficit in manufactures increased to such an extent that it was equivalent to 250,000 jobs.
Those hon. Members who have engineering companies in their constituencies will know of the way in which they have been undercut and put out of business. Jobs have been lost and people have been thrown on the dole queues because of our membership of the Community and the terms of our membership. We complain about the unfair practices of the Japanese and the way in which they are smashing our industry. Does not the House realise that our balance of payments deficit in manufactures with the Federal Republic of Germany is three times that of our deficit with Japan?
In this recession, one of the most important things that can help towards overcoming the problem of unemployment is our trade policy. However, one of the penalties of membership of the Community is that we have surrendered our trade policy, lock stock and barrel to Brussels. My hon. Friend the Minister for Trade is sitting on the Front Bench. He does a magnificent job, but there is little that he can do, because all his powers have been transferred and taken away from him.
There is a world recession and everyone is suffering from unemployment. However, we have a petro-currency that makes us less competitive than other countries. Our problems in the recession are worse than the problems of others. They are not of the same nature as those of other European countries. We have problems outside, which they cannot comprehend. We also have problems inside, because European countries have free access to our markets at a time when our currency is uncompetitive.
Still, we have surrendered our trading policy to the well-manicured hands of the Brussels bureaucrats. What have they done? What about Japan and the laser beam that has fastened on to some of our industries? The Federal Republic of Germany is in favour of free trade. It is not concerned about Japan. France has ways of overcoming such things. The Italians overcame the problem before it

75
started. What about us? Who is interested in little Britain or in the United Kingdom? Those countries are supposed to be fighting for us, but they are not concerned about us. We are only part of their problem.
Hon. Members should bear in mind that 50 per cent. of one type of electrical appliance—food mixers—have been imported from Eastern Europe at one-third of the United Kingdom price. They are being dumped. What happens when we fight dumping in Eastern Europe? We have to take the problem to the Community. All the other countries get together, including West Germany. The West Germans and the East Germans are the same people. The West Germans do not want to stop the East Germans. They are not concerned if East German manufactures come into the United Kingdom and destroy our industries. Therefore, they delay and delay. Other electrical appliances come into Britain. For more than a year complaints have been made on dumping but there has been no resolution of the problem. Industries are being destroyed. Brussels fiddles while Britain burns.
Norman Sommerfeld, president of the British Footwear Manufacturers Federation states:
"I recognise that the Government is itself subject to all sorts of practical and institutional restraints—not least our membership of the Community . . We were sold membership of the Community partly because of the great negotiating weight that it would bring to bear on our behalf. But instead, too often, it has appeared divided, irresolute and slow to take necessary action in its members' interests."
The Community has been particularly slow to take action in our interests. It does not seem to care.
Man cannot live by bread alone. We all need a sense of direction and a certain spiritual uplift. The great European adventure—the idea of European co-operation and of Europe being stronger as a whole than its individual parts—has much to commend it. We should all like to go along with that. But how can we, when the Community's very instruments are so unfair?
Would the French put up—as we have done—with robbery from the Community budget? Would they allow their industry to be devastated by inadequate trading policies that do not suit their national needs? Would the French have allowed such a massive extension to their dole queues while other European countries railroad in goods at prices with which they could not compete?
How much longer must the United Kingdom be the paymaster of Brussels, the whipping boy of the Community and a lamp-post for every French poodle and German dachshund? We have all the cards in our hands. We have the market for their agricultural surpluses. We have the market for their manufacturing surpluses. We have got the North Sea oil that they all need. We have the status in the world to work together politically with other European countries. We must demand reforms and equity, and in pursuing this budget we have the instrument with which to do so.
Question put, That the amendment be made:
The House divided: Ayes 219, Noes 301.

Division No. 281]

[10.00 pm

AYES

Adley, Robert

Cadbury, Jocelyn

Aitken, Jonathan

Carlisle, John (Luton West)

Amery, Rt Hon Julian

Carlisle, Kenneth (Lincoln)

Ancram, Michael

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

Arnold, Tom

Chalker, Mrs. Lynda

Aspinwall, Jack

Chapman, Sydney

Atkins, Robert(Preston N)

Churchill, W. S.

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

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

Baker, Kenneth(St.M'bone)

Clark, Sir W. (Croydon S)

Baker, Nicholas (N Dorset)

Clarke, Kenneth (Rushcliffe)

Banks, Robert

Clegg, Sir Walter

Beaumont-Dark, Anthony

Cockeram, Eric

Bendall, Vivian

Colvin, Michael

Bennett, Sir Frederic (T'bay)

Cope, John

Benyon, Thomas (A'don)

Corrie, John

Benyon, W. (Buckingham)

Costain, Sir Albert

Best, Keith

Cranborne, Viscount

Bevan, David Gilroy

Critchley, Julian

Biffen, Rt Hon John

Crouch, David

Biggs-Davison, John

Dean, Paul (North Somerset)

Blackburn, John

Dickens, Geoffrey

Blaker, Peter

Douglas-Hamilton, Lord J.

Body, Richard

du Cann, Rt Hon Edward

Bonsor, Sir Nicholas

Dunn, Robert (Dartford)

Boscawen, Hon Robert

Durant, Tony

Bottomley, Peter (W'wich W)

Eden, Rt Hon Sir John

Boyson, Dr Rhodes

Eggar, Tim

Braine, Sir Bernard

Eyre, Reginald

Bright, Graham

Fairgrieve, Russell

Brinton, Tim

Faith, Mrs Sheila

Brittan, Leon

Farr, John

Brooke, Hon Peter

Fell, Anthony

Brotherton, Michael

Fenner, Mrs Peggy

Brown, Michael(Brigg & Sc'n)

Finsberg, Geoffrey

Browne, John (Winchester)

Fisher, Sir Nigel

Bruce-Gardyne, John

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

Bryan, Sir Paul

Fletcher-Cooke, Sir Charles

Buck, Antony

Forman, Nigel

Budgen, Nick

Fowler, Rt Hon Norman

Bulmer, Esmond

Fox, Marcus

Burden, Sir Frederick

Fraser, Rt Hon Sir Hugh

Butcher, John

Fraser, Peter (South Angus)

116

Galbraith, Hon T. G. D.

Mates, Michael

Gardiner, George (Reigate)

Mather, Carol

Gardner, Edward (S Fylde)

Maude, Rt Hon Sir Angus

Garel-Jones, Tristan

Mawby, Ray

Gilmour, Rt Hon Sir Ian

Mawhinney, Dr Brian

Glyn, Dr Alan

Maxwell-Hyslop, Robin

Goodhart, Philip

Mayhew, Patrick

Goodhew, Victor

Mellor, David

Goodlad, Alastair

Meyer, Sir Anthony

Gorst, John

Miller, Hal (B'grove)

Gow, Ian

Mills, Iain (Meriden)

Gower, Sir Raymond

Mills, Peter (West Devon)

Grant, Anthony (Harrow C)

Moate, Roger

Gray, Hamish

Monro, Hector

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

Montgomery, Fergus

Griffiths, Peter (Portsm'th N)

Moore, John

Grist, Ian

Morris, M. (N'hampton S)

Grylls, Michael

Morrison, Hon C. (Devizes)

Gummer, John Selwyn

Morrison, Hon P. (Chester)

Hamilton, Hon A.

Mudd, David

Hamilton, Michael (Salisbury)

Murphy, Christopher

Hampson, Dr Keith

Myles, David

Hannam, John

Neale, Gerrard

Haselhurst, Alan

Needham, Richard

Havers, Rt Hon Sir Michael

Neubert, Michael

Hawkins, Paul

Newton, Tony

Hawksley, Warren

Nott, Rt Hon John

Hayhoe, Barney

Onslow, Cranley

Heath, Rt Hon Edward

Oppenheim, Rt Hon Mrs S.

Heddle, John

Page, Rt Hon Sir G. (Crosby)

Henderson, Barry

Page, Richard (SW Herts)

Hicks, Robert

Parkinson, Cecil

Higgins, Rt Hon Terence L.

Parris, Matthew

Holland, Philip (Carlton)

Patten, Christopher (Bath)

Hordern, Peter

Patten, John (Oxford)

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

Pawsey, James

Howell, Ralph (N Norfolk)

Percival, Sir Ian

Hunt, David (Wirral)

Pink, R. Bonner

Hunt, John (Ravensbourne)

Pollock, Alexander

Hurd, Hon Douglas

Prentice, Rt Hon Reg

Jenkin, Rt Hon Patrick

Price, Sir David (Eastleigh)

Jessel, Toby

Prior, Rt Hon James

Johnson Smith, Geoffrey

Proctor, K. Harvey

Jopling, Rt Hon Michael

Pym, Rt Hon Francis

Joseph, Rt Hon Sir Keith

Rathbone, Tim

Kaberry, Sir Donald

Rees, Peter (Dover and Deal)

Kellett-Bowman, Mrs Elaine

Rees-Davies, W. R.

Kershaw, Anthony

Renton, Tim

Kimball, Marcus

Rhodes James, Robert

King, Rt Hon Tom

Rhys Williams, Sir Brandon

Knight, Mrs Jill

Ridley, Hon Nicholas

Knox, David

Ridsdale, Sir Julian

Lamont, Norman

Rifkind, Malcolm

Lang, Ian

Roberts, M. (Cardiff NW)

Langford-Holt, Sir John

Roberts, Wyn (Conway)

Latham, Michael

Rossi, Hugh

Lawrence, Ivan

Rost, Peter

Lawson, Rt Hon Nigel

Royle, Sir Anthony

Lee, John

Scott, Nicholas

Lennox-Boyd, Hon Mark

Shaw, Giles (Pudsey)

Lester, Jim (Beeston)

Shelton, William (Streatham)

Lewis, Kenneth (Rutland)

Shepherd, Cohn (Hereford)

Lloyd, Peter (Fareham)

Shepherd, Richard

Loveridge, John

Shersby, Michael

Luce, Richard

Silvester, Fred

Lyell, Nicholas

Skeet, T. H. H.

McCrindle, Robert

Speed, Keith

Macfarlane, Neil

Speller, Tony

MacGregor, John

Spence, John

MacKay, John (Argyll)

Spicer, Jim (West Dorset)

Macmillan, Rt Hon M.

Spicer, Michael (S Worcs)

McNair-Wilson, M. (N'bury)

Sproat, Iain

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

Squire, Robin

McQuarrie, Albert

Stainton, Keith

Madel, David

Stanbrook, Ivor

Major, John

Stanley, John

Marland, Paul

Steen, Anthony

Marlow, Tony

Stevens, Martin

Marshall, Michael (Arundel)

Stewart, Ian (Hitchin)

Marten, Neil (Banbury)

Stewart, A.(E Renfrewshire)

117

Stokes, John

Walker, B. (Perth)

Stradling Thomas, J.

Wall, Patrick

Tapsell, Peter

Walters, Dennis

Taylor, Teddy (S'end E)

Ward, John

Tebbit, Norman

Warren, Kenneth

Temple-Morris, Peter

Watson, John

Thomas, Rt Hon Peter

Wells, John (Maidstone)

Thompson, Donald

Wells, Bowen

Thorne, Neil (Ilford South)

Wheeler, John

Thornton, Malcolm

Whitelaw, Rt Hon William

Townend, John (Bridlington)

Whitney, Raymond

Townsend, Cyr I D, (B'heath)

Wiggin, Jerry

Trippier, David

Williams, D.(Montgomery)

Trotter, Neville

Wolfson, Mark

van Straubenzee, W. R.

Young, Sir George (Acton)

Vaughan, Dr Gerard

Younger, Rt Hon George

Viggers, Peter

Waddington, David

Tellers for the Ayes:

Wakeham, John

Mr. Spencer Le Marchant and

Waldegrave, Hon William

Mr. Anthony Berry.

NOES

Abse, Leo

Dixon, Donald

Adams, Allen

Dobson, Frank

Allaun, Frank

Dormand, Jack

Alton, David

Douglas-Mann, Bruce

Anderson, Donald

Dubs, Alfred

Archer, Rt Hon Peter

Duffy, A. E. P.

Ashton, Joe

Dunn, James A.

Atkinson, N.(H'gey,)

Dunnett, Jack

Barnett, Guy (Greenwich)

Dunwoody, Hon Mrs G.

Barnett, Rt Hon Joel (H'wd)

Eadie, Alex

Beith, A. J.

Eastham, Ken

Bennett, Andrew(St'kp't N)

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

Bidwell, Sydney

Ellis, Tom (Wrexham)

Booth, Rt Hon Albert

English, Michael

Boothroyd, Miss Betty

Ennals, Rt Hon David

Bray, Dr Jeremy

Evans, Ioan (Aberdare)

Brocklebank-Fowler, C.

Evans, John (Newton)

Brown, Hugh D. (Provan)

Ewing, Harry

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

Faulds, Andrew

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

Field, Frank

Buchan, Norman

Flannery, Martin

Callaghan, Rt Hon J.

Fletcher, Raymond (Ilkeston)

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

Fletcher, Ted (Darlington)

Campbell-Savours, Dale

Foot, Rt Hon Michael

Canavan, Dennis

Ford, Ben

Cant, R. B.

Forrester, John

Carter-Jones, Lewis

Foster, Derek

Cartwright, John

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

Clark, Dr David (S Shields)

Freeson, Rt Hon Reginald

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

Freud, Clement

Cohen, Stanley

Garrett, John (Norwich S)

Coleman, Donald

Garrett, W. E. (Wallsend)

Concannon, Rt Hon J. D.

George, Bruce

Cook, Robin F.

Gilbert, Rt Hon Dr John

Cowans, Harry

Ginsburg, David

Craigen, J. M.

Graham, Ted

Crowther, J. S.

Grimond, Rt Hon J.

Cryer, Bob

Hamilton, James (Bothwell)

Cunliffe, Lawrence

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

Cunningham, G. (Islington S)

Hardy, Peter

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

Harrison, Rt Hon Walter

Dalyell, Tam

Hart, Rt Hon Dame Judith

Davidson, Arthur

Hattersley, Rt Hon Roy

Davies, Rt Hon Denzil (L'lli)

Healey, Rt Hon Denis

Davies, Ifor (Gower)

Heffer, Eric S.

Davis, Clinton (Hackney C)

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

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

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

Deakins, Eric

Home Robertson, John

Dean, Joseph (Leeds West)

Homewood, William

Dempsey, James

Hooley, Frank

Dewar, Donald

Horam, John

118

Howell, Rt Hon D.

Roberts, Ernest (Hackney N)

Howells, Geraint

Roberts, Gwilym (Cannock)

Huckfield, Les

Robertson, George

Hughes, Robert (Aberdeen N)

Robinson, G. (Coventry NW)

Hughes, Roy (Newport)

Rodgers, Rt Hon William

Janner, Hon Greville

Rooker, J. W.

Jay, Rt Hon Douglas

Roper, John

John, Brynmor

Ross, Ernest (Dundee West)

Johnston, Russell (Inverness)

Ross, Stephen (Isle of Wight)

Jones, Barry (East Flint)

Rowlands, Ted

Jones, Dan (Burnley)

Ryman, John

Kaufman, Rt Hon Gerald

Sandelson, Neville

Kerr, Russell

Sever, John

Kilroy-Silk, Robert

Sheerman, Barry

Lambie, David

Sheldon, Rt Hon R.

Leadbitter, Ted

Shore, Rt Hon Peter

Leighton, Ronald

Short, Mrs Renée

Lewis, Arthur (N'ham NW)

Silkin, Rt Hon J. (Deptford)

Lewis, Ron (Carlisle)

Silkin, Rt Hon S. C. (Dulwich)

Litherland, Robert

Silverman, Julius

Lofthouse, Geoffrey

Skinner, Dennis

Lyon, Alexander (York)

Smith, Rt Hon J. (N Lanark)

Lyons, Edward (Bradf'd W)

Snape, Peter

Mabon, Rt Hon Dr J. Dickson

Soley, Clive

McDonald, Dr Oonagh

Spearing, Nigel

McElhone, Frank

Spriggs, Leslie

McKay, Allen (Penistone)

Stallard, A. W.

McKelvey, William

Steel, Rt Hon David

MacKenzie, Rt Hon Gregor

Stewart, Rt Hon D. (W Isles)

Maclennan, Robert

Stoddart, David

McMahon, Andrew

Stott, Roger

McNally, Thomas

Strang, Gavin

McNamara, Kevin

Summerskill, Hon Dr Shirley

McTaggart, Robert

Taylor, Mrs Ann (Bolton W)

McWilliam, John

Thomas, Jeffrey (Abertillery)

Magee, Bryan

Thomas, Mike (Newcastle E)

Marshall, D(G'gow S'ton)

Thomas, Dr R.(Carmarthen)

Marshall, Dr Edmund (Goole)

Thorne, Stan (Preston South)

Marshall, Jim (Leicester S)

Tilley, John

Mason, Rt Hon Roy

Tinn, James

Maxton, John

Torney, Tom

Mikardo, Ian

Urwin, Rt Hon Tom

Millen, Rt Hon Bruce

Varley, Rt Hon Eric G.

Miller, Dr M. S. (E Kilbride)

Wainwright, E.(Dearne V)

Mitchell, Austin (Grimsby)

Wainwright, R.(Colne V)

Mitchell, R. C. (Soton Itchen)

Walker, Rt Hon H.(D'caster)

Morris, Rt Hon A. (W'shawe)

Watkins, David

Morris, Rt Hon C. (O'shaw)

Weetch, Ken

Morris, Rt Hon J. (Aberavon)

Wellbeloved, James

Morton, George

Welsh, Michael

Moyle, Rt Hon Roland

White, Frank R.

Mulley, Rt Hon Frederick

White, J. (G'gow Pollok)

Newens, Stanley

Whitehead, Phillip

Oakes, Rt Hon Gordon

Wigley, Dafydd

Ogden, Eric

Willey, Rt Hon Frederick

O'Halloran, Michael

Williams, Rt Hon A.(S'sea W)

Orme, Rt Hon Stanley

Wilson, Gordon (Dundee E)

Owen, Rt Hon Dr David

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

Palmer, Arthur

Wilson, William (C'try SE)

Park, George

Winnick, David

Parker, John

Woodall, Alec

Pendry, Tom

Woolmer, Kenneth

Penhaligon, David

Wrigglesworth, Ian

Powell, Raymond (Ogmore)

Wright, Sheila

Prescott, John

Young, David (Bolton E)

Radice, Giles

Rees, Rt Hon M (Leeds S)

Tellers for the Noes:

Richardson, Jo

Mr. Hugh McCartney and

Roberts, Allan (Bootle)

Mr. Frank Haynes.

Question accordingly negatived.
Main Question put and agreed to.
Resolved,
That this House takes note of the Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981, and the Preliminary Draft General Budget of the European Commission for 1982.

Orders of the Day

  Finance Bill
  Order for Third Reading read.—[Queen's Consent signified.]
  7.30 pm
  The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move, That the Bill be now read the Third time.
  Our debates in Committee and on Report have been wide-ranging and have quite rightly concentrated on the detail of what the Finance Bill does and does not contain. We can now take stock and look at the Bill as a whole in the context of the Government's overall economic strategy.
  For many years our economy has suffered from low growth, caused by high inflation, low investment, and sluggish responsiveness to change. For many years successive Governments have failed to tackle the underlying problems.
  This Government, however, are determined to tackle these problems at root. We have put at the forefront the goal of reducing inflation by responsible monetary control because by doing that we are tackling the problem that has been at the heart of our trouble. It is not a question of choosing to tackle inflation rather than unemployment. It is, rather, a recognition that past inflation has been the cause of present unemployment. To embark on a massive reflationary package such as that advocated by the Opposition would simply be to stoke up inflation for the sake of a very small, short-term improvement in the employment position, but with the ultimate consequence of unemployment at far higher levels than we are suffering today. I would be the first to agree that monetary policy by itself is not enough. The support of an appropriate fiscal policy is also needed. That is what this Finance Bill is about.
  While adopting that approach in the Budget my right hon. and learned Friend the Chancellor of the Exchequer also fully appreciated that account had to be taken of the pressures and strains brought about by the world recession. The suggestion that the Government have pressed on regardless in an inflexible manner is the product of a fertile propagandist imagination rather than a reflection of what has been happening in the real world.
  Mr. D. N. Campbell-Savours: Who said that?
  Mr. Brittan: I did. The hon. Gentleman should recognise the inimitable style.
  That is certainly not the inflexible approach. It is certainly not how the Government's policy is seen in BL or BSC when confronted by substantial Government expenditure for both those bodies. None the less, action was clearly needed to secure a lower PSBR than would otherwise have emerged. Had the Chancellor presented a broadly neutral Budget the indications were that the PSBR would have been of the order of £14 billion this year. That would have implied the continuation of very high interest rates to fund such a borrowing requirement. Industry would have continued to be very hard pressed, with severe consequences for investment and employment.

  81
  The only way to take the pressure off interest rates, and thus help industry, was to raise taxes to cover at least some of the extra expenditure caused by the recession and already agreed to. Because personal incomes had continued to rise in real terms, despite the squeeze on companies, it was right that most of the extra revenue should come from personal taxation.
  Between 1977 and 1980 real personal disposable income had risen by one-sixth, while output hardly rose at all. By our concentrating tax increases on personal taxation, industry was able to benefit from a 2 per cent. reduction in MLR as well as help on energy prices and an improved stock relief scheme.
  But it is not only to the personal sector that the Chancellor has looked for revenue. The House will need no reminding that the Bill contains two new taxes—the special tax on banking deposits and the supplementary petroleum duty. Of course the bank tax was introduced with regret but the changes made to it during the passage of the Bill demonstrate my right hon. and learned Friend's willingness to be flexible in response to reasonable representations.
  The new North Sea tax regime will ensure that the country as a whole continues to benefit from our possession of North Sea oil. Revenues from the North Sea make it easier for us to achieve a level of public sector borrowing that gives private sector industry a chance to borrow and invest on its own account.
  The Bill also provides for a further major package of help for small businesses. Pre-eminent among this year's measures is, of course, the business start-up scheme. This is an imaginative and original scheme. Because it is without precedent in any other country, it is not surprising that there was a great deal of interest in the details when they were originally announced. We received a wide range of representations and reactions and obviously we have discussed the scheme at length. My right hon. and learned Friend was able to respond to many of the proposals put to us for strengthening it—for example, by increasing from three to five years the period during which a business qualifies as new.
  We also made two significant extensions to the scheme on Report. Distributive trades are now included, and the relief has been adapted to cover the case where investment funds act as nominees so that investors can, if they wish, invest with the help of professional managers.
  This is an extremely generous relief. It offers substantial incentives to those prepared to risk their capital to support enterprise, and it is clear that it is now widely welcomed. I am confident that it will make an important contribution to the problems of small firms seeking equity capital.
  With this and the other enterprise measures that we have introduced since taking office we have set a climate in which, as the economy starts to come right, new and small firms can prosper and play a leading part in providing the jobs, the innovative ideas and the flexibility for the future.
  Taken as a whole, the provisions in the Bill are designed to consolidate our progress in reducing the rate of inflation and to carry forward our anti-inflationary strategy. It will, of course, take time for these policies to bear fruit in terms of higher output and productivity and lower unemployment. We should not expect, nor have we ever expected, a dramatic adjustment in the economy to occur overnight. Yet, so far as the current recession is
  82
  concerned, there are indications that the worst is behind us. Industrial-manufacturing output has stabilised since the turn of the year. Unemployment is still rising, of course, but progressively more slowly. Vacancies have stabilised and average weekly hours worked in manufacturing are increasing. There are signs of improved productivity—both in individual companies and in total manufacturing industry. Surveys show that business confidence is continuing to improve.
  All those indicators are consistent with the forecasts we published with the Budget, and we have no reason to change our view that there will be some modest growth in output over the next 12 months or so. None of the evidence supports the Opposition's view of an accelerating decline in output.
  None the less, the Opposition call for a policy of massive reflation. Night after night in Committee upstairs and on the Floor of the House they have endeavoured to press upon us a succession of amendments that would have deprived the Exchequer of vast sums of revenue. The consequence would have been a huge increase in public borrowing. That could have led only to a damaging collapse of financial confidence, higher interest rates and a reversal of the success that we had in the past year in bringing down the rate of inflation. Above all, except in the shortest run and to a very limited extent, it would not have improved the employment situation.
  The right hon. Member for Stepney and Poplar (Mr. Shore) presents his call for reflation comparatively modestly, but the leader of the Opposition is more ambitious, though characteristically more vague. He talks in terms of a reflationary package of £6½ billion. However, it would be wrong to be unfair to the right hon. Member for Ebbw Vale (Mr. Foot), because he recognises that there are certain difficulties in following such a policy. Indeed, he said in Cardiff on 4 July:
  "Of course, this would only be the start, and such a planned policy of expansion does have implications for our balance of payments, does pose problems of how we are to overcome the kind of bottlenecks in industry and the inflation we have known in the past."
  The right hon. Gentleman recognises to the full the problems presented by the policy of reflation which he was advocating so generously.
  What is the right hon. Gentleman's answer to the problem that he analysed so candidly? It is an interesting but not particularly illuminating answer. Having outlined the problems that would be caused by the policy that he is advocating, the right hon. Gentleman gave his answer:
  "These and all kindred problems we are examining afresh with our trade union colleagues."
  I do not find that an illuminating answer. It is a sad reflection of the shallowness of the official Opposition's diagnosis of the problem that they put forward their prescription, recognise the problems, but have only those few hollow and shallow words in answer to those problems.
  Of course, our problems remain extremely serious. They have taken decades to develop and it would be astonishing if we had been able to overcome them in a couple of years. But the foundation has been laid for a return to prosperity and to steady growth. Inflation has been checked. There is encouraging evidence of greatly improved productivity. Above all, attitudes are changing—to pay, to industrial relations, to working methods. There is a growing awareness that living standards depend on co-operating to make our industry

  83
  competitive once more. That is the course to which we must adhere. It is Britain's only hope for a sound economy in the future.
  Lord Vaizey wrote in a letter published in The Times today:
  "The present Government's policy … has one central feature … It is to make business more efficient by making it more competitive. Nationalized industries, big business, trade unions, public regulation—all unite to weave a web of restriction in which economic progress cannot be made. It is a heroic task to sweep this web of restriction away. Initially, as it is done, people lose their jobs. But if the attempt is successful (as it was in Germany after 1948) millions will get better jobs."
  Lord Vaizey put the problem succinctly and well.
  The objection to a radical change of course now is not that it would involve a U-turn or mean eating our words. The future of our country is far too serious a matter for me to regard either of those considerations for one moment as a serious reason for refusing to change tack if that would really give this nation new hope or new opportunities. But I am profoundly convinced that it would not. It would mean giving up the one serious attempt to tackle our deep-seated problems at their very root. It would mean throwing away the sacrifices of so many people just when those sacrifices are enabling us to emerge from recession with a real prospect of stable advance instead of continuing the steady slide downhill which has lasted for so many sad long years.
  To relax now would be the easy way out. It has been followed often enough in the past. That is precisely why things are so difficult now. It is why the process of tackling our basic economic problems has become so painful and so protracted. But it is also why it is so vital not to abandon that task now. The Bill does not do that. It carries the task forward realistically and courageously. That is why it should be read the Third time.
  7.45 pm
  Mr. Peter Shore: We have reached the final stage of the Third Reading of the 1981 Finance Bill. Having heard the Chief Secretary's speech, I am inclined to say "Thank heavens that we have reached this stage". I do not think that I could bear to hear another speech so full of complacency, wishful thinking, shallow thinking, and exhausted clichés as that to which we have been subjected for the past 15 minutes.
  The Third Reading comes four months after the Budget Statement and three months after the Second Reading. In spite of debates on the Floor of the House, the most diligent and searching examination of the Bill upstairs in Committee, on the conduct of which I warmly congratulate my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and the Opposition Front-Bench and Back-Bench team, and two long days and nights on Report, the Bill in its final form is little different from the version presented to us just over three months ago.
  Indeed, the only change that deserves a mention is that the Chancellor backed down on derv and halved his original proposed increase in duty, but promptly recouped the £85 million involved by a further impost on tobacco and an increase in a number of betting and gaming taxes.
  The Chancellor can, for what it is worth, rightly claim that his Budget is intact. He is still seeking to raise the £3,600 million of additional revenue that he originally
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  proposed and he is raising it in almost exactly the same way as he set forth in his Budget Statement. The taxpayers of this country have been cheated of even a partial uprating of tax allowances to take account of last year's inflation, in spite of all the pledges and promises that the Treasury team have given.
  Those who drink, those who smoke and those who drive will pay an additional £2,000 million in taxation. The unemployed and the families of those on strike receiving social security benefits are brought into the tax net, while those at the opposite end of the income scale will benefit from the virtual destruction and gutting of capital transfer tax.
  But if the content of the Bill has survived virtually unscathed during the past four months of debate, the economic environment into which it was originally launched and the assessment of economic developments during the next 12 to 18 months have changed substantially. The Budget is, as I hope to show shortly, already obsolescent, even within its own terms of reference, and totally unrelated to the needs of the nation.
  The Chancellor of the Exchequer had the courtesy to inform me that he would not be here for the debate. With the Ottawa conference under way the House will readily understand why he cannot be with us. I only hope that he will not urge on his American counterparts the same disastrous high interest rate policies as he inflicted on us during last year. Secondly, I hope that we shall have an outcome from Ottawa that is less disastrously sterile from the point of view of world output and trade than was the Venice summit just a year ago.
  During the course of these protracted debates the absence of the Chancellor has been a noteworthy and recurring phenomenon. It is as though he has become a fugitive from his own economic decisions. Although, as a consequence, we have not been able to debate directly with him since his winding-up speech in the Budget debate nearly four months ago, we learnt from the Chief Secretary in the Ways and Means debate on 6 July that nothing had changed in the real world of the economy to make the Chancellor alter his Budget judgment and, in particular, the size of the public sector borrowing requirement at £10½ billion. We had it on the Chief Secretary's authority that
  "The Chancellor's view is that nothing has happened since that date to invalidate that judgment".
  I beg to disagree.
  I refer the Chief Secretary to his statement on Second Reading on 13 April, when he gave his reasons for believing that the Budget measures
  "enable us to look to the coming year with greater confidence".
  Among the encouraging signs to which he then directed us—I agree that he has produced one or two more today, but let us take the ones that he produced three months ago—was the fact that
  "Output is likely to be on a rising trend over the coming financial year 1981–82."
  That, according to the Chief Secretary, was
  "not just a Government forecast … reputable outside forecasters also see prospects of recovery".
  The Chief Secretary reinforced his optimism by
  "the behaviour of indicator series published by the Central Statistical Office. Longer leading indicators have been rising since November 1979, shorter leading indicators since November 1980 and coincident indicators have levelled out since last November".
  Then there was the anecdotal evidence from industry, and the fact that housing starts
  "rose sharply in January and in February".

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  Finally, as he put it:
  "There is hard evidence that the fall in output may be over … The February figures for manufacturing production, seasonally adjusted, were published this afternoon. They show a rise of 1 per cent, compared with January. For total industrial production the figures show a rise of ¾ per cent.".—[Official Report, 13 April 1981; Vol. 3, c. 37–38.]
  At the time I thought that the cupboard must be pretty bare for the Chief Secretary to be clutching at so many fragile straws. That is precisely the impression that I got today when listening again to the assembly of inconsequential material with which he sought to fortify his renewed and revived optimism.
  How do the scraps of evidence that were served up three months ago look today? First, we know that the Government have received a further short-term forecast—the Treasury June forecast. As that has been leaked to most of our serious newspapers, and as their accounts are virtually identical, I see no reason why we should challenge what they say. According to The Times
  "The Treasury expects manufacturing output to go on falling and thinks that the country's total production will remain broadly stagnant between now and the end of 1982".
  The general view of outside forecasters about the outlook for the growth of industrial production and the GDP is shared by such authoritative forecasters as the OECD, the Brussels Commission and the National Institute.
  What about the key indicators published by the Central Statistical Office? The main indicators, as the Chief Secretary knows, were published last week, on 16 July. The coincident indicator, which is supposed to show the current position, has fallen for two months running, after flattening out last winter. The longer leading indicators have shown a fall in the latest month, the first decline since last summer. Thus, both the key indicators published by the CSO, which gave the Chief Secretary such comfort in the April debate, are now showing the opposite trend to that which they showed three months ago.
  Then there are the housing starts. We now know the figures not just for January and February but for March, April and May. I remind the Chief Secretary of what they indicate. In the past three months housing starts have been 4 per cent. down on the previous three months, and 14 per cent. lower than they were during the corresponding three months of 1980.
  Lastly, we have the latest figure for the index of industrial production. As I said in the last debate, they do not show any rise. Indeed, they showed a small fall both in manufacturing and in total industrial output for the third month running.
  Next, there is inflation, the falling trend of which gave the Chief Secretary such confidence on 13 April. He told us on that date that
  "the underlying rate is … not much more than 10 per cent. Moreover, inflation is forecast to fall into single figures early next year."—[Official Report, 13 April 1981; Vol. 3, c. 37.]
  I wonder whether the Chief Secretary would care to repeat that forecast now. Is it not true that the Treasury's June forecast now shows inflation continuing in double figures throughout this year and most of next, with at best a fall to about 9 per cent. at the end of 1982? How far has even the Treasury's June forecast taken account of the recent overall depreciation of the pound against other currencies, which must add roughly 2 per cent. to the rate of inflation?
  My last query concerns the vital matter of unemployment. The Treasury has always been reluctant to give estimates of the unemployment rate. Nevertheless, the public expenditure White Paper, published at the time
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  of the Budget, gave the Government unemployment assumption for 1981, at 2½ million, and 2·7 million for next year.
  In an earlier debate I drew attention to the fact that in June the Treasury had instructed the Government Actuary to revise upwards the 1981 unemployment rate to 2·6 million. However, I believe that that, too, is an underestimate. Tomorrow's monthly figures, as the Department of Employment made haste to inform us, will be inflated by the effects of the Civil Service dispute, which has meant that a number of those who have left the unemployment registers will not have been recorded as such. Meanwhile, the bulk of school leavers will be joining the register now that the school term has ended.
  Nevertheless, I think that we are in for a shock tomorrow. The latest Treasury forecast—the June forecast—indicates that unemployment is now heading towards the 3 million mark, and, worse, that it will rise above it, and that there is no indication of any fall in 1982.
  I have rehearsed this evidence of the present situation and our future outlook to underline my claim that the Budget—and the Finance Bill, which seeks to express the Budget judgment—is, clearly, four months later, obsolescent. In so far as it was designed to connect with the real economy, the evidence shows that it no longer fits. It is clear that with higher than estimated unemployment and lower than estimated output, public expenditure is bound to increase. I reckon that the cost of employment measures added to it will swell the outturn of the PSBR.
  While I do not believe that the Treasury will seriously wish to contest what I have said, I do not think that the new evidence will make the slightest difference to the behaviour of Ministers. We are not dealing with a Government who are moved by evidence, compassion or reason. We are dealing with a Government who are themselves governed by dogma. The figures for unemployment, output, inflation and the balance of payments are not at the centre of their thinking. What matters to them is the money supply and the PSBR. The Bill is designed to achieve a particular outturn PSBR and to reinforce money supply restraint within the target figure of 6 to 10 per cent. The money supply and the PSBR have become the totem and taboo of the primitive monetarist sect which now dominates the Treasury. That is an apt analogy.
  According to the Encyclopaedia Britannica, totems in primitive societies were considered to have
  "superhuman powers and abilities … objects of awe and fear. Though it is generally agreed that totemism is not a religion, in certain cases it can contain religious elements of varying degrees, just as totemism can appear conjoined with magic."
  That is certainly the position that money supply, M3, occupies in the mind of the Government.
  Equally,
  "taboo, when applied to the customs of primitive peoples, may be defined as prohibition against certain kinds of behaviour, violation of which is believed to be punished automatically by supernatural means."
  That is very near to the Government's approach to the PSBR. We saw that clearly when it was violated by the impious decision to lower the tax on derv, a move that had to be punished automatically by the introduction of immediate and equivalent fiscal penalties.
  Mr. David Winnick: On Friday's television programme "Newsnight", the Minister of Agriculture, Fisheries and Food made a clear criticism of

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  the Government, though obviously in more guarded terms than those of my right hon. Friend. He warned that the Government should beware of economic dogma and the rest. It is interesting to note that no reference has been made by any Minister or Government supporter to that comment.
  Mr. Shore: My hon. Friend is right. The truth is—and it will come to be recognised, because it will come out—that what I have described as the primitive monetarist sect which at the moment dominates the economic Departments and No. 10 in no sense represents even the majority view of Conservative Ministers. That will be clear for the record and for history, although it is the last thing that Treasury Ministers would dare to concede today.
  It is one thing for the Government to worship the money supply totem and to venerate the PSBR taboo. It is quite a different matter when it comes to imposing these primitive beliefs on the men and women and the diverse institutions that make economic events in the country.
  Last year the PSBR taboo was broken to the tune of £5 billion, when the outturn reached £14 billion against a Budget target of £8½ billion. This year, the evidence is already plain that the PSBR will again be higher than the sum for which the Government budgeted. The Government already face new and large demands for additional public expenditure. No one in his senses can doubt that large expenditures will be needed if the Government's promise of job training or work experience for all of this year's school leavers is to be achieved.
  The £1,000 million package proposed by the Secretary of State for Employment to alleviate unemployment, especially for the young, is, we now know, still being discussed in the Cabinet. The events of the last few weeks in our cities have given the argument for such measures additional strength and urgency. This will come on top of the additional costs arising from higher unemployment and the additional financing for the National Coal Board and British Telecom, which has been announced since the Budget debate.
  This autumn, when the present public expenditure exercise is resumed, the Government are committed to seek further cuts to reduce next year's PSBR along the lines of their medium-term financial strategy. I do not believe that further significant cuts will prove to be possible. If in some way they were achieved I do not believe that there would be any net saving in public expenditure arising from them. Further cuts are bound to have an impact upon other public expenditure programmes, including the financing of still higher unemployment. It will largely wipe out any apparent reductions in public expenditure.
  As for the M3 targets, as I remarked during our last debate, there is a statistical fog which has followed from the Civil Service dispute. But here again I recall the outturn of last year. Then, M3 was supposed to fall within the range of 7 to 11 per cent. That was the most important objective of Government policy. In the event, it was almost double the top figure of the range. I shall be surprised if there is not a substantial overshoot in this year's 6 to 10 per cent. target.
  All this must matter enormously to the Government and, I assume, worry greatly Treasury and other Ministers. They have said little about these matters in recent months
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  and recent debates. Since I venerate neither totem nor taboo, the money supply and PSBR figures cause me little unease. I am much more concerned about the real indicators—unemployment and the output of our economy. But I am concerned with M3 and the PSBR, in that they are likely to influence the Treasury and to lead Treasury Ministers to still more damaging economic policies.
  The Third Reading of the Finance Bill sets the seal on yet another year of economic failure and mismanagement. During the Second Reading debate on 13 April the Chief Secretary told us that the Government had two major objectives: first and foremost, to reduce inflation; secondly, to improve the supply side of the economy.
  I have already described the outlook for inflation. For the supply side of the economy, it is clear that the Government have no policy. Here again they are the prisoners of dogma.
  In a speech to the St James's club in Manchester last Friday the Chief Secretary spelt out in some detail what he meant by "supply side policy". He said that it was, in essence, to remove unnecessary distortions to market forces and to allow
  "the invisible hand of the market to replace the visible hand of bureaucracy."
  While all our competitors are trying their utmost to identify the growth industries in the 1980s and 1990s and to take Government action to assist their industries to exploit the opportunities of the future. Britain, under its present mangement, is doing its utmost to pull out of Government intervention in industry—to denationalise as much of the public sector as they can. These policies have not worked and will not work. There is a deficiency of demand in the British economy, and that deficiency has been increased enormously by this fiscally deflationary Finance Bill. Industry will not invest unless there is a reasonable prospect of selling its output, and with output as far below capacity as it is today the prospect of increasing investment is remote.
  I do not know what further misfortunes must befall the British people and the national economy before this stubborn Government and their primitive economic doctrines are overturned—but overturned they will be. This is a bad Finance Bill, embodying as it does a perversely wrong Budget judgment about the needs of our economy. It is a Bill which not merely accommodates itself to the record unemployment level which existed in the early spring of this year but increases that unemployment deliberately by reducing purchasing power by a further £4,000 million.
  The Government's excuse is that they must deal with inflation first, as we heard yet again today, and that we cannot have increasing employment unless and until we tackle inflation. There is no evidence for that assertion. While inflation has harmful social and economic consequences, experience here and in many other countries over the years has shown wide differences in growth rates and in unemployment and inflation levels. Germany has had low inflation and high output for many years. Italy, Japan and Brazil have been traditionally high inflation and high growth countries. Switzerland is a low-inflation and low-growth country. There is no simple relationship between growth and inflation. Against that background it is no good the Government pretending that

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  they are as concerned about unemployment as the Opposition are. It is sheer hypocrisy for them to make such a claim.
  The country is crying out for a change of policy, for measures that will reduce, not increase, unemployment generally and youth unemployment in particular, for measures that will increase investment in worthwhile projects in both the public and private sectors of industry, for substantial housing and infrastructure investment, and for the renewal and revitalisation of our decaying and tense inner cities.
  The Finance Bill and the economic policy that it seeks to serve denies the real needs of the people and the economy. For these reasons, the Opposition will vote against the Third Reading.
  8.9 pm
  Mr. Peter Hordern: The right hon. Member for Stepney and Poplar (Mr. Shore) indulged in a good deal of hyperbole. I am not clear from his remarks what his own prescription for our economic difficulties is. He said about my right hon. and learned Friend the Chancellor of the Exchequer that he was following a policy which involved the admiration of a totem pole so long as it was not taboo, but I am not clear which totem pole the right hon. Gentleman and the Labour Party are worshipping. He was critical about our level of interest rates and of the level of United States interest rates, but I was surprised when he ignored the fact that interest rates in France are a good deal higher than they are here. We are not a high-interest rate country at all.
  I do not know what the right hon. Member would do if he were in the position of my right hon. and learned Friend, but if he were to reduce interest rates I assume that he would also increase the amount of money that the Government needed to borrow. I cannot see how the two would go together. The right hon. Gentleman was not anxious to spell that out this evening.
  It is time that the Opposition made it clear, when talking about reviving our industry and our city centres, just how the money can be found. Is it by additional borrowing, taxation, or by printing money? All three have been tried. I notice that the Leader of the Labour Party has joined the ranks of those who say that they will cut taxes, so additional taxation is not open to them.
  The Opposition would not borrow additional money because they must know that interest rates would rise significantly. They are left with only one alternative, and that is to print more money. That exercise has been tried before with the most disastrous results for inflation. Is that what the right hon. Gentleman is suggesting the Government should do? It is time that the Opposition spelt out their policies. I do not think that the Leader of the Opposition cares to spell out economy policy in any great detail or clarity. It is not possible to accept his statement that taxes can be reduced while at the same time not increasing borrowing.
  The right hon. Member for Stepney and Poplar did not say what policy the Opposition would adopt to control inflation. He never mentioned his affection for a prices and incomes policy—that is the policy of the Social Democratic Party. He keeps very quiet about that. Now, when he is quite safe with the right hon. and hon. Members who are sitting behind him—there are very few of them—he could have spelt out his policy. However, he would not say that he believed that the only possible policy
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  was that of prices and incomes. I am looking forward to the day when that policy is properly spelt out. I doubt that we shall hear it soon.
  Dr. Jeremy Bray: If the hon. Gentleman feels that a prices and incomes policy is a viable alternative to the monetary targetry in which the Government have been indulging, does he regard the Chancellor's talk of a national cash limit and the Chief Secretary's talk about targeting on GNP—national income—as indicating that the Government are making a gradual movement in the direction of an incomes policy?
  Mr. Hordern: The hon. Gentleman is one of the nicest Members in the House. He always takes the charitable view that hon. Members share the same indulgent view of the prospects of the economy that he holds. I have not believed in a prices and incomes policy for many years. Experience has shown only too clearly that it is a disastrous policy.
  Mr. Bray: Do the Treasury Ministers believe that?
  Mr. Hordern: I do not sit on the Front Bench. The Treasury Ministers are capable of answering for themselves. I have observed no indication of a prices and incomes policy—I hope that there will not be one—save for the public sector, which is a different matter. It is of the greatest importance that wages and salaries should be controlled in the public sector. I do not know who, other than the Government, can be responsible for controlling them. The problem is not only the level of salaries—which was exacerbated by the level of settlements for which the Labour Government were responsible under the awards of Professor Clegg—but the number of people recruited, even by this Government. That has been taking place for 20 years. There has been a continuous growth in recruitment in the public sector, especially the National Health Service. In 1960, 21 years ago, 575,000 people were employed in the National Health Service. In 1980 there were 1·2 million. That number grew last year by 25,000.I have no doubt that the figures will show a further increase this year. Furthermore, the Secretary of State for Social Services has no intention even of inquiring into the purpose of that recruitment. Therefore, it will continue until something is done.
  The additional cost of wages and salaries in the NHS last year was £980 million. I do not think that it is possible to defend such an enormous increase in one year. It would have been a great deal better had we spent some of that money on construction and capital expenditure rather than current expenditure. Nor, I regret to say, is it only the NHS where recruitment has continued to advance quickly for very many years. It has happened in the education service. I find it remarkable that among those who serve in that area, who neither lecture nor teach on a part-time basis, the number increased from 93,000 20 years ago to 475,000 today. I do not need to be persuaded that there is considerable scope for reduction in current public expenditure if the Government will only seize the opportunity of stopping continuing recruitment in the NHS and other areas of our economy. That will provide an opportunity to increase capital expenditure, which Britain so badly needs.
  Mr. Campbell-SavoursThe hon. Gentleman criticised the NHS for hiring additional people during the past 12 months. Does he accept that his policy would mean a

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  reduction in the number of nurses and doctors, and perhaps even the closure of hospitals, in his constituency? Does he think that his constituents elected him to promote that policy?
  Mr. Hordern: The hon. Gentleman must try not to be too absurd. I am suggesting that there should be a curb on recruitment in the NHS. It is quite unreasonable to cut the services in the NHS—which is happening—and at the same time to continue to increase the numbers employed, especially the number of administrators. The proportion of administrators to doctors has doubled during the past 10 years.
  One concern should be the level of capital expenditure in the public service. I should like to see that increased as long as it is done within the confines of the PSBR generally. There is a strong argument, which my right hon. and learned Friend the Chief Secretary put forward, about the element of what is called crowding out. If the public sector needs to borrow too much money there will be less money for the private sector to borrow, and if it can borrow it will be at advanced rates of interest. I do not think that the argument about crowding out is as straightforward as has been suggested.
  I have observed that the institutions that provide funds for investment and Government are at the same time, quite properly, investing considerable sums of money abroad. Last year they invested £2,000 million aboad. It is strange that, for example, the Prudential should invest enormous sums of money in the American Telegraph and Telephone Company and the Hong Kong Light and Power Company, without being able to invest in, for example, the Electricity Council if it wished to build nuclear power stations. It is strange that the institutions can invest in such companies without investing in telecommunications in Britain—for the simple reason that that industry happens to be in the public sector. I do not wholly accept the crowding out argument, but I accept my right hon. and learned Friend's argument, which he put forward strongly, that we cannot allow such industries to be financed from outside and yet retain an element of Government guarantee. I am firmly of the view that investments in the telecommunications industry—and perhaps in British Rail, although I am not convinced of that—should be allowed. If they are not to be denationalised, at least they should be privatised so that the majority stake can be sold outside and a genuine element of risk imported. I hear my right hon. and learned Friend ask "How?"
  Mr. Brittan: I did not.
  Mr. Hordern: I am so sorry, but if my right hon. and learned Friend wishes to know how, I refer him to an article that I wrote in The Daily Telegraph a short time ago. I genuinely believe that there is some method of financing such investment, and that a way should be found of doing this. I cannot believe that it is right for a Conservative Government to spend most of their capital expenditure on trying to prop up the steel industry and the ailing motor industry without allowing any money to be available to the telecommunications industry or some of the more progressive parts of industry that happen to be within the public sector. I hope that my right hon. Friends will consider these matters during the coming year. Such investments should not be ignored solely because they
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  happen to lie within the confines of the public sector. The answer is to get at least part of them out of the PSBR, to let them be financed and to let them find their way in the market.
  8.20 pm
  Mr. John Horam: The fundamental message of the Finance Bill is one of deflation at a time of severe slump. The equally clear message of the Warrington by-election is that that is unacceptable to the British population. The second clear message from Warrington is that the absurd economic policies of the Labour Party are also unacceptable.
  Mr. Campbell-Savours: We won the by-election.
  Mr. Horam: I remind the hon. Member for Workington (Mr. Campbell-Savours) that there was a 23 per cent. swing against the Labour Party and to the Social Democratic Party, with Liberal Party support. People are clearly turning to the sensible reflationary measures outlined by Roy Jenkins during his campaign.
  We need, for example, a worthwhile programme of investment in public industries. I am glad to note that the hon. Member for Horsham and Crawley (Mr. Hordern) has grasped the point about crowding out. It is one that his colleagues on the Treasury Bench ought to have grasped a long time ago. It has been made repeatedly by many commentators and I am sure that it is valid.
  Of course we should choose our public investments with care. Like the hon. Gentleman, I am sceptical of some of the more fashionable suggestions. British Telecommunications is a example that the hon. Gentleman cited and is one which I support. There are smaller companies engaged in high technology, such as Nexus and Inmos. These companies are helped by the National Enterprise Board. They are sensible candidates for more public investment. That policy could be embarked upon with a probability of its showing a good rate of return. Indeed, it could meet the rate of return put forward by the Treasury. I have no doubt that 5 per cent. would be achieved by most investments of that sort.
  Secondly, we need a major programme of housing renovation. Shelter calculated recently that the number of unfit houses has increased from about 2·5 million in 1980 to around 3·5 million now. That is where the Government's cuts have hit hard. Their effect on the housing programme will have serious social consequences. If we invested in housing, the effect on imports would probably be less than in any of the other areas that have been mentioned.
  Thirdly, it is apparently beginning to be accepted by the Government that we need a package of measures to help the 16 to 18-year-olds. More Government financial assistance is needed for the industrial training boards. The Government should be thinking not of pulling out, but of re-inforcing their help for the boards.
  We must ensure that youth employment and youth opportunities schemes provide more real traning. So few of the schemes have a real training element, and so few of the young people who take part in the programmes have something that they can use after they have left the programmes. Grants could be given to employers to take on more apprentices. We should be concerned about the decline in the munber of apprentices and apprenticeship schemes. We can do much in that area for the 16 to 18-year age group.

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  Fourthly, we could do a great deal in direct job creation for those who have been unemployed for more than six months. We must not forget that about 1 million have been unemployed for this length of time. It is perfectly feasible to encourage private employers to take on those who have been unemployed for six months or more. It costs the Government about £70 a week to keep each unemployed person on the dole. That money could be used as a grant to help employers take them on as additional labour.
  Fifthly, some of the social services, especially those that rely on female labour, could be re-expanded. I am thinking, for example, of home helps. To re-expand that service would be sensible from an employment point of view. It would help to keep down costs within the public sector. It would also be beneficial to the elderly, who face severe problems as a result of many of the measures taken by the Government over the past two years.
  In the five areas to which I have referred, which are similar to those to which Roy Jenkins drew attention at Warrington, we have a sensible reflationary, job-oriented package. We calculate that it would cost about £3 billion over 12 months. If it were run for two years it would cost about £6 billion. That level of reflation could be afforded without taking exceptional risks in terms of inflation and the balance of payments. I think that we could probably go further than that in a policy of reflation, but I accept that if that were done we would need a tough incomes policy to accompany a further degree of reflation.
  The measures that I have indicated in the five areas to which I have referred could be implemented while continuing with present policies without unacceptable risks of inflation and an unhealthy balance of payments. If we were to go further, we would have to have a severe incomes policy to contain the inflationary effect and the balance of payments effect. I am glad to see that the hon. Member for Motherwell and Wishaw (Dr. Bray) appears to accept that.
  Dr. Bray: I take it that the hon. Gentleman is advancing his view. Presumably the inference to be drawn is that this is not the Social Democratic view but the Liberal view.
  Mr. Horam: No. I am not making a speech on behalf of the Liberal Party; its members can speak for themselves. I was saying that beyond the programme that Roy Jenkins set out in Warrington I feel that we could afford more reflation. However, in my view we would require a tough incomes policy to accompany it. In the absence of such a policy the risks would be unacceptable. I was interested to note that Lord Kaldor was arguing in these terms only recently. He seems to have changed his tune somewhat on import controls. He is now arguing for a tough incomes policy.
  The programme that I have outlined made sense to the electors of Warrington. What would be wrong in the present circumstances would be to embark on the wild splurge of reflationary measures outlined by the Leader of the Opposition in Cardiff. The right hon. Gentleman attached no bill to that programme. Various attempts have been made to estimate what it would cost. One estimate is £15 billion. That was from the Conservative Party and is perhaps slightly biased. Another estimate was by an economist working for a television company, and therefore perhaps slightly more independent-minded. That estimate was £22 billion.
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  That sort of figure is fantastic and absurd, and would lead to the level of inflation that the Leader of the Opposition faced when he was Secretary of State for Employment in the early years of the last Labour Government. Inflation would be at 25 or 27 per cent. if we went in for that sort of wildly reflationary approach. That would be ridiculous in terms of any sensible, controlled reflation of the economy.
  It was clearly the view of the electors of Warrington that that policy was not acceptable. Moreover, the Labour candidate there clearly insisted that he was fighting on the policies of the Labour Party. [Interruption.] I have indicated clearly what my programme costs. It is the Labour Party which always refuses to indicate the costs of its programme. The electorate of Warrington rumbled the Labour Party and swung heavily against it. Never in the history of party politics has a programme been so expensive, so ill-conceived and so unappreciated.
  8.30 pm
  Mr. Hugh Dykes: Earlier in the speech of the hon. Member for Gateshead, West (Mr. Horam) we saw just the beginnings of a real row breaking out between the former Labour Party and the new Labour Party, if I may use that title.
  Mr. Horam: The SDP is not in any sense the new Labour Party.
  Mr. Dykes: I stand corrected on the title of the new formation. It will all have to emerge later, in order to clarify the understanding of people here about the SDP, so that we may know in a little more detail what some aspects of SDP policy will be. We have had a glimmering tonight of the campaign speeches of the party's candidate in Warrington. Certainly the former Labour Member for Gateshead, West—now the SDP Member—was right in saying that the old Labour Party has no recipes whatever to give to this country or to this House to solve the problems of the British economy.
  The whole context and background of the debate—and, I suppose, the whole necessity for severe Budgets in recent years under the Conservative Government—has been that years of decline were injected into the British economic system by Labour policies of one kind or another. I cite mostly the disastrous, wasteful and useless nationalisation that the Labour Government insisted on inflicting on a hapless British economy at a time when no one wanted it.
  In the previous debate, on the EEC budget, the right hon. Member for Stepney and Poplar (Mr. Shore) said, as usual, how terrible it was that our net contribution to the budget was £500 million-plus. Yet previous Labour Governments, from 1964 to 1970 and from 1974 to 1979, spent, at current prices, more than £10 billion on wasteful, useless nationalisation, mainly of industries such as steel, which are now in a parlous state and, coincidentally, producing a deficit of about the same size as our current net contribution to the EEC budget.
  When the Labour Party—ailing, flaccid, quasi-Marxist and worn out with its own internal arguments—has the impertinence to put to the House any economic solutions, the whole House will collapse in laughter. I am sure that that must have been the reaction in Committee whenever Labour spokesmen put forward any so-called constructive ideas. They have nothing to propose or suggest to the House.

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  At least one was able to listen with interest to the new party, the SDP, and perhaps we shall hear the Liberal spokesman, if he catches your eye, Mr. Deputy Speaker. They perhaps have some new ideas about the British economy, but there is nothing at the moment from the official Opposition. After last week's by-election result one wonders how long the Labour Party will remain the official Opposition.
  There have not been any very significant changes in the Finance Bill, but those that have been made are welcome improvements. I have in mind, for example, the changes in the agency workers' clause and in the business start-up scheme. The documentation on the scheme remains extremely complicated. I suppose that it is too late to hope for simplification of the text. None the less, the fact that collective entities can now join in the start-up scheme is a very good development.
  I so should like to make one point in connection with VAT. It is a special one relating to small shopkeepers and those in the category of repayment traders. It may have been debated in Committee. I am thinking particularly of pharmacists who may have a very high prescription content in their businesses.
  I have been in the Chamber all day and may be out of touch with the latest news, but if the civil servants are now to end their industrial action and accept the Government's latest offer I plead with my colleagues, the Treasury Ministers—and in particular with the Minister of State, who is to reply to the debate—to bear in mind the severe plight of people in the category to which I have referred. I have several local cases and I shall be sending the details of one to the Department.
  Pharmacists who have a high prescription ratio can easily end up—as some have done—being absolutely stripped cash, on the verge of bankruptcy and having to overdraw at high interest rates from the banks to support their cash flow deficit because the Customs and Excise has not made the VAT repayments. Pharmacists have to pay VAT on their inputs, but not on the outputs if they are prescriptions and other registered transactions within the National Health Service. That is only one example, but a severe one, on an important category of small trader. If the civil servants are to return to work quickly I hope that the Customs and Excise will make the repayments speedily, without any further undue delay—or will at least make ex-gratia payments of a significant size to bear the interest charge equivalent to people in the worst plights, depending on the evidence, and perhaps with independent attestation. That may be a small point, but it is so important that I register it and I hope for an answer tonight or at least in the near future.
  I come now to perhaps the most important part of any Third Reading debate on a Finance Bill as traditionally encapsulated in the House—the economic situation. I do not think that I shall be misunderstood on the Conservative Benches if I reiterate in a fairly mild form—because we understand how difficult it is to run the British economy, which is awkward to administer—my feelings of at least relative dismay at the nature and tenor of this Budget. There was a substantial impression that a huge amount of additional deflation at this time was wrong. I can understand why my right hon. and learned Friend the Chancellor of the Exchequer thought that it was necessary. His main priority was to try to control the public sector
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  borrowing requirement upsurge and the money supply. I have deep sympathy for my right hon. and learned Friend because it is not his fault. It is just an irony of the operational characteristics of the economy and the public sector that things have not worked out like that, even if his intentions were good.
  My right hon. and learned Friend the Chief Secretary is extremely resilient and a first-class member of the Front Bench. I know, therefore, that he will not burst into tears if I say that I thought that some of his remarks were slightly complacent. A worrying economic situation is developing, and it is not merely registered by the perhaps more extreme theatrical utterances of people such as William Keegan, in The Observer. It has also been mentioned in other papers, including Sunday newspapers that have supported the Conservatives strongly in recent years on the main tenor of the Government's strategy—the reduction of inflation. I think that all hon. Members would still support that as the priority.
  However, as time goes on, the other priority of unemployment begins to rise. When does it pass the priority of inflation? Perhaps not yet, but it probably will do so in the near future, on current indications and patterns—
  Mr. Austin Mitchell: It did, in 1980.
  Mr. Dykes: Bearing in mind my earlier remarks about the Labour Party's ideas on the economy, this economic debate is confined to the SDP, the Liberals and the Conservative Party. The Labour Party has nothing to contribute on these ideas. By definition, it is the party of inflation, so I do not have to listen to sedentary comments from that quarter.
  There is a worrying scenario developing whereby it may be difficult to achieve a significant additional reduction in the rate of inflation. That is what the indicators are likely to bear out. If that is so, it is not right just to continue with a reiteration of the old message. It is a cardinal and respectable tenet of Tory philosophy, in Opposition as well as in Government, to adjust policies as time goes on in a pragmatic and empirical way to deal with the new development of economic problems. The combination is therefore giving rise to anxiety in many quarters, including, of course, among captains of industry. There is a disturbing combination of a fall in output and a progressive rise in unemployment, and an indication that inflation may be beginning to rise again, although the Government are determined—we respect and support them wholeheartedly—to try to continue the reduction in the rate of inflation. Now we have this latest anxiety of a renewed rise in interest rates.
  Although I accept the extreme difficulty of measuring these things properly, I believe that the margin of spare capacity in the British economic system is large in all respects—in human and capital resources. It is an unprecedentedly large margin, at least in the post-war period, and we have to go back to the 1930s to see similar percentage figures. If that is so, and if there is manifestly no demand pull inflation in the system, it is possible to take respectable expansionary measures of one kind or another—the House needs a separate debate on what they could be in more detail—without giving rise to an increase in the rate of inflation at the margin. Indeed, in so far as costs would, therefore, be spread over a larger output, I

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  presume—that is classic but none the less unchanging as a reality—that it would have a depressant effect on the rate of inflation, rather than increasing it.
  It is in that context and against that background that I hope that the Government will realise, when they discuss the question of more cuts in Cabinet and elsewhere—and I agree with my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) on the virtues of further cuts in revenue and current spending—that that may be difficult to achieve now because of the stage that the economy has reached. Although I was extremely keen on that, and have been all the way through, it is perhaps now harder to contemplate that than it was a year or two ago.
  We are coming to a time when there will be new ideas and proposals coming up from all quarters, including the Conservative Party, on what has to be done in taking the economy forward and getting recovery both nationally and in co-operation with our allies and the United States. The Ottawa conference is, therefore, an apposite topical background. I am optimistic that there will probably be new thinking there because the world leaders are so concerned about the situation.
  We cannot just go on contemplating an inexorable rise in unemployment without considering additional measures to deal with it. There may have to be a fully-fledged programme that would guarantee a job or a job equivalent post of the kind alluded to earlier for every single young person. Indeed, the more that time goes on, the more we see that the pressure for concerted international action to get the Western world economy going again is growing and becoming inevitable and should, therefore, be recognised realistically by all concerned.
  The Finance Bill is really the operational mechanistic expression of the Government raising money, changing some tax laws and continuing their manifesto programme. That is all very well and there is therefore no problem about it intrinsically, but in that context, because it does not go far enough itself, we are bound to see in the future additional measures, some of which may come in other Finance Bills.
  8.42 pm
  Mr. David Ennals: Although the hon. Member for Harrow, East (Mr. Dykes) speaks for a party that obtained only 7 per cent. of the votes in Warrington, I shall not now make deductions from that event, as we are here to debate the Finance Bill.
  However, I cannot let pass the hon. Gentleman's accusation that our Front Bench has made no proposals for expanding the economy. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) has done so on a number of occasions. Indeed, the Chief Secretary referred to policies put forward by my right hon. Friend and my right hon. Friend the Leader of the Opposition. He pooh-poohed the idea that we should discuss with the trade union movement ways to expand our economy and rescue Britain from the devastation created by the Conservative Party. However, it makes no sense for the Government to proceed as they are without discussions with the trade union movement and the CBI.
  The hon. Gentleman said that the Chief Secretary was slightly complacent. I believe that his presentation was extraordinarily complacent. He said that he was talking about the real world. He appears to have escaped from it in the Treasury. He said that certain things would happen as the economy began to come right. Tragically, it is not
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  coming right; it is still getting worse. He said that the worst was past. I wish that that were true, but the unemployment figures when they are published will show that the worst is not past. The hon. Gentleman mentioned signs of productivity and slower increases in unemployment. He was taking credit for the decrease in the inflation rate. It is no use the Minister shaking his head. Let us consider the taxes and prices index. That index, which was created by his party and which he thought would be fairer than the retail price index, now stands at about 14½ per cent. Even the retail price index is unlikely to go into single figures for a very long time.
  The Chief Secretary's whole approach in talking about new hope, new opportunities, the return to prosperity, and all the other fine phrases in his beautifully written brief, is not part of the real world. I do not know whether he has looked at the survey on which the Association of Metropolitan Authorities based its programme, "Investing in Recovery". That programme was based on an independent study of the economic and Treasury model and produced some striking conclusions. I quote just three:
  "National output, as measured by Gross Domestic Product continues to fall throughout 1981 and 1982 with the end of the recession not being reached until mid-1982.
  Manufacturing output, investment and employment undergo a severe decline throughout the period although the rate of decline moderates towards the end of the period. By the end of 1983, manufacturing output is 12 per cent. lower than at the end of 1980"—
  far lower than when the Conservatives took over from the Labour Government—
  "there are 1,331,000 fewer jobs in manufacturing industry, a reduction of 5 per cent. Manufacturing investment is forecast to fall by over 20 per cent. in 1981, followed by a further 13 per cent. fall in 1982.
  Unemployment rises steadily throughout the period to reach 4 million by early 1984, representing an unemployment rate of almost 17 per cent."
  The right hon. and learned Gentleman knows that our levels of unemployment are far higher than those of our competitors and our colleagues in the Common Market. The Government know that as we consider the final stages of a Finance Bill designed to put our economy right things are getting worse on almost every index that one might look at.
  The Government are whistling in the dark if they think that this Finance Bill, which in my view has worsened the situation almost beyond measure, will somehow be the saviour of our economy for which they hope. I fear for this country and for our people as unemployment figures steadily rise and the Government produce no significant proposals to rectify a situation which has now reached desperation.
  It is therefore right not only that the Opposition should put forward alternative proposals for reflation and an expansion of our economy, but that we should also say at the end of this Finance Bill that it is probably the most disastrous that the House has ever passed in the worst economic circumstances that we here have ever faced. The mess that the Government have made in well over two years in office is viewed with no confidence by the people, as was well shown by the 7 per cent. vote that the Conservative candidate managed to collect in the Warrington by-election on Thursday.
  8.49 pm
  Mr. Richard Wainwright: If the wise warnings of the hon. Member for Harrow, East (Mr.

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  Dykes) about the flattening out of the decrease in inflation, the remorseless rise in unemployment and the catastrophic drop in output back to levels below those of the 1930s, had come not only from a respected Tory Back Bencher but from the Treasury Bench, those of us who are optimists by nature might have felt that there was at least a candle in the darkness. Instead, the Chief Secretary's speech reminded me of the utterances of a deck steward on the "Titanic" just before the iceberg came within view.
  Equally, I did not find consolation in the speech of the right hon. Member for Stepney and Popular (Mr. Shore). He was on dangerous and shaky ground when he chose the image of a totem as his concept of what the Treasury is worshipping. At least a totem can be seen and photographed. People can sneak out in the darkness and cut it down. But the image which the Government, especially the Treasury, worship is not as solid and attackable as a totem. It is a medley of shifting images.
  Perhaps this news has not reached Stepney and Poplar, but the Government are no longer targeting mainly on the money supply. Pressure of questioning in the Treasury Select Committee has elicited the fact that the shrine at which Treasury Ministers now worship is that of money national income as the target for Government policy. That is significant, and I think that we shall hear a great deal more about it during the season of party conferences and at some more by-elections. In fact, a change has already taken place and Ministers are in retreat from the simplistic concept of targeting on money supply. I look forward with great interest to revelations of their further thinking on that central subject.
  In the meantime, this has undoubtedly been the Finance Bill of the missing Chancellor. The moment that the Second Reading vote was announced, the Chancellor disappeared from view. Even the Prime Minister put in a brief and commendable appearance at the Standing Committee, but the Chancellor was never to be seen. [Hon. Members: "She was looking for him."] The only fleeting impression that the Chancellor made was to announce his petty, niggling make-weight for the sensible decision on derv which Conservative Members wisely forced on the Government.
  I do not say that simply to score a political point. At a time when the economic indicators have been moving in such a contrary direction to what the Government had previously expected, the Chancellor had a duty to influence the content of the Bill. In the present appalling state of the world economic system it is simply not enough for a Chancellor to wind up the clock of a Finance Bill in a Budget in March and thereafter to let the main aspects of economic policy remain unchanged into July. There were other moments when the Chancellor should have intervened to modify the restrictionary stance that he took in the Budget debate.
  The Budget, and the November measures that preceded it, withdrew about £5 billion from the economy. Although many hon. Members felt at the time that that was a perverse judgment, its perversity has doubled and even trebled since then. Yet there was no action from the Chancellor. He was content for the measures that he had devised to go their way substantially unchanged.
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  The consequence is all too manifest to the nation as a whole. The New Standard, in its market report this evening, sums up the whole grisly situation clearly when it says:
  "Gloom, doom and disaster dominated the gilts market today. As prices fell away, yields emerged that have not been seen since the sterling crisis of 1976. There are only two stocks which now stand above par … In the money markets, the position is worsening daily. This morning, interest rates took another lurch upwards."
  The article say that the pressures on the clearing banks to raise their base rates are very strong. It adds:
  "Under the old system, the Bank of England would by now have been forced to raise MLR, and the banks would be able to follow. The picture was just as gloomy on the equity pitches."
  That is the position today after the Government have had their way with the Finance Bill. They have certainly not succeeded in lifting the spirits or the hopes of investors. However, it is not primarily investors that one worries about. The withdrawal of £5 billion from the economy by virtue of this Bill and other Budgetary measures has contracted our economy just at a time when the world recession would have indicated the need for the beginnings of a gentle reflation to combat unemployment.
  I should like to say straight away how much I and my hon. Friends agree with the remarks made by Mr. Roy Jenkins in his so-successful Warrington campaign and reiterated tonight by the hon. Member for Gateshead, West (Mr. Horam). We have to reverse the present heavy taxes on jobs and turn the situation into one where there is a positive incentive to employers to take on young people so that they can have some kind of industrial training, an introduction to industry and, one hopes, be placed on the threshold of sustained employment.
  I was even more glad to hear the hon. Member for Gateshead, West go on to say that this should be only the beginning of an expansionary programme. The hon. Gentleman was right to emphasise that as soon as a sustainable incomes policy can be put in place—it cannot come too soon for Liberal Members—further expansion should be set on foot. If the hon. Gentleman can fully and quickly persuade his Social Democratic colleagues that this is the right course, the accord between the Liberal Bench and the Bench that he occupies will, so far as I am concerned, be complete on the economic front.
  Mr. Austin MitchellThen we can have one speaker instead of two.
  Mr. Wainwright: That is not for me to say. In the meantime, the country has to bear the consequences of the highly restrictive set of taxes that are embodied in the Finance Bill. I shall recommend my right hon. and hon. Friends to vote against Third Reading.
  8.58 pm
  Mr. Austin Mitchell: I do not propose to follow the remarks of the hon. Member for Harrow, East (Mr. Dykes), who was defending, with irrelevant arguments, a policy of which he does not approve, as his speech made clear. The hon. Gentleman obviously has to attack the Opposition to cover his disloyalty to his own Government. Nor do I intend to take up the arguments of the hon. Member for Gateshead, West (Mr. Horam), who is now rapidly receding from the Chamber. The hon. Gentleman has been emboldened by the chimera of a moderate by-election success—all by-election successes except those at Grimsby are chimeras—into speaking and

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  acting as a turncoat, attacking the party from which he sprang, to which he owes his seat and with which he basically agrees. That is a question of taste, but I note in passing that the hon. Member for Gateshead, West, on behalf of the Euro-fun party, pointed out in his speech on the Budget that he would expand the economy and pay for the expansion by increasing the standard rate of income tax. A slightly better proposal, according to the hon. Gentleman, would be to put a surcharge for one year on all rates of income tax. That comes from the man who accuses the Labour Party of wilful overspending. I agree with the hon. Gentleman that we must expand the economy but the expansion must be more vigorous than he indicated. We should pay for it, as he says, by increasing the public sector borrowing requirement and, if necessary, by increasing taxation.
  In the main those who accuse us of misguided expansion must face the fact that the burdens of unemployment, lost tax, lost productivity, lost output, and the expenditure of benefits, particularly on unemployment benefits, are now a major drag and constraint on this economy. If we could ease those burdens, expansion would be possible—and expansion itself must ease the burdens.
  Our main job today, however, is to say farewell—particularly those of us who sat with the Bill in Standing Committee and throughout the debates in the Chamber night after night—to a bad Budget. The essential fact is that in this Budget we are also saying farewell to monetarism—a policy that is now going out not with the promised bang of prosperity and growth, not with a bang but with a whimper, at the whim of the bankers who instigated it in the first place.
  This Budget underlines all the faults of the monetarist policies with which the Tories came in. It is essentially a deflationary Budget. It is a deflationary Finance Bill at a time when the economy desperately needs an expansion of demand and the stimulus to get the economy growing again and to reverse the decline of the last two years.
  In the period over which we have been discussing this Budget, all the evidence on which it was claimed by Conservative Members that it was based has changed. It is clear that the economic crisis is getting worse—not better, as they optimistically predicted before the Budget. Yet the Government have averted their face from this situation. The Chancellor has plodded on. Instead of relaxing, when his own Back Benchers allowed him the opportunity, the financial stringency and the deflationary impact of this Budget, he persevered and made the situation worse by the petty, vengeful increase in the taxes on tobacco, bingo, betting and gaming machines—the pleasures of the working man—to get his own back after what his Back Benchers have made him do.
  It is too much to say that this Budget is irrelevant, because it is more positively harmful than that. This Budget is the revenge of the small-minded, monetarist dogmatists on the Conservative Benches who, as their only defence, bleated for so long that there was no alternative to policies which have been positively harmful to our economy that they are now well on the way to reducing the economy to a situation so disastrous that there really will be no alternative to the mess that they have created.
  All the justifications for the Finance Bill, argued from the first, have now gone. Monetarism is an exploded
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  economic philosophy. I quote from Professor Galbraith, writing in the latest issue of The New York Review of Books. He says:
  "A case can readily be made that the English-speaking countries, the United Kingdom and the United States in particular, are currently getting the economic policy that they deserve. Theology, wishful thinking, and a modest resort to necromancy have extensively replaced practical judgment on both sides of the Atlantic. The results are in keeping."
  They are in keeping. We are now putting up with the disastrous results of that escape from reality.
  Monetarism is a discredited philosophy. The hopes of revival that the Government hold out are themselves discredited. The hope of the unity of the industrial countries in deflationary policies has been removed by the expansionary policies which will now be adopted in France, and by the fact that the Japanese economy is still growing. The American economy, despite all the wilful perversity of the Reagan Administration, is still growing.
  Today, the Chief Secretary says that the Conservatives never said that monetarism alone was enough; that fiscal measures were also necessary—although they did once give the impression that monetarism alone was enough. The fiscal measures that they are proposing in this Finance Bill will make the situation worse. The Government are now in a trap. Spending is rising remorselessly as the pressure of unemployment builds up, as more and more people are put out of work and as the decline of the economy hits the nationalised industries. With that, the Government's financial predictions will all go awry, because as spending rises the tax receipts are threatened by the same depression as that which requires the increase in spending. That is the cause of the "we need the money" syndrome that the Minister treated us to so liberally in Committee and that excused all the petty increases in taxation and the Government's failure to increase allowances. Indeed, that was probably the most monstrous aspect of the Budget.
  At the end of the "we need the money" syndrome, which has been produced by the economic decline that the Government have generated, we find that the average family will pay more. Instead of starting to pay tax at 45 per cent. of average earnings, tax will start at 38 per cent. of average earnings. The basic rate will be increased from 25 per cent. for the lowest payers to 30 per cent. In the Conservative Party's manifesto, hopes were held out of eliminating the poverty trap. However, it will become wider and deeper because the numbers of those in it will increase by about 40 per cent. In addition, we must consider the way in which the Government are treating single women aged between 60 and 64, with their "little pensions".
  The final obscenity is that in addition to those increases in taxation the Government have cut capital transfer tax for the very wealthy. They have given a straightforward set of handouts to a class that
  "toil not, neither do they spin"
  At the same time they call for sacrifices from the rest of the community. The only consolation is that the Finance Bill will be the swan song of those narrow dogmatists who have dominated Treasury policy for so long. The change will be forced not by the miners, the Government's Back Benchers or the Minister of Agriculture, Fisheries and Food—who is the siren voice of a Government on the rocks—but by the burning that has taken place in the cities of our blighted Britain of 1981. That will force the

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  Government to change their policies and to start the expansion that they have long told us is impossible. That will be the result of the policies embodied in the Bill.
  The Government will change course because their policies are in ruins and the longer they persevere with such policies the bigger will be the dose of Socialism, of Government spending and of Keynesian stimulus that will be needed to get the country out of the mess that they have created. In addition, there will be a greater need for planning and for the arts that we have advocated for so long. Those arts alone can turn the Government round. Recovery will not follow inevitably, as night follows day, as the Chief Secretary told us. It must be worked for, spent for, planned for and engineered. The Government will have to turn to those arts—which are alien to them in the desperate situation to which they have reduced Britain. They will change course. The Finance Bill is the last monument to the dead sheep, the Chancellor of the Exchequer.
  To say that the economy has been savaged by a dead sheep is perhaps too facile an image. That savaging has caused disastrous damage to an economy that can ill afford to suffer. The budget makes the damage worse and must be the sheep's final whimper before it is carried off to the last resting place of dead sheep, namely, the Woolsack. The Government will need to make that change of leadership and of policy. They must admit the truth, namely, that they have wilfully pursued wrong policies for too long and have taken the country down a disastrous road. They have wasted precious time and precious jobs.
  British industry has lost one in eight industrial jobs during the two years in which the Conserative Party has been in office. The Budget has made everything worse. It will be reversed because it must be reversed.
  9.9 pm
  Mr. Clive Soley: The Government set out in 1979 to squeeze inflation out of the system and to encourage growth by encouraging entrepreneurs. They have not achieved either objective and have not succeeded in producing a Budget to help to achieve them.
  In opening the debate, the Chief Secretary said that he thought that we were through the worst. I note that he did not suggest, as he has acknowledged before, that we might bump along the bottom for some considerable time with a worsening of the unemployment figures. Inflation is still as high as it was when the Conservatives took office, perhaps a bit higher. The indications are that it will go higher and we still have the problem of collapsing industries and bankruptcies. The Government's policy has not been successful and there is no evidence to lead us to believe that the Budget will lift us out of the mess.
  It is significant that when the Tories took over they virtually doubled VAT, which had the effect of pushing up inflation. They are now saying to the nation "We have brought inflation down". The only way that inflation has been reduced to its present level—which is still higher than it was in May 1979—is by allowing VAT to work its way through the system.
  Several Labour Members have spoken about the tax cuts. I should mention the Minister of State's performance in Committee. I have watched him and listened to him with great interest on a number of occasions. In many ways, he
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  is a rather endearing character. He is unique in this place in the arguments that he uses. He is incredible. I am sure that he works far harder than anyone else. He is obviously a work horse. I am sure that in the mornings the civil servants in the Treasury look for him under mounds of paper, to find him scribbling away with papers flying over his shoulder with all the enthusiasm of an agitated doormouse. He is doing a fantastic job in his own right.
  When we discussed the tax in Committee the hon. and learned Gentleman said over and over again that the Government needed to raise the money, but at the same time the Government are bringing people on low incomes into the tax net and allowing people on high incomes out of it. The cuts in or the virtual obolition of capital transfer tax have troubled us. That is where the hon. and learned Gentleman is unique, because he has argued on the Floor and in Committee that this is a moral question, which has nothing to do with taxation. Time and again he has said that this is a highly emotive subject and that he would prefer not to have morality involved in taxes. I cannot believe that any hon. Member, since the establishment of this place, has argued that there is no connection between morality and political economy. That is bizarre in the extreme. I cannot imagine a political theory for that view. Yet that is what the Minister argues.
  There is an immense amount of evidence to suggest that wealth in the United Kingdom is grossly unequally distributed—indeed, more unequally distributed than in any comparable country where incomes are similar. The argument has been that the money will generate wealth. There is no evidence for that. It is difficult to get rich by saving. The way in which people get rich is by inheriting wealth. If the Government want to raise the money and reduce the tax burden that they have been increasing, despite their claims to the contrary, they should begin by taxing wealth.
  The Chancellor of the Exchequer will say that that is not possible, that he cannot do it, that that is a moral question and has nothing to do with taxation. In fact, it is crucially important, because nothing is more annoying—to put it mildly—to the average PAYE payer than to see people like the Vestey family or other families, against whom I have nothing individually, getting away with enormous sums of money and paying nothing in tax. At the same time, those at the lower end of the income scale, including those on supplementary benefit, are asked to pay more. That is totally unacceptable.
  The Government claimed that they would encourage entrepreneurs to regenerate growth, but there is no evidence of that. The money has gone in investment overseas. I acknowledge that some of that money returns in the form of profit but it does nothing to regenerate industry or to produce the employment that we need.
  The attempts to cut public expenditure across the board have massively aggravated the problems in our economy. The Conservative Party is the party not only of high inflation but of mass unemployment. There are no ifs or buts about that. Unemployment is partly a result of the present Government's attack on public expenditure. There is a need to increase expenditure, particularly on infrastructure—roads, sewers and telecommunications. If we do not do that we shell be in trouble.
  Housing is also of crucial importance. The two sectors of the economy that have been worst hit by the recession

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  are industry and construction. Construction could benefit most from reflation because it would not produce imports from abroad.
  The key importance of the issue is shown in the recent street disorders. When skilled, particularly young, workers are unable to get employment in our inner cities they move out. They are followed by companies, because they then cannot get skilled labour in the inner cities. A spiral of decline occurs. There is an urgent need for a sensible housing policy to discourage that trend.
  A country which does as we have with education must have gone out of its mind. We are not only eating our seed corn; we are burning it. Not to invest in education, particularly adult education and training, is crazy.
  It is tragic that in the Western world there are between 20 million and 30 million unemployed people. Money is washing around looking for the highest rate of interest in country after country without being used to meet the needs of the communities involved. It is urgent for the leaders of the main economies in the West to get together to work out a new Bretton Woods agreement. When I read the comments particularly of Conservative Members, it is clear to me that they are saying that they can do nothing, that market forces are at work and outside their control. They are not outside their control any more than they were in the 1930s. If we do not do something, we shall pay dearly.
  9.17 pm
  Mr. David Winnick: My hon. Friend the Member for Hammersmith, North, (Mr. Soley) made an excellent contribution. The Chief Secretary read his Treasury brief like the lawyer he is. I do not know whether he believed a word of what he read. Unlike the Financial Secretary and, perhaps, the Minister of State, the Chief Secretary has, I think, no particular attachment to any economic theory. He is a lawyer, he was given his Treasury brief, and he read it accordingly. He read it well.
  We are debating the Third Reading of the Bill at a time of acute economic crisis. Unemployment continues to rise substantially and there is no sign of industrial recovery. That is the background to the great concern that we feel tonight.
  The standard ministerial reply to our questions about the economy and unemployment, nationally and locally, is always the same, regardless of the Minister or the Department. The reply is that the Government's task is to provide the climate in which industry can prosper. We say on the Labour Benches that the climate provided by the Government is one in which redundancies, extensive short-time working, bankruptcies and yet more closures are taking place. That is the pattern of events in Britain in 1981.
  The Chief Secretary cannot deny that unemployment will continue to rise. The latest figures will be out tomorrow. It will continue to rise throughout 1981 and probably throughout most of 1982.
  Not all Ministers, it seems, believe that the right approach is being taken. I intervened during the speech by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) arising from an interview with the Minister of Agriculture, a senior member of the Government, on television's "Newsnight". He was asked various questions arising from the Warrington by-election. He was asked about any change in economic policy. The right hon. Gentleman said:
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  "I'm asking the Government … to examine the current problems on their merits … and to take pragmatic decisions to get them right."
  He added:
  If you go for efficiency and don't bother about compassion, then you'll find a situation where such will be the deprivation … that the hostility of society generally will ruin the efficiency."
  In a clear reference to the Prime Minister's monetarism, the right hon. Gentleman said that it was wrong for any Government, "including my own", to have a doctrinaire approach to economics.
  Any prize for what he was talking about? The Minister also said in the same programme:
  "As new problems emerge we have to tackle them with new weapons and new methods, and you have to take note of the social and economic changes that are taking place."
  I do not know whether the Minister of Agriculture will suffer the same fate as the right hon. Member for Chelmsford (Mr. St. John-Stevas) and get the sack. Perhaps he would consider it better to resign and to state his views more openly on the Floor of the House. Because of the right hon. Gentleman's ministerial position, he has to be more guarded in his media interviews, but he went as far as he could on Friday to dissociate himself from the economic policies being pursued by the Government.
  Mr. K. J. Woolmer: Does my hon. Friend recognise that the Minister of Agriculture may be speaking for many silent Conservative Members, particularly those in marginal constituencies in Yorkshire and Lancashire who see the textile industry facing such a massive decline? How would he advise those hon. Members to vote in the Division on Third Reading?
  Mr. Winnick: My advice to those hon. Members is the same as that which my hon. Friend would give. They should vote with us against a Third Reading.
  The charge against the Government is that they have rewarded the rich and prosperous while the vast majority of our constituents are paying more not just in indirect taxation, but in direct taxation as well. The Government probably won the 1979 general election because of their promise to cut income tax. If we asked our constituents how much they have gained from the tax changes in the Government's Budgets they would laugh dismissively. They are paying more in tax, and that is likely to continue.
  We are in a plight which is similar to that of the 1930s. The Treasury and Ministers continue to argue that demand must be reduced. As demand is being reduced, deflation bites deeper into the economy and the recession is turning into a slump.
  The Bill is further poison for the economy and for many of our constituents. It is a disastrous Bill, which can only inflict untold damage on the British economy. We all know that by the time of the next Budget the situation will be even worse and there will be even more in the dole queues. That is why we have every justification in voting against the Third Reading.
  9.23 pm
  Mr. Robert Sheldon: In rising to oppose the Third Reading my first thanks must be to my hon. Friends the Members for Blackburn (Mr. Straw) and Edinburgh, Central (Mr. Cook) and to the innovation, at least on the Opposition side, of our talking Whip, my hon. Friend the Member for Grimsby (Mr. Mitchell).
  Mr. Campbell-Savours: The cannot-stop-talking Whip!
  Mr. Sheldon: In looking at the main features of the Bill—those that will remain in our recollection of what took place on the Floor of the House as well as upstairs in Committee—we see that as recently as last year the Government introduced, in section 24 of the Finance Act 1980, indexation as a fixed approach to Finance Bills of the future and were immediately the first Government to repudiate their own enactments when they failed to index allowances this year.
  We are also aware of the taxation of short-term benefits in the Bill and the many injustices that we debated in Committee and on Report. We know that the contrast that we observed in the failure to revalorise allowances must be seen in the context of the handouts on capital transfer tax, whereby the slate is wiped clean and the liability ends every 10 years. It is the contrast between what is given to a few at the top end of our incomes scale and what is denied to the many at the lower end which to many of us will be the abiding recollection of this Finance Bill.
  The background to the Finance Bill was probably best set by the Financial Secretary to the Treasury, who made a speech to the Zurich Society of Economics in the Kongresshaus in Zurich. He described something that was happening in this country in January—something which most of us had failed to detect. He spoke of
  "The breath of fresh air that is blowing through British industry today".
  He went on:
  "we have now"—
  that was in January of this year—
  "more or less reached the bottom, and better times are clearly in sight … As a result, British companies throughout the length and breadth of the country are becoming more efficient, cleaner, tauter, fitter and more productive".
  That was the background to this Finance Bill.
  It was a time of great hope. It is surprising how a Budget and a Finance Bill never look the same in July as they did in April. However, the difference between the two periods was probably never greater than this year. The first was a time of great hope and great optimism. Possibly the prize for the most ineffable comment, following the publication of the Budget and the Finance Bill, went to the Chief Secretary to the Treasury. He said, in a comment on the Budget on 20 March 1981:
  "This was a Budget for industry and for economic expansion."
  We have seen the effects on British industry during the past few months.
  In a Budget for industry and economic expansion one would have expected an investigation into what industry wanted and what it was that those people with responsibility in these matters were wanting. What did industry want, and what did it need? One thing that industry clearly wanted was expressed by the CBI in its demand for a cut in the national insurance surcharge burden, about which we tabled an amendment. It asked for an extra £1½ billion to £2 billion three-year programme of public investment and, in particular, an improvement in the national infrastructure.
  The Guardian on 18 July said:
  "After meeting groups of industrialists, trade union leaders and bankers in the North-west, the Industry Secretary, Sir Keith Joseph, said yesterday that he felt no need for a change of course in the Government's economic policies.
  'I have not seen any coherent alternative analyses or set of policies', he said."
  There is an interesting comparison between what the Chief Secretary and the Secretary of State for Industry said, and
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  what the Manchester Chamber of Commerce and Industry said in its North-West industrial report. This is what it said was happening in that part of the country:
  "Despite optimistic statements to the contrary, there are no indications that anything more than a deceleration of the downward slide of the U.K. economy is taking place. Indeed, both company liquidations and bankruptcies rose appreciably during the first quarter of 1981".
  There is an alternative analysis for a start, which is different from that of the Government. The Secretary of State for Industry failed to see that when he went to Manchester. The Manchester Chamber of Commerce and Industry went on to say:
  "Levels of industrial production … dropped in the year to the fourth quarter of 1980 by approximately 15 per cent."
  and represented
  "the largest fall in any year since the war".
  Is this a Budget for industry? The Manchester Chamber of Commerce and Industry, according to its North West industrial report, does not think so. It goes on:
  "Despite considerable reductions in stock in the first half of 1980, company borrowing from the banking system was at an extremely high level and there is some evidence that many companies have borrowed merely to stay in business."
  Is that a Budget for industry?
  "The Chamber's economic and Industrial Committee is extremely apprehensive that the current depressed state of industry in the North West could lead to the region being unable to take advantage of any possible future economic revival, thus leaving the region in a permanently semi-depressed situation."
  Is there no need to change Government economic policies, as the Secretary of State for Industry said?
  The chamber went on to say that
  "government intervention in the North-West and capital investment in the infrastructure could bring significant benefits to the region."
  It believes that
  "transport, communications … are all desperately in need of further capital investment."
  Those are alternative sets of policies which the Secretary of State for Industry did not see.
  Finally, the Chamber says that it is
  "apprehensive that the last budget which took approximately £5½ billion out of the economy will have a further adverse effect on economic activity and give no help to hard pressed industry."
  Is that the Budget for industry that was required? Is that the Budget for economic expansion that was needed?
  What worries me most of all is why the Secretary of State for Industry and the Chief Secretary to the Treasury went to the North-West. What is the point of the Prime Minister's going to Merseyside if she hears only what she wishes to hear? Never have we had a Government with their ears so shut to the anguished complaints of industry and the people.
  The Budget is supposed to be for industry and economic expansion. Who are the Government fooling? Who are they deluding? Who do they think believes this chicken-scratching? They have not begun to touch the surface of the problem, let alone to approach the causes.
  In the first quarter of 1981, bankruptcies increased by 37 per cent. over the same period in the previous year. Company liquidations increased by 67 per cent. This is the result of the disastrous actions of this Government, as my hon. Friend the Member for Grimsby said.
  When industry rightfully complains about the level of the pound, the Government reply by stressing their need for supply side economics. That is a splendid notion. Of course, everyone wants to see quality and design improved and improvements in technology. Meanwhile, we see the

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  savage cuts at Salford, Aston and Bradford universities, which does not seem the right way to go about bringing in supply side economics.
  The Government cannot do very much about the supply side, but they can help to make British industry competitive. They can improve competitiveness by acting against the level of the pound. They can improve it by adjustments to the pound. They can improve the profitability of exporting and reduce the profitability of importing, and the profit that goes into industry can find its way into research, design and other matters.
  Sir William Clark: How would the right hon. Gentleman decrease the value of the pound and decrease the minimum lending rate?
  Mr. Sheldon: The hon. Gentleman should read the report of the committee of clearing bankers. I agree with that, and I advise the hon. Gentleman to study it with great interest. It stretches to more than eight pages, and it details how the Government can reduce the value of the pound in accordance with what is required.
  Sir William Clark: How would the right hon. Gentleman do it?
  Mr. Sheldon: I have referred the hon. Gentleman to my sources.
  The constriction of home demand and the high interest rates that we have seen have made it impossible for firms in Britain to have a home market for their goods, and, because of the higher value of the pound, they have found it impossible to get export markets for many of their goods at the same time as imports have been coming in at cheaper and cheaper prices.
  I can understand that if devaluation and deflation are joined together, industry is forced into export markets. This was traditionally the way that it was done. It was not done very well or very cleverly, but it had that effect. By making it impossible for firms to increase their exports and difficult for them to increase production for the home market, we are constricting them completely. That is what we see in industry today. The Government must intervene in the currency markets of the world. Lord Lever, in his two fine pieces in The Times, headed "The World's Currency Casino" showed the need to intervene in the way that I mentioned. The committee of clearing bankers showed the way that that could be done.
  The trouble is that the Government have a theology in these matters—a belief in the free market. Nothing that they see happening in industry convinces them that their preconceived ideas are necessarily wrong. Because the Government have not intervened in the currency markets of the world, much of British industry has been gambled away on the gaming tables of the world's international currency dealers. Industries have been closed, never to be reopened. Many others have been severely damaged.
  The effects of Government policies are not bearing specifically on the older industries, while saving, rescuing and improving newer industries. They are impartial in their effects, and affect the computer industry, the man-made fibre industry and the machine tool industry. All those industries blame the high pound and the recession, as well as the Government, for their troubles and woes. We need to take control of our currency to make it work for us and for the industry of Britain.
  In the 1970s we heard that whoever was in Government in the 1980s would gain the inestimable advantages of
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  North Sea oil, and would have the greatest opportunity in the post-war world to bring about the transformation of our economy. All the glory and credit would rightly go to them. What has happened? We have North Sea oil now, but what have we done with it? North Sea oil revenues this year amount to nearly £6 billion. It will be £7 billion in a year's time. Where is that great bonanza that was to do so much to revive the fortunes of Britain? It has gone in high unemployment pay. According to the Chief Secretary's figures, it costs about £3,500 per unemployed person per year. I would put the figure higher. I shall take his figures, however, and even his figure of 2½ million unemployed. That gives a cost of £8¾ billion a year for unemployment pay. It is more than we are gaining from North Sea oil. Even when North Sea oil revenues peak in a few years' time, unemployment pay will be roughly in balance. That is what we have done with our great advantage, which should have been used for our industries and to provide for our future. North Sea oil was our nest egg for the future, not overseas assets. The real nest egg in which we can invest is to pay our people and put them in employment, using and creating skills. That is the only way that we can earn our living, and that is what we always assumed would be the purpose of North Sea oil.
  The Bill was seen as increasingly irrelevant before the effects of 3 million unemployed were thought of and while hope in the Government remained. The Bill is like a gravestone. It records the economic mismanagement of the Government and the continuing decline of the economy, as well as the opportunities that have been squandered. The Government appear to be without hope. It is time for them to go. For that reason we shall vote against Third Reading tonight.
  9.39 pm
  The Minister of State, Treasury (Mr. Peter Rees): Tonight we conclude our debates on the Bill. Except for those aficionados who formed the ranks of the Standing Committee, the House may feel that the conclusion is coming not a moment too soon.
  I hope that I shall be allowed, without presumption, to congratulate the newcomers to the Opposition Front Bench—the hon. Members for Blackburn (Mr. Straw) and for Edinburgh, Central (Mr. Cook). The hon. Gentlemen were buttressed by the enormous experience of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I think that those who formed the Standing Committee will agree that they made a notable contribution. I am only sorry that the rigours of the Standing Committee have dispatched the hon. Member for Blackburn to hospital. I hope that he will not long be detained there. I think that he and perhaps everyone else will recognise that Finance Bills are rather masochistic exercises, but at any rate they serve a purpose.
  The Bill is long and complex. I take no pride in that. I should like to revert to the four or five-clause Victorian Bills. However, the complexities of the Bill reflect the increasing complexity of our national life and especially our industrial life. There is a feeling that we should attempt to legislate with certainty and precision. I recognise that those are objectives that much too often elude us.
  The Bill has been subjected to a good deal of good natured scrutiny and debate. I dare say that no Finance Bill in living memory has provided an opportunity for so many Second Reading speeches. We have had many tonight.

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  The clichés of the class war were much in evidence during the early stages of the Bill's passage through the House. Mercifully, they receded until tonight.
  The Standing Committee came to grips in a practical way with some of the real issues. I am sorry that the right hon. Member for Stepney and Poplar (Mr. Shore) did not involve himself with the Standing Committee. If he had done so he might have developed a clearer understanding of what the Bill is attempting to achieve. All that we have had are six or seven apocalyptic interventions from the right hon. Gentleman.
  I cannot remember whether it was the right hon. Gentleman or the hon. Member for Grimsby (Mr. Mitchell) who complained of the absence of my right hon. and learned Friend the Chancellor of the Exchequer. The right hon. Gentleman will be the first to acknowledge that it would be difficult for my right hon. and learned Friend to be present tonight. In my limited experience of Finance Bills I cannot recall any Chancellor who involved himself in the proceedings of the Standing Committee considering the Finance Bill. I am sure that my right hon. and hon. Friends will concede—I hope that some right hon. and hon. Members on the Opposition Benches who bring a fair mind to these problems will recognise this—that my right hon. and learned Friend has made a notable contribution at various stages. No Chancellor has been more assiduous in the conduct of his great responsibilities than has my right hon. and learned Friend.
  The right hon. Member for Stepney and Poplar seemed to be bent tonight on an economic rehash of Frazer's "The Golden Bough". I have spent some happy hours with "The Golden Bough". I did not recognise the mutilation which the right hon. Gentleman inflicted on it. He chose to describe the present Treasury team as primitive monetarists. I readily concede that I am no macro-economist. I merely perceive a connection between the money supply and the level of prices. I am not certain whether I should be acknowledged in the select company of Professor Friedman. I am conscious that perhaps Professor Lapper would not give us as high marks for our performance as some of my hon. Friends would like. However, to describe us as primitive monetarists shows a rather crude misunderstanding of what we are attempting to do. It indicates a rather crude misunderstanding of the methods that we have employed.
  If we happen to be primitive monetarists, I think that the right hon. Member for Stepney and Poplar, and especially the hon. Member for Grimsby, are primitive Keynesians. Whether Professor Keynes should be regarded as a totem or a taboo I leave to the House to determine.
  I ask the Opposition to reflect on their last period in Government between 1974 and 1979. I ask them to reflect on whether their management of demand in the long run left the economy and industry in a stronger or weaker position. [Interruption.] Let me remind the hon. Member for Grimsby that the real growth in domestic product annually between 1974 and 1979 was 2 per cent. On the other hand, the growth in the retail price index was 15 per cent., and the unemployment figures doubled. Either they were remarkably unsuccessful in their demand management, which suggests that it may be a more difficult exercise than they are now prepared to concede—
  Mr. Ennals: Will the hon. and learned Gentleman recognise that there is a difference between even a modest growth and a devastating fall in output, which is the record of the present Government? During the period of the Labour Government the unemployment figures may have doubled, but the present figure is dramatically greater, and he knows it.
  Mr. Rees: I listened to the right hon. Gentleman's speech, and I recognise the contribution that he makes to our social security debates. I was not certain whether he was well advised to intervene in these debates. Indeed, his intervention just now was singularly ill-advised, because I shall now remind the House of the cost in terms of the debilitation of British industry, the collapse of profits and the increase in the retail price index on an annualised basis of 15 per cent.
  The right hon. Gentleman may feel that it was a price worth paying for what was achieved by the Labour Government. [Interruption.] The verdict of the electorate is conclusive in these matters. Let the right hon. Gentleman reflect on that. If he takes comfort from the Warrington by-election, he must be a masochist. His former hon. Friend the Member for Gateshead, West (Mr. Horam) took a rather different view of the sentiments of the electorate of Warrington last week. However, these are small matters, and I should not be tempted into the byways.
  As for the apocalyptic utterances of the right hon. Member for Stepney and Poplar, one wonders who writes his speeches for these occasions, because there is a remarkable similarity between them. I think we were told by the right hon. Member for Ashton-under-Lyne that a Budget does not look the same in July as it did in April. I do not know whether my right hon. and learned Friend's Budget and Finance Bill look the same now as in March, but the speeches that we have heard from the Opposition Front Benches have not altered by one iota. The sentiments, the language and the clichés are precisely the same.
  I have always believed that the point of a Third Reading debate was to draw together the threads of a Finance Bill. I know that in your benevolence, Mr. Deputy Speaker, you have allowed the debate to run wide. Whether it has advanced our understanding of the problems I leave to posterity to decide, but let me attempt to identify the themes of the Bill.
  My right hon. and learned Friend was faced with the need to raise a considerable sum of money—£64 billion—by way of taxes on income, expenditure and capital. I was moved to state the problem with a certain vulgar directness in the Standing Committee, when I said that we needed the money. I have been given a slight Gladstonian colour in the brief period on which I have been privileged to serve in the Treasury. That should warm the heart of the hon. Member for Colne Valley (Mr. Wainwright).
  Mr. Richard Wainwright rose—
  Mr. Rees: Apparently it does not warm the hon. Gentleman's heart.
  Mr. Wainwright: Does the Minister really suppose that Mr. Gladstone would have debased the House with the persiflage that he has just given us?
  Mr. Rees: I am tempted to recall that in high spirits Mr. Gladstone used to dance around with Mrs. Gladstone

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  in the evening. There was a side to his character that perhaps the hon. Gentleman does not recall at the moment. However, I can say with utter confidence that Mr. Gladstone would have approved of my right hon. and learned Friend's attempt to set the PSBR this year at £10½ billion. He would have appreciated his candour and integrity. [Interruption.] There are sterner Gentleman behind me, and I defer to their rigorous approach.
  I have been accused of being frivolous and of not detecting a moral feeling in our debates. I say to those who accuse me of that that I find that gentleman of the cloth are not perhaps at their best when discoursing on political subjects, and therefore I am a little hesitant to moralise on these questions.
  I am persuaded that my right hon. and learned Friend was right to set a lower PSBR. Of course, the House will know that there is a certain marginal imprecision in such targets, but if the containment of inflation—sound money, if I may put it in language that I am sure the whole country will understand—and modest real interest rates are essential elements in our recovery, a restrained PSBR—a limited pre-emption by the public sector of the resources generally available—is equally important. That is why I am certain that Mr. Gladstone—and I hope therefore, the Liberal Party—would have supported the Government in the Lobby tonight.
  If Liberal Members hesitate about that, let them contrast the objectives that my right hon. and learned Friend sets with the profligacy of the right hon. Member for Stepney and Poplar and his right hon. Friend the Member for Ebbw Vale (Mr. Foot). I have never been able to get out of the right hon. Member for Stepney and Poplar in our many debates this summer exactly what PSBR he feels could be supported by the economy. I give him his final chance tonight. I shall give way if he will tell us candidly what figure he nails his colours to—[HON. MEMBERS: "Go on."]
  My right hon. and hon. Friends recognise, as I do, that if there is frivolity and incoherence in these debates it is in the contributions of the right hon. Gentleman and his right hon. Friend.
  Mr. Barry Sheerman: If the hon. and learned Gentleman cannot agree with my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), perhaps he can agree with the Minister of Agriculture, Fisheries and Food. What does he feel about his right hon. Friend's behaviour and speeches? That is more to the point.
  Mr. Rees: The Cabinet, of course, speaks with one voice, and my right hon. Friend is a gifted contributor to its debate. However, since I am not privileged to attend, I do not know the nuances of his contributions, but history will no doubt disclose them.
  As I said, I contrast the rigour and self-discipline of my right hon. and learned Friend with the utter frivolity and incoherence of the right hon. Member for Stepney and Poplar. I have tentatively costed out the programme that he and his right hon. Friend have so far produced. On the most cautious estimate it would involve a PSBR of about £17 billion—[Hon. Members: "Is that all?"] I make every allowance for the fact that the right hon. Gentleman is innumerate, like myself. I should like him to reflect a little and, the next time that we have an opportunity to debate these great themes, to tell us what that would do for
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  interest rates or, indeed, to tell us what level of real interest rates British industry could support. Perhaps he will tell us how many jobs he believes his programme would create and at what cost—unless, of course, he agrees with his friends on Stirling council and the Greater London Council in the belief that merely padding the public sector payroll will solve this difficult and intractable problem.
  The Government recognise—and this is explicit in the Finance Bill—that a public sector borrowing requirement of that level must be paid for. It is being paid for, I readily concede, by an increase in direct taxation, and it is proper and legitimate to debate whether we have the mixture right. I can say only that the pattern of our tax system now is not so very different from that of our Continental competitors who over the past two decades or so have done perhaps a little better than we have.
  I readily concede that this is being paid for by a standstill in personal allowances, but I emphasise to Opposition Members, who affected to believe that the Government's tax measures affected only the less well off, that last year we proposed measures for indexing the higher rates which we have not put into effect. Overall, therefore, the income tax burden has borne more heavily on them than on others.
  Mr. Soley: Will the hon. and learned Gentleman give way?
  Mr. Rees: The hon. Gentleman will forgive me if I do not give way. I have only five minutes left. The hon. Gentleman and I exchanged many pleasant words in Standing Committee.
  Finally, there are two new taxes, which I at once admit that no Conservative Administration would readily introduce—the special petroleum duty and the bank tax. The right hon. Member for Ashton-under-Lyne affected to believe that there was a great bonanza which could solve all our problems, but that it was being frittered away on unemployment benefit. He may care to reflect how much has gone into preserving the nationalised sector of our economy—an objective which must surely be close to his heart if not to those of some of my right hon. and hon. Friends.
  Having touched upon the more difficult aspects of the Bill, I remind the House of the continuing theme of my right hon. and learned Friend's Finance Bills and Budgets, which is to encourage and stimulate entrepreneurial activity in the private sector. I remind the House of the recasting of stock relief, the enhanced interest relief that will encourage investment in co-operatives and partnerships, the loss relief for investment in unquoted shares, the increased initial allowance for industrial buildings that I hope will stimulate the construction industry and the business start-up scheme that we spent many hours refining and embellishing in the Standing Committee.
  Mr. Sheerman: Changing.
  Mr. Rees: The hon. Gentleman prefers to call it "changing". I would call it refining and embellishing. The main outlines remain the same.
  I also remind the House of the modest measures to humanise and rationalise capital gains tax and capital transfer tax. If the right hon. Member for Ashton-under-Lyne accuses us of disproportion in this area, I remind the House that the first-year costs o f our measures will be a mere £5 million and the subsequent year's costs £20

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  million. I am more afraid that my right hon. and hon. Friends will say that more needs to be done—indeed, I agree with them, but perhaps not this year.
  Against the background of what I readily concede is a rather grey sky, which overshadows the economies of most of the developed world, I therefore believe that the Government may claim without immodesty that this third Finance Bill is a solid legislative achievement.
  Mr. Sheerman: It is a disaster.
  Mr. Rees: The hon. Gentleman says that it is a disaster. Let us wait upon events. To pretend that one can say on 20 July what the precise consequences will be is a rather arrogant intervention by the hon. Gentleman, who I know can put on a more agreeable face. This Finance Bill marks another milestone on the road—an undeniably hard road, I concede—to put the finances of this country on a healthier basis, to achieve a more sensible fiscal mixture, to strike a better balance between the private and public sectors and to lay the basis for solid and sustained recovery.
  On that basis, without, I hope, too much immodesty—indeed, with a certain pride—I am delighted to commend the Bill to the House.
  Question put, That the Bill be now read the Third time:—
  The House divided: Aves 279, Noes 236.
  Question accordingly agreed to.
  Bill read the Third time, and passed.

  Hygiene in Poultry Slaughterhouses
  10.13 pm
  The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Jerry Wiggin): I beg to move,
  That this House takes note of European Community Document No. 5704/81 amending Directive 71/118 concerning hygiene in poultry slaughterhouses and supports Her Majesty's Government's objective of removing inequalities between Member States in the implementation of that Directive.
  The Government welcome the Scrutiny Committee's decision to recommend this document for debate. The subject is of importance to the poultry industry and the consumer and it raises serious questions about the implementation of Community directives throughout the Community.
  It may be helpful if I recall first that directive 71/118, which was of course agreed before the United Kingdom's access to the Community, is unlike other meat hygiene directives in that it applies to domestic trade within member States as well as to intra-Community trade. The directive lays down a number of requirements designed to ensure the hygienic production of poultrymeat, including structural standards for slaughterhouses and hygienic practices. However, the main provision which concerns us tonight is the requirement that each poultry carcase which is produced in a licensed slaughterhouse should be inspected under the overall responsibility and supervision of an official veterinary sugeon. The purpose of this provision was to provide a consumer safeguard for poultry-meat similar to that which had previously been available and still exists for red meat, and the terms of the directive make it clear that the intention is not only to reduce the risk of possible food poisoning but also to protect the consumer from other conditions in the meat, such as pus or tumours, which, while not necessarily making the meat unsafe, would nevertheless make it unwholesome.
  The implementation of this inspection requirement, which became compulsory in August 1979, required in most member States the introduction of a virtually new poultrymeat inspection service, since previously in most countries there had been very little systematic inspection of poultrymeat. In this country, as hon. Members will know, we have made substantial progress in setting up the inspection service largely as a result of a major co-operative effort involving the Ministry, the British Poultry Federation, the local authority associations and the British Veterinary Association, to all of which I am glad to pay tribute for this achievement. It is fair to say that there were doubts both on the industry and the local authority sides, but nearly all local authorities have now gone a long way to establishing the service required by the directive on the basis of guidelines issued by the Ministry after detailed discussion. These cover both the numbers of poultrymeat inspectors required and the extent of veterinary attendance in poultry establishments.
  However, as early as 1979 evidence began to emerge that some other member States were applying the directive in a way which is more favourable to their industries, either through lower levels of inspection or subsidies towards the cost, or both. At our insistence, the Commission undertook to make a study of the implementation of the directive in the various member
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  States. In spite of frequent reminders by my right hon. Friend the Minister of Agriculture, Fisheries and Food, the Commission report took a long time to appear, but when it did it confirmed that there were serious distortions both in inspection levels and in charging practices which, in the Commission's view, were sufficiently serious to require further harmonisation measures. After some further delays, the Commission produced in April this year the proposals contained in the document before us tonight.
  Before dealing with these proposals in detail, I wish to express my sympathy for the position in which the industry now finds itself as a result of these distortions in the implementation of the directive. It is not the main factor that has contributed to the present difficult trading conditions, but it is one element. The Government have recognised the need to help by making available £2 million towards the costs of poultrymeat inspection in 1980–81, and we shall continue to try to achieve uniform application of the directive in Brussels. We have already given an assurance that we shall adjust arrangements here to whatever turn out to be the agreed levels in the Community; and I repeat that assurance now. We are also determined to ensure that whatever is agreed is realistic and that it is genuinely applied in all member States. We shall be seeking agreement that for this purpose the Commission should make regular visits to each member State to check on the measures which are being applied.
  I shall comment briefly on the four main proposals in the Commission document.
  Mr. Tony Marlow: Is my hon. Friend suggesting that at that stage we shall have the bureaucrats of the Commission creeping round our slaughterhouses seeing what we are doing?
  Mr. Wiggin: I thought that I had made it abundantly clear that we sought the assurance of the Commission that in implementing such regulations it should see that such regulations are being carried out in all member States.
  I was commenting on the four main proposals in the Commission document—veterinary attendance in poultry slaughterhouses, inspection rates expressed in numbers of carcases per inspector per hour, charging arrangements and the extension of the derogation allowing the production of uneviscerated poultry in licensed slaughterhouses. First, I appreciate that the Commission's proposal for full-time veterinary attendance in all but the very smallest of slaughterhouses is one to which the industry and the local authority associations are particularly opposed. I understand the view that that is excessive. We consider that a sliding scale of attendance included in our existing guidance to local authorities under which full-time attendance is recommended in only the largest slaughterhouses—and the average is more like 50 per cent. Attendance—is about right. We shall, therefore, be resisting the Commission's proposal on that.
  Second, the Commission has proposed that the maximum number of broilers which can be inspected per hour by each inspector should be 1,200, while for hens, turkeys, geese and ducks it has proposed 600. In other words, the Commission is saying that it takes three seconds to carry out an adequate inspection of a broiler and correspondingly longer for larger or older birds. Here again, I appreciate that the industry and the local authority associations believe that one inspector can inspect more carcases in one hour than the Commission suggests. I

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  apologise for having gone into such detail, but I know that a number of hon. Members are concerned about those details. My technical advice is that three seconds per broiler is about right, given the need to inspect both the outside, inside and visceral mass of each carcase and that the figures for the other species are about right also, except that for ducks, where rather faster rates of inspection are possible.
  In discussing this subject in Brussels, we shall be especially mindful of the need for regular Commission supervision of whatever turns out to be the agreed level of inspection and we shall not give our agreement to any figures unless we are satisfied that they will be adequately policed. One idea which has already been advanced in Brussels and which in our view merits further examination is that such inspection levels might be obligatory only for poultrymeat which is eligible for intra-Community trade. However, there is also considerable opposition to this idea among some member States and it is too early to say how the discussion might develop.
  Third, on charging, the Commission proposal is that there should be no subsidy from public funds and that the full cost of inspection should be charged to the product at a standard rate. We are in agreement with the part of the proposal which rules out subsidies. Successive Governments in this country have, rightly in my view, considered that the costs of meat inspection, whether for red meat or poultry meat, are part of the costs of production and should therefore be charged to the product. Some other Governments in the Community have not taken that view up to now. We have, however, some doubts about the Commission proposal for a standard rate charge. The Commission have explained that it intends that charges within countries should be at a standard rate, but that there need not be a standardisation between countries. We do not see much point in this aspect of the proposal, bearing in mind the practical problems of calculating and collecting a standard charge.
  The fourth Commission proposal is for a five-year extension of the derogation permitting the production of uneviscerated poultry in licensed slaughterhouses. At present, that is due to end on 15 August this year and the Commission proposal would extend the date to 15 August 1986. The proposal is of greater relevance to some other member States than it is to the United Kingdom, but it is of importance to those licensed slaughterhouses in this country which still produce New York dressed poultry. As it is clear that no decision on a five-year extension can be taken by 15 August this year, the Commission has now proposed a one-year extension pending a definitive decision later. The Council of Ministers in Brussels is due to discuss this proposal tomorrow. The Government have alerted all the local authorities concerned to the situation and, whether the Council takes a decision on this matter this week or after the summer, we think that all local authorities are now aware of the need not to take action which might place processors of New York dressed poultry in this country at a disadvantage compared with their equivalents in other member States.
  I hope that it will be helpful to the House to have heard in some detail how we plan to tackle the main Commission proposals. It is already clear from discussions at official level in the Council working party that there are wide differences of opinion on most of these issues among the
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  various delegations. Early decisions are, therefore, unlikely, although we shall continue during our Presidency to press for agreement.
  The Government are very well aware that time is short domestically, particularly as the cost equalisation scheme run by the British Poultry Federation is due to end on 31 August this year. We have, therefore, been considering urgently with the federation, the local authority associations and other interested organisations whether, in advance of Community decisions, some means can he found of enabling the poultry, meat inspection service to be provided, within the context of the existing regulations, at a lower cost to the industry while maintaining the essential safeguards which the service provides to consumers of poultry meat. These discussions have not yet been completed and I am not in a position to say more today, but I hope that it will be possible to make an announcement on this subject in the near future.
  10.26 pm
  Mr. Gavin Strang: Hon. Members who have followed these matters will recall the tortuous arguments that preceded the implementation of the present arrangements for the inspection of poultrymeat. The Parliamentary Secretary participated in the debates. The present arrangements for the implementation of the provisions led to an improvement in standards of hygiene in the processing of poultrymeat. All the interested parties, the veterinary surgeons, environmental health officers, poultrymeat inspectors, producers and processing companies played their part in achieving a real improvement in standards. The main improvement came from new investment in more modern and hygienic equipment on the introduction of the regulations.
  We must also acknowledge the real tensions that exist, not least between the official veterinary surgeons and the environmental health officers, over the allocation of responsibility for the administration and supervision of poultry processing plants.
  Some advance has been made in hygiene standards. We must not forget that that is what the regulations are about. However, some significant problems have arisen as a consequence of the application of the directive throughout the member States. Above all, the problems arise out of the unevenness of its application. According to the official survey, we have been applying the directive more rigorously and effectively than have other member States, with the possible exception of Denmark, and to some extent Germany. Many member States, including our main competitors, have not come anywhere near the standards laid down by the British Government.
  There has been a severe disparity in relation to the cost of the inspection service. The Government made a contribution towards the training, and a limited contribution towards the cost of running the service, but in practice the British producer has borne a heavy burden compared with his competitors. The Danish Government for example, have covered the cost of the service. Clearly, we cannot expect our industry to accept that state of affairs, particularly in present circumstances.
  There is a dichotomy in the approaches to the problem. I note that the Parliamentary Secretary is not committed to the Commission's amending directive. Indeed, I take it from his remarks that the Government are determined to achieve changes, if not to eliminate the directive—and we may be better off without it. The Commission's approach

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  is to introduce an element of greater stringency and uniformity across the board, but the Government seem to be saying that there should be increased flexibility and a loosening of requirements in the United Kingdom in relation to the inspection service.
  Will the Parliamentary Secretary say more about the proposition that it is widely believed the Government favour, namely, that there should be a change in the uniform requirement, which many welcomed when it was first introduced, that if a poultry processing plant was deemed appropriate for the export trade, it was deemed appropriate for the home trade as well, and vice versa?
  There may be some difficulty in moving from the present position, particularly if some major retailers, say Marks and Spencer, were to decide that they wanted to retain the standard applied for the export trade. Our approach should not necessarily be to create a two-tier system in the United Kingdom. Above all, we have to acknowledge that the present situation is unsatisfactory and we cannot expect our industry to labour under the present conditions.
  The reason why this has become such a major issue is not so much the disparity in the cost of the service, though that is a significant element in competitiveness, as the overall state of the poultry industry. We cannot discuss the Commission's proposal in isolation from the decimation of the British industry. I hope that the Minister can give us some facts about the decline that is taking place. Is it true that 5,000 of the 25,000 jobs of those directly employed in the industry have already been lost? We know of the major closures, and many other plants are running at a loss and only just surviving. They want some changes in the inspection service, and they want the Government to meet the total cost of the service, at least temporarily, but the gut issue is the unrealistic competition that our industry has to put up with.
  This sector, more than any other, brings out the extent to which we are getting the worst of all worlds from the CAP. On the one hand, we bear a disproportionate share of the cost of the CAP across the board, but on the other the French Government are pouring money into their industry and deliberately setting about establishing a large market share in the United Kingdom. No one can dispute that. The facts have been exposed by the British Poultry Federation, the NFU and others.
  It is not possible to have a debate on the narrow lines that the Minister has set without considering the crisis that exists in the poultry industry. Our approach to the directive should be: what can we do urgently in the short-term to shore up our industry? That sounds rather negative and defensive, but it is a reflection of the depth of the crisis. First, we must help with inspection costs. I do not disagree with the hon. Gentleman's observation that, as a principle, Government would be reluctant to bear the total cost of the inspection of red and white meat. I should not make an issue of that.
  In the present climate, we should not debate such principles, but should look at the matter from a pragmatic point of view. The industry is in a state of crisis, and assisting with inspection costs is one immediate way in which we can help the industry. Rather than spending a lot of time arguing about modest changes to this amending directive—there is much cynicism and scepticism anyway about whether it will be applied in the other member
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  States—it would be better if Ministers came forward with a scheme, before Parliament goes into recess, to provide Government money to lift the cost of this service from our producers.
  Secondly, Ministers should bring forward a scheme to provide production aids for our industry. There is no alternative to that in the short term. The Government should tell the French and the Commission that they are not prepared to abdicate responsibility for this important industry—and in my view it is an important industry.
  Mr. Hugh Dykes: We are, of course, in sympathy with what the hon. Gentleman is saying about the need to defend the industry. However, perhaps he is getting the French situation out of perspective, because I know that he is always anxious to attack wicked foreigners if he can. Is it not, rather, that the French are benefiting in the under-developed regions, such as Brittany, from the kind of regional grants system that we have here? There are certain similarities. If the relevant poultry industry were located here in under-developed regions, as opposed, say, to East Anglia and elsewhere, they could benefit from subsidies of the kind that the French are receiving.
  Mr. Strang: I am surprised that the hon. Member should accuse me of attacking wicked foreigners. Most people who have followed what I have said in these debates over the years would not make that charge against me. One cannot dismiss the matter by saying that the French are locating these plants in areas where regional funds are payable and that it can simply be accounted for in that way. When one examines the scale of the support, which is selective and sectoral—it is in Brittany, but it is not applied across the board to all industry—and when one examines the volume of the concessions and the amount of public money that is being spent in various forms, one sees that it constitutes wholly unacceptable competition.
  We should treat our industry in the way that the French would treat their industry if it were in a similar position to ours and make it clear that either they remove the unfair aids, or we limit their access to the British market.
  Sir Paul Bryan: Would the hon. Gentleman be right in saying that a single plant which has been put up in Brittany, and which has been heavily subsidised, will have the capacity to produce as many turkeys as the whole British turkey industry?
  Mr. Strang: The hon. Member is right. It is certainly of that order of magnitude. That is the example that has been most frequently cited in the agricultural press. This is a question not just of regional policy but of a sustained policy by the French Government, aimed at supporting and encouraging a massive expansion of the industry, which has already taken place, and which will take place to an even greater extent.
  The history of the Community is such that we can forget about the Treaty of Rome and about free competition. When it comes to vital national interests, in practice member Governments seek to protect them. We are talking about a vital national interest here, and the Government do no one a favour by refusing to take action.
  We can argue as much as we like about the narrow technical details of the inspection service implicit in the directive, but all the pressure being devoted to this matter stems basically from that unacceptable attitude. I hope that the Minister will address himself to these major issues of concern to the industry.
  10.40 pm
  Mr. Peter Mills: It is not often that I agree with the hon. Member for Edinburgh, East (Mr. Strang), but I agree with one of his comments about the directive. We have to look behind the directive and try to see what is happening in the industry. It is no exaggeration to say that a crisis has developed, not only in the poultrymeat section but in eggs as well.
  There has been a real loss of confidence. Of course, the industry has had its problems before. It is an industry which has received the least amount of subsidy for many years; but it cannot weather the present storm, and it has lost confidence.
  A great many people have been in touch with me about the problems—probably more than ever before. In my part of the world, in Devon and Cornwall, I have had the chairman of the local branch of the National Farmers Union and various constituents lobbying me. They have shown me their accounts and explained their problems. I find it very difficult to advise them.
  The reasons may seem clear to some, but I do not believe that we can blame the Government. As has happened in many other industries, costs have risen, and these health regulations are a burden which add to the costs. There have been diminishing returns to the industry. Production levels are falling. Above all, there are genuine and real fears.
  We see the expansion of French production. I do not know whether the House fully appreciates the determination of the French Government to be the food producers of Europe. In my view, it is the wrong way round. We ought to have that determination to be the food producers of Europe and to thrust into Europe with our exports and counter this threat. The industry has this real fear of French production.
  There are low-price imports of both eggs and chickens, and, of course, there is more to come, as my hon. Friend the Member for Howden (Sir P. Bryan) implied in his remark about Brittany.
  These fears, plus the costs and all the other factors to which I have referred, mean that the industry's confidence has gone. The producers feel a strong sense of unfairness. It is very difficult to prove this unfairness, however, especially about French production and their methods. The belief is that French producers are heavily subsidised. We know that there are national aids, and the industry believes that the French get away with it. We stick by the rules, and they do not. It is very difficult to pin down the French and for the Community to take action on this unfairness.
  All this adds to the problems of the producer, but others are worried. There are many jobs at stake. If we lose our poultrymeat industry, thousands of jobs will disappear. The animal feed trade and our meat plants and slaughter plants which specialise in poultrymeat production will be affected. Many others besides the producers are fearful of the future and have lost confidence. This is a serious time with serious problems. In the long run the consumer will suffer. It will be a sad day if the consumer has to rely on imports of French or any other Continental poultrymeat for his table. The industry needs to have its confidence restored.
  What can be done? It is difficult to know exactly what action can be taken. The hon. Member for Edinburgh, East has made one or two suggestions the implementation of which would be fairly costly. However something will
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  have to be done. The trade is saying to me "All right, Peter Mills, you have made all these excuses about what the Government are trying to do. You have told us about how they have taken the issue to Brussels and all the rest of it. But does the Ministry want a turkey and poultry industry in future?" I know that it does. That being so, action has to be taken fairly quickly. A point of no return is rapidly developing. It would be a tragedy to let the industry wilt away. We have an assurance—
  Mr. Deputy Speaker: (Mr. Bryant Godman Irvine): Order. I draw the attention of the hon. Member for Devon. West (Mr. Mills) to the fact that we are debating the subject of poultry hygiene and inspection.
  Mr. Mills: That is exactly what I am doing, Mr. Deputy Speaker. The directive represents one more burden and one more difficulty for the industry to face. It is another measure that will add to the loss of confidence. It is plain that this measure will add to the industry's burdens. This is a crisis. The Minister has, I am sure, taken into account the effect of the directive. He has said that he appreciates the problems of the industry and has confirmed his determination to ensure that it is not destroyed by unfair competition from abroad.
  Mr. Deputy Speaker: The hon. Gentleman may have a good argument to develop on another occasion. He must now confine himself to inspection.
  Mr. Mills: I hate to disagree with you, Mr. Deputy Speaker. May I explain why I do so? The Minister said that he appreciates the problems of the industry. The directive is a problem for the industry.
  Mr. Deputy Speaker: Order. That is the problem that we are debating. We are not debating other problems.
  Mr. Mills: I am trying to emphasise that the problem that we are debating is adding to the burdens that the industry is experiencing.
  Mr. Geoffrey Johnson Smith: Is my hon. Friend saying that the burdens that the industry already has placed upon it put it in serious jeopardy and that the directive before us will push it over the brink and put the United Kingdom out of the industry altogether?
  Mr. Mills: My hon. Friend is right. That is what I am trying to say. He has put the argument in a different way and in a different form. He is not Peter Mills and he speaks in another way.
  I turn to the regulations. The latest proposals from the Commission will do nothing to restore the confidence that the industry requires. I reject the document. I hope that the Minister will deal with it savagely in Brussels. It is not what is needed. It is not what is wanted for the industry with one exception—namely, the proposal to allow New York dressed birds to continue. I have lived in Devon all my life. I have eaten New York dressed birds virtually all my life. I have never suffered anything from a bird dressed in that form. An extension of that derogation is very important.
  The British Poultry Federation Limited states, first,
  "That domestic product can in future be inspected according to national traditions, provided all the objectives and standards are met."
  Secondly, it states
  "That export product must be processed to standards agreed at Community level, and rigidly enforced. We believe that the only effective sanction is to ban product which has not followed the agreed criteria."

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  I tend to agree with that.
  The NFU is not happy about it. It does not like the two-tier system. I wonder why. We have a two-tier system in various animal slaughtering—beef, lamb and so on. We have export standards and we have home standards. I do not know why, to help the industry in its present troubles and difficulties, the Minister should not bring in the two-tier system. I recommend it. I believe that in the present situation it would be the best way forward.
  I apologise if I have been difficult, Mr. Deputy Speaker, but I hope you see that there is much more behind the proposals that we are discussing tonight than is immediately apparant. There is a serious loss of confidence. I believe that the Minister wants the turkey and poultry industry to continue. All I would say to him now—as I have said to him personally—is that, if he wants it to continue, we have to do something about it quickly.
  10.51 pm
  Mr. Bill Walker: I welcome the opportunity to speak in the debate because of my constituency interest. I have a poultry processing plant at Coupar Angus. It is a substantial employer in an area that has already been adversely affected by the closures of a canning factory and three textile mills. One does not have to be terribly clever to realise that some of the closures have been brought about by the changing pattern of European trade, and there is deep concern in my constituency about the way things are going.
  The directive that we are debating is of great concern to my constituents, because they see the way that British membership of the EEC has affected others around them. They note that we have suffered because of the way in which directives are applied by other member States, to the extent that it has adversely affected the people working in the two industries that I mentioned.
  The British poultry industry is one which has been affected not only by the recession but by the distortions at the inspection level and in the charging practices operated by other member States. Consequently, we face subsidised imports from abroad, and this is damaging to our poultry processors.
  From the comments made by the Minister earlier this evening, I trust that the original EEC hygiene directive is now up for amendment. I hope that he will confirm that that is what he was saying.
  The poultry industry was right to draw hon. Members' attention to the situation that it saw. Uneconomic hygienic costs is only one adverse factor, but that is what we are debating this evening. My hon. Friend the Member for Devon, West (Mr. Mills) was rightly brought to order because he was widening the debate, but the industry is terribly worried, because this additional cost burden could be the difference between survival and going out of business.
  It is time that we looked after this British industry and acknowledged that the French have not been behaving correctly. They have not been applying the existing EEC directive. Can we genuinely believe that, whatever amendments are agreed, the French will apply them? They have already invested heavily in plants and will wish to see them prosper, and they can do so only if they substantially penetrate the British market.
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  I do not often agree with the Opposition Front Bench, and I rarely agree with the hon. Member for Edinburgh, East (Mr. Strang), but much of what he said this evening I would have wished to have said myself. He confirmed the views expressed to me by the management, trade unions and others in the poultry processing plant in my constituency.
  In these difficult times, Government aid to help with the cost of inspections and other burdens would be welcome, but the industry wants fair competition, particularly in our own and EEC markets. More importantly, it needs a stable home market. We look to the Government to ensure that our industry continues to have that.
  10.55 pm
  Mr. Austin Mitchell: It is interesting to listen to Conservative Members. They are essentially saying that, if we enforce the regulations, they will prove to be unnecessary, as the industry will have gone bankrupt because they have been enforced. It is the usual spectacle of the party of Euro-enthusiasts praising the Common Market generally, although on every specific issue they lament its disastrous effects on industries and other activities in their constituencies. They praise the general and attack the particular. These regulations are not only pointless and unnecessary; they are an inevitable consequence of our membership of the Market that we agreed to enter in 1972.
  Grimsby may not be recognised as a centre for the Chicken-Licken Turkey-Lurkey and Ducky-Kucky industry, but I, too, have received representations, particularly from Cherry Valley Farms, which employs an unfortunately reduced number of my constituents. It feels that the provision for veterinary inspection place an unnecessary burden on the industry.
  Most hon. Members will have received similar representations from the British Poultry Federation Ltd., which states that
  "the whole of the British poultry industry … asks you to reject the proposals in the latest Commission document root and branch with the exception of the derogation proposed for New York Dressed Production. We see this document as totally disastrous, and irrelevant to our requirements."
  That puts this document in its proper light. We face a proposal that has already increased costs. Estimates of the increase vary, but for efficient producers it must be about 1½p per bird and for less efficient producers up to 20p.
  In agreeing to assist phasing in the system to the extent of £2 million in 1980–81, the Government acknowledge that the burden of costs on the industry is considerable. Those costs, are being imposed on an industry that is in an extremely difficult competitive situation, largely due, as hon. Gentlemen point out, to unfair competition from the market that they adore.
  Although standards have been improved, it has been largely the result of better equipment, much of it imported. The cost burden of the new inspection system is too heavy for an industry in a difficult situation. It is, therefore, appropriate that the burden should be borne, not as the directive says, but by the Government, as happens in Denmark and in other competitor countries. Our policy has been to push our standards ahead of those in other European countries and then to argue that we should resile from them or let others catch up. That policy has placed our industry in an exposed position.
  Here, as all too often, we find ourselves obeying the full strictness and interpretation of the law and establishing

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  practices ahead of other Common Market countries. We treat matters seriously, and so incur costs and other disadvantages which impose a burden on our industries. As a result, their industries steal our markets, partly because they are less scrupulous in the observance of the rules than we are. It is a classic Common Market story which is now affecting this industry.
  All this points not to this directive—our previous provisions were, after all, satisfactory—but to applying the veterinary inspection system only to the export trade and taking powers to control imports to see whether proper inspections have been applied to imported chickens, turkeys and ducklings.
  This is a directive, not a regulation, so it is enforced more subjectively. By that very fact, it will encourage the very divergence of practice that we are anxious to avoid. Unfortunately, in pursuing uniform standards, the Government are pursuing a mirage and at the same time damaging our own industry.
  Mr. Nigel Spearing: My hon. Friend mentioned that this was a directive, not a regulation. If the Minister does not achieve what his hon. Friends seeks, surely it will be possible not to implement the directive by not approving the orders that he may have to lay before the House. They would then be doing what many of us believe that the House will eventually have to do, which is to stand up against the Commission operating an unfair system.
  Mr. Mitchell: My hon. Friend is right. I hope that in the last analysis they will stand up and be counted, instead of mouthing vague protests and then doing nothing about it.
  In my view, we should withdraw the guidelines for the domestic industry, apply the regulations only for exports and ensure that they are enforced for imported produce. It is unreasonable to impose mechanical standards designed by Euro-bureaucrats, as the Minister suggested, timing turkeys and chickens as they pass through.
  This brings us, as it were, to the parson's nose of Euro-folly. Perhaps the Minister will tell us, incidentally, what we are supposed to make of the passage in the amended directive 71/118, which reads:
  "Whereas a procedure ensuring close co-operation between the Member States and the Commission should be set up for taking decisions relating in particular to the changes of the maximum number of birds which may be inspected in one hour by one veterinarian or by one assistant."
  To me, that is a Euro-gobbledegook passage in a largely Euro-gobbledegook directive.
  The industry is in an extremely difficult competitive situation. It is faced with unfair and uncontrolled competition, largely from France. The Government should heed the voice of the industry and speak with that voice to the Common Market, instead of speaking, as they have hitherto, with one voice to the industry and another to Europe. They should speak for the industry and try to help it in this difficult situation, rather than sit on the fence as they have done so far.
  11.3 pm
  Mr. Charles Morrison: As you have rightly and properly reminded us, Mr. Deputy Speaker, we are discussing health problems affecting trade in fresh poultry meat. Indirectly, therefore, we are talking about the future of the United Kingdom poultry industry. The two matters
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  are indivisible because of the costs involved. Indeed, the National Farmers Union has estimated that there are 100,000 jobs in this industry, if one includes the production, packing and processing of poultry. The amending regulations before us tonight are therefore of considerable importance not only to poultry production but also to employment in this country.
  As my hon. Friend the Member for Devon, West (Mr. Mills) has reminded the House, the poultry industry is suffering a severe loss of confidence. Like my hon. Friend, I have been inundated with representations and letters from my constituency expressing fears for the future of the industry because of what is thought to be unfair competition from other member States of the Community. There is no question at the moment of any expansion in the industry. Indeed, all the statistics show that it is contracting sharply and that a number of poultry producers and processors are in considerable difficulty.
  I am a strong supporter of our continuing membership of the European Community—
  Mr. Austin Mitchell: But.
  Mr. Morrison: —and I consider that any other possibility is beyond belief and totally impractical. Furthermore, I am a strong supporter of sensible poultry hygiene regulations—
  Mr. Mitchell: But.
  Mr. Morrison: —and I am in favour of harmonisation.
  Mr. Mitchell: But.
  Mr. Morrison: The hon. Gentleman is a fraction ahead of me. Harmonisation must be real harmonisation on a totally equal basis throughout the Community. The hon. Gentleman, who has been interrupting me, implies that he has been rather clever. The truth is that this brief debate takes place because, as the explanatory memorandum states,
  "A study of the practical application of this Directive undertaken by the Commission during 1979–80 revealed differences both in levels of inspection and methods of charging in Member States sufficiently great to necessitate further harmonisation."
  It is therefore clear that the Commission itself appreciates that there has not been harmonisation and that there should be harmonisation in the future.
  I thought that the Minister's speech was encouraging. It voiced some, if not all, of the reservations about the proposals that I happen to feel. I was also encouraged to hear my hon. Friend say that early decisions are unlikely. That is excellent. It means that the Government are determined to ensure that before the revised regulations come into force there should be proper arrangements to ensure that this time there will be harmonisation. In that regard, I take the view that it is important to ensure that there should be adequate policing of the arrangements in all the member States of the Community.
  I have been in correspondence with the Minister about unfair competition. I have been encouraged by his response. My hon. Friend tells me that he has sent the Commission a substantial dossier of the aids that he understands are available in particular to French poultry producers with a request that the Commission should determine whether such aids are compatible with Community rules on State aids. I should, therefore, like to encourage the Government in their efforts to chivvy the

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  Commission to take steps to secure the control of the abuse of regulations or competition by any Community country. I rely on the Government's determination to agree only to poultrymeat hygiene amending regulations that will insist on equality of treatment, in the widest sense, throughout the Community.
  11.9 pm
  Mr. Eldon Griffiths: I am sure that the Minister has got the point that hon. Members are virtually unanimous in asking him to take the directive back and to wring its neck. That is the best thing to do.
  My constituency, like that of my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton), is full of chickens, ducks, geese and turkeys. Long may it remain so! However, I have grave doubts about whether that population of feathered creatures will remain so strong if anybody—the EEC, the Government, or urban people, who constantly add to our costs—continues to add to the industry's burdens. The Minister was right to start by underlining the fact that directive 71/118 is the only Community directive that seeks to regulate domestic as well as infra-European trade. That is why it is particularly important to have a detailed debate.
  I have only four points to make on the Minister's speech. As regards the attendance of vets, the EEC has never understood the virtue of the old English system of public health inspectors, who are now known as environmental health inspectors. It was wrong of the vets unions to join together to squeeze the public health inspectors out of the inspection business. They did a good job and should have been allowed to continue to do so. They were cheaper, much more practical and knew their business. The suggestion that there should be one vet in every egg-packing or chicken-processing plant in the country is absurd.
  I agree with my hon. Friend the Minister that our sliding scale is better, but I should be inclined to go even further and suggest that it is sufficient for public health inspectors or environmental health inspectors to form their own judgments. They live in the country and know what they are doing. They know when it is necessary to attend, without needing regulations from Brussels or anywhere else.
  I turn to the subject of the inspection of carcases per hour. It is absurd that we and the other Parliaments of the Community should debate whether three or four seconds per bird is needed. Is it to be three seconds if it is a broiler, four seconds for a duck and five should the bird happen to be a goose? That is preposterous. Anyone who has seen a poultry production line will know that even the most highly paid vet in the world will become cross-eyed if he tries to look at every bird going by. There is not a man alive who will spend three seconds on every broiler and four seconds on every duck. That does not happen and it would be absurd to write such detail into any form of international law.
  The Minister mentioned the charging rates. The local authorities and industry in my part of the country are at one in believing the charges to be far too high. If we had had a more sensible system, with environmental health inspectors making their own judgments on random
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  samplings, the charges could have remained lower. It must be borne in mind that environmental health inspectors have to bear the responsibility if they do not do the job properly.
  On the question of the five-year derogation of New York dressed poultry, like my hon. Friend the Member for Devon, West (Mr. Mills), I was brought up on un-eviscerated birds. I have never understood why they were called New York dressed. I hope that I can continue to eat them, because I am old-fashioned enough to think that the flavour is better. Whether it is, where there is a decent system of local public health inspectors, they know what it is necessary to inspect.
  All of this extra complication brings the Common Market into disrepute. I am a supporter of British membership. I hope that the Minister will be strengthened by the debate to return to his colleagues in the European Community. He should tell them that if there is one way of putting at risk the loyalty to the European Community that the vast majority of Conservatives have, it is to introduce directives such as this, which are irrelevant to the countryside and do no good for the hygiene standards that they seek to promote.
  11.15 pm
  Mr. Colin Shepherd: One of the things that I find when looking round my constituency and examining the businesses of my major employers is that the more I examine them the more interested I become in what they are doing. I have a major producer of poultrymeat in my constituency, Sun Valley. It fills me with pleasure to see so many colleagues here this evening from constituencies in which Sun Valley has subsidiary plants. That is indicative of the interest that is taken on a wider front in the affairs of Sun Valley and the poultry industry generally by Conservative Members, even if not by the Opposition.
  One is inclined to think of poultry producers' premises as being small sheds or houses. Nothing could be further from the truth. Today the poultry industry is a large, vertically integrated industry which involves not just the growing of birds but their processing,, the growing of feed for the birds and the further value added to birds by selling cooked meats, prepared dishes, Tandoori this, fried chicken that and so on. That is a major fact for hon. Members to bear in mind when considering the structure of the poultry industry.
  We are considering suggested amendments to the poultrymeat hygiene regulations, which have given rise to an immense amount of stress to the industry since they were introduced in 1979. We are also considering the draft proposals for the improvement of those inspection regulations.
  The proposals do not fill me with much confidence. Basically they are not a happy set of draft proposals, with one exception. That is the proposal mentioned by my hon. Friend the Member for Devon, West (Mr. Mills), backed up by my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) about New York dressed poultry. I can see no reason for not having derogation in perpetuity for NYD. Let us not mess about with a further five years here or one year there. Let us take that out of the ball park and get on with the mass-produced business, not the New York dressed which is small-scale, farm gate sales stuff.
  We are not happy with the present regulations. We see differences arising about enforcement. That was adequately drawn—or dragged—out of the Commission by the survey that was carried out and published many

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  months later after much procrastination. There is no such thing as parity of enforcement of the regulations within the Community.
  We have seen no parity either in the costs of the regulations. Denmark carries the entire cost of poultrymeat inspection. We have been forced into having to bail out the industry by the welcome addition of £2 million on a fifty-fifty basis with the industry. That is much appreciated. The French run two systems. They have the effilé system for internal use, which means that the full costs of inspection are not borne by the broiler fowl industry. The extra margin from that can go towards assisting the export business or the development of new business. These are important factors.
  Problems are also experienced in the United Kingdom by the operation of the British Poultry Federation's equalisation scheme. It has given rise to stresses in the industry, although broadly it was welcomed as a fine initiative by an industry under great stress.
  We must examine a two-tier structure. As an interim measure we must get away from what we have on the table in front of us. We must lean towards an interim measure until the question can be resolved properly in the light of experience and the development of markets. I stress the importance of having an interim measure.
  Veterinary inspection is more onerous. If we are happy about the present enforcement, why should the next provision be more rigorous? Why should we be confident that veterinary inspection will be enforced in the French and Dutch plants when we have no reason to believe that it is enforced at present? I am open to being shot down on that. I should welcome it, but I do not think that it is possible.
  There is a massive disagreement between the Commission and the industry about possible inspection rates. The issue was put in its proper perspective by my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), who poured derision on cross-eyed inspectors trying hard to keep pace with the fast flowing line of birds. I have watched them and it is as hypnotic as watching cider being bottled down the road from Sun Valley.
  We like the thought that no Government subsidies will be given towards the cost of inspection. We like the concept of the full cost of inspection being charged to the product at a standard rate. However, we do not know how monitoring is to take place. How do we know that it will happen? It is important that confidence is instilled. My hon. Friend the Member for Devon, West referred to that.
  The British Poultry Federation's equalisation scheme is due to finish at the end of August. That threatens to drive a wedge through the poultry industry. We should recognise that that is inherent in the present position. The equalisation scheme was designed to spread the cost of inspection across the industry. It helped the small producer. However, it produced a major strain on the larger producer.
  If the equalisation scheme were removed and we returned to the position before its introduction, the bigger producers such as Sun Valley would be able to charge about 5p per lb. less on their poultry meat. At the end of the inspection system it will cost only ½p. With that 5p per lb. premium such companies would be in a position to expert and to compete against imports which are quoted as their price less 6p.
  Big industry could compete with big industry in France. We have to make up our minds about whether we want an
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  industry which is balanced between big and small, and make our arrangements accordingly. We cannot have it both ways. If we want a big industry that can compete, the small industry will be unable to compete. Perhaps the industry must take that on board and debate agressively within its own framework.
  We are trying to have it all ways. We are trying to protect a morass of small producers who do a super job, at the same time as trying to make it possible for the bigger producers, which are incredibly efficient, to compete effectively with the threat from across the water. It is clear that if we do not indulge in equalisation schemes the big industry can and will compete. We must therefore have a clear idea of the future structure of the industry when deciding on the course we take.
  I shall conclude with a plea for a major "Buy British" campaign in this country. We can do it. The industry can get together and put its mark on its produce within the two-tier structure. It can say "This is a British bird inspected to British standards. Buy British and eat a British bird". I do not want to coin the slogans. The industry can do that far better than I. But it would like to know from the Minister whether it will be able confidently to mark British birds with a British mark, and whether there is any legal objection to that—I am thinking of the French effilé mark.
  There are problems ahead—I have tried to explain how they relate to the structure of the industry—in terms of inspection. There are rumours that the French are pouring still more resources into a massive broiler fowl production plant to produce birds for third country consumption. That will put a lot of poultrymeat on the world market, and that is bound to affect our home market. It is therefore essential that we do not indulge in unnecessary high-cost inspection methods. We shall then be able to compete with the threat when it came.
  Above all, the industry—to return to the subject of confidence referred to by my hon. Friend the Member for Devon, West—needs to know the form. It is undoubtedly resilient and is determined to remain so. It does not want to be buoyed up with false hopes. It wants to know where it stands. It does not want to indulge in wishful thinking that M. Bourgoin might go broke. We know that he will not go broke but will be propped up by the French Government, because that is the structure of the deal—although not officially. Our debate tonight underlines this important confidence-essential.
  11.28
  Mr. Bob Cryer: I shall be brief, and I apologise for having missed the Minister's speech. I have questions to put, because a number of my constituents work in a large poultry packing plant. I hope that the Minister can answer them.
  The British Poultry Federation lobbied Parliament several months ago to raise the problem of unequal charging. Doubtless, hon. Members from both sides of the House attended that lobby. It was a serious issue at that time.
  In the explanatory memorandum 5704/81 the Government say that they will be
  "discussing these proposals with the objective of securing realistic arrangements which all Member States will undertake to apply".

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  I should be grateful if the Minister could explain which "realistic arrangements" of application he has in mind, and, most important, how long he envisages it will take to get these arrangements into operation.
  The poultrymeat industry is undergoing severe competition, particularly from French imports, and there is clearly a time limit up to which the British industry can tolerate unfair competition under which the costs of inspection abroad are not fully met by the industry, contrary to what happens here. It is only a matter of time before serious harm is done to our industry.
  Mr. Colin Shepherd: Is it not the threat rather than the actuality of imports that is causing concern?
  Mr. Cryer: I must tell the hon. Gentleman that when I met representatives of the poultry industry they said that in the wholesale catering sector there were already considerable amounts of imported meat that were affecting them. They were much concerned about the retail side, too.
  I ask the Minister to say what time scale the Government have in mind. It is a matter of considerable urgency, and I hope that he will be able to assure the House that he will act with speed.
  If the Minister cannot achieve the time scale that he wants, and if he cannot achieve the position that he seeks, is he prepared to recommend, as has been suggested, that any subordinate legislation that he is required to bring in under EEC directives should be put before the House with a recommendation that it be rejected? If he is prepared to take that attitude, he must recognise that it will be a card up his sleeve and may well encourage proper negotiations, with a limited time scale, resulting in realistic arrangements that can be brought into effect quickly and ensure that there is proper competition, without hidden or direct subsidies that form unfair competitio for the British industry.
  11.31 pm
  Mr. David Myles: It should be generally understood in the House that there has never been an EEC regulation for poultrymeat products, as there is for most agricultural products. The poultry industry, like the horticulture industry, has had to rely on the concept of a common market, with harmonisation of State aids, hygiene regulations and so on, so that there would not be unfair competition between member States. Poultry products have never, as far as I know, been subject to MCAs or market support mechanisms, such as we have had for beef, sheepmeat or, to a lesser extent, pigmeat.
  The documents being discussed tonight are mainly about the harmonisation of hygiene regulations and, while we have an industry that is as efficient as any in Europe, and one that maintains hygiene standards that are higher than most other States, all sectors of the British poultry industry have been facing a critical situation in the last few months.
  In the United Kingdom, £1·5 million was paid to assist in phasing in all the inspection services required as a result of directive 71/118. In January my right hon. Friend the Minister of Agriculture, Fisheries and Food announced a further £2 million subsidy towards inspection costs. This represents about 50 per cent. of the total costs of inspection. Other member States have found it necessary
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  and important for their industries to provide Government funds to a greater extent. This is largely what has created the present problems facing the British poultry industry and led to the likely attack in the coming months on our turkey industry from such plants as that operating in Brittany.
  The proposals that veterinary surgeons should be present in slaughterhouses at all times is surely unnecessary. Poultrymeat inspectors are capable of performing the necessary duties and vets should be employed on a consultancy basis only, or for random checks.
  Turning to the second propoal, the British Poultry Federation's costs equalisation scheme comes to an end next month. This has helped small slaughterhouses and is highly commendable. I hope that it can continue after the end of August. The practical problem of collecting a standard charge is such that we should resist this proposal. I was pleased that my hon. Friend the Under-Secretary said so in his speech.
  I welcome the proposal to extend the derogation allowing the production of un-viscerated poultry, New York dressed or long-legged, or any other euphemism, in licensed slaughterhouses. I have such a poultry slaughterhouse in my constituency which does a substantial trade in those birds.
  Mr. Kenneth Carlisle: My hon. Friend is very articulate about inspection. Does he agree that the whole context of the poultry industry and the great difficulties that it is facing far and away override any of the matters connected with inspection, and that what the Government have to do is tackle the basic problem of the industry?
  Mr. Myles: I welcome my hon. Friend's intervention and the fact that he has been able to get into the debate. Currently, Dutch and French imported chickens are selling at 6p a pound below our market prices. By 1977 the British poultry industry had developed quite an export trade of 4 per cent. of production. In 1981 it is expected that the industry will be fortunate if it can keep 90 per cent. of our own market. I urge that something be done to rectify the situation.
  11.36 pm
  Mr. Wiggin: The hon. Member for Edinburgh, East (Mr. Strang) assumed a welcome, agreed on both sides of the House, to the basic criticism of this Community document. I am grateful to him for that. He made the important point, which perhaps escaped one or two other hon. Members, that the question of poultrymeat hygiene is not exclusively one for the Community, but is a matter of considerable domestic importance to make certain that we have high standards in our poultry slaughterhouses. but if these standards are unreasonably high, so are the costs, and that really is the nub of the complaint of the industry.
  I should perhaps go into slightly greater detail about what we have in mind in modifying existing arrangements in this country. I emphasise that no decisions have yet been taken and that we still await comments from several important organisations. However, I can confirm that we are thinking of drawing a distinction between establishments which wish to use the Community health mark on some or all of their production and those which do not wish to use the health mark at all.

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  For the first category we would maintain the existing detailed Ministry guidance on numbers of inspectors and on veterinary attendance; for the second we would withdraw the detailed guidance and leave it to the individual local authorities to determine the arrangements necessary to meet their obligations under the regulations to provide inspection of carcases under veterinary supervision.
  We believe that in that way it should be possible for the poultrymeat inspection service to be provided within the context of the existing regulations at a lower cost to the industry, while maintaining the essential safeguards which the service provides to the consumers of poultrymeat.
  My hon. Friend the Member for Hereford (Mr. Shepherd) raised the question of a British quality mark. I understand that the British Poultry Federation supports the idea for premises not using the EEC health mark. However, there is no provision in the regulations for the use of such a quality mark. That would be a matter for the industry, which will no doubt bear in mind the need to comply with the general provisions of the Trade Descriptions Act and the Food and Drugs Act. We shall complete and issue a revised circular as soon as we are in a position to do so. We hope that this will be during August, but the matter is not entirely in our own hands.
  The hon. Member for Edinburgh, East, like many other hon. Members, finished with general comments on the state of the poultry industry. Bearing in mind your strictures, Mr. Deputy Speaker, I shall not go too far down that road, but I should say that we are in close touch with the leaders of the poultry industry in the United Kingdom not only on hygiene questions, but on all the other issues that are causing concern and can distort trade, including the increases in production elsewhere in the Community with the help of substantial national aids.
  My hon. Friend the Member for Devon, West (Mr. Mills) quoted my right hon. Friend. He was actually quoting from an NFU press handout, so at least there was no question of bias in this matter. We appreciate the problems and are determined to ensure that the United Kingdom industry is not destroyed by unfair competition from abroad. We have taken these matters up in Brussels and my right hon. Friend the Minister of Agriculture, Fisheries and Food has made it clear that he will continue to press for effective action on them. He intends to use his period as President of the Agriculture Council to stress the need for greater attention to be paid to the whole question of national aid and other practices that can, and do, prevent fair competition.
  The hon. Member for Grimsby (Mr. Mitchell) described the directive as pointless and unnecessary, but that seemed to go against what his hon. Friend the Member for Edinburgh, East said about the importance of poultry hygiene. I tried to explain the details of timing in my opening speech.
  My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), with his usual eloquence, poured much
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  scorn on the question of timing, and I am conscious of the apparent Gilbert and Sullivan situation of seconds per bird being discussed on the Floor of the House, but if inspection procedures are to be fair and equal some yardsticks have to be laid down. They may be worked out in seconds per bird, but we are really talking about numbers of inspectors on line. There will be the same number in French and Italian factories as in British factories. Such a yardstick has to be used. As my hon. Friend knows, time is money and standards have to be laid down.
  My hon. Friend the Member for Hereford (Mr. Shepherd) mentioned New York dressed poultry. He will know that farm production is already exempt from the hygiene regulations for that. I shall bear in mind what he said, and I have no doubt that his comments about a permanent derogation will be read with great interest.
  I have dealt with French competition, but it was raised by a number of hon. Members, including my hon. Friends the Members for Perth and East Perthshire (Mr. Walker), for Devizes (Mr. Morrison) and for Banff (Mr. Myles) and by the hon. Member for Keighley (Mr. Cryer). The competition coming from France, particularly in the turkey industry, is not illegal, but the Government are acutely conscious that if industrial subsidies are to be used for the production of what is a semi-factory operation, there will be a distortion not only in the poultry market, but in that for pigs and for other factory types of production.
  My right hon. Friend has made it clear that he intends to raise that matter with the Commission as it breaches so blatantly the whole principle of the CAP. He will use his position during our Presidency to make that point firmly.
  Question put an agreed to.
  Resolved,
  That this House takes note of European Community Document No. 5704/81 amending Directive 71/118 concerning hygiene in poultry slaughterhouses and supports Her Majesty's Government's objective of removing inequalities between Member States in the implementation of that Directive.

  Statutory Instruments, &c.
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): May I put together the Questions on the two motions?
  Motion made, and Question put forthwith pursuant
  Standing Order No. 73A (Standing Committee on Statutory Instruments, &c.):

  IMMUNITIES AND PRIVILEGES
  That the draft Commission for the Conservation of Antarctic Marine Living Resources (Immunities and Privileges) Order 1981, which was laid before this House on 22nd June, be approved.
  That the draft European Centre for Medium-range Weather Forecasts (Immunities and Privileges) (Amendment) Order 1981, which was laid before this House on 22nd June, be approved.—[Mr. Le Marchant.]
  Question agreed to.

  Non-contributory Invalidity Pension
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Le Marchant.]
  11.42 pm
  Miss Jo Richardson: This short debate is about discrimination—discrimination, moreover, against women with severe disabilities who have enough to cope with without having to battle against injustice, inequality and bureaucracy in claiming the non-contributory invalidity pension.
  That pension was introduced by the previous Labour Government in 1975 for men and single women. To qualify, such persons have to show only that they are unable to do paid work. Married women were put into a different category. They also have to show that they cannot take up paid employment, but, because they are married women, the out-dated view that their first responsibility was the home led the Department of Health and Social Security to the view that they must pass a test to show that they could not look after that home.
  Thus, the now notorious household duties test came into being. So difficult, however, did it prove to be to devise such a test that it was two years before the regulations spelling out what the test meant could be submitted to the national insurance advisory committee.
  The committee accepted the DHSS's argument that married women regard caring for the home and family as their major occupation, in the same way as other people regard their paid employment. The committee did not take a view on whether the test was equitable or whether it was discriminatory but agreed that a flexible approach to the test should be adopted. So the HNCIP regulations came into force in 1977.
  What a mess those regulations proved to be. Apart from the discriminatory aspect, they are hard to understand and complicated to administer. Their very flexibility has produced varying decisions. A woman applying for the pension must fill in a form stating how well she can clean, cook, do washing and shopping. Faced with these questions, many women often do not answer them realistically because their pride and independence make them put a good face on it. Therefore, many do not qualify for the pension.
  Following the questionnaire, the DHSS has to have a medical report, usually from the woman's GP. That report must certify that she cannot do paid employment, and assesses her functional capacity to perform a range of movements and activities. The claim is then decided by the national insurance officer and, if it is refused, there is a right of appeal to the national insurance commissioner—but, of course, only on a point of law.
  By September 1978, about 43,000 women had successfully claimed the pension, although in nearly 8 per cent. of cases, it was only after the appeal. When one considers that Professor Peter Townsend estimated that there were more than 2 million married women with some appreciable or severe incapacity, including nearly 200,000 under the age of 60, one sees what a tiny proportion have claimed and been successful.
  I hope that the Minister will bring the House up to date tonight about how many such women have successfully claimed during, say, the past 12 months. In some cases when a pension was awarded, the DHSS itself appealed to the national insurance commissioner against the decision
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  of the local tribunal to award HNCIP. One of those cases was heard in September 1978 by a tribunal of national insurance commissioners. The DHSS argued that, to qualify, a woman
  "must establish that she is totally incapable, or only minimally capable, of performing household duties."
  In that appeal the commissioners, ruling against the DHSS, said that
  "once it is found that what she is unable to do is substantial…then in our judgment she brings herself fairly and squarely within the terms of the regulations; and it is no longer material to consider what she is able to do, or whether that is also substantial."
  What followed this historic and far-reaching decision is now well known. The Department, frightened by the thought that more women would qualify and that that would result in a doubling, or even a trebling, of expenditure on the benefit, amended the regulations four days after the decision was announced—two of those days being a weekend, and Parliament being in recess to boot. If that was not indecent haste, I do not know what is. The amended regulations required a married women to prove that any housework which she could still do was insubstantial.
  When the House reassembled after the Summer Recess, two Prayers, signed by over 150 Members of Parliament, were tabled against the amended regulations. To avoid a debate—and a defeat, as I think—the Labour Government decided to refer the interpretation of the household duties test back to MAC. I have no doubt the DHSS Ministers did battle over the financial implications while all this was going on, but the all-powerful Treasury mandarins won the day, and the extra cash was not forthcoming.
  The present Secretary of State for Social Services—the then Opposition spokesman—was as angry as Labour Back Benchers. He denounced the Government's handling of the matter as deplorable. He said that it was close to "sharp practice". However, he got two promises from the Government: first, that time would be given for a debate and a vote on whatever came from NIAC; and secondly that no woman already receiving the benefit would lose her benefit before that debate had taken place.
  Nineteen months later, in July 1980—almost exactly a year ago—NIAC reported. It accepted the Department's argument that the 1978 amendment regulations had simply restored the original intentions of the household duties test. However, impressed by the huge weight of the evidence which the committee had received, it then stepped outside its brief and proceeded to consider whether a separate test for married women was still jusifiable. It concluded:
  "It seems to us that, whatever the arguments for applying a special test of this kind to married women in the past, these arguments must inevitably grow weaker in the future as employment outside the home becomes more and more the norm for married women … a test which applies only to married women will begin to seem increasingly inappropriate."
  Many of us have recognised for a long time that employment outside the home has been the norm for millions of married women. But we are all pleased that the NIAC acknowledged a change of attitude. The committee considered a number of alternatives and proposed that an alternative test for all NCIP applicants based on an individual claimant's "normal activity" should be applied. But it was quite firm that, if such a test were impracticable, consideration should be given to phasing out the test altogether.

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  When the then Minister of State announced the publication of the report on 15 July 1980—a year ago—he referred only to the idea of an alternative test—not to the possibility of phasing out the existing one—and he proposed a departmental examination of the NIAC's suggestions.
  Where was the promise obtained by the Secretary of State when he was Opposition spokesman in November 1978 for a Commons debate and a vote on the report? It was totally and deliberately forgotten. There has been continual pressure for a debate during the last 12 months, from the Disability Alliance, from the Campaign for Equal Rights for Disabled Women, and from the Labour Back Benches, notably my hon. Friend the Member for Eccles (Mr. Carter-Jones), who has done so much work on this issue, and there has been pressure for the publication of the Department's review. But to no avail. So much for that promise.
  The second promise gained by the Secretary of State fell by the wayside almost immediately. The undertaking he obtained that no woman receiving HNCIP would lose her benefit before the Commons had debated the report was broken the very day after the NIAC report was published, when 15 women who had been affected by the amended regulations had their benefit withdrawn.
  This has been a very long and sad story, because the people affected are those who, anyway, suffer very much and who have to have that bit of extra courage and determination to cope with daily problems which others take for granted. It is surely not lost on them, too, that this is the International Year of Disabled People, and the extra benefit to which I believe they are all entitled would have been a real way of making life a little easier and would also have contributed meaningfully to the spirit of this international year. Most disabled married women find that the theme of the year has a very hollow ring, I am sorry to say.
  Ironically, it is often the most disabled women who fail to get through this humiliating test. Disabled people are very inventive and very practical and want to retain their physical independence. But, with this test, the more a married woman tries to help herself, the less likely it is that she will qualify. In fact, such a woman has to forget her self-respect—which is important to us all but particularly important to those who are handicapped—if she wants successfully to claim HNCIP. If she responds to attempts at rehabilitation by doctors, nurses, therapists and the like, she will find that she is unlikely to pass the test because she has responded to that rehabilitation.
  The test has proved shameful and inhumane in itself. But the bureaucratic processes involved make it even more indefensible. It is hard enough for someone who is completely able-bodied to fight her way through a succession of appeals. It is doubly so if she is suffering from some incapacity.
  I quote only one case out of many thousands which show how the test works. The woman concerned suffered from chronic bronchitis and hypertension. She could not walk even short distances or climb stairs. She could do no shopping, cooking, heavy cleaning or laundry. She could do only light cleaning and rinse the odd cup and saucer. She received HNCIP from November 1977 until the regulations were amended in September 1978, though only after an appeal. She reapplied for the benefit under the amended regulations and was awarded it some time later. In the meantime she had died. That may seem dramatic,
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  but it happened. The extra benefit can go to help women to afford extra equipment, for example, to help them, and their families to manage, or perhaps to go towards a home help now that there is a charge because of the public expenditure cuts.
  Aside from the humiliation, distress, and even the tragedy, there is the basic discrimination against disabled married women. Many of them have had employment and recent employment, yet they have to prove twice over that they should qualify for benefit. We are living in the 1980s. We are as a society trying to outlaw discrimination wherever we find it. Cost considerations should not stand in the way of simple rights and there would probably, in any event, be some savings, from overlapping benefits.
  I do not hold out much hope that the Government will listen to this appeal from disabled married women. What I am saying reflects their views. However, I hope that the Government will at least publish the DHSS review. Let us have a full debate so that we may know the views of the Department. Let us remember that 2 million vulnerable women are involved. We should not turn our backs on them, and particularly not this year.
  11.57 pm
  The Under-Secretary of State for Health and Social Security (Mrs. Lynda Chalker): The hon. Member for Barking (Miss Richardson) is a formidable advocate of the rights of women—married and unmarried—and she has an honourable and consistent record of opposition to the household duties test. She has a right to raise the subject in the way in which she has done tonight—a much greater right, if I may say so, than some of her right hon. and hon. Friends who, to hear them nowadays, cannot have been around when the Government of whom they were members or supporters introduced the household duties test. She knows that the test had a difficult beginning. I have much sympathy with many of her remarks.
  The hon. Lady has given a clear explanation of the rules for the non-contributory invalidity pension—I hope that I may now be forgiven for abbreviating it to NCIP—and of the nature of the extra condition, the household duties test, which married women have to satisfy. She has reminded us that NCIP was included in the Social Security Act 1975 and that men and single women started to receive it in the autumn of that year. However, two years passed and it was not until 1977 that the regulations defining normal household duties came into force and the benefit was extended to married women who could satisfy the household duties test.
  The hon. Member regards the household duties test, as she has always done, as blatant discrimination against married women. I am not going to argue that point. She is perfectly entitled to say that a qualifying condition that is imposed on married women but not on other groups is discriminatory in the normal sense of the word, regardless of any legal definition.
  But without this apparent discrimination, could the previous Government have included married women in their NCIP plans? The White Paper which they published in 1974, entitled "Social Security Provision for the Chronically Sick and Disabled", clearly identified the problems of both groups—housewives who were too disabled to cope with their household work and people who could not get out to work yet had no contribution record. But although their problems were recognised the previous Government tried to leave married women out of

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  the 1975 Act. Then, when forced to include the married women by Back Bench and Opposition pressure, they added the qualification of the household duties test. It took nearly two more years to prepare the regulations that brought married women into the scheme.
  I am not criticising the previous Government. I merely ask that those who criticise the concept of an additional test for housewives whether it would have been possible in practice to bring in married women on the same terms as everyone else or whether it would even have been right to do so, when many of them had made their homes and families their only career, and many of those who had worked had opted out of paying full contributions to cover themselves for sickness benefits.
  To be fair to the Labour Government, the introduction of that household duties test was consistent with their White Paper of 1974, which said:
  "Housewives in this context are essentially married women who do not have paid work and whose normal job is in the home."
  It went on to identify as a gap in social security provision as a whole the absence of help for those hosewives whose disablement was such that they had never been able to take unpaid work outside the home or to do their household work.
  One thing is certain. It would have been financially impossible to include married women simply on the basis of incapacity for paid work. To have done so then would have brought in nearly 300,000 married women instead of the 40,000 for whom the Labour Government budgeted, and it would have more than doubled the cost of the NCIP scheme as a whole.
  The hon. Lady reminded us tonight of what the same Labour Government did a year later, after the Social Security Commissioners had handed down decisions which would have made the household duties test easier to satisfy. They rushed through those amending regulations in record time—in four days over a weekend—because of the financial implications. When the hon. Lady complains about the time that my Department is now taking to carry out the review of the household duties test, I hope that she will reflect on these and other episodes in the history of the test.
  When my right hon. Friend the Member for Daventry (Mr. Prentice) announced a year ago that the review would take place, he described the test as having been a controversial one ever since its introduction. The hon. Lady might think that an understatement, but let us look at the record. First, the Labour Government in 1975 tried to duck the issue of a non-contributory benefit for married women. I remember it well. I was a Back-Bench member of the Committee at the time. It took nearly two years to make the regulations. Then, as the hon. Lady said, in 1978 the amending regulations were rushed through because the Social Security Commissioners had interpreted the original ones more leniently than had been expected.
  Then belatedly, under great pressure from both sides of the House, the question was referred to the National Insurance Advisory Committee. It then considered the regulations and the test as a whole for 19 months. At the end of that time it did not produce a convincing alternative apart from the suggestion that the test should be phased out altogether over a period. Its main recommendation was that the Department should re-examine the test; in effect,
  144
  it was inviting the Department to find an alternative solution to the problem which the committee could not find.
  Abolishing the test, whether it was done by stages or not, would eventually cost well over £200 million at current prices, because the result would simply be to extend the NCIP to married women at the same time as men and single women. The unpalatable fact is that much of this would go to women who had been out of the employment field for many years, or who had never regarded themselves as family breadwinners. The advisory committee and other groups have made alternative suggestions, but none has come up with a completely acceptable solution to the problem of fitting married women into a scheme of this kind which is fair to them and to everone else.
  I should like to say a few words about the review that is going on at the moment. The problem of how to treat married women fairly is not unique to the United Kingdom. We have been studying what other countries do—something that the NIAC report suggested would be useful. Our correspondence with foreign countries has revealed one or two things which will be of interest to the hon. Lady. Some countries have a benefit which is comparable with HNCIP; others have something similar, but with stricter qualifying conditions or with an element of means testing. Those which have such benefits face problems particularly with assessment. The Finns and the Swedes have both stated that the concept of assessment for incapacity for housework can be difficult and that their procedures had failings. The Danish authorities are in fact, reviewing their own benefit. So I do not believe that there is anything to be gained by presenting the issue as an evil peculiar to this country or to the Government. A sense of perspective shows that it is a problem peculiar to this kind of benefit, and it is one that we have to solve.
  It is not surprising, then, that officials in the DHSS are having to make a long and painstaking study of the problem. I hope that we shall find an answer which will be acceptable to all concerned, but I must also sound a warning that any change in the rules which would enjoy general approval would be likely to involve additional cost, and they, of course, we should be faced, as always, with choosing our priorities.
  The hon. Lady and other hon. Members press for an early debate. They refer to the fact that my right hon. Friend the Secretary of State, when he was chief Opposition spokesman on the subject, said that we should debate the matter. It is not in my gift to organise a debate, but it strikes me that the present may not be the best moment.
  I have heard it said that my ministerial colleagues and I have changed our tune since our criticisms in Opposition of the manner in which the previous Administration amended the regulations. That is ignoring the context of the amendment. After the tribunal of commissioners confirmed the new interpretation of the household duties test, the then Government moved very fast, as has been said.
  When the amendments were rushed through the House over the weekend, the normal procedures for referring regulations to the NIAC were ignored. Any responsible Opposition would have been perturbed by such a move. We criticised that method of transacting business and legislating for benefit which can affect thousands of people, and we succeeded in having the regulation referred

  145
  to the advisory committee, thus ensuring that the proper authority fully considered the issue. When it reported that the regulations confirmed the original intention of the benefit, our immediate suspicions were allayed. The previous Administration acted hastily perhaps, but not improperly.
  However, following the publication of the report, with its wider recommendation, it was suggested that there should be a debate, just as it is now. As I explained, we accept the committee's recommendation to view the test, and I shall make sure that I bring to the attention of my right hon. Friend the Leader of the House the comments of all those who press for a debate. However, I believe that we should wait at least to see the Government's conclusions on the review, which will be the best time for informed discussion.
  I have already stated that we are pressing ahead with the review. It will not be completed in time for an announcement before the recess, but I accept the concern of the hon. Lady and others that it should be completed within a reasonable time. My hon. Friend the Minister for Social Security has already promised that the outcome of the review will be brought before the House. I ask the House to accept my assurance that we are treating the matter with as much urgency as is consistent with the need to find a lasting solution.
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  The hon. Lady also pointed out that there had been persons who had sustained losses following the publication of the NIAC report. I was aware that they may have been, and I shall look further into the matter.
  She also said that we should vote on the report, but, as I said about the debate, it would seem sensible to await the outcome of the review, which we are pursuing most urgently. We can then debate the matter and, if wished, vote on it.
  Further than that I cannot satisfy the hon. Lady, but I fully understand her point that the harder a disabled woman tries to do those things that she wants to do about her home, the more likely she is not to be entitled to benefit. It is one of the ironies for disabled people that when we wish to help them and they wish above all to help themselves and not to be dependent where they can possibly be independent they sometimes fall on the wrong side of the line of entitlement.
  I can only reassure the hon. Lady that everything that she has said, and that other hon. Members and many of the groups outside have said, is being considered, alongside the review of what is going on in other countries and how we tackle one of the most difficult problems of entitlement that I have come across in all the seven and a half years that I have been dealing with social security benefits.
  Question put and agreed to.
  Adjourned accordingly at ten minutes past Twelve o'clock.

PRIME MINISTER
  Defence Expenditure
  Defence Expenditure
  Laboratory Animals (Protection)
  Laboratory Animals (Protection)
  Live Animal Research
  Live Animal Research
OVERSEAS DEVELOPMENT
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HOME DEPARTMENT
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WALES
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EDUCATION AND SCIENCE
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AGRICULTURE, FISHERIES AND FOOD
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ATTORNEY-GENERAL
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HOUSE OF COMMONS
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SOCIAL SERVICES
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  Married Man's Tax Allowance
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  Channel Islands and Isle of Man
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  National Insurance Fund
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TRADE
  Footwear Industry
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  Estate Agents Act 1979
  Estate Agents Act 1979
  Investment Management (control)
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  Bankruptcies
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  Official Receiver Service
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  Shipping Casualty Information
  Shipping Casualty Information
  Liner Conference Code
  Liner Conference Code
FOREIGN AND COMMONWEALTH AFFAIRS
  International Sea Bed Authority
  International Sea Bed Authority
  Namibia
  Namibia
  Banaba Island
  Banaba Island
  British Phosphate Commission (Funds)
  British Phosphate Commission (Funds)
  Guyana
  Guyana
  South African Rugby Team (New Zealand Tour)
  South African Rugby Team (New Zealand Tour)
  International Sugar Organisation
  International Sugar Organisation
CIVIL SERVICE
  Her Majesty's Stationery Office
  Her Majesty's Stationery Office
  Pay Research Unit
  Pay Research Unit
ENERGY
  British Gas Corporation
  British Gas Corporation
  British National Oil Corporation
  British National Oil Corporation
EMPLOYMENT
  Industrial Training Boards
  Industrial Training Boards
  Work Force (Yorkshire and Humberside)
  Work Force (Yorkshire and Humberside)
  Redundancies
  Redundancies
  Manufacturing Industry (Skilled Workers)
  Manufacturing Industry (Skilled Workers)
  Nuclear Installations Inspectorate
  Nuclear Installations Inspectorate
  Birmingham
  Birmingham
  Disabled Persons
  Disabled Persons
  Ethnic Minorities (Birmingham)
  Ethnic Minorities (Birmingham)
  Redundancies (Birmingham)
  Redundancies (Birmingham)
  Young Persons (Birmingham)
  Young Persons (Birmingham)
  Short-time Working (Sheffield)
  Short-time Working (Sheffield)
  Elstree Studios (Closure)
  Elstree Studios (Closure)
  Youth Opportunities Programme
  Youth Opportunities Programme
  "A New Training Initiative" (Financial Support)
  "A New Training Initiative" (Financial Support)
  Manpower Services Commission (Apprenticeships)
  Manpower Services Commission (Apprenticeships)
  Brixton
  Brixton
  Unemployment Statistics
  Unemployment Statistics
  Lambeth
  Lambeth
DEFENCE
  Department Personnel
  Department Personnel
  Ten Tors Exercise
  Ten Tors Exercise
  1(BR) Corps
  1(BR) Corps
NORTHERN IRELAND
  Commission for Justice and Peace
  Commission for Justice and Peace
  Housing Executive
  Housing Executive
  School Returns
  School Returns
  Health and Social Services Boards
  Health and Social Services Boards
  Education and Health Expenditure
  Education and Health Expenditure
  Girocheques
  Girocheques
  Alcoholism
  Alcoholism
  Nursery Education
  Nursery Education
  National Insurance Contributions
  National Insurance Contributions

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

Terrorism: International Counter-Measures
Lord Gainford: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied with the present arrangements which exist between this country and the police forces and Governments of other Western nations, including the United States, to counter terrorism.
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, we co-operate closely with other Western nations on measures to counter terrorism. The effectiveness of these arrangements is kept under review.
Lord Gainford: My Lords, I thank my noble friend for that Answer. Can he please tell me, arising from that reply, how many British police are seconded to Interpol and what influence Interpol has as regards terrorism?
Lord Belstead: My Lords, I am afraid I cannot give my noble friend the number of police who are seconded to Interpol. Within the limits of its constitution, which of course strictly prohibits any activity of a political character being undertaken, Interpol plays a valuable part in the international arrangements to counter criminal offences connected with terrorism, and I should like to make it absolutely clear to my noble friend that Her Majesty's Government strongly support the work of Interpol.
Lord Gainford: My Lords, in thanking my noble friend for that reply, may I ask him whether he has any information about a television programme on 6th July, "World in Action", which seemed to make an outrageous allegation that this country was almost a haven for terrorists?
Lord Belstead: My Lords, I was not aware of that particular television programme, and, if it did take the line that my noble friend says, then I should certainly want to take this opportunity to rebut it.
Lord Elwyn-Jones: My Lords, was there not a report in the press and on the media about alleged gunrunning between British nazis and, in particular, a body calling itself Column 88 and a Leicester-based British Democratic Party, which is alleged to be engaged in weapons trafficking for purposes which do not on the face of it seem to be very lawful?
Lord Belstead: Again, my Lords, I shall certainly look into what the noble and learned Lord has said. I think it is important, though, that we bear in mind that one of the benefits of the European Community is the regular meetings which take place among the European Community Governments so far as terrorist matters are concerned.
The Earl of Kimberley: My Lords, arising from my noble friend's supplementary question, can my noble friend the Minister say whether he has seen the report in the Daily Mail today about certain schools being set up by the Workers' Revolutionary Party to continue promoting terrorism in this country, and are the police keeping a very watchful eye on these schools?
Lord Belstead: Again, my Lords, I have not had the advantage of seeing today's Daily Mail, but I will certainly look carefully at what my noble friend has said and draw the attention of my right honourable friends to it.

Forensic Scientists: Standards and Training
2.40 p.m.
The Earl of Kinnoull: 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 intend to improve the professional standard and training of forensic scientists employed by the Home Office and the standards of those already in practice.
Lord Belstead: My Lords, the greatest importance is attached to standards and training. The service has well-established schemes of quality assurance. It has its own training unit where, to date, several hundred scientists have been trained in basic principles and instrument use. The unit's programmes are kept under review. Emphasis is given to the development of new methods and techniques to improve the operational skills of the forensic scientists in regional laboratories. To this end the service's Central Research Establishment regularly conduct colloquia and specialised training projects.
The Earl of Kinnoull: My Lords, while thanking my noble friend for that informative reply, may I ask him whether he can confirm the important future use of forensic science in the detection of crime? Could my noble friend also say how many universities offer degree courses in this subject?
Lord Belstead: My Lords, I am afraid that the second point my noble friend put to me I cannot answer, but I will certainly write to him. So far as concerns the first point that my noble friend put, of course in view of the increase in crime in recent years the work of the forensic science service is of the greatest importance.

Unemployment: South-East Hampshire
2.42 p.m.
Lord Jacques: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they are going to take to counteract the high level of unemployment in South-East Hampshire which will arise from the change in defence strategy.
Lord Lyell: My Lords, all the facilities of the Manpower Services Commission will be available to help those workers who lose their jobs as a result of the defence review and who need help in finding new jobs or training for fresh employment. It is the Government's policy to create the conditions in which firms can be helped to become more competitive, and so create the new jobs needed.
Lord Jacques: My Lords, may I thank the Minister for that reply and put two supplementary questions to him? First, will the Minister bear in mind that
4
the Royal Navy employs 13,000 people in the dockyard and surrounding shore establishments, and that if there was a run-down as proposed over three years it would wreck the local economy and cost the Government a great deal of money in redundancy pay, unemployment pay, social security payments and lost taxes? Would it not save the Government a great deal of money and enable them to get better value for their money to have a longer period of run-down so as to allow other industries time to establish themselves and take up the spare labour? Secondly, is the Minister aware that the Royal Navy occupies all the prime industrial land in the City of Portsmouth, and that in return it has given substantial employment? It is inconceivable—
Several Noble Lords: Question!
Lord Jacques: Is the Minister aware that it is inconceivable that the Royal Navy should continue to occupy the whole of this land and offer little employment? What action is being taken to ensure that as much land as possible is made available as quickly as possible, and that it is used to attract alternative industries?
Lord Lyell: My Lords, if I could take the second supplementary question first, the Government are well aware of the concern of parties, including the local authority, to see that any land held by the Royal Navy or the Ministry of Defence which becomes surplus to their requirements should be released as soon as possible for industrial development. This particular matter is being very urgently considered by the Government and others. So far as the first supplementary question asked by the noble Lord, Lord Jacques, is concerned, as he and the House will be aware—and we shall be hearing in a very few minutes—there has been a radical review of the defence policy of the United Kingdom and indeed the Royal Navy has played some part in that.
Lord Bruce of Donington: My Lords, is the noble Lord aware that, if corrective action is not taken in and around the City of Portsmouth, the unemployment rate there within three years will go to something like 16 per cent.? Arising out of my noble friend's question, is the noble Lord aware that there is today, and has been for some years, some 60 acres of land owned by the Ministry of Defence outside the dockyard area which is not being used for anything at all? Will he use his best endeavours with his right honourable friend the Secretary of State for the Environment to get this released? Is the noble Lord aware that the cessation of the dockyard training scheme will mean that 200 apprenticeships that were to begin before the end of the year will now be cancelled? Is he also aware that the apprenticeship training scheme, which trains some 600 apprentices annually, will also have to be closed down? This at a time when industry needs more training seems to be something that ought to be corrected forthwith.
Lord Lyell: My Lords, regarding the second supplementary question on land, if the land is not covered by the Royal Navy or indeed is not part of the Ministry

5
of Defence land, to which I have already referred, then I shall make inquiries and let the noble Lord know. I answered one supplementary question to the noble Lord, Lord Jacques, on land and I hope that covered the second question that the noble Lord asked. So far as corrective action on the economy is concerned, a special working group with local authorities was set up with the Ministry of Defence and other interested departments to see what can be done about the Portsmouth travel-to-work area, for further job prospects. The apprenticeship training scheme within the dockyard will be continued for the existing apprentices.
Lord Shinwell: My Lords, is there not something to be said for the suggestion made by my noble friend Lord Jacques, instead of a final shutdown to phase the closing down? After all is said and done, even the debate today will not be the final word on defence.
Lord Lyell: My Lords, I think that the House will agree and the noble Lord, Lord Shinwell, will agree that the so-called run-down—which is not closing Portsmouth altogether; there will still be approximately 1,500 workers in the dockyard after the entire review has taken place—will take at least three years. This we understand—and we hope—will give reasonable time to see what further opportunities can be made available for the workers who lose their jobs.
Lord John-Mackie: My Lords, may I ask the Minister whether there is any system of arbitration to decide whether land should be released from these various bodies? They take the decision. All over the country one sees land that could have been released long ago still held by the railways, the dockyards, the Army, the Navy and so forth, because they make the decisions.
Lord Lyell: My Lords, I am not entirely sure which bodies the noble Lord believes take the decision. Ministry of Defence land which is surplus to requirements is something I have already covered in two answers. I confirm that, if there is any surplus land, the Government will make sure that the local authorities are able to take what action they wish.
Lord Murton of Lindisfarne: My Lords, may I ask a closely-related question of my noble friend the Minister? Has he seen the report in another place by an honourable Member that in his calculation at least 10 per cent. of all civilians employed in that part of Hampshire are in defence or in defence-related industries?
Lord Lyell: My Lords, I have to admit that I have not seen the precise information to which my noble friend refers, but I will acquaint myself with it.
Lord Elywn-Jones: My Lords, may I ask the noble Lord if he would answer the question put by my noble friend Lord John-Mackie? If there is a refusal by a defence authority to release land which, on the face of it, looks as if it is readily available for release, is there any procedure for those who think it ought to be released to appeal to anybody, write to anybody or to bring pressure to bear upon anybody?
Lord Lyell: My Lords, the one thing I have always learnt, and I think the whole House will have learned, when dealing with lawyers and particularly the noble and learned Lord, is never to deal with hypotheses. If there is land which is surplus to requirements for the Ministry of Defence, then indeed it is entirely up to local authorities or any other interested parties who may wish to acquire that land to take the normal and traditional steps. If the noble Lord has any further questions, perhaps I could write to him.
Lord Jacques: My Lords, surely it is not suggested that three years will be sufficient to get new industries to re-employ about 10,000 people in the present circumstances. May I suggest—
A noble Lord: No!
Lord Jacques: My Lords, may I suggest that is absurd? In the circumstances it would take much longer.
Lord Lyell: My Lords, the particular point raised by the noble Lord was the run-down in the change in defence strategy; that is three years. The Government would not—nor, I think, would anyone else—suggest that three years is entirely sufficient. Indeed there is no period that would be sufficient.
Lord Jacques: My Lords, in that case—
The Lord President of the Council (Lord Soames): My Lords, I do suggest that we move on to the next Question. The noble Lord has managed to ask quite a number of supplementaries.

Industrial Aid and "Buying British"
2.53 p.m.
Viscount Hanworth: 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 accept the principle that when, for example, very large sums of taxpayers' money have been given to British Leyland with the object of preventing bankruptcy and avoiding its side-effects on their suppliers, the company should so far as possible buy British engines and components.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, the Government have provided funding to British Leyland to assist the company's investment and restructuring programme, as the means by which British Leyland can return to viability. In their dealings with component suppliers British Leyland's stated policy is to acquire from United Kingdom firms whenever this is commercially and technically feasible. It is up to these firms to prove themselves competitive.
Viscount Hanworth: My Lords, I thank the noble Lord for that reply. Does he agree that in all such cases it is desirable where possible—and a certain penalty might be necessary—to buy British?
Lord Trefgarne: My Lords, in general I would not agree with the noble Lord. In the broad generality of the case it is necessary for British Leyland to purchase their components from the most competitive source.

Refreshments
Lord Denham: My Lords, it may be for the convenience of the House if I say that I have asked for the Grill Room to be kept open until 10 p.m. tonight. In addition, light refreshments will be available in the Guest Room.
Greater London Council (Money) Bill
Read 2a, and committed to an Unopposed Bill Committee.
Northumbrian Water Authority Bill
Read 3a, with the amendments, and passed, and returned to the Commons.
Armed Forces Bill
Read 3a, with the amendments, and passed, and returned to the Commons.

Defence
2.55 p.m.
Lord Soames Lord Soames rose to move, That this House takes note of the White Paper The United Kingdom Defence Programme—The Way Forward (Cmnd. 8288).
The noble Lord said: My Lords, I think the House has been looking forward to this debate. What is more, I believe this is true also of many outside who care about our country's defences and who look to this House, with its unique fund of experience and its lack of constraints and pressures of a representational character, for a debate of great value: indeed, something which perhaps could not be matched in any other forum.
The reverse of that coin is that there is a long list of those who intend to contribute to this debate, including three maiden speakers—the noble Earl, Lord Orkney, and the noble Lords, Lord Mayhew and Lord Thomas, all of whom we look forward to hearing with the greatest interest. But this long list of speakers imposes on us all, I suggest, the need for self-restraint and brevity in relation to what is a vast topic with national and international security ramifications of the highest order. I must practise what I preach and therefore I propose to concentrate on a few general aspects of this most important White Paper.
The debate will doubtless feature the results set out in the White Paper of what was a thorough and fundamental review of how our national defence requirements could best be assured for a medium-term
8
future within the inevitable financial constraints. There were a number of reasons why such a fundamental review was necessary. First, there is the remorseless build-up of Soviet military strength in recent years, both in size and quality: that is, accuracy, destructive power and range. We have seen the deployment of growing numbers of Soviet missiles, aircraft, tanks, submarines and ships. This faces us with an increasing threat in the NATO area. Further-more, the Soviets' ruthless invasion of Afghanistan, with the implications that that could have for the Middle East, is a further sharp reminder of the need for a Western capability to act outside the NATO area if and when our interests and our friends require it.
Thus we are faced with a growing threat in quantitative, qualitative and geographical terms, greatly exceeding anything that the Soviets could reasonably require for defensive purposes. The Government are convinced that this calls for a major defence effort from the alliance and that the United Kingdom must make its proper contribution. So with defence expenditure already 8 per cent. higher than it was three years ago, we are now planning on four further years of 3 per cent. increase per annum in real terms, in line with the recent decision in the North Atlantic Treaty Organisation. But—and this is the second reason for our fundamental review—even these increased resources will not allow for the continuation of all the hitherto planned force levels and equipment of our armed forces, largely because of the great increase in recent years both of sophistication, and therefore of cost. To give just one example, the cost of the Harrier aircraft is today four times, in real terms, the cost of the Hunter which it replaced.
Against this background we are in grave danger of trying to do too much across the whole defence field, ending up doing too little on too broad a front. Then there is the related fact that technological advance is sharply changing the whole defence environment. The ability of modern weapons to find targets and to hit them first time at long ranges has improved to the point where it has enormously increased the vulnerability of hitherto traditional platforms such as aircraft and surface ships. So the review needed to include a reappraisal of the balance between platforms and weapons both to take advantage of improved strike-power and to lessen vulnerability.
So much, then, for the reasons underlying this major reappraisal of our future defence effort. Hopefully, we have learnt some lessons from past mistakes. We have over the years under successive Governments seen the costly cancellation of many weapons systems at various stages of their development. We cannot look too far ahead, but we hope this time to be proved to be acting within the realms of the possible in fixing our expenditure in real money terms for the next four years, and that we will see the programmes planned for that period reach fruition.
Given the necessities and motives of the review it was, I suggest, inevitable that more emphasis should be put on some aspects of our defence and less on others. But in no way did it take the form of a kind of sterile argument between the proportions of expenditure which should be allocated to each, or any, of the three Services. I suggest to your Lordships that it

9
should be seen for what it was—a review of our defence capability as a whole, and an earnest of the Government's determination to continue to carry out our essential roles on the central front in Europe, in the defence of the United Kingdom and of our sea lanes, on the flanks of NATO, and to have some forces available for operations outside the NATO area. All these roles go on and are essential to us and to the alliance.
I hope the House will not take it amiss if, given the time constraints upon me, I refer only in general terms to the changes announced in the White Paper. Generally speaking, we consider that a 3 per cent. increase in real terms for the next four years permits us to increase the effectiveness of our defences by providing better equipped, harder hitting and better trained forces with more staying power. That was our objective. We are strengthening the defence of the United Kingdom base by increasing the number of modern fighter aircraft for our air defence and increasing the air tanker support. We shall be making greater use of our naval and air reserves and expanding the Territorial Army.
At sea, our major role will still be in the East Atlantic and Channel, albeit with some shift of emphasis towards maritime air systems and submarines. Our surface fleet will be somewhat smaller, but with the introduction of the Type 23 frigate our intention is that each vessel will spend more of its life available for operations. Abandoning what is today the, alas!, most costly mid-life modernisation of surface ships will, over time, allow us, we believe, to reduce some of our support costs, notably in the dockyards.
As well as increasing the submarine fleet, both nuclear and diesel powered, we shall introduce larger numbers of the new Nimrod aircraft. The enlarged air tanker fleet will give us a greater maritime air attack capability, and we shall be providing new guided missiles for use against surface ships. We shall retain the three Royal Marine Commandos and strengthen the capability of our forces for operations outside the NATO area. On the Continent, our commitment under the Brussels Treaty of providing 55,000 troops remains and they will have more modern equipment. They will have, in short, stronger teeth and a smaller tail.
Apart from that, we shall be improving the effectiveness and staying power of our forces on the Continent by increasing their war stocks in general, and ammunition supplies in particular. The staying power of the 1st British Corps, for example, will, as a result, be increased by somewhere between 20 per cent. and 30 per cent. Though this may sound unglamorous it is, in fact, an important aspect of the totality of our deterrent force. For when the Russians know that the allies on the European front are going to be able to hold our ground for a considerable period of time, this surely reduces any temptation there may be for a Blitzkrieg.
A word now about our nuclear forces in general, and Trident in particular. The plans we inherited in 1979 from the last Labour Government were to modernise Polaris with Chevaline. We were also faced with the fact that, with the constant improvements in offensive and defensive technology, by the early 1990s both the Polaris boats and the updated missile
10
system would be fast losing their credibility. Since we were convinced that we should retain our strategic nuclear ability, decisions therefore had to be reached on the successor platform and missile.
The most careful and thorough. examination that we set in motion showed beyond doubt to us that Trident was the right answer, and by far the most cost-effective weapon. With a range of 4,500 miles, it can disappear into the vastness of the deep in almost total safety, and each submarine could hit over 100 targets over a vast area of the Soviet Union. This amounts to no mean deterrent.
Two questions. First, should we be staying in the deterrent business at all? Secondly, as a corollary of that, would the money be better spent on, say, hunter-killer submarines or other conventional weapons? This is not the first time that we have faced such questions. There has been a constant development of our deterrent capability, beginning with the decision of Mr. Attlee's Government to create the V-bomber force, the later development of the hydrogen bomb, then the deployment of Polaris and, most recently, the plan to update it with Chevaline.
These decisions have been taken by successive Governments, Conservative and Labour. But the theme has been constant, that every Government with the responsibility of being in power has come down in favour of the wisdom of this country making a contribution to the nuclear deterrence of the West. So the theme has been constant, but just as constant, I must say, has been the Labour Party's threat, when in opposition, to jettison our nuclear deterrent. Yet when in power, with the advantage of all the professional and expert advice then available to them, they proceed not only to live with it, but to improve it—and very rightly, too.
I remember, and many noble Lords may remember, Mr. Harold Wilson saying in the general election of 1964 that he was going, somehow, if the Labour Party won the election, to "internationalise" the deterrent and change the way in which it could be ordered and commanded. But when the Conservative Party returned to power in 1970, there was the deterrent not changed in any way, except that it had been, to some extent, improved; and this is, I think, understandable. But, so far as I know, no noble Lord on the Front Bench opposite disputed, when they were in power up to 1979, the wisdom of maintaining our deterrent and, indeed, improving it with Chevaline; and I suspect that, if they were to find themselves back in Government again, they would still be persuaded by the very same arguments.
To those who favour the argument that it would be more advantageous for us to spend the Trident money on conventional weapons, I shall not waste the time of your Lordships' House repeating—because so often has it been repeated before—the actual expense and cost of Trident and the proportion that is of our total defence expenditure. But I would ask your Lordships to ponder for a moment on what the Russians might think about this argument. Perhaps we should ask ourselves whether the Russians would rather see us introduce more killer submarines, more tanks or more conventional surface ships; or would Trident perhaps make them pause longer?
I believe that one has only to pose that question to know the answer. It must surely be that the appalling damage which could be inflicted on the Soviet Union by the Trident force is an immeasurably greater deterrent to war than any increase we could make to our conventional forces. It is also, as a result of that perhaps, significantly more cost-effective. A decision by the United Kingdom to renounce its strategic nuclear force, no matter what implications that carried for an increase in conventional forces, would surely weaken rather than strengthen the deterrent capability of the alliance.
There are also those who argue that we should abandon our nuclear capability, because the possession of nuclear weapons by this country serves to make the United Kingdom a priority target in any conflict that might break out. In a Question last Friday, the noble Lord, Lord Jenkins of Putney, suggested that the wishes of certain local authorities to have their areas declared nuclear-free zones should be respected. With respect, this is a totally fallacious argument. Does anybody believe that if during the last war Coventry had declared itself a weapon-free city it could have escaped attack? Regrettable as it is, it remains a harsh military fact that, if a war should break out, our political, geographical and industrial importance, let alone our military importance, would inevitably make the United Kingdom a primary target. The possession of nuclear weapons does not alter that basic fact. In fact, the reverse of the argument is true. It is the alliance's deterrent capability, of which our contribution is no mean a part, which makes the risk of war less. Our nuclear forces make it less likely that any conflict would break out and therefore less likely that the United Kingdom would ever be attacked.
So far as tactical nuclear weapons are concerned, the Government remain firmly committed to NATO's December 1979 decision to modernise its long-range theatre nuclear forces by the deployment of ground launched cruise missiles and Pershing IIs, while at the same time seeking negotiations to limit such forces on both sides.
As noble Lords will be aware, over the past few months there has been a concentrated and sustained effort by the Soviets to call into question the need for any NATO modernisation of theatre nuclear weapons, on the ground that parity in that area already exists. That might he useful propaganda, but in no way is it approaching reality. We must hope that this is not a sign that the Russians will be unwilling to enter into serious and well-documented discussions in the autumn. Meanwhile, let none of us be deluded.
Those who say that we and our allies should unilaterally abandon the deployment of cruise missiles are I am afraid, be it wittingly or be it unwittingly, playing the Russian game. For the Soviet Union have already deployed 200 of their medium range SS20 missiles and they are increasing that deployment at the rate of one a week, while we have nothing except our ageing Vulcan bombers and the American F1–11 aircraft, with a question mark over the ability of either for very long to be able to penetrate the Russian defences.
I hope noble Lords will forgive me if I indulge myself in quoting a few words from a speech which I
12
made when winding up a defence debate in another place as long ago as 1958. As some of your Lordships may remember, the burning issue of the day at that time was the deployment of American missiles in this country. I said the following:
"When we are framing our speeches for a defence debate, we cannot help feeling a great sense of awe at the terms of terrible destruction in which we have to speak when discussing the topics with which this House has been dealing. I know that I felt it deeply, and the more one thinks about these problems, the more one becomes convinced of the dire necessity for broad and far-reaching disarmament agreements between the Communist and Western worlds".
I submit that that is as true today as it was 23 years ago.
Then, as now, the propaganda of the Campaign for Nuclear Disarmament was having some impact, but the fact is that since that time we have had peace. Would we have been so lucky if the unilateral disarmers in the West had had their way then? Who can tell? But what is surely beyond argument is that the deterrent has had at least some part to play in the keeping of peace. And at our peril would we reject that.
This is a view which is shared by all the Governments among our allies. Doubtless your Lordships will have taken note of the new French President's recent insistence on the importance of the European allies fulfilling the NATO decision on nuclear theatre forces, something to which the Chancellor of West Germany has for long been dedicated. Of course we must work with a genuine desire to achieve by international agreement the control and, hopefully, the reduction of arms in general and nuclear weapons in particular. Let us strive for that—we must—but for God's sake let us not take the risk of throwing our own deterrent away without achieving a proper balance in return.
I hope noble Lords will feel that although they may not agree with every detailed decision announced in the White Paper, at least it represents a realistic and laudable attempt by the Government as a whole, and by my right honourable friend the Secretary of State for Defence and my noble friend Lord Trenchard in particular, to grapple with the daunting problems of how best to defend ourselves in this highly dangerous world, with all the commitments that we have, with our limited resources and with future plans complicated by the rapid escalation both in sophistication and cost of modern weaponry. It is bold to plan on increasing our defence expenditure at 3 per cent. per annum in real terms, for who can tell, in the face of so many unknown quantities, how our gross domestic product will move in those years? But in the face of the vast expansion of Soviet military might, we have our obligations to the alliance, upon which our whole security depends, to increase our defence expenditure along with our partners. There are certain aspects of defence, notably a contribution to the strategic deterrent, the defence of our vital sea lanes and a state of readiness for possible operations outside the NATO area, to which this country can and should bring a unique contribution to the defence of Western interests.
We are already spending 5·2 per cent. of our gross domestic product on defence, a higher proportion after the United States than any of our other NATO allies. Of course it is true that money spent on defence is money which cannot be spent on other vital needs. But, given the hideous spectre of modern war, we

13
believe that the mass of our people do not begrudge money properly spent on the nation's security. I emphasise the word "properly", for they do want assurance that these enormous sums are being spent wisely and to good effect. It is up to all of us who make it our business to study these matters of prime national importance and great complexity to ensure that this is so—that it is money well spent, and to persuade the people of it. The Government are convinced that the White Paper points the way. I beg to move.
Lord Peart: My Lords, before the noble Lord sits down, will he withdraw any impression he may have given that any noble Lords on these Benches were wittingly playing Russia's game? I think he must withdraw that accusation.
Lord Soames: My Lords, I would not withdraw any accusation if the cap fits, but if the cap does not fit … I said, whether wittingly—
Several noble Lords: No.
Lord Soames: I said, whether wittingly or unwittingly—and not only in this House but in the country as a whole. There are many who, wittingly or unwittingly, advocate unilateral nuclear disarmament, and I repeat that any who do that are wittingly or unwittingly, in my view, playing the Russian game.
Lord Peart: My Lords, that will not do.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): Forgive me, my Lords, but I am now going to put the Question. The Question is, that the said Motion be agreed to.
Moved, That this House takes note of the White Paper The United Kingdom Defence Programme—The Way Forward (Cmnd. 8288).—(Lord Soames.)
3.18 p.m.
Lord Peart: My Lords, the noble Lord has spoken for much longer than I thought he would. I shall try to keep very close to a much shorter timetable. I am not complaining about the noble Lord going on longer; I think he made an effective case for his point of view. No doubt later in the debate there will be arguments as to whether we should have Trident or whether we should continue in the way we are doing. I accept that the defence paper is a very good one; I do not agree with all that is in it, but at least it gives one information and it also stresses important points on defence from a local point of view.
Not long ago I was fortunate enough to pay a visit to the Army of the Rhine with some of my colleagues on both sides of the House. I am so glad that the Army of the Rhine was mentioned in the Defence White Paper and that it is not to be destroyed by removing manpower back to this country. I think I am speaking for noble Lords and particularly for the noble Earl, Lord Kimberley, who arranged the visit—the morale of the Army is magnificent. This applied to the RAF, the Black Watch—the regiment we met—and also to those gunners who were operating missile sites. I was a gunner and I was very proud to see them
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in operation. So that is one example where our people are playing a major role in the defence of Europe and also really within NATO. We must remember that we are members of NATO and when we talk about defence it is basically our commitment to NATO.
I believe that we are now possibly on the eve of a major summit in Canada. The noble Lord, Lord Soames, will have been following the press and I am certain that Helmut Schmidt will tackle President Reagan and will see that he is aware that the time has now come for more negotiations. It is all very well talking about the Russian bogey. We must negotiate. That is why on every defence occasion in this House I have argued for the need to have an extension of the strategic arms limit and to create a situation whereby we can get together. It is no good using strong words to the Russians at this stage; whether they are weak is for them to decide, but I believe it is right and proper that we should continue with the search for strategic arms limitation to work successfully. I am glad that the noble Lord has said so.
Indeed, one noble Lord from the other side of the House, the Foreign Secretary, has already done sterling work. His visit which enabled him to talk with the Russians direct over Afghanistan was a major achievement and I hope that one day very soon the noble Lord, Lord Carrington, will again achieve success in a much larger theatre of operations. So I hope we do not have this anti-Russian bogey played up too much. In the end we must negotiate with them and they must negotiate with us, and with the Americans and in NATO. So I do not see why we should be too testy about it.
On the other hand, I recognise that we have our problems. We have to work out in our own minds whether or not we have Trident or something else. That is something that I am certain will be raised continually today. I will not deal with it because already my time has been frittered away partly because I answered the noble Lord. I believe that, on the whole, from the domestic point of view this defence paper is very reasonable.
On the other hand it is no good the Government pretending that they are not harming some of our good citizens. Many of the mayors in the south-west have protested strongly to the Government and they are of different political complexions. The Conservatives have been strongly critical about destroying the role of the Navy, cutting down Chatham, and the same applies to other bases in other parts of the country. May I say to the noble Lord that it will not be easy to get the right people to operate these bases, because of the cuts that have been made. The noble Lord is head of the Civil Service and he is responsible for some of our industrial civil servants in different parts of the country. He must realise that there is tremendous anxiety at the present time. The cuts have been made and I believe they will hurt, and in many cases they will mean that we shall be losing skilled men whom we cannot afford to lose. It is no good relying on a sophisticated defence system unless we have the trained personnel to operate it. That is why it is important to have colleges of technology, which are now under attack from the Government in another way.

15
If I may just add a lighter note, the latest United States military aircraft moved into a hangar recently because it was not operational on account of its sophistication. It has now been nicknamed "the hangar queen". What I am trying to prove is that we must have good technology and we can have it only if we have the trained men who come out of our colleges of technology, and indeed others at university level. I believe there will be irreparable harm done to the services because of the failure to have that recruitment which is so essential to our industrial base. I think my time is up. I hope the debate continues and that it will be good tempered. There has been a bit of heat, but it was not my fault—I am sorry to say!
3.26 p.m.
Lord Gladwyn: My Lords, I promise that I do not propose to detain your Lordships for more than a quarter of an hour—which is rather more than the six minutes which seems to be sufficient for the Leader of the Opposition. I shall not examine in detail the decision of the Minister of Defence to scrap or mothball something like a third of the Navy's ships and eventually to replace frigates and destroyers with new frigates and, to some extent, with hunter-killer submarines. Nor shall I attempt to judge whether that is to our advantage, because frankly we have not had the time to go into it in detail. It may well be that, given our limited financial resources and provided that we really are not as a result—and perhaps the Government will tell us about this in the winding-up speech—going back on our NATO obligations to increase our real expenditure by 3 per cent. (the Government have only said that; they have not pointed out how it is to happen), the new policy would be the best way to prevent the Soviet Murmansk fleet from getting into the Atlantic. Or perhaps not. Other noble Lords who are better qualified than I am will no doubt pronounce on that in the course of the debate.
But to my mind one thing stands out a mile, in spite of what the noble Lord, Lord Soames, has said. For the price of Trident, we could, among other things, such as additional tanks and hardened airfields, produce substantially more hunter-killer submarines over the years. That specific point was made by the Guardian defence correspondent some little while ago, when he said:
"As a result of the Trident commitment there will be a seven-year gap in the construction of nuclear hunter-killer submarines at Vicker's Barrow-in-Furness yard, while the Trident submarines are built there. Mr. Nott said recently that there were no plans to re-open a second nuclear submarine line at Cammell Laird's Merseyside yard. So while he may be 'shifting the emphasis of the Navy's submarine effort', he is not able to put substantial new resources into the North-Eastern Atlantic for this purpose".
Lord Orr-Ewing: My Lords, if the noble Lord will allow me. For the price of five hunter-killer nuclear submarines, which would cost a billion pounds, and therefore it would be only 25 extra submarines—does he think, in the words of my noble friend, that that would actually deter the men in the Kremlin more effectively than Trident?
Lord Glathlyn: Yes, my Lords, I do because we could spend the additional £6 billion not only on more hunter-killer submarines but on other things as well. That is my considered view. Anyhow, all such speculations are naturally based on the assumption that war, if it should come, would not be nuclear. That is what we are talking about. And if it is not nuclear, our whole future may well depend on the number of our hunter-killer submarines. If, on the other hand, for one reason or another, the war is nuclear, then there is little point in speculating whether one kind of conventional defence is better than another. As has been said many times, in a nuclear war there cannot be a victor. Indeed, given the present superiority of the Soviet Union in nuclear weapons of all kinds, and more particularly given their present ability to devastate Europe with their SS20s without European retaliation, there is little doubt that, even if the super powers were exempt, which is quite possible, much of Continental Europe, and possibly part of this country too, would emerge from such a war as an uninhabitable wilderness. In any case, and whether or not Polaris—and, subsequently, Trident—would be able to deter the adversary from reducing the United Kingdom to such a state, the actual decision to wage nuclear war will depend not on us but on the super powers.
However, could our strategic nuclear force, whatever it may consist of, nevertheless play such a deterrent role? In theory, yes, it could. If the Americans had made first use of nuclear weapons in Europe and an interchange in the so-called theatre of operations if these appalling missiles had duly taken place, it is true that a declaration on our part of our intention, if bombed, to bomb Moscow might give us some immunity. That is possible. However, that would presumably depend on Soviet appreciation of the fact that United States nuclear weapons in this country were not being used in a first strike. The essential function of cruise missiles is, however, to prevent the first use by the Russians of their SS20s, thus maintaining the general nuclear balance, and a general nuclear balance is the thing.
On the other hand, it is entirely possible that if the Americans did not make first use of nuclear weapons and allied armies were pushed back to the Rhine, it is inconceivable that we should, over the heads of the Americans and even the Germans, threaten to use our strategic nuclear weapons to impede a Soviet advance, thus deliberately courting national suicide. Assuming that the Soviet Government did not themselves proceed to use this weapon, which is possible but unlikely, the war would then be decided by "conventional" means—including, no doubt, some kind of air and sea blockade of this country and indeed of France. But to argue that the Russians, even if initially successful, would be bound to win such a war with the Americans, as I have seen suggested in the press, is pure defeatism. If that were so, why should we have any "conventional" weapons at all? Anyhow, I believe that most of our people, though still prepared to die, if necessary, resisting an alien dictatorship, would not, as to many of them, consciously opt for national obliteration.
There is another scenario now accepted as possible by the Government. What would happen if the Americans gave up the defence of Europe in despair

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and went back to America? The Government seem to think that we could then still rely on the mere existence of Trident, and perhaps also of the French force de frappe, to discourage the Russians from ever attempting to overrun Western Europe or, indeed, ever risking war anywhere in the world. This is much the same as the original "Duncan Sandys" theory, if I may so describe it, announced way back in 1957 when reliance was, I rather think, placed on a rocket called Blue Streak which subsequently, as we all know, streaked into oblivion. Alas! the theory that the mere possession of nuclear weapons in itself averts war, even if valid once, no longer holds good. The balance of terror may or may not have prevented for many years a major war between the super powers, though it has not prevented goodness knows how many rather vicious conventional wars all over the world; but a general war between the super powers may also have been prevented by the preponderance in world politics, until recently, of the United States of America. Nevertheless, if the theory is valid, it applies to the balance between the super powers and not to the relationship between the United Kingdom and the Soviet Union.
It would be absurd to suggest that this country, or indeed France, could prevent war in (shall we say?) the Middle East from spreading to Europe by brandishing her nuclear weapons. It is just possible that America could, but only on the assumption that the United States of America builds up an indisputable nuclear preponderance, which seems to be rather unlikely. Either "Western Union", which means Western Europe, would have to be able successfully to hold the fort on land, on sea and in the air by its own "conventional" efforts, which is highly improbable, or it would be overwhelmed. In fact all such speculation is rather otiose. What would happen if the Americans went back to America would be the emergence of neutralist government in the Western European democracies and, I am afraid, even in this country, who would be prepared to negotiate some deal with the Soviet Union.
It must surely be clear that, just as the primary function of American nuclear weapons is to deter the use of Soviet nuclear weapons not only against America but also against the whole alliance, so any British strategic nuclear deterrent can have only one conceivable use—which is to deter, or help to deter, the first use of Russian nuclear weapons against this country. If it is really thought that this capability is essential, even though the Soviet Union in the absence of the Americans could no doubt reduce us to impotence by air and sea blockades, then we could, if necessary, in, say, 10 years' time—when Polaris is becoming no longer effective—and presumably in the absence of disarmament or in the absence of some complete ABM system in the USSR, purchase from our departing friends some of what could be the latest and possibly the most effective weapons—submarine, cruise or other—which might in theory give us a certain immunity from Russian nuclear attack and would in any case preserve us from the possible threats of some irresponsible dictator such as Colonel Gaddafi.
What is clear however is that to spend a great deal of money now on Trident at the necessary expense of our conventional forces is to run a grave and unnecessary
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risk. Why are we apparently prepared to run this risk? I have heard it argued by responsible people that the chief reason is that if we, as they say, "opt out" of the nuclear arms race by deciding not to replace Polaris now, we shall suffer a loss of prestige which will diminish our standing in the alliance and reduce us to the status of a second-rate power, with the French remaining the European "Great Power" to whom all would consequently turn for leadership.
Apart from the fact that we could always, if we had to, continue to be a nuclear power of some sort after Polaris is phased out, I regard this argument as totally unrealistic. Does anyone really think that in the Atlantic Council, M. Mitterrand has more influence because he has behind him the force de frappe? Is it seriously believed that when it comes to any bargaining in the Community, the French will be in a more powerful position because of their theoretical ability to bomb Moscow? The grim fact is that the force de frappe will have only the same limited power of deterrence as Polaris or Trident, and that in the absence of American presence and support it would be equally useless as protection against the ultimate hegemony of the Soviet Union.
What, therefore, could ensure such protection against hegemony by the Soviet Union? Pending disarmament, or the limitation of armaments, only the strengthening of the present alliance in a conventional sense could ensure that. This is not defeatism; it is the reverse. The Russians do not want a war and a war is only likely if the two super powers are drawn into some conflict, almost against their will, over (shall we say?) the inability of the American Administration to induce the Israelis to carry out their obligations under the second stage of the Camp David agreement, or for any other reason.
Conjured out of existence by inspired diplomacy and a renewed disposition to come to terms with arms limitation though such dangers may be in the coming years—and we must all devoutly hope that they will be and work together for that end—there is none the less no doubt that they do exist. We must therefore insure against them in Europe and we shall probably be faced soon in in any case with the necessity of taking over part of the American commitment to defend the Continent by "conventional" means. Already we hear serious suggestions that the European nations—some of whom are now just as rich as their protectors—should provide the equivalent of two new armoured divisions to take the place of United States contingents that henceforward may be earmarked not for reinforcement of Europe but for the "rapidly mobilisable" force for possible deployment elsewhere.
Could the Western European democracies respond to such a suggestion—and it may soon be a demand—if they put their minds to it, without any fearful effects on their economies? Of course they could. If, instead of pouring out billions for the purpose either of maintaining 1 in 12 or 1 in 10 of their workers in idleness, or of paying them to produce certain unsaleable goods, they pooled their research and development; arranged for many of the unemployed to produce the necessary new additional conventional weapons; and, in our case, for some thousands to join the Services in order to deploy them, they could at one and the same time raise the nuclear threshold, increase the

19
chances of peace, preserve the Atlantic alliance, and in all probability stimulate their economies and put new heart into the whole industrial system.
Nor could anybody say that this was preparing for a war or provoking the Russians. On the contrary, far from appearing to overwhelm them by pursuing the will-o'-the-wisp of nuclear superiority, it could, by calming apprehensions, represent the first real step forward towards a negotiated settlement with the Soviet Union. As it seems to me, it is such possibilities as these which should now be the main preocupation of the Foreign Ministers and indeed of the Defence Ministers of the Community.
My Lords, to pursue such a policy in this country would clearly require a Government capable of instilling in our industrial workers some feeling of national purpose. It would also necessitate an abandonment of the strict principles laid down by the guru, who, though beloved by our leader, is, I believe, held by some to be an unqualifiable leprechaun. It might mean taking, along with the French Government, some economic risks. But it would surely be better than mouldering on with 3 million unemployed or more, and only an unusable virility symbol at the end of the tunnel. I do not say, of course, that turning over from Trident to the increased production of conventional armaments would itself effect such a desirable revolution, but it certainly would help.
I will rest my case, and conclude, by quoting from a recent article by Professor Michael Howard, now Regius Professor of Modern History at Oxford, and formerly Chichele Professor of Military History at that university, whose views of these matters, and indeed whose admirable interpretation of the doctrines of the great Clausewitz will, I feel, command considerable respect. After deploring the present insensate rush to produce ever more devastating and complicated weapons of destruction, without apparently, at any rate on the part of the United States, any reasonable politico/strategic objective, and pointing in these circumstances to the continuing necessity of constructing some credible conventional system of defence, he concludes:
"It is politically much easier, much less of a social strain, to produce nuclear missiles rather than trained, effective, military manpower, and to believe that a valid trade-off has somehow been made between the two. It has not. And the more deeply we become committed to this belief, on both sides of the Atlantic, the greater will be the danger that we are trying to avoid: on the one hand, the impossibility of defending the specific areas and interests that are seriously threatened by a potential adversary, and, on the other, the possibility that, in a lethal mixture of hubris and despair, we might one day feel ourselves compelled to initiate a nuclear war. Such a war might or might not achieve its object: but I doubt whether the survivors on either side would very greatly care".
In other words, the nuclear balance is the thing—and there, at least, I agree with the Government—gradually lowered, it must be hoped, by negotiation, but still a balance. For, short of some fully effective ABM system, which seems impossible for many years—and is in any case impossible for Western Europe—neither side—and I repeat "neither side"—can expect to impose its will by building up a first-strike nuclear capability, hoping, if war should come, and in spite of huge inevitable losses, to "win" a first-strike nuclear war. For though the presumed political
20
objective, namely, the physical elimination of a hated political régime, might thereby be achieved, it could only be at the cost of the acceptance, if not of anarchy, at least of some inconceivably dreadful new régime at home. It is for these reasons that I commend the wise words of Professor Howard to the serious attention of Her Majesty's Government.
3.46 p.m.
Lord Hill-Norton: My Lords, we are asked by the noble Lord the Lord President to take note of the White Paper. It would be difficult, for me at least, not to do so, since it represents the second attempt by a Tory Government in the last 24 years to destroy the Royal Navy. It will not, therefore, surprise your Lordships if I address most of my remarks today to what is now so foolishly proposed for the service whose uniform I have worn for more than 50 years.
But, before doing so, it would only be fair to welcome certain aspects of the White Paper. I concede with pleasure that an attempt has been made, for the first time for many years, to carry out a Defence Review on the right basis, even if it has been constrained from the beginning by a fixed monetary ceiling, arbitrarily chosen, and quite unrelated to a geopolitical, much less military, requirement. The fact that the Government have arrived at the wrong solution is their fault and not the fault of the method. I shall say where and why I think they have got the wrong answers.
I welcome the announced increase in the staying power of the Rhine Army by increasing its war stocks, though I have not found a corresponding mention of parallel increases for Royal Air Force Germany, without which, of course, the Army increases will be of very little value. I agree with the Government that such increases will serve significantly to raise the nuclear threshold in Europe, as will the much needed improvement to the weapons available to both services in Germany, and to the Royal Air Force in the United Kingdom. It is good news, too, that the Territorial Army is to be substantially increased, though whether, or when, the increased numbers will be given suitable kit and weapons is not mentioned.
We are also invited to welcome the commitment to increased defence spending by 3 per cent. over the next three or four years. But what, my Lords, is the magic of this 3 per cent.? It is unrelated, as I have just said, to any strategic assessment of requirements and is merely what the Government think the market will bear. You cannot buy defence like you buy soap powder in a grocer's shop, though the whole thrust of this White Paper seems to be based on that simplistic notion. Finally, I warmly welcome the intention modestly to improve capability of the Army and the Royal Air Force for out of area operations, even though that of the Navy, which would be more useful there than either, has been sharply reduced.
I feel constrained to remark first on the management of defence, for the changes so recently made in ministerial responsibilities seem to me a wholly retrograde step, by detaching the Parliamentary Under-Secretaries of State from the three individual services, apparently, or so the announcement implied, for fear that they might become too closely identified with their single service as opposed to defence as a whole. Surely

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the whole object of appointing the service Ministers always has been to represent the point of view of services of which they acquire detailed knowledge, and of the men and women in them, both to Parliament and to the Cabinet.
We have two greatly distinguished former First Lords of the Admiralty in your Lordships' House and, having served under both of them, I can recall no instance in which their loyalties were divided to the point of embarrassment to the Government of the day; indeed, I have always supposed that the reverse was true. Loyalty can exist only when members of any team share a belief in their objectives, and share a determination to achieve them; it can certainly not be ordained, much less organised. I find it a regrettable sign of weakness by the Government that such an attempt should have been made. Management, and more important to the armed forces of the Crown, leadership, will be the poorer for it.
I turn from the general to the particular. The Government's thinking—if I may so dignify the process—seems to be based on several demonstrably false assumptions which flow almost certainly from sheer ignorance of the total defence problem. There is certainly some political adroitness in what is before us, but no intellectual consistency, much less any sign that strategic realities have been studied and measures appropriate to deter them or to deal with them, has been devised. I am not alone in this view of the White Paper as a whole, for it was described in the other place two weeks ago as:
"faulty in reasoning, incomplete in strategy and totally mysterious in arithmetic"—
and so it is, as I shall seek to show. That is not really surprising, partly in the light of what I have just said about management; partly by the very short acquaintance with the subject of the Ministers now responsible; and partly from a dogged refusal to accept the advice of those who are constitutionally responsible for giving it. I refer, of course, to the Chiefs of Staff who have felt obliged to exercise their right to represent their anxiety about this review to the Prime Minister twice in the last six months. I do not believe that that has happened before in this century.
The three most damaging false assumptions to which I have referred are, first, that any future war in Europe will be short and therefore the problem of reinforcement and re-supply across the Atlantic is of secondary importance, which wholly misunderstands the concept of deterrence. Secondly, if we abandon the NATO task in the North Atlantic someone else will do our job for us; which no other European ally can, and the Americans are already so overstretched that they will not do so. Thirdly, the job of surface warships in the Atlantic can be done by maritime aircraft and submarines; indeed, the White Paper at paragraph 26 actually says:
"Our most powerful vessels for maritime war are our nuclear-propelled attack submarines".
I do not agree with that view and I know of no other war-experienced practising sailor who does do so. I have heard of some superficial, so-called scientific, theories upon which the Government's view may well be based, despite the complete lack of any operational or even experimental evidence in support of them. I
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may be forgiven for preferring a widely-shared professional opinion of how best to deter, or if that fails, to fight a war at sea.
I should like to deal briefly with the first two of those false assumptions. Before remarking in more detail upon the effect of the White Paper proposals upon the Royal Navy, I must say at once that deterrence to all war, nuclear or conventional, long or short, is indivisible. It is as much in the mind of an aggressor as it is in our own. It applies as much in the Atlantic as it does in the central region of NATO, or as it does outside the NATO area. It depends critically upon a flexible response, enshrined from the outset in the North Atlantic Treaty. There is no scenario to which an allied response, and hence our own defence policy, could be seen to be adequate, which can be based upon a short war. The United States Secretary of Defense, Mr. Weinberger, said only a few weeks ago:
"The idea that all future wars will be short has been overtaken by events".
Nor is the short war notion any part of NATO doctrine; and it is hard to see how anyone in the West planning for such a war, is planning to do anything but lose it. I need hardly remind your Lordships that both the last World Wars were expected by politicians, and thus by the public—on both sides—to be short wars. Nor need I remind your Lordships that we came very close to defeat in both of them, in the battles of the Atlantic.
As for the notion that somebody else will pick up the tab in the North Atlantic, we now provide 70 per cent, of all the allied forces there deployed, for 20 per cent. of our defence budget, and we provide 10 per cent. of the land air forces in the central region for 40 per cent. of our defence budget. There simply is no other ally with the means to do the maritime job. Moreover, our allies expect us to do it, and the Supreme Allied Commander Atlantic has recently stated that his escort ship strength is even now only 50 per cent. of what he considers the necessary minimum. The United States Department of Defense report for fiscal year 1982 states:
"the powerful and operationally effective Royal Navy provides the bulk of the non-U.S. contribution".
The International Herald Tribune recently commented
"if British ships are taken out of service, there are no other allied naval forces to replace them. The US Navy is stretched so thin, and is so undermanned at the moment, that it could not possibly fill the gap".
The same paper goes on to say:
"cuts in British naval strength will weaken the alliance's capability to fight a prolonged conventional war in Europe".
One might have supposed that the Government were unaware of these simple truths; but when agreeing with a statement in another place recently that
"the principal role of the Royal Navy is to keep open the North Atlantic for reinforcement and re-supply, without which we could not survive",
the Defence Secretary declared only two months ago:
"I entirely agree that a vital factor in any war on the central front will be the reinforcement of NATO, much of which will need to be done by sea"—
—he might have said, more accurately, 95 per cent. of which will have to be done by sea. NATO, as Melvin Laird said when he was the United States Defence Secretary, is "an alliance strung together by ships".

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Reductions in our surface fleet must, in all these circumstances, strike at the very cohesion of the alliance upon which our whole defence policy is based.
What then is left of these ill-advised proposals, and what will be the outcome if they are given effect? It can only be the absurd notion, to which I have already referred, that the Atlantic lifeline can be kept open by maritime aircraft and submarines. I imagine that some of your Lordships may have seen Captain Stephen Roskill's comments on this foolish assessment, in his letter to The Times last month. No one in the country is a greater authority on naval warfare, and he described what is now proposed as the height of folly.
The mysterious arithmetic, to which I have already referred, was much discussed in the debate two weeks ago in another place. It appears, though it is far from clear, that the intention is to reduce our destroyer and frigate force from 59 ships, three of which are in reserve, to 50 ships, of which eight will be in reserve, or from 56 to 42. This is a huge reduction, but the facts may well be much worse. Mr. Speed, who has very good reason to know them, has asserted that 26 such ships will be disposed of in the next three or four years, with perhaps nine coming forward in the same time-scale. Whatever the truth may be—and I can understand the Government's reluctance to reveal it in plain terms—it seems clear enough that the operational escort fleet will be reduced by between 25 and 35 per cent.
The White Paper suggests that ample compensation will be made by adding three Nimrod aircraft, five nuclear-powered submarines (which represent no addition, because they were in the programme already) and some newly-designed diesel submarines arriving at the rate of one a year, starting about six years from now. I find it inconceivable that anyone, much less the responsible Ministers, could believe that such a preposterous rate of exchange could leave our capability unimpaired. It certainly cannot fail to reduce our capability to deter the Soviet fleet outside the NATO area, to which the White Paper rightly accords some priority. Moreover, it takes no account at all of the loss of some 20 helicopters, which fly from the destroyers and frigates, each of which is nearly as good an antisubmarine weapons system.
Maritime warfare today is a team business; surface ships, submarines, ship-borne aircraft, and maritime aircraft each have a part to play. Grossly to reduce any one element of that team fatally unbalances the whole, and an arbitrary decision on our part to change the shape of this allied deterrent in the North Atlantic makes nonsense of our emphasis on defence through the NATO Alliance.
I might perhaps add here that of the 20 new ships coming into service in the next five years, to which the White Paper gives some prominence, less than half are destroyers and frigates—the rest being mine countermeasures vessels and submarines—and that of the 20 ships concerned, 15 were ordered by the last Labour Government and only five by this Administration, of which just one is a major war vessel. To compound the folly, the Government propose to complete the last two big ships of the "Invincible" class, and then dispose of one of the three, thus paying their high
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capital costs and failing to reap the reward of their very low running costs, when they are ideally suited, and unmatched by any other Navy in the alliance, for both Atlantic and out-of-area operations.
I must, before concluding, say a few words about Trident. As your Lordships are aware, I am totally convinced that the Government are right to go forward with this corner-stone of our defence policy, and there is no need for me to rehearse my reasons again. They were put cogently and briefly by Marshal of the Royal Air Force Sir William Dickson in a letter to The Times a few weeks ago, and it is more than a coincidence that his views are shared by three other former Chiefs of the Defence Staff; leaving the noble and gallant Lord, Lord Carver, in a dissenting minority of one against four.
The proposition which the noble and gallant Lord has put to your Lordships in the past—and for all I know he may well do so again today—that an armament of immense power, unique in its politico-military nature, is of less strategic value than a necessarily modest increase in conventional forces, is certainly not self-evidently true, even if the noble Lord, Lord Gladwyn, and perhaps some other noble Lords also believe it. In my view the very reverse is true; and the critics of the programme have lost the argument. What is depressing about it to me is that the repeated assurances that Ministers have given to Parliament that the Trident programme would not diminish our conventional forces, now seem to have been abandoned so far as the Navy is concerned. I find it even more depressing that last year we looked our American friends in the eye and told them that we would not be cutting our surface fleet to pay for Trident. Indeed, I have understood from the published papers that we obtained very generous terms from them, on the basis of that assurance, which has now plainly been broken. I am glad that it was not my word which was given.
I have spoken at greater length than usual, and greater length than the noble Lord the Lord President invited us to, because, for me, this is an unusual occasion. There are, however, two further points about the Royal Navy which I must mention briefly. The White Paper says that more naval training will be done at sea, rather than ashore. It is probably news for the Government that this has been tried before, only about 10 years ago; and it was shown not to work and to cost much more. Nor is any account taken in the White Paper of career structures; the vital importance of officers and sailors obtaining sea-going experience; and the whole morale of a service which is to lose 15 per cent. of its trained manpower. What, if any, thought have the Government given to problems of this nature? No doubt they will leave their solution to the professionals, whose advice on operational matters they have so arrogantly rejected. Thank goodness that we have immensely competent senior officers to make the best of this very bad job!
To conclude, I regard these savage cuts in the Royal Navy as a highly dangerous gamble with our national security. They flow from a misunderstanding of the threat, ignorance of the best means to counter it, disregard for the combined capability of the alliance, a mistaken assessment of priorities and a total neglect of history. War may be, as Talleyrand said, too serious a business for the generals; but defence policy

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certainly seems too difficult a business for this Government. I am appalled by what is proposed; I am affronted by the way it has been done; and I am deeply concerned about the almost certain consequences.
Lord Home of the Hirsel: My Lords, will the noble and gallant Lord allow me to ask him to correct one fact about which I think he inadvertently misled the House? He spoke as though the 3 per cent. increase for five years was a figure snatched out of the air by the Government. Of course it was not. It was the figure asked for by the Secretary-General of NATO and all the allies.
Lord Hill-Norton: My Lords, with the utmost respect to the noble Lord, the figure was produced by the Secretary-General, who is as well known to me as he is to the noble Lord, Lord Home of the Hirsel, because that was what he thought the NATO market could bear.
4.8 p.m.
Lord Thomas of Swynnerton: My Lords, I thought that it would be appropriate in a maiden speech to make some reflections on the nature of the Soviet threat as, naturally, had that not existed, we should not be discussing these other matters in the way we have. To historians it is certainly evident that the present size of Soviet military endeavour is something new. For example, in 1940 the Germans had some 2 million men under arms, and the Soviet Union now has something like twice that number. In 1940, again, the Germans, in the attack on the Western front had something like 2,700 tanks, whereas the Russians have added rather more to their armoury than that number during the course of 1980, as the White Paper has made clear.
If statistics of that sort seem rather old-fashioned to your Lordships, I think that we might also remember the size of Soviet industrial might. Whereas, for instance, in 1939 the Germans were producing about 24 million tonnes of crude steel in one year, the Russians are now producing 150 million tonnes of that commodity. That seems to give some indication of the size of Soviet industrial might. As for the other far more important weapons which we have been discussing in the Soviet domain, my noble friend Lord Soames mentioned the number of nuclear-powered missiles. I think that there is an even more important point to mention, and that is that, if we read Soviet military journals, we see that they make it perfectly clear that Soviet strategists do not distinguish, as we do, between a deterrent and a war-winning capacity.
It may be in the short term that the Soviet Union are interested in amassing this military might in order to force the West to withdraw in some repeat of the events of Cuba in 1962. That would not be deterrent capacity, that would be an intimidation capacity. But there is no doubt whatever—Soviet strategists make this clear in their writings—that if a war were to break out they are determined to use all weapons in order to win that war, nuclear or not, in order to ensure the survival of their system.
That said, I think there is no doubt that the Soviet Union are not interested in attempting to engage their forces in war against us at the present time. As my
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noble friend Lord Chalfont may indicate later in the course of this debate, they are more interested in such matters as subversion, conspiracy and intimidation than in actual conflict. There is nothing in the Soviet or communist dogma to say that they are invigorated by the idea of war for its own sake, as was the case with the Nazis. Nevertheless, it must be said that the idea of conflict and the idea of the use of force plays an essential part in the Marxist ideology. Since it is obvious that force can be effective in the 20th century—perhaps even more than in any other century, who knows?—it is obvious that the Soviet Union have gone to great lengths in order to supply themselves with surrogate forces. Cuba has at the present time, if you will forgive another historical comparison, more men under arms than Frederick the Great of Prussia had at the height of his power.
Turning from the military aspect of these matters may I talk about the nature of the Soviet régime. I do not think that it is always appreciated that it is an unusual form of government. It is one that is very difficult indeed to make arrangements with. There are certainly many strands within the Soviet world. There is Russian nationalism; there is bureaucracy; there is an extremely reactionary side to the Soviet régime, of that there is no doubt, on matters such as environment, the status of women, or the status of ethnic populations, which interests many of us. That reactionary side is something which deeply shocks, or causes to be embarrassed, many communist parties in the West and elsewhere, whose attitudes are normally quite conventional on such matters.
All these strands are held together by the ideology of Marxist Leninism. That ideology should not be regarded as something which gives the Soviet leaders in every instance a chart, or a timetable, for what they should do. What it does certainly give them is some kind of compass which tells them how to direct and arrange their institutions and motives. These are individuals who regard themselves as subordinate to a scientific system whose victories are preordained historically.
The West has been facing this threat for something like a generation. I do not think the nature of the threat is very well understood in this country, nor perhaps in the West in general. We see many interesting films on television as to how badly the Germans behaved in the course of the last war, and there are films available as to how unpleasant a nuclear war would be. We do not see very clearly depicted the sort of régime that the Soviet Union has, nor what would happen if there happened to be a Soviet victory in a war against us. I think something could be done along those lines.
It is possibly difficult to represent in visual terms censorship or thought control, but nevertheless it could possibly be arranged to show that the best this country, or the West in general, can hope for in their relations with the Soviet Union is what Litvinov described as being the only possible aim; namely, an armed truce. This was a remark he made in 1946.
Many people have supposed that in the generation since 1945–46 the nature of Soviet expansionism has changed. We have seized on hopes that, for example, the death of Stalin, the accession of Khrushchev, the signature of the SALT I treaty might indicate a fundamental

27
change. This does not seem to me to have been the case.
It is desirable to be hopeful but it is not desirable to be naive, and there is no doubt that in the era of so-called détente we have seen, on the one hand, the very substantial build-up of Soviet military forces both in the conventional and nuclear sphere that we have been talking about, and also the display of Soviet ambitions through their surrogate forces in the most remote tropics, in which one would once have thought it inconceivable that a Soviet intervention could occur.
Others have seen in the changes within the Soviet Union another sign of hope or comfort. They point to the fact that the Soviet Union have not managed to fulfil Khrushchev's prophecy and overtake the West industrially by 1980. They point out that Soviet agriculture is unsuccessful. It is also easy to notice that in the nationalities within the Soviet empire there is a great deal of restlessness. Corruption is rife. But I do not think that from an analysis, or understanding, of those things one should draw the conclusion that the Soviet empire is about to crumble.
On the other hand, indeed it might very well be that these anxieties at their back may persuade the Soviet leaders to take advantage of any Western weakness and compensate, if they can, for domestic failure with military adventure. I am sure that that would be a possibility if they thought they had the slightest chance of getting away with it.
In these circumstances it would seem that something like the policy of preparedness indicated in the White Paper is essential. Indeed, in some respects it seems to be modest. I am told that it would not be appropriate to use a maiden speech to discuss the appropriateness of this or that weapon, but I think it probably would be appropriate to remind your Lordships that over the last generation the Soviet leaders have been at their most cautious and most responsible when they have been faced with a steadfast manner.
A good indication of this quite recently was the occasion to which the noble Lord, Lord Soames, pointed a few minutes ago in relation to 1979 when the West determined to modernise their long-range theatre nuclear forces, only to find that within a matter of months the Soviet Union were anxiously requesting discussions on arms control, whereas previously they had promised that should that modernisation go ahead it would be the end of all possible contact.
In the long run I must say that I think there is a possibility of optimism. This may seem a contradiction of what I said earlier, but it seems most unlikely that in the 20th century (an age of nationalism) nationalism or economic failure will not play the serpent in the Soviet paradise in the same way that the first of those things, nationalism, did so in the much gentler Western European empires in the past. That should give us some ground for comfort.
Perhaps this would be the unforessen element which the noble Lord, Lord Caccia, in a previous debate on this subject in this House, suggested might alter our picture of things by the 1990s. I hope very much that that will be so, since it is difficult to see that there could be a better hope than would follow from that for the achievement of real disarmament such as noble Lords on both sides of this House desire; for a real
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removal of the threat of nuclear war, such as we all desire; and perhaps for the refurbishment of the brilliant, if somewhat bruised, heritage of the West.
4.20 p.m.
Lord Kennet: My Lords, the House will be greatly enriched by the presence of the noble Lord, Lord Thomas of Swynnerton, who brings to it a wider knowledge and greater experience of world affairs in our generation and earlier ones than most of its new recruits. I am glad to have the opportunity to say that and of speaking immediately after him, and also just after his respected father-in-law, my noble friend Lord Gladwyn—I am all for families cropping up in this House—and I look forward with great pleasure to the maiden speech of my noble friend Lord Mayhew, whose speech on a very similar occasion nearly 20 years ago I remember as if it had been yesterday.
We heard a corker of a speech from the noble Lord, Lord Hill-Norton; without his inside knowledge of recent negotiations it would be quite presumptuous of me to say anything about that. I hope the noble Viscount, Lord Trenchard, when he replies to the debate will be able to take up some of the points made by the noble Lord, particularly the graver allegations of bad faith towards the United States, which I fear is something we may hear more about, if indeed that was the way things went.
I share some of his more mildly expressed feelings about the cuts in the surface fleet, and by way of consolation to those who feel even worse about this than I do, I will tell a story about a recent radio interview in Moscow. A visiting inquirer from the West said to a Soviet pundit called Adamov, "Yes, but what about the death penalty?" and Adamov's answer was, "We regard the death penalty as a temporary measure". It may be permissible to hope—at least in the view of the noble Lord, Lord Hill-Norton—that the death penalty inflicted on the Navy by the Government may turn out to be a temporary measure of the same sort.
The naval cuts are part—are they not?—of a rather spectacular decline in recent years in the maritime activities of this country altogether; it is not only the surface fleet which has been cut but it is the complete failure to succeed in building any warships for export, the drastic decline in the ability to build any ships for export, the shift of British shipping away from the British flag into flags of convenience, the reduced proportions of world trade carried in British bottoms and all the rest of it which has been debated so often and so despairingly in your Lordships' House.
I do not understand why we should have been overtaken by countries so similar to us as France, Italy, Germany and Holland in naval construction in general. If it were Japan, one could understand, but why should it have been the case with close neighbours with the same sort of economy? Some Government at some time—if not this Government, then another soon—will have to take this matter very sharply in hand to obtain the understanding of the reasons for this decline and to obtain the best methods to rectify it. I believe there is a wide open case (and a wide open market in other countries) for a new approach to the export of maritime products of all

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sorts—the so-called offshore package, as I have described it to the House before—which would be a collection of small sturdy ships for coastal protection, fisheries protection, energy installation protection, the communications and command and control systems to go with them, and the experts to train the mariners of third world countries in running them. This is a market which is exploited very effectively by certain other countries, but not at all by ours. I do not know why that should be the case but we should find out; and I am certain that the new British Naval Equipment Association would be anxious to co-operate in any inquiry the Government might set up.
The Government appear to have forgotten that the Navy has other roles besides deterring Russian attack and fighting a war if it comes. There is the whole immense responsibility of keeping the peace in Her Majesty's recently expanded dominions. Those dominions have been increased recently fourfold by the annexation of sovereign rights over the seabed and, in cerain respects, over the waters above the seabed; and are about to be intensified by the taking of outright sovereign power over territorial waters out to 12 nautical miles, as was announced last month in the House of Commons. It is difficult to see how one can with one hand increase the extent of the dominion fourfold and with the other hand reduce the power of the only armed force which can stand to the civil power in respect of peace-keeping in that increased role.
A few words about a forgotten subject—I say "forgotten"; perhaps I should say "undiscussed"—and that is the North. We read all the time, in what we are able to glean of NATO planning, about the Greenland/Iceland/United Kingdom gap; the importance of bottling the Soviet fleet up on the right side of that if there should be a war. But I ask myself, as I ask the Government: Why is that the gap we talk about? Is Norway not a part of NATO? Why do we not talk about the Greenland/Svalbard/Norway gap; or, if that is too far north, the Bear Island gap or the Jan Mayen gap? That is where the frontier hits you in the face if you look at the map.
I was interested to read recently—I do not know how true the account was—that the Government had decided to send naval units to patrol in international waters round the North Cape in the Barents Sea. About time too, say I. The Soviet Union have been patrolling in the southern North Sea and we all know that there has been for years a Soviet listening ship permenently stationed between Ulster and the Clyde Estuary to keep track of the Polaris submarines, both British and American, which go in and out of the Clyde. There is another one just off the Shetlands monitoring radio traffic of all sorts up there. If they can do that, it is about time we exercised our corresponding right in the opposite direction, because rights which remain unexercised quickly become forfeited rights.
Svalbard—or Spitzbergen, to use its less accurate but more familiar name—is the Berlin of the North. The Barents Sea, in its so-called Grey Zone, contains the only disputed frontier between NATO and the Warsaw Pact, and every historian of war and diplomacy knows that disputed frontiers are where hot disputes break out and turn into wars. This is a neglected
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matter and I wish to ram home the fact that the "salami tactics" which we used to worry about in Central Europe, heaven help us, 20 years ago, which were not realistic, are still alive, well and alarming in the Barents Sea, where there is a continual shove against Norwegian sovereign rights in a small way. They never seem worth making a fuss about; Norway never likes to embarrass the world by asking her bigger neighbours, or very seldom does she do so, but this is happening all the time.
I will give the House one example. In 1976 Norway commenced seismic research for oil exploitation in the Grey Zone of the Barents Sea. They had not got very far before the Soviet Union announced that they were going to do some rocket testing in just that area, so the Norwegians went away. The Soviet Union are now starting seismic research for the same purpose in the same part of the Barents Sea. That is the only story I have time for, but there are many more like it.
When we had the Statement in this House on the Defence White Paper, I asked the noble Viscount, Lord Trenchard, whether we had talked to Norway about the changed situation in our military relations which would be caused by the cuts in the surface fleet. He said, No, we had not, but we would. I think that we may be distressed, alarmed and disapproving at the fact that we have not in advance. It will affect nobody more than Norway, except possibly the United States, to whom we did talk in advance. We should have talked to Norway. The noble Viscount, Lord Trenchard, said that we now would, even if belatedly. Perhaps at the end of the debate he can very kindly tell the House whether we have, what we are saying to them, and how he sees that relationship developing.
I come at last to the great question of Trident. As I think all your Lordships know, the SDP is not a one-cider party in disarmament. I do not like the word "unilateralist"; it is needlessly pompous—unilateralist and multilateralist. There are one-siders and all-rounders in disarmament; and we are all-rounders. But we find certain questions in the proposed Trident purchase worrying questions. To begin with, the decision was taken only one month after a House of Commons Committee had started to inquire into the question of what should be the successor to the Polaris, and it was taken nearly a year before the Committee reported, which it now has. This gives a bad taste to the whole thing. I am not going to blame everything about it, some things are good, but let us take things in order. There is the possibility that the whole deal may be "Skybolted". I do not need to say more. The House will remember how the Skybolt deal feel through in 1962, and at the Nassau agreement between Mr. Macmillan and President Kennedy we got Polaris for the first time.
The United States Navy are now having trouble with the hulls to carry their Trident system, and if that trouble turns out to be bad, they may be tempted to cancel it, just as they cancelled Skybolt. The invulnerability of Trident is good. This is good deterrence, and we are talking about deterrence. We are also talking about getting systems which point towards disarmament. The expense is very bad. The Government will know that the team of Mr. David Greenwood at Aberdeen University, who has had a formidable record for getting things right, already says

31
that the Government's estimate of £5 billion at 1980 prices should be £7½ billion by now. And I would ask rhetorically what major weapons procurement ever did not run away on the cost side? They all have; this one will, too.
Mr. Nott has had fun knocking the gold-plated frigates which it was proposed to construct, but he has instead after all chosen the diamond-studded Trident system. There are two difficulties that are particularly bad. One of them it shares with its predecessors, and that is what is called C3, communications, command and control. Although it is good to have this vast range which enables the submarine to get lost in yet more distant bits of ocean than the Polaris boats could, it is bad that there does not seem to be much reason to hope for an advance on the situation where the poor old submarine has to come up very near the surface to get its orders:—and, of course, its orders include the order whether to fire or not fire in a crisis.
The Americans have a system to overcome this, and it is the EC13 aircraft system, called Tacamo, which helps them to spread all over the world's oceans. We do not seem to be getting a corresponding system, and I wonder whether the gain in range may not be partly nullified by the need for us, being a smaller country without a Tacamo equivalent, to keep our boats closer to home, where communications are possible.
Last and worst of all, there is the question of accuracy and "mirving". The Trident is about the most accurate thing that has ever been seen and each rocket is going to carry eight warheads giving—somebody gave a figure just now. How many targets in Russia?
Viscount Trenchard: My Lords, up to 128.
Lord Kennet: Up to 120 targets in Russia. It involves extreme accuracy and extreme penetration ability. That is something which cannot but be seen in Moscow as a possible addition to the general western first strike capacity which they fear may arise. They would be mad to think that anybody had it now. They would not be mad to think that the West might get it at some future date, and they would obviously fear that multiple centres of command in such a force would be a greater danger to them than a system under single command. That is obvious. This does not point towards disarmament.
Ours is a small country. If we wish to have the thermo-nuclear deterrent force, all we can say with it is: "Do what you like to us; but if we don't like it we will exterminate you even after our death". Ours is always a bee-sting deterrent. It has been so, and should remain so; as the human hand avoids the bee, so the super-power hand may avoid swatting a small country with a bee-sting deterrent. Trident is not like that, and I believe that the Government would have been wiser to look for a continuation force to succeed Polaris which would not necessarily be terribly accurate—For Heavens sake! five, 10 cities, or even one city, totally eliminated will be a sufficient deterrent against any sane Government in the world; I have always thought that—not terribly accurate, not very highly equipped with penetration gear. What does it matter whether we get through the ABM screen over
32
Moscow? If we can destroy a lot of other cities, that is good enough, and—
The Minister of State for Defence Procurement (Viscount Trenchard): My Lords, having supplied the figure of up to 128, I should like to add that I shall be dealing with the question of ballistic missile defences in the 'nineties, which is what we shall be talking about.
Lord Kennet: My Lords, if the noble Viscount is able to convince us that there is going to be an ABM screen all over Russia in the 'nineties, and if he is also able to convince us that that will be an effective defence against cruise missiles (which is another question), then some of my doubts will be allayed. I shall wait with the greatest interest to hear what he has to say.
There are plenty of other ways in which a country like ours might equip itself with a thermo-nuclear deterrent force in the 1990s—ways that are almost equally invulnerable, not so provocative, and which point better towards possible arms control at this level. I do not think that I need go into them. There remains the question of the so-called short-range theatre nuclear weapons, which has not yet been mentioned. Here NATO doctrine can be expected to develop, and here I think that this country should continue to play the same kind of modest but effective role as it has played in the past.
Lastly, though one should really begin with it in any speech on defence—lastly disarmament. I have addressed this House so many times on the subject over the last 20 years that I shall not detain it long now. I was glad to hear the noble Lord, Lord Peart, say that the White Paper was very reasonable, because no one-sider among disarmament buffs could say that it was very reasonable. We all know, though, the commitment of the party which he leads in this House, and many of us hope that our former friends in that party will in due course draw the consequences of the contradition between the commitment of their party and their own convictions on this matter.
It is at the moment bad weather for disarmament. An increasing difficulty in the attempts to reach arms control over the generations is the fact that the United States has an 18th century constitution in the age of instant communication. President Reagan was elected last autumn, and it will be this November before the United States is ready to meet Russia about arms control: that is, November 1981. By the summer of 1983 electioneering will have started again. American presidencies are now down to a year and a half in this respect, and that makes difficulties for the rest of the world, and I hope that the Americans might agree to discuss ways of overcoming the difficulties in common with their allies.
I do not share the belief that the so-called "two-track" decision of December 1979 was a wise one. It came after 20 years of unexplained neglect of the presence of 600 or 700 Soviet MRBMs pointed at Western Europe, which could not reach America—the SS4s and SS5s at first, and then succeeded by the present much more powerful SS20s. We said nothing about that. We never talked to them about that. We never asked them to take them away. We never said, "Come and sit down and let's talk about what we might do which would make it easier for you to take

33
them away ". Then suddenly in December 1979 we had a very bold two-sided reaction: first, we will unconditionally permit the deployment on our territory of the American cruise missiles and the Pershing IIs, and at the same time we would like to talk to the Soviet Union about nuclear arms control in Europe. I think it was clumsy, and I think it is now time for us to hurry to correct any possible bad effects which may come from that. We should also hurry to improve the whole structure of negotiating fora, now a bit cumbrous, which has at last, in the last year or two, been given a proper place to report to in the First Committee of the United Nations General Assembly, and in the successive Special Sessions of the General Assembly itself to deal with disarmament.
My Lords, I have spoken too long. May I end by apologising that I have shortly to leave the House for an engagement which I undertook many weeks before this debate was announced? It is not ill-manners; it is a prior duty.
4.41 p.m.
Lord Kaldor: My Lords, I, too, should like to begin by congratulating our maiden speaker, Lord Thomas of Swynnerton, whom I have known for a number of years as an academic colleague and as a friend—not a noble friend, but a friend—and who I am sure will add a great deal to the intellectual resources of this House as far as history and historical analogies are concerned. I do not expect that I shall agree with him very often—not so long as he sits on the other side of the House—but that will not in any way diminish my respect for him.
I do not claim any expertise in defence, and if I were asked why I wished to speak in this debate it is to pin-point some glaring contradictions (or what I thought were glaring contradictions) in the White Paper and in Government speeches, and to ask some questions which might help to clear up at least some of them.
The main theme of the White Paper and of the speech in the other place of the Secretary of State for Defence was the need to modernise our defence system, mainly as regards nuclear defence. This implied a plea—to NATO powers generally, to America particularly and to ourselves equally—for a tremendous acceleration in the nuclear arms race. Consider only the fact—and here I am quoting from the Secretary of State's speech in the other place—
"that for the last three years the Soviet Union has been deploying long-range theatre nuclear missiles of enormous accuracy on targets throughout Europe, and on our own homes here in the United Kingdom, whereas all that NATO possess is a force of ageing Vulcans and United States F1.11 aircraft. Indeed, the Vulcans are increasingly difficult to keep maintained and flying in the air, let alone capable of penetrating Soviet defences".—(Official Report, Commons, 7/7/81; col. 275.)
If that is so, and if our new efforts and the introduction of Trident and the cruise missiles will change all that, as we are told that it will, in a few years' time, why do the Russians not make use of this extremely favourable but fleeting opportunity to finish us off before it is too late? Why should they wait with folded hands to watch us gradually reduce their advantage and then for us to regain superiority? It is well known that escalating arms races are designed to preserve peace but usually end up in wars, only
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because one side or another gets out of step and there is a moment when it gains the upper hand, or thinks it has, which it feels it is bound to lose again in a few years' time. Such a moment is now.
Hitler was in a terrible hurry to attack Russia because he knew of the scale of Russia's fast-growing military preparedness; hence the decision to abandon the invasion of Britain in September 1940 rather than allow the "Barbarossa" operation to be postponed, possibly for another year. If the Secretary of State's intelligence is anywhere near correct, including his estimate of the vast Soviet superiority in conventional weapons, surely it would be extremely foolish of the Russians to allow us to carry out a vast nuclear modernisation programme, in America as well as here, without stopping it while there is still time.
Yet nobody thinks that anything of the sort is likely to happen. None of the previous speakers today thought that it was likely. Indeed, the Secretary of State went on to say in the same speech:
"I do not believe that at present the Soviet leadership seeks direct military confrontation with Western Europe—and that in itself is proof of the success of the Western Alliance".—(Official Report, Commons, 7/7/81; col. 277.)
I cannot understand what he meant by the word "success" in this context. To have allowed the Russians to get the upper hand in both nuclear and conventional weapons after 20 years of a virtually uninterrupted arms race would be proof not of the success of the alliance but of its miserable failure—particularly when there was no real reason for it—when both in total manpower and in industrial resources NATO is and always has been greatly superior to the countries of the Warsaw Pact.
Indeed, the Secretary of State's argument would have been more logical if he had said that the Soviet leadership does not seek a military confrontation because it realises that the NATO alliance has been such a continued failure, not a continued success. This would make sense since, in view of this miserable record, there is no reason to fear that the Western powers will be more successful in the future than they have been hitherto. Indeed, they might well think that the longer they wait the easier their final job of liquidating Western capitalism will be. This, I fear, is more likely to be true if leading Western powers like America and the United Kingdom become progressively more enfeebled as a result of following monetarist policies.
I am not suggesting that what I have said is likely to be an accurate description of what is in the minds of the Russian leaders, though it is not likely to be less accurate than the view put to us by the Secretary of State. In fact, as far as nuclear arms in general are concerned, the terms "superiority" and "inferiority" have no meaning since both the super powers possess an armoury of bombs and delivery vehicles of the most varied kinds in such vast numbers that they are capable of completely annihilating each other many times over. Any addition of new types to one side or the other cannot make any difference except on the far-fetched assumption (which is tacitly, if not explicitly, adopted by many speakers) that the Russians intend to play a strictly defined game according to well-defined rules, as if they were playing tennis, in the manner that they will only hit the ball inside a certain circle and not

35
outside, and the nuclear war-play will be confined to particular circumstances and particular types only.
It was a NATO conception, not a Russian conception, to use small nuclear bombs as "tactical" or "theatre" weapons, to offset NATO's inferiority in conventional weapons. The Americans thought, and everybody else thought with them, that with tactical nuclear weapons we could get defence on the cheap. This was a silly idea, and it was branded as such by no less an authority than the late Lord Mountbatten on more than one occasion, and by the noble Lord, Lord Zuckerman, in this House in his speeches on 23rd April and 8th May, 1980, as well as by many other noble Lords, including the noble and gallant Lord, Lord Carver. They all made the same point, that once nuclear weapons are introduced it is impossible to prevent escalation into a full-scale nuclear war; it is most inappropriate, therefore, to introduce nuclear weapons to meet a non-nuclear attack.
The idea that the introduction of new nuclear weapons on either side—be it the SS20 or be it the cruise missiles—will permit one side to dominate the other is absolute nonsense. With 50,000 or so nuclear warheads in the world, divided between the two sides, neither side can hope for a minute that it can attack the other and survive. If noble Lords do not believe this, I commend to them a recent book by my friend and colleague, Professor Robert Neild, entitled How to Make Up your Mind about the Bomb. He sets out the evidence and arguments and puts them in a historical setting with more clarity and precision of analysis than I have found anywhere else.
In my view, which I trust will be shared by other noble Lords, current innovations in the nuclear field emphasise the danger and uselessness of putting your trust in nuclear weapons, and greatly strengthen the case for concentrating our preparedness on conventional defence and not weakening it. When it comes to the point, whatever the brave words being used now by Ministers in this country or any other country, neither side will take the risk of introducing atomic weapons into the fighting, just as the Americans shied away from taking such risks even when they were most hard-pressed in Vietnam. There were two nuclear bombs dropped in anger in 1945. That is all. Since then, 50,000 or more have been produced but none of them has been dropped.
But when I look at the White Paper, as many noble Lords have already pointed out, it is precisely in the field where we are most in need of stronger defences, in conventional weapons, that the Government's defence programme leaves most to be desired. I should also like to refer to the brilliant letter by Captain Roskill in The Times to which the noble and gallant Lord, Lord Hill-Norton, has already referred. He said:
"Why should the Soviets launch a nuclear attack and risk retaliation in kind, or launch a land attack on Western Europe, when merely by sinking our Merchant Navy, they can bring us to our knees in a few weeks?"
The Russians possess 400 submarines—almost as many as the Germans were able to keep operational at any one time in the last war. The Navy will not be in a position to protect our merchant ships or to rescue the crews of sinking ships, which is essential if
36
you want to maintain the capability of the Merchant Navy, as they did in 1917 and 1918 and in 1942 and 1943, because the escort vessels, indispensable for protecting convoys, will not be available (killer submarines and shore-based aircraft are no substitutes for them). Their number—which amounted to between 400 and 500 in the last war—and that was a close shave—not counting those of our allies, is, under the Government's present plans, to be reduced to 42 operational units or less; our capacity for enlarging their numbers in times of war will be impaired by the closure or emasculation of the naval shipyards.
I realise, of course, that escort vessels are the most unglamorous things, serving only defensive purposes, and so they are apt to get overlooked when such trendy and dynamic weapons as killer submarines, SS20s, Tridents and such like command all attention. Nevertheless, I think the Government would be well advised to think again and invest in a large fleet of escort vessels—particularly as I understand that an entirely new design of escort vessel could be constructed at a small fraction of the cost of the £125 million envisaged in current estimates.
Otherwise, if it were a credible notion that the Russians should want to colonise an island as bankrupt and as unruly as Britain—their troubles with Afghan tribesmen would pale into insignificance when confronted with British trade unionists—they could do the dirty on us and finish us off where we least expected it—not with a bang, but a whimper, not by the latest missile but by the old-fashioned method of sinking merchant ships as in the first and second world wars.
The Government's plans—as has already been pointed out by several speakers—only make sense on the assumption that they are thinking of the next war, unlike the last two wars or most other wars in history, lasting not for years but for days or perhaps only for hours. But that means that they put all their eggs in the nuclear basket—they put themselves into a situation where they are forced to rely on nuclear deterrence not only against nuclear attack, but any form of conventional attack as well.
This is a most hazardous undertaking; Mrs. Thatcher and Mr. Nott might be genuinely prepared to respond to the sinking of merchant ships by dispatching a Trident, Polaris or whatever the big stuff happens to be in hand. But can they bind their successors in this? If not, the lack of capability for defence with nonnuclear weapons would be fatal. Is such a threat, whether genuine or not, credible? Is it really credible that a Prime Minister of this country will order the collective suicide of the nation in order to avenge the sinking of some merchant ships by submarines? I submit that it is not.
Anyhow—and I am nearly finished—I want to ask just one more question. Why do we have to go through all this slimming process now? I raised the same question when we discussed educational cuts the other day, and was listened to with incredulity as if I were mad. How could I doubt that cuts are a good thing which will make us better off?
Well, I do. At the moment we operate 25 per cent. below capacity; we have 3 million unemployed. Whether we have more or less than 3 million we shall discover tomorrow. Surely this is not the time to contract; it is the time to expand in all possible direc-

37
tions—since in so doing we are not depriving anybody of anything—we are bringing idle resources into use, quite apart from the satisfaction which jobs create for those who have them. The Government behave as if the less we produce the less we can afford to produce and consume.
The White Paper prides itself on having already cut civilian work for the Ministry of Defence by 20,000, or 8 per cent., since 1979, and on having now taken measures to secure additional cuts in civilian manpower of 20,000 to 30,000. In addition, the personnel of the three forces will come down by 20,000—altogether a wonderful achievement, which increases unemployment possibly by 100,000 or more, if the indirect multiplier effects are taken into account. What is the point of it all if no alternative opportunities are available? Or if there are, where are they? Speaking more generally, what is the point of increasing productivity if its effect is not more production but simply more unemployment? Given the Government's proclivity for reducing output, from the point of view of public safety as well, it would surely be much better to follow policies of decreasing productivity which would make it possible for the available work to be shared more equitably all round. Unfortunately, such policies would run counter to Mrs. Thatcher's almost insatiable appetite for what Marx called "the reserve army of labour" necessary for disciplining the workforce, for bringing down wages and for improving incentives for earning profits. My fear is that, as Marx might have predicted, she will succeed in this only by destroying democratic capitalism.
Lord Boothby: My Lords, before the noble Lord sits down, may I ask him one question? I quite agree with him that there are no such things as tactical nuclear weapons. Nuclear weapons are total or they are nothing. If one side can annihilate the other and the other cannot do anything back, sooner or later it will. If both sides can do it, neither will. What is his answer to that?
Lord Kaldor: My Lords, my answer is the same as the noble Lord's. Neither will; but that does not mean that one side can make itself defenceless in conventional warfare when the other side is not defenceless. That is the point. If you want security, NATO must be able to match the Russians both in the nuclear field and in the conventional field and not use the one kind of weapon to offset inferiority in the other.
5.1 p.m.
The Earl of Orkney: My Lords, I very much welcome the Government's declared intention to increase defence expenditure by 3 per cent. in real terms each year, and to maintain its commitment to the NATO target for the next four years. However, I should like to take this opportunity to remind my noble friends of the promises made by the Conservative Party in the general election campaign of 1979. The manifesto stated quite clearly that a Conservative Government should take steps to improve Britain's defences, in consultation with the Chiefs of Staff and with our allies overseas. It said also that such improvements would require significant increases in defence expenditure.
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I am not at all sure that recent ministerial statements have been entirely in the spirit of those manifesto commitments, and I would suggest that failure to stand by our original position would be a grave mistake, particularly in view of the adverse psychological effects on the morale of our armed forces. Such effects could only bring comfort to the leaders of the Soviet Union in its determination to pursue its aggressive foreign and military policies.
Our principal objective must be steadily to increase our defence spending, particularly on our conventional forces, with full regard for the economic constraints which dictate the level of general public expenditure. In this respect I fully accept the Secretary of State's view that reallocation of resources to the defence field must be undertaken and that we should review our defence commitments with a view to developing a more rational and constructive balance between the various elements involved.
May I briefly draw the Minister's intention to the three areas which are of concern to me? First, the paramount importance of the Royal Navy to the security of our islands should not be underestimated. Morever, it is also vital to protect the sea lanes which bear 95 per cent. of Britain's imports and exports. This country is above all a trading nation, so that those sea lanes are all the more important to our survival. Secondly, I support the Trident project as an essential dissuasionary strategic weapon for the defence of the nation. However, I suggest that its cost should be treated separately from the main defence budget because its role is quite different from that of the conventional forces.
Finally, in our deliberations on this issue we must take care not to undermine our excellent relations with the United States—and I note with pleasure the success of the Secretary of State's recent visit to Washington to explain our position. We must remember that the United State's represents the ultimate deterrent to the Soviet Union's designs, and also that Russia is currently increasing military spending by 4 per cent. each year. Our overriding aim must be to maintain peace in the world, but we must remember, sadly, that peace can only be assured through a military balance between East and West. Britain must play its part in contributing to that balance.
5.5 p.m.
Lord Chalfont: My Lords, I hope I shall be forgiven if I refer only briefly to the admirable maiden speeches of the noble Lord, Lord Thomas of Swynnerton, and the noble Earl, Lord Orkney. My only reason is that time is very short and we shall have an opportunity of hearing them both again on future and perhaps more spacious occasions.
I have already expressed on several occasions certain reservations of mine about the policies put forward in the document we are debating today and, as those policies seem now unlikely to be substantially changed by anything that we might say here. I do not propose to pursue today further arguments about Trident and the Royal Navy. In any case I suspect that they will be, and indeed already have been, dealt with in a formidable manner. We have already heard the thunder of the naval broadsides and I have no doubt that shortly we shall hear the armoured divisions moving

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into action when the noble Lord, Lord Carver, rises to his feet. Instead, I want to refer to one sentence, the first sentence in paragraph 11 of the White Paper, which says this:
"We cannot reduce our effort in direct defence of the United Kingdom homeland".
I want to revert briefly to a subject I have raised before in this House—one which is as relevant to our defence policies as the threat of military aggression from outside: that is, the danger that our home base might be destroyed from within. No foreign aggressor would choose to achieve his political aims by going to war, especially now while there exists the probability that it might become a nuclear war. He would, of course, much prefer to prevail without firing a single shot, as my noble friend Lord Thomas of Swynnerton pointed out in his wise and thoughtful maiden speech and, indeed, as a distinguished Russian general has put it:
"The role of the Red Army is to shake the tree when the rotten fruit is ready to fall".
For that reason I believe it is important that we should remind ourselves of the extent to which that fruit—the fruit of our liberal democracy and our political freedom—which may in spite of everything look reasonably firm and healthy on the surface, is being eaten away from the inside by men and women some at least of whom hate and despise our political system and are ruthlessly bent on destroying it.
To get some of the flavour of the way in which these hidden destroyers operate, one needs to look no further than their involvement in the outbreaks of violence which have taken place in the streets of our cities over recent weeks. I have no intention—indeed it would be inappropriate to do so—to enter in this debate into any discussion about the root causes of the riots, or indeed of the methods which might be used to deal with them. My concern today is to suggest that, whatever the causes of the current unrest, it has been exploited and to some extent organised by those who see it as an instrument of subversion and political disruption.
I think it is interesting, as a point of departure, to note that at a meeting of the Labour Party Young Socialists at Brixton Town Hall on 15th April, Mr. Kevin Ramage, the national chairman of the LPYS, talking about the Brixton disorders, said:
"Thatcher says unemployment has nothing to do with it—but unemployment has absolutely everything to do with it … and there will be riots in Liverpool, Manchester, Newcastle and other cities, if unemployment is not brought down".
My Lords, are really so naive—
Lord Brooks of Tremorfa: My Lords, would the noble Lord give way on the point he has just made? I have continually denounced the activities of the militant tendency in the Labour Party, but would the noble Lord not agree that all the classic ingredients for social instability are in our economy at the moment, with high unemployment, an unstable currency and very high inflation? Does he not agree that these aspects of our economy are bound to lead to trouble and that they allow these people to make hay?
Lord Chalfont: My Lords, I should much prefer not to enter into that argument. As I said, I do not
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wish to discuss the root causes of whatever is happening in this country. My concern is to point out how it is being exploited. That there is a situation to be exploited, I do not contest for one moment. But as I said: are we really so naive as to take the statement that I have just quoted as a simple, innocent exercise in clairvoyance? It is, as has been said elsewhere in a different context, the kind of remark which is designed to provoke precisely the events which it foreshadows. When the riots came, as they inevitably did, in Liverpool, Manchester and other cities, are we really so simple-minded as to believe that they were all spontaneous or just imitative?
It was abundantly clear to neutral observers, including a number of foreign journalists who reported them at length in their newspapers, as well as it was clear to many policemen to whom I spoke, that in Brixton, Liverpool and Manchester there were substantial numbers of outsiders, who moved in and organised a great deal of the violence, moving supplies of petrol bombs from one sector to another and directing operations with impressive professionalism. Nor should any of this be at all surprising. Let me quote briefly two more statements made by political personalities over recent weeks.
In an interview with the newspaper Socialist Organiser on 14th May, Mr. Livingstone of the Greater London Council said:
"wherever there is an industrial dispute in London, we shall go down and support it. Local GLC facilities will be put at the disposal of the strikers".
Then followed this phrase:
"You can't jump from the Callaghan government to a perfect revolutionary position. You have to go through a spectrum of left-wing opposition".
Interviewed by the same newspaper on 4th April, another member of the Greater London Council said, when asked what he thought should be done if the GLC were taken to court on some matter by the central Government:
"I think we defy the law. Major changes have always come about as a consequence of direct action and that direct action in most cases has been in contravention of previous laws".
You will note, my Lords, that I have attributed to no one any views which they have not themselves publicly expressed. If there were time, I could give literally hundreds of other examples. Is it, then, really a matter for astonishment that, fed on this kind of subversive rhetoric, people are turning to violence to express their frustration? To say, in the light of this orchestrated campaign of provocation, that there is no organised political direction behind the violence in our streets is, quite simply, casuistry and self-deception on a massive and dangerous scale.
Let me now turn briefly to another aspect of the threat to our security—equally relevant, in my view, to a consideration of defence policy—the unilateralist movement which was mentioned in his opening remarks by the noble Lord, Lord Soames. Here perhaps I might, in passing, take mild issue with my noble friend Lord Kennet, if I understood him aright. I believe that there is a great and crucial difference between unilateral disarmament and multilateral disarmament, and between those who advocate these points of view—
Lord Kennet: My Lords, the noble Lord did not understand me aright at all. I was emphasising that difference with all the strength at my command. What I was doing was suggesting that we might call unilateralists "one-siders" and call multi-lateralists "all-rounders", simply to get back to short Anglo-Saxon words.
Lord Chalfont: My Lords, I am grateful to the noble Lord. Perhaps I might begin my few brief remarks on the unilateralist movement with one more quotation from a leader of public opinion. From the Communist newspaper Morning Star last week I collected the following gem of political philosophy:
"Anybody with eyes to see should know where the threat to our schools, housing, health, employment, living standards and, indeed, life itself comes from. It comes, not from the mythical Soviet threat, but from International Monetary Fund cuts, the Common Market, the investment and pricing policies of the multinationals and from the United States inspired arms race".
Straight forward Communist propaganda, you might say, from a straight forward Communist newspaper. Yes, my Lords, but it was written by Mr. Ernie Ross, the Member of Parliament for Dundee West. I mention it as an example—because I think it is an important one—of a certain approach to the problems of our defence and security in which the Soviet threat is always "mythical" and in which the arms race is always American inspired.
This is an attitude which, whether we like it or not, lies behind much of the rhetoric of the Campaign for Nuclear Disarmament, which is not, I am going to suggest quite the harmless idealistic movement of popular protest which it is sometimes represented to be. In most movements of this kind it is not difficult, if you look far enough, to identify the hand of the World Peace Council—an international front organisation controlled by the Soviet Union. And, surely enough, the World Peace Council was active in organising near Ostend, in October 1979, the European Forum on Disarmament and Security. This conference, which was, incidentally, attended by two of the foremost Kremlin experts on subversion, had as its principal aim to oppose the development of the so-called neutron bomb and the deployment of new theatre nuclear weapons in Europe. These are, predictably, now among the principal targets of the unilateralist and neutralist movement in Western Europe and, more significantly, of the Campaign for Nuclear Disarmament in this country.
When contemplating the activities of the CND in this country, it might be wise for all of us, whatever our political point of view, to consider certain facts about it which are not widely disseminated in the press. What I have to say will be unpopular and will, indeed, be resented by some people both inside and outside your Lordships' House, but I believe it essential to say it. The first thing to say is that the governing hierarchy of the CND has a very significant element in it of men and women with Communist affiliations. Two of the vice-chairmen of the organisation are members of the Communist Party. Its national organiser, its Scottish secretary and the editor of its magazine are all members of the Communist Party. Furthermore, it would be strange, indeed, if the CND were not substantially assisted from Communist sources, since the Soviet Union spends vast sums of money on its so-called
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"peace campaigns" all over the world. And, indeed, Monsignor Bruce Kent, the general secretary of the CND, has publicly expressed his appreciation of the support which CND has received from the Communist Party, among others.
In case anyone should be tempted to regard this as another example of anti-Communist paranoia, let me once again proceed by means of a direct quotation. Speaking at Birmingham University only a month ago, on 16th June, Mr. Gordon MacLennan, the general secretary of the Communist Party said—and I quote his exact words—
"the primary force for creating conditions for a general election, the defeat of Thatcher and a Labour government of a new type is mass action involving millions of people, like the People's March for Jobs, the present wages struggle and the Campaign for Nuclear Disarmament".
Thousands of people in this country, many of them young, many of them idealistic and of high principle, have turned to the Campaign for Nuclear Disarmament because they are, understandably, afraid of the appalling consequences of a nuclear war. I happen to believe that they are ill-advised and that unilateral disarmament by the West would be more likely to bring about the disaster which they most fear. Nevertheless, many of them hold their views honestly and sincerely. But I wonder how many of them realise how cynically they are being manipulated and for what political ends.
As the noble Lord the Leader of the House has pointed out, many other noble Lords wish to speak in this debate and I must therefore detain the House no longer, although this is a subject which I think deserves, and I hope will get in the future, more detailed analysis and discussion. I believe that it was important to raise once again an issue of national security on which I have spoken before at greater length in your Lordships' House, because the dangers which I outlined in your Lordships' House some years ago have not diminished or receded. At that time, many of my warnings were greeted with disbelief, derision and sometimes outright hostility. Now some of the things which I foretold have come to pass.
There is in this country an extensive network of subversive and extremist organisations, and the most militant of them are systematically preparing for confrontation on the streets of this country with the power of the state. The level of violence, the contempt for law and order, the hatred and vilification of the police, the hostility to the armed forces, the rejection of the parliamentary process, have all grown to a degree which ought to sound alarm signals of an insistent kind. Protecting the values, the freedom and the safety of our people is not exclusively a matter of defence against the enemy outside the walls. We shall not be protected by Polaris, or Trident, or by our ships and submarines, or by our soldiers on the Rhine if we allow our freedom and security to be eroded at its foundations by those who, protected by a tolerant and sometimes over-permissive political system, are working ruthlessly and unscrupulously to bring that system down in ruins so that the enemies of freedom may take its place.
I know that there will be many people who, for various reasons, will prefer to pretend that this problem does not exist or that perhaps it is irrelevant to a discussion of national security. It was, I believe, Dante who said that the hottest places in Hell are reserved

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for those who stay neutral in the face of a great moral crisis. This is a grave crisis, moral and political, and one which I believe touches upon our very survival.
5.22 p.m.
Lord Orr-Ewing: My Lords, I think we all owe a debt of gratitude to the noble Lord, Lord Chalfont, for having so succinctly put before us some of the dangers which face our country. I recall that some six or seven years ago in a longer speech he gave a very trenchant presentation of the dangers which beset us. He is right in saying that they have grown since then. It is significant that that particular edition of Hansard was out of print 24 hours after it was published, and has never been reprinted. It was a source of immense value to those of us both inside and outside this House who study these problems. I am sure that today's Hansard will be equally in demand as a result of the noble Lord's intervention.
May I, too, congratulate the noble Lord, Lord Thomas of Swynnerton, on the content and delivery of his maiden speech. How many of us can make a maiden speech of 12 minutes without reference to any notes? His succinctness in a long debate was absolutely admirable and an example of what a maiden speech should be. We hope to hear him speak on many occasions in the future.
I should like to refer briefly to the speech made by the noble Lord, Lord Hill-Norton. I do so as very much the amateur rather than the professional. After having served as a Minister on the Board of Admiralty for five years, however, I feel that I can deal with some of the arguments which the noble Lord put forward. What has to be remembered is that the White Paper's promise of 3 per cent. more in each year for five years in real terms is done on a diminishing GNP of probably minus 2 per cent. this year and in the face of a worldwide slump. It is not easy to promise in these circumstances that more money should be diverted to defence. Therefore, I think that the Minister and the Government ought to be congratulated on what they have done.
The White Paper is framed in terms of today's economic climate and in terms of what is politically possible in Europe. I agree with the noble Lord—I shall refer to this later—that we ought to rethink our strategy over the part that different forces should play in NATO. But that is not possible today. Therefore it is no good the noble Lord saying that the service which has suffered the penalty has been the Navy and that the other services have not been affected. It may be that this had to be done in today's context.
I would also ask the noble Lord not to belittle the effectiveness of maritime air power. In World War II, 60 per cent. of the submarines were sunk by the air force. Since then the power and sophistication of electronic detection methods and attack have enormously increased. It was 60 per cent., and the Navy accounted for the balance. Lastly, I am sure that the noble Lord does his cause no good by suggesting that the professionals are always right and that Ministers are always wrong. One has to remember the history of World War II. I could cite many examples where the professional advisers in all three services were not always right.
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I aim to cover in as short a time as possible two aspects of defence. First I wish to deal with the soaring cost of each new generation of ever more sophisticated equipment. Secondly, I wish to deal with the high cost of all the armed forces when they are entirely professional. Fig. 14 on page 45 of the Defence White Paper sets out in real terms the immense growth in the cost of our ships, aircraft and armoured vehicles. It is desperately sobering and alarming. My noble friend the Minister of State for Defence has made this point again and again. If you look at that chart, it shows that the Leander Class, which cost £5 million when I left the Admiralty, now costs £125 million. If you reduce that to real terms, it has gone up in 13 years by an average annual percentage increase of 23 per cent. The Hunter, followed by the Harrier, has gone up by 28 per cent. in real terms each year. Armoured vehicles have gone up by 20 per cent. in real terms each year and the Seacat missile and its successor has gone up by 27 per cent. each year. This is an enormous increase. Although the White Paper has done its best—and should do because of the increasing threat from the Soviet Union—in real terms, it is 3 per cent. over the whole of the defence budget. Since the pay of our armed forces virtually moves with the RPI, that means a 6 per cent. increase in the hardware budget. A 6 per cent. increase in that budget does not bridge the gap. We shall find that we are embarking on a process of disarmament. All three services must look at this problem most carefully.
The crux of the matter is whether we can afford to develop and order ever more sophisticated weapons in ever smaller numbers, weapons which are so sophisticated that we do not succeed in selling them to third world countries. It is significant that no major Royal Navy ship has been sold overseas since 1970 to the third world. No small ship, even, has been sold overseas since 1975. Of course, there are honourable exceptions. The Rapier missile system is one. But the alternatives are far too common. Ships now are so expensive that the cutting which the noble Lord, Lord Hill-Norton, quite rightly referred to is really the result of the cost of our whole armaments system.
It has been necessary to run the fleet down by 35 per cent. This is extremely alarming and something which should be put right again as soon as we can conceivably do so. More vigour and more attention must be paid to cost effectiveness. One cannot go on, even on a budget of spending 6 per cent. more in real terms on hardware, when that hardware escalates each year at a cost of between 12 and 20 per cent. extra, or you finish up with a handful of tanks, aircraft, missiles and ships which are no effective conventional deterrent. This, I suggest, is creating disarmament by inflation. This Government are quite rightly pressing for multilateral disarmament. They are pressing on with the reduction of inflation. But it is equally alarming that in trying to achieve cost effectiveness in arms we are slowly disarming ourselves in terms of the number and effectiveness of our armaments.
I now turn to the second point—and we all have to try to keep our speeches short in this debate—and that is the cost and the number of men. I suggest that we have now cut our forces in numbers to a much greater extent than we can afford in the face of the threat. Britain is almost alone among the Western European

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nations—the United States being the only one that is equal in this connection—in depending on all professional armed forces and having no national service whatsoever. These professional armed forces are so expensive and have such an extensive tail—for example, the married quarters, the schools, the hospitals and everything else for BAOR, which are costing £700 million a year—that I suggest we must seek every conceivable way of using part-time volunteers. They proved themselves in the exercises last autumn and I think there are many valuable social advantages in doing just this.
I was pleased in the last White Paper—and I think other noble Lords will share my pleasure—that it was stated there that,
"The Government are determined to make more use of reserve forces".
I suggest that the Royal Naval Reserve should be built up. Our ports are essential for the reinforcements due to come to this island base and the threat to our ports is such that we should seek to appoint a commodore in charge of each of our major ports and he should seek among the fishermen and among the merchant seamen and the yachtsmen too, of which there are very large numbers, to build up a reserve which could make use of almost every small ship.
Now that our replacement minesweepers are to cost no less than £30 million we cannot afford to build them and scatter them around our ports. I suggest that we should make use of some of the more sophisticated fishing trawlers. They now have very ingenious electronic sonar in order to detect fish. I believe it is said that they can now find a bucket which has fallen overboard, and if they can do that, then they can start to hunt mines and do a host of other jobs. I believe that until we build up this reserve we are very vulnerable in a most important area.
I also hope that we meet the target of the Territorial Army and its expansion from 70,000 to 86,000, set out in the White Paper; that at least half that number will be here for home defence, for a whole host of reasons, some of which were sketched by the noble Lord, Lord Chalfont.
I have tried to get the figures of costs and I should like to point out that the cost of a regular officer—and I am speaking about military salary and other matters and not the armaments, because that would be very difficult to aportion—is £13,000 per annum, but for a TA officer the cost is £1,700. That is to say we get eight Territorial officers for every Regular. The average cost of a Regular other rank is £7,000 a year in salary; the cost of a TA other rank is just over £1,000. So we get seven TA other ranks for every one Regular other rank. Surely this is an area where we have a willing population, where people can be persuaded to come forward and help to defend our country. I very much hope that the Government will give a high priority to this concept.
I was delighted to see in the White Paper that our school cadet forces now number 142,000. What is sad is that so many of those young boys, aged between 11 and 17, when they come forward to volunteer for the armed forces have to be rejected because in a period of unemployment the more senior NCOs and other ranks do not wish to retire early. They wish to hold
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on to their jobs in the services and therefore there is not the flow through. That is a desperate waste of the enthusiasm of those young people who may, of course, fall on to the job market as a result.
There are many parents and others who would like to see the reintroduction of national service. The spring gallup poll on this showed that 68 per cent. of the population would greatly favour it. It is certainly true that every Western European nation, save Britain, relies on national service to some extent or other. As a result their reserves are larger, they are more recently trained, and of course they are younger.
If we introduce this, may I suggest that your Lordships might consider what it would mean. It would mean that over 400,000 would come forward for national service every year. It is absolutely impossible to organise or to divert Ministry of Defence funds to such a project. On the other hand, I do not think it would be right to neglect or to deny to those who wish to serve some possibility, but I suggest that there will be two opponents to this suggestion. One would be the regular forces; they do not want to see money diverted to the amateurs, and I am afraid that even applies to our regular police. I find they are not all that keen to build up the strength of our reserve police forces; so I am afraid there is a resentment between the full-time professionals and the amateurs.
I would advocate that perhaps a modest scheme which might affect between 1,000 and 3,000 young people could be introduced. I happen to have believed for long, and I have made speeches about it in this House, in the desirability of introducing universal community service for school-leavers, and I have many allies in all parts of the House in this respect. Never has there been a greater need to think of every conceivable way of providing useful employment for young people leaving school. I would suggest that a properly organised scheme each year would offer to the young people 24 different forms of service. I suggest that one of them should be voluntary service, perhaps for six or nine months, attached to our armed forces, disciplined and in uniform.
Immediately people will say, "Who is going to pay for it?" The cost would be £2·3 million a year per thousand people. The Manpower Services Commission has a budget of £1,000 million every year and of that £320 million goes on the Youth Opportunities Programme; and I should like to see perhaps a few million scratched off that, but I believe there is considerable opposition within the MSC to such a suggestion.
Alternatively one goes to the Ministry of Defence and says, "Surely somewhere in your £12,000 million budget you can find £2·3 million"; and they will say, "If we had a little extra we should like to recruit more Territorials, more trained reservists, so we are not anxious to do it". So I suggest that the Government go to the Department of Employment. After all, when National Service existed that department was then called the Ministry of Labour and National Service, so they have a long-standing interest in a form of community service in this area.
I have three further points that I wish to raise. Let the Government now open talks to restructure the various allied contributions to NATO. In this I agree to a certain extent with what the noble Lord, Lord

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Hill-Norton, was saying, but I believe that such an operation would take many years to negotiate and more years still to put into effect. In addition to providing our nuclear deterrent, I think we have a big responsibility for defending not only the air space around our country but the sea lanes and the ports to which our reinforcements, both in equipment and personnel, would come. Britain has the largest navy in Western Europe and I think they are suited to defend the sea lanes. If we have to economise, then let us start negotiations about the reduction of BAOR. Other countries have soldiers on the ground; no other country has a navy able to do the tasks which we should have to do.
Finally, I think we should have a fresh attack on the escalating cost and sophistication of our armaments because they have to be made to go further every year; and, lastly, we should build up our reserves and let the Ministry of Defence play a worthy and a social part in offering job chances for young people.
My Lords, I hope I have not been totally unconstructive in making these proposals. But I believe there is a deep desire on these Benches—and I think in most parts of the House—to give jobs to our young people, to make our armed forces effective, and to concentrate them where they can best do the job of defending this country and our alliance.
5.40 p.m.
Lord Mayhew: My Lords, it will be remembered that for a short period after the last war this Chamber was used by the Members from the other place and in asking for your Lordships' indulgence, as I do, I should perhaps explain that this will, in fact, be the second maiden speech that I have made in this particular Chamber. The first was made in support of the Attlee Government. I see now that my speech was rather poor but I believe that it was a very good Government, and I am sure that my noble friends will allow me to say that. It was a very good Government if for nothing more than its handling of defence. Mr. Attlee, who was a strong leader with plenty of robust common sense, not only committed this country to producing nuclear weapons, but did so without consulting his party or Parliament. Mr. Ernest Bevin, another strong man of great integrity and character, probably did more than anyone else to unite the West against the menace of Stalinism.
Lord Soames: Those were the days!
Lord Mayhew: My Lords, I must wait until an occasion other than my maiden speech to give my views on the Government's plans for Trident and the Navy. On this occasion I would rather make a few comments about our defence problem in Europe, and to ask what lessons, if any, we can learn from the past. I am following to some extent the admirable speech made by my fellow maiden speaker, the noble Lord, Lord Thomas of Swynnerton.
The outstanding change over this period, of course, has been the vast increase in the number and lethality of modern weapons. In the late 1940s all-out war with Russia would have been cataclysmic; today, however, it
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would be the end of civilisation. At the same time—as a number of speakers have made clear in this debate—the likelihood of such a war breaking out has mercifully become more remote. I remember a particular meeting at the Foreign Office when I was a junior Minister, just as we began the Berlin airlift. A Soviet plane buzzed one of our aircraft and our aircraft crashed with a loss of life. Mr. Bevin had to decide whether this incident marked the beginning of a deliberate attempt to block the air corridors, which would have meant war, or whether it was an accident. It was not easy for him to decide, but he decided rightly that it was an accident, and the crisis passed.
On that occasion, and on other similar occasions, war with Russia looked very likely in those times. Part of the reason why war is more remote today is the appalling nature of the weapons now in the hands of both sides. I do not consider that it is inconsistent to support multilateral disarmament, and to believe that if the forces of the communist and the free worlds had been armed with bows and arrows they would have been fighting each other without interruption ever since the end of the last war.
The further important change to which I shall draw attention is that, while Soviet policies are still, of course, a threat to peace, while the Soviet empire is a reality, as is the spectacular increase in Soviet arms and their occupation of Afghanistan, I do not feel that we should allow these things to obscure the extent to which—in terms of ideology, living standards, politics and diplomacy—the free world has now placed the Soviet Union on the defensive.
It is not so many years ago since Soviet communism was engulfing seven European states, and then China, and was organising powerful and obedient fifth columns in France, in Italy, and even in West Germany, and was also threatening a number of the newly independent countries of the Commonwealth. Even in this country, at that time—and here I beg to differ from the noble Lord, Lord Chalfont—the Soviet Union commanded the loyal support of a much larger and more influential pro-Soviet communist party than it does today. It had the use of a network of high level secret agents far beyond anything it has today. Having listened to the noble Lord, Lord Chalfont, I think it is important—although I must be careful not to abuse my status as a maiden speaker—not to deny the worrying increase in subversive elements in this country, but at the same time one should distinguish very clearly between those subversive elements which are pro-Soviet and those subversive elements which are profoundly and bitterly anti-Soviet. It is an important distinction from the point of view of national defence. However, the problem of subversive elements is one which, as the noble Lord, Lord Chalfont, pointed out, needs very careful attention.
Today, however, the main challenge to the status quo in Europe no longer comes from Soviet communism, but from the growing and ultimately irresistable demand for freedom in the Eastern European countries. Moreover, China has now become one of the Soviet Union's main adversaries instead of being a complete ally. Hostility towards the Soviet Union has grown considerably in the third world since those years and the Russians' economic problems have become more acute and more insoluble.

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I would therefore respectfully challenge the view expressed by my fellow maiden speaker, the noble Lord, Lord Thomas of Swynnerton. I do not believe that it is either naive, gullible or complacent to conclude that, while the Soviet challenge is stronger today in military terms, it is considerably weaker in every other respect. The Soviets continue, of course, striving to maximise their power worldwide, but proportionately less of this power is now used towards making the free world communist and proportionately more towards keeping the communist world loyal to the Soviet Union. That is the true and realistic picture of the use of Soviet power today.
It may be, as the Americans claim, that the Russians' occupation of Afghanistan was the first step in a deliberate attempt to control the Gulf, but when viewed in perspective it seems much more likely that it was aimed at preventing the emergence of a hostile régime on the Soviet borders. It was, if you like, another attempt to shore up the Soviet empire. It would be hypocritical to pretend that the break-up of the Soviet empire and of the Soviet régime would not give all of us a great deal of pleasure; I believe it would be hypocritical to deny that. And, it is certainly no part of NATO's task to try to help Mr. Brezhnev to prevent that from happening. Nevertheless, our priority task obviously must be to prevent war with Russia.
If any of these comparisons are fair, and I think they are, certain conclusions seem to follow. First, the West should maintain the military balance with the Soviet Union which has helped to keep the peace for 36 years and which has made the prospect of war in Europe much more remote. We must not fall behind, either because of our economic problems or because of political pressures from neutralists or unilateralists.
However, if it is true that the Soviet Union's political and ideological position is a great deal weaker, or more precarious or more defensive than it was, as I believe to be the case, then some other conclusions follow too. We can conclude that Mr. Brezhnev's invitation to discuss disarmament, disengagement and the Middle East ought to be taken a good deal more seriously than we used to take similar invitations from Stalin and Khrushchev. It also seems to me that we should be careful not to exploit the Soviet Union's difficulties in a way which may persuade them to resort to desperate measures. I think we should show some restraint, for example, in arming China. I think we should keep out of intervention in Poland and Eastern Europe.
It seems clear that before deploying cruise missiles in Europe we should insist on really serious negotiations for the removal or the reduction of all long-range theatre nuclear weapons on both sides in Europe, including European Russia. Similarly, before deploying larger forces round the southern border of the Soviet Union, something about which they are entitled to feel anxious, I think we should be willing to discuss Mr. Brezhnev's proposals, which are unanimously supported by all the states in the region, for the neutralisation of the Gulf. Finally, in the Middle East I think we should acknowledge that American and Israeli actions are pushing even the most moderate Arab states further towards the Soviet Union, and acknowledge, too, that some degree of Soviet participation in a settlement is essential if the settlement is to last.
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In conclusion, my Lords, I am aware that, after all, I have not managed to avoid controversy in my maiden speech. I can only plead that this is, I should think, the least controversial speech I have ever made in this field; and I am grateful for your Lordships' indulgence.
5.52 p.m.
Lord Shinwell: My Lords, two noble Lords, Lord Thomas of Swynnerton and the Earl of Orkney, have made their maiden speeches and have been congratulated, deservedly, by succeeding speakers. It has fallen to me to offer congratulations to Lord Mayhew, but I must confess it presents me with some difficulty. His speech, excellent in delivery and impeccable in content—I would largely agree with him so far as that is concerned—still makes me a little reluctant to offer him congratulations, because of events that occurred in another place years ago. Nevertheless I bow to the traditions of this noble Assembly. It is a far far better thing I do than I have ever done before.
It may have been noted that the Leader of the House, Lord Soames, invited your Lordships to take note of the defence White Paper. It will also be noted that we were not asked to approve it. That, in my opinion, denotes considerable sagacity on the part of the Government, for obviously the White Paper, the contents of the White Paper, have not been received with acclamation. There has been some element of faint praise, but there has also been devastating criticism. I assume, from what the noble Lord said about taking note brushing aside the matter of approval, that this White Paper is not the final word. Nor did I believe it to be so when the Statement came before your Lordships' House, or when certain discussions took place among some of our colleagues associated with the Defence Group dealing with the study of defence. We have had several reviews and we have not seen the last of them, and it is all to the good, because we can defer final consideration of some of the ingredients contained in the White Paper.
To take an example that has created considerable controversy, and rightly so, there is the question whether we should spend billions on the manufacture of the Trident missile, which will occupy the attention of Her Majesty's Government, and probably succeeding Governments and the country at large, for several years to come, Perhaps the final word has not been uttered about the Trident and perhaps that is all to the good. Nor has the final word been uttered on the very important topic raised by my noble friend Admiral of the Fleet Lord Hill-Norton. How right he was to refer to the need for maintaining the Royal Navy, not just at its present strength but strengthened even more in the future.
There was one aspect of the problem that he raised to which reference could rightly be made, and that is the protection of our trade routes in time of war. We have had vast experience in this connection. In the First World War the convey system was in operation, and in the Second World War, and without the aid of our naval vessels and the assistance we received from some of our allies we should never have been able to supply the equipment or the material or the oil and so forth that were required in order to prolong the war and in the end achieve victory. But there again the subject of the strengthening of our naval forces which

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was advocated by my noble friend is a matter which can be reviewed in course of time. I repeat, the White Paper is not the final word.
I want to take the opportunity this afternoon, in one of the many defence debates that many of your Lordships have indulged in, as I have myself, to dispose of some of the dialogue, some of the dialectic, some of the shibboleths, some of the clichés that have been associated with defence. There is one to which I pay particular attention and it is this. If missiles of a ballistic character are ever in operation, if the targets aimed at by our aggressor—the only possible aggressor we can conceive of at the moment—are reached as intended, thousands, perhaps millions, of the civilian population will be destroyed; there will be enormous, massive devastation, earthquakes following earthquake, avalanche following avalanche, to the detriment and destruction of our people and perhaps the end of our country as a civilised state. I want to dispose of it by saying I agree with all of it. Of course that dialogue should come to nd.
Of course we recognise that if ever major countries go to war and use these missiles there is bound to be the devastation suggested; of course there will. But it is part of our intention, and, fortunately, part of the Government's intention, and part of the intention of NATO and our allies, to prevent war if at all possible. Never let us forget that aspect. We seek to create a deterrent in order to avoid the catastrophes that have been suggested.
There are some features that are perhaps to our advantage. Of course Russia has an overwhelming superiority in missiles—conventional, nuclear and so on—and we recognise it. But let us not emphasise our weaknesses. Why exploit them? After all, we recognise that, in the event of a conflict—conventional or otherwise—we shall have allies. I take as my illustration the declaration made quite recently by General Haig, the American Secretary of State, who stressed in particular that the objective of the United States was to ensure the security of its allies just as much as it sought to ensure the security of the United States. That was a very welcome reassurance. He went further and said that we must never set aside the possibility or renewing the talks intended to control armaments, or perhaps to make an end of some of them, and to promote the possibility of peace. However, he added—and rightly so—that it is no use talking about negotiations and conferences and the possibility of compromise and so on unless we talk from strength; that is essential.
To go to the conference table weak or, as the late Aneurin Bevan said, "naked", would be disaster in itself. Therefore, we must strengthen our forces not merely for the purpose of using them, but for the purpose of avoiding the need for using them. That is our aim. If we have those assurances from General Haig, who knows what he is talking about and who represents, if not the whole of American opinion at the present time, at any rate the American Government, we can take the view that we are not as weak as is sometimes alleged.
I wish to emphasise that point again having regard to some of the speeches that have been made in another place. I deplore those speeches. They have
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been made by people who profess to understand everything connected with the defence problem and who are sure that we shall be defeated whatever happens, whether it is in the conventional sphere or in the nuclear sphere. They say that we shall be defeated. That is not the way to talk. People who talk that way are ready for surrender. I want to say to your Lordships' House, to all of my colleagues on whichever side they may sit and whatever their opinions may be, that we must never allow the word "surrender" to remain in our vocabulary. That is the last thing we want. Why should we do so?
My noble friend Lord Chalfont intervened with what might have been called an irrelevance; the Chief Whip or the Deputy Chief Whip might sometimes describe it as raising wide-ranging issues. He referred to the question of civil subversion. Of course we must be careful about that, but it is nothing new. I recall in the last century—although I did not experience some of it myself, but I read about it—the anarchy that prevailed and the disturbances that occurred all over the place. Assassinations occurred, there was trouble over the Irish question and there were many problems that assailed us at the time and assailed the people. It is nothing new.
When it is suggested that we must be careful about the communists who are using what is called "unilateral disarmament" merely for the purpose of intimidating people and of civil subversion, I venture to direct attention to some of my colleagues. Will anyone suggest that when my noble friend Lord Soper indulges in some of his pacifist utterances—which he is entitled to do because he holds strong views about that subject—he has allowed himself to be intimidated by some of the people to whom the noble Lord, Lord Chalfont, referred? Will anyone make similar suggestions as regards my noble friend Lord Brockway—who is not with us today—or the noble Lord, Lord Noel-Baker—who is now leading a procession in the United States in connection with unilateral disarmament? Object to their views, reject their views, have nothing to do with their views and regard them as subversive, but they are not, surely, allowing themselves to be intimidated by these communists or some of the people who are engaged in riots and who are thinking about more riots?
Lord Chalfont: My Lords, I ask the noble Lord to give way for a moment, because I think that he is totally misrepresenting what I said. The views of my noble friends in this House and of my noble colleagues are, indeed, a matter for them and I have the greatest respect for them. What I said, and what I stand by, is that there are thousands of people in this movement—the Campaign for Nuclear Disarmament—who are not so intelligent and sophisticated as they are, and who are being manipulated by the communists, and let us not forget it.
Lord Shinwell: My Lords, there are two points that I should like to make in reply to the noble Lord, Lord Chalfont. I would not for a moment impugn his integrity in connection with defence matters—I recognise that. But it seems to me that to intervene with an issue of this kind is forgetting the problems

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associated with defence. We should never allow that to happen. I shall leave the matter there.
I wish to come to a conclusion and I shall do so by making reference to my noble friend the Leader of the Opposition and the speech that he made this afternoon. So far he is the only member of your Lordships' House who has engaged in this debate who has referred to the White Paper as being reasonable. No one else has made that suggestion, but no doubt in view of what I have just said some of those who are to follow me may decide to use the term "reasonable" and perhaps even say that it is a very good White Paper.
I shall venture to give my opinion of the White Paper. It is produced by the Government after consulting with the professionals in the three services and the Ministry of Defence and all the people who know something about the subject of defence, who have experienced it and who can speak about it theoretically as well as practically. That is what the Government have done. If the Government have gone through the hoops so far as these matters are concerned and have delved and delved and inquired as far as they possibly can, and say, "That is the best we can do", then I say, not as a member of the Conservative Party, but as a member of the Labour Party, and as one who believes in the Labour Party and its ideals and who will stand by the Labour Party, that I support the Government in their efforts in the sphere of defence.
I would have nothing to do with unilateral disarmament and I say that because this morning I received—I do not know whether my noble friend Lord Peart received it—the agenda for the Labour Party Conference. What did I find there?—scores and scores of resolutions demanding unilateral disarmament; no defence at all. There are resolutions denouncing defence of whatever kind—conventional or nuclear. They must have the conference before those resolutions are agreed. I want to say to them that, if ever the time should come when we were engaged in a conflict—it might emerge as the noble Lord, Lord Mayhew, said perhaps in the Middle East, but I hope not, or it might happen on the borders of East Germany and the Federal Republic of Germany—and our troops were involved, does anyone suppose for a moment that the Labour Party in this country (the official Labour Party and even the unofficial section of the party) would dare to oppose the Government in their efforts to stand by our forces? Of course not. That will not happen. When it comes to the crunch they will support whichever Government are in power, whether it be Conservative or Labour—I was about to add "or SDP", but I do not think that that will ever happen. For the second time I say—and I am sorry to repeat myself, and will sit down in a moment—that the Government have submitted a White Paper that is subject to criticism. There will be more criticism, there will be more views and there will be more inquiries. All that will happen. But whatever the Government do—and I speak of whatever Government are in office—it will be the duty of your Lordships' House (if it still remains, as I believe it will remain) and of the other place (if it remains, as it is bound to remain) and of our civilised society—which perhaps will become more civilised—to stand by whatever Government are in power in order to maintain our security, not in the interests of political parties,
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whatever they may be, but in the interests of every man, woman and child in our country.
Several noble Lords: Hear, hear!
6.12 p.m.
Lord Strathcona and Mount Royal: My Lords, it is never a very easy matter to follow the noble Lord, Lord Shinwell, when he is in robust form, as he obviously is this afternoon. Unlike him, I have no difficulty in one respect, in that I can give an unequivocal welcome to the noble Lord, Lord Mayhew, and I am the first to do so from this side of the House. I can only say to him that he is just as articulate now as he was when I first heard him argue and, indeed, had the temerity to argue with him, in, I think, 1938. We shall look forward to hearing more from him for as many years ahead.
This evening we are, in fact, discussing two White Papers, one rather more slim than the other. But before I embark upon that matter I should like to suggest to the noble Lord the Leader of the House and the Chief Whip that they regard a list of 36 speakers as a gentle reproof; that they seem to be imposing somewhat on the good nature of this House in the amount of time that we are allowed to devote to defence matters which, as the noble Lord himself rightly said, is a matter of great interest to all of us. May I once again suggest to him that it would be immensely valuable if, somehow, we could find time to discuss some of the specific issues which are embraced within the broad spectrum of defence. If he wants a few suggestions, there is the matter of the dockyards; there is the matter of the Territorial Army; there is the matter of the Royal Ordnance factories; there is the question, which I shall mention in a moment, of the exploding costs of technology, research and development; and there is the whole matter of how we should relate our procurement policy to our defence policy. All are very difficult and interesting questions, and, following the noble Lord's advice, I shall do my best to exercise great self-restraint and return to the more general questions.
May I start by saying that I have a special reason for making more than what one might call the ritual genuflection in the direction of NATO. Even a cursory attempt to list the possible roles of our forces demonstrates the impossibility of the United Kingdom going it alone. We have talked about short, intense wars on the central front. We have to think about larger conflicts perhaps developing elsewhere, perhaps threatening the European sea routes, and certainly ending up by our having to protect our reinforcement routes across the Atlantic and round the Cape. On top of that, we worry about the threat to the northern flank in Norway and about the threat to the southern flank in the Mediterranean. We worry about the situation in the Middle East and in the Persian Gulf, and we even still have peripheral interests in places such as Belize and the Falkland Islands.
Clearly, the United Kingdom cannot make available resources of men and equipment to deal with all these alarming threats. So the hope is that by binding ourselves together with our allies the aggregate security which we achieve will form an entity greater than the parts that go to make it up. Therefore, I want to make

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the fundamental point that the judgments that we are now being asked to make are essentially political. The immediate criterion is not so much a question of military effectiveness as the effect upon our NATO allies. Sadly, the alliance is not in good shape. For one reason or another, most of our continental allies are demonstrating by faltering in their resolve. One can ask the question: Has NATO the political will to pay the price of buying the luxury of a sense of confident security? But this ought to be possible because NATO, collectively, is spending on very much the same scale as the Soviet Union, whence comes our principal threat.
There is nothing new about the underlying cause of what I might call the present crunch. The cost of sophistication is rising perhaps twice as fast as the rate of inflation, a point which the noble Lord, Lord Orr-Ewing, dealt with admirably. All other countries are experiencing much the same phenomenon and are worried about it. Equipment costs are increasing at perhaps the rate of 20 per cent. over the years while the rate of inflation has been 10 per cent. The arithmetic is quite simple. If you increase your real resources on defence by 3 per cent. in real terms, you still have a shortfall, and it is a shortfall which gets larger and more alarming as the years go by. Of course the 3 per cent. is welcome, but it will not bridge the gap which opens up before us.
As regards the overall level of resources, I have said before in this House that the long-term ability of a country to defend itself has to depend upon its industrial prosperity. If we look back, we see that this country, in its time of exercising the powers of pax Britannica, did so based upon its industrial leadership and its wealth, which it deployed throughout the world. Now all defence expenditure is not necessarily lost to the economy. There are gains in employment and there are gains in inventions, which ultimately set up new industries and create exports. But I believe that in peacetime it is hard to claim that you can have a defence-led return to prosperity, which, of course, is what happened in the lead-up to the Second World War.
Therefore, I applaud the Government's courage in, to use the words of the noble Lord, Lord Soames, grappling with the daunting choices. I must say that I have slightly greater doubt as to whether the White Paper deserves similar plaudits for its forthright honesty regarding the overall effect of spending over the next few years, though I am lost in admiration at the skill with which the White Paper has been written. Judging by the criterion of the political impact on others, I come to the reluctant conclusion that it is probably as good a balance as we are likely to achieve.
As a modest, erstwhile naval man, I would naturally wish to see us maintain our traditional maritime role. No thinking person could fail to be alarmed by the implications of doubts of our ability to maintain the sea routes for reinforcement, which leads to a lowering of what I might call the threshold of desperation. I would not wish to repeat the passionate and logical exposition of this point of view from the noble and gallant Lord, Lord Hill-Norton. It seemed to me that there were two things lacking, which I have no doubt he left out in the interests of brevity.
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One was where he proposes either to persuade the country to spend more overall on defence; or alternatively, is he prepared to say which other branches of the armed forces he is going to raid in order to increase his naval power? I believe that you need to have either one of those if you are going to support the Navy in the way which I, like he, would wish to see happen. Whatever the misgivings one may have about the naval effects of this White Paper, it would surely be even more catastrophic if our continental allies in NATO, or if NATO itself, were to disintegrate because our continental allies started to believe that our commitment to Europe was weakening, and that we were once again reverting to the offshore island posture of the maritime power which was our position pre-NATO.
Some good may come of the depredations which are being made on the Navy if this forces them to concentrate their minds on exercising their ingenuity and fresh thinking to produce simpler and more cost-effective equipment for the discharge of their certainly arduous and demanding tasks. Here again I go along with the noble Lord, Lord Kennet, who suggested that in this area the pursuit down that road might very well lead to an increase in exports and a corresponding increase in home employment. But I believe that it is dangerous for us to delude ourselves that salvation in this difficult moment lies purely in the pursuit of efficiency. I am glad to see that efficiency is, indeed, mentioned in the White Paper, and of course there is scope in a department of the size of the Ministry of Defence.
I have always been suspicious that size leads to management problems, and it is very much easier to mask waste in a large organisation than it is in a small one. But here again we should applaud the Government's devotion to the cause of efficiency which is epitomised by the successful efforts of Sir Derek Rayner and his special little department. I am also glad to see in the White Paper—I think it is paragraph 42—reference to the Government continuing to seek a partnership with private industry. However, here again I know from experience that this is a difficult area and to make achievements in it is a slow process. You have to avoid disruption of the existing state of affairs in introducing a more efficient way of setting about some of your problems. Not only is the search for efficiency no universal panacea but it also tends to be a long-term business. Therefore, there is little hope that we will find true alleviation for the shortfall over the coming years of thousands of millions of pounds which is suggested by the White Paper.
May I say at this juncture a word or two about something that has not been mentioned this evening, which is the question of the Ministry of Defence overspend. This needs to be put into context. Supposing the Ministry of Defence overspends by some £250 million. That is a lot of money. But remember that this is on a budget of over £10,000 million. I suggest that almost any commercial business in this country would be proud if its budgetary system operated within the limits of less than 3 per cent. of accuracy. When you bear in mind that this is a business operating on the frontiers of technology, and a business where you commit yourself to many of your orders many years ahead, getting within 3 per cent. of your budget is no mean achievement.

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The Prime Minister herself is not above riding with the hounds and running with the hare on this issue. She brags to our allies about how high our level of expenditure is in comparison with our GDP, and she then turns round and castigates her Minister of Defence at the same time for spending more and showing that he cannot manage his affairs. Lying behind this matter of budget management is an issue of wider relevance than defence alone. This is the nonsense of the Treasury's rigid system of annual control of budgets. I believe this to be a contributory factor to overspend, and it imposes distortion and waste across the whole field of Government, so I venture to bore your Lordships with it for a couple of minutes.
Any prudent housewife knows that she likes to give herself headroom in her budget by planning to undershoot a little. I do not say she would use these words to express this process, but that is what she does. Yet if the Government department follows this course the first thing that happens is that the Treasury takes away the savings, and they are lost forever. On top of that they then say, "Since you have underspent your budget this year, I think it is likely you will not need such a big budget next year, now, will you?"
What an incredible way to treat the "wise virgin" who tries to plan ahead and have a little bit of room to manoeuvre. Anybody who has had any experience of dealing with a Government department knows the results of this kind of thing. On the one hand you get work being interrupted. You get road contracts being interrupted because the local government, or the authority concerned, run out of money, so the contract stops towards the end of the financial yearand it has to be restarted. On the other hand, there is the even more ridiculous state of affairs, that you find an underspent department rushing around to try to find something on which they can quickly get rid of some money. What an incredibly wasteful practice! I am sure that any noble Lord can think of examples of this with which they have to deal at all levels of government. If everybody does this, and if it is such "common sense", why on earth do we go on doing it?
I have no doubt that intelligent men will produce marvellous excuses about it being necessary for the control of finance in this country. That excuse is wearing a little thin, since I believe the Treasury have been able to accommodate themselves to a loss of something like £10,000 million of revenue as a result of the Civil Service strike; so it cannot be all that difficult. But I also suspect that lying behind it is what I can only call a shabby device. The Treasury believe that every department is fearful of overspending, and so the aggregate effect will be an undershoot. That enables the Treasury to apply a block adjustment to all the budget put in by all the departments, and in that way they have a little less money to find each year. One sympathises with them in their difficulty. One suggests that the gain they make in no way outweighs the inefficiency—the waste, frustration, pain and grief—they impose on everybody in this country by their present practice. I urge the Minister to see whether he can get some sense into this matter as far as his department is concerned, and I hope in the process he will manage to bring a breath of fresh air into Whitehall as a whole.
In spite of my efforts, I have already overrun my
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time, and I apologise. I have tried to say that our present uncomfortable posture was inevitable and was not of the Government's making. I have tried to suggest to the Government one way in which they might make their management task a little easier for themselves and do us all a good turn in the process. I applaud their courage in facing their problems. I should have liked to see them have the courage to be totally frank with the country and the House as to exactly what are the financial implications, but perhaps that was expecting too much. I conclude by again emphasising that our yardstick in judging defence decisions should at this juncture be the effect on our allies in NATO, both on the continent and in the United States. My concern is that the health of the alliance is even more precarious than the twin problems of defence overstrain and the ailing health of our own economy.
6.32 p.m.
Lord Carver: My Lords, I also join in the congratulations to the maiden speakers today. I do not like to make invidious comparisons but I must remark that I was immensely impressed by the speech of the noble Lord, Lord Mayhew. I speak with some apprehension because I speak under the eye of my former sergeant major; Company Sergeant Major Low (as the noble Lord, Lord Aldington, was then) always had trouble with Lance Corporal Carver in Winchester College OTC about keeping his puttees wound up. But puttees, like theories of naval warfare, have become a bit outdated.
It gives me no pleasure to tell the Government, "I told you so". In previous speeches in this House I said, first of all, that we could not go forward with a replacement independent strategic deterrence system without adversely affecting our conventional forces. I told the Government they were overloading the equipment programme, and I told them that unless they restored the financial cuts they were making they would be forced into a review by the summer of this year. All three have happened. To a certain extent they brought it on themselves. When they came to power they made a number of additions for cosmetic purposes; they brought back old "Bulwark", gave the Army some more manpower, and saddled the Air Force with that flying white elephant, the Chinook. With the exception of the Chinook, they have had to give all those up.
They have laid great stress on equipment cost growth, but, as has already been pointed out, there is nothing new in that. It is the problem with which successive governments have been faced. The problem is not equipment cost growth—that is a problem but it has always been there—but the lack of any growth of the GNP, and I find it ironic that we have a Conservative Government implying in the paper, and actually saying in private, that the trouble with Labour's Defence Review was that it did not cut enough. That is an example we should take to heart, the folly of using defence as a political football to kick around from one side to the other when parties are in opposition or in power.
Viscount Trenchard: My Lords, perhaps the noble and gallant Lord will permit me to ask him whether he

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could explain why Trident is the reason for our problems and not equipment costs, when Trident expenditure has barely started and the problems have been with us more acutely in the last two years?
Lord Carver: I will, if I may, my Lords, come to the Trident issue towards the end of my remarks. Trident apart, if this task had to be done, and I accept that it had to be done, I say that it was well done. I think that, faced with the problems which, to a certain extent, they brought on themselves and which, to a certain extent, were inherent in the situation, they have set about it very sensibly; and that I say in spite of the naval broadsides that have been fired off by my noble and gallant ex-gunnery officer, who turned one turret upon me. It made me wonder whether some of the great naval precepts were still applicable, such as:
"No man can do far wrong if he lays himself alongside the enemy".
I do not want to spend long on naval strategy, but I suggest there are three aspects we need to look at. I reject entirely the concept that suddenly, out of the blue, Russian submarines will start sinking our merchant ships. We have to think of all the other implications that would be involved if that happened, including the effect on the Russian fleet. Of course, the submarine threat in the oceans is a very serious threat indeed in the condition of a major war between the two sides, but, with the number of nuclear weapons about, I do not believe that a major war between the two great rival powers could go on for long before becoming nuclear; and once it had become nuclear matters such as what happened to our trade routes would become practically irrelevant. Perhaps a more difficult subject is one which I suspect the noble Earl, Lord Inchcape, will raise later; namely, the problems of shipping in comparative peacetime interfered with by minor powers. That may well be a real problem, but I believe that the frigate strength which has been left to the Royal Navy is quite enough for that.
Then there is the question of the great emphasis that is placed on the reinforcement problem of NATO across the Atlantic. Unless those reinforcements and supplies reach this side of the Atlantic before hostilities start—that would be of great importance in a period of tension—then I have not much hope, whether they come by air or sea, that they will be very relevant to the situation; which means in practical terms that we can forget the whole great World War I and II idea of escorting convoys. Whether we are talking about the Navy, Air Force or Army, it is no simple matter at all to get the balance right between quantity and quality.
Great stress has been laid on the fact that everything to get the balance right between quantity and quality. is becoming too sophisticated, but nothing could be a greater waste of money than to produce a large number of equipments none of which are capable of dealing with the enemy. We cannot escape the consequences of the extraordinary revolution that is going on in electronics applying to all three Services.
Some questions arise out of the thinner White Paper—which is the one I thought we were discussing—to which I hope the noble Viscount, Lord Trenchard, will be able to produce some answers. The first is whether the Royal Navy will be able to maintain the
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planned number of nuclear powered hunter-killer submarines until the new ballistic missile submarine programme is completed; rightly in my opinion, they have put great stress on the long-range maritime patrol aircraft acting with the hunter-killer submarine, but it is not clear to me from the Paper whether the planned number will be maintained in spite of having to build some new ballistic missile submarines.
Secondly, is it intended to keep the Jaguar flying into the 21st century? If not, what will replace it? Will there be some other aircraft, are we going to buy the F.16, or shall we be relying on a mix of Tornado, Harrier and Phantom for as long as it will fly? If all that the Royal Air Force is to have in Germany and elsewhere is the Tornado and the Harrier, I would not be too happy about that.
Thirdly, what sort of brigade is it that it is planned to withdraw from the Rhine Army? I hope that it is not an armoured brigade. Mr. Healey made that mistake before, and he had to send it back again. If it is the curious formation that is known by the name of the Fifth Field Force, I would have no objection to that. But since this is a unilateral withdrawal can the Government confirm that they now have no hope of achieving any mutual and balanced force reduction withdrawals as a result of the endless conversations in Vienna?
Finally, on the question of the Territorial Army, I welcome the emphasis that is being given by the Government, but can they assure the House that they will not use extra manpower for the TA to resurrect old units for sentimental or local political reasons, but will apply it where it is really needed?
Turning to the part of the White Paper headed, "Beyond the NATO Area", I welcome the fact that some of the more fantastic ideas which were being played around with some time ago have now faded. I note the role that the Government suggest for the Royal Navy, but I would suggest that cruising around the world with whatever they call it—a substantial naval task group—going to the South Atlantic, Caribbean, Indian Ocean or further East, is not a very practical way of bringing more actual military power to bear to something like the rapid deployment force.
The only other mention of something practical in this nature was the suggestion of some soldiers, the Eighth Field Force, and lengthening the Hercules. I am astonished to think that there is absolutely no mention of Royal Air Force strike and reconnaissance aircraft. In practical terms if we wish to produce a real contribution, say, to a rapid deployment force in the Middle East, which could actually do something useful, air forces would be of far greater value and could be deployed far more rapidly than could either soldiers or sailors. I would suggest that a practical way of showing our interest in this would be to resurrect the Royal Air Force station at Akrotiri as a fully operational base from which Royal Air Force aircraft could contribute to a force like that. I was astonished to see no mention of that.
Nor do I see any mention of what I had understood the Secretary of State was hoping to achieve, and to which the noble Lord, Lord Strathcona and Mount Royal, made reference. I understood that the Secretary of State had hopes of somehow creating a form of financial reserve which could meet unexpected

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increases in costs on the way. Well, I wish him the very best of luck in that, but I suspect that the reason why there is no mention of it here is that the Treasury would make absolutely certain that it did not succeed.
I now wish to turn to the nuclear problem. My main disagreement here with the Government is that they have their priorities wrong. Whatever they may say, they have sacrificed the conventional forces to the independent strategic deterrent, which I believe to be unnecessary, and to a certain extent undesirable. I do not pretend that if they cancelled a replacement system—I am not saying cancel Trident—for Polaris, then they would not have had to do any of these awkward things. I think that they would have had to do some of them, but nothing like enough. I am not impressed by the argument that the noble Viscount has often deployed in this House: that, oh well, the Tornado programme as a whole takes up more money than Trident. But Tornado is a flexible weapon system that can be used anywhere, and it can be used in conventional or nuclear operations. It is a flexible weapon that can be used in support of one's policy and in support of one's strategy, whereas an independent strategic deterrent cannot.
I would appeal to the Secretary of State for Defence—if the noble Viscount will make the suggestion to him—that he applies to the nuclear aspect the same hard, penetrating logic that he has applied to conventional forces, and I suggest that NATO rethinks its nuclear strategy. In my opinion NATO relies too much on nuclear weapons more so than is needed for deterrence; and this distorts. It distorts the equipment programmes, it distorts the training, it distorts tactics, and finally it distorts the strategy itself.
My fear is that if NATO does not do something about this, then the popular support for NATO and for NATO strategy will wither away and will be directed against defence generally. The credibility of NATO strategy will be weakened, and if as a result of that, the deterrent to war failed, NATO would suddenly face the reality that it would gain nothing and lose everything by implementing its agreed strategy and war plans. Therefore, it must think again. It will not be easy, and I doubt whether it can be done through NATO's normal machinery, through the NPG or anything like that. It will have to have resort to that to which it has resorted in the past and try to find three wise men.
So what do I think should be the way forward for NATO strategy? First, there must be reliance on the United States nuclear arsenal to deter war and to deter the Russians from using their nuclear weapons if deterrence were, tragically, to fail. The United States has more than enough for that, both overall and in Europe. Other NATO members should participate by manning delivery systems to show their association with, and support of, the American nuclear deterrent. All the rest of NATO's effort should be devoted to conventional forces, both as a deterrent to war and, if that were to fail, to ensure that the situation is brought under control before there is any temptation to use nuclear weapons. Flexible and strong mobile army and RAF forces in Germany are essential to that end and are of a higher priority than maritime forces, which must exist, but which are much more slowly acting.
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Finally, NATO must give up its ideas which undoubtedly exist—and exist at certain lower levels, certainly—of fighting a nuclear war. It is illogical, because whether or not we could limit it—and I do not believe that we could—in any scenario of nuclear war the West would come off worse than the East. It is impractical because you cannot fight a controlled nuclear war, and it is immoral because the total results of it in terms of the destruction, the misery and the after effects could not in any conceivable sense of the word be called defence.
6.48 p.m.
Lord Mottistone: My Lords, it gives me great pleasure to congratulate the maiden speakers, my noble friends Lord Thomas of Swynnerton and Lord Orkney, and the noble Lord, Lord Mayhew. I hope that the noble and gallant Lord, Lord Carver, will forgive me if I do not follow him precisely, particularly in the nuclear argument, though I shall touch on it as I go. There is a great deal to be said and we must try to hurry.
I should like to start by saying that I think that the White Paper is good on money and weak on strategy, and in that sense I wish to endorse what the noble and gallant Lord, Lord Hill-Norton, and the noble Lord, Lord Shinwell, had to say. Perhaps I should speak first about the points where I agree with the Government. I agree with the end of paragraph 22, which states:
"we must therefore retain a large and versatile ocean-going surface fleet".
I do not detect that in the rest of the White Paper. I agree with the Government in running down the dockyards, and like them I am appalled at the high cost of modernisation. I very much take the point of, and agree with, my noble friend Lord Orr-Ewing on this particular matter. In this general area, I agree with much of what the noble and gallant Lord, Lord Carver, said. But perhaps he might agree with me that fundamentally since about 1945—possibly earlier—we have had, working out what sort of systems we should have, and how much money we can spend, people, none of whom are subject to the discipline of themselves balancing the books—that is, the service chiefs, the senior civil servants and, indeed, some Ministers who may have had no experience in this area—though some, of course, have—and the scientists, with great respect to the noble Lord, Lord Zuckerman, who I see is not in his place. So I believe there has been a tendency, over and above the one that the noble and gallant Lord, Lord Carver, mentioned, which has emerged because of the appalling difficulty of balancing quality against quantity—something upon which I greatly sympathise with the Government.
I think that this is a problem. Though I have not had time to read it, the introductory article in the latest edition of Jane's Fighting Ships was reported on page 5 of The Times of July 16th. I shall not quote it to your Lordships because there is not time, but as one reads one sees that that introduction raises the whole point of how appallingly lengthy and costly is the total procurement system. It takes 10 years—or did in the early 'sixties, and I expect it may be more now—to produce a medium-sized new weapons system, and it took 15 years to produce a major one. When we looked into

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this in the 1960s we found that half the time was spent on committee meetings and in exchanges of correspondence, and the other half was what you might call the hard work.
I am not saying that you have not got to have committees, but I really think that what needs to be looked at in all sorts of areas is sacrificing the best, if you like, in order to have the second best, buying off the shelf more and being less insistent on rigorous, elaborate and comprehensive staff requirements all being met in every detail. I would suggest that we could also usefully denationalise British Shipbuilders, so that there was a greater degree of competition between the shipbuilding firms, and could introduce within the background to the whole of this a sense of the need to balance the books. The people who make the decisions and the people who make the recommendations should be conscious of the fact that every minute they spend is going to be a cost to the project which may be a wasted cost and an unnecessary one.
So, basically, I agree with the Government's difficulties in this area, and I would make just one other remark on that subject. On page 5 of the same edition of The Times from which I quoted the editor of Jane's Fighting Ships, Captain John Moore, there is an article, on page 2, describing the activities of Sir Derek Rayner, who is clearly trying to inject into the bureaucratic machine exactly the sort of thinking that I have just been suggesting. I think that this would be a very useful supplementary way of trying to bring down the costs. I commissioned a Leander-class frigate in 1963, and it cost £5 million. We are told in the White Paper that to do a major refit on it—not to rebuild it—is going to cost £70 million. That is surely ridiculous.
Coming now to the points on which I disagree with the Government, it is really on what I would call their basic strategic thinking. I would put as their priorities the need for the United States' contribution to NATO. That is the most important one; and in the naval context I wrote a letter to The Times on 22nd June on that matter. I apologise to your Lordships for giving the basis of my newspaper comments without quoting them to your Lordships but it is because I want to save time. In that letter I endeavoured to show that the bridge across the Atlantic is vital. It is vital not only in the event that we need to get resources across—and that is not just United States reinforcements; it is also the food, the fuel and what we need in these islands, because we are importers, and always will be. So that is one point. But, also, this Atlantic bridge serves to convince the American families that their people, their boys in Europe, are able to be reinforced and re-supplied. If this basic requirement is seen to be reduced below what I call a credible level, then we might find that the Americans would fall out of NATO, and that would be a disaster. So that is the first important thing.
The second important thing is that we really need naval forces also for home defence. I was appalled to see the lack of mention of the Navy, except in relation to mine counter-measures, in the section of the White Paper on defence of the home base. Apart from mine counter-measures there is to mention of the Navy in that position at all. To me that is nonsense, and your Lordships may indeed wonder why.
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I would suggest now—and this is where I come to the nuclear deterrent—that the important thing is that we have a deterrent capability which is both comprehensive and credible. I am not going into the arguments pro and con the deterrent; I am for it, as many noble Lords will know, but that is not the point. The point is that if we have these levels of deterrent they must be credible.
So far as the lower levels are concerned, like ships, like aircraft, like tanks, like men under arms, they are credible if there are enough of them in the right place and they are well trained. But in the case of the nuclear deterrent this depends in a very special way on the leader of the nation that possesses it, and what one needs to be sure is that the credibility of the nuclear deterrent will remain if it is in hands which are less firm than those of the present Prime Minister.
One can look forward—and I particularly suggest the years 1987 and 1988. I do not know whether it has occurred to your Lordships, but in 1988 we shall be due to have a new American President, and it will be the end of the second term (if he is with us) of Mr. Reagan, so it will be somebody new. Heaven help us!, we might get another Jimmy Carter, who cannot make up his mind, and that would surely reduce the credibility of their deterrent, though there are a lot of forces in the States to keep it going. Then, in France we shall have an election. Let us hope that the French will have seen that the soft option of socialism does not work, and that they will return to something a bit tougher and we shall get a firm Frenchman. Then, how about this country? Let us hope that our present Prime Minister not only gets in at the next election but has the physical strength to survive to the one after.
But we shall find ourselves—and this is the essence of it—at points of what I would call low credibility, and it is under those circumstances that I feel that the threat at the lower level of deterrent becomes more important. That is the sort of occasion when I can foresee certain sorts of thing that might be done with a more credible naval force—one of a size to do its job properly in the Atlantic, one greater than is now being suggested by the Government. I am not going to enlarge on that. I have a certain amount of practical experience of actually doing it, and I am not going to enlarge on it because I do not want to put ideas into any potential enemy's head. They can do their own thinking quite well for themselves.
I hope your Lordships will forgive me, but I shall not speak for much longer. It seems to me that the Secretary of State has been advised only in relation to a high nuclear credibility, and, from what I can see in reading between the lines, with what I might call a Maginot Line attitude. It seems that perhaps he has been advised to assume that the Soviet capabilities are wholly invulnerable, and I would suggest that this is not by any means always the case. New weapons systems, particularly with limited testing, often falter when first tested in action. As to the threat to ships at sea, I should have thought there were many other things such as airfields and troop concentrations which are as threatened as ships, if not more so.
So what is the answer? The answer must lie in balancing gradually towards a main maritime contribution to NATO, as was said by the noble and gallant

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Lord, Lord Hill-Norton. I would not castigate the Government for what they have done; but I suggest that they can work towards that and that it should take perhaps 10 years to do. To produce the new ships that I suggest we ought to have to augment what we have already, and to replace many of the ones that will go out of service, will take the best part of 10 years. Your Lordships will remember that I said that I thought 1988 would be a particularly important period, so we cannot wait to do this.
Where is the saving to come? I suggest that in the same period we persuade NATO that our main use to them is in preserving the North Atlantic bridge, that we are not doing anything useful for them by keeping the military forces in Northern Europe and we should therefore gradually, over a longish period, phase out our commitment there—others have broken the Brussels Treaty so there is nothing new in that respect. As for immediate savings, I suggest to the Government that they could bring home the families of operational troops as soon as practicable. Your Lordships might think that that is tough on the operational troops, but it happened to us in the Navy in the mid 'fifties. I had my family with me in Malta in the late 'forties and early 'fifties and, when I did a commission in the Far East in 1958 and 1959, I and my ship's company had to do 18 months without seeing our families at all. That was rather an abrupt change. In this case, they are quite close and they could go across at their own expense. Bringing home the families would make quite a saving.
Furthermore, I had always understood that the camp followers of armies are a great target for the enemy, and I should have thought that they were less effective as a deterrent if they had their families around them in houses which could be destroyed. So let us hurry it up, get them home and then gradually phase this system out and concentrate on developing a good Navy. We must maintain the North Atlantic bridge; we must maintain sea defence of the home base, and we must allow for periods of low credibility of the nuclear deterrent. We should adjust the strategy to maximise these points and we must start now.
7.3 p.m.
The Earl of Cork and Orrery: My Lords, for the past 14 years I have heard a lot of defence debates. I have taken part in not a few. There have been times when I have had a feeling of something like unreality—I do not think that this is peculiar to me—in which the atmosphere has been that there are not many people taking part and they are people really committed to the subject and are talking to one another; but the people they would really like to be talking to are not listening or are not even here.
This debate seems to be a departure from that. It is a much longer debate, there are more speakers of more kinds and more persuasions, and the background against which it takes place is a more dramatic one than usual. The situation in the world is more fluid. In some ways it is more frightening and in others perhaps less frightening. At any rate, I personally have a sense of occasion and this debate has done nothing to abate it, containing, as it does, admirable maiden speeches and notable speeches expressing various points of view. There are many
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more speakers still to come. My contribution will be brief because I am going to talk only about deterrence. I have something to say which may be worth while because perhaps not many of your Lordships have heard this put very closely before.
I have said before that the strategic key geographically speaking, from the Russian point of view, to Western Europe is the British Isles. This is a familiar point of view: Russian armaments are such now that we can perfectly easily be blockaded and invaded from the West, from the seaward side. I do not say that this is likely to happen; I do not think it will happen. It is one of several possibilities of hostile action, all of which are gravely dangerous to us.
It is not enough to anticipate such moves and hope to be able to block them by force of arms, although we must do what we can. What is needed is interdiction—that is a word fashionable in air defence circles, meaning authoritative prohibition. In the 20th century the most authoritative prohibition that we have is that to which we give the name of the independent strategic nuclear deterrent. I am in favour of this. I am in favour of Polaris and Trident. I have nothing whatever to say—I hope your Lordships will be relieved by this—as a contribution to the controversy. I make that statement to get it out of the way.
Starting from the point that our means of interdiction is the nuclear deterrent—Polaris as we call it now; Trident as we shall be calling it in a few years—we come almost at once upon a question: In what circumstances might a Polaris or Trident force be used, if at all?
Lord Gladwyn: Hear, hear!
The Earl of Cork and Orrery: That, my Lords, is a wrong question in spite of Lord Gladwyn's "Hear, hear!". The deterrent is being used all the time already. The question is really: When will the rockets be fired, if at all? This is a question which must not be answered by anyone in any circumstances at all. The reason why is this: the missiles in their submarines in the depths of the ocean are not really the deterrent in themselves. The deterrent is ignorance; the ignorance of the Russians as to whether and in what circumstances those missiles might be fired.
Before enlarging on that statement, may I clear a rather curious misapprehension out of the way. Some people believe that our submarine forces are not by themselves powerful enough to deter the Russians. The noble Lord, Lord Gladwyn, said in December 1979 that any threat to use it would clearly be ignored by the Russians. If it were carried out it would inflict only limited damage on the Soviet Union, whereas the United Kingdom would cease to exist as a nation by reason of Soviet nuclear retaliation.
"Limited damage", my Lords. One bomb, with a yield of 12 kilotonnes of high explosive, destroyed a city of a quarter of a million people and knocked Japan out of the war. One corresponding bomb in a Polaris submarine has a yield of 50 kilotonnes. I am enlarging slightly on what my noble friend the Lord President said earlier, but it is worth doing. Each missile carries 10 bombs. There are 16 such missiles in one submarine and all of them are independently targeted. One boat carries 160 bombs, each four and a half times as

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powerful as that which destroyed Hiroshima. That is only one quarter of our total Polaris force. What that force can do was described by the noble Lord, Lord Gladwyn, as only limited damage that would clearly be ignored by the Soviet authorities. It is all very well for the noble Lord to stand up and tell the Russians that the possible destruction of all their big cities and most of their population is something that probably they need not bother their heads about, but I daresay they think differently over there—
Lord Gladwyn: My Lords, does the noble Earl really think that if war breaks out—and it may just break out, like that—the Russians will, as it were, surrender, because they will be in ignorance of whether we are going to bomb them by nuclear means or not?
The Earl of Cork and Orrery: My Lords, I am talking about deterrents. There will be no war breaking out: that is the object of deterrents, to prevent war—
Lord Gladwyn: My Lords,—
The Earl of Cork and Orrery: My Lords, the force is quite big enough, being undetectable and therefore invulnerable to a pre-emptive strike. What needs to be improved from time to time is not the hitting power, but the means of delivery. What we need sometimes are cleverer missiles, not more and bigger ones. I return to my statement that the true deterrent is ignorance. To lessen or remove this ignorance is to remove or destroy the effect of the deterrent. That can be done in two opposite ways. First, we could let the enemy know, in what circumstances we would fire. To do this would enable him to alter his strategic planning so as to make sure that those circumstances would not arise, and therefore that would be self-defeating.
Secondly, I should like to draw your Lordships attention to the fact that the enemy's ignorance can be lessened or dispelled by telling him that we would never fire at all. To make that statement is to destroy the effectiveness of the deterrent by exactly the degree to which the statement is believed. I myself said during the debate on the Unstarred Question of my noble friend Lord Kimberley last December that I believe in the effectiveness of the independent deterrent and that I believe we would be prepared to use it in certain circumstances, but that I could not see how such circumstances could arise. I acknowledge now that that was a mistake. I am satisfied now that such circumstances could arise. I certainly never made the deadly, dangerous mistake of saying that we would never fire.
However, there are those who do say that, and in prominent places too. I will take an example that lies close at hand, because on 26th May The Times published a letter from the noble Lord, Lord Gladwyn, which said this:
"The idea that we or the French could commit suicide by telling them to retire or face the elimination of Moscow is only tenable on the assumption that we have a Prime Minister who is mad"—
mad, that is in the opinion of the noble Lord, Lord Gladwyn. Does the noble Lord really believe that the
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"elimination of Moscow" is of so little account to the Russians? If anyone else does. which I doubt, perhaps he will reflect on my summary of a few minutes ago of the unimaginably greater damage that even a single submarine could do. No nation on earth would dare to move in the face of such a threat if they believed it or if, as I have already said, they did not know or could not tell whether to believe it or not. Only if they were certain that they were safe from nuclear attack would they advance regardless of such a threat. And here we have the noble Lord, Lord Gladwyn—a man who has stood at the heights of the diplomatic representation of his country—writing to the newspapers to proclaim in advance his belief that it would be safe.
Lord Gladwyn: My Lords, in my opinion of course we could have a nuclear deterrent in order to deter the Russians from bombing us, but if war breaks out—and it might break out tomorrow—we cannot expect the Russians to surrender because they might be under the impression that they might nevertheless be bombed by us. If they are bombed by us and we start it off, of course they bomb back and everything is lost anyway.
The Earl of Cork and Orrery: My Lords, the thing is that we expect the Russians not to start a war. They have the deterrent and we should not expect ourselves to start a war. That is what I am talking about: deterrence a no-war situation. I wish the deterrent to exist and I do not wish people to say that we would not use it. Nor do I wish them to say that we would use it. I wish silence to be maintained on this subject. The question now is: Do the Soviet leaders believe the noble Lord, Lord Gladwyn?—because, if they do, he has dissipated their ignorance and the deterrent is dead: he has killed it. He may believe (I am sure he does) that Trident is "simply not credible"—those are his words—but what are we to think of a man who stands up in Parliament and says so for publication to the world? But do they believe him? Not entirely, I suspect.
I am sorry to have to bring the noble and gallant Lord, Lord Carver, into my speech, because he is not here at the moment, but I think he should be mentioned. He has not said in so many words, like the noble Lord, Lord Gladwyn, that the independent nuclear deterrent is not credible—or perhaps he has—but one of the things he has said is this:
"…I have never heard or read a scenario which I would consider to be realistic in which it could be considered to be right or reasonable for the Prime Minister or Government of this country to order the firing of our independent strategic force at a time when the Americans were not prepared to fire theirs—certainly not before Russian nuclear weapons have landed on this country".
That is a quotation from column 1628 on 18th December 1980. I confess that the more that I read that statement in the Official Report, the more obscure do I find it. But it seems to me to mean that the noble and gallant Lord has never come across a credible plan to fire Polaris independently when Russian nuclear weapons have not landed here. I should like now to afford the noble and gallant Lord an opportunity to correct me if I have wrongly interpreted him, but I cannot do that, so I will go on and hope I have interpreted him correctly. I will just say that coming from a former Chief of the Defence Staff, this revelation

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of secret information from the Ministry of Defence—because that is what it is, if your Lordships consider it—can hardly fail to invite criticism on the grounds that it is likely to give aid and comfort to an enemy. I will not pursue this matter any further in the absence of the noble and gallant Lord, because I think it would be improper.
As I have said, the true deterrent is ignorance. Statements such as those that I have analysed may not entirely dispel that ignorance, but they might well go some way towards encouraging an enemy to take what, without them, would have seemed an unacceptable risk. For this reason alone—and heaven knows it is powerful enough!—we are entitled to ask that such statements shall not again be made.
Whatever effect damaging pronouncements about the credibility of our independent deterrent may have beyond the Iron Curtain, I am quite certain that they are damaging at home, and for this reason: they provide generous and gratuitous helpings of jam on the bread of the unilateral disarmers. In saying that, I do not intend a general attack on the unilateral movement. It has been most ably and creditably dealt with by the noble Lord, Lord Chalfont, and others, and I do not think that there will be a great deal of disagreement if I say that within this CND organisation—sincere and admirable as it may be in many ways to many people—there exists a strong focus of subversion on behalf of one party or another. And what could be more welcome to them in their work of manipulating and misleading their fellows in this country than a statement from a former British Ambassador to Paris that an independent firing of Polaris would be possible only if the Prime Minister is mad? What could be handier for them in their efforts to strip us of our defences than the published opinion of a field marshal that it would be neither right nor reasonable to fire our deterrent weapons either before or after the Russians had fired them against us? Such utterances play straight into the hands of those who, for their own base reasons and base ends, wish to argue the uselessness of the deterrent.
There are arguments in favour of unilateral nuclear disarmament, though I personally profoundly disagree with them, which are arguments that may be called respectable. It is also possible, though I believe wrong, to argue logically for the abolition of our own independent strategic nuclear deterrent. But if, by pronouncing it incredible, you damage or destroy the effectiveness of our deterrent and do so on no authority higher than your own opinion—however sound that opinion may seem to you—then, in my submission, you will have done something for which it is hardly reasonable to expect the forgiveness of your countrymen.
7.20 p.m.
Lord Soper: My Lords, I should like to add my congratulations to those already offered to the maiden speakers, and to thank them for the substance of what they had to say and the characteristic way in which they said it. Were this debate confined to recondite arguments as to the disposition of available resources within the defence policy, and, indeed, decked out with speculations as to the psychological reactions of major powers, it might seem to your Lordships' House
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that the intervention of a parson was irrelevant and perhaps impertinent. I have listened with deep melancholy to a very great deal of what has been said, and feel impelled to add something to it, because the second part of the title is "The Way Forward" and I believe that the way forward, as indicated by the substance of this White Paper, is inadmissible to a Christian, or a would-be Christian. I say it in tabloid form, if you like, but with all the lack of ecclesiastical authority at my command, that modern war and Christianity are incompatible and the prosecution of one prevents the furtherance of the other.
I could have wished that in this debate I had been supported by a number of members of the Church of various kinds and denominations, who increasingly have come to share the conviction that there is no middle road; that, in fact, we have to abandon the Christian faith if we are to give wholehearted support to a White Paper. We are in no way involved merely at the point of commitment to war. The intention, in certain circumstances, to resort to the implementation of these weapons is as immoral as the actual practice of them, and the Sermon on the Mount is quite clear on that point.
I say this with considerable difficulty, because it involves an immediate response on the part, I suppose, of a great many people who would claim to be practically minded, but we are in such a dilemma that we have, so to speak, to help out the Almighty. Whatever might be the good intentions that are involved in the Christian faith, they are inoperable in the kind of wicked world in which we live. Therefore, for me, a simple choice results. I either renounce the Christian faith, because it is inapplicable, or I seek to be obedient to it, even though I cannot foresee the consequences of such an obedience.
I would dare to remind your Lordships' House that the Service of Prayer, which immediately preceded your affairs this afternoon, contained the words:
"The Lord of Hosts is with us,
The God of Jacob is our refuge",
and on most of the official Christian state occasions we sing the hymn:
"Oh God our help in ages past",
which contains those pregnant words,
"Sufficient is thine arm alone
And our defence is sure".
Your Lordships will not be surprised that there are not a few who feel that there is a basic sense of hypocrisy, for which we parsons are very largely to blame, in that we contrive to blend two issues, two moral principles, which are fundamentally incompatible. That is where I stand, or where I would prefer to kneel.
But having said that, I am well aware of the fact that it would be quite incomplete and irrelevant merely to make a claim, without assessing something of the virtue which belongs to it, which is, so far as I understand the Christian faith, that if you look at the time sequence, you find that that which is morally right will turn out to be politically right as well. Those short-term excursions into probabilities and results may give a dusty answer. Yet if you look carefully enough at the sequence of events over a period, you will find that obedience to the Christian faith not only derives power for those who exercise it, but can be ratified by the processes of history itself.

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On 3rd December, there was an extensive debate in your Lordships' House on defence. I would invite you to contemplate a little some of the events which have happened subsequent to that debate. It is perfectly true that we have not, as yet, been involved in a nuclear war or even in any kind of international conflict of that dimension. But I find very little comfort in the assurance that things are going well because there has been no war. If you fall off Beachy Head, it takes longer than if you fall off a ladder. But it does not seem to me a very comforting reassurance when you are halfway down to say, "We have not got into trouble as yet". I believe that descent is inevitable and, therefore, the time lag is irrelevant.
We are on a juggernaut process which accumulates the dangers and which, in my judgment, in no way minimises the risks. Only a week ago there was evidence, which I cannot quote accurately because I am sure what happened has not been accurately represented, of yet another accident whereby some kind of nuclear missile went astray. I remember listening with a sense almost of terror to the noble Lord, Lord Snow, offering this prognostication, that the multiplicity of nuclear weapons increases the probability that some of them will go off, to such a point as to make it inevitable that some kind of holocaust will, sooner or later, arrive. I find no comfort in the proliferation of nuclear weapons, so that within the next two years 12 more countries will be so equipped. The danger persists; in fact, it seems to me to escalate.
I am further perturbed when I read this White Paper and discover the somewhat subtle transfer of emphasis. One of the emphases, which is very suggestive, is:
"the balance of our investment between platforms and weapons needs to be altered so as to maximise real combat capability … The best way of enhancing the deterrent effort of our armed forces, for example, in raising the nuclear threshold, is to give more resources to their hitting power".
I wonder whether Mr. Begin read that. I do not believe that a deterrent stands anything like the kind of scrutiny which will encourage people to believe that it is effective.
As regards the cruise missiles and other methods that are now available—and I have not noticed that this has come within the ambit of discussion today among those who are expert in these matters—the suggestion which now seems to be gaining a good deal of credence is that you are more likely to deter, if you initiate a strike which will take out the capacity for the return. I notice that noble Lords are not receiving that with any assurance or with any agreement. But at least it is part of the argument which persuaded Mr. Begin that to take out the Iraqi possibility of a retaliatory strike was the best way in the difficulties from which he suffers.
I believe that the perilous process whereby you accumulate weapons on the assumption that that accumulation will provide a general state of deterrence is threadbare to the point of being useless. I am further convinced that the whole process, whereby we now look at individual and unilateral action, needs revision.
I was interested in what the noble Lord, Lord Chalfont, had to say about subversion, which I agree is now fairly prevalent. But you do not subvert pacifists. The guarantee of the renunciation of violence as a pacifist proposition is the best defence
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against subversion. I agree—I was grateful for what the noble Lord said in his maiden speech—that it is perfectly obvious that some kind of violence is involved in the process of revolutionary activity and should be recognised as such. That is precisely why it would seem to me that today the only relevant process is that which renounces entirely the instrument of violence, because subversion is likely to take place even among those who may be persuaded of high motives in taking up that violence—as of course now belongs to the liberation theology that is prevalent in South America.
It would be foolish to pretend that such a programme as is envisaged now would not leave a blank and a vacuum if it were repudiated. Therefore, I would presume to make an appeal, for it is all I can make. I believe we are in a terminal condition. That is not the opinion only of scaremongers but is an eschatological derivation from the kind of circumstances which belong to our technological ability. I believe that this terminal condition demands an altogether unprecedented act in order to avert it. I therefore would offer to noble Lords what may appear to them to be Cloud Cuckoo-land, but what for me is an article of faith: that what we need in the world today is one community to take the risk of peace-making, as innumerable communities over the centuries have taken the risks of war-making. I do not believe that the people of the world would be subjected merely to the military objectives of leaders who now are prevalent. I do not believe that dictators would find themselves impervious to the effect of such an initiative. That is the kind of unilateralism which I would commend.
Unilateral disarmament in terms of nuclear weapons is in many cases an invitation to the discovery of worse weapons. I have no use any longer, although I served with CND, sat down for it, walked around with it and occasionally got arrested for it, for CND's commitment to the proposition that if you initiate disarmament in terms of the nuclear threat you will ill dispose those who are conventionally armed to ways of peace-making. I do not believe it. I wish I could. But what I do believe is that there are millions of ordinary people, who have not had much of a say in this debate this afternoon, who would respond with a new sense of purpose if somebody—and who better than a country which has initiated so many liberal and splendid ideas in the past?—were to take the great risk of total disarmament, which would include with it vast social and political changes. This seems to me to be the only answer that gives any credence to a programme which looks to the future with hope, and for peace.
7.33 p.m.
Earl Cathcart: My Lords, I should like to start by congratulating the three maiden speakers who took part in our debate this afternoon. They each spoke from wide and varied experience and they have greatly enhanced our debate today. Noble Lords will be glad to learn that in the interests of economy of time I have decided to make drastic cuts in the speech which I brought here this afternoon. If I omit to mention the pros and cons of the various alternative reductions in our defence expenditure, and in particular fail to

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comment on the proposed reduction of surface ships in the Royal Navy, it is not because I fail to appreciate their importance.
It is a fact that whatever cuts we make in order to keep within an increase of 3 per cent. per annum, those roles which would be cut out of our defence expenditure will not go away. They will either not be done or they will have to be done by somebody else. That is an unpalatable fact and makes it extremely difficult to propose any cut. Nor will I argue the case for Trident. Rather, in the interests of brevity, I will nail my colours to the mast and say that I am in favour of this country possessing a strategic nuclear weapon and that I regard Trident as the most cost-effective deterrent available to us. Rather, I would wish to direct your Lordships' attention to a subject which we have not covered this afternoon, that of service manpower and our reserves and the decision to increase the TA by 16,000 men.
Before I do so, I must try to respond to the speech of the noble Lord, Lord Soper. I agree very strongly that the Christian way forward is disarmament by negtotiaion. Everybody in your Lordships' Chamber would probably agree with that. Unexpectedly I find myself also agreeing with the noble Lord that we cannot accept unilateral disarmament. It is not a viable proposition. The Russians are not only non-Christian; they are anti-Christ. The policy which the noble Lord was so sincerely putting to us is the most difficult lesson of the Bible—that when you are smitten on one cheek you should turn the other. But what would have happened if the noble Lord had persuaded the large majority of the men and women of this country to do what he suggested in 1939 when this country was threatened with invasion? We should have suffered, and maybe we should still be suffering under a Nazi régime.
Lord Soper: My Lords, if I may briefly reply to the noble Earl, I quite agree that by 1939 we had fallen over the cliff and that there was nothing we could do but go to war, but the prevention of war must take place much earlier than that. I am committed to the belief that the wages of sin are death: that if you go on doing what is wrong for long enough, you lose your capacity to do what is right.
Earl Cathcart: My Lords, I suspect that the real difference between the noble Lord and myself is that he does not appreciate and agree with the policy of deterrence as a weapon to keep war at arm's length, which I do. Unilateral disarmament is not only not a viable policy. Russia will not be impressed by good examples and soothing words. We cannot ever effectively argue that they should disarm when we ourselves have already done it. Nor can we maintain peace in a situation of rising tension leading to all-out hostilities from a position of self-imposed weakness.
To turn to the White Paper, I must point out—it has been mentioned already by one noble Lord—that, although we are all extremely anxious about the reduction in the strength of the Royal Navy, this new Statement on Defence Policy must be seen as a whole. It certainly represents an increase in our total defence effort because our annual increase of 3 per cent.
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has been extended until 1986. The statement also confirms the coming into service of many new and vital equipments. It is a pity that the publication of our future defence policy, issued on 25th June of this year, could not have coincided with the publication of the annual defence estimates, published only two months earlier, which would have cut out a great deal of speculation about cuts and reductions and would have been seen immediately in its proper perspective.
I want to spend the rest of my time upon discussing service manpower and the proposed increase in the Territorial Army. During the Second Reading debate on this year's Armed Forces Bill, my noble friend Lord Bridgeman discussed this most important subject of service manpower and our reserves of manpower. He described paragraphs 37 and 78 of the White Paper as "the least decisive paragraphs of them all". When my noble friend the Minister, Lord Trenchard, replied to that debate he said that he would prefer to deal with the matter when he wound up today, so I should like to take this opportunity to raise the matter now.
The Defence White Paper envisages a total reduction in the armed forces of some 19,000 men and women over the next five years. This is nearly 6 per cent. of the present total strength of all three Services. The reduction of 8,000 to 10,000 in the Royal Navy by 1986 is presumably accounted for by the reduction in our surface ships and the fact that a number of shore training establishments will be closed down completely or reduced in size to enable more training to be carried out at sea. But how will the RAF reduce by 2,500, or 3 per cent. of their present strength, by 1986? During the same period no reductions have been announced in the RAF; indeed, two Phantom squadrons are being retained instead of being phased out and the RAF is to receive an addition of 36 Hawk aircraft while the total force of VC10s is being increased by a third. So I wonder how the reduction of 2,500 is to be achieved?
During the same period the Army is to be reduced by 7,000, and that, too, poses some unanswered questions. I understand that in some regiments and corps there has been a curb on the number of new recruits accepted from civilian life. This is at the very moment when the opportunity to serve is most needed by young school-leavers. This was referred to by my noble friend Lord Orr-Ewing in his speech. It appears that the Army Information Offices and school liaison teams have to a great extent been run down. I should be grateful if the Minister could confirm that this is so, and would tell us whether this limitation on recruiting applies to the whole Army.
At the same time, the number of men, and especially the more senior non-commissioned officers, have not been leaving when their engagement ends, but have been re-engaging for a further period of service. Excellent though this is, because it maintains experienced non-commissioned officers in the units, it causes regimental promotion rolls to become unbalanced and it limits the opportunities for younger trained soldiers to earn promotion. However, this state of affairs will eventually work itself out and the need for recruiting will become more apparent again. Once the recruiting organisation has been allowed to run down, it will be extremely difficult to get it back into top gear. As table 15 in Section 4 of the original

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White Paper shows very clearly, the total number of young men in the age group from which men are recruited starts to fall very dramatically between now and 1991, while at the same time the number of recruits needed to join the armed forces is higher than it has been in recent years. This further enhances the argument that we must not let the recruiting organisation run down.
We hear that the Territorial Army is to be increased by 16,000. This is very welcome indeed and will be a great encouragement to all who now serve in TA units. I calculate that a strength of 16,000 territorials will need an establishment of 1,200 regular officers, and non-commissioned officers; and I wonder whether that figure of 1,200 has been taken into account in the saving of 7,000 regular soldiers. As was said in the debate in the other place on 9th July, it is to be hoped that this increase in TA strength will not be made piecemeal. I hope that it will be established with emphasis and all at the same time. The Ministry of Defence will presumably make a proper plan in conjunction with the TA Association and, through them, with the local TA headquarters to ensure that not only are the new TA units formed in those localities where recruiting successes can best be achieved, but also that these new units will have a really worthwhile role and task. The noble and gallant Lord, Lord Carver, made that point in his speech. It is an extremely important point for the future of this new element of the TA.
Another important factor is that of good TA drill halls which must be easily accessible to residential areas. Do drill halls exist in sufficient numbers, and what sort of condition are they in? Has the cost of providing them, maintaining and re-establishing them in good order, been allowed for in the plan? Furthermore, if 16,000 men are to be recruited into the TA with a sense of purpose, they must have modern equipment to a proper scale and also the opportunity to train. Will there be sufficient ranges and training areas available for them, bearing in mind that the present ones are already overcrowded and many have been disposed of as unwanted? I hope that the recent limitation on training which all quarters of the armed forces are experiencing will not adversely affect these new TA units when they are formed.
Finally, I want to speak briefly on the regular reserve. One has the anxiety that we are not making the best use of the trained personnel when they leave the armed forces at the end of their engagement. They are certainly a very valuable reserve, and although I regard as a good thing the new process which was begun by this Government, of calling-up reservists in order to maintain contact with them, and to check that their personal equipment is still in good order, I believe that with the modern and technical equipment that is now in service in the armed forces there is a need for these individual reservists to be updated and refreshed in the use of this equipment or, maybe, to meet it for the first time. Therefore, when they are recalled to check on their equipment and their dress, and so on, they need to have a longer period than at present occurs for training for their commitment in the event of mobilisation.
7.47 p.m.
Lord Zuckerman: My Lords, I think we should all be grateful to the Government for having passed the defence programme that we are debating today in a realistic framework, in order, as the Secretary of State for Defence said in another place, to stop the drift down a path which has led to cuts in ammunition, fuel, training and deployment and which, as he put it, would inevitably lead in the next few years to increasingly degraded operational ability—his words.
This alarming situation has come about because we have not been able, certainly not over the past two decades, to maintain even a constant level of defence expenditure, measured either as a percentage of gross domestic product or, more correctly I believe, in terms of real purchasing power for which there has been a slight decline over the period. I am relieved to hear that over the past three years, reading the White Paper, the level was 8 per cent. higher in real terms than it was three years ago, and that the intention is to increase it at the rate of 3 per cent. over the next two, and possibly four, years—even though again, in the words of the White Paper, this may well mean that defence will absorb a still higher share of our gross domestic product than it does now.
These figures worry me, as they have other noble Lords who have spoken in the debate today—as the noble Lord, Lord Strathcona and Mount Royal, put it in his contribution to the debate—because they make me ask whether the programme which is incorporated in the White Paper, and which has been spelt out by the Secretary of State in another place, is not already over-stretched in relation to the resources that are postulated. Dr. David Owen in the debate in the other place warned that if the economy goes on declining, it will be difficult to justify the present level of expenditure, let alone to increase it. This is a point which I expected the noble Lord, Lord Balogh, to bring up in his contribution, he being an economist while I am not—
Lord Kaldor: I am not Lord Balogh.
Lord Zuckerman: Even if the GDP stops falling, the Government—
The Earl of Longford: My Lords, on a point of Order. Was the noble Lord referring to the noble Lord, Lord Kaldor?
Lord Zuckerman: Yes.
The Earl of Longford: Not Lord Balogh.
Lord Zuckerman: I see. I apologise to both noble Lords. I was about to say that, even if the GDP stops falling it seems to me that the Government and the nation as a whole will have to steel themselves to the proposition that a 3 per cent. increase per year will not assure the present programme. All experience shows, and this point emerged from other speeches, although not quite in the way I wish to make it, that a 3 per cent. annual increase is likely to be very much less than the cost increases that inevitably occur in the development and production of military equipment, which makes up some 40 per cent. of defence expenditure.

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It is misleading to talk of major items of equipment as implying only a small percentage of our total defence spend. We have first to subtract an amount nearly half the total—which constitutes manpower costs. These will rise at least pro rata with the increase in GDP. All other costs—research and development, procurement, building airfields and barracks—will certainly rise at a faster rate. Let me illustrate the point with an expensive example.
The Tornado aircraft programme is now said to have cost twice as much as it is projected the Trident will cost. Today one machine is said to cost £14·3 million. I shall be grateful if the noble Viscount, Lord Trenchard, will give us that figure, and one other figure I shall ask him for, when he winds up the debate. That figure of £14·3 million is at least three times greater than what was estimated at the start of the programme. The German price today is 75 million deutschmarks, which is three times what was estimated in 1973 and seven times the 1964 estimate. This vast increase occurred over a period when inflation was on average less than 5 per cent. By 1984 the Tornado project will, it is said, consume something like one quarter of Germany's defence equipment budget.
This may be an expensive example and I might have chosen something simpler—such as the cost of 5,000 dollars for a single round of ammunition for a particular type of anti-tank gun in the United States. But the example I have given illustrates a general process; one which in a previous debate I called "the inexorable law of research and development". I am not talking about the increase in cost between successive generations of equipment, such as was referred to by the noble Lord the Leader of the House in his opening remarks, but rather about the increase in costs which occurs within one generation of equipment. That is the danger.
That "inexorable law" carries the simple message that the increasing cost of introducing new technology in the development of weapons inevitably leads to the shedding of commitments. It is against the background of this process that one should view the concern felt by those who are not unilateral disarmers—and I am certainly no unilateral disarmer—about the claims on our resources which Trident is likely to make in the years ahead on the proportion of our total defence spend that will be available for procurement. It is the cost that may occur during the lifetime of Trident that is the cause for concern, and let us hope that it will not distort the whole pattern of our defence strategy.
The Secretary of State has assured us that his present proposals will raise the staying power of our conventional front line, and that consequently the nuclear threshold for all NATO's defences will not be lowered. I hope that he is right. His is a bold statement. For if NATO were ever to resort to the use of nuclear weapons—and I am repeating here what has been said several times in your Lordships' House—it would almost certainly be the end of the industrialised world north of the equator. The only credible theory about nuclear armaments is that responsible leaders on both sides know that they should never be used; that fear of their possible use acts as a deterrent; and that the safest way to counter active aggression is by the use of conventional arms. The noble Lord, Lord Gladwyn, made this point earlier in the debate,
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and it is not playing the Russian game to repeat it, because the Rusians have absorbed this message. The Russians have nuclear arms, but we go on protesting that they also have an overwhelming superiority of conventional arms. That is the point which worries my noble and gallant friend Field Marshal Lord Carver.
It is not just the initial cost of modern weapons that goes on increasing at such an alarming rate. Because of their technological complexity, modern weapons systems not only cost more and more; their maintenance demands more and more in the way of scarce and increasingly expensive technological expertise. Adequately trained supporting personnel do not grow on trees. It is because of the scarcity of such personnel that, for example, so large a proportion of the most advanced aircraft deployed by the Americans is always out of service—sometimes nearly half. Those people who are concerned with the "increasingly degraded operational ability" of our forces—to quote again the words used by the Secretary of State in the other place—would like to be assured, I am sure, that the Secretary of State's new costings look far enough ahead to avert this internal contradiction of the technological arms race in which we are participating.
Unilateral disarmament is not on, as I see it. If we can afford Trident in place of Polaris, well and good. If we cannot, we ought to pause. Laser and particle-beam weapons, which the Secretary of State says—correctly, in my view—are never likely to be a threat to Trident missiles, are equally no threat to Polaris missiles. Nor will they be a threat over the next 10 years. The noble Lord, Lord Gladwyn, has referred to ABM systems but there is little hope that an effective ABM system will ever be deployed. If one is ever deployed around Moscow or around Washington, they will certainly not be deployed around the capitals of Europe.
Lord Soames: Will the noble Lord permit me to intervene for a moment, just on the question of costs? I am not sure that I understand him correctly. I bow to the noble Lord's great knowledge and experience in respect of increasing costs—not only for successive generations of equipment but also, as he has said, within the same generation. Referring to Trident, however, as opposed to Tornado, surely the Americans have carried the expenditure on the research and development of Trident and it is on the point of coming into service in the United States, if it has not already done so? That being the case, there is no reason why Trident should escalate in cost to us any more than Polaris did, because the Americans have borne the heat and burden of research and development.
Lord Zuckerman: My Lords, the noble Lord is quite correct. The Americans have borne the cost of the research and development for the missile. If I may resort to a little personal history, I was with the Prime Minister of the day, Mr. Harold Macmillan, at Nassau when that arrangement was concluded. Like all the civil servants present I was busy on the drafts and there were some words which had to be added about R and D to make it plain exactly how the Polaris deal had to be agreed in the way that it was, and why the Trident deal followed suit. Those words said that the Americans

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would provide missiles "on a continuing basis". But the design of the missile changes. That is the trouble. And we make the warheads. A reference was made to Chevaline, for which we are responsible because, to the best of my knowledge, we did not buy the components for Chevaline. We did not buy the components of Chevaline, and the costs have gone up. On top of that there is the escalation in the costs of the hull.
There are many questions which could be asked on the single subject of the Polaris, whether or not the Polaris is, as it were, obsolescent now. But I shall forebear, because all I am concerned about now is the point that the noble and gallant Field Marshal Lord Carver made, that we do not want our conventional forces eroded. That is the point at which I am getting.
May I make a concluding point. I make a plea, to endorse what my noble friend the Leader of the House said about negotiations, a point which was taken up by the noble Lord, Lord Peart. The Government should, in my view, use all the influence they have—and they have still got influence here—to resume negotiations for a slowdown of the nuclear arms race. And let negotiations be resumed on a realistic and honest plane. The noble Lord the Leader of the House, in referring to this matter, spoke about parity and reality. I myself am one of those who believe that parity has been achieved—even if not in numbers. If we believe we have enough to provide for an independent nuclear deterrent, then how much more have the Russians got and how much more have the Americans got? If the unit of deterrence for a country which is responsible for its own security is what we have, then there is a great deal that could be bargained away at the negotiating table.
But I also want realistic negotiations. In my list of priorities I would put the comprehensive test ban first, followed by the elimination of presumed battle field nuclear weapons, not so called theatre warheads. I would do that well before embarking on arcane discussions which add up to possible agreement to abolish the twentieth avalance of strategic nuclear warheads which would be launched, either against the United States or the USSR, after they had been totally devastated by the first.
I am confused by some of the things I have heard about Russian intentions. I listened with pleasure and admiration to the maiden Speech of the noble Lord, Lord Thomas of Swynnerton, when he was referring to the Russians' views. I do not know what the Russians think, but I do believe that they would not gamble physical existence of their whole state, the whole of the USSR, in a nuclear war, any more than I believe the United States would. Without a conventional underpinning, there is little credibility to our nuclear deterrent.
8.3 p.m.
Lord Murton of Lindisfarne: My Lords, I should like to add my congratulations to my noble friends Lord Thomas of Swynnerton and the Earl of Orkney, and also to the noble Lord, Lord Mayhew, on their distinguished maiden speeches. We look forward very much to hearing them on future occasions.
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I intend to confine myself, in this most important debate, exclusively to the subject of the Royal Navy. Paragraph 11 of the White Paper sets out clearly the crucial role this country plays in support of the NATO alliance and as the main base for continental reinforcement in time of war. First, the Channel and its approaches. It is now the stated intention in the White Paper to make yet more use of reserve forces to bring British Army of the Rhine up to full strength. Moreover, a TA Reserve Division will be formed as a reinforcement for one British corps. To quote the White Paper, there will be,
"a very extensive commitment for rapid reinforcement from the United Kingdom in emergency".
Exercise Crusader was reasonably successful as a large-scale peacetime exercise, but it would be a very different matter if all or any reinforcements had to be ferried across the Channel after hostilities had begun. Can we be certain that this will not be the case? I must confess I have never felt too easy about the Channel dividing BAOR from its reinforcement. And in the case of the mobilisation and concentration of this new TA Reserve Division the same considerations apply. The Royal Navy might in certain circumstances, therefore, have to undertake extensive mining to guard the flanks before any sea crossings could take place, and also to sweep enemy minefields in the path of ferrying vessels. How many ships have we in service for effective mine counter measures? How many modern minesweepers?
Paragraph 15 tells us that no orders can be placed this year for financial reasons. Surface warships and extensive air cover would have to be provided to protect those cleared channels. One thing is certain. In the next war, if it ever comes—and pray God it does not—there will be no eight-month respite, as there was in the so-called "phoney war" of 1939–40. Moreover, the next war may, contrary to many published expectations, turn out to be a long war.
Paragraph 22 states that the power of maritime air systems and submarines in tactical offensive operations is especially apt and telling in our forward geographical situation. This of course is very true, but it cannot, in my view, function successfully without the co-operation of a sufficient number of surface warships also. As NATO's major European maritime power, we have special responsibilities in the Eastern Atlantic. Britain contributes over 70 per cent. of the ships available for escort duty. Something which we should never forget is that in two world wars the German U-boat menace all but starved Britain out and defeated us. To go back some 40 years, the existence of a mere 60 German U-boats was critical. Now the Soviets have a fleet of submarines numbering approximately 370, many of which are very powerfully armed, deep-diving and fast.
What is the strategy of the Soviet Naval High Command at this present time? I am sure we should like to know. There are known to be two battle cruisers, two helicopter cruisers and two aircraft carriers in commission, some 35 nuclear powered light cruisers and 10 older ships, 90 destroyers, 245 frigates and 64 corvettes, at least half of these with very modern weapons. Remarkable strength, if these vessels of war have been built only for the defence of home waters, as was previously believed. In fact, however, it is known that approximately 10 per cent. of Soviet

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naval strength is deployed "out of area" at any one time, in the Mediterranean, the Indian Ocean, off West Africa, or on passage.
It is perhaps appropriate to think back to May 1941 when the "Bismarck", a battleship of 45,000 tons, in company with the heavy cruiser "Prinz Eugen", attempted to break out into the North Atlantic through the Denmark Strait, the objective being commerce raiding. During the ensuing engagement, chase and final battle, all of which covered three days, the British Admiralty issued orders directing towards the scene of operations a large force in support of the "Prince of Wales", the "Hood" and the two cruisers "Norfolk" and "Suffolk". Converging on the "Bismarck" were no less than four other battleships, two battle cruisers, two aircraft carriers, eleven other cruisers, 33 destroyers and eight submarines. This huge concentration of effort indicates the extreme anxiety with which the Admiralty viewed the threat of a fast and powerful enemy vessel with one escort traversing the sea routes in mid-Atlantic with the object of capturing or destroying unescorted shipping.
What assurance have we got that our proposed naval resources will be sufficient to defeat the intentions of a Soviet battle group which might break out and be aimed at destroying allied convoys in the same manner? Given the increased accuracy and longer range of anti-surface ship guided missiles, a possible tactical counter measure would be to have a wider dispersal of ships in convoy. Sonar detection of hostile submarines over a wide area would, therefore, be essential and the helicopters carried by our surface ships would play a vital role to search and to destroy, with missiles, those very submarines.
A major weakness in the White Paper, in my view, is its failure to acknowledge the fact that the protection of convoys in the East Atlantic will be made extremely difficult, if not virtually impossible, for us alone as a nation if the proposal is carried out to reduce the number of destroyers and frigates to a sustained figure of 50 and to keep in being only two of the three aircraft carriers. Incidentally, those three small aircraft carriers or through-deck cruisers are much praised by the United States Admiral Stansfield Turner, lately Director of the CIA in the Carter Administration. In a recent article in The Times newspaper Admiral Turner maintains that they are just the sort of small flexible ship which the United States Navy will need when—and these are his words, not mine—
"it [the United States] awakens from its ill-conceived fascination with mammoth super carriers".
Likewise, what is the wisdom of phasing out earlier than the end of their useful life the specialist amphibious ships "Intrepid" and "Fearless"? Could they not be retained in standby reserve? The Royal Marines, mercifully, are to survive relatively unscathed in the proposed force reductions, but their effectiveness under certain operational conditions will not be improved by the withdrawal of their specially designed vessels.
It is, however, in that part of the White Paper headed "Beyond the NATO Area" where I think that a certain air of unreality enters into the discussion. Up to that point the message has been a contraction of our naval strength in surface vessels and we understand the reasons why. Now we are told at paragraph 34 of the particularly valuable role which the Royal Navy has
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to play in providing a naval presence in other parts of the world. The specific example is quoted of our maritime presence which is being maintained continuously in the Indian Ocean as we speak this day. We pay tribute to a ship's company on a five month deployment in a hot and humid climate in the Persian Gulf, which patrols for seven weeks at a time at sea without a break; and only a short shore leave in between those long patrols.
No enhanced submarine building programme can replace the need for surface warships in the vital role of "showing the flag". The same paragraph—paragraph 34—refers to the resumption from 1982 onwards of the practice of sending:
"a substantial naval task group on long detachment for visits and exercises in the South Atlantic, Caribbean, Indian Ocean or further east".
Further on in paragraph 36 it is stated that our forces will continue as necessary to sustain specific responsibilities overseas, ranging from Gibraltar and Cyprus to Belize and the Falkland Islands. It is a pity, incidentally, that the "Endurance" in the South Atlantic is to be phased out in 1982. She was acquired 14 years ago from a Danish shipping line and adapted as an ice patrol ship. She has helicopter space. There is nothing to replace her as a support and guard ship. A conventional frigate with her thin skin could not possible penetrate ice. Who will show the British flag in the Antarctic region and the South Atlantic apart from a very occasional visit from a warship detached from a naval task group? Presumably, the only permanent presence will be the existing small garrison of the Royal Marines in the Falkland Islands, and I think that at least we should be thankful to them.
I turn briefly to the question of new ships. As regards surface ship replacements, I fully understand the proposal to build simpler and cheaper Type 23 antisubmarine frigates; but for goodness' sake! let us get the designs out quickly. Let the shipbuilders themselves have a go, give them their head and tell them to produce quickly a modern weapon system ship which is economical in manpower and which can speedily be built, launched and fitted out.
Technology moves fast. Our procurement procedure is apt to be inordinately slow. Let us see a change for the better as from now, otherwise it may well be too late. For the rest, I much regret the decision to end the life progressively of the Leander class frigate. They are excellent seagoing vessels and the key frigates for escort duty in the Atlantic. If it had been possible to afford mid-term refits with up-to-date weaponry they would have had an even better capability, in my view, than the proposed newer Type 23 which is to be built; but that is be as it may.
What will be the state of the Standby Squadron into which some of those unmodernised Leanders will go? Possibly a depressing situation for the ships' companies concerned? What can be done to maintain good morale?—for, in their case, it is hard to see where there will be:
"clear evidence of important and satisfying work properly supported"—
that is, in fact, a quotation from paragraph 37 on "Service Manpower". However, the question still remains: how many destroyers and frigates will be in service in 1990? That really is a vital question.

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Finally, I turn to the question of service manpower and training establishments. I do not intend to dwell upon the proposed contraction of Portsmouth, except inasmuch as to say in passing that if the dockyard itself is to be reduced, it should not be forgotten that it is estimated that 13,000 jobs will go and it has also been said that 10 per cent. of all civilians employed in this part of the County of Hampshire are involved in defence or defence-related industries. There will be a good deal of effect upon them.
It is well understood that manpower in the services is now a very expensive commodity. Economies can no doubt be made in cutting out posts and establishments ashore, but I wonder how exactly it is proposed to implement the intention that more training should be undertaken afloat. Training in those ships now in commission is already stretched to the limit. Ships are already fully manned and there is no accommodation for extra trainees. Moreover, there is no space in ships to install sophisticated equipment specifically for training in the advanced technologies of weaponry in all its forms, communications, radar and tactics. Indeed, there are nothing like enough technically qualified and experienced instructors, both officers and ratings, to deploy round ships at sea; and it would in my opinion be a waste of expertise to attempt such a measure, and more expensive than the present system.
From what I have seen by personal visits to the major training establishments, I do not think that the proposal in the White Paper is feasible. Many establishments have students on courses which amount to a throughput of hundreds annually: while in some, officers' specialist courses last more than 12 months at a time and allied officers attend them too. I noticed that the noble and gallant Lord, Lord Hill-Norton, told us that this policy was tried 10 years ago, but it proved even more costly than the present system.
While I understand the reasons for the Government's decisions, all in all as regards the Royal Navy I find that the White Paper has little of comfort. Its naval strategic basis is, in some respects, defective; it leaves a number of major questions unanswered; and it proposes certain economies which could be harmful to operational efficiency. I would say that this is an unhappy time to be reducing the surface fleet by 35 per cent. and to be cutting by 15 per cent. the number of trained seamen. I worry about the possible effects upon our allies.
On the facade of the Royal Naval College, Dartmouth, is inscribed in vast lettering:
"It is upon the Navy under the good providence of God that the health, wealth and prosperity of our country do chiefly depend".
Foolish indeed would we be to ignore those wise words.
8.19 p.m.
Lord Stewart of Fulham: My Lords, I join gladly in the congratulations which have been offered to the noble Lords who have made maiden speeches. They were interesting, informative, to the point and commendably brief. I propose to make a somewhat specialised contribution to the debate. There have been one or two references already to the doctrine of unilateral disarmament. It is, of course, relevant
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to our considerations here as, if we accepted that doctrine, we should not want either this White Paper or indeed any other, and the argument about the comparative merits of short and long-range nuclear weapons and conventional weapons would cease to be of interest.
The doctrine of unilateral disarmament has been urged in this country by the Campaign for Nuclear Disarmament and, indeed, by others. It suggests, as a remedy for the terrible and dangerous tangle into which the world has tied itself, with heaps of armaments and massive armed blocs of nations, that this country should dissociate itself altogether from nuclear weapons, should neither possess nor manufacture them, nor have them on its territory. There must, of course, be one further step to be taken from that. If we accept the logic of that doctrine, we must not be allied with any nuclear power. I would not charge the CND or anyone with the hypocrisy of saying: "We shall dissociate ourselves from nuclear weapons because we believe that they are wrong and dangerous, but our security will be all right because there are always the Americans to fall back on". The doctrine of unilateral disarmament therefore involves our leaving the North Atlantic Alliance and not having any nuclear allies. It will mean, in practice, not only nuclear disarmament but, in effect, complete disarmament.
Let us consider the position of this country if it had no nuclear weapons and no nuclear allies. If any nuclear power approached us in a threatening guise, all our conventional weapons would be so much useless ironmongery and a very limited selective use of nuclear weapons against this country could render us completely helpless. In effect, it means a doctrine of surrender. Some years ago a Danish politician urged his fellow countrymen that all the expenditure on defence should be abolished and some of the money so saved should be used in providing cities and villages with a large number of recording machines which were ready to say in the Russian language, if the need arose, "We surrender".
In the framework of his own logic he was quite correct; that is the alternative to effective defence. If you like, you may say—and I say this with no animosity to anyone: "I am prepared to pay that price; nuclear weapons are so terrible and the whole concept of nuclear war so horrible that I am prepared to see my country in a position of complete helplessness, obliged to concede any demand which a nuclear power made on it". That is simply one form—the form in the nuclear age—of the consistent pacifist doctrine; that the evils of waging war and using the weapons of war are so great that you must be prepared to submit to anything rather than do so.
But it seems to me that those who so advocate must make it quite clear that that is their position. What I criticise about much nuclear disarmament propaganda is that it always dodges this. The disarmers want complete nuclear disarmament, but they assume that somehow or other you can escape this unpleasant consequence of it. I do not believe that we can do so. Sometimes it is argued on the unilateralist side that what I am conjuring up is a bogey; that the idea that if we were defenceless a great nuclear power would make

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demands on us, is not in the realm of reality. Let us very briefly examine that.
It is, of course, part of communist ideology that it is the duty of a great communist power to spread communism throughout the world, and that, as Lenin put it, the process will be accompanied by frightful collisions. I do not build too much on that fact alone, because we know from experience that human beings rarely act up to the best of their ideologies nor down to the worst of them. None the less the fact that that piece of ideology is there is not reassuring. If we turn from ideologies to facts, every one of Russia's western neighbours, except two, has been reduced to a greater or lesser degree of servitude to the Soviet Union. The two exceptions are Norway and Turkey, and they are both members of NATO. That, if I may say so to my noble friend Lord Kaldor, is one thing one might mean if one said that the alliance had been a success. Its success in preserving its members from invasion and in keeping the peace has been considerable.
Then, if one looks at the Soviet Union's behaviour towards its own allies, one sees the harsh repressions that have been experienced in East Germany, Hungary, Czechoslovakia and the dark shadow that now hangs over Poland. A Polish trade union leader, speaking to his members not so long ago and counselling on them a path of moderation, said: "We must remember the Russian tanks". I pray heaven that no British trade union leader is ever in a comparable position.
One line of unilateralist propaganda is to say, in reply to this evidence of possible dangers from the Soviet Union, "This is only the other side of the penny from the behaviour of the United States". That will not wash. No ally of the United States has been treated in the way in which the Soviet Union treats its allies. As I said, no British trade union leader has to consider, when counselling some course of action on his members, what will be the attitude of the American Government. It might be said that Russia's allies are her own business and that that is within her sphere of influence. That reminds me of what Queen Elizabeth I said to the French ambassador when she first met him after the massacre of St. Bartholomew. She said: "If your master the King of France treats his subjects like this, how can he expect foreign princes to trust him?"
Of course, Russian behaviour does not stop within what we understood to be her sphere of influence, as the Afghan example has recently shown. I understand that a Select Committee of another place considered that the motive for the Russian action was not a desire to get nearer to the oil routes, but an anxiety about their security if there was trouble among their own Islamic subjects. That may be true, though I must say that I do not know how anyone knows that so positively. It has always puzzled me that there be so many Kremlinologists and so few accurate prophecies as to what the Russian Government will, in fact, do next. I shall not be dogmatic about that. I shall merely say that, in view of the record, I for one am not prepared to stake the way of life and independence of this country on a favourable assumption as to the behaviour of the Russian Government towards an unarmed and defenceless Britain. I put it no higher than that.
We should notice that this policy of surrender would not get us neutrality. The noble Lord, Lord Kennet, referred to the actions of the Soviet Government
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towards the Norwegian island of Spitzbergen. If we are required to allow them military facilities in Orkney or Shetland, if we have no defences what do we say? If anyone says that this is a fantastic supposition, I say, "Look at what is happening in Spitzbergen and look what happened elsewhere in Europe". If we are required to use our industries and our technology to help supply the Russian military machine, what are we to say? We are in no position to say, "No". We should have adopted a formal posture of neutrality only to find that we were quite unable to defend it. There is no way out then—no way of trying to walk out of the world in this fashion.
I should like to mention one other tendency of unilateralist propaganda, and that is to obscure the argument by advancing a number of propositions which are indisputably true, and then hoping that somehow their truth will rub off on the proposition that this country should be made defenceless. We are repeatedly told in unilateralist publications that the world would not survive a nuclear war; that the money spent on nuclear and other defence could be very happily and usefully employed in aid to the third world, and towards improving the standard of life and social service of the people of this country. All those propositions are true. But there is no process of logic by which you can jump from the truth of those propositions to the quite different proposition that we should, therefore, render ourselves helpless, not even able to say how we would distribute our resources between arms production and anything else.
If we do not follow the unilateralists' doctrine, they are prepared to say to us, "Where do we go? Is there anything better in front of the world than two huge camps glaring at each other over an ever-growing pile of armaments?" I have suggested already that, distasteful as that project seems, you do not escape from it by disarming this country. I cannot accept the idea that, if we did that, others would follow our example. It might be that some would, but who would do it? The most humane; the most gentle; the most civilised. The toughest, the most ruthless, would be in a position to take advantage of the situation. It is always the objection to pacifist doctrine that it is a recipe for putting the government of the world into the hands of the most unscrupulous people in it, and I think it is wrong, even in the context of nuclear weapons.
We must, therefore, try to cope with the situation in which we live and not run away from it. There are various paths on which that can be done. One is making deterrence work. I listened to the argument of the noble Lord, Lord Gladwyn, who was arguing, quite reasonably, the importance of proper conventional defence. But he said, and it is essential to his argument, that this was all on the assumption that the nuclear balance was maintained. So I do not think that we can assume that because conventional weapons may be necessary—indeed, are necessary—the nuclear balance does not matter.
On deterrence, I agreed very much with the noble Earl, Lord Cork, that a great part of deterrence is ignorance on the part of a possible opponent as to what may happen to him. He is much less likely to wage war if he is aware that you and your allies are in a position to strike back in a variety of ways, not all of which he may foresee. That surely is how deterrence

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is supposed to work, and it means keeping your defences, both nuclear and conventional, adequate. That will be expensive.
Here, I shall just say on a rather different theme that it is going to be expensive, and the party opposite has to realise that the cost of paying for it has to be more equally spread among the population than the burden of taxation is at the present time. You will not rouse this country to believe that there is a real and pressing need for increased expenditure on defence unless they see that that burden is being borne increasingly by those who are really able to bear it. It is a most dangerous thing to do to talk about defence and make passionate anti-Russian speeches, and then talk as though the only way of paying for defence is cutting the social services on which the poorer section of the population rely. If you are serious on defence, the burden must be more fairly shared.
The other way forward beside deterrence is conciliation. I am not going to develop that because that takes you into the whole field of foreign policy, but experience has shown us that, with great patience and pertinacity, you can make progress with the Soviet Union. They are totally unlike the Hitlerite dictatorship in that respect. There is the Austrian State Treaty; the non-proliferation treaty. You must just sweat away. Indeed, we ought to have as a complement to this debate at some time a debate on disarmament, and a full statement by the Government on the progress they are making and hoping to make.
The third thing besides deterrence and conciliation is multilateral disarmament. If you want that to be effective, you must try to get as far as the Russians will go on the question of verification. To sign an agreement with not the least idea whether it is being carried out or not does not get you very far. I wish some unilateralist propagandists would urge that consideration on the Russian Government. If they would make a move on the question of agreeing to verification it might alter the face of disarmament negotiations. But the one condition on which you certainly will not get success in disarmament negotiations is if the Soviet Union have reason to believe that if they fail you will disarm yourself anyway. That is an invitation to them to make no concessions at all. Unilateral disarmament, then, is not a complement to multilateral disarmament, it is its enemy. I believe that it is a doctrine that has in it no safety, no armour, and no road out of the difficult problems that now face mankind.
Lord Kaldor: My Lords, before the noble Lord sits down, perhaps I may be permitted to clarify the meaning of some of my remarks which he evidently misunderstood. Maybe they were somewhat convoluted. I did not mean to say that NATO was a failure as such. I said it followed from the views of the Secretary of State for Defence and his speech that we must infer that NATO had been a failure, because he tried to represent NATO as so inferior both in conventional weapons and in nuclear weapons. Obviously that is not the case, because if it were the case then what was said—that NATO defended the freedom of all these countries from the Russians—would not have happened. So I was criticising the
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view of the Government. But, on the other hand, what I missed from your speech was a clear statement whether you wished—
Several noble Lords: Order!
Lord Sandys: My Lords, the noble Lord must curtail his remarks, if possible, to a question on an intervention and not make the opportunity for a further speech.
Lord Kaldor: Am I allowed to put a question?
Lord Sandys: Yes.
Lord Kaldor: The question I want to put is: are you prepared to think of nuclear weapons to be used to counteract an aggression, or a war, or fighting with conventional weapons? In other words, are you prepared to use nuclear weapons as a first strike, and not as a deterrent against a nuclear attack on yourself?
Lord Stewart of Fulham: My Lords, first I am glad to hear that the noble Lord does not think that NATO is a failure. Secondly, I am certainly not going to be in the position of informing a possible enemy in advance that he need not fear the use of nuclear weapons. The important thing is to give him the impression that if he commits aggression it is an inexcusable thing in itself. He does it at very great risk, and he is not going to be obligingly informed in advance how great or small those risks are.
8.37 p.m.
The Earl of Inchcape: My Lords, it is a tradition of this House that those taking part in a debate should declare an interest. To do so in a debate on defence is surely unnecessary, for all citizens have a vital and proper interest. But I should declare a particular interest as chairman of a large shipowning company and of an international trading group, as well as a director of oil companies. This means that I have an important interest in, and responsibility for, a wide range of merchant shipping of all types, and of trading activities throughout the world which would be devoted to the national and NATO effort in time of conflict. These include cross-channel ferries, container ships, general cargo ships, bulk carriers, tankers, oil rig supply ships, and passenger ships, which I only mention to remind your Lordships of the wide variety of merchant shipping operations for which defence is required. It was surprising that in the recent debate in another place little was said about merchant shipping specifically.
Sadly, the British merchant fleet today is not as large as it once was, and in the coming months we shall see it get smaller. But we are still a major maritime nation, and one of the largest contributors to the maritime alliance within NATO—for Greece apart we have the largest fleet. The reduction in the United Kingdom fleet is in itself something of which we should take note in defence terms. Since 1975 we have come down from 1,600 ships to 1,100, and in carrying capacity from 50 million tons deadweight to 34 million tons. Some of my colleagues in the shipping industry foresee a further decline, possibly to 30 million tons

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within the next couple of years. But I should make the point that within this smaller fleet is increased efficiency and increased carrying capacity. For example, 18 large container ships can do the work of 120 conventional ships.
To turn now to the White Paper, nowadays most of us would accept the need to review our defence capability in terms of economy and effectiveness. One can also accept that with developments in weapons technology certain long held assumptions, indeed possible preferences, or prejudices, may no longer stand up to scrutiny. In a recent debate in another place the right honourable gentleman the Secretary of State for Defence, referring to three main tasks in the Atlantic, mentioned the importance of covering the Greenland, Iceland, United Kingdom gap, and other choke points against Soviet submarines, the prosecution of antisubmarine warfare generally in the Atlantic, and the protection of reinforcement shipping. He expressed confidence that our capability in respect of the first two was being enhanced, and then made the point that if we were to lose on those fronts, reinforcement would be irrelevant. It is apparently accepted that the airlanes should be protected in the first days of a war and that as much heavy equipment as possible should be pre-positioned in Europe. The latter of course is what the Sealift Operation would supplement, and that is part of the deterrent philosophy to which we have so far subscribed.
The Secretary of State also acknowledged that if the deterrent failed and the first aggressive thrust could be held, massive reinforcement of heavy equipment by sea would be essential. His words could be taken as implying that defence of reinforcement shipping is of secondary importance. They were chilling words to all those concerned in shipping, and especially to the seafarers. Presumably our ships would not be left undefended until it was found that a continuing reinforcement operation was needed, or if conflict at sea occurred before a land war in Europe, which seems to me very possible.
Assuming that a reasonably effective defence capability is intended, is there not a responsibility on the Government to convince the shipping industry and others that they can rely on the effectiveness of a modern weapons technology, that the presence of naval surface forces is really no longer the answer, and to prove to those who will be exposing their lives and their ships that they are not to become the forgotten arm of defence? Of course, we must not think of fighting the battles of the future in terms of those of the past, but in the last war there were certainly moments in the Battle of the Atlantic, as the noble Lord, Lord Hill-Norton, pointed out, when we were at severe risk. The rate of attrition became frightening, and that could occur again.
I mentioned that increased efficiency meant that 18 large container ships could now do the work of 120 conventional ships. By the same token, only 18 missiles are needed to do the work of 120 torpedoes in the last war. It may be that future maritime air surveillance should provide us with some reassurance. If so, it is, as I say, for the Government to convince us, for merchant shipping would not be confined to a cross-Atlantic operation; not everything we would need could be brought from the arsenal of democracy in
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the United States. Raw materials for military purposes and food to sustain the civilian population—a factor rarely mentioned nowadays—would have to come from further afield, where merchant ships would need protection.
I have concentrated on the position of merchant shipping at sea, but are the Government confident that our ports, as my noble friend Lord Orr-Ewing mentioned, would be adequately protected or that our ships could be discharged at emergency anchorages? What of the vulnerability of the sophisticated cargo-handling ports on which our trade is becoming increasingly dependent?
I spoke earlier of the reduction in size of the British merchant fleet. Are the Government satisfied in their assumptions, admittedly together with colleagues in NATO, as to the tonnage needed in merchant shipping terms for military, civilian and economic purposes in time of war? Those in the shipping industry who are involved in the quite extensive discussions with Government on contingency planning for defence are aware of the estimating that is done for military purposes, but the impression is that very little has been achieved in terms of assessing merchant shipping needs for economic or civilian purposes.
I wish briefly to refer to two other aspects. It is understandable that when matters of principle are being attacked, less attention is paid to alternatives. Now that we can see the determination of the Government to reduce the number of destroyers, frigates and so on, I hope serious and radical attention will be devoted to cheaper and more cost-effective platforms; that is, ships from which the important surface element of maritime defence could very well be conducted. There are several comparatively cheap designs available for study which would ensure that such ships could carry out very useful escort duties in various parts of the world. Their construction could provide much-needed work in our shipyards, and perhaps such vessels could in peacetime be made readily available in potential trouble spots. They could have provided an alternative to a naval presence in the Arabian Gulf; they could help to dissuade those to whom I am told we must now refer as "robbers" instead of "pirates", who are still active in various parts of the world; and they could provide a useful service in respect of Vietnamese refugees. In those ways, they could fulfil the role on which the noble and gallant Lord, Lord Carver, suggested I might be able to comment.
My final point concerns the Hydrography Service, which is not part of the White Paper, although it is a matter on which I have spoken in this House on previous occasions. From what was said in the recent debate in another place—or perhaps, rather, from what was not said—one has the impression that this is another area which the Government have under examination for some substantial economies. I appreciate that we can no longer afford to provide an efficient but uneconomic hydrographic service for the oceans of the world, but we must ensure that the Hydrography Service in respect of the waters around the United Kingdom remains fully effective, not only for defence but for environmental and general marine safety needs. The Government must guard against short-term thinking and false economy.

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I have been careful not to reject the need for this Defence Review or for change. We in British shipping have a responsibility to the nation to provide an efficient and economic service to the country in peace and in war. The shipping industry is reluctant to look to Government for economic protection in times of peace, but our ships and seafarers are entitled to reasonable protection in time of war.
8.47 p.m.
Viscount Ridley: My Lords, I do not wish to join in the nuclear bombardment, or even the naval bombardment, the Government Front Bench has suffered this evening. I intervene in the debate only because I want to speak about the Territorial Army. I speak as chairman of the North of England TA Association, and I wish at once to welcome most sincerely the Government's decision to expand the TA by 16,000 men. I know from personal experience how very welcome that news is, and I believe it is much the most cost-effective way we can increase our ground forces and meet our defence commitments. We shall have to depend on the TA more than ever before in the next few years.
I spoke first to your Lordships on this subject as long ago as 1965, and I remember saying then that the Territorial Army was hopelessly inadequate. I am glad to say that I am now finding it extremely good indeed. We saw the virtual destruction of the Territorial Army by a Labour Government in the 1960s—a process which was known to those involved at the time as "Hacking and Carving"—but since then it has risen in a remarkable way, like some phoenix from the ashes, so that it can now be said to be a very effective army indeed, as was shown during Exercise Crusader last year.
Lord Carver: My Lords, would the noble Lord agree that the "Hacking and Carving" contributed considerably to its present health?
Viscount Ridley: I cannot agree with the noble and gallant Lord: I have never disagreed with a Field Marshal before, but I fear that on this occasion I must, my Lords. The Territorial Army is at the moment 94 per cent. recruited, which is a very fine percentage. However, in welcoming the Government's announcement, there are a few points I must make. Before we expand the TA, we must be quite sure that the existing units we have are fully up to the standard we need. It is said that only 64 per cent. of the present TA are classified as trained, and that is not enough. The Shapland Report, with which many of your Lordships will be familiar, has done a great deal to cut down wastage in the TA—the problem is the soldier who joins and leaves too soon—particularly by the payment of realistic bounties, which have done a great deal and which I think have been largely responsible for the increase in 10,000 soldiers over the last two years; and I hope the Government will allow the bounties to keep pace with inflation because we must find ways to prevent soldiers leaving too soon. The current rate of wastage at 28 per cent. is much too high.
One major cause of that is the financial cut-backs which have been experienced this year, although one
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realises the problems the Government face. However, the cut-backs have especially been affected by the restrictions placed on man-training days, and I apologise at this late hour for having to adduce certain technical figures. The figure was 44 days per annum, but it has now been reduced to 38. Although 38 was the average used in the past, as a statistic that figure can be extremely misleading; it has caused great hardship and I know from experience that it is very worrying to many commanding officers. It is very good news that the figure is to go up to 42, but if the Government mean business about the TA, they should put it back to 44, if possible.
Further, and perhaps even more important, commanding officers should have much more flexibility so that they can use the extra days to pay the men whom they need to help with training and to help the TA generally. Inevitably these men are going to be noncommissioned officers and officers, their pay will be greater and so they will cost more. But they are needed—they are needed now. The widespread disappointment in the cut-back in man-training days could so easily be put right and the flexibility could be increased. Over and over again in visiting TA units this summer people have asked for this. The more technical the equipment, which as I have said is extremely good, the worse is the problem. One commanding officer said to me, "We shall have a situation, if we are not careful, of too many Indians and not enough chiefs". It will mean sacrifices in other directions, but I ask the Government whether they can seriously consider raising the level to 42 at once for the rest of this year, and try to recover some of the lost ground.
The next point I would make—again I apologise for the technical language—is that the amount of overbearing which is allowed in particular units to carry recruits should revert from 10 per cent. to the previous figure of 25 per cent. I hope that I can leave that point there.
I wish to follow the noble Earl, Lord Cathcart, in what he said about the question of drill halls. If we are to expand the Territorial Army, we shall need to face up to the need for more drill halls. Many were sold off in the 1960s, and although many have been built since, it is very doubtful whether the 16,000 extra men can be trained in the existing buildings. It may be possible temporarily to squeeze some of them into some of the existing drill halls, but that will not be a permanent solution. It might take four or five years to build new drill halls, and I am sure that many volunteers would put up with inadequate places meanwhile. There may well be redundant factories or schools which could be converted if they are in the right place. Surely the construction of new drill halls would provide much needed jobs for the building industry and there would be civilian staffs employed in them as well. So there must be an advantage in that.
May I commend to the Government a suggestion which has been made, that employers, in particular those with small numbers of employees, might receive some minimal tax relief for allowing their employees time off to go to camp. There have definitely been problems here, with the unemployment situation as it is. A chappie is a bit worried about completing his training if he has to go to camp and his job might not be there

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when he comes back. I think that we could help a bit in that field at no great cost.
I have no intention of being critical of the Government. Everybody connected with the Territorial Army is delighted. They wish to know as soon as possible—it might not be immediately possible—what plans the Government have for the expansions, what arms are needed, where they may be based, when, and so forth? In the North, which has traditionally been one of the best recruiting areas, we believe, looking at the waiting lists, that we could probably raise enough men for at least three major units, if needed, given the facilities I have mentioned. I hope that we have a chance of a fair percentage increase and I know that it would be welcomed.
Finally, I would make the suggestion—again I find myself in disagreement with the noble and gallant Lord, Lord Carver—that this seems to me a very opportune moment to revive for the Territorial Army alone some of the more famous names of the line regiments which were abolished in recent years. I speak, naturally enough, of the Royal Northumberland Fusiliers, the DLI, and so forth. If they should wish to be rechristened the DLI, instead of the Seventh Light Infantry or whatever, I believe that that could be easily done, would cost nothing, and would be highly popular. I do not accept that it would be purely for sentimental reasons. I think that it would be for the best possible reason.
I believe that the Territorial Army is well worthy of the confidence that is being placed in it and that it will respond with great enthusiasm to the challenge. No longer will it be possible to say, as Hilaire Belloc said in his Moral Alphabet, 100 years ago, or it may be less:
"V stands for the Glorious Volunteer
Who fills the armies of the world with fear".
8.54 p.m.
Lord Clifford of Chudleigh: My Lords, like the noble Viscount who has just sat down, I first inflicted myself on your Lordships on the subject of the Territorial Army in 1965, and of course he will remember that we had a couple of rather traumatic years when rumours followed rumours and eventually the Territorial Army was as good as decimated. I recall the time when the noble Lord, Lord Shinwell, first came to this House. After a defence debate in which I had been making my usual points, the noble Lord came up to me and said, "My boy, what has always worried me more than anything else has been our lack of reserves". I am pleased to say that since then I have worked very closely with the noble Lord over the years.
I want to speak only about the reserves, though I feel strongly on various other subjects in the White Paper. We used to have a magnificent set-up for reserves—reserves for everything. It was called national service. Well, I will not remind the Government who abolished national service, but it is worth remembering that national service gave us reserves for the regular forces, TA, civil defence,—practically anything under the sun. To my mind it was one of the most regrettable things that have ever happened when it was abolished.
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In those days I was a regular soldier and we did not like it. The reason we did not like national service was that we had to send off our best NCOs and officers, whereas we wished to keep them for our own unit. Think what national service would have done in today's context. Think, as the noble Lord, Lord Wigg, said a couple of years ago, of the problems regarding ethnic minorities and so on, with violence in the streets and so on. All that energy could have been channelled into seeing that A company beat C company in a football match, rather than all this trouble. The reintroduction of national service ought to be considered. I do not think that it has to be as we had it before. There could be sections in the way that the noble Lord, Lord Hunt, has previously suggested in the House.
The first thing we did was to abolish national service. Then in 1964–65 Mr. Healey, with the able assistance of whom I think we used to refer to as the hatchet man, took action. I had better be careful. I shall put it into Italian: it is known as talia carne—a cutter up of meat. That is what decimated the Territorial Army then. It is all very well people saying now, "Oh yes, it is a good thing, get all these things going". But what happened as a result of that earlier decision? All the drill halls were sold for bingo or something like that. Nobody paid any attention when we asked about arrangements for preparing for any emergency. We said there was nowhere for mobilisation. The thing had gone absolutely haywire.
The noble Earl, Lord Cathcart, and the noble Viscount, Lord Ridley, have covered a lot of the points, so I am not going to go on very long this evening. All I want to ask the noble Viscount who is to reply is: please may we have something definite? How many units are going to be added to the Territorial Army? Where are they going to be placed? I ask those questions because the noble Earl, Lord Cathcart, was going on about figures—so many here, so many there. I have certain information, but it does not seem to have gone down very far. I am afraid that, as one very senior officer has said, the increase announced will not lead to the raising of new units. Is that right? Further, it will take some time to effect, because the Government will not immediately make the necessary cash available. Is that correct?
Then, it is said that the increase will largely be in the form of enhancements to existing units. T must say that at present I would use extra cash, if it were my decision, to increase the man-training days. Does the noble Viscount realise what damage has been done to the Territorial Army by the recent restrictions on man-training days? Does he realise that, if you are going to do any training at all, there are certain individuals who have to be there every time—your leading officers, your NCOs, your quartermasters and so on?
Let me tell your Lordships what happened in the case of the unit of which I am the honorary colonel. The second-in-command repaid a visit from an American National Guardsman. We did a "recce", and he came back. Then he took them over for 10 days. This was repaying a visit from them to us. Then what happened? He had annual camp. Just by doing those three duties he had overstretched on his man-training days. You cannot run a unit when you have the main people responsible for it limited solely to training. All right, you say; there is a reserve.

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But what happens then? You are taking it from a private soldier.
All I would say in conclusion about reserves and the Territorial Army is: Let us have some definite figures, facts and dates of when we are to have the promised increase, and do not let this rumour (if it is a rumour) get around because it will only have a reverse effect on the morale of our main reserves.
9.4 p.m.
Lord Brockway: My Lords, I welcome the fact that in his speech the noble Lord, Lord Soames, declared in favour of international disarmament. This surely must be the forward road, not only, for the reasons so powerfully argued by Lord Zuckerman, on economic grounds, but on human grounds—indeed, for the life of mankind. I was a little disappointed that Lord Soames did not follow up that declaration by proposals on how international disarmament could be achieved. I ask the House to bear with me tonight if I try to suggest how international disarmament could be achieved—not theoretically, not Utopianly, but realistically, in practical terms.
Three years ago the United Nations held a Special Assembly on Disarmament. The leaders of all the Governments of the world were there, and unanimously they came to quite remarkable recommendations. Those recommendations are now being considered by a committee at Geneva. This is not theory; it is what is happening. The committee at Geneva are to report to a second assembly of the United Nations in June of next year. Tonight, I want to take the four principal recommendations of the United Nations Special Assembly—not in the air, but actual recommendations made, which are now being considered by the committee at Geneva.
The first recommendation was the abolition of nuclear weapons and weapons of mass destruction. At the Geneva committee, decisions can be made only by consensus; but even there I think two important recommendations are going to be made to the United Nations Assembly next year. The first is for an international convention to outlaw underground nuclear tests; and the second is for an international convention to ban chemical and radiological weapons. That will be a considerable advance in the disarmament which we are seeking. But I am afraid that it is unlikely because consensus is necessary in the Geneva committee for there to be any recommendation in the foreseeable future for the abolition of nuclear weapons, even though a majority on the committee at Geneva is now in favour of those proposals.
There is an increasing recognition in the world that man cannot live with nuclear weapons. That view has been expressed by leading ex-generals, admirals and leaders of the Air Force. It has been expressed by outstanding scientists and doctors. Indeed, the overwhelming opinion of those with knowledge of the effect of nuclear weapons all take that view. It has been endorsed in the most remarkable way by a United Nations document.
The General Assembly of the United Nations requested the Secretary-General, with the assistance of qualified experts, to carry out a comprehensive study of
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nuclear weapons. That report has now been published and there is an almost entire ignorance of its contents. I have the report in my hands. What do the United Nations experts say? The report estimates that the number of nuclear warheads in the world now is in excess of 40,000. It says that the largest nuclear weapon is now, 4,000 times more destructive than the Hiroshima bomb. It states that there is no limit to the explosive yield that may be obtained by nuclear weapons.
It records that the total strength of present nuclear arsenals is equivalent to about 1 million Hiroshima bombs. It states that there now exist three tons of explosive for every man, woman and child on earth. It says that it is possible to release by one nuclear weapon more energy in one micro-second than from all the conventional weapons in all the wars of history. It emphasises that the systems of intelligence are not infallible. I quote:
"There is growing concern that control may some day fail—under the influence of, for example, a false message or a misunderstood command—and that nuclear war is thus triggered inadvertently".
That is a frightening report.
Hiroshima Day is to be remembered on 6th August. The bomb which fell on Hiroshima killed 65,000 people directly and 200,000 died from it. As I have said, now there is a nuclear bomb 4,000 times as destructive as the bomb which fell on Hiroshima. There are enough explosives for three tons to fall on every man, woman and child on earth. With the nuclear weapons that now exist in the Soviet Union, in the United States of America, all mankind could be destroyed and it is difficult to accept that if a nuclear war began it could be contained. Nearly all the world today is divided between support for the United States of America and support for the Soviet Union. There are unaligned nations, yes, but if a nuclear war broke out it would be difficult for any part of the earth to be saved from it.
I want to be honest: while I shall be arguing tonight for international disarmament it would be honest to the House to say that I support the CND in its proposal to end nuclear weapons in this country. But I add this: nobody can be urging the ending of nuclear weapons in this country without still more deeply urging the ending of nuclear weapons in the world. On this first recommendation of the United Nations Assembly, I beg the Government to support the proposals which are now before the Committee in Geneva, that nuclear weapons and weapons of mass destruction should be abolished.
The second recommendation of the United Nations Special Assembly was the abolition of conventional weapons in phased stages. It is not enough to end nuclear weapons: 50 million people were killed by conventional weapons in the last war. There are now discussions on a bilateral level, trying to balance tanks on one side, missiles on the other side. Those discussions are having little effect, but if you had a plan as proposed by the United Nations—a world plan—in that atmosphere then discussions for the phased abolition of all conventional weapons would also be practicable.
The third recommendation of the United Nations Special Assembly was that these proposals for ending weapons of mass destruction and conventional weapons

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should lead to complete and general disarmament. This would clearly become practicable if the first and second proposals were carried out. There were two modifications of this proposal by the United Nations: first, that weapons should be allowed which were thought to be necessary within a nation for its internal security and, secondly, that contributions should be allowed to a United Nations peace-keeping force.
Those are the first three recommendations of the United Nations Special Assembly. Are these recommendations just idealism? I recognise that if they were to be carried out it would be a revolution in world affairs, but I have seen in my time a revolution in world affairs just as radical as the proposal for ending arms in this century. I was one of a small group before the First World War who were opposed to imperialism. No one at the beginning of this century could believe that within this century political empires would be ended in the world. The party opposite at that time even claimed to be a great imperialist party and rejoiced in that fact. Western Europe, Spain, Britain, Portugal, Italy, Germany and Turkey—these imperial powers occupied the whole of Asia, the whole of Africa and of Latin America—but within this century that enormous power of imperialism has been destroyed—
Lord Carver: My Lords, would the noble Lord give way for a moment? Would he not agree that there is one empire which has not diminished, and that is the Russian Empire?
Lord Brockway: My Lords, I hope that the noble and gallant Lord will forgive me. One of the faults of growing old is that one does not hear. I do not want to be discourteous and it is only because I am not aware of what that intervention was that I am not replying to it. I do apologise to the noble Lord. I was saying—and I hope that that intervention has not destroyed my argument—that within this century there has been a revolution in world affairs in the destruction of political empires, as great as the proposal now being made that armaments should be destroyed in the world.
There was a fourth recommendation by the United Nations Special Assembly. It was for the transference of military expenditure to world development. Honestly, I do not know how we can accept the comforts of life when we know that, according to the statement of Robert MacNamara, the ex-chairman of the World Bank, 8 million of our fellow human beings are starving and are on the border of death. Recent reports have shown that nearly half the children of the world are so hungry that they suffer permanent mental and physical damage, and the gulf between the rich and the poor in the world is growing every day.
Have the Government seen the very notable articles by my noble friend Lord Lever in The Times recently, in which he urged that a mere patching-up of trading arrangements in the world is now inadequate; that what we need is a new world economy? Will the Government do their utmost, not only at the Ottawa Conference that is going on this week, but at the Mexico Conference which is to come in October, to end this intolerable situation?
We have had the Brandt Report. That report stated that a mere fraction of 1 per cent. of military
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expenditure could end hunger in the world within 10 years. Next Monday, there is to be launched a remarkable document. It is a declaration by 53 Nobel prize winners—not only peace prize winners, but scientists and authors, and experts in medicine, chemistry and economics. They are going to urge that we should take immediate steps to end the intolerable poverty that there is in the world. I shall read only one passage from this remarkable declaration, which states:
"We, the undersigned, appeal to all men and women of goodwill, appeal to the powerful and the humble, to act, each in his or her various responsibilities, for tens of millions of people on the point of dying from hunger and under-development, so that they may be restored to life".
They ask that military expenditure should be transferred to ending hunger in the world. Can there be any doubt that the danger of the destruction of life on earth by war and the millions already dying from hunger are the overwhelmingly dominant issues of our time? They are interdependent. I believe that in the early future, much sooner than we think, the peoples of the world will so press for the removal of these evils that we shall see them removed in our time.
9.26 p.m.
The Earl of Kimberley: My Lords, I agree with part of the speech made by the noble Lord, Lord Brockway, in as much as I believe in multilateral disarmament. I thought that the noble Lord made a very fine speech. Without in any way trying to be funny or sarcastic, I think that a speech like that might well be sent to the Kremlin for Mr. Brezhnev to read.
I was very encouraged the other day to hear the new Socialist President of France, M. Mitterrand, publicly state, with Chancellor Schmidt, that the only way you can talk to the Russians is from a position of strength, and also back up NATO's requirement for ground-launched cruise missiles. Secondly, I am delighted to see how many speakers there are, from all sides of the House, in the debate today.
I am going to talk very briefly on four topics: on overall principles, on how to deploy our natural resources, on our strategic industries and on cost comparisons. On principles, how to deploy our natural resources, we should try to lay down guidelines to ensure that the national interest is fully maximised. This is industrial strategy, because investment in defence is of prime importance to this country for two reasons. First, defence provides a national environment secure from external threats. Secondly, because of the sheer volume of expenditure, it affords vast opportunities to our industry, not necessarily in defence only but in other jobs, in research and development, and profit. If we grasp these opportunities, we shall create other marketable products as our capability and infrastructure develop, as well as improve our exports.
Infrastructure means mutually supportive capability in components and sub-assemblies as well as complete defence systems. It is a vital key to our national survival, economic recovery and prosperity.
I know that the disarmament lobby will wail that more money should be spent on schools, health, housing, et cetera, but all these are constrained when you are in an economic hole. If, however, we can get

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industry going, then all the rest will follow naturally.
The fundamental question for defence, as for all these other good things is, "How much should we spend?" or, even more basically, "How much can we afford, given our straitened resources?" By deploying our defence budget resources intelligently, we can achieve what I believe the economists call a "multiplier effect" to give a positive stimulus to the whole economy as well as ensuring a continuing national capability. A less perceptive policy might well effect some measure of short-term saving at considerably greater long-term cost, both financial and strategic.
I should like to enlarge upon the point which my noble friend Lord Strathcona and Mount Royal made this afternoon. I would ask my noble friend the Minister when he winds up to say whether the thoughts of Her Majesty's Government perhaps go in any way towards having defence budgets spread over, say, three years instead of annually.
I come now to my second point: strategic industries. These must be maintained to preserve a credible defence posture, and I know of no list of these industries which are needed to maintain this position, because such a list would constantly change as technology evolves; for instance, in something called C3, which is command, control, communication. But these systems are vital to deploy rapidly the necessary resources in changing battlefield situations.
We should have a national policy about party politics to define these areas where we have a national capability or we shall have to rely more and more on imports such as radar, telecommunications, computers, et cetera. But if we could do this it would enable our industry to plan in a long-term way. In the past we have seen radar orders lost and the threat of an American takeover of our computer industry; a conservative attitude (with a small 'c') to take up British technology and innovation. In every instance our foreign competitors have benefited. Examples abound in the aerospace, electronic and dynamic industries. I hope the Marconi heavyweight torpedo will not go the same way or, for instance, the antisubmarine warfare airship, which will fly next month.
I have a vested interest in the airship and I should like to say a few words on it. Because of its extraordinarily long endurance the airship is particularly suitable for surveillance and for anti-submarine warfare operations. It has a very high degree of space available inside, coupled with low vibration and noise levels, making it a very suitable vehicle for C3. Perhaps this is a surprising area of aeronautical research in which Britain may lay fair claim to a position of preeminence. A small airship, embodying many aspects of the latest available technology, is about to commence trials in the United Kindgom but this is under consideration already by the United States Coastguard for evaluation as a surveillance and radar development platform, both civil and military, and Australia, Indonesia, France and Japan are very interested in it. So I hope that once again we shall not invent something and then lose it.
I come now to my third point of cost comparison, domestic and foreign. Usually United States products are cheaper initially because of the sheer size of the
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American market, which makes it easier for them to produce them, and the Treasury seems to favour the policy of buying cheap goods. But are "Treasury rules OK"? If this is so, should we not logically conclude that we should get a quote for defence equipment from the Soviet Union?
If a British product costs £x and a foreign one £½x, and if in the make-up of 'x' 50 per cent. is labour costs, 40 per cent. materials and 10 per cent. profit, what happens? Probably more than 50 per cent. comes back to the Government in tax and earnings, national insurance contributions, corporation tax, VAT et cetera. There are also multiplier effects from the prime contractor because it goes to subcontractors and other smaller services as well as providing employment. In other words, sometimes spending more costs us less. If we spend £½x on an import our balance of payments is affected, but we can pump more oil from the North Sea to pay for it. But one day we shall run out of oil. Secondly, there is a reduction in local production, workforce and profit. The Treasury says that unemployment costs £3,000 per head per annum. The TUC says that it is £6,000 per head and that is before we cost the riots in our cities, which we have had in the last few weeks.
Our industry is very often pressurised to cut research and development for false economies. Also we lose many of our best people through the brain drain, and in addition our export potential is reduced. What foreign Government will buy a British product if our own Government will not buy it?
Lastly, my proposals for the Government's consideration, which are very brief and very humble. The first one is to buy British if one can. If one cannot then import it, but on the basis of licensing the technology and know-how so that we can eventually develop our own capability. The second is that defence procurement principles apply to all public sector purchases; particularly in high technology areas such as information technology. The Ministry of Defence is to be congratulated on following these principles, and let us now consolidate them. This whole issue is our national survival and prosperity. It may be that the Navy's problems have not yet been sorted out as well as they could be, but, on the whole, now is the time for us to all support the Government's positive initiative of The Way Forward.
9.36 p.m.
The Earl of Longford: My Lords, it is a great pleasure to follow the noble Earl, Lord Kimberley. He has probably done more for defence than anyone else in your Lordships' House in the past few years, unless it be the noble Lord, Lord Shinwell, who rendered such signal service to the nation when he was Minister of Defence and who gave such a distinguished speech this afternoon. I should like to join in the congratulations to the three maiden speakers, although I can see only two of them in your Lordships' House at the moment. In particular may I mention my old pupil—if he does not mind my mentioning it—Lord Mayhew, and also Lord Thomas of Swynnerton. They both said a number of things which I had it in mind to say myself, but they said them so much better that I do not think anyone will recognise my version of them.

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I personally believe that there was never a moment when it was more necessary for the Labour Party to be returned to power as quickly as possible. I know that all my colleagues will agree that the policies of Her Majesty's Government are disastrous in their short-term implications, but still more so in their long-term implications. But I must acknowledge that for the first time since the war, I feel no small disquiet about the defence policy that a Labour Government might follow if returned to power.
Several noble Lords: Hear, hear!
The Earl of Longford: Well, my Lords, those remarks were more appreciated by the noble Lords opposite than the remarks which immediately preceded them! Anyone who listened to my noble friend Lord Stewart of Fulham's brilliant expose of unilateralism would have noticed the connection between that and leaving the Atlantic alliance. Anyone who listened to that exposé must feel that any Government committed to such a policy would probably never be returned to power in the first place, and that if they were returned it would be a very sad day for this country.
I hope and believe that that will never be the actual situation. The noble Lord, Lord Shinwell, quoted a number of resolutions in favour of unilateralism which are down for our party conference. He took a fairly cheery view, and in a sense he assumed that if the resolutions were carried they would in the end be forgotten when the time came. I cannot be quite so optimistic. The noble Lord the Leader of the House will certainly remember what Sir Winston Churchill once wrote about the resolution not to fight for King and country which was passed at the Oxford University Debating Society. This resolution was opposed by Mr. Randolph Churchill, Lord Hailsham and myself. Sir Winston Churchill wrote that little did the foolish boys who passed that resolution realise that within a few years they were to conquer or to die gloriously and to prove themselves to be the finest generation bred in Britain. So whatever happens at the party conference in the autumn I shall continue to believe in the ultimate sanity of my colleagues. But at the moment, as I say, I feel considerable disquiet.
We in the Labour Party have much reason to be proud of the record of our party in Government in the 17 years or so we have been in office since the war. I am saying nothing in disparagement of Conservative Governments, but in fact we were responsible for a notable historic achievement which was not open to them. The noble Lord, Lord Mayhew, had something to say on that matter. But it was a Labour Government, led by those great socialists Lord Attlee and Mr. Ernest Bevin, which played the main part in founding the Atlantic Alliance. I shall always consider that Mr. Bevin had a bigger share in that achievement than any other individual in this country or in America. Lord Mayhew has good reason, of course, to speak of Mr. Bevin. Mr. Bevin was very fond of him when he worked in the Foreign Office; he always used to refer to him in glowing terms. But what he would have thought if he had been told that Mr. Mayhew had joined the Liberals, I shudder to think. If Lord Mayhew had actually gone to him and said that he thought possibly for one reason or another of defecting
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to the Liberals, the eruption, I think, would have blown Mr. Mayhew and the Foreign Office sky high. But that is by the way. The fact is that Mr. Mayhew rendered very valuable service at that time.
We must ask ourselves about this Atlantic defence system which has, after all, been the foundation of our national defence and security since the war. What is the raison d'être? Why is there such an alliance at all? Well, I am afraid there is only one answer; it is the response of the free world to the threat of Soviet domination. Whether I can say that more easily perhaps than Front Bench spokesmen I know not, but at any rate there is no doubt it is the fact. No one supposes that it was a response to any threat from any other quarter or is due to some instinctive aggression on our own part. Today we are spending £12,000 million a year on defence. I noticed, incidentally, when I was looking up something in the Library, that Lord Randolph Churchill, Sir Winston's father, resigned because of excessive defence spending, which was £31 million. So things have moved on a bit, from £31 million to £12,000 million; but that again is by the way.
If we consider this colossal sum of money, of course one must agree with Lord Brockway and anyone else that it is the most appalling waste, on the face of it, to spend all this money and these resources, which could be used for improving the standard of life of our own people and of the impoverished nations about whom my noble friend Lord Brockway spoke so movingly. Of course we would all much rather spend it in that way. This colossal expenditure can only be justified by the Soviet menace. Were it not for that the expenditure of these vast sums would be not only a nonsense but a wicked nonsense. We must, I am afraid, recognise that we are still dealing with this threat. Though I thought Lord Brockway was at his best tonight, and that is very good, the fact is that he did not seem to realise that all these ideals are being hamstrung at the moment by the policy of Soviet Russia.
This attitude that I am referring to has of course been the basis of Labour Party policy, in office and out of it, but particularly in office, since the war. There has been only one moment when the attitude of my party to national defence seemed to waver. That was at the moment when the Labour Conference in 1960 defeated Hugh Gaitskell, and for that matter the parliamentary party, at Scarborough. Seeing defeat approaching, Hugh Gaitskell made his never forgotten promise to fight, fight and fight again, which he did to such effect that the decision was reversed a year later. I am sure that some noble Lords were present on that occasion; certainly Lady Gaitskell was. He asked at that time—I am summarising what he said, but it can be looked up in the Library—how could the parliamentary party be forced to turn themselves into pacifists, neutralists or fellow travellers? That was the question that was asked in 1960. It is still the question today. That is the issue before the party to which I have the honour to belong. How can the parliamentary party, which agrees with none of these things and whose case is put so well in this House and the other place on the Front Bench and elsewhere, be forced to force itself into these strange categories?

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In a speech on the Address last November I discussed the pacifist case, with, I hope, proper seriousness. No Christian and I should think no one of any ethical sensitivity, can occasionally avoid the feeling that perhaps there is something in it after all. One feels that one must go back time and again to make quite sure that one does not accept the case. I set out the moral dilemma last November as honestly and as starkly as I could. I explained then why I came down reluctantly on the side of national defence, even in the nuclear age, which means—as my noble friend Lord Stewart has explained—not only possessing nuclear weapons ourselves (that is a matter of argument) but certainly being allied to countries and helping countries that possess nuclear weapons.
If one rejects the pacifist case, is there any alternative to the type of defence system in which we have participated since the war? There is something that we could call "neutralism". I shall not deal with fellow travellers now that those words are not in common use: I think that the current word is "subversive" which covers an even wider category. At any rate, I do not consider that fellow travellers are an important issue in this particular argument today.
One can look at neutralism from two points of view. One could feel, as I do, that, in view of the traditions of this country and in view of our wealth—referred to by my noble friend Lord Brockway—and our moral ideals, it would be a terrible abdication and be highly dishonourable to say, "No, we shall opt out and play no part whatever in trying to maintain the peace of the world". However, I have met mothers who have said, "I am sorry, I am not interested in international affairs; I am concerned only with the safety or survival of my own children". Without going over ground dealt with so well by my noble friend Lord Stewart, one has to say that it is an impossible policy, that the policy of neutralism cannot, in fact, provide neutrality in time of a nuclear war. So there is no escape along that route.
I shall not go at length into the details of those issues. The crux is whether we continue to face our responsibilities as members of the Atlantic Alliance. I would concentrate on that one question. The tremendous issue was so rightly dealt with by the noble Lord, Lord Carver, who is a distinguished general, and all other issues are, in a sense, subsidiary to that issue. Until it is settled we cannot make sense of any of the other policies. That does not mean that I feel that all wisdom has been delivered to me on any of the other questions. I would be inclined to follow the great service chiefs if they could agree with one another. If that were so I would be a slavish adherent to them. However, I am dealing with this single issue.
If anyone objects to our continued membership of the Atlantic Alliance he must adopt one of two lines of argument. He must either say that it was a mistake from the beginning or that it was the right policy at the beginning—in the days of Clem Attlee and Ernie Bevin—but it has become wrong for some reason since then. In a sense one is preaching to the converted here, but somehow or another I hope that these words will filter out elsewhere. I can only say that nearly everyone whom I respect most in the Labour Party agrees that it was the right policy to start with. I
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cannot believe that anyone can seriously come forward and say that the Russian threat today is in some way diminished from what it was when Ernie Bevin took over. At that time Russia had already overrun Eastern Europe and there was no small prospect that she might overrun the rest of Europe. That was the situation. Taking the whole world scene, I do not see any substantial difference today.
I conclude on this note. I sat with Mr. Ernest Bevin for three weeks in 1947 at the meeting of the Council of Foreign Ministers, which broke down. The next morning he was more depressed than I had ever seen him, because he felt that the world was breaking up into two halves. The noble Lord, Lord Mayhew, who served with him a long time, will know that to the end of his life he clung to the idea of somehow reuniting the world. Therefore, to put it in one sentence, if one is to take a firm line—as I think most of us do here, and I certainly do—in favour of an active membership of the Atlantic Alliance, one must never lose sight of the higher, wider vision of a peaceful world society.
9.52 p.m.
Baroness Vickers: My Lords, I should like to congratulate the two maiden speakers today, particularly the noble Lord, Lord Mayhew. I remember him resigning in the other place on a matter of principle because he did not agree with the policy of his party, together with Admiral Luce. It was a very brave thing to do and we are very glad to see him here today taking part in this debate.
I should also like to thank the noble Lord, Lord Thomas of Swynnerton, because I found what he said extremely interesting. I am sorry that the noble Lord, Lord Strathcona and Mount Royal, is not here at the moment, but I should like to thank him because he did a good job and was very helpful to me; he had a great deal of patience in answering Questions, and so on. I should like to put on record my thanks to him for all the help he gave me.
I like the approach to the defence White Paper; it appears to me to be more realistic than many that we have debated in the past. I think that we should congratulate Mr. John Nott on the excellent work that he has done in a short time and the fact that he has produced a very clear and succinct Paper. Napoleon stated that the factors that affected morale in the war were fatigue, distress and fear. I should like to add another at the present time, in peace-time; that morale is affected by uncertainty. Therefore, I hope that today we shall—and I think that so far most people in the House agree with me—reach some agreement whereby we can back most of the proposals in this White Paper. Many times in the other House we heard—as we do today—a party who did not like a Bill say that they would repeal it next time they were in power, or that they would change the policy. I believe that that is very detrimental to defence.
I welcome the fact that the three services are to combine. I remember the debates that we had in another place where we often competed against one another to get the Minister's attention and his services. We should also remember that it was Lord Mountbatten who originally wanted the services to come

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together. He did his very best to get them to do so. Unfortunately, at that time he failed.
The noble Lord, Lord Chalfont, mentioned the very interesting point about propaganda. Recently I have been collecting all sorts of subversive literature in South London which I have sent to the noble and learned Lord, Lord Scarman, for his use during his inquiry.
I should like to ask the Minister some questions, of which I have given him warning. In regard to the points I raised previously concerning the Royal Dockyards and the letter that he wrote to me in December, has any action been taken on those various points? Time has moved on and I should like to have some further knowledge of what action can be taken? I know that everyone who is interested in naval matters will regret the closing of Chatham Dockyard, where excellent service has been given for over 300 years.
I should like to suggest to the House that we should very quickly set up a committee of the local people, businessmen and others, because the Medway towns are going to be in a great difficulty with employment if some action is not taken in the very near future. Also, we want to keep their morale going because we have to wait for another two or three years before the dockyards close. Uncertainty with regard to what they are going to do is unfortunate.
I should like also to suggest that the excellent barracks there might be used for the RNR and also the Territorials, and perhaps a marina may be made, as they are popular at the present time. Perhaps my noble friend would also say a word, or let me know, what is going to happen about the dockyard at Gibraltar. If that is going to be closed in due course, there will have to be other work provided there, because the whole of the fortress is so dependent on this dockyard.
I thought the White Paper realistic in the proposal in regard to the United Kingdom and NATO, and the role of home defence. Regrettably, the latter has to be taken very seriously indeed, as events in war could become just as much a problem with home defence as external security. The very bad literature that I have been collecting recently gives great point to this. It is essential to hold our key position in NATO. But if we are to keep the sea lanes open we need faster, smaller and more heavily armed ships, and less costly surface ships, for the vital anti-submarine, anti-air and missile tasks.
For many years I have been against the ship construction branch at Bath, and the manner in which they run the dockyards. I should like to suggest that the Ministry could merely produce good staff requirements, and that private enterprise could carry on a shipbuilding programme much more quickly and less expensively than is being done at the present time. I understand that in Norway, which some people have mentioned in respect of NATO, small subsidies are given to shipping firms, and if the floorboards of car decks are lifted in some of the Norwegian fjord ferries, there are rails ready in place so the ferry can rapidly be converted into a minelaying role. I consider this an admirable suggestion from the Norwegians.
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Small conversions can be made at relatively low cost, and it would enable some of our small roll-on/roll-off ferries to be taken quickly from trade at a time of crisis to carry mines or landing craft, or helicopters that are used for the Royal Marines. I think that only one noble Lord has mentioned the Marines. I am glad that the three commando brigades are being kept, but it is unfortunate that No. 41 Commando is abolished. I do not know whether there is any chance in the near future of having No. 41 Commando reinstated.
The Royal Marines have a very special role with NATO, and I understand that SACLANT has more tasks than the United States Marines, combined with ours, can undertake at the present time. There is a need for a reserve for the Royal Marines and the Royal Navy. There has always been a demand among young men, and still is I gather, to become members of the Royal Marines. When recruiting is allowed, I hope perhaps they will consider the Royal Marines first, because it is very advantageous for young men, and the training is probably easier than on going into the Navy of the Air Force.
To do the required tasks in and beyond NATO of course mobility is essential, and this is what worries me at the present time. I gather that the LPHs—the "Bulwark" and "Hermes"—are to be done away with, and also the LPDs "Fearless" and "Intrepid". In fact, I have the Sunday Times here, which even gives a picture of the catalogue which is concerned in putting these ships up for sale. I should like to suggest that, until we get some other ships, "Fearless" and "Intrepid" should be kept, and also, if possible, the other ships I mentioned just now.
Having mentioned the roll-on/roll-off ferries, it is clear that the other ships, the LPDs, would be very useful, and I believe we need them for transporting helicopters, for example to the Norwegian and Danish islands. If the Royal Marines are to perform their tasks, then I have been led to understand that we need to keep both ships to which I have referred.
Finally, a word about war stocks In regard to NATO planning, there has been a failure on the part of many countries to achieve the recommendations about the levels of war consumable stocks, for example ammunition. I understand that at least 30 days' stocks are required, that being the time it would take for the production line in America to gear up and supply replacements, and especially is that the case for stocks of air-to-air missiles. I understand that the rearward location of combat stocks for 1 (BR) Corps in Germany, the inadequate and somewhat unrealistic sources available and planned for forward re-location in time of emergency, has been of concern to 1 (BR) Corps Rhine Army and SACEUR for a number of years.
I wish to offer my congratulations to the women's Services for the part they are playing at the present time. We discussed this when we debated the Armed Forces Bill, so I will not go into detail. I hope the present White Paper will be acceptable to the Opposition and will give confidence to the men that we shall have better services in the future.
10.2 p m.
Lord Hankey: My Lords, I warmly support the general line of the White Paper and of the Government's defence policy. I am sure the Government are right to concentrate on the effective introduction and use of the newest proven technologies. These weapons are very costly, but we owe it to our people and defence forces to provide them with the best weapons we can afford. As the White Paper makes only too clear, that involves the most difficult decisions, and in my view the Government are being courageous in going forward the way they are with what is, on the whole, a well-balanced programme, and they have my support.
Having said that, I wish to make a few pointed comments, and I beg the Government earnestly to think about them. First, it is important to think more about NATO now there is a new Government in France. Frankly, NATO has not seemed to me to look very impressive so long as the French did not co-operate on the military side but only on the political side. The position of the allied forces in Germany, especially in South Germany, has always looked rather uncertain unless they were sure of having secure lines of communication back through France. But to what extent have they? Do they know the strength of all the bridges? Have they stocks of arms on the airfields and so on further back along those lines of communication? The whole thing looks to me to be very dicey.
The new French Government of M. Mitterand seem to be much less unto-operative than their predecessors, and I should have thought the time had come to approach them to see whether a fresh deal could be arranged. Even if the staff contacts exist, and I do not know whether they do, my mind goes back to the Anglo-French staff arrangements of 1913 and 1914. Having studied the history of that period in a German university, I have a sort of impression that the Germans never believed we were fully committed. We claimed that we had no formal alliance, just the Entente Cordiale, and said that we were formally committed only to Belgium. I am not making excuses for the Kaiser. But I want to say that uncertainty in these matters is dangerous in the years we live in, and I believe that if there were certainty about France's position now, there would be somewhat less likelihood of a future possible miscalculation in the Kremlin.
Secondly, I come to Trident. I think that the Secretary of State has made a quite unanswerable case for Trident. I entirely support him. But the decision involves some further points which have not been mentioned and which I am fairly sure are quite important. First of all—and this is an awkward one—is it any use leaving the servicing and maintenance of our Polaris and Trident submarine force in the hands of civilians on the Clyde?—civilians of such doubtful loyalty that they go on strike when a fresh submarine has to be serviced in order to go to sea, as happened last winter. Personally I think that that behaviour was quite intolerable. I do not care what the legislation of 1906 or 1974 says: in a matter of national defence importance that kind of behaviour is intolerable. If we cannot have better arrangements, the civilians
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should be got rid of and replaced by service personnel, even if it involves further training and an addition to manpower. It is only reality that counts in these matters. If the whole of Scotland goes on sympathy strike when that happens, our Department of Employment will have an opportunity to show the effect of its legislation on secondary action.
For my next point about Trident, I ask your Lordships please to conjure up in your minds a picture of the map of the Clyde, and then across the sea—it is no great distance—to the coast of Northern Ireland, full of indentations. Should we ever—I repeat ever—risk that indented Northern Ireland coastline being out of our own control? Certainly not, certainly not. If a Soviet hunter-killer submarine were able to lie undetected in one of those bays, as I am pretty sure German submarines lay undetected occasionally on the bays of Western Ireland, then it might very well neutralise our deterrent. I do not think that there can be any question but that we must hold on to Loyalist Northern Ireland; and let us remember that the Loyalists are anyhow in a handsome majority.
Thirdly, I want to say a few words about communications across the Atlantic in the event of war. This matter has been mentioned by many noble Lords today, but I believe it to be of outstanding importance. Unless we have new secret weapons which one must not ask about, I just do not believe that we can dispense with convoys for the absolutely vital protection of shipping which will be bringing arms, food and troops across the Atlantic for the support of NATO.
In the First World War the Admiralty tried to maintain open lanes which were effectively patrolled. They failed completely; we had to have convoys. In the Second World War various methods were tried, but in the end we had to have convoys. Let us face the fact: we very nearly lost both wars because we could not use the North Atlantic without unacceptable shipping losses. Even if we have secret weapons, we do not know how effective they are going to be, or what response other navies might have to them. I should have thought that it was not worth the risk to have an unacceptably low number of escort vessels to provide protection for our convoys.
At the end of the last war we had 600 escort vessels. We now have 50 or 60. I am not quite sure of the arithmetic; I find it rather hard to follow what the Government really have. The Russians certainly have many more submarines than the Germans had, even at the height of the war, and the submarines are much more effective. They can go further, they can stay submerged for longer, and they have much more sophisticated weapons. Ever since Helsinki ushered in the period of so-called détente, the Russians have been making submarines and tanks just like sausages. Why, my Lords? I ask, why?—certainly not for their own defence. Really, can we not all see the writing on the wall?
I am glad that we are constructing more escort vessels. I hope the new Type 23 will be approved, and its construction pressed forward as fast and as extensively as possible. We have to think of the oil supplies for NATO, including the United States, coming all round Africa now. If, as I hope, many of your Lordships

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have read that great book by Admiral Gorshkov, the Soviet admiral—it is called Red Star at Sea, and it is available from our Library—your Lordships will realise that the Soviet Navy has been built up and trained to operate in all the oceans of the world; and I believe many of their nuclear submarines can catch any commercial vessel, even the fastest ones.
So I come back to the vital need for convoys and for the escort vessels which are essential for them. In the nuclear age I believe convoys will have to spread out—otherwise, one atom bomb would destroy the whole lot—and this means even more escort vessels than were necessary before. So I do not think the danger has got less; I believe it has got greater.
Of course, there is the problem, I realise, of paying for these vessels. I know that this is a balanced programme, and the great difficulty is that we do not want to cause inflation. But I want to support what Lord Kimberley said. He made some extremely cogent points. The industrial ramifications of ordering ships are immense. Not only does it help to support the shipbuilding yards; it is a great help to steel, to coal, to transport, to engineering, to electronics and to weapons production. It goes right through industry; and a lot of the cost will be recouped by not having so many unemployed and by not paying people off to be redundant. When you take into consideration the enormous sorrows and miseries of unemployment and the social disasters we undergo on that account, I am sure that it is well worth while and will handsomely repay the effort.
There is now another similar question. I want to press the Government strongly to decide in favour of our new heavyweight torpedo, which is already in an advanced state of development by Marconi. I understand the Americans want us to lay off the production and to buy, instead, their projected Mark 48 ADCAP, although, as a matter of fact, it has not been developed so far as has our own heavy torpedo. The Americans are suggesting that they might buy some of our lightweight Stingray torpedoes in return.
I have had a lot to do with export promotion in my time, and I can assure your Lordships that our American allies, whom I admire immensely, are really ruthless in these matters. They will, I think, string us along with talk about Stingray, but when it comes to the crunch, especially in Congress, I do not personally believe they will buy any, or not any large quantity. They would be crazy to become dependent on us for any large quantity of their own torpedoes.
So let the Government not be bamboozled by the Americans, if they are indeed in any danger of it. We are well on the way to making a first-class heavy torpedo of our own. Let us not waste all the money spent on developing it. Let us not lose the valuable teams of scientists, of technological experts and of engineers who are now working on it. Let Mrs. Thatcher's Ministers show more character and consistency of decision than those who have failed so often, in both parties, to press great British inventions and enterprises through to a successful conclusion.
Of course, this will cost money; but we need to promote employment and development in precisely these areas of very high and very new technology. The
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engine will be American, so the Americans will have their share, anyway. If necessary, I think we should bring in the Germans to help. They are very good at torpedoes, and co-operation with them would be good for Europe. Moreover, I am told that there will be an immense technological spin-off from the new heavy torpedo. Just think of the enormous spin-off from the American space probe. Just to mention only one example: it gave such a leap forward to "Silicon Valley" in California that they overtook the Japanese—almost incredible at that time. I believe that there would be a very valuable spin-off which would help just those new industries which the Government are most anxious to help. So I press this proposal on the Government.
That is all I want to say today, but I want to wish the Government Godspeed in their efforts to improve our defence forces. NATO must be able to defend itself in a conventional war. We cannot be quite sure what is going to happen or how long we have to prepare; and, in the face of the SS20, we must have the Trident deterrent ourselves.
10.16 p.m.
Viscount Mersey: My Lords, I wear two hats: a personal hat and a trade union hat. Wearing my personal hat, I have this to say: I support the Government White Paper, lock, stock and barrel. While lamenting the loss of surface ships, I believe that the Government have achieved the best mix in this period of economic stringency. In particular, I agree with the noble Lord, Lord Hankey, that the best way to achieve a lasting peace lies in Trident D5: a horrible weapon but one that is proven, inexpensive and accurate.
I have only one nagging doubt about the system—and it has already been touched upon by the noble Lord, Lord Kennet—and that is that boats, working at maximum range from the Admiralty, might have their wireless communications jammed by the Russians. I should be grateful for any reassurance that the noble Viscount could give me on this point. The reasons for my arriving at my pro-Trident decision are measured but I do not think that I will go into them. They have already been stated by others far more distinguished; I will merely say that I support them.
I turn instead to my second or trade union hat. I have been a loyal member of the Association of Cinematograph Television and Allied Technicians for 20 years. On 7th June my union set up a committee for disarmament: not just nuclear disarmament, total disarmament. Thus I find myself party to a pacifist trade union block vote. When the head of our union, Mr. Alan Sapper, tells the TUC that his 20,000 members want Great Britain to disarm then I am one of the 20,000 despite being pro-Trident.
I note with great interest the remarks of both the noble Lord, Lord Chalfont, and the noble Baroness, Lady Vickers, about CND. It is easy to dismiss Alan Sapper as one who is singing the Kremlin song. As a matter of fact, I think it is too easy; it is just not that simple. My union at least consists of reasonable, intelligent people whom I know well, and Mr. Sapper

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himself is a reasonable man; a trade unionist who does not support a system where trade unions are illegal. So I shall just quote two paragraphs from our union journal to show how the ACTT arrived at what is to my mind a catastrophic decision. The first is this:
"Proposing the motion, Yvonne Richards of the writers section said that the danger of nuclear war was suppressed and distorted in most of the press. No headlines had been given to President Carter's statement that in the first few hours of nuclear war the killing would be equivalent to all the wars of history".
That is correct so far as it goes, but Miss Richards has fallen into the trap of thinking that the point of the deterrent is to use it: whereas surely we all know by now that the deterrent's job is to prevent war and if we use it we will have failed, as the noble Earl, Lord Cork and Orrery, has already said.
I continue quoting from the journal:
"Jim Connock of the editorial section was a lone voice opposing the motion. He argued that the ACTT had enough difficulty in calling meetings to deal with its own work, to which Miss Richards replied 'I don't see how we can separate our work from our survival'".
She is absolutely right here too, so far as she goes. We all want to survive. We all want peace. But she must realise, and we all must realise, as the noble Lord the Lord President of the Council told us at the start of the afternoon, that this country would be a prime target for Russian attack even if we did disarm.
It may not be a nuclear attack: it could involve chemicals—even more horrible. Even if it is conventional, I now believe that the damage caused would be just as destructive as that caused by any other type of warfare. I believe the Government face a difficulty, which is that the CND argument can be expressed by slogans so simply and quickly. I am sure that your Lordships know them well: "Ban the bomb", "No more nuclear deaths", "Rather red than dead"—whereas the pro-nuclear argument is more complicated and cannot be put across in much under 20 minutes. I have dwelt on the ACTT attitude not merely because it is my union, but because it is a union, on film and television, of communicators. It is obvious to me that the communicators themselves are suffering from a lack of communication from the Government. How else could they have come to such a disastrously naive conclusion?
It is indeed in the general field of communications, or public relations, that I would mildly criticise the Government. The Secretary of State, Mr. Nott, has told our defence group that he wants to make a film publicising the sophisticated, pro-nuclear, pro-Trident, pro-White Paper view. I have a suggestion for Mr. Nott, and in no way is it special pleading. I am not suggesting that he comes to my company or indeed to the companies of the noble Lords, Lord Birkett, Lord Brabourne, Lord Chalfont, or the noble Lord, Lord Snowdon. What I do suggest is that he comes to our union and asks them to make that film. I doubt whether they will laugh in his face. The ACTT has made films on its own before, and of course it would mean extra work for the film industry, which is at present 80 per cent. unemployed. Provided that the Government arguments can be seen to be well balanced, provided that they cannot be dismissed as Tory propaganda and are patently reasonable, I think they will have a sympathetic hearing, as Mr. Sapper is a reason-
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able man. He would certainly listen with interest and intelligence to the Government's case.
It is only by taking the bull by the horns in this way that I believe the White Paper and Trident have any long-term chance of success, because the Trident programme itself is long—at least 11 years before it becomes operational. It must be probable that during those 11 years a Government will come to power which is not a Conservative Government. And if that Government scrap Trident, then indeed we shall have wasted billions of pounds and, worse still, we shall have lost the best and most credible deterrent, so that some form of Russian attack will be more, not less, likely. We must prevent that through strength. We must deter. We must have Trident D5. Most importantly, we must explain to the people of Britain why we must have it.
10.23 p.m.
Lord Jenkins of Putney: My Lords, I should like to join in the congratulations that have been given to the maiden speakers today. I must confess that I did not hear every word of them—sometimes one has to leave the Chamber—but I heard enough to know that the congratulations which were conveyed to the maiden speakers were very well justified. I should like to convey this warning to them, however. Their future utterances in this Chamber will not necessarily be followed by the same universal acclaim which always greets their initial statements, so they must be prepared for the possibility in future that things may not go quite so smoothly as they have done on this occasion. None the less, I congratulate them.
In the last war millions of people lost their lives, but perhaps the abrogation of the laws of the war themselves may yet prove to have been an infinitely greater disaster. Early in the war British bomber pilots brought their bombs back or dropped them in the sea if they could not find the designated military target, so as to avoid any possibility of civilian casualties. By the end of the war the RAF was killing—possibly incidentally, but none the less killing—certainly hundreds and thousands of men, women and children in Hamburg, Dresden and other German towns, while at Hiroshima and Nagasaki the American Air Force, with our connivance, committed the atrocity which may end civilisation, if not humanity itself.
I should like to tell your Lordships of a little incident which happened during the war. I was in India at the time, a very humble member of the command presided over by the late and deeply lamented Lord Mountbatten of Burma. We were due to go down to Burma, and then the bomb was dropped on Nagasaki and Hiroshima. The story was put around that this would have the consequence of saving our lives, and there may have been a good deal of truth in that—I do not know. But I recall one airman saying to me all those years ago, "They may have saved our lives at the expense of our children's". That thought has remained with me for the rest of my life and it is the punch, the drive, which has carried me in total opposition to the whole idea of the nuclear weapon.
I believe it was a somewhat similar consideration which moved Lord Mountbatten in his different opposition to the nuclear weapon. But, make no mistake about it, although not a unilateralist, Lord

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Mountbatten was deeply and fundamentally opposed to the whole idea of nuclear war, and one could quote him time and time again on that issue. In 1941, British officers received a little booklet called What Acts of War are Justifiable? It was written by Professor A. L. Goodhart—a famous name known to many of your Lordships—and published by the Oxford University Press. I kept my copy and I have it here. Goodhart said:
"the separation of armies and peaceful inhabitants into two distinct classes is, perhaps, the greatest triumph of International Law. Its effect in mitigating the evils of war has been incalculable".
Alas! even as he wrote, those laws were being set aside, and since then mankind has been accumulating weapons which make their observance impossible. Furthermore, since then in relatively minor wars civilian populations have been the targets. The monstrous attack by Israeli aircraft on Beirut is only the latest example. Goodhart closed his little book by saying that the war was being fought to re-establish the laws of war. If that was so, that war was fought in vain.
The modern nuclear weapon is an instrument of mass murder and Lord Mountbatten did not believe that its so-called tactical use was possible, without unleashing the total destruction of civilisation. Behind his constant protests one senses the indignation of the decent military man, who feels that lie has not joined the Royal Navy to become involved in the wholesale slaughter of innocents. Lord Mountbatten has been foully murdered, but other leading military men are beginning to stand up and, in different ways—not necessarily in unilateralist ways—are beginning to express their grave doubts about the desirability of nuclear weapons. Notably among them, I listened with great attention this afternoon to what the noble and gallant Lord, Lord Carver, had to say on the subject. Though we differ in important detail, I think that fundamentally we both have at root a horror of the possibilities behind this weapon.
In what was the last big speech that he made, Lord Mountbatten said:
"The world now stands on the brink of the final abyss".
If we are erecting a statue to Lord Mountbatten, those words should be engraved upon the plinth. What Lord Mountbatten was talking about was the nuclear abyss. In this context, standing on the edge of the nuclear abyss, the Government's defence programme The Way Forward reads a trifle ominously. I will not rub it in. The Astronomer Royal, the Nobel prizewinner, Professor Sir Martin Ryle, does not believe in civil defence. He said in a BBC World Service Broadcast on 27th May:
"I think the way things are going nuclear war is almost inevitable. I think the enormous excess of destructive power which both super-powers now have and the gradual transition from weapons which were clearly designed to make deterrence work and are clearly not designed for that purpose now but are weapons of first strike capability means that one side or the other will attempt to send sufficient precise weapons to destroy the launching sites of the other. The system is inherently unstable and one side or the other is eventually bound to do it".
The problem is that all through these post-war years while talks about multilateral disarmament have been taking place the weapons themselves have piled up and piled up. And they are still piling up, despite
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the fact that we have reached the point at which there are so many powerful weapons targetted across the world that Sir Martin Ryle says that the Soviet Union could be wiped out 30 times and the United States 20 times.
The polls are now suggesting that the majority of people in this country believe that Ryle is right and that Mountbatten was right and that if Britain does not opt out of nuclear war, this country and its people will be wiped out of history. It is a hard conclusion to arrive at.
The argument against nuclear disarmament is that if we do it, the Soviets will walk in. I believe this to be nonsense. Russia has enough on her hands without wishing to occupy an island several countries away. It is also suggested that the Soviet Union will drop nuclear bombs on a Britain without nuclear weapons. This seems to me to be equally unlikely. Present nuclear missiles on all sides are targetted on the bases of the other side—in sheer self-protection. If you have nuclear weapons, this must be done. To waste nuclear weapons on a country without them would be sheer folly.
I recommend to your Lordships a book which was mentioned by my noble friend Lord Kaldor, Professor Robert Neild's How to Make up your Mind about the Bomb. I do not agree with everything Professor Neild says in his book, but one thing we can be sure of is that he is neither a scoundrel nor a fool, which the noble Lord, Lord Soames, suggested supporters of CND must be. He says that they are either wittingly or unwittingly playing the Russian game. That means they are either fools or scoundrels. Of course it does. If they are wittingly doing it, they are scoundrels. If they are unwittingly doing it, they are fools. Perhaps the noble Lord does not like it to be put so baldly, but that is what he is saying. Is my noble friend Lord Brockway a scoundrel or a fool? Is my noble friend Lord Ritchie-Calder a scoundrel or a fool? What has the noble Lord, Lord Chalfont, got to say about that? Into what category do these noble Lords fall? And into what category does Monsignor Bruce Kent fall? Is he a scoundrel or a fool?
Lord Soames: My Lords, I think that they give pleasure to the Russians.
Lord Jenkins of Putney: My Lords, the noble Lord may say that, but it is not exactly what he said before. He is toning it down a bit, because he realises that there is an intellectual argument here if only he will take it up and try to deal with it on an intellectual level and not go in for the business of smearing, of which the noble Lord, Lord Chalfont, gave us an example this afternoon.
Lord Chalfont: My Lords, as the noble Lord has made a very serious accusation, perhaps he would give way. In my speech, which the noble Lord has called "smearing", I stated a number of facts from which people may draw their own conclusions. Will the noble Lord deny any of the facts, or will he confirm them?
Lord Jenkins of Putney: My Lords, I will neither deny nor confirm what the noble Lord said. I have my own speech to make. So far as McCarthyite tactics are concerned, I do not play that game. I will deal with what I have to say. Let me get back to a point on which perhaps there may be a little more agreement. The USA and the USSR will keep their nuclear weapons until they agree a basis of mutual reduction.
Unilateral nuclear disarmament by Britain is not an alternative to multilateral nuclear disarmament throughout the world. It is a means whereby the process of de-escalation may be started; without it there is a straight line from here to the ultimate holocaust. How long the line may be is anybody's guess. War by accident could occur at any time—there have already been more narrow shaves on our side. We do not know how many or how narrow on the other side, but to suppose that the USSR is more technically efficient than the USA in this respect flies in the face of expert opinion.
Then there is proliferation. More and more countries are reaching out towards the bomb, and some of them are not stable democracies. How long is the line? How near the brink of the abyss? It could be days, months, years—a decade is perhaps an overestimate. In other words, the expectation of life of a child born in Britain today may not be more than 10 years. That is the reality of the situation we are in, and that is why any talk about preferring to be dead than red is simply failing to deal with the problem at the level it demands. To choose personally to die rather than to live in slavery may be noble, but to determine the end of civilisation is a choice no one is entitled to make. A nation is entitled to live to struggle back to freedom and not to have its nuclear extinction decided by foreign nationals. For that is our position. We have handed over to the United States of America the power to determine our own destruction.
The question now is whether or not European civilisation is to continue. After the "theatre" nuclear war now being planned in the United States, Europe will cease to be a place of urban living; it may be a place of no life. The assumption is made that human life is permanent. It is an assumption we all share and each one of us believes in our own immunity: I would almost say, in our own immortality. I was in Fighter Command in the last war and I never met a pilot who did not assume that he would be the exception and would survive the war. He was usually wrong.
Today, we extend our personal confidence into a belief in the indestructability of our own civilisation. This time we may all be wrong. The human experiment may be God's decision or it may be a marvellous accident, but either way it is probably unique. It is, however, much more fragile than we care to admit, and for the first time mankind is now capable of destroying the conditions of human existence. We have the power to terminate life on earth, and all the indications are that we are on the way to using that power to commit the ultimate blasphemy of ending consciousness. We can turn our beautiful earth into another moon spinning eternally—bereft perhaps of the most wonderful creation of all universal time. There is
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no guarantee that this terminal disaster can be prevented, but we must struggle against it for it is more dignified that man shall end protesting against his fate rather than supinely submit to it.
Why is CND—this effort to make mankind safe from self-extermination—resisted so fiercely, so passionately? Partly, I suppose, because to recognise the validity of the struggle against it means recognising the reality of the danger. To some extent Governments do recognise reality. The official estimate of survival after a nuclear attack is not at all optimistic. The noble Lord, Lord Belstead, on behalf of the present Government, put the survival figure in this country at between 15 and 30 million. Further research since then suggests that in fact it is unlikely that so many would survive a major attack. In any event, the conditions in which the survivors would exist would be such that they would regard the dead as fortunate.
There is an alternative scenario which we can follow if we choose; one that would lead us to a world in which, if we were not totally free from fear, fear would be reduced to tolerable levels. The future demands a Government committed to unilateral nuclear disarmament. It further demands that the policy shall be carried out rapidly and totally.
The second necessity, in my personal view, is that like Canada and the other non-nuclear countries the United Kingdom shall stay in membership of NATO for as long as NATO remains. As a member of that body the United Kingdom will take part in negotiations for multilateral nuclear disarmament with the Warsaw Pact powers. There is every likelihood that such negotiations would bring about a gradual reduction in nuclear arms in Europe, accompanied by a process of mutual inspection—provided that the United Kingdom has set the example by showing that it regards the possession of nuclear weapons as a danger and disadvantage rather than a deterrent. We are uniquely placed to set that example because in this overcrowded island even the present Government admit that with our nuclear weapons we are at this moment so vulnerable that we could be destroyed overnight as a functioning entity, with all our great cities in smoking ruins and the remnants of our people wandering wounded sick, and praying for death.
The two super powers could only gradually dismantle their missiles. This would have to be done under mutual inspection and accompanied by an agreed scaling-down of conventional arms and manpower, perhaps leading in the longer term to the mutual dissolution of NATO and the Warsaw Pact. There is no certainty that such a procedure will succeed, but what seems to me to be quite certain is that if something like it is not embarked upon soon, then, at the very least, we shall be approaching the end of European civilisation.
10.42 p.m.
Lord Beloff: My Lords, it would appear to be the view of the noble Lord, Lord Jenkins of Putney, since he entered your Lordships' House that we are an exceptionally foolish and ignorant body of men and women. Does he seriously believe that anybody in this House is unaware of the potential of nuclear destruction; that the documents and reports which he and the noble Lord, Lord Brockway, have quoted

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from come to us as a vast surprise? The noble Lord asks us to discuss this matter not with passion but with intelligence—and the beginning of intelligence is to agree that all of us recognize that a nuclear war would be damnable and, perhaps, terminal. The differences arise only over how such a catastrophe is to be avoided.
It is the view of Her Majesty's Government, and I believe the view of the majority of your Lordships, that catastrophe can only be avoided if we analyse in detail the international scene with which we are confronted and which has led us and our allies to have as part of our defence capability a nuclear deterrent. In his maiden speech, my noble friend Lord Thomas of Swynnerton made some useful and helpful remarks to us all about the nature of our principle antagonist. I would add only one point which my noble friend did not make, and that is that the major difference between the Soviet Union and the rest of us is that the Soviet Union, to judge from the statements made by its leaders and from the instructions given to its military and diplomatic personnel, believes that that is still a possible instrument of policy and that it does not exclude from its armoury any form of forcible compulsion.
This is not to say—and indeed it would be absurd to say—that the Soviet Union desires nuclear war. We are constantly being asked to make a claim which no one here claims. What we say is that the Soviet Union, like other great imperial powers in the past, will use or threaten to use, and will use if it can use with impunity, the minimum of force necessary in order to secure what it regards as its national objectives. And in this respect of course the noble Lord, Lord Chalfont, was perfectly right, because one way of achieving your objective is to weaken the resolve and capacity of your opponent. It is, after all, far cheaper to move people to protest against your opponents' nuclear weapons or other forms of armament than it is to go on adding to your own armoury. And, from the Soviet point of view, it makes very little difference whether they add another set of missiles in Europe or persuade our Governments through popular pressure not to counterbalance them with missiles of our own.
From that point of view, Lord Chalfont, and indeed the noble Lord, Lord Soames, were perfectly right to indicate that objectively considered, if I may use a Marxist term, the various movements going on in Europe today to make it impossible to match Soviet theatre weapons are instruments of Soviet foreign policy; and CND is the instrument of Soviet foreign policy in this country. I think that Lord Chalfont made an omission, which the noble Lord, Lord Hankey, called to our attention: that is to say, it is probably more dangerous that we should have in Government service persons who take these views than those who are liable to riot on the streets. And I think one of the assurances that Lord Hankey asked for from the noble Lord the Minister when he winds up was to be told the precautions that will be taken to see that our ability to manipulate such defences as we have, whether in our nuclear weapons or in our communications, is not at the mercy of those who may take views hostile to the interests of this country.
The noble Lord, Lord Mayhew, with whom I have
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been arguing on and off for half a century, in a most interesting and exhaustive maiden speech did, I think, commit one serious but perhaps unintentional error. He said that we should distinguish when we deal with subversive forces between those like the Communist Party, who are more or less—it varies at different times—adherents of a pro-Soviet line, and others like the various groups that call themselves Trotskyist who hate the Soviet Union as much as any lover of freedom may do. I would not disagree with the noble Lord, Lord Mayhew, that the name of Leon Trotsky is not one to conjure with in Red Square. But does it very much matter? If these groups are making civilian life or Government activity difficult or impossible, the ultimate beneficiaries can only be the enemies of our country, who at the moment happen to be the Soviet Union.
After all, if we look at the partial disintegration of the French armed forces in 1940, which preceded the French catastrophe, the number of those who were plotting in favour of a Nazi takeover of France was very much smaller than the number of those who were inspired by the Communist Party, which at that time was hostile to the French war effort. Yet in the end it was the Soviet Union that suffered from the fall of France, to which the communists had contributed, and it was Nazi Germany, which had very little to do with their activities, which profited by them. Therefore, it seems to me that the noble Lord, Lord Chalfont, was perfectly right in saying that we must look at all those movements in our country which tend to devalue our confidence in our own Government and our own institutions and our confidence in our own allies if we are properly to see the dangers with which we are faced.
I emphasise the word "allies" because it seems to me that a great deal of the propaganda and the suggestions that are made, are, in fact, based on the assumption that the protection which we have received from our allies, and notably the United States, has not been the principal reason for which we have enjoyed 36 years without war. Our whole defence posture, as is made clear in this and in every preceding White Paper—and it has been made clear by speakers on both sides of the House tonight—depends upon the maintenance of the alliance. I think that the noble Earl, Lord Longford, will hardly disagree with me—indeed, it has been said in terms by the noble Lord, Lord Stewart—that it is absurd to think that we can somehow decouple our preparations for defence from the NATO alliance and continue members of that alliance.
For that reason it seems to me that our attitude to the White Paper and to defence policy in general must be to see whether we are playing within that alliance the most useful role that we can. I can see that there can be serious differences of opinion as to whether the existence of a separate deterrent in our hands or indeed in the hands of the French is an important or major contribution to the general position of the alliance. I am inclined personally to give it the benefit of the doubt in the sense that it is a producer of doubt, that it is even less likely that the Soviet Union will challenge in any important way the vital interests of members of the Western Alliance if there is even a

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thousandth or a millionth particle of fear that they might otherwise incur a deterrent nuclear response.
If we agree with that, then certainly we must take account of what our allies think is the most important contribution we can make, and we must do it in the light of the fact that the Soviet armoury consists not merely of nuclear armoury, not merely of its conventional forces massed in Europe, but also of a navy, though even the admirers and defenders of the Soviet Union's position could hardly claim that a large ocean-going navy is needed to defend an almost land-locked motherland.
We must, therefore, consider that it may be that there are uses to which this navy will be put which are not necessarily part of some cataclysmic plan for a global conflict. Indeed, if we look at those countries where Soviet power sustains Governments—Cuba, Angola, Ethiopia, South Yemen and Vietnam—one can see the classical pattern (and as we were reminded by the noble Lord, Lord Brockway, we have all done it in our time) of asserting national interest through the use of sea power. If we believe that those interests are inimical to us, then clearly some consideration should be given to our ability to use sea power to repel it. That is why I have, without his knowledge or his authority, some sympathy with the point of view put forward by the noble and gallant Lord, Lord Hill-Norton.
It seems to me that if one discusses these matters with, let us say, our American allies or with others, one again and again comes to the conclusion that what the British are good at is messing about with boats. Why then do we seek an alternative role? There is, therefore, some slight criticism in my mind about the diminution of the surface fleet, which is the only thing that prevents me from giving wholehearted support to this White Paper.
The noble Earl, Lord Longford, may be right that the Labour Party will reject the policy of unilateralism; that the alternative Government will not be a Government led by someone who honestly and openly professed the unilateral creed before he was elected leader of the party and since. If your Lordships believe that these are grave risks to ourselves and our friends, then you have very little alternative not only to taking note of the White Paper but to giving it your support.
10.56 p.m.
Lord Brooks of Tremorfa: My Lords, I wish to congratulate our three maiden speakers, two of whom I was able to listen to. I apologise to the noble Lord, Lord Mayhew, that I was not in the Chamber when he made his speech. But I think he will be amused to learn that I remember, with some clarity, almost the precise moment when he resigned from the Labour Government, because that evening I was due to dine with the then Chancellor of the Exchequer who turned up rather late and informed me that the Government were having a little trouble with one of their Defence Ministers.
I am sorry that I was unable to get to last Tuesday's Defence Group meeting; I had other duties in this House at that time. However, I am very grateful to the members of our Defence Group because when one attends that group before debates of this sort
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it is almost a dress rehearsal, and one can structure one's speech around the contributions that are made at those meetings. I am particularly pleased to be able to thank the noble Lord, Lord Strathcona and Mount Royal—this is the first opportunity that I have had to do so—for all the kindness he has shown me and for the courteous way in which he has helped us all when he had his responsibilities.
Before I lose my note, I want to say one or two things to my noble friend Lord Jenkins of Putney. One does not have to be on the Right-wing of the Labour Party to recognise some of the things that are going on at the moment. In the 1950s, like him, I was a Bevanite, and Aneurin Bevan had something to say about persons who were then entering the Labour Party with a view to subverting it. He said that they were: "Death watch beetle. Get them out". That is precisely the kind of battle that some of us are waging at the moment. Aneurin Bevan had something else to say about the Soviet Union. He said that modern Soviet communism was the running mate of fascism. I have never heard anyone ever say that Aneurin Bevan was on the Right-wing of the Labour Party. He was a sound, sensible Left-wing member of the Labour Party who believed in the traditional values of what the Labour movement stands for.
I cannot and will not attempt to comment on the 30 and more speeches—
Lord Jenkins of Putney: My Lords, before the noble Lord moves on, and as he specifically referred to my speech, does he recognise that the leader of our party in another place is himself a unilateralist? Who is he fighting?
Lord Brooks of Tremorfa: My Lords, I said that I did not want to lose the note that I had made on what the noble Lord, Lord Jenkins, had said. I was simply referring to what seemed to me to be the core of his speech, which was that everything that the Western powers were doing was wrong, and he made virtually no mention of the external threat from the Soviet Union. I simply wanted to try to put the record a little straighter.
I approach this task with a large measure of humility. To be privileged to listen to the many noble Lords who have over many years served at very senior level at the sharp end of our defence commitment is an experience that I value greatly. As one who served briefly as a young private in the last war, and who has taken on my present responsibilities, I have listened to this debate with a great deal of interest.
The White Paper, The United Kingdom Defence Programme: The Way Forward, shows precisely the dilemma facing any Government embarking on a major review of our defence programme. It is, as my noble friend Lord Peart says, a reasonable paper. My doubt is whether it will stand the test of time. The White Paper spells out in some detail the escalating costs of defence in a continuing climate of rapid technological change. We spend more than 5 per cent. of our gross domestic product on defence, one of the highest figures anywhere in the alliance, even though we are not among the wealthiest members. We continue to face sharp economic difficulties. The White Paper tells us that.

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We are also told that the technological advance is sharply changing the defence environment, and that we need to set for the long term a new force structure which will reflect in up-to-date terms the most cost-effective ways of serving the key purposes of our defence effort. There is, of course, nothing new in these sentiments. We have had five major defence reviews since the Second World War, and the scrutiny of defence expenditure has been almost continuous. Successive Governments have had to come to terms with the need to adjust our defence expenditure to our changed role in the world and to a series of domestic economic crises.
Paragraph 7 on page 5 of the White Paper—and I apologise for quoting at some length, because I think that page 5 goes to the core of this White Paper—says:
"We have now four main roles: an independent element of strategic and theatre nuclear forces committed to the Alliance; the direct defence of the United Kingdom homeland; a major land and air contribution on the European mainland; and a major maritime effort in the Eastern Atlantic and Channel. We also commit home-based forces to the Alliance for specialist reinforcement contingencies, particularly on NATO's European flanks. Finally, we exploit the flexibility of our forces beyond the NATO area so far as our resources permit, to meet both specific British responsibilities and the growing importance to the West of supporting our friends and contributing to world stability more widely".
Paragraph 8 tells us:
"There can be no question of abandoning our contribution in any of these roles, especially in face of a growing threat. The issue is not whether to undertake them in the future, but how best to do so from our growing resource allocation. Within this key objective, the review has taken nothing as exempt or sacrosanct. The rest of this White Paper sets out the Government's broad conclusions".
Paragraph 9 refers to the need to maintain, as the Government see it, our present nuclear role in the alliance. Paragraph 10 tells us that the Government intend to proceed with the Trident, and that certain aspects of the programme are still being studied, but however these are resolved expenditure over the next few years will remain comparatively modest.
Defence policy since the war has been referred to as a long succession of agonising reappraisals. Mr. Brynmor John, in the defence debate in another place on 7th July, reminded the Secretary of State for Defence that the Financial Times had reported Mr. Nott as saying that the Government had never produced figures of long-term costings, and that they would not do so now. We simply do not know how much greater a share of our gross domestic product is to be devoted to defence expenditure, and it is my belief that the decision on Trident will distort our efforts in the conventional field.
The arguments for and against Trident have been fully aired and there has been further reference to Trident today. I say only that the original figure of last year for Trident was £5,000 million, and the figure has already been raised to £6,000 million. The system is to be fully operational by 1994. No one really knows whether by then the cost will be £8 billion or £10 billion, or even more. It is my view that, despite the case for Trident made out on many occasions by the Government, we shall have, sooner rather than later, yet another reappraisal of our defence
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strategy because of the failure of the Government to recognise the reality of our economic position.
I have referred on other occasions in this House to the failure of successive Governments to appreciate that the nation will support only a defence programme that we can afford. One Minister after another responsible for defence has had to learn that lesson. I believe that full public support for our defences will become more and more difficult to obtain unless demonstrable progress is made with international arms control. I stress the question of the cost of the Government's defence programme at this time because I can see a growing disenchantment with the Government's economic policies which will seriously weaken the public's support for adequate defence.
The fact that the industrial nations of the West are meeting this week in Ottawa has been referred to in the debate. As they meet, there are 25 million people out of work and, as The Times said, many in the dole queues are young, educated and ready for useful roles they may never fulfil, domestic stability is at risk in even the most ordered societies, and political co-operation in defence and trade is daily undermined. A leader in The Times to which I have referred also said:
"We cannot be unilaterally prosperous. In a world wracked by competitive deflation, interest rate and currency wars, what any single country can achieve is limited … Today everyone recognises the prewar acceptance of chronic underemployment of our resources was wicked and unnecessary. But there is no more reason than in 1931 to accept the waste and misery. There is nothing inevitable about our crisis. It is a consequence of our failure to respond to changed economic and financial circumstances and no country can respond on its own".
Finally, a brief reference to the speech of the noble Lord, Lord Chalfont. I recognise his enormous expertise in this field. I certainly agree with his conclusion on the question of the Government's policy on Trident. But his speech today was only half a speech. He quoted from certain journals—nobody can deny that such things are being said in those journals—but it was only half a speech because it is not good enough simply to cry wolf. I do not want to make too much of this, but if we look carefully to see what is going on around us, is it not true—as I asked Lord Chalfont in an intervention—that the classic ingredients are appearing in our country which inevitably will lead to social instability? That is why I intervened; because it seemed to me that he was simply crying wolf and was not paying attention to the causes.
I have been involved in politics for some 36 years. I am as active now, perhaps even more active, in local politics as ever I was. I am still the secretary of my constituency party and the minute secretary of my local branch, so I know exactly what is going on and to some extent the noble Lord, Lord Chalfont, is right. But I do not intend, like certain members of my party, to run away and leave it when the heat gets hottest. I intend to stay and fight because I believe that the traditional values of the movement to which I belong are still worth preserving and fighting for. I am sorry to have spent so much time on something which may not seem strictly applicable to the debate, but these matters have been raised during the day and it was right, I think, for me to refer to them.
I say this finally. Certainly there is a strong mood within the Labour Party and without to pursue a

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policy of unilateral nuclear disarmament. I say only this to the House. Yes, last year, at Blackpool, in October, there was a resolution passed which advocated this policy. There were two other resolutions passed, which do not seem to have received quite the publicity that they deserve. A resolution was passed advocating multilateral disarmament. Now, these things are not unusual at Labour Party conferences. Indeed they are not unusual at many conferences of that kind. The very climate of conferences, the arrangements on which conferences have to run, inevitably mean that these kind of contradictions emerge. But, most importantly, there was a resolution passed at that conference by an overwhelming majority committing the Labour movement to NATO. It seems to me axiomatic that if the Labour movement is committed to our NATO allies, then inevitably the consequences of that must be plain.
This has been a long and very interesting debate. I hope that I have made some small contribution to it, and, as I said earlier, I certainly do not envy the noble Viscount in attempting to answer the 30 or so speakers who have taken part.
11.11 p.m.
Viscount Trenchard: My Lords, I thank the noble Lord, Lord Brooks of Tremorfa, for those kind words. Indeed, in winding up the debate it is clearly impossible to deal with more than a tiny proportion of the many very valuable and knowledgeable contributions that the 34 or 35 speakers have made. So will they all please accept my apologies in advance? I shall go through the record carefully and where we can answer specific questions we shall do so in writing if, as is inevitable, I do not have time to answer tonight. I also propose in the main to leave out the names of those noble Lords who have made remarks, since the repetition of a phrase such as "the noble Lord, Lord so-and-so of what-not", would take quite some time.
I believe that the debate has shown that the majority of this House, and I believe of the country, and certainly already of the other place, support my right honourable friend's efforts to enhance our defence strength. In my view the word "cuts" should be banished in relation to the defence effort as a whole. As an overall description, the word "cuts" is a travesty of the real plan. In 1985–86 we intend to spend in real terms 21 per cent. more than in 1978–79. By any standard that is a major strengthening of defence.
Since the days of spears and bows and arrows, fire power has increased and become more expensive. This age-old trend has accelerated to breakneck pace in the modern age of technological possibility and, as the noble and gallant Lord, Lord Carver, mentioned, the microelectronic revolution. While this has allowed the production of weapons of war many times more powerful than their predecessors, it has in many fields necessitated a reduction in numbers; for instance, of aircraft, ships and major fighting platforms.
Let me give your Lordships a few more figures in addition to those that my noble friend the Leader of the House gave early this afternoon. In 1950 we had 1,500 front line combat aircraft. In 1981 we have under 500. Of ships of frigate size and above,
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we had 387 in 1950, and we had 97 at the start of 1981.
If your Lordships look again at page 45 (which has already been mentioned) of the Annual Defence Estimates, your Lordships will see a chart indicating the rise in the cost of equipments over the last 25 years; and if those figures are extended on a straight line basis and on the assumption that you have an inflation-proof but otherwise static defence equipment budget, you could, for the same real money, afford only one aircraft as a replacement for Tornado in 62 years' time. For frigates, the Type 22 extrapolation would result in our being able to afford only one ship in 27 years' time. However powerful that aircraft and frigate were, our defence would not be secure.
Steps to bend the straight line of increased cost have been increasingly taken over the last two years; and, therefore, this road to a degree of absurdity is not going to be followed. My right honourable friend has, I believe, sounded a further major call for a much better balance in defence. Of course, as the noble Lord, Lord Brooks, says, the follow-through to the new direction that he has set is not going to be easy, and he is the last to believe that it is. But he has set a new direction; and even before that we had already decided that the Type 23 frigate had to be much simpler and cheaper.
New technology, when first invented, can be up to a hundred times more expensive than repeat technology, and for this reason I would say to the noble Lord, Lord Zuckerman, that I believe it is not always true, or even usually true, that the escalation takes place on the follow-through phases within the generation of equipment. The arithmetic that I have described forces us to select more strictly a smaller number of vital attributes for new application in each generation of weapons. That is if we are to have a sound balance between numbers and weapon power.
In the past, reduced numbers have more or less coincided with the abandonment of roles, such as East of Suez and in the Middle East. My Lords, we have no more roles which we can abandon. I believe it possible that with an increasingly commercial approach, taking account of foreign markets, examining the equipment requirements of each role rather than just each service, collaborating closely with other members of the alliance in equipment matters and, most important, forcing the selection early of narrower key areas for research and development and new technology applications—doing all these things, we can retard and perhaps prevent the future necessity for numbers reductions in the majority of key defence units and so, I hope, thwart the inexorable law of the noble Lord, Lord Zuckerman.
Lord Zuckerman: My Lords, may I put a question to the noble Viscount? Is he aware that precisely what he has just been saying was said, no doubt in this House but certainly in another place, 20 years ago?
Viscount Trenchard: Yes, I am, my Lords. Indeed, when I first went to the Ministry of Defence, when I said, "When will we get to the day of one frigate or one aircraft?", everybody said, "Well, it will be in about 60 years or 25 years—now shall we go on with business?"—because that is precisely what they have

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been doing for the last 25 years. But the vision is now that we are well down a road to absurdity, and we can no longer afford to shrug our shoulders and go on. Thus there is (may I say it?) at least a new determination to try to bend this line. I have studied the cost-lines of other nations, and I believe that this line can be bent quite considerably.
In addition, we are also doing everything we can to push forward in the use of what we call force multi-flyers. The emphasis on early warning systems, electronic battlefield control systems, in air refuelling and Army transport helicopters, are all designed to maximise the potential use of a superbly equipped but relatively numerically small force.
While still on equipment, let me say to the noble Earl, Lord Kimberley, and the noble Lord, Lord Hankey, that we buy 90 per cent. British equipment in the Ministry of Defence. Furthermore, in many cases the premium we pay for buying British is substantially larger than either of those noble Lords mentioned, and has been up to twice the purchase price that we could have bought abroad, because we do know the indirect benefits of buying at home. I shall not have the time to comment on the individual items that have been mentioned, but I shall say that the torpedo question will not be decided for a few months yet; and I have noted all the points that were made.
If I may answer the noble Lord, Lord Zuckerman, the Tornado costs of GR-1 are £11 million each, and the fighter version, £14 million. The German funding problem has arisen largely through making insufficient financial provision for the programme and it is not because of inflation. In real terms, Tornado costs have gone up by 25 per cent. in a decade. This is our Tornado cost to us. What has happened in the Federal German Republic is that all that increase has tended to be pushed back until the last year. The 25 per cent.—I would not call it a reasonable figure, but for the complex project that it was, as a first swing wing military aircraft in the first instance, it is not completely out of court.
The noble and gallant Lord, Lord Carver, asked me about the Jaguar replacement. I have not the time to go into it in detail. The Jaguars will go on for a long while and the Tornado will take over some of their roles, particularly in Germany. When we do come to a final replacement, the next generation of aircraft is either in the field of European combat aircraft or in advance V-STOL. Considerable discussions and studies are of course going on in relation to the degree to which one should jack up the platforms in the next generation with all that is involved in cost and in pushing forward technology on every front rather than in arming them with much more modern weapons.
If I may turn quickly to manpower and services, because a number of your Lordships have raised very important questions, may I start with the point that the noble and gallant Lord, Lord Carver, raised. I assure him that it is indeed the intention to take out from Germany the headquarters of Five Field Force which will be re-located, together with its signal regiment to Catterick in 1983. The number of in-station armoured brigades will remain the same, and overall combat strength, as has been announced,
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will not fall below the present level. My noble friends Lord Cathcart and Lord Ridley, and the noble Lord, Lord Clifford of Chudleigh, and others, all raised questions of manpower and the reserves. The two do overlap. Let me say to my noble friend Lord Cathcart that within the degree of accuracy of the current estimates of manpower, the Army have taken into account the regular requirements to look after an increased territorial force.
There are many important matters here which overlap. There is recruiting restraint at the moment but at the same time the outflow from the services, even in 1980–81, was about 37,000 people, and we are talking of a reduction of 15,000 to 17,000. So we have to keep those figures in perspective. Recruitment restraint, the question of how much redundancy will be needed and the detailed planning of it are matters for which we have to work the details through from now on.
I do not have time to go into these important subjects in sufficient detail now, but I would say to my noble friend Lord Ridley that we shall of course review bounties against wastage and other factors when we see how the increased recruiting in the Territorial Army will go. I believe that, as regards facilities, ranges, training areas and the other points that were mentioned, we shall find a way to accommodate the major increase in the reserves which applies not only to the Territorial Army, of course, but to the RAF and the Navy as well.
May I now turn to the naval case? The noble and gallant Lord, Lord Hill-Norton, fired a very formidable broadside. He also fired, if I may say so, a well-aimed salvo at the noble and gallant Lord, Lord Carver, in which he made it clear that the latter—and I believe this is true of most retired service chiefs and in addition retired Chiefs of the Defence Staff—my old brigadier, the noble and gallant Lord, Lord Carver, is the odd man out among the defence chiefs on the nuclear issue.
With regard to the future of the Royal Navy, let me first say that we trust them to guard with zealous care the four new flagships—for that is what they are—which are going to carry Britain's nuclear deterrent for the remainder of the century and beyond. Secondly, we certainly plan to expand our submarine power, both SSNs and SSKs. The conjectural assumptions made on the basis of our building capacity, taken together with the need to build Trident submarines and taken with some assumed dates for the phasing out of our older submarines, are, I believe, at this stage unreliable. We are working on the details of our shipbuilding programme following the review, including the details of Trident submarine construction. But though in quality and, over the years, in quantity, our submarine force may not be entirely even, it will expand.
In surface ships, the noble and gallant Lord included in his figures for reductions ships which have been phased out and which were planned to be phased out. Some will be phased out earlier. His reckoning ran very much along the lines spelt out in the other place on 7th July by my right honourable friend Mr. Keith Speed, recently Under-Secretary of State for the Navy, whom he quoted. It is very easy to have a long discussion on these figures which will not resolve the issue as to the extent of the real reduction, but I should like, if I may, to use for a second Mr. Speed's own figures in the debate on a longer-term basis, which I

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believe is the only way to look at this. He pointed out that in 1970 the Navy had 81 destroyers and frigates, and contrasted that with the 50 intended for 1986, including eight in the stand-by squadron. I think that is the true nature of the reduction. To take that longer period I have looked at different years and believe it to be a fair comparison. Of course that is a substantial reduction, but the 1986 ships will have a fire-power and sophistication of immensely greater proportion than the 1970 fleet, and of course, as I have already described, a much higher cost.
So we have the same phenomenon as I described in relation to equipment. As my right honourable friend the Secretary of State made clear in the other place, there will be fewer long mid-term refits, and he pointed out the higher utilisation, which a recent dockyard study showed, that can be obtained from shorter life ships. So I believe he claimed correctly that this number, including all the new ships going through the shipyards at the moment, will not represent a very serious reduction. All kinds of further research will go on into the various roles in the maritime field, and I would not disguise for one moment, as my noble friend has already described earlier this afternoon, the fact that there is a change of emphasis at work. But that change of emphasis will constantly be tested against technology and against the advice of all our main advisers in the service and outside.
There will remain a large and vital role for the Royal Navy, which I am sure they will discharge with the efficiency and courage that they have already shown. I am only sorry that the noble and gallant Lord accused us of a degree of arrogance. I do not believe that that is correct as regards my right honourable friend, who has listened at length and patiently to the views of all concerned. One has again to make the point that the situation which he inherited was untenable, and those who may disagree with the emphasis must suggest where else the money can come from.
The noble and gallant Lord, Lord Hill-Norton, mentioned the USA and the question of our consultations with them. My right honourable friend the Secretary of State has agreed that I shall reveal the agreed text of the agreement after the consultation which he had with United States Secretary of Defense Weinberger. It reads as follows:
"The United States Secretary of Defense welcomes the decisions taken to increase still further our defence effort, understands the basic thrust of the proposals for reshaping our programme to make the most cost-effective use of the resource effort, and will be working side by side with us on the process of deciding how best the proposals can be translated into detailed plans to sustain and enhance capability in Europe, the Atlantic and further afield. We shall be discussing these matters informally together during the coming months".
Time prevents me from going into the questions of the methods of reinforcement in a future war, on which many different views have today been expressed, and also from going into the important points that my noble friend Lord Inchcape made—and many others made them, too—both in relation to small and cheaper ships, but also in relation to the defence of our shipping and our sea lanes all over the world. I have to say that in time of war, or even tension, we have never been able to protect our ships all over the world on our peacetime strengths and, clearly, emergency plans,
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should emergencies arise, will have to be made.
I must touch for a moment not on disarmament, which needs a separate debate, nor on the many views and counter-views that have already been expressed, but on the nuclear deterrent. I believe that wars are, on the whole, started by aggressors who think that they can get away with something. The danger is greater if potential aggressors have desperate problems at home. The threat to NATO is therefore very real. We have to ensure that no aggressor thinks he can get away with it. I am unashamedly convinced that NATO has a greater respect for life than have the Soviets. If one then bears in mind the enormous preponderance of Russian conventional forces, and the recent demonstration of their ruthless use, I believe it is essential to have nuclear deterrent options of all the main kinds. I welcomed the speeches from many noble Lords on the Benches opposite which supported that view.
These options are necessary to resist nuclear blackmail to which we would be open if we did not have them. They are also necessary to deter prolonged and bloody conventional aggression. Those who find the first use of any nuclear weapon by the defender incredible—and I understand their thinking—and who also believe in the inevitability of uncontrolled nuclear escalation if once a nuclear weapon were ever used fail, I believe, to distinguish between the different positions of the aggressor and the defender. The aggressor is trying to get away with it. He is trying to get his objective at an acceptable cost. If he ever started, because he thought he could get away with it, he would most probably cold-bloodedly review at every stage whether or not he was getting away with it at an acceptable cost. Provided, therefore, we have an adequate response at every level and, one has to say, if need be the will to use it, or to indicate that one will use it, then he will know that he cannot get away with it. We must be able to say "Stop it" and to back that injunction with any of the options which seem appropriate at the time. That is deterrence based on flexible response. I agree so much with the remarks of the noble Lord, Lord Hankey, on the causes of the Second World War.
Now I must answer those who believe that the United Kingdom should not maintain its own nuclear weapons but should rely on the United States. We must remember that we are dealing with Soviet perception—that they might believe that they could get away with a victory in Europe without incurring the main American response. Notwithstanding the American commitment to Europe, for which we should be eternally grateful, a British nuclear decision-taking centre can help not just now but in any unforeseeable future to ensure that there are no miscalculations by the Soviets on this point. We can help to make sure that they are even more certain, both now and in the future, they that cannot get away with it—that is, with a quick European coup. In this connection it is perfectly possible to imagine that a plan for such a coup could include conventional forces or selected nuclear forces, or both, and that they might be backed by degrees of nuclear blackmail. I believe that the case for maintaining the British independent nuclear deterrent is overwhelming, and that is why our allies welcome it.

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There is not the time to go again into the costs of our nuclear deterrent, but I must say to the noble and gallant Lord, Lord Carver, that the expenditure has not yet started and our problems therefore palpably are not due to it at the present time. I must also say that it is our estimate that, with every kind of back-up and necessary air cover, the cost of Trident over 15 years would, if it were not spent on Trident, allow us perhaps to add one armoured division to NATO's 25 to 30 on the Western Front. Even if the noble and gallant Lord—I can give him chapter and verse for this—were to dispute my figures, it certainly could not be above two, and that as an addition to the conventional defensive force is not, unfortunately, of sufficiently material effect, in my view, to mean that we can get by without the British deterrent. It would take something like a 60 per cent. increase in our budget and those of many other allies in relation to the European central front.
Those who first take the costs of Trident over 15 years—this has been done outside the House—and then tend to exaggerate them and calculate how many tanks they would buy with the next 15 years' money, and who make no estimates of the men, fuel, ammunition, air support and back-up facilities are, I believe, guilty of a one-hundredfold travesty. We really must live in this world. I hope and believe that enough has been said from the other Benches to make my noble friends' belief and hope correct: that the party opposite, when faced with the real decision, would come to a realistic decision on the British nuclear deterrent, as it has done so often before.
My Lords, I can only say that I have noted with great interest all the remarks of the noble Lord, Lord Chalfont, and those who on both sides have commented on it. I have noted the remarks of the noble Lord, Lord Jenkins of Putney, who is I think the chairman of CND at the present time, and I would reiterate on behalf of my noble friend and myself that there is no question but that we believe that there are many very sincere members of the CND. But one has to add that there is no question that the effect on the public understanding of issues like Trident, which is the Polaris replacement, and cruise missiles, which are the ageing bomber replacements, is exactly what the Soviets might wish.
I support 100 per cent. my right honourable friend's efforts to deal with a very different defence situation, to tackle it more at its roots and to cut the overhead and the back-up; to use the force multipliers, to bend the equipment cost escalation line, but in all to ensure that this country has a modern and highly efficient force to meet the growing Russian threat.
On Question, Motion agreed to.

Ullapool Pier Order Confirmation Bill
Brought from the Commons; read 1a, and (pursuant to the Private Legislation Procedure (Scotland) Act 1936) deemed to have been read 2a and reported from the Committee.
Greater London Council (General Powers) Bill
Brought from the Commons; read 1a, and referred to the Examiners'.
  PRISONS: SELECTION OF BOARDS OF VISITORS
  PRISONS: SELECTION OF BOARDS OF VISITORS
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  HALVERGATE MARSHES: DRAINAGE SCHEME PROPOSAL
  HALVERGATE MARSHES: DRAINAGE SCHEME PROPOSAL
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