Sitting of 24 July 1981

Preamble
The House met at half-past Nine o'clock
PRAYERS
[MR. SPEAKER in the Chair]
MESSAGE FROM THE QUEEN

  HIS ROYAL HIGHNESS THE PRINCE OF WALES AND THE LADY DIANA SPENCER
  9.34 am
  The Prime Minister (Mrs. Margaret Thatcher)reported Her Majesty's Answer to the Address, as follows:
  I thank you most sincerely for your loyal and dutiful Address of congratulations on the forthcoming marriage of my beloved son to the Lady Diana Spencer. The Duke of Edinburgh and I have been greatly touched by the countless messages of good wishes which the Prince of Wales and Lady Diana have received from all parts of the United Kingdom and the Commonwealth on this happy occasion.
  We much appreciate this latest example of the close link between Parliament and the Crown. You have once again shown your interest in the well-being of our family. With you we pray that the marriage will be blessed with good health and every happiness.

Petition

  Sex Shops
  9.36 am
  Mr. Anthony Steen:With your permission, Mr. Speaker, and that of the House, I wish to present a petition by the Sex Shop Action Committee of Liverpool, whose members are outraged by the proliferation of sex shops throughout the country, and especially by the recent opening of one in the quiet and secluded residential area of Wavertree, and seek action from this House in outlawing this and other shops engaged in this kind of activity.
  With your leave, Mr. Speaker, I shall read the petition. It is as follows:
  To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
  The humble petition of we, the undersigned sheweth
  That sex shops are now being opened in towns and cities throughout the length and breadth of the land causing great offence and concern to the right-thinking members of society.
  That a private firm already claims to be engaged in a multi-million pound expansion programme to establish a chain of at least 100 sex shops throughout the United Kingdom.
  That such shops sell pornographic literature, large coloured posters of a lewd and indecent nature, obscene articles used to stimulate sexual activity and encourage sexual perversions, films and videotapes showing explicit sexual scenes, perversion and sexual violence. That such shops offer contact service for prostitution and sodomy.
  That the presence of these shops is highly offensive and 1. are a temptation and a danger to young persons who become the victims of pornography; 2. are an insult to young children who see obscene posters through open doors of such shops; 3. attract people of undesirable repute to the areas of the shops; 4. are a source of evil which damages respect for womanhood, degrading the sanctity of the sexual relationship within marriage and undermining family life.
  That the local authorities have no power to control the spread of such shops, as the planning authorities with their very wide powers to control such things as the siting of tripe shops and the building of verandahs to private dwellings are impotant when comes to preventing the springing up of such sex shops.
  Whereof your petitioners humbly pray that your honourable House will immediately amend the Town and Country Planning (Use Clauses) Order 1972, Statutory Instrument 1385, under the Town and Country Planning Act 1971, by increasing the number of classes therein referred to as those shops exclusively and predominantly engaged in the sale and hire of pornographic magazines, sexual appurtenances, marital aids and the like, and your petitioners are duty bound and will ever pray.
  To lie upon the Table.

  Brandt Report
  Motion made, and Question proposed, That this House do now adjourn—[Mr. Thompson.]
  9.40 am
  The Lord Privy Seal (Sir Ian Gilmour): The recent European Council and the Ottawa economic summit earlier this week began a period of intense international activity at the highest level concerning the developing countries and their place in the world economy. This subject will also be prominent at the Commonwealth Heads of Government meeting in Melbourne in September-October; and, of course, at the special summit of 22 countries at Cancun in Mexico later in October.
  In the intervening months, the United Nation's conference on new and renewable sources of energy in August, and the conference on least developed countries in September will also be devoted to aspects of the same theme. In all these meetings, Britain will be participating actively both on our own account and, on occasion, in our current capacity as President of the European Community.
  I therefore welcome greatly this opportunity to debate the vital issues which will be discussed over the coming months, and explain the Government's approach.
  The Cancun summit, which we fully support, is directly inspired by the Brandt commission report. Over the last 18 months, the report—in which my right hon. Friend, the Member for Sidcup (Mr. Heath) played such a leading part—has stimulated a lively interest and concern throughout the country. It has aroused a powerful surge of activity from the churches and all other organisations concerned with development. In May, we witnessed a mass lobby of several thousand people.
  The House of Commons Select Committee on Foreign Affairs and its Overseas Development Sub-Committee have thoroughly examined the Brandt report and the issues it raises. Since the Committee's report was published only yesterday morning. I hope that the House and the Committee will understand if I can give only a preliminary reaction today; but, in general I welcome the report and confirm the Government's intention to respond by means of a Command Paper shortly. There is considerable common ground between the Committee and the Government, as I shall elaborate later. Most of the Committee's recommendations find an echo in the Government's own approach.
  The Brandt report sets out vividly the momentous problems facing the developing countries in terms which confront Governments, of both rich and poor countries, with the responsibilities which they must face if the world is to be an acceptable place for 6 billion inhabitants in the year 2000. The problems are daunting and for many developing countries the outlook is grim. Strenuous action is needed on many fronts. We for our part—both the Government and the people of Britain—recognise our responsibilities in and to the international community.
  Most people in Britain, I am sure, see this as a moral challenge. They believe that the relatively rich countries should be helping their poorer neighbours.
  The Government share this view. It is utterly wrong that hundreds of millions of people should live out their lives in poverty, hunger and disease. If only for reasons of humanity and justice, we must take part in the fight against poverty and assist those in the Third world to achieve a better life. This is reflected in the laudable efforts of the
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  British voluntary agencies in their relief work and their small scale development projects, and we have maintained in real terms our help for them through the joint funding scheme.
  But, as Brandt says, this is not only a moral imperative; it is also a matter of mutual economic interest. This, too, is a view which we share. We should all benefit if we could work out better international economic arrangements from and remove obstacles to development. Growth within the Third world and growth in trade between developed and developing countries are also in our interest. We all live in what used to be called "one world"—I think that the phrase was coined by Mr. Wendell Willkie a long time ago; he wrote a book on the subject, which I read, although I do not remember much about it—where increased prosperity is ultimately to the benefit of all.
  But interdependence obliges every Government to follow responsible policies which help and do not hinder their neighbours. We in Britain cannot make the contribution we should like to world growth, to expanding markets, to aid for those in need without a strong economic base. That is why we must achieve an efficient economy here in Britain. Protection is not a responsible alternative. It would be cruel folly, damaging to our own economic efficiency and damaging to the prospects of many developing countries.
  Interdependence is not simply an economic matter. The Brandt report emphasises the close link between economic advance and political stability. When countries of the Third world are frustrated in their efforts to develop, Governments come under threat and instability increases. That situation benefits only the Russians—and perhaps explains why they do so little generally to help the Third world, giving aid worth a mere 0·1 per cent. of their gross national product in 1979.
  Political instability, on the other hand, strikes hardest at the poor and unprotected who become refugees and victims of famine, as millions are in Africa today. We have therefore the strongest political as well as humanitarian motives for helping those countries that seek to help themselves and to preserve democratic government and open societies.
  Naturally, the Government do not agree with everything in the Brandt report. I will note only three points of difference. First, the outlook is not bleak for all developing countries. Many have made great progress over the last two decades and continue to prosper in difficult circumstances.
  Secondly, we do not think it would help to overturn the present world economic system, with its attachment to open markets and free movements of capital. Instead, we want to improve it so as to give developing countries a better chance.
  Finally, while agreeing that Governments have an important role, we think that there is also a vital contribution which is already being made and could be increased by the private sector—by farmers, manufacturers, traders, bankers and investors.
  Therefore, we differ, on occasion, from the Brandt report on methods, but not on goals. We would rather strengthen and adapt existing institutions than create new ones. We prefer to reduce obstacles to private activity than to introduce new governmental regulations. But we accept the moral, economic and political challenge which the Brandt report puts before us.

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  I should like to tell the House something of how preparations are being made for the important summit at Cancun and how it will fit in with other international discussions concerned with developing countries.
  The Mexican Government will be the hosts for the summit, to be held on 22 and 23 October. Heads of Government of 22 countries will attend. There will be a good regional balance of economic summit nations, OPEC and non-oil developing countries. Seven Commonwealth countries will take part, including Britain.
  My right hon. and noble Friend will attend a preparatory meeting of Foreign Ministers in Cancun at the end of next week. That will set the scene but will not prejudge what the summit itself will do. The primary aim is to agree procedures for the summit that will provide maximum opportunity for Heads of Government to tackle the problems that concern them most in an open, informal and spontaneous discussion.
  Four themes have already been chosen for the summit—trade, food, energy and finance. Three of those match elements in the emergency programme of the Brandt report and the fourth, trade, is no less important. I shall take them in turn. International trade remains a major engine for growth and development. The volume of trade in both directions involving the Third world is 25 times that of official aid flows. A progressive expansion of trade is in the interests of all countries and is vital to the economies of the developing countries. We must, therefore, continue to help the developing countries expand by maintaining access to our markets for their products.
  As members of the European Community, we offer trading preferences to the 61 ACP countries that cover all their industrial exports and some 90 per cent. of their agricultural exports. The Community's generalised scheme of preferences was renewed in January this year and offers greater benefits to the poorer countries.
  Increased trade, of course, implies changes in the industrial structure which bring problems, especially in times of slow growth. Special arrangements may be necessary in a few especially sensitive sectors, such as textiles, to ensure that the pace of change is socially tolerable. But, as a major trading nation, we recognise the need to maintain the open trading system. Protectionism as a general principle—which many Opposition Members opposite would advocate—would not be in the interest of the United Kingdom or the Third world.
  It is heartening that the developed countries have resisted any widespread recourse to protectionism, and that was reaffirmed at Ottawa earlier this week. They continue to provide markets for 70 per cent. of developing countries' exports by value. Britain takes 20 per cent. of its total imports from the developing world, and the proportion of manufactures that we import from the developing countries is the highest in the European Community after Germany.
  Meanwhile, we look to the more successful exporters among the developing countries, which are taking a growing share of the world market, to remove their own trade barriers as their economies strengthen and to take a fuller part in the international trading system. We hope to keep up the momentum in trade matters and to give our full backing to the proposal for a GATT ministerial meeting next year.
  The problem of food production rightly arouses strong feelings. Famine and malnutrition are the most acute
  730
  problems faced by developing countries, and obviously the ones that most affect the conscience of the world. There has been encouraging progress, notably in India and Zimbabwe, but in other countries, especially elsewhere in Africa, the position is becoming worse. My right hon. Friend the Member for Sidcup recently noted that per capita food production had dropped in more than 60 countries during the past decade. There is only one durable solution and that is to improve food production in the developing countries themselves.
  The primary responsibility must lie with them to choose wise policies and to maintain them over a long period and this they increasingly accept. The policies should apply not only to food production itself, but to the whole rural sector, including land tenure, investment, storage and rational pricing policies that do not penalise farmers in favour of those in the towns. Population policies are also important.
  We are ready to help in three main ways, which correspond quite well, I believe, to the recommendations of the Foreign Affairs Committee. First, we shall support the growing weight of investment by international lending agencies, such as the World Bank, in food and agricultural production, and by our own technical and financial assistance. That is an area where relatively modest sums skilfully applied can do as much as large projects.
  Secondly, we must improve the trading environment and promote greater food security. Recent changes in IMF facilities, which can now compensate countries facing a sudden increase in cereal import costs, will help in that direction. The prospects for a new international wheat trade convention are less certain, but we continue to support it.
  Thirdly, there is food aid. We have supported the new food aid convention and will contribute this year more than £50 million directly and through the Community, though Britain is a net food importer. But food aid must be temporary only and must be given in ways that clearly promote, and do not discourage, local food production.
  The energy shortage and the massive oil price increases of 1979 and 1980 have produced a bitter economic setback for most developing countries. The extra they must pay for their oil imports far exceeds the total official aid they receive. Here, our first responsibility must be to conserve energy resources, so as to take the strain off the oil markets. The achievements of OECD countries have been encouraging.
  It is also important to encourage energy production in the developing countries themselves. We have some large bilateral aid projects devoted to that, for example, in Sudan and Sri Lanka. We also support efforts to enlarge multilateral funds for energy investment, for example, from the World Bank. One objective here is to generate additional private investment.
  Mr. Denis Healey: Do the Government now support the energy affiliative of the World Bank?
  Sir Ian Gilmour: The right hon. Gentleman will be aware that the Ottawa summit, earlier this week, stated the readiness of the Government to explore with OPEC any possible financial mechanisms that would take account of its financial contribution. We would have to see exactly how an energy affiliative would be set up. We are not opposed to it, but we do not think that it is necessarily the

  731
  best way of doing it. We shall look carefully at the recommendations of the Foreign Affairs Committee in that area.
  The United Nations Conference on new and renewable sources of energy in August will pursue ways of making all countries, and especially developing countries, less dependent on dwindling resources of fossil fuels. Meanwhile, we look for every opportunity to develop a dialogue with the oil-producing countries for a better understanding on matters of demand, supply and price of oil. Energy is identified as an especially important element of the proposed global negotiations. Finance is needed by all developing countries to supplement their own efforts to build up their investment, to sustain growth, and to adjust to present economic conditions.
  Aid is one essential element. Even with the cuts, the British aid programme is the fifth largest in OECD and will exceed £1,000 million gross in 1981–82, 8 per cent. above last year. We must ensure that that aid is well used and goes to those who need it most. That means focussing on the poorest countries, which find it hard to increase their export earnings and cannot get finance from other external sources. In 1980, 62 per cent. of our bilateral aid went to the poorest countries, and in the last financial year about two-thirds, the highest proportion of the five major Western donors.
  Mr. Clinton Davis: Words of good will are one thing, and cuts are another. Does not the Minister recognise that a cut of more than 15 per cent. during two years is hardly a real symbol of the Government's good faith? Does not he think it right that to exemplify the position for other nations he might restore some of the funds that have been cut?
  Sir Ian Gilmour: The hon. Gentleman knows the answer to that question. It was given as recently as yesterday by my right hon. Friend the Prime Minister. We cannot be shielded from cuts that are being made right across the board in Government expenditure. We regret the necessity, but it was due to the economy that we inherited.
  Mr. Christopher Brocklebank-Fowler rose—
  Sir Ian Gilmour: I have dealt with this problem.
  Mr. Brocklebank-Fowler: The right hon. Gentleman has dealt with only part of it.
  Sir Ian Gilmour: Within the existing aid programme, we are developing new activities in areas where we believe our aid can do most good. We intend to launch a new programme for drinking water and sanitation and the fight against water-borne diseases as part of the United Nations decade. We shall do more to promote better use of energy in developing countries. We shall expand our activities in agricultural research. We shall contribute more to international population programmes. These four areas deserve special attention. Much can be achieved by relatively small amounts of public money and they will especially help the poorer countries.
  Many countries benefit from private financial flows, which now provide nearly two-thirds of the total funds reaching developing countries. Here, our performance is
  732
  particularly strong. In 1979 we fulfilled, nearly three times over, the 1 per cent. target for public and private flows together.
  Private direct investment in developing countries is a vital source of capital, technology and managerial skills for developing countries. Britain invests more overseas in relation to GNP than our major European partners.
  Bank lending helps to recycle funds which may originate with OPEC countries, but the risk is carried by banks in the City of London. A year ago, some thought that the banking system was on the point of collapse. However, this view under-rated the skill of the banks and the determination of borrowing countries to remain creditworthy.
  Though some countries still remain vulnerable, others have adjusted successfully and are now on the road to recovery. The Financial Times of 20 July, referring to a World Bank report due for publication in August, gave the bank's view that there would not be a general debt problem in the Third world.
  Mr. John Townend: Will my right hon. Friend tell the House to what extent the lifting of exchange controls has helped private investment in the Third world?
  Sir Ian Gilmour: It has helped it considerably. It has been of enormous benefit to the Third world. I am grateful to my hon. Friend for bringing that issue to the attention of the House.
  Mr. Edward Heath: Our aid contribution is often quoted as 2·33 per cent. However, that includes funds which have come from outside and which have merely passed through the City of London. It is completely bogus to claim these funds as a contribution from the United Kingdom. They have come from OPEC and elsewhere. They pass through the City and go on for investment. No other country includes that sort of transfer operation as a percentage of its GDP. My right hon. Friend should stick to the basic acknowledged figures and quote the genuine proportion of GDP that we contribute.
  Sir Ian Gilmour: Perhaps my right hon. Friend did not hear what I said. I accepted that much originated from the OPEC countries. I made that clear, but I said that it was the banks in the United Kingdom which carried the risk. I was not claiming that all the funds come from the United Kingdom although a good many of them do so.
  Indispensable support is provided by the international financial institutions—the IMF and the World Bank. That emerges clearly from the recent report from the Foreign Affairs Committee and from the memorandum of my right hon. Friend the Member for Sidcup. Over the past year, the IMF has greatly increased the amounts that it can lend. Pakistan, for example, has arranged to borrow $2 billion. It is gathering the resources to sustain these larger commitments. Saudi Arabia has concluded a very large loan agreement with the fund. We have ourselves contributed to a loan arrangement with a group of central banks.
  The fund is tailoring its conditions to the situation of each borrowing country in a humane and sensible way. It is also beginning to look at the next review of quotas, which are linked to voting strength.
  Meanwhile, greater resources are being mobilised for the World Bank. We have supported the doubling of the capital of the World Bank itself and the sixth

  733
  replenishment of the IDA, to which Britain contributes 10 per cent. The IDA replenishment now depends on the approval of the United States Congress for the American contribution. The Senate has approved it and we now await the House of Representatives. Together with our Community colleagues we have encouraged the United States Government in their request for this approval.
  We are also considering favourably ideas such as that proposed in the Brandt report for enlarging the gearing ratio of the World Bank, and look forward to hearing the views of the bank's new president on these matters. We are taking part in various negotiations to replenish the regional development banks and funds, and hope before long to join the African Development Bank.
  I have explained our approach to the Cancun summit and the themes which will dominate both the summit and other international meetings this autumn. Many of them may also be picked up in the proposed global negotiations. We and our Community partners agreed at the European Council that a positive impetus to preparations for global negotiations should be given at the Ottawa and the Cancun summits. A definite step forward was made at Ottawa this week.
  Our approach in all these matters accords well with that of our other Western partners and we are in close consultation with them. The participants at Ottawa this week stressed their support for the stability, growth, independence and genuine non-alignment of developing countries and reaffirmed their commitment to co-operate with them. They called upon the Soviet Union and its allies to do the same. They undertook to maintain substantial aid policies, and give their backing for the international financial institutions. They stressed the importance of access to their markets and of accelerated food production in developing countries.
  We are also in close touch in these matters with our fellow members of the Commonwealth, the Secretary-General of which is also a Brandt commissioner. There is a Commonwealth Heads of Government meeting in Melbourne in October. That is bound to devote much of its attention to issues affecting the developing world. We hope that the open and informal atmosphere that prevails at Commonwealth meetings will provide something of a pattern for the Cancun summit meeting, which will follow only two weeks later.
  The Cancun summit ought to bring all these international efforts into focus. That is why the Brandt commission suggested such a summit. We shall he developing the British position in the light of the Foreign Ministers preparatory meeting and the Select Committee report.
  It would be wrong to raise expectations too high. A summit meeting of two days' duration cannot cover everything. It cannot negotiate arrangements which would bind those who are not present. However, we would like to see the summit lead to a meeting of minds at the highest level, which could influence the whole range of activities elsewhere. We would like it to promote a better understanding of the problems and a greater urgency and common purpose in tackling them.
  If the countries of the world can co-operate effectively in the spirit of the Brandt report, the massive problems of which the report has done so much to make us aware may become less daunting. Morality and our interests are
  734
  involved. By taking the right action together we may yet counter despair with hope, parochialism with global vision and apathy with a new sense of purpose.
  10.9 am
  Mr. Denis Healey: The House will welcome the debate, but I hope that at some stage the Government will find a day other than Friday to discuss what is perhaps the most important single problem facing the modern world. However, the debate is uniquely well timed, because it follows immediately after the Ottawa summit and comes before the Commonwealth summit in Melbourne and the North-South meeting in Cancun. We have the advantage of an excellent and comprehensive report from the House of Commons Select Committee on Foreign Affairs, and no doubt that will figure widely in our debate. We have a powerful memorandum from the right hon. Member for Sidcup (Mr. Heath), which was circulated to the Governments attending the Ottawa summit.
  In addition, we have reports from the International Bank, the IMF and the OECD, the three major economic institutions in the world. That emphasises and re-emphasises the urgency of the problem that we are discussing. Those reports expose the fatuous complacency of the Government's official response to the Brandt report last year, when they said:
  "The Government believes strongly in the merits of the present world economic system."
  They said that it was regularly adapted to changing conditions.
  The Lord Privy Seal's opening remarks gave one some hope of a more positive approach, but I regret that as he got down to practice, and as the flaccid platitudes drivelled out, it became obvious that there has been no fundamental change in the Government's approach to these problems and, above all, no sense of the urgency required. When I listened to the right hon. Gentleman, I could not help remembering the story about the Highlander who was asked what the word in the Highlands was for "mañana". He said " I do not think we have any word in our part of Scotland which quite conveys that sense of urgency". We could say that about the right hon. Gentleman's speech.
  Let us look for a moment at the merits of the present world economic system as described in the reports produced by the leading economic and financial bodies set up by the international community. The OECD has just forecast for the industrial world over the next 18 months a far worse situation in nearly all areas than six months ago. It sees unemployment rising to 26 million in the second half of 1982 in the industrial world, and one out of every five young people on the dole in Britain, France and Italy.
  The IMF, which covers the whole of the non-Communist world, is equally gloomy, and especially gloomy about the non-oil developing countries, whose fate is the main concern of the Brandt report. It says that their populations will grow by about 2·5 per cent. a year, so that their living standards are bound to fall unless their economies and output can grow at least as fast. However, the chance of their growing fast enough to maintain their present appalling living standards is small because the terms of trade that they face deteriorated enormously, by 16 per cent., between 1973 and 1980. The cost of debt service has almost doubled. I shall return to that problem in a moment.

  735
  Mr. Larosiére, speaking a couple of months ago in San Francisco, said that even if the industrial Governments manage to get growth up and inflation down, even if oil does not rise in price in real terms and even if the non-oil developing countries are successful in improving their balance of payments performance, for the 38 poorest countries in the world and the 50 middle income countries there will be major increases in their debt and they risk being unable to finance their deficits at all.
  That is the problem faced in the Southern part of the world, with which we are concerned today. The consequences are spelt out in horrific terms in the alarming World Bank report, which is due out in 10 days' time but which was comprehensively leaked in the Financial Times last week. I gather that that leak is endorsed in its accuracy by the right hon. Gentleman, because he referred to that report and quoted it in his remarks. The World Bank report states that there are 750 million people in absolute poverty today. I remind the House that the definition of absolute poverty as given by Mr. McNamara when he was head of the World Bank is
  "a condition of life so limited by illiteracy, malnutrition, disease, high infant mortality and low life expectancy as to deny its victims the potential of the genes with which they are born."
  The House and the country must reflect on that. There are 750 million people living in absolute poverty now in the developing world. On the best assumptions that the bank can envisage, that could be cut to 630 million by the end of this century—that is, by 2000 AD. In order to achieve that modest but welcome fall in absolute poverty, the industrial countries would have to grow faster in the 1980s than in the 1970s. There is no sign of that now. Free trade would have to be maintained and extended—it is under severe threat in spite of the Ottawa summit. The real cost of oil would have to rise by no more than 3 per cent. a year. Official aid would have to increase by 50 per cent. as a percentage of the gross national product of the countries giving aid.
  Even on that extremely rosy assumption, the outlook for many of the developing countries would remain appalling, because the bulk of the aid from the richer part of the world goes to a handful of developing countries. Most of the American aid goes to Israel and Egypt. OPEC aid goes to Syria and Jordan, to a large degree. French aid is largely concentrated on France's ex-colonies. Therefore, the poorest countries in the world, other than those that I have mentioned, even on the rosy assumptions about the way in which the world economy is likely to develop, would face a fall in their incomes of 1 per cent. a year, and the middle income countries dependent on exporting raw materials for their prosperity would get no growth whatever.
  That is the outlook as described in one of the more conservative reports which the international bankers have published in recent years. That outlook is based on assumptions that are far more optimistic than it is reasonable to expect will be fulfilled. If those assumptions are not met, the World Bank sees absolute poverty increasing by 100 million by the end of the century.
  The consequences of that would be unimaginable human suffering and mass starvation in many parts of the world. As the right hon. Gentleman rightly said, this is not a human and moral problem but a problem that deeply and directly engages the interests of the richer countries, such
  736
  as ours. It would present an immense threat to the economies of the industrial world. As the fifth report of the Select Committee on Foreign Affairs says, in 1980 Britain had a surplus of £6¼ billion in its manufacturing trade with the Third world. That would be bound to shrink savagely and there would be a risk of a chain of defaults on private bank lending throughout the world, which could bring down the whole private international banking system in a crash similar to that of 1929.
  The political instability which the right hon. Gentleman rightly said would follow would threaten the industrial world's sources of vital raw materials and could involve Russia and the West in direct conflict. The House must debate the questions raised by the Brandt report against some of the political realities of the developing world. The developing world has already lost 20 million people killed in 130 wars since 1945. Its arms expenditure as a percentage of the world's arms expenditure has almost doubled in the last decade and currently represents 5·9 per cent. of the GNP of the developing countries, a higher percentage by far than arms expenditure in NATO countries.
  If instability develops on the scale implied by the predictions of the World Bank, there will be a temptation for some of the developing countries to grab by force of arms. I see in today's newspaper a prediction that Pakistan may have its own nuclear weapons within 12 months. The risk that they would try to grab by force that which they cannot get because of the functioning of the world economic system, to which the right hon. Gentleman and his Government pay such glowing tribute, would be real. There is little prospect, with the present policies being followed in the industrial world, that the rosy assumptions on which these catastrophes can be avoided will be met.
  The seven leading industrial countries which met in Ottawa last week failed to come to grips with their own problems or with the problems of the developing world. That threatens a far worse outcome than that foreseen by the World Bank. M. Mitterrand, Chancellor Schmidt, Senor Spadolini and Mr. Trudeau directed attention at Ottawa, according to newspapers, to the fact that the current policies being followed by the industrial world of reducing unemployment and low growth were wholly disproportionate to the meagre gains on the inflation front. President Reagan denied that. He thought that overriding priority should be given to inflation alone and not to unemployment.
  The level of American interest rates was described by Chancellor Schmidt as the highest since the birth of Christ. I suspect that that is true, because in the United States they are 10 per cent. higher than the rate of inflation. Present interest rates are crippling and unheard of in real terms.
  M. Mitterrand said that the interest rates were inflicting great damage not only on the United States, but on Europe and the world, but President Reagan again denied that that was so.
  The main role of the British Prime Minister, according to the Financial Times, was to chip in now and then and say "I agree with President Reagan". It is no wonder that the other delegations, according to the Financial Times, found that the right hon. Lady had lost some credibility and that less attention was paid to her remarks than in the past. What a role for a British Prime Minister—to be a parrot on the shoulder of Long John Silver! Or is it a budgerigar?
  Mr. Raymond Whitney: I appreciate the opportunity of intervening at this amusing point. Is it not true that the Socialist Mitterrand, Senor Spadolin, and Herr Schmidt put their names to a document which said that controlling inflation was the key factor and that sustained growth could be achieved only if inflation was conquered? They also put their names to a document which said that the world economy must basically depend on the development of the free market economy and that protectionism was the danger.
  Mr. Healey: I agree that protectionism is one of the many dangers threatening the whole world, and the developing world in particular, but the hon. Gentleman is wrong on his first point. They said at the Ottawa summit that unemployment and inflation were equally important. That position was not accepted by the Prime Minister, reporting from Ottawa yesterday. She is clinging to the idea that conquering inflation is the overriding priority and that we must be prepared to continue sacrificing output and employment in that cause. I understand from today's newspapers that she ladled out the same pat to the 1922 Committee last night.
  Mr. Whitney: I accept that The Times gets these things right. According to The Times, the communiqué said:
  "We must continue to reduce inflation if we are to secure the higher investment and sustainable growth on which the durable recovery of employment depends."
  Mr. Healey: I have attended summit conferences and I know that communiqués are prepared several months in advance by the sherpas to conceal disagreement. The other part of the communiqué makes it clear that unemployment is equally important and should be an objective that is equally important and should be an objective that is given equal status with inflation. The hon. Gentleman will not deny that. The communiqué is a tissue of contradictions or, to quote the The Times, "a mountain of fudge".
  Mr. Brocklebank-Fowler: The House might like to know that the quote for which the right hon. Gentleman was searching in the interests of accuracy is on page 2, paragraph 4:
  "The fight to bring down inflation and reduce unemployment must be our highest priority."
  Mr. Healey: I am grateful for that information. It confirms what I have said. It is also clear that the Prime Minister, although she subscribed to the document, does not accept that view. She made that clear yesterday in the Chamber and, I gather, upstairs. She believes that the continuation of her policies to conquer inflation must be given absolute and overriding priority, whatever the cost in lost output, lost welfare, damage to the rest of the world and damage to the youth of Britain.
  American interest rates will remain high. Whatever Mr. Regan, the Secretary of the Treasury in the United States, might say, the chairman of the Federal Bank made it clear a few days ago that that is the case. Interest rates in the United States will remain exceptionally high. That will inflict appalling damage on us all, but particularly on the developing countries.
  The Bank of International Settlements recently endorsed a calculation by the Morgan Guaranty Bank of New York that e very increase in interest rates of 1 per cent. costs the developing world the equivalent of an increase in the cost of oil of $3½ a barrel. That is the direct effect of the increase in the cost of servicing their debt.
  738
  On top of that there is the effect of the high interest rates on the exchange value of the dollar. Because oil is priced and paid for in dollars, the increase in the value of the dollar due to these high interest rates since the turn of the year has imposed a burden and increased the real cost of oil to those who buy it by the equivalent of $2 a barrel. There is the equivalent of a $5½ a barrel increase in the cost of oil, which has not only obliterated the effect of the modest fall in the oil price, but has increased the oil price in real terms from what it was at the end of the year by about 3½ per cent.
  The high interest rates are exporting both inflation and unemployment to the rest of the world. At present, far too many Governments believe that the only answer to interest rates is to raise their own interest rates, deflate their own economies, reduce their own deficits and add further to the deflation.
  I predict that when the IMF and the OECD present their next forecast towards the end of the year, just as the current forecast is far worse than the one made six months ago, it will be far worse than those that I have cited. That is why I regard the Government's remark, endorsed by the Lord Privy Seal this morning, that the Government believe in the merits of the present world economic system and its capacity regularly to adapt to changing conditions as a sick joke.
  Nobody who pays the slightest attention to the predictions of the world's economic authorities can regard the present world economic system as having merit Nobody can believe, against the background of the way in which it has failed to adapt in the last few years to the second increase in oil prices, that it is capable, as at present run, of adapting to changing conditions.
  What is to be done? Oddly enough, there is almost unanimous agreement among all who have studied the problem—the international economic organisations, such as the OECD, the World Bank, the IMF, and in the fifth report of the Foreign Affairs Committee published yesterday, and also an interesting report recently published by the Group of 30 under the last managing director of the IMF, Dr. Witteveen—that there must be an increase In aid, particularly through large replenishments of international development aid.
  Secondly, there is a need for massive investment in energy in the Third world over the next five years. Dr. Witteveen suggests $25 billion. Thirdly, we need to relax the limits on the growth of international bank lending—that is World Bank lending, through the IBRD. Fourthly, we need a doubling of the gearing ratio of the World Bank from 1:1 to 2:1.
  I want to concentrate for a moment on the problem of world aid, because it has become clear in the last year that the poorest countries, which are likely to be the worst affected by the outlook that I have described, are unlikely to be able to borrow the money that they need. The private banks are over-lent and over-exposed and they are very nervous about lending to the poorest countries. Many of the poorer countries find it impossible to meet the conditions laid down by the IMF, even though they have rightly been relaxed, and I hope, from what the right hon. Gentleman said, that they will be further relaxed in the coming months.
  What is needed is an increase of 50 per cent. in official aid as a percentage of GNP, from 0·33 to 0·5 per cent., of the OECD countries. Some countries in Europe are making increases of that nature and on that scale,

  739
  particularly the Netherlands, although the United States is threatening to cut its foreign aid. Even in 1980, last year, the United States spent more on potted plants and flowers than on aid. Its total aid to the outside world was only 0·27 per cent. of GNP, and it is by far the richest country in the world. The whole concept of foreign aid—indeed, the concept of international co-operation to deal with these problems through the World Bank—is being challenged by the idealogues in the United States Treasury and Congress.
  The British record is even worse. Let us look at the facts. Last year Britain was the only major developing country running a surplus on its current account, yet we were cutting aid savagely. The March White Paper on public expenditure shows that the Government plan to cut foreign aid by 15·3 per cent. over a two-year period, which is nearly 10 times the average cut in public expenditure—1·7 per cent.—planned in the White Paper. It will not do for the Lord Privy Seal to tell the House that we are in a difficult position and that everyone has to suffer. The Government are cutting foreign aid by 10 times as much as they are cutting anything else, at a time when they are increasing defence expenditure in real terms by 3 per cent. a year.
  We know that the Prime Minister's attitude to foreign aid is scandalous. She has described it as a handout. The views that I express about the disgusting nature of the Government's performance are shared by almost all our friends abroad. The Commonwealth Secretary-General described it as appalling parsimony at the last Commonwealth conference in Bermuda. Mr. McNamara, who was then still the managing director of the World Bank, singled Britain out for criticism last year. The development assistance group of OECD, which met recently in Paris, attacked not only the cuts, but the Government's decision not to concentrate on countries in need but to give priority to political, military and commercial considerations.
  Sir Ian Gilmour: That is untrue. I explained to the House earlier that we give a higher percentage of our aid to the poorest countries than is given by any other country.
  Mr. Healey: The right hon. Gentleman is a member of a Government who have undertaken publicly to the House to give political, military and commercial considerations priority. That means that he does not give priority to the needs of the poorest countries. He cannot have it both ways. He knows perfectly well that it takes time to change the pattern of aid, and the pattern of aid was decided by the Labour Government in 1978 and 1979. However, this Government plan to cut aid and to change their direction.
  The best proof of the disgust felt by our friends in the world is that when the Chancellor of the Exchequer turned up the other day in Lomé expecting to be elected to my old job as chairman of the interim committee he was blackballed in Libreville. [Interruption.] The right hon. Gentleman is obviously extremely sensitive about this, because he remembers it so well. The plain fact is that the Chancellor trotted off and got the Americans lined up, in the belief that he would be elected, but the developing countries and some of the others would not touch him with a barge pole, so he came home with his tail between his legs.
  Of course, the Government tried to fiddle the figures by changing the method of calculation, using a different
  740
  financial year from the international institutions, changing the inflator and counting in, as the right hon. Gentleman did a moment ago, money which is not provided by Britain but which is simply put into British banks by OPEC countries and then on-lent, with their agreement, to countries in the developing world. There was no sign whatever this morning that the Government are to change their decision to cut foreign aid. On the contrary, the right hon. Gentleman simply stuck to what the Prime Minister told us yesterday and said that there was no chance whatever of their doing that.
  My party is committed to achieving a target of 0·7 per cent. of GNP by the end of the first Parliament. A condemned woman does not hurry to the scaffold, so perhaps the Parliament will start in 1984, or perhaps we can get her out a little earlier. However, that is the commitment which we shall make and which we shall keep. The House knows that in our last public expenditure White Paper before the election we committed ourselves to increase foreign aid in percentage terms three times as rapidly as we increased the rest of public expenditure.
  Mr. John Townend: The right hon. Gentleman criticises the amount of aid that the Government give. Instead of speaking in percentage terms of what a future Labour Government would like to do, can he tell the House how much more cash aid he would like to see in the next three years over and above the Government's present proposals and how he would finance it? Would it be from increased taxation, and, if so, which taxes would he increase, or would it be from reductions in expenditure on, say, defence or help to the unemployed?
  Mr. Healey: I should like to answer the question in detail, but I shall answer it in broad terms. First, I should like to see the Government sticking to the 6 per cent. a year increase in foreign aid, to which we pledged ourselves before the election. Secondly, one of the many ways of financing that would be a reduction in defence expenditure, to which we are also pledged. However, another way to finance it would be by an increase in borrowing from the savings in Britain, which are running at a higher rate than in almost any other industrial country. I remind the House that the Government themselves admit that the bulk of foreign aid comes back to this country in the purchase of goods and services from Britain.
  I have dealt with one or two of what I regard as the most urgent aspects of the Brandt report. I know that my hon. Friend the Member for Glasgow, Queen's Park (Mr. McElhone) will deal with other questions, particularly food and energy. I wish to conclude with a more general remark. I believe that the House must face this, as public opinion and Governments in many other industrial countries are beginning to face it. It is now crystal clear that the existing world economic system is not working satisfactorily and is not adjusting satisfactorily to changes in its environment. It is also crystal clear that the mix of policies adopted by many industrial countries is not producing the results. "Stagflation" is still the ruling experience of the industrial world. The time has come for a radical shift in policy in the industrial world which will give output and employment at least equal priority with the conquest of inflation.
  In the sentence that was quoted a moment ago from the communiqué, that was the conclusion reached at the Ottawa summit. Apart from the ambiguous and equivocal

  741
  communiqué, the Ottawa summit fudged and bungled its responsibilities. There will be another chance at the Melbourne Commonwealth summit just before Cancun. Unless the Government shift the position that the right hon. Gentleman described, I see no possibility that the British Government will rise to the level of events. I warn the House that if there is a failure to make progress at the Melbourne summit, the chance of real progress at Cancun will be zero. The Cancun meeting could be a disaster for relations between the industrial and the developing world—between North and South.
  I hope that what the right hon. Gentleman hears during the rest of the debate will cause him to think again and to use his influence with the Chancellor of the Exchequer and the Prime Minister to try to achieve the shift that everyone knows is needed if the fine words that he used earlier are to have the slightest reflection in Government policy.
  10.41 am
  Mr. Charles Irving: I join the right hon. Member for Leeds, East (Mr. Healey) for a moment in his gentle complaint about the timing of the debate. After the mass lobby that attended Parliament and the representations that were made by millions of people, a debate of this importance deserved to be selected midweek when more hon. Members could be present to contribute and share in the anxieties of those of us who are present today. Many of us have had to cancel long-standing constituency engagements to be present.
  The immensity, complexity and urgency of the interlocking issues involved in world development and world peace were brought home especially pungently by the Brandt report. We owe a considerable debt of gratitude to my right hon. Friend the Member for Sidcup (Mr. Heath) for the nationwide interest that he has stimulated in one of the most worthwhile reports that we have ever had the opportunity of considering.
  I cannot believe that any person who cares with a conscience or a heart does not bear in mind the outrageous and nauseating conditions in the Third world where, as the right hon. Member for Leeds, East said, according to World Bank statistics 750 million to 800 million people live in the most unbelievable and chronic poverty that can possibly be described. In addition—it is worth mentioning the figures—15 million children under five years of age die from malnutrition every year. I am sure that few are not moved by those figures.
  Some of us who have had the privilege of visiting Third world countries and seeing at first hand the poverty, misery, repression and deprivation of the people must inevitably come to the conclusion—I say this with the greatest respect to the Lord Privy Seal, who I know is a caring person and realises all the difficulties—that more urgency should have been injected into the Minister's speech today.
  I am glad that most people in public life and a growing number of the electorate accept the need for international action to assist the developing countries to end their growing poverty, even though there is often perplexity about the cost, especially at a time of world economic recession. It was thought that, as economic conditions improved in the developing countries, the resulting demand for goods and services would go a long way towards alleviating the current economic recession. Most of us were of the opinion that when those and other aspects
  742
  were publicised and faced, there would be the political will to act. I hope that urgency and political will will be given the highest priority in Government thinking.
  We have learnt that the main need is for orderly, major changes in the world economic and financial structure, costing Governments very little. I am glad that the Government welcome the report as a spur to discussion and action.
  I hope that we shall play a more vigorous part in the North-South summit. We look to the Government to give a lead in resolving the difficulties and in positive forward moves. We are privileged to live in a developed, rich country and should pledge ourselves to work for world development—materially, socially, culturally and spiritually in every possible way. Many in the community already give about 1 per cent. of their after-tax incomes, sometimes through the church or other voluntary sources, for that purpose. Let us appeal to those in public life to realise how much is hoped for from them and by how many and to seize, nay seek, opportunites for bold but well-considered action.
  "Charity begins at home" or "Can we afford it?" has become the ritual moan of critics and cynics about the economic co-operation that we already provide from the developed to the developing countries. How fallacious is the policy to which that premise has led them. Perhaps the development of the Third world is a key to the problems of unemployment and low growth in our society.
  Over 35 per cent. of the United States and European community exports and over 45 per cent. of Japanese exports go to developing countries. Can we in the industrialised countries afford to disregard the deepening indebtedness into which many developing countries are sinking at this time? A default, even by a relatively minor borrower, could fatally weaken the Western banking system and bring chaos to the world's monetary affairs.
  For Governments to recognise a limit to the public purse is no justification for blindness to their own national interests in the development of the Third world, nor is it remotely credible as an alibi for neglecting the economic problems of the non-aligned developing countries after the West's positive stampede to rescue the Polish economy. In a flash, and with public money at the ready, Governments were able to stave off a looming default by Poland in its debt to Western banks. Yet the circumstances—the still more precarius position of many of the developed countries whose ratio of debt to earnings is much higher than Poland's—commands little more than a murmur of concern in the West.
  Perhaps the North could guarantee the value of any large additional funds which OPEC is prepared to place in the international lending institutions. How much less expensive this would be for the West than to provide from its own purse all the requirements of the Third world for loan capital which the commercial banks are unwilling to meet.
  When will Governments finally realise that inexpensive ways exist for channelling large sums of money to developing countries? Let them, for example, give the OPEC countries a more equitable share in the running of the World Bank and other leading institutions. Perhaps then countries such as Saudi Arabia and the Sudan might increase their contributions. Economic assistance can not only be an engine of prosperity and employment in the West; it is also an investment in the friendship and stability of vital developing countries.

  743
  For many Third world leaders, the reliability and generosity of Western economic assistance is both a test of our commitment to them and a major determinant of their good will towards us; and for Marxist countries, such as Angola and Mozambique, it can provide an escape from the pervasive Soviet influence to which they have long been subjected.
  We would do well to recognise that instability in vital developing countries, which is rooted in poverty, hunger, lack of jobs and disappointed economic expectations, can in the long run be countered only by sustained and adequate economic assistance to help remove the causes of turmoil. The history of Africa is littered with coups precipitated by food shortages and crop failures which the West did little or nothing to remedy, even on an emergency basis.
  To threats such as these, Western military power is no credible counter. Strategically placed countries such as Somalia and the Sudan are testimony to the growing importance of sustained and equitable economic progress in strengthening the resilience of the Third world against Soviet encroachment.
  It is, therefore, vital for the sake of all, for the West urgently to deepen its economic partnership with the developing nations of the world. Many millions of people in this country—despite the cynics—would give this a high priority in their thoughts.
  10.53 am
  Mr. Eric Deakins: There is not a single sentence in the speech of the hon. Member for Cheltenham (Mr. Irving) with which I would disagree. He made the case very well, and painted with a broad brush. I hope that the House will forgive me if I go into a little more detail on one or two subjects. It is essential, if we are to give guidance to the Government in their approach to both Mexico summits, for some of us to go into a little more detail.
  I start by referring to paragraph 14 of the Ottawa summit communiqué, which has not so far been referred to, where the leaders of the world's economy, the leaders of the rich countries, say:
  "We are committed to maintaining substantial and, in many cases, growing levels of official development assistance".
  Britain, as we have heard, is one of the exceptions to that growth in official development assistance, and I draw the attention of the House to recommendation No. 73 of the Select Committee on Foreign Affairs, which says:
  "Your Committee recommend that in order to have a positive psychological impact the Government devote at least the same proportion of total public expenditure to overseas aid that it achieved in 1980–81".
  That with respect, is not asking for the moon. It is not asking the Government to go back to the growth pattern of the previous Labour Government. It is not even asking the Government to go back to the aid level in the first year of their office. But it is asking them at least to maintain in real terms the growth pattern that was established in the second year of their office. I hope that the least that the Government will do in the run-up to Mexico will be to accept that Select Committee recommendation.
  In paragraph 11 of the summit communiqué there is a welcome reference to the Mexico summits. The leaders say:
  744
  "We look forward to constructive and substantive discussions with them"—
  that is, the leaders of the developing countries who will be present.
  I draw the attention of the Minister of State to the importance of adequate preparation for the major Mexico summit. The Select Committee, in paragraph 75 of its recommendations, has suggested that at least half a day should be given to each of the four topics which everyone agrees are, so to speak, on the agenda—if there is to be an agenda—for that summit.
  But in addition I strongly urge the Minister—as I have been urging his colleague, the Minister for Overseas Development, in questions recently—to have consultations with the other Commonwealth countries which are going to Mexico, at the Commonwealth Prime Ministers' conference and perhaps at official level apart from that, because these Commonwealth countries are the only group of countries which are linked and perhaps can arrive at some concensus before the summit meeting. It is no use agreeing with the other rich countries on the approach, because that will mean that there will be two major divisions of opinion at the Mexico summit. One way of bridging that potential gap in advance is to have widespread consultations with the other Commonwealth countries which will be represented at the meeting.
  I draw the Minister's attention also to the great importance of considering at the 1 and 2 August meeting in Mexico of Foreign Secretaries, the follow-up to the major Mexico meeting. There is no reference to this in the Ottawa summit communiqué, and I hope that the Minister will be able to tell us something of the Government's thinking on this. We did not directly allude to it in the Select Committee recommendations. We were concentrating solely on the summit. But what is to be the follow-up?
  For example, does the Minister think that the summit might consider setting up a secretariat to service future summit meetings of that kind? How is that summit meeting and its progress to be linked with the global negotiations in the United Nations? Are the Government envisaging that this will be a once-for-all summit, and that thereafter the problem will be handed over to the United Nations? I do not think that would be a good thing, because there is a strong case from time to time for smaller numbers of countries from North and South, meeting together, to discuss these problems in ways that cannot be done when 130, 140 or 150 nations are taking part.
  The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd): Does the hon. Gentleman accept the difficulty that this group is, as it were, self-selected and does not represent the whole?
  Mr. Deakins: I fully agree with the sensitivity of the problem and I do not know the answer. All I am suggesting is that it might be discussed with the developing country members of the Commonwealth which would be present, just to sound them out, because they have their contracts with the Group of 77 in a way that we do not. We must not regard the Mexico summit as necessarily a one-off meeting. Whether it is a success or a failure remains to be seen. We have to be thinking about what follows from it, or the world will be left in some disorder.
  I now turn to the major part of what I want to say, relating to the Select Committee's recommendations on food policy. With that I couple the sensitive issue, for many countries, of population policy.

  745
  In paragraph 26 of the Select Committee's report—I speak as a member of that Committee—we say:
  "Your Committee believe that the issue of food supplies for the world's growing population should no longer be considered separately from that of population policy throughout the world."
  I think that population policy will become increasingly important, and I do not think it will be possible for the leaders at the Mexico summit to consider food policy without reference to population policy.
  I appreciate the sensitivity of that issue, as do the Government. I was heartened to see a brief reference to the subject in paragraph 20 of the Ottawa communiqué in which the leaders said:
  "We are deeply concerned about the implications of world population growth … we recognise the importance of these issues and will place greater emphasis on international efforts in these areas."
  If that means anything, it must mean that the matter will figure indirectly in the discussions at both Mexico summits. I hope that the Minister of State will be able to give us an assurance on that aspect.
  World food supplies are likely to be outstripped in the next two or three decades by world population growth, which is in the pipeline and cannot be stopped. As my right hon. Friend the Member for Leeds, East (Mr. Healey) said, that will lead to greater problems in the developing world, not merely for the developing world, but for us.
  It will not be a case of looking at starving children in Ethiopia or anywhere else and putting our hands in our pockets. There will be political, social and economic instability which will rebound on us. Even if there is not that instability, which I believe to be inevitable, there will be greater pressure on world resources, which will affect our economic performance.
  I was privileged recently to be sent to Nairobi as the United Kingdom's IPU observer at a conference of African parliamentarians on population policy—the first such conference ever held in Africa. Africa is a vast continent, with a sparse population for the land area. However, the current population of 470 million will reach 850 million by the year 2,000, 1 billion by 2,010 and, unless strict measures of population control are taken, 2·2 billion by about the end of the twenty-first century. That is unsustainable by any conceivable growth in resources.
  The crude birth rate in Africa is 46 per 1,000. In the world as a whole it is 28 per 1,000 and in Europe the rate is 14 per 1,000. I hope that hon. Members will forgive me for quoting a few figures, but they show the measure of the problem.
  The crude rate of natural increase in population in Africa is 2·9 per cent., compared with 1·7 per cent. in the world generally. The fertility rate in Africa is 6·5 children per woman. In some places, including Kenya, it is over eight children per woman. Those are appallingly high figures.
  Food demand in Africa has been growing at the rate of 2·6 per cent. a year, but the production of food has been growing at a rate of 2 per cent. a year. There is an increasing gap.
  Estimates for the next 20 years show that the production of food is likely to increase by 2·8 per cent. a year. That is a considerable increase, but the demand for food will rise by 3·7 per cent. a year. The result will be that the trade deficit for cereals for the whole of Africa, which was only 2·9 million tonnes imported in 1963 and 7·3 million tonnes, importation in 1975, will rise to 16 million tonnes in 1990 and 30 million tonnes in 2,000.
  746
  Food production can be increased by more, but that will necessitate big increases in agricultural inputs, irrigation and the area of arable land. All those problems require greater resources.
  The importance of population policy for development is accepted by every hon. Member. Excessive population growth produces, particularly in developing countries, high dependency ratios. That means that the countries concerned have fewer savings for investment in production and productive capacity. They also have to spend much more on education, health and welfare services for an increasing number of mothers and children.
  For example, Kenya, which has the world's highest population growth rate, at 3·9 per cent. a year, spends 35 per cent. of its budget on education, and that percentage will rise because one-quarter of the population is under the age of 5 and not yet at school.
  Excessive growth leads to increased demand not merely for food, but for water and arable land. All that will create tremendous development problems in Africa and other parts of the world.
  There is a further concern that should appeal to us all. There is an implication in population growth for individual human development and it is not a pleasant implication. Women are the depressed class throughout the developing world. They do the childbearing and much of the labour and they live lives which are, in the words of Hobbes,
  "poor, nasty, brutish, and short."
  Usually, their lives are very short.
  Those women could play a major part in the economic and social development of their countries if they were relieved of much of the burden of childbearing between the ages of 15 and 44. The rich countries could do much more in that area and the Select Committee's recommendations for Mexico would help to that end.
  However, in the last resort the developing countries must help themselves by making the best use of their own individual human resources. I believe that the use of human resources is a sine qua non for development in any developing country, no matter how much aid we put in or how much we change the world economy to help them. That must mean a proper population policy throughout the developing world. More than any other factor, that will allow individual human development and allow people to get away from absolute poverty and towards leading the lives of proper human beings.
  I conclude by stressing the importance of development education in the rich countries. Political initiatives to help poor countries must be based on popular understanding in the rich countries and, if possible, popular support. Paragraph 14 of the Ottawa communiqué makes a brief reference to that:
  "We … will seek to increase public understanding of its importance."
  That is a reference to the importance of increasing official aid.
  It is tragic that our Government have virtually cut out development education, for the sake of saving a few million pounds. I hope that they will change their mind and I suggest to the Minister of State that this is a subject, if not a major subject, which should be alluded to at Mexico and, I would hope, mentioned in the final communiqué.
  It is essential to have proper development education in rich countries to promote the concept of one world. Unless we promote that concept we shall not get support from our

  747
  people, and politicians will not be giving the lead in rich countries that they should be giving. One hopes that that lead will come out at the Mexico summit.
  11.8 am.
  Mr. Bowen Wells: I wish, not to criticise the Government, but to encourage and help them, and I hope that they found the Select Committee encouraging and helpful.
  There is much for this country and the Government to learn about the interdependence of Britain and the world, particularly the developing world. Reference has been made to how we, alone among developed countries, run a surplus on current account with the developing world. Britain is also way ahead of any other nation in its dependence on world trade. The value of our exports hovers around 30 per cent. of our gross domestic product. Our nearest rival is Japan, at roughly 12 per cent., with the United States much lower. This means that we are uniquely dependent upon trade. We are uniquely dependent, therefore, upon the financial position of the trading nations of the world.
  I want the Government to go to Mexico in a positive mood to find a solution to the problems outlined in the debate. I want them to realise that the only way out of our domestic problems is through an international effort connected with trade and the development of countries that can buy from us. If they cannot buy the exports, we cannot export. We cannot therefore work our way out of the serious problem of unemployment. I believe that the Government are beginning to understand the situation. I welcome the speech of my right hon. Friend the Lord Privy Seal. Despite the criticisms of the right hon. Member for Leeds, East (Mr. Healey), my right hon. Friend has shown a positive attitude, certainly much more positive than the Government have adopted in the past.
  I wish to concentrate, as the Select Committee report does, on practical means for making the Mexico summit a success without spending vast sums of money which we do not have. There is no doubt that the financial situation of the world is in a mess. It is impossible for our business people to plan when both exchange and interest rates vary to a tremendous extent. They vary because there is no agreement in the international financial world on how to smooth out the problems of financial flows.
  I hope that the Mexico summit will address itself to setting up a seminar, an annual conference or a meeting, at whatever time is necessary, to study how to regularise the financial difficulties that now exist. Since the collapse of the Bretton Woods agreement in the early 1970s, this problem has not been tackled. The only answer that I have received from the Treasury is that the problem is so large that the Government cannot even think about it. It is, however, necessary to think about it. We must think about it and try to plan a way out of it. I hope that such a recommendation will emerge from Mexico. It will not cost any money.
  The Government have to seize the initiative in Mexico. Britain will be the only developed country at Mexico that is oil-sufficient. We can therefore talk to the OPEC countries and other oil rich countries in a manner that provides a bridge. The Prime Minister is in a unique position to grab the opportunity that I have outlined. The initiative must be grasped. We must make use of this
  748
  unique position to try to find a way to recirculate to the developing world the profits and the surpluses made by the OPEC countries, so that trade can expand. That money needs to go into profitable investment in those countries. It needs, if possible to go through the private institutions.
  I accept the criticism of my right hon. Friend the Member for Sidcup (Mr. Heath), that a large part of the money that we recirculate through our private institutions does not originate from this country. None the less, the banks play a major and important role in getting that money into profitable investment in Third world countries. Paragraph 55 of the Select Committee report spells out the extent to which the private sector is lending. It is four times greater than our own official public flows. It should, however, be pointed out that £700 million was private direct investment and export credits were worth £500 million and that £3 billion was in the form of portfolio lending, much of it on lending of OPEC surpluses.
  Mr. Nigel Spearing: That was the evidence that the Government gave. It no doubt incorporated the point made by the right hon. Member for Sidcup (Mr. Heath). If, however, capital is going for the highest return possible, is there not sometimes a conflict when the highest return may not be in the developmental interest of the country where the money is invested? Indeed, it could be detrimental to that interest. A great deal of the money may go to areas that are not receiving the sort of developmental capital that even the hon. Gentleman would wish to see.
  Mr. Wells: There is a great deal in what the hon. Gentleman says. This is why we have to combine the private flows through the banks and look at the rate of return that will be of most benefit to the country in which it is invested. The problem arises, as I think the hon. Gentleman will agree, when investments are made in the poorest countries, which will probably not show the highest rate of return. This means that the private flows do not go to the poorest countries. The need for public sector flows therefore arises. I should like to see a re-jigging of our whole aid thrust to make public flows and private flows work together in the poorest countries. That combination would, I believe, produce a dynamism of development in the poorest countries, resulting in maximum benefit.
  Mr. Brocklebank-Fowler: If that is the hon. Gentleman's view, why, in the determination of the Select Committee report, did he find it necessary to vote against the expression of opinion by the remaining members of the Committee that they were concerned about the recent trend in official development assistance?
  Mr. Wells: The reason for my vote on that occasion is that I do not believe that development can best be accomplished simply by increasing the amount of public flows, particularly when this country finds itself in great financial difficulties. I shall come to the amount of money that is involved in the Government's cuts. I believe that, as a gesture and as a token of our good intent at the Mexico summit, we should restore the £62 million to which the hon. Member for Waltham Forest (Mr. Deakins) referred. That is the difference between £803 million and £741 million. I reckon the drop in aid, if my arithmetic is right, to be about £60 million. I should like to see that amount restored. The reason for my vote in the Select Committee

  749
  is that I do not believe that at a time of great financial difficulty we can increase our overseas investment from the public sector. I want to see private sector expansion.
  Mr. John Townend: The right hon. Member for Leeds, East (Mr. Healey) indicated that he would pay for increased Government aid from public sector borrowing—that is, borrowing to give away. How would my hon. Friend pay for the extra £62 million? Would he choose increased borrowing? Would he choose taxation; and, if so, which type of taxation would he select? Would he prefer to see reductions in expenditure in other areas? Will he specify what he has in mind?
  Mr. Wells: I shall not duck the question. It should, if necessary, be done through increased borrowing and, if necessary, by increased taxation. However, the thrust of my speech is that I do not think that either is necessary if an expansion in world trade can be achieved, because with an expansion of world trade the whole economy would expand.
  I regard the overseas aid budget as an investment. It should be an investment. Sometimes it is not, and we can criticise it where that is so. It should be an investment that creates wealth. If we create wealth, the problems of raising taxation and borrowing will not arise. But if in the initial phase we need to do that, the extent to which we would have to raise taxation would not be great. We are talking about £63 million. We would not have to raise taxes or increase the borrowing requirement by very much. After all, the Government increased the PSBR by default, it seems, by over £5 billion, and interest rates and inflation are coming down. So I do not think that we are talking of these problems in practical terms when we talk about trying to increase our aid budget by a modest amount of £63 million.
  Due to interventions, and so on, I think that I am taking up too much of the time of the House. However, I want to emphasise the need for the Government to seek every means by which they can expand trade and private investment overseas. The Government must take credit for their great and bold initiative in abolishing exchange control and assisting the outward flow of capital from Britain. That is part of the reason why the exchange rate has gone down. It will result in profitable projects overseas, in greater trade for Britain, and in the export of management expertise, which the Third world badly lacks.
  That is one of the reasons why we need to increase our overseas investment—to increase management, technical and administrative assistance. Without those human resources attached to the money flows, we cannot create development in the Third world. That is why the private sector is so important. That is why we should tailor our public overseas aid effort towards, and in conjunction with, private flows.
  I believe that the Prime Minister has a tremendous opportunity at Mexico to grasp the initiative, on the part of Britain and for the world. I ask her to do so in the name of Britain, but also in the name of the party of which I am proud to be a member.
  I think that there are three psychological things that my right hon. Friend the Prime Minister could do to help. It would help Britain as well, because all these things help Britain. It is not just the overseas development. This is an interdependent philosophy. We are dependent upon our trading partners and others in the world. I think that we
  750
  should restore some of the cuts that we have made in respect of overseas students. We could do that through the aid programme. It is a modest amount; it would not cost very much. I give credit to the Minister for Overseas Development for the increase that he has given—an increase of £6 million for grants to overseas students from the poorest countries. However, we should increase that still further.
  If that were done there would be incalculable benefits for our relationships with the world at large and particularly with the Commonwealth. It would assist that necessary ingredient of all development—young people and others being educated in British ways, so that when they return to their countries and think of any projects, they come to Britain to make their purchases, thereby increasing our exports. As I have said, we should restore the cuts that we are planning for 1980–81 and 1981–82. That would cost us £63 million.
  Those psychological gestures, plus the conference to which I have referred on the revision and remodelling of our international financial institutions, plus an effort to expand trade in every possible way, with great determination and enthusiasm, and continuing efforts to increase world trade and thereby the prosperity of Britain and of other countries, are what we need. I beg the Government to think on those lines.
  11.24 am.
  Mr. Kevin McNamara: I thought that it might be for the benefit of the House if I were to try to outline the way in which the Select Committee arrived at its conclusions and the reasons for them. Therefore, apart from a few comments at the end of my speech, I do not think that I shall say anything very polemical. I shall try to explain the way that we set about our task in the Select Committee, because it is important.
  It is important for a number of reasons, not the least of which is how it was that my hon. Friends and I could come out with such a mild report—as it might be regarded by some of out friends in the development world and by some of our colleagues in our party.
  The first thing of which we, as a Committee, were conscious was the great wave of enthusiasm which had come from the British population for many of the ideas contained in the Brandt report. That was remarkable in the experience of all of us.
  Some of us have, in the past, been engaged in many hectic election campaigns, and occasionally we have had at least half a dozen people at a political meeting. I cannot recall any occasion when so many Members of this House, in village halls and town halls of great cities, have seen so many members of the population so enthusiastic, keen and desperate to take on board the philosophy contained in Brandt. That was a remarkable achievement. It shows the great concern that exists within the population of Britain, in just general humanitarian terms, to seek to implement the ideas of Brandt and to show their concern for the concept of one world.
  The second matter which considerably amazed us all was the number of copies of the Brandt report that had been sold in Britain—126,500 at the latest count. That is a phenomenal number. It may not be of Harold Robbins proportions, but I can think of no Government publication, of the present Government or any previous Government, which is likely to have sold so many copies in such a brief period.

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  Great interest in this subject has been shown in Parliament, too. We have had three days of debate in this House—some of it in Government time and some in Private Members' time—and one debate in the House of Lords. We had a fantastic lobby in May, with estimates ranging from 4,000 or 5,000 to 10,000 people coming to the House to show their concern about the problems of the Third world.
  It was against that background that the Select Committee worked.
  It is also interesting to note, in many ways for the first time, the way that public opinion on this matter has changed Government attitudes completely. I do not believe that any Government would specifically announce that, as a result of all this, they would immediately change their plan. However, when one looks at the rather cold, hard, original reactions of the Government to the ideas contained in Brandt and compares those reactions with the almost positive espousal of the report by the Lord Privy Seal this morning—as though, if he had not written it, his right hon. Friend the Prime Minister might have done so—one can see the change that has taken place in Government attitudes. That is to be welcomed not only for the issue but also for the degree to which it shows the Government responding to popular opinion in Britain. Therefore, I do not criticise the Government for altering their position; I welcome what they have done.
  I also welcome the attitude that the Lord Privy Seal took to the Select Committee's report. Obviously, we all appreciate that he cannot give an immediate and considered reply. Nevertheless, as a Committee, we felt that the House should have an opportunity of at least reading our conclusions before the debate took place.
  The spirit of the Select Committee was to respond to what we believed was public opinion and to welcome the change in the Government attitude, but also to realise the limitations that are placed upon the Government and to realise the self-imposed limitations that they have placed upon their own development policies. We therefore sought to find ways whereby we felt that Britain could perhaps make a unique and helpful contribution to the discussions that are likely to take place, bearing in mind the Government's own inhibitions about these matters.
  We felt that we had to look at the matters that were of most practical and immediate significance, and that we would eschew any temptation to talk in terms of new institutions and grandiose organisations. We did not believe that they would be particularly helpful in view of the enormous difficulties that face the developing world. We felt that to create a new international bureaucracy would perhaps take a decade, and in that decade, on some of the figures that were originally supplied to us, 150 million children under the age of 5 might have died.
  In all our attitudes we took the existing situation and asked "How best can what we now have be used, expanded and developed?" That was the practical attitude that we as a Committee took. Looking at the international institutions—whether it was the IMF or the United Nations—we believed that we could work to develop and expand. Thus, we believed that many of the ideas—the energy affiliative, the role of the OPEC countries, the degree of participation of the developing countries in deciding policies—necessarily creating fresh, new, expensive and, almost by definition, dilatory institutions.
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  The second matter that we considered was the degree to which we felt that there was an expertise within the United Kingdom which could be used for these purposes, within the framework of the four main issues which the Minister of State enumerated to the Sub-Committee when he gave evidence on the four main issues of food, energy, trade and financial flows and institutions. We had to decide how best our country's financial expertise could be used in these matters.
  We felt that many of those did not require great sums of money—perhaps a transfer of resources, a change of emphasis, a transfer of personnel, and a use of existing expertise and knowledge. For example, the great importance of food in many ways is not the actual production of food, but its storage, transport and the marketing. In such matters we have an expertise and technology which can be transferred, and will not cost much money.
  Equally, we felt that there was not necessarily a lack of knowledge in relation to energy, but perhaps a lack of purpose and will in seeking to discover in the non-oil producing developing countries possible alternative sources of energy. We felt that there was not a lack of expertise in finding a particular financial arrangement which could cushion the poorer developing countries without their own natural energy against sudden fluctuations in energy prices. We felt that it was all there. We have it, but we need to be able to use and develop it.
  We also felt, however—here I take up the point made by the hon. Member for Hertford and Stevenage (Mr. Wells)—that there had been a loss of prestige and influence by the United Kingdom Government as a result of some of the cuts which took place in the high and early days of this Government's pursuit of their monetarist policies. There is the matter of aid to overseas students, and in particular to those who were outside the official aid programme—the great number of private students who benefited from our low fee structure. The cuts in aid that have taken place have also damaged our prestige, and are far and above the cuts that have taken place in any other form of public expenditure—15 per cent. over a period against 1·7 per cent. on the gross figure of public expenditure.
  We therefore felt that a psychological boost was needed, which we believed would come if the Government accepted the recommendations of the Select Committee in going back, not to the 1979–80 figures, but merely to the 1980–81 figures. As the hon. Member for Hertford and Stevenage said, £63 million could have a psychological effect in helping to restore our prestige and in showing our concern and determination to deal with these matters over and above the sum of money involved.
  Let me give an example. When Lord Soames went from this country to the Zimcord conference in Zimbabwe and announced increases in British assistance—not a momentous sum, but significant and in areas of delicacy and importance in the Zimbabwe economy—that gesture did more than anything else for our prestige in that country and to help Her Majesty's Government regain respectability.
  We said that there were three main arguments why it was important. In paragraph 8 we said that we accepted
  "that there is a fundamental moral case, based upon human dignity, for taking action to end absolute poverty in the world".

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  The other is Mr. McNamara's definition of world poverty, which my right hon. Friend read out from the Dispatch Box today, and which merits continuous repetition. It is
  "a condition of life so limited by illiteracy, malnutrition, disease, high infant mortality and low life expectancy as to deny its victims the very potential of the genes with which they are born and men also and women made in the image and likeness of God condemned to a living hell".
  The second reason, although it was the third in the arguments that we put forward in Committee, was given in paragraph 14:
  "Economic development that enables people to move out of desperate hunger, poverty and misery could provide a chance of greater stability in countries of the Third World".
  That, we believe, is of fundamental importance. Certainly, in terms of world peace, I personally believe that the problems of peace in the world and the danger of war will not necessarily come from an eyeball-to-eyeball confrontation between Russia and the United States over East Berlin, West Berlin or Poland. It is more likely that we shall be dragged into some sort of conflict by a surrogate of either party dragging the super-powers into a war. Anything that we can do to create stability in the Third world is in our own basic and selfish interests and those of our children.
  The third is, again, a selfish argument and one which is of enormous importance—the actual trade and jobs involved in this country in Third world development. With the Third word, both oil-producing and non-oil-producing countries, we have a surplus on bal ante of payments. We can only maintain that trade if those countries can purchase the goods and services that we want to sell to them. That can only be done by stimulating their economies. So the jobs, livelihoods and opportunities of my constituents and the constituents of all hon. Members depend upon the trade and development that take place in the Third and developing worlds. That was one of the three main arguments put forward by the Select Committee—one being human dignity, one being world peace, and the other being self-interest. We believe that Brandt and the question of mutuality of interest has to be followed through.
  It had been my intention to be a little polemical about what the Prime Minister said to me yesterday, but I content myself with making one observation. I find it a little hard that the right hon. Lady should sign an Ottawa communique which says:
  "We are committed to maintaining substantial and, in many cases, growing levels of official development assistance and will seek to increase public understanding of its importance."
  Bearing in mind the fact that we have ended development education and, more particularly, that our development aid at present is on a sliding scale and moving downwards, I do not know how the right hon. Lady came to sign that document.
  When I put the matter to the right hon. Lady yesterday, she said:
  "I cannot promise increased Government aid this year."
  I did not ask for that. I merely wanted it maintained. The right hon. Lady went on:
  "I hope that our excellent flows of private aid will continue and that they will increase from other countries, but that will happen only if the developing countries adopt a code of practice to safeguard those investments."—[Official Report, 23 July 1981; Vol. 9, c. 501.]
  The Select Committee makes just that recommendation. It says that there should be codes for protection. Whether it be public or private flows going to developing countries, people obviously wish to feel that they can get
  754
  a fair return on their investment and that it will be properly safeguarded against sudden and violent changes, in economic and domestic policy.
  We talk about "agreed" codes because, equally, the developing country has a right not to expect to he ripped off. It has the right to expect that its natural minerals, for example, shall not be seized and exploited by the developed and industrialised world without the country getting any sort of protection and inward investment of other sorts building up its own infrastructure and investment potential. It has to be a two-way switch. It is not only a matter of protecting money. It is protecting the future of those countries as well. That is a very important matter which right hon. and hon. Members who speak about protection must recognise. It is not just our money over there which has to be protected. The future and well-being of the developing country has to be protected as well.
  11.43 am
  Mr. Raymond Whitney: I welcome the remarks of the hon. Member for Kingston upon Hull, Central (Mr. McNamara) about the importance of trade with the rest of the world for all our constituents, and I shall return to that topic at the end of what I hope will be a very brief intervention.
  As one who has spent most of his life working in or with overseas countries, I welcome the sense of interdependence—of one world—that has emerged constantly as the main theme of our debates on the Brandt report over the past year or so. That in itself is a great achievement of the publication of the Brandt report, and the hon. Member for Kingston upon Hull, Central drew attention to the incredible interest that it has generated in Britain. That is to be welcomed. It demonstrates a readiness to look outwards and to manifest our humanity and our sense of linkage with the rest of the world.
  I am conscious that I am about to break the happy unanimity that has generally prevailed in these debates, and it is a pattern that tends to be repeated. However, it needs to be said that we have also managed to create a climate in which, to point out some of the fallacies of Brandt seems to suggest a degree of insensitivity to the poverty and suffering of the rest of the world.
  That very manifestation is itself damaging. It has created some element of unreality about our treatment of these problems, as Britain or as the Western nations, and our approach to them. The Brandt phenomenon, for good or ill—and mostly for good—is a British phenomenon. We have heard of the 126,000 sales of the report in Britain. That figure has in no way been matched in any other developed or developing country. That is to our credit, but it is a very British manifestation. It is a manifestation of the continuing compassion that we in Britain feel and of which we should rightly be proud.
  The Churches have played a prominent part in it, and, as a Christian, I welcome that. But, however compassionate we are, and however Christian we are, we have to understand that we are dealing with economic, social and political facts and that we cannot therefore escape the history and reality of economic and social problems and of political relationships.
  Therefore, I offer a few other statistics. I do so with some regret, because none of us likes to absorb statistics. I offer them recognising that they too, may be fallible and questionable. I say "too" because the statistics with which

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  we are generally provided about the enormous problems of feeding the world, of population and the rest of it are themselves challengeable.
  Up to a point, we must not talk ourselves into total depression. We must not forget, for example, that over the 20 years up to what we now describe as "the oil shock" the developing countries generally were increasing their growth by about 6 per cent. a year. That is a factor that will make a significant difference to the projections that the right hon. Member for Leeds, East (Mr. Healey) offered.
  Much the same is true of the projections in "World Economic Outlook", which may or may not be falsified. Its forecast for the next five years is that the economies of the developing world will grow by about 5·8 per cent. over that five-year period.
  Mr. Deakins: I am sure that the hon. Gentleman appreciates the distinction between overall growth rates in GDP and growth rates per capita, which are what matter when it comes to raising the living standards of people in developing countries.
  Mr. Whitney: I appreciate that, and I shall return to the population statistics in a moment, if the hon. Gentleman will allow me to continue.
  Reverting to the Brandt report, the change from 6 per cent. to the lower rate of growth that we have had in all countries, including the developing countries, was in large measure caused by the oil shock. One of the lacunae in the Brandt report is that it deals very sketchily with the impact of the oil changes.
  I take up the point about population just made by the hon. Member for Waltham Forest (Mr. Deakins). He and the right hon. Member for Leeds, East quoted some projections of figures. I offer some others which may enable us to provide a slightly more optimistic note about the population problem.
  I do not deny that there is a problem and that it is increasing, but I might point out that figures produced last year by the United Nations fund for population activities suggested that there was a decline in world population growth, and that the world fertility survey suggested that, because the birth rates in Third world countries and developing nations diminished significantly during the 1970s, one set of estimates suggested that the peak rate of 2·1 per cent. in the mid-1960s was now down to 1·6 per cent. or 1·7 per cent. and that in the big countries of the world—China and India—it was down much more sharply.
  Chinese demographic statistics are notoriously difficult, but one estimate is that they are heading towards about 1·4 per cent. If the Chinese and Indians, given the massive proportion that they represent of the underdeveloped population of the world, can achieve rates of that sort, I suggest, without being complacent, that we must not be alarmist about the significance of the population figures, and therefore the implications for the feeding problem.
  The American study last year, Global 2000, was in no way optimistic. It was couched in the standard pessimistic approach which, sadly, has become all too common in the fraternity that usually specialises in that area. It forecast that by the end of the century there would be a population increase of 42 per cent., which is frightening enough. It
  756
  also forecast an increase in food production of 69 per cent. I hope that that prognostication is correct, and therefore that the other gloomy prognostications will be falsified.
  Mr. Heath: I do not think that my hon. Friend's remarks in any way deny the Brandt report's basic statement that the world population will rise from 4·3 billion to 6·3 billion or 6·5 billion by the year 2000.
  Mr. Whitney: They do deny that statement. The prognostications on those figures come to less than 6 billion—namely, 5·75 billion. A quarter of a billion people significantly change the problem with which we are dealing.
  Many references have been made to the Ottawa summit. The right hon. Member for Leeds, East—perhaps for want of his own inspiration—used the reference in The Times leader to "a fudged summit". He attacked the whole content of that statement. That was an extraordinary thing to do, because it was signed by such leading Socialists as President Mitterrand and Herr Schmidt. The suggestion that it was put together by a few clerks a few weeks before the summit, and that the Heads of Government simply put their initials to it, is a serious calling into question of the sense of responsibility of all the world's leaders, not least the Socialist leaders. The difference is that those Socialist leaders accept the force of reality and common sense.
  The world as a whole, and especially the developing countries, should welcome the statement in the Ottawa summit communiqué. It was accepted that global negotiations should continue on a basis of mutual interest. I hope that we can adopt that piece of jargon—global negotiations—rather than the North-South dialogue, which is itself misleading and has so many curious and strange connotations. The communiqué recognised the gruelling poverty in parts of the world and the need to aid the poorest. I see nothing to complain of in that. We must insist, as I am sure the seven leaders do, that practical steps are taken in the light of their assertions. They called upon the OPEC countries for help.
  They were right to point out—I am sure that none would disagree—the appalling record of the Soviet Union and its allies towards the developing world. That point cannot be stressed too often, not only in the democratic world, but in Third world countries.
  The most important point of all is the emphasis in the communiqué on the need to resist the protectionist pressures that are growing in the world. As my right hon. Friend the Lord Privy Seal said, it is all too easy to slip into the aid discussion. Speaking as someone who has spent 10 years working in developing countries, I assure the House that trade is far more important. The figure quoted by my right hon. Friend was 25 times more important. That is the key to the thought that I wish to leave with the House.
  I hope that the Opposition accept and understand that in living in one world we have a duty to understand that the wealth of that world was created by free market forces and that the real growth in world economy came from the operation of the market. One of the major weaknesses of the Brandt report is that it concentrates, as is the Socialist wont, on redistributing what exists. We must create more and more wealth. That is the key to the solution of the great problems. However, they are not quite as great or quite as daunting as has been suggested. They can be cured if we have a sensible approach to free and open trade policies.

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  I hope that the Opposition and the trade unions in Britain, and the Governments and workers of all countries, understand that that is where salvation lies for us all.
  11.55 am
  Mr. David Ennals: The hon. Member for Wycombe (Mr. Whitney) would not expect me to agree with his concluding remark. However I must agree strongly with his condemnation of the Soviet Union, whose record on development aid is modest compared not only with that of the Western industrialised countries but with what the Soviet Union can afford to provide.
  I wish to pay a personal and warm tribute to the right hon. Member for Sidcup (Mr. Heath). During his period as a member of the Brandt Commission, and also during the long months that have passed since then he has rendered both this country and the world a great service. He has given not only of his time but of his effort and influence to ensure that the message that is written in Brandt has been conveyed to the people, especially the British. I welcome the fact that he was concerned that the message should also be conveyed to the leaders in Ottawa. I congratulate him on the memorandum that was circulated. I hope that he will speak in the debate.
  I wish to congratulate the Select Committee on not only the timing but the contents of its report, and also my hon. Friend the Member for Kingston upon Hull, Central (Mr. McNamara) for his excellent exposition of it. I do not need to delve into the details of the world position. They were presented in stark form by my right hon. Friend the Member for Leeds, East (Mr. Healey). I wish to add only one point, which is that spending on official development aid is running at less than one-twentieth of the world's military spending. That is getting matters wholly out of proportion. The Government are making a modest contribution to that imbalence between what is spent on development and what is spent on aid. Many of the developing countries are spending far more than they can afford, and far more than they should, on arms. That was pointed out in the Brandt report.
  I wish to make three points. I agree with the Lord Privy Seal. I welcome his approach and his mood, which was sharply different from the first reaction of the Government to the report. He said today that it is a moral problem. We have a moral imperative to do everything in our power to assist—even at a time when Britain, in many ways due to the Government's actions, is impoverished. However, compared with the starving nations, we are rich indeed. The challenge upon us to share some of our riches, both to the advantage of the developing countries and of Britain, is very great.
  I agree with the Archbishop of Canterbury, Dr. Runcie. He is President of the British Council of Churches. He supports the Brandt repotr and the May lobby, in the hope that they will increase public awareness of the terrible evils of world poverty. He said:
  "I would urge the Government to make every effort to give a strong moral lead in combating such an evil."
  The impressive lobby that we met on 5 May was a magnificent example of the way in which the message of the Brandt report has got through to people throughout Britain. I do not remember a more impressive and better organised lobby. Hardly ever do we see the House lobbied by those who want something for others rather than simply something for themselves. Great credit should go to the
  758
  World Development Movement, which co-ordinated the lobby. I am glad to say that it has opened a branch in Norwich this very week.
  Among the 9,000 or 10,000 who were present were many young people. I believe that three issues inspire our young people, especially if their view of life has not been jaundiced by the horrors of unemployment. First, they hold positive views about the importance of the fight against poverty. Secondly, they wish to see an end to the fearful growth of weapons of mass destruction. Thirdly, they recognise that there is an urgent need to protect our environment from the ravages of so-called modern urban development.
  The recommendations of the Brandt report are not about handouts to the poor nations, if we are to quote the Prime Minister. There is a healthy recognition of mutual self-interest. None of us is looking for confrontation between North and South. We wish a soundly based cooperation that makes markets available for exports for poor countries as well as making markets available, as a result of the growing wealth of the poorest countries, for the exports of the industrialised nations.
  We need major reforms in the international monetary system. We need much more progress in debt relief, which imposes such a heavy burden upon developing countries. We need, as my hon. Friend the Member for Waltham Forest (Mr. Deakins) has said so clearly, a major emphasis to be placed on food production and distribution as well as population policies.
  In April 1974, I had the honour to lead the United Kingdom delegation to the United Nations special session on economic development. The session took place in New York. At the time, I held the position that is now held by the Minister of State, Foreign and Commonwealth Office. I said in New York:
  "when we get down to the detailed discussion of individual issues it may perhaps be misleading to speak in the shorthand terms of rights and duties … Are we not more honest with ourselves if we talk in terms of what we need or want and of what we can offer or contribute in fair exchange? I believe that this realistic approach will lead to the evolution of an economic relationship which transcends our divergent interests and results in growing, and more evenly spread prosperity for all nations not, in disorder and this dislocation."
  I think that I did rather better in 1962 when I wrote the following:
  "No country will consciously act against its national interests. The task of the United Nations is to harmonise these national interests, to prove that, on balance, national interests are best served by co-operation, and to facilitate such co-operation."
  By some of its present policies, Britain is acting against its national interest. The world is a market for our manufactured goods, for our technology and for our experience. That is to our advantage and to the advantage of others. We are throwing away our opportunities. I was glad that the hon. Member for Hertford and Stevenage (Mr. Wells) referred to overseas students. We place obstacles in the way of students from overseas who come to study here. This will have immense long-term consequences. I know that that will be so. I reached that view both as Secretary of State for Social Services and as a Minister in the Foreign Office. It was also my view when I was working in overseas development years ago.
  It is recognised that, by coming to Britain and gaining skills and experience, and becoming familiar with our equipment, students are better able to promote our interests when they return to their countries. More and more students are going to France, Germany and the

  759
  United States. Some are going to the Soviet Union. They are turning to countries other than Britain. It will be a good thing if some gesture is made on that score before we go to the Mexico summit.
  We cut our voice in the world by miserly cuts in the external services of the BBC, an issue that was debated last night. We have reduced our planned aid programme by about £125 million. The majority of the cuts will have an effect on our bilateral aid, as the Minister for Overseas Development will recognise. About three-quarters of that aid is tied to the purchase of British goods and services. That means more employment in Britain or, if the aid is cut, less employment and less British trade overseas.
  The Government's attitude, and especially the attitude of the Prime Minister, damages our long-term commercial interests and lessens our leadership in the world. I do not know how the right hon. Lady was able to sign the Ottawa agreement, which commits Britain to enlarging official aid. Apart from the new Government of the United States, whose policies are presently negative—I hope that that will be a temporary phase—the British Government represented the only country to be moving downwards and away from the 0·7 per cent. gross national product target for official aid. This is happening after several years of gradual improvement and movement towards that target. I am glad that my right hon. Friend the Member for Leeds, East confirmed from the Opposition Front Bench that that target will be achieved during the lifetime of the Parliament that stretches before the next Labour Government.
  My third and last point is, in a sense, quite different. It was taken up by the hon. Member for Wycombe, who said that he did not like to hear the term "North-South". Apparently he prefers the term "global negotiations". I recognise that there is some confusion about North-South. In the Grand Committee Room during the Brandt lobby, the Minister of State referred to the massive increase in refugees. There are about 8 million refugees in Asia,
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  Africa and Latin America, and even in Europe. There is an increasing flow from Eastern Europe. Some of the refugees in Africa and Asia are in desperate need, as I have seen for myself during recent journeys overseas.
  The Minister of State said that these people are refugees not because of economic factors but because of political oppression. I have a close interest in refugees. It has been one of my interests for many years. I do not agree with the hon. Gentleman's conclusions. Many of today's refugees, especially those from Vietnam and other parts of South-East Asia—certainly those in the Horn of Africa and even those from Poland—are as much economic refugees as political refugees.
  There is a link between our East-West discussions and our North-South dialogue. What we are doing in trying to promote greater dialogue and co-operation between North and South can have beneficial effects upon relations between East and West. I should like to see the Government to contribute a programme of assistance, or consider such a programme, to Vietnam, from which there is a new flow of refugees who are nearly all economic refugees. I should like to see a new programme for Poland. Discussions should be taking place now to ascertain how we can help the newly emerging and freer Poland of today.
  I hope that the Minister will deal with those two points when he replies, as well as spelling out in some more detail—I recognise that this will be difficult, with the discussions which will take place with the Foreign Ministers in a couple of days' time—a little of the constructive approach which the Government will take at the Mexico conference. The lobbies and interests in the matter have perhaps moved the Government. The right hon. Gentleman has moved the Government away from what had seemed to be a cold, negative attitude at least to the right mood. We now need, either before the Mexico conference or in Mexico, positive proof in terms of funds which at present are being cut back and also in terms of other ideas which can regenerate the leadership role which Britain used to play in this area and which today it seems to be slipping away from.
  12.11 pm
  Mr. Edward Heath: I thank the right hon. Member for Norwich, North (Mr. Ennals) for the generous tribute that he paid to the Brandt Commission, to any part that I was able to take in it and to anything that I have been able to do since. I have had many opportunities to express my views. They are largely embodied in the commission's report. Today I should particularly like to concentrate on the future, which will include the conference of Foreign Ministers beginning on 2 August, the Commonwealth conference in Melbourne in September and the meeting of Heads of Government in Cancun in Mexico towards the end of October.
  There can be many criticisms of the Brandt Commission report. I do not accept some of the arguments put forward by my hon. Friend the Member for Wycombe (Mr. Whitney). Whatever the criticisms, and whatever the assessment of the recommendations, one thing is remarkable. As far as I can recall, it is the first report of any kind that has brought about a meeting of the Heads of Government of 23 countries. Although from time to time there may be disappointment, and sometimes disillusionment, among members of the commission, we must never forget that we have brought about the forthcoming summit and that it is a ray of hope in what is at the moment a dark world.
  I wish to say a further word about the speech of my right hon. Friend the Lord Privy Seal. I do not particularly want to argue about statistics. I find that international opinion of Governments and organisations accepts the basic statistics on which we work. The report to which my hon. Friend referred which concerned the year 2000, is purely an American internal working group report and has not carried the same weight as that of the Brandt Commission. Nevertheless, my hon. Friend is entitled to quote his figures. However, whatever difference there may be does not diminish. The immense crisis that will face the world from the point of view of the problems that we set forth in the Brandt Commission report are also set out in the report that my hon. Friend mentioned.
  Mr. Whitney: Does my right hon. Friend accept that I was quoting three sets of figures—not only Global 2000 but the World Fertility Survey and the United Nations study on populations last year in June?
  Mr. Heath: That does not alter my basic thesis about the facts in Brandt, which have not been challenged and which are now accepted as general recommendations for the future. Of course the position in India and China is important. Especially those of us who have been to China and have discussed the matter with those at the top know that it is difficult to obtain figures for what is happening to population growth in China. The Chinese are still working on a high population growth. In India there was a period when the rate declined, but it has now steadied out again. In Latin America, because of religious history and background, one finds that the population is increasing fast. That will weigh largely in the balance of world population.
  What impresses me is my hon. Friend's final conclusion. He said that, if we leave everything to the market, everything will be solved. That was the underlying theme and philosophy of his speech, and it is also that of his writings and general outlook. It is a philosophy that many of us feel bound to challenge.
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  My hon. Friend referred to developing countries that have done well, but one only has to look at the reason why they have done well. Let us take Brazil as an example, which has had one of the highest growth rates of the developing world. Two-thirds of its investment comes from governmental or international sources and only one-third from private enterprise.
  One should consider the amount of Government investment in the much-quoted examples of Singapore and Hong Kong. That has come largely from the British Government. We have built up Singapore and Hong Kong and we should be proud of that. At the same time, those countries have had an immense amount of international help, as Lee Kwan Yew will be the first to admit. He has been skilful in securing that help.
  In Taiwan and South Korea there have also been considerable amounts of investment from international sources. Therefore, it is an over-simplification to say that some developing countries have done well, that that has been done through the market, and that, if we leave the rest to the market, that will produce the answer. That is the greatest fallacy of all.
  My hon. Friend can criticise Brandt for not putting emphasis on the private sector, which I do not accept. We in no way underestimated the importance of the contribution of the private sector. There was a chapter in the report that dealt with transnational companies. From the point of view of development, it is the transnational companies that get the job done, because they have the money and the expertise. If my hon. Friend now nods his head, he cannot criticise Brandt for the chapter on transnational companies and the code that was referred to just now. Yesterday, my right hon. Friend the Prime Minister rightly emphasised that that was of great importance. Therefore, in no way can he say that we overlooked the contribution of the private sector.
  Mr. Whitney: I am very grateful to my right hon. Friend for giving way again. This seems to be developing into a dialogue between us. Does he accept that in my remarks I made no suggestion that there was an attack by Brandt on transnational companies? Nor did I suggest that individual countries were right or wrong to use their own methods for their own economy. I agree with that. I did not mention the newly industrialised countries or Brazil. Each community must find its own way. Chapter 3 of Brandt is absolutely right when it says that the majority of the impetus for growth must come from those countries, whichever way they choose.
  Mr. Heath: This is a debate in which I am winning round my hon. Friend. That is encouraging. By the time that we get to Cancun, he may totally support me.
  I welcome what my right hon. Friend the Lord Privy Seal said and the tone in which he said it, which is in keeping with his views and his hopes for the future. It is true that there has been a development of Government attitudes over the past 18 months. The country will welcome what my right hon. Friend said, in exactly the same way as it welcomes much of what is in the communiqué from the Ottawa conference.
  However, this country and the world will be asking to what extent the Ottawa communiqué is cosmetic and a change in tone and approach, and to what extent it represents reality. One of my doubts arises from the fact that there has been a complete lack of interest in the

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  Treasury and by all Treasury Ministers in any debate in the House on the Brandt report. The Chancellor of the Exchequer has never appeared. He has shown no interest. No Treasury Minister is here today. No trade or industry Minister is here. The matter has been left entirely in the hands of the Foreign Office. I have always admired the Foreign Office, having been Lord Privy Seal myself, and I recognise the extent of its power and influence, but it does not dominate the Treasury.
  We have suffered a great deal in the last 18 months from the Treasury's attitude, which finally led to the blackballing of a British Chancellor of the Exchequer as the chairman of the Committee of 22. I cannot recall that happening before in my political experience. It is a lesson that the Government should learn.
  I welcome what the Lord Privy Seal announced about the specific areas in which the Government are to take additional action. We shall have to concentrate on specific points. The Government are to support the activities for clean water, and so on. At the same time, the London School of Tropical Hygiene and Medicine, which is probably the finest in the world, is being driven to desperation by having its resorces cut off by the Government. It is suffering because of the reduction in students. Its income has fallen by 20 per cent. It fears that next year it will lose still more, that it will have to reduce staff and that it will just not be the school of which we have been so proud.
  The Lord Privy Seal and his colleagues must be consistent. They should look at the matter. They might say that it is not the Foreign Office but the Department of Education and Science that is involved. However, this is a specific case. The Government will be judged on whether their action to help with clean water throughout the world is to be consolidated by the work done by the London School of Tropical Hygiene and Medicine, which no other school in the world can equal. That is the British contribution.
  There are other examples, but I do not wish to be too controversial. There is the question of producing technicians for the developing world. The three principal new institutions for producing technicians in Britain—and Aston is one—are suffering heavily. They have to cut down on what they can produce. That again represents a lack of consistency in the two spheres. I hope that the Foreign Office will look into that.
  I turn to the question of the conferences. It is clear that the situation in the developing world is, in every respect, worse than when we produced the Brandt report 18 months ago. From the point of view of its terms of trade, of interest charged on its debts, of its oil prices and of the growth of protectionism, it is worse. Above all, from the point of view of its total deficit year by year, it is worse. I do not want to quote many statistics, but I shall illustrate what I mean.
  When we wrote the report, it was thought that in 1980 the deficit would be $72 billion for the non-oil producing developing countries. The deficit turned out to be $80 billion. In 1981 it was estimated that the deficit would be $80 billion. It is now expected to be $100 billion because of the worsening tendencies that I have described. In that respect the indebtedness is piling up and the general situation has become worse. The need to take action is greater.
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  Let us examine the results of the Ottawa conference. There are matters in the communiqué about which we can be pleased. One might concentrate on four matters. First, there is the willingness to co-operate with OPEC to increase energy production in the Third world. That is relevant to Cancun. Secondly, there is the desire to make increased resources available for food security and the food programme. That is also welcome. Thirdly, there is the approval of a GATT ministerial meeting to deal with the trade problems. Finally, there is the positive statement on aid.
  When one examines each of those, one sees the inner contradictions of the Seven in the agreement and in the practice that they are pursuing. One of the first tasks must be to try to bring consistency between what they have agreed and what they set out in the communiqué
  I turn to the programme for the Heads of Government meeting. On procedure, objectives and agenda there are two schools of thought. The first is that this should be a non-structured meeting in which people have a general discussion. The second is that if 23 world leaders get together they should agree on certain basic principles which they will implement. I say without hesitation that I belong to the second school. I believe that unless there is specific agreement on certain things—albeit a limited number—there will be grave disappointment and disillusion.
  I understand the fears of those who want a non-structure meeting. They are afraid that it will lead to a confrontation of the kind that we have had in previous global negotiations. That is why, for two practical reasons, I have no sympathy with the views of my hon. Friend the Member for Wycombe that we should talk all the time of global negotiations. As far as we are concerned, for the past 15 years they have to all intents and purposes failed. Secondly, from the South's point of view, they regard it as an alibi for the North doing nothing.
  That is the position that we are in. That is why Brandt suggested not another global meeting but a meeting of a limited number of Heads of Government who could, in fact, reach agreement not to start from heavily prepared positions, as the North and the South do, or the Group of 77 does in the global negotiations, but genuinely, by preparation beforehand, to see where they could compromise and reach agreement.
  I assure my hon. Friend the Minister of State that if 23 Heads of Government agree on measures for the benefit of the North and the South, I do not believe that the rest of the world will complain; one says to them "If you want to come into this arrangement do so, you are welcome, and, if you do not, you stay out, and that is your affair." If 23 Heads of Government can agree on specific action in four different fields, everyone will heave a sigh of relief. It will be the first time that we shall have seen it. So those are unnecessary worries, but they are seen by the South as being just a cover-up and a reason for not reaching agreement when one talks about global negotiations and says that we must be so careful about what the rest of the world thinks.
  Mr. Hurd: The hon. Member for Waltham Forest (Mr. Deakins) asked whether the Cancun summit would be the first of several, and it was in that context that I said that there was a difficulty-the Cancun membership was, as it were, self—appointed and that created a problem. My right hon. Friend takes me up on that and says that everyone

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  would be delighted if the meeting reached agreement. I simply say that the worries about the fact that the Cancun membership is self-selected come to us not from ourselves or our partners in the North, but from certain developing countries in the South.
  Mr. Heath: I believe that I have been in touch with probably the greater number of those countries, and the worries, to my knowledge, come from two. They come from Australia in the North. Mr. Fraser is very strongly behind the Brandt report and will back it at the Commonwealth conference, and I believe that that fact is now becoming well known. He would like to be at Cancun, and some of us would like him to be there. The other worry comes from the South from President Castro. he is at the moment chairman of the 95 non-aligned countries, and in many ways he has a claim to say "I should be represented there or they should be represented there through the President of Cuba". There is a strong argument for saying that, which I discussed with him. I personally wish that he was to be there, because I believe that the opportunity for the American President and the President of Cuba to meet informally is one that should not be missed. However, in this I may hold unusual views, because I want to bring about a settlement in the Caribbean.
  If we now come to the items that deal with the summit, which the Lord Privy Seal mentioned. I do not know whether he mentioned them in the order of discussion or importance, but I should like to say a word first about his first item, which is trade. This is, in fact, the most difficult item with which to deal. Of that there can be no possible doubt. Looking at it from the point of view of the organisation of a conference, what one wants to do is to start with the things on which one can most easily reach agreement and then move, step by step, to the most difficult.
  I should not challenge the four, but when it comes to trade, how much can we hope to achieve in those circumstances? I have suggested that the countries should agree on a standstill on protection. Is that feasible? The Ottawa communiqué says that trade is all important. At the same time, the world hears that the European Community has announced that the multi-fibre arrangement will be more restricted next time than it was last time. How do we reconcile those things? If one had a genuine agreement in the North and a standstill on protectionism, one would gain a great deal.
  We should consider the American position. President Reagan has been very strong about maintaining free trade, but with the dollar where it is, and with the slump announced yesterday in New York and Washington as now being firm, the opportunities for Japan to compete in the United States will become greater. We saw that when the pound went up to $2·35. With the dollar going up, the United States will have to withstand more and more competition industrially. We know what happens in the United States in those circumstances. We have seen it under previous Presidents.
  One must recognise that trade is the most difficult of all the subjects on which to reach agreement. On food, we can be practical at comparatively limited cost, and we can support the institutions. However, we have technical knowledge and expertise to contribute.
  On energy, we have the problem of the energy affiliate which the World Bank wants to create but which has so
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  far been barred. There is a misunderstanding here as well. The energy affiliate is justified from a number of points of view. We want exploration to be carried out in the poorer developing countries. It is not true to say "Leave it to the market" and the great companies will do it. There is nothing to stop their doing it now, if they wish, but they are not. They are not doing so because of the political risk involved in exploration and development. They know that if, as individual companies, they are backed by the World Bank, or by an affiliate of the World Bank, the political risk is enormously reduced, because no developing country will interfere with a project in which the World Bank has an interest.
  That is why we encourage individual enterprise to play its part in development. No one is suggesting that the energy affiliate should carry out the exploration and exploitation, but it gives a cover for that political risk that the companies want. From that point of view it is justified.
  What about our point of view? The impact of marginal increases and decreases in oil supplies is enormous. During the Iran-Iraq war oil supplies have decreased by 4 per cent. and the price has increased by 130 per cent. That is the marginality of that commodity. A comparatively little production from a developing country can influence world oil supplies considerably. Even though production is limited, it can have a large impact on the total economy of a small, developing country. It is therefore of great importance to them.
  For all those reasons, one should support an energy affiliate, which would concentrate on those aspects with the oil companies of the world.
  Finally, there is the question of the institutions and monetary arrangements. It would not cost us or the Americans anything to change the institutional structure to give a larger say to the people who are prepared to put money into it. Fundamentally, that means the OPEC surpluses. So far, that has not been possible.
  I know that the so-called bureaucracy of the IMF and the World Bank is prepared to accept that. It has been prepared for some time to do so. Brandt did not want to have an additional institution of this sort. We suggested it because we thought that it was a suitable tactical manoeuvre to bring the World Bank and the IMF together to see whether they would be prepared to adjust. They have shown that they are prepared to adjust. It is now up to the Governments of the North, not the South, who will have to agree to that. When the South says that it wants a genuine demonstration of the will of the North, we can do that. It will not cost us a penny or a cent., and therefore I urge the Foreign Secretary, when he goes to the conference on 2 August, to be prepared to make those changes in the institutions.
  The view has grown in the United States—although it is probably now beginning to decline and will decline further—that these things are much better handled bilaterally. Of course there is a place for bilateral action, but there are certain areas in which results cannot be achieved purely by bilateral Government action or by bilateral private action—first, because of the nature of the task and, secondly, because of the scale of the task.
  There are, for example, the major dam projects. Very few Governments in the world are undertaking such projects. We are doing one in Sri Lanka. I imagine that the Treasury wishes that we were not doing it, but we are. I do not believe that some of the larger projects—particularly the one in West Africa—can be

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  undertaken by one country. The reafforestation of the Himalayan slopes is another example. There are also the problems of Brazil. They cannot be managed by one Government. They can be done only by an institution that is efficient and has multilateral resources.
  A second view is that it can all be done by Governments on a regional basis. The United States has recently done a great deal to help the Caribbean. The question has been asked: why do not other Governments take other sections of the world and act similarly? To a certain extent we do it with the Commonwealth, but that does not deal with the problem of a large number of the least developed countries. Here one might ask who is to take over Africa? Who is to provide for the development of so much of Black Africa? Who is to deal with a large part of Asia—particularly Bangladesh, and the forthcoming needs of India? I do not believe that it is possible to divide the world into regions in that way and say that the United States will be responsible for one region, the EEC for another, and Japan for another. What is there left after that? The problems cannot be dealt with in that way.
  That is why it is necessary to have international institutions, with resources, which can see that the areas most in need are dealt with—areas which are the least attractive either from the point of view of bilateral Government action or of private enterprise.
  In that respect, I hope that Cancun will succeed in bringing the North round to the view that this is a false trail. Countries can look after areas with which they are particularly concerned or with which they have long connections, as America and Canada have with the Caribbean, and so on. But we have to continue with the process of developing international institutions which can cope efficiently with the problems of the least developed countries.
  I hope that the Foreign Ministers will now prepare the conference with a view to finding how much ground there is upon which they can agree. The Heads of Government in Cancun will then obviously have to discuss matters further. They will be able to reach agreement on specific issues, such as the four that have been mentioned. Trade ought to come at the end of discussios, and it will be much more limited than many people want. There will be great difficulties of implementation for countries such as the United States and ourselves, and other European countries. There will be great political difficulties, but it is essential to overcome them if world trade is to be increased.
  It should never be forgotten that one of the basic objectives—if not the basic objective—of the whole of the exercise is to recreate world economic activity. Whatever economic doctrines people may have, there is no sign at the moment that anyone has any other way of recreating it. It was said yesterday in the United States that a depression has now started and will be continued. I cannot see that the present policies of the American Administration will recreate American activity, and if American activity is not recreated, the world can no longer look to the United States as its dynamo, as we did at one time.
  When we get to the end—if there is an end—of a long period of unemployment and acute monetary stringency, what will enable the economy to recover? That is something that can be discussed in more detail in the
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  debate on Monday. The real, outstanding purpose of the recommendations of the Brandt Commission was to deal not only with the problems of poverty, hunger, disease, mortality, justice and fairness in the world, but to recreate world prosperity so that we should all be able to gain, and so that the differences between us would be decreased and the North would be able to help the South as well as helping itself.
  I ask the House not to overlook the fact that the whole purpose is to recreate world economic activity on a stable basis. That is what the world expects from us.
  12.40 pm
  Mr. Christopher Brocklebank-Fowler: It is extremely difficult to follow a speech of the calibre which has rightly engaged the attention of the House for the past 20 minutes. The right hon. Member for Sidcup (Mr. Heath) has played a leading part in educating the House and the British public in the range and scale of the problems facing the international economy. He deserves the thanks of us all for his important work.
  I wish to extend the apologies of the hon. Member for Inverness (Mr. Johnston) who is not able to be here, because he has to be in his constituency.
  I am disappointed that after four debates time has still not yet been found to consider this important subject on a day other than Friday and when the House is full and we could expect the attention of senior Ministers from other major Departments as well as the Foreign Office. Having attended the debates regularly, I get the impression that Foreign Office Ministers are put up to play the straight bat with the sort of egregious and circumlocutory charm of some of the leading figures on the Government Benches which fudges the real issues. I would welcome the participation of Ministers from other Departments, if only to ensure that at least some of them read the Brandt commission report and began to get to grips with some of the problems it describes.
  The Brandt report is a challenge to all of us. It is a challenge to Governments all over the world to look at our contemporary world problems with an imagination which has been lacking in the past. This has led, as the late Dame Barbara Ward pointed out recently, to the stark choice that lies before us. It is either in the direction of the Brandt report—towards peace and co-operation—or the way that the world went so disastrously in the 1930s—towards war, death, destruction and unemployment.
  Although there are increasing signs that Ministers in the Foreign Office perceive some of those great issues, I regret that there are few signs that the rest of the Government do. I was encouraged to see last week that in the United States of America, despite the more overt remarks of the Administration, at least the Under-Secretary of State for Economic Affairs recognised in evidence to the joint economic committee of Congress the crucial linkage between foreign economic policy and both foreign policy objectives and domestic economic policy.
  Our Government have failed to make that link and to understand the interaction between what they are trying to do domestically and what is possible in the contemporary world economic situation. That leads to the sort of despair that some of us have felt in recent months at the successively weak responses from the Government to all the pressures from the public who want them to play a leading part in the world negotiations to solve these problems.

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  As many hon. Members have testified, the Brandt report has excited enormous interest in Britain. This has occurred not only on moral but also on economic grounds. The Churches, large numbers of groups and individual members of the public have been excited by the problems of the world and wish to see the Government play a constructive part in solving them. Can we really hope now that the Prime Minister will approach the Mexico summit rather less like a virgin facing a fate worse than death upon her marriage and rather more like the enlightened bride who knows that her future will depend on understanding and partnership?
  That is what we look to the Prime Minister for. We wish to see not fear for the future and a certain looking to the past but hope for the future and a clear idea that our destiny depends on our forging strong economic partnerships not only with the developed countries and the OPEC countries but also with the developing countries.
  No country has more to gain from the expansion of the world economy than Britain. Few have more to contribute in leading the search for solutions to the problems of food, energy, international trade and the financial flows of institutions that are to be the main items on the agenda in Mexico. I shall deal with the food problem first.
  I should like to remind the House that the Brandt Commission report says:
  "There must be an end to mass hunger and malnutrition."
  I am sure that all hon. Members will say "Aye" to that. The fact is that 50,000 a day die of starvation. Thirty-five individuals a minute throughout the world are dying of starvation. This is clearly unacceptable in a world that wishes to call itself civilised. No less than one-quarter of the world's population is hungry. Against that background, we have to remember that before the Second World War every major region of the world, with the exception of Western Europe, was a net exporter of grain, the basic measure of food sufficiency. Now the position has changed, so that Africa, Asia, the USSR and Latin America are all net importers of food grain. That is a major turnround, partly a reflection of growing population but also a reflection of slackening in the growth of agricultural development in many of the developing countries.
  Another factor to be borne in mind is that, in this year of 1981, no less than 30 per cent. of world food stocks are lost each year through infestation by pests or consumption by rodents. One-third of the world's food is lost in this way. These are clearly major problems that have to be tackled in a major fashion. Food production in many developing countries is not keeping pace with the growth of population. Half of Africa's population—225 million people out of a total of 450 million or slightly more—do not have enough to eat. Twenty-six out of 43 countries in Africa are net importers of food. What is to be done?
  First, as Brandt said, the South itself has an important role to play. The less developed countries themselves must plan for food self-sufficiency. Without that basic planning in the developing countries, the efforts of the rest of the world to help them will be slighter than we would wish. I am careful to say food production and not agricultural production. One of the great difficulties beginning to emerge in developing countries is that far too much of the available agricultural land is going to plantation crops that can generate foreign exchange earnings from exports while at the same time the capacity of the country concerned to support its own population from agricultural production
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  offsets that by causing the country to be a net importer of food and thus spend a high proportion of the foreign earnings that it gets from plantation crops.
  Many of the developing countries must look at the whole question of food crop pricing, because unless price levels are right in these domestic economies there is serious danger that people will go for cash crops and ignore the more important food crops which are necessary for the health of the population concerned.
  I agree very much with the right hon. Member for Sidcup that we in Britain have a major part to play in enabling management and technology to be available in this great drive for agricultural self-sufficiency. I should like to see more British men and women making their careers in the developing world and working on food production projects, which I think are infinitely preferable to food aid. Of course food aid is necessary to cope with disasters and with short-term shortages, but there is a serious danger that if the European Community expands its food aid programme too substantially, we shall get the recipient populations too used to alien products which can then subvert their interest in growing their traditional food grains.
  I say that, unlike the Minister for Overseas Development and the hon. Member for Newham, South (Mr. Spearing), as a supporter of the Community. We must watch the food aid programme with great care.
  We should certainly be working towards improved food security and a world food reserve. We should increase our aid for food production in the poorest countries. One of the most cost-effective ways of doing this—I am not now arguing for an increase in aid, although I believe that an increase is necessary—is making far more aid funds available for feasibility studies. One of the biggest hang-ups in trying to get medium-sized and smaller agricultural schemes going in the developing world is the shortage of money up front to fund feasibility studies, which can then be picked up by the private sector in order that potentially profitable schemes can be brought into operation more quickly.
  I urge the Minister to look at the aid programme to see whether there is not a case for making more funds available for surveys of the kind I have mentioned.
  Certainly, Britain should be playing a leading part in food production. Before the Foreign Secretary goes to Mexico, I hope that we shall have—perhaps in The Command Paper—a much more positive statement of what the Government propose for Mexico, as opposed to them simply saying, "We are broadly in agreement with that," which is suggested by someone else, or, "We are a little sensitive about that," or "We have reservations about that." What I think the country is looking to the Government for now is a positive, constructive and imaginative statement, not only on the question of food but in other spheres, to ensure that we play a leading part in the forthcoming negotiations.
  Many other speakers are hoping to catch your eye, Mr. Deputy Speaker, so I shall not go into the questions of energy and trade as I should have liked to do had there, been more time for the debate. However, I cannot let the. Government's remarks on aid, in the Lord Privy Seal's opening statement, pass without comment.
  The Government have acknowleded the importance of aid, but the Lord Privy Seal refused to explain why, at a time of domestic economic difficulty, which we all know exists, the aid programme should be cut by 15·3 per cent.

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  over two years and the rest of Government expenditure should be cut by only 1·7 per cent. Those are the figures in the Select Committee's report. If the Minister disagrees with them, I hope that he will reply to that matter. If they are correct, it shows that the Government have cut the aid programme nine times as much, exactly, as the general cut in the level of public expenditure. That, quite apart from anything else, is a very poor earnest of our real interest in solving some of the problems posed by the Brandt report.
  There is no doubt that, however important trade is, and it is important, some countries can make no progress whatever without a substantial amount of aid going into their economies each year. It is a matter of great regret to me that the party to which I used to be proud to belong, during its two years in power has reduced the percentage of GNP that is available for official development assistance to the lowest level since official development assistance has been given by any British Government.
  We in the SDP are committed to the earliest possible attainment of the 7 per cent. target. When we come to Government, as I have no doubt we shall, I hope that we shall be able to restore the rapid increases in aid expenditure which happened before this Government came to power.
  Finally, I want to say a word about financial flows, which were touched on by the right hon. Member for Sidcup, and also the question of debts, because they are key factors in the forthcoming discussions in Mexico. Means have to be found to ensure that OPEC surpluses are put into sound investments in developed and developing countries to enable them to buy sufficient oil and to permit developing countries to run import surpluses with developed countries.
  In other words, we want a basic triangle of mutual interest between the OECD, the OPEC countries and the less developed countries. The OECD has surplus capacity and is seeking markets for the products that our unemployed people would like to make. The OPEC has money which is seeking inflation-proof investments, and the LDCs have the most appalling poverty which, if only it could be financed and turned into demand, could provide substantial markets for the Western countries' surplus capacity.
  It is to that central problem that the Government must address their attention. The principal ingredients of that are to try to agree a system of tricycling—if I may put it that way: getting the funds round the triangle—and providing debt guarantees. These matters can only be negotiated between the parties concerned. It would be a major start if, as the right hon. Gentleman said, the 22 round the table in Mexico could begin to make bilateral progress between themselves on these key issues so that the rest of the world could later begin to be associated with them.
  I believe that Mexico gives the Western world a real opportunity to make progress on solving these macro-economic issues. I hope and pray that the Government, after reflection on the Select Committee report and the tone of this debate, will go into those negotiations, not simply seeking to do no worse than any other European country or the USA but having made up their minds that they will take the lead and encourage other countries to help solve these important and contemporary problems in an imaginative way.
  Several Hon. Members rose—
  Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. The hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler) said that a number of other hon. Members wished to take part in the debate. In fact, there are five, and it has been intimated to me that the winding-up speeches will begin at about 1.45 pm. If hon. Members could limit their speeches to about 10 minutes, we shall be able to get everyone in.
  12.59 pm
  Mr. David Crouch: Mr. Deputy Speaker, I shall certainly take your injunction to heart.
  It has been quite a Friday. It was said at the beginning of the debate—I think by the right hon. Member for Leeds, East (Mr. Healey)—that it was a pity that this debate on such an important subject should be taken on a Friday. I do not really object to that, because the debate has been enlivened by speeches of quality and great consideration, not least the distinguished and outstanding speech of my right hon. Friend the Member for Sidcup (Mr. Heath), who treated us to the opportunity of learning from his enormous experience, study and understanding of the problems which the world faces today as a result of world poverty.
  No one does more than my right hon. Friend to remind world leaders, politicians and others in influential positions that action must be taken to deal with this crisis, because the world will be in peril if we do not. Therefore, I am particularly glad that I stayed today to speak in this debate, because it enabled me to hear my right hon. Friend make his major contribution to it.
  My right hon. Friend spoke not only as an international statesman but as a great Tory, especially when he reminded my hon. Friend the Member for Wycombe (Mr. Whitney) that the problems would be solved by national Governments and international intervention and could not and must not be left by us to market forces alone to produce the solution. By speaking thus, my right hon. Friend spoke as a man made in the great Tory mould of concern for all people and not as one who preferred allowing market forces alone to ensure that all the people were served.
  The House has also been fortunate in having a good attendance by those responsible for aid. I exclude Treasury Ministers. However, my right hon. Friends the Lord Privy Seal and the Minister for Overseas Development and my hon. Friend the Minister of State, Foreign and Commonwealth Office have all attended the debate, and, of course, we have also had present the Shadow spokesman for foreign affairs, the right hon. Member for Leeds, East. I am sorry that the right hon. Gentleman could not stay for the whole of the debate. It may be that he had another engagement.
  We are also indebted to the work of the Select Committee on Foreign Affairs and to all those members of the Committee who have remained behind today to contribute. They have spoken with detailed knowledge of the problem and, as was illustrated by the speech of the Chairman of the Overseas Development Sub-Committee, the hon. Member for Kingston upon Hull, Central (Mr. McNamara), they have shown that the work of a Select Committee is to study a subject in detail and to give the House the benefit of its investigations on behalf of the House during many hours of work. We are grateful to them. They have added greatly to the debate.

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  The Mexico summit has been referred to by a number of hon. Members. I happen to be attending a summit of parliamentarians in Havana in September—the Inter-Parliamentary Union. I shall be speaking on energy matters as they affect the world, bearing in mind the Brandt overtones.
  That inter-parliamentary conference is being given 10 days. No one can say that a meeting of parliamentarians from some 90 nations is worth 10 days if a summit of 23 world leaders to consider the Brandt commission problems is given only two. It is extraordinary to expect our leaders to be able to consider four major elements of the Brandt report in a mere two days.
  Today I adopt a broad brush approach. I shall not deal with any of these matters in detail. I have been rather put on the spot about Brandt by my constituents. They came to the House in a mass lobby, and they are coming back to me again in my constituency demanding that I attend a public meeting. It must be said that they do not have to demand, because I go willingly. I welcome it.
  Above all, I am glad and proud that my constituents recognise the importance of Brandt sufficiently to convene a public meeting before the Mexico summit with a view to producing a message for me to send to my right hon. Friend the Prime Minister telling her what at least a few people in the country feel should be achieved in this vital area.
  As my constituents' Member of Parliament, I have to take some action. I accept that. There is a moral challenge in Brandt, and a political one as well. I know that elections will not be won by offering more overseas trade.
  Politicians must give the lead. We have a duty to educate, to explain more and to make people look outwards and not inwards. I have no doubt about my political response. There has never been any doubt about it. Twelve years ago I introduced a Friday debate on the Pearson commission report. I advocated that official Government aid should be at the Pearson recommendation of 0·7 per cent. I still advocate and fight for that. I will make sacrifices in any other area to achieve that.
  As the Select Committee report properly and severally said, to increase aid now would have great psychological effect around the world. The greatness of this nation in understanding its place in the whole community of nations—among rich and poor—is to set an example and to help.
  I agree with Brandt, who, on page 282 of his report, referred to the search for solutions being difficult. He said that that was not an act of benevolence but a condition of mutual survival. That is the sort of educational message that I am trying to convey to my constituents. We have a duty to explain the implications—to use Brandt again—of global interdependence. Above all, there is a need today for an outward-looking education. The youth of the nation must be taught to look outwards. We must begin to think—again, in the words of Brandt—of investing in a healthier world economy, so properly referred to by my right hon. Friend.
  We cannot ignore the poverty that exists in the world, but we do that all the time, from our cosy armchairs, when sitting inside our new imported cars as we commute to and from our jobs, as we sit in front of our new colour televisions, adapted with video, as we listen to our latest hi-fi and as we fill the planes and the ferries for our summer holidays to the Continent, the United States, Miami and the West Indies. [Interruption.] I am talking
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  of all the people. We are ignoring the problems from our comfortable positions. Many of our business men, lunching in their walnut-panelled dining rooms, are ignoring the challenge that faces them as they drive home comfortably in their Rolls-Royces and Daimlers. Looking around Britain today one would not think that it was a poor, penniless and poverty-stricken nation. It does not give that impression.
  Many others are ignoring the problem. They do not wish to see outside our country. They refuse to acknowledge that we have a duty not only to help the poor, but to help mankind survive.
  Mr. Stanley Newens: I am following the hon. Gentleman's remarks with great interest. I hope that he will stress the point that Brandt's recommendations are not only in the interests of the developing countries but will help to provide the additional markets and goods that we desperately need in Britain. It is not simply a question of charity.
  Mr. Crouch: I agree with the hon. Gentleman. That point has been made by many hon. Members, and I accept it absolutely. He has taken the words out of my next note. I am told that charity begins at home. I am told also that Britain cannot afford charity at present because it has enough troubles of its own. I do not accept that. I am looking outwards, and must continue to do so. There are even echoes today of the philosophy of "I'm all right, Jack". I accept none of that. We must not turn our backs on the problems of the poverty of the world.
  Brandt described what poverty means. We use the word rather lightly and loosely. Brandt said that the nature of poverty means hundreds of millions in starvation and despair. Can we turn our backs on that? Of course we cannot. We dare not turn our backs on the possibility of war or of an attack upon us. We cannot ignore the possibility of an attack on the West. We must spend thousands of millions of pounds to guard against that eventuality. We are investing overseas as well as at home in the cause of defence. We are investing in bases, airfields, ships, troops and in support of our allies. If we did not do so, we might well be overrun and overthrown.
  We cannot turn our backs on the problems of poverty and social injustice in Britain. We have been warned in Liverpool, Brixton, Manchester and elsewhere. The Brandt report is another warning of an even greater crisis. It speaks of immense risks threatening mankind. In his introduction to the report Willy Brandt describes the problem as
  "too important to be left to Governments alone."
  I conclude with the following words from Willy Brandt:
  "Our appeal goes to youth, to women's and labour movements, to political, intellectual and religious leaders, to scientists and educators, to technicians and managers andto members of the rural and business communities."
  I agree that we must take up the challenge. This debate at least affords us that opportunity.
  1.12 pm
  Mr. Frank Hooley: In his fascinating speech, the right hon. Member for Sidcup (Mr. Heath) omitted to say that there is the element of a power struggle between the Third world and the economic domination of the rich industrial North. We would be unwise to overlook that element within what is going on

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  and what will take place at the Mexico summit. We hope that that will be transmuted into co-operation and common agreement. The challenge at Mexico will be partly whether we can successfully use and re-form the highly sophisticated machinery of international co-operation that has been built up over the past 35 years—for example, the United Nations, GATT, the IMF, the World Bank and UNCTAD—to achieve a new international order.
  We must remember that there is a political and economic struggle in which some quite rich countries in the Third world have identified themselves as on the side of the Third world and against the industrial North. Unless we can resolve this conflict by coming to some of the excellent conclusions and policy that the right hon. Gentleman outlined in his speech, the power struggle will become more serious and more grim.
  I shall direct my remarks to financial institutions and to energy. In some ways the IMF encapsulates the entire debate between North and South. It focuses the argument on power and the flow of resources.
  At present the IMF is predominantly a Western institution. The United States, the United Kingdom and France possess 32·1 per cent. of the voting power. The 109 countries within Africa, Asia and Latin America possess 30·1 per cent. There are 20 industrial countries which between them possess nearly two-thirds of the voting power—59 per cent. The 121 other countries, including all the great oil producers in OPEC possess only 41 per cent. Even more startling is the fact that the United Kingdom alone has a 6·9 per cent. of the voting powers within the IMF. That is more than the right extended to the whole of Africa excluding the oil-producing countries.
  The IMF has come to represent to me a symbol of orthodox finance, monetary policy, cuts in public expenditure and indifference to unemployment. There is no worthwhile reason why that should be so. The IMF's objective is
  "to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives to economic policy."
  That is enshrined in the charter of the IMF. It has been overlooked to a considerable degree in the policies of the IMF hitherto.
  Of course, all in the IMF is not negative. There has been the creation of the special drawing rights which, as Brandt himself said, represents
  "a clear first step towards a stable permanent international currency."
  There has also been the creation of the compensatory financing facility, the buffer stock facility and, recently, special arrangements for food within the fund. Therefore, the IMF, whatever its past defects and faults, as an institution and as a structure contains within it possibilities for a genuine move forward in the building up of a new international order.
  There should be four objectives of policy at Mexico by the British Government and the other Western Governments. First, there should be a genuine move towards sharing power with Third world countries within the voting structure. That is recommended in the Foreign Affairs Select Committee report. Secondly, the IMF must
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  become one of the main mechanisms for the recycling of oil surpluses. It will not do to rely on the private banking system to deal with that problem.
  Thirdly, the compensatory financing facility resources should be trebled to at least $12 billion, as is recommended in Brandt. Fourthly, there must be a serious move and serious negotiations towards making special drawing rights a principal reserve asset in the world and linking the allocation of special drawing rights with the developing needs of the Third world countries. Related to that are the more complex, highly technical problems of getting off the ground the idea of a substitution account which would take the strain off the dollar as an international currency.
  I shall now say one or two words about energy. The Third world countries have two urgent problems. The first is the cost of oil imports, which has been referred to several times. The second is the fact that its urgent and immediate energy requirements are leading to the massive destruction of the forests and also the widespread use for domestic energy purposes of animal dung, which should be used as fertiliser on their farms. Those two factors are causing immediate and disastrous effects in many Third world countries.
  The objectives of policy which should be pursued at the Mexico summit are, first, that in the North we have a massive responsibility to use our energy resources efficiently. We must bear in mind that the use of energy per head in the rich industrial world is currently 40 times as great as its use per head in the poor world. It is important that we should not only use sensibly the hydrocarbons which we have, but we should develop more rapidly and vigorously the newer resources such as solar, wind, hydro and other possibilities, which are infinitely renewable. Thus, we should not be gobbling up our finite hydrocarbons.
  The Third world must have financial help to cope with oil debts. What is more important and more urgent is investment in technology to explore and exploit those countries' hydrocarbons. The World Bank has said that probably 58 Third world countries have some oil resources. Given the technical help and financial assistance, they could exploit those resources.
  We know that those countries also have gas and that some of the greatest hydro-electric possibilities on the greatest rivers in the world exist in Third world countries. Investment there could provide an infinite and renewable source of electricity for many of those countries, which would make them less dependent on oil and hydrocarbons generally. Investment in renewable energy resources is just as important in Africa, Asia and Latin America as it is in the North.
  The United Kingdom has a special opportunity to contribute on energy. We possess great public corporations such as the National Coal Board, the Electricity Generating Board, the British National Oil Corporation and British Gas. They have immense technological skill and experience in the exploitation of hydrocarbon resources. It could be made available at great cost to Third world countries. I understand that the NCB is already assisting in India and might be involved in other countries. There is no reason why our great public corporations should not make their skill and knowledge available to other countries that have natural resources to exploit.
  In addition, we are rapidly developing considerable knowledge and skill in wave and wind power and in solar technology. That could be passed on at no enormous cost

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  to countries with the natural possibility of exploiting the resources. The Commonwealth Development Corporation has immense experience in dealing with utilities such as electricity, and could provide the managerial experience.
  There is a great opportunity at Mexico to give hope to the poor people of the world and to use the international machinery that already exists. If the chance is missed, what could be a constructive dialogue will develop into a acrimonious wrangle and will help nobody in the world.
  1.22 pm
  Mr. Hugh Dykes: The hon. Member for Sheffield, Heeley (Mr. Hooley) knows a great deal about the subject. He supplied the House with some interesting ideas in the closing part of the debate. It has been a good and constructive debate, as other right hon. and hon. Members said.
  Recently, I received a letter from a constituent who complained about the noise, shouting and fighting in the House of Commons as he heard it on the radio. He asked why the House of Commons could not behave more like their Lordships in their quiet and more thoughtful debates. As a footnote he said that, however, he had attended the House of Commons once on a Friday, and it was more like the House of Lords then. This debate has been an example of that. If we accept that constructive advice, we have to aspire to the difficult concept of duller politics, which might be difficult for some to accept.
  There has been a substantial meeting of minds on some of the priorities in the Brandt report. Unfortunately, I missed the opening stages of the debate and the first part of the speech of my right hon. Friend the Lord Privy Seal. It would not be right to rehearse and repeat some of the ideas that have already been expressed. The urgency of the whole concept of the need for a Brandt solution to the world's development problems in underdeveloped countries has come through clearly from both sides.
  That was not fully endorsed in one or two comments. I recall the comment of my hon. Friend the Member for Wycombe (Mr. Whitney), who is no longer in the Chamber. He said that the matter was important but that we should not become too pessimistic. That comment might have some validity if it means that we should not get so depressed that we do not move to take constructive international action. However, if it means that there is not much of a problem, so what we are worried about, that is unacceptable.
  I do not suggest that my hon. Friend's remarks were in any way akin to the remarks of my hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) in the previous debate on the Brandt report on 16 June 1980, when he said:
  "The report, after all, is the beatification of the begging bowl. We are pauperising some of these countries—bringing them to mendicancy … the real service that we can render to these countries is to get them to understand that in the end it all depends on them … it is teaching them the lesson that we learnt—the lesson … in Samuel Smiles and many other excellent writers. A very good form of overseas aid would be to send them a whole lot of copies of Samuel Smiles' admirable book."— [Official Report, 16 June 1980; Vol. 986, c. 1265–6.]
  I do not know whether many hon. Members, irrespective of party, would accept that not very modern proposal.
  The tenor of the debate has been right, in that it has again and again emphasised the partnership between private efforts and public and international efforts, but surely it is not a matter of ideology or political obsession
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  in a narrow sense to say that the lead has to come from international agencies and from Governments working together.
  That is why these forthcoming international conferences are so important. The two basic crises in the world—the crisis of the underdeveloped countries and the crisis of the advanced world—fit together. We may call the advanced world the Western world, but of course it includes Japan. The whole of the advanced world is capable of producing goods and services that can be consumed and used by the aggregate demand of the world, but there is not sufficient demand in these countries themselves, and there certainly is not in the underveloped world—excluding the oil-producing countries if then-demand is developed by their resources in the future.
  None of those countries at present has that total real demand to meet the potential output of the Western world, not only the output that we have now because of the depression in the Western world, but the output that we could have if we returned to the concept—which may to an extent strike some people as old-fashioned but which I think is very modern—of the need for renewed growth throughout the world and for advanced countries to get their internal growth going again through concerted and direct action and partnership between public and private effort. My right hon. Friend the Member for Sidcup (Mr. Heath) also referred to those important imperatives, and we pay tribute to him for the work that he has done in this area.
  One point that has not yet been made may reduce the amount of agreement that has so far been manifested in the debate. I think of the relative lack of enthusiasm of Opposition Members for the European Community and its institutions. It is important for the European Community, as a single entity and not just as a collection of members, to be a wholehearted and enthusiastic supporter of the entire Brandt exercise. There should be some sort of Community identity imposed, at least at the margin, on these forthcoming international conferences.
  I think that I am right in saying that the planned disbursements from the European development fund for the next five years to 1985 are about £2·8 billion, and we will be making a good contribution to those figures. However, that is a tiny amount—about 1½ per cent. of the current size of our economy. Over the five years, the percentage figure is even more minuscule. It would help if the European development fund could be built up. If the member States had the will and the determination to build up the budget and provide more resources for overseas aid, we could have a much larger European development fund in the future.
  That is the plea that I make specifically to my hon. Friend the Minister of State. I hope that he will encourage the concept of a larger EDF, coupled with the obvious requirement that the EDF's control procedures in the underdeveloped countries need to be improved. It is not a contradiction to say that many officials in the European Community are very worried about the way in which money that is distributed from the European development fund and related funds can be misused at the margin by wicked officials in some underdeveloped countries. We all have our favourite stories, and they cannot necessarily be related in this debate, but that would be the Community's contribution, although it needs an effort of will by all the individual member States.

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  My right hon. Friend the Member for Sidcup referred to the fact that the countries from the South—he used the word colloquially, because he said it included Australia—may have been worried that 23 leaders were gathering to the exclusion of other countries and feared that agreements might be made in the names of countries that were not present. I noticed that my hon. Friend the Minister of State disagreed when my right hon. Friend cited the two specific examples of Australia and Cuba. I should, therefore, be grateful if my hon. Friend would say which countries from the South have expressed misgivings. It would help the House to have those.
  There is not time to go into more detail, but I wholeheartedly agree with what has been said in the debate about the imperatives and priorities of Brandt. However, I end with a plea to my right hon. Friend. Although in recent months there has been an improvement in the mood and attitude in each country and in the response in official circles to all that Brandt stands for, as a result of various pressures, I am not sure that they go far enough.
  Even in the journal about the whole excercise—"IDS Sussex"—when in April Frances Stewart considered the Brandt report and summed up its impact, one can see the danger of what always follows even a striking international excercise such as Brandt, which is unique in world history. The article concludes:
  "Detailed examination of almost all the areas covered by the Commission suggests that the obstacles to change—conflicts of interest, opposition of powerful groups and so on—are more powerful and effective than the mutual interests, which is not surprising given the manifold failures to negotiate change."
  Therefore, even if we have the conferences this year, and even if this Parliament and others express the essential will to take Brandt further forward, unless individual Governments operate with ruthless determination to get co-operation growing in the world—I include the British Government, above all, with our legacy, history and experience—we and the starving millions will face a very grim future, indeed.
  1.31 pm
  Mr. Clinton Davis: We were privileged to hear the right hon. Member for Sidcup (Mr. Heath). Those of us who have read the Brandt report unanimously join in the tribute to him for his dedication, together with that of his colleagues on the report, in making a unique and remarkable contribution to international thinking. It is an inspiring example. I suppose that the central theme of the report is the interdependence of the North, and the South.
  The views that the right hon. Gentleman and the report express contrast vividly at least with the Government's initial hostile reaction and in particular the reaction of the Prime Minister. Some time ago I attended a meeting at which there was a large number of the militant faction, and I found a remarkable coincidence of view between them and the Prime Minister on the Brandt report. They, of course, felt that it was a capitalist conspiracy, because the right hon. Member for Sidcup was on it, and they rejected its whole thesis. They believe that we have to wait for the whole system to change before we can bring aid to the depressed people of the world. In a sense, that reflects the Prime Minister's view. She believes that we must first get our economy right, as she would put it, before we can embark on a massive programme of aid. However, there
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  just is not time for that. Time is not on our side. Above all, I do not believe that the Government have the will to see the transformation of events in the world that is so vital if we are to secure the objectives set out in Brandt.
  We cannot ignore the backcloth that has been repeatedly referred to in the debate, which is that one-fifth of the world's population suffer from the most acute poverty and malnutrition and have apallingly low health, hygiene, sanitation and nutritional standards, and that things are getting worse with an increase of 2 per cent. a year in the world population. That represents a deadly threat to each one of us and to our children, because it is peace that it is in issue. Eventually, the hungry have no hope. They have nothing to gain from seeking cooperation with an unco-operative and unfriendly world, and when they continue to be denied anything remotely resembling a square deal, what will they do? I believe that the prospects of disaster should be clearly before those who attend the Mexico summit.
  Unfortunately, the most significant country in the Western world has taken a hard line view about that. On 12 March it was announced that President Reagan had decided to shrink the American Peace Corps, reduce the scale of direct American food aid and curb American bilateral development assistance. The Asian Development Bank faces grim prospects. The United States had promised to provide, under President Carter, $3,240 million to the International Development Association over three years and proposed three instalments of $1,800 million, but President Reagan has called in his new budget for the current year for IDA funding to be cut to $540 million and for next year's funding to be cut to $850 million. That is the example set by the leading Western nation, and it is an example for which the Prime Minister, apparently, has so much admiration.
  Whatever view the Government may adopt about that, there is tremendous mutuality of interest between the North and the South, but the burden lies on the industrialised nations to lead the way. They should show good will to engender the confidence that is in such short supply.
  I do not intend to speak about energy supplies. I had intended to, but the subject was covered by my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley).
  I should like to speak briefly about the financial and other institutions. If the developing world is shut out of decision making, we shall never engender the confidence that is so essential. That has been the case hitherto. I hope that the Minister will say whether he proposes to change the composition of the financial institutions to ensure that the developing world has a greater say than in the past.
  When I was in Government my responsibility was for shipping. In that area the Government could have shown that they have good will towards the developing world, but they have not done so. I mention two examples. Decisions have been taken by the Government which I believe are wholly inimical to the purposes of Brandt in developing trade and ensuring that there is a better and fairer deal for the developing world.
  We had a report, which was unanimously accepted by the industry, about phasing out differentials in pay between seafarers registered in Britain and Asian seafarers. It would have been carried out over five years. It was a direct and immediate way of ending a disgraceful exploitation of workers from the developing world. It would have given them improved status and dignity and

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  the opportunity to improve their standards of seamanship, because the two things go hand in hand. To their shame, the Government have failed to implement that report.
  The second problem is that the Government have aligned themselves against the developing world and the recent UNCTAD conference on shipping by sustaining an abuse, which itself sustains the exploitation of seafarers from the Third world.
  That sort of attitude will injure our interests over a period of time to an extent that the Government appear not to contemplate. We should recognise the demand for a fairer share of trade in shipping. We need to pass on the considerable expertise that we have accumulated over the years as a traditional maritime country. We could do that in a number of other directions, too. However, we should endeavour to strengthen the role of our international trade unions, because there is so much exploitation of workers the world over. The trade unions are weak at present and they need to be nourished. The one essential role that they can fulfil is that of getting better conditions for workers, better wages and a more equitable deal generally.
  1.4 pm
  Mr. Austin Mitchell: It has been an interesting exercise over the last few months to watch the evolution of the Government's attitude towards the Brandt report. The first phase was clearly just a blank negative, with the Prime Minister criticising aid as handouts, and others attacking aid as being wasted—the traditional kind of attack by truism to dispute the case. It was as if at that stage they wanted to pretend that the Brand report did not exist, like the right hon. Member for Sidcup (Mr. Heath).
  We then passed into the "praising with faint damns" phase. Today we seem to have moved into a new, more reverential phase, with the Lord Privy Seal's speech about the Brandt report. I welcome the evolution, because U-turns are a great spectator sport. I hope that it will lead to changes in policy, because we are suffering still from the serious and harmful effects of what has been done, and those effects will be with us for a long time unless the policies on aid and development are reversed.
  The Sub-Committee's report shows that the overseas aid figures for 1982–83, as compared with 1980–81, will be down by 15·3 per cent.—that is compared with a cut in public spending generally of 1·7 per cent.—because this brave, courageous Government go for an area which is apparently defenceless and make their biggest cuts there. That shows a state of mind which is totally hostile to the purposes and intentions of the Brandt report.
  We have had the treatment of overseas students, the abolition of help to development education and studies, and also the depression and deflation in our domestic economy—our "Made in Britain" depression—which, as well as being a blow at the weaker regions of this country, is a blow at the Third world.
  It is hypocrisy to condemn protectionism, as the Lord Privy Seal did, and then to use unemployment as an import control, which is essentially what the Government are doing. The realities of the Government's policies are harmful to world development and to the developing world generally. They are throwing away what should be a major advantage—the contacts, the relationships, and our ability to contribute to development, which come from a long and close association with the developing world. They are being cut back and pared down just at the moment when they could and should be most useful.
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  It is hardly surprising that the Prime Minister, alter staying to hear of the threat from sex shops to the morals of passing bicyclists, did not stay to hear the speech of the Lord Privy Seal, because that speech was at variance not only with her own past words but with her hard, uncharitable attitudes and the narrow piggy-bank economics that she preaches. It is still the Prime Minister's attitudes that are conditioning our international stance when she finds herself, as she did last week, as "Little Miss Echo" to the economic follies that the Reagan Administration are proposing to pursue in the United States, and when other nations want to condemn the increase in American interest rates, which is itself a direct tax on the developing world in an extremely tough financial situation.
  In my view, the train theory of economic development still works, and it is up to the industrialised countries, by expanding and growing and by inflating their economies once again, to pull the rest of the world out of the depression.
  I have one or two reservations about the Brandt report from an avowedly protectionist point of view which I will mention briefly, because there will be no future for this country unless we take steps to rebuild our basic industries and rebuild our industrial base. That envisages some measure of import management, but that is import management directed against the advanced industrial countries, not against the developing world. It is interesting to see from the Sub-Committee's report that both the TUC and the CBI emphasise that the threat to our industries comes from the advanced industrial economies and not from the developing world.
  I was particularly interested in the rather jolly contribution from Professor Jolly about the beneficial impact of trade with the developing world on the economy. The report quotes a surplus in trade in manufactures with the developing world of £6 billion, in contrast to a deficit of £2·8 billion in trade in manufactures with the EEC in 1980. That is the economic problem which we have to tackle by protectionist measures. Trade with the developing world is not the problem. That must be built up, because our destinies are interlinked.
  I shall not detain the House by quoting figures about the relative position of the Third world, because the statistics have been well rehearsed in our debate, which has been of a high standard and has included a particularly moving and effective contribution by the right hon. Member for Sidcup, for which we are all grateful. The statistics of poverty and the tragedy of the developing world are so appalling that they numb in the delivery.
  We must emphasise the essential burden of the Brandt report—our moral responsibility to help and our commitment as one of the stronger and better-off countries, despite the Government's efforts—to help those who are far less well off. We have to help, because we are one world and we go forward together or not at all, and we must help because it is in our interests to build up trade and contacts, particularly our long-standing contacts on the Third world.
  The Brandt report is important because it sets out a considered, effective and powerful programme of action for both the long term and the short term. It proposes an avenue on the international scene down which the world should move. The report is also a powerful document because it acts as a rallying point for informed opinion, which is building up steadily in this country.

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  As politicians, we are accustomed to hearing people ask why we should give aid to others when we have no money for ourselves to build new schools and so on. The Brandt report provides a rallying point for people to come together as a pressure group for aid and development. It gives point and focus to concerns about the Third world. We had a mass lobby of the House and many hon. Members have been lobbied in their constituencies, particularly by church groups, but also by groups that are forming round the report and are anxious to push its proposals and to persuade the Government of the need to accept them and to push them on the international stage.
  My speech springs directly from such representations in Grimsby. This building pressure is an important demonstration that the Brandt report will be a major issue in British politics, as well as on the international stage, in the 1980s. Parliamentarians and Governments who ignore it do so at their peril.
  The change in the climate of opinion which is developing rapidly, thanks in large part to the proposals of the Brandt report, means that the Government should take the lead and use our traditions, accumulated expertise and close relationship with the developing world. They should go to Mexico, not to listen, but to lead and to advance the workable, practical and important proposals of the Brandt report. I am particularly attached to the financial proposals, the need to sustain countries through balance of payments deficits arising from expansion and the need to sustain the transfer of the surpluses of oil countries for development.
  This is an area in which we have a good record, close contacts and experience and in which public opinion is becoming increasingly involved and concerned. We have a responsibility to take a lead and to make a moral contribution instead of preaching the Gradgrind, piggy-bank economics of the Prime Minister or sitting on the international stage like Micawbers saying that something will turn up internationally, as we say that something will turn up nationally.
  It is our responsibility to put forward positive proposals in Mexico and to seize the opportunity that we have been spurning for too long. It is important that the summit at Mexico should lead not to the usual mass of verbiage and platitudes but to positive proposals to help the developing world. The consequences of not doing so are disastrous, both internally and externally.
  1.50 pm
  Mr. Frank McElhone: I should be failing in my duty if I did not begin by paying my tribute to the excellent work of the Overseas Development Sub-Committee of the Select Committee on Foreign Affairs. Its efforts on this and several other reports being published this week and later have been a trememdous help to Opposition Members. I hope that the Government will pay serious attention to its recommendations, expecially as they refer to the Mexico summit.
  I hope that the Government will also accept that the Opposition kept pushing for a major debate on the Brandt report week after week to present the Government with an opportunity to explain to the House the specific proposals that they intend to make at the summit meeting in Mexico. I listened attentively to the speech of the Lord Privy Seal the right hon. Gentleman will not be surprised if I express
  784
  almost total disappointment at the Government's lack of specific pledges and proposals for the summit. The very fact that a Friday was allocated for the debate smacks of a fair lack of commitment. The hon. Member for Canterbury (Mr. Crouch) said that he thought that holding the debate on a Friday was a good idea. He also talked about the need to educate people. The difficulty about Friday is that many hon. Members have constituency commitments. It is apparent that the Press Gallery also has many other commitments.
  Our experience of previous debates on Brandt on a Friday has shown that they receive practically no coverage from the media. If we are to educate people, as the hon. Member for Canterbury and I wish, I believe that the media—especially in the absence of an education programme—has some responsibility to promote the issue.
  I should like to add my personal tribute to the right hon. Member for Sidcup (Mr. Heath) not only for his outstanding speeches in the House. From my experience on the campaign trail, with meetings at universities, churches and local bodies, I often find that the right hon. Gentleman is in advance of me, that this process can mean long waits on railway stations, long journeys by car and, in the right hon. Gentleman's case, long journeys by air to get across the message of Brandt. His meetings, of course, are excellent. No praise is too high for the tremendous efforts of the right hon. Gentleman over the last 18 months.
  I come to my first question to Ministers. If there are to be no specific proposals today, will the Government give a promise that by September at least they may have some clear intentions which will enable those who take an interest in this matter to respond and give support? If the suggestion of the hon. Member for Hertford and Stevenage (Mr. Wells) about restoring the £63 million cuts in the aid programme was to form part of the proposals for Mexico, I would give loud and public support to the Prime Minister. If the Prime Minister presents clear and rational proposals, she will have the support not only of the House but the country. This is essential if Britain is to make an impact at the summit in Mexico.
  I have mentioned that the speech of the Lord Privy Seal was somewhat negative and empty of specific proposals. This is in sharp contrast to earlier promises by Ministers. As an example, I refer to a speech by the Minister of State—the hon. Member for Mid-Oxon (Mr. Hurd)—at Watford on 13 March. Talking about the Mexico summit, the hon. Gentleman said:
  "The Prime Minister will certainly go with a clear analysis and good ideas."
  I hope that the Minister is right. There has been a marked absence of clear analysis and good ideas from the Government today. We look to them for that, because they are "our Government" when British Ministers go abroad. We wish them well.
  However, the response so far, in practical terms, has been extremely disappointing. After all, as was mentioned yesterday by my right hon. Friend the Leader of the Opposition and this morning by my right hon. Friend the Member for Leeds, East (Mr. Healey), all that we have had so far from the Prime Minister, at Ottawa and in this House, is platitudes. How can she justify saying that she supports the Community, which gives added support for aid and development policies for the Third world, and, at the same time, in an interview in Ottawa, say "I have not

  785
  changed any of my policies"? There is no way in which one can justify such double standards. Therefore, we are looking to the Prime Minister to attend the summit with a very positive attitude to the discussions.
  I am the first to admit that the Prime Minister's task will not be easy—that I grant the Government—for she goes to that conference as a Prime Minister whose credibility on the Third world is seriously flawed. It was her public indiscretion at the Dispatch Box when she declared that aid was only a handout. It is public knowledge now that it was her hectoring of the leaders at the summit in Venice that persuaded them not to include anything specific about the Brandt report in the communiqué.
  Therefore, if anyone thinks that my judgment is harsh or unjust, he will have to show me, the House and the country how the Government can justify attending a conference and pledging the good will of Britain to the Third world, when we and the Government know that over the next two years there will be a 15·3 per cent. cut in the official aid programme.
  I hope that the Minister will not repeat what he and other Ministers have said so often—that in money terms we are spending far more than the Labour Government spent. In the Prime Minister's days in Opposition, she always informed and lectured Labour Members that we were talking about Government finance and that we always had to talk about it in real terms. The right hon. Lady is hoist on her own petard in that matter by indicating that we shall be spending over £1,000 million in the aid programme. We must talk in real terms. I hope that that is the way in which she will talk at Mexico, for to do other at that very distinguished foreign gathering would make the British Government a laughing stock.
  The truth—I do not think that any Opposition Members dispute this—is that the Government are somewhat unwilling and reluctant partners at Mexico. Indeed, it is the Prime Minister's appalling record over the last 18 months that has ensured that we are not even invited to be a co-sponsor of the conference. That is a terrible insult to a country with our standing and reputation in the world. It was very questionable at one time whether we would even be invited to attend the conference.
  But, however unwilling and however reluctant from a moral and philosophical point of view, the Government have no excuse from an economic point of view. With our almost total dependence on trading with the rest of the world, we should be grasping the opportunity to provide leadership at that conference. In the next few months, we should be saying that we shall make aid and trade a central part of the Government's economic strategy.
  No one expects the present Government, especially as they are so uncaring and so insensitive to the Third world, to say that they will implement Brandt 100 per cent. However, at the many public meetings to which I have referred, one thing has come through very sadly. The caring British public have been gravely embarrassed by the fact that when this woman Prime Minister of ours returned from a visit to the Middle East and India, having witnessed the crushing poverty and misery in those areas, with all the maternal warmth of an ancient dinosaur, all that she could boast about was the selling of arms and equipment of destruction. I hope that no Conservative Member would seek to justify that statement by the Prime Minister.
  Nevertheless, if the Government are bereft of ideas or practical suggestions let me, in a few short minutes, try to present what I hope the Foreign Secretary and the Prime
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  Minister will get across at that conference table. As has been said so often today, food is probably the highest priority of the four that have been mentioned. A strong crash programme is needed to stimulate food production in the poorest countries. I hope that that programme will seek to develop farming systems that are appropriate to the local needs of each country. An essential part of that programme—and this is perhaps one of the weakest parts of Brandt—would be the strongest possible pressure for land reform. Land reform was one of the weakest aspects of the Brandt report. All too often, as the Minister for Overseas Development will accept, giving aid to Governments is no guarantee that the aid will reach the poorest parts of their countries.
  I hope that we shall make greater use of the expertise and skills of the Commonwealth Development Corporation. The right hon. Gentleman commented on the absence of Treasury Ministers. Yesterday I had a fruitful discussion with the Commonwealth Development Corporation. Its finances are in a critical position. I lay no blame at the door of the Minister for Overseas Development, but the corporation has some scathing things to say about the Treasury. This important body, like the London School of Hygiene and Tropical Medicine, is at risk. I hope, therefore, that the Minister will be able to tell me, if not today then in the near future, about the finances of the Commonwealth Development Corporation.
  I take this opportunity to press, as I hope the Minister will press, for the setting up of a new and effective international grains agreement that will guarantee a real degree of price stability. Provision of water is one area in which we have great expertise. Britain has an outstanding lead in this respect. One only has to talk to Sir Robert Marshall, the chairman of the National Water Council or Mr. Devenay the director of my Strathclyde region, to discover not only their expertise but their wish to be involved. What is needed is not a large number of darns as those in Sri Lanka. I have great doubts about that project, welcome as it is to the people of Sri Lanka. Nor do we want sophisticated water systems that too often break down or remain unrepaired. What is needed is more low-cost equipment that can be manufactured in the developing countries. That would cost little in financial terms, and would do much for health as well as water and food provision in those countries.
  The second area of policy, and perhaps the most important, apart from food, demands that an attempt should be made to fill the empty chair at the summit in Mexico. That empty chair is the chair of OPEC. Of course, members of OPEC will be at the conference, but it is essential that at future summit meetings the organisation that has a greater influence than any other—it is the most powerful economic weapon in the world—is there in an official capacity. The fate of many of the poorest undeveloped countries rests with that organisation.
  Tanzania, for example, pays almost 70 per cent. of its export receipts to cover oil bills. That is frightening. Unless an agreement can be reached with OPEC on the future levels of oil prices, several of the poorest countries will be in danger of defaulting on their commercial debts. That should be a serious warning to us, particularly as we are an influential banking country, because that debt burden is reaching a critical stage.
  I hope that the Minister will have examined Lord Lever's articles in The Times last week. My right hon. and noble Friend is a man of outstanding ability in finance

  787
  matters. I shall give one brief example. Last year, interest payments on external debts accounted for 16 per cent. of export earnings of 12 largest borrowers in the non-oil producing Third world countries. This year, the figure could reach 20 per cent.
  Therefore, I warn the Government that if this debt burden continues, it is possible that one major bank could be seriously at risk, which in turn would precipitate a crisis in the international monetary system almost of the proportions of the Wall Street crash. It should also be borne in mind—I believe that it is accepted by everyone—that the future of our exports to the Third world would be affected, because almost a quarter of the total would be seriously at risk, with our economy ending in disaster if that occurred.
  It is crucially important in this week of the thirty-seventh anniversary of Bretton Woods that the Government should take the lead in calling for fundamental changes in the present structure of our international monetary system. It is in a mess, and there have to be changes which create a more democratic effort to get management and control representing Third world interests.
  I and others before me have said in these debates that there must be a constant endeavour by us all to correct the economics of madness in which 800 million people are living in absolute poverty, there is more that $100 billion in OPEC surpluses, not including the billions which are floating round the Euro-doallar market, and there are almost 9 million people unemployed in the European Community.
  The Prime Minister's main and continuing response is "Leave it to market forces." We have had no better response than that which we heard from the right hon. Member for Sidcup.
  We are told that the Prime Minister's intentions in this matter are sincere and honourable. However, the Bible tells us that the road to hell, too, is paved with good intentions. It also tells us that the greatest joy in the Church is when a convert is received. I hope that this message will get through to the right hon. Lady. If she proved to be a convert even to the last objective that I outlined, there would be no greater joy in my heart, in the country and in the Third world.
  2.7pm
  The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd): I shall try in the time available to deal with most of the principal matters raised in what has been a very far-reaching debate.
  I pick up immediately a point made by my hon. Friend the Member for Cheltenham (Mr. Irving) and others about the timing of the debate. I, too, would have welcomed a mid-week debate if between them the Opposition and the Government could have contrived it, but for a slightly different reason. It would have enabled more right hon. and hon. Members to attend and a greater variety of opinions to be expressed.
  Those of us who are here should not delude ourselves. At the beginning of the debate, there were about 50 right hon. and hon. Members present. There are now rather fewer. There has not been a Liberal in the Chamber all day. But that is not my point. My point is that most of the speeches by right hon. and hon. Members on both sides
  788
  of the House have adopted roughly the same theme. With the exception of the hon. Member for Grimsby (Mr. Mitchell), most right hon. and hon. Members spoke against protectionism. But if we are honest, we all know that, if today's debate had been about the textile industry, there would have been a quite different 50 or more right hon. and hon. Members, all, regardless of party, speaking in favour of protectionism and for protection against the developing as well as the developed countries.
  The same is true of public spending. In any given debate, the subject is treated by most right hon. and hon. Members who take part as the highest priority—a phrase which I have heard several times today. The trouble is that we have so many highest priorities—housing, social services or, as today, foreign aid. The Government have to sort out and accept the fact of life that, at the end of the day, there can be only one highest priority, and the rest have to be grouped.
  Although this has been a very interesting debate, I believe that it would have been better if right hon. and hon. Members on both sides of the House with a slightly wider range of opinions had taken part.
  Mr. Hooley: On the question of priority, the Minister is misrepresenting the tenor of the debate. The point is that overseas aid has been given a far higher and grossly disproportionate cut than the general level of cuts being applied by the Government.
  Mr. Hurd: I accept that. If the debate had been on a different subject, the same argument would have been applied. Other programmes have been cut more heavily than aid. I rest upon that point.
  The right hon. Member for Leeds, East (Mr. Healey) courteously told me that he had to attend his reselection conference this afternoon. No doubt that will be another stimulating occasion. He made a number of points to which I shall not reply in detail as he is no longer here. He criticised a number of countries for the spread of their bilateral aid programmes. He give interesting facts. He did not attempt to include the Government in that stricture, and we are well placed on that point.
  It is perfectly legitimate to criticise the reductions in the Government aid programme, but its spread and quality cannot seriously be criticised. It is spread over 100 countries. Sixty-two per cent. of the money in 1980 went to the poorest countries. Although the figures are not yet finalised for 1980–81, the signs are that the proportion going to the poorest countries rose to 69 per cent. That is a high figure indeed.
  The right hon. Gentleman and some of his colleagues strongly criticised the United States' attitude. It is true that the new Administration took office with some of its supporters looking at the whole North-South problem with an approach so sceptical that it makes us appear to be radical enthusiasts. It is part of our responsibility, and that of our European allies, to express our views to the new Administration about the importance of this range of subjects. But it should not be done by the sort of denunciation to which the right hon. Gentleman occasionally turns his mind.
  United States policy is still evolving. It still has some way to go before we can be clear how it views the different negotiations. There has been some devolution, certainly on the question of global negotiation and on the important question of the sixth replenishement of the IDA, which is

  789
  being supported by the Administration and is currently before Congress. We hope that it will go through. It would be wrong to be over-pessimistic. It is wrong to suppose that the attitudes on the other side of the Atlantic will change or evolve in the right direction if we continue to bang against them in the way that the right hon. Gentleman did.
  The hon. Member for Waltham Forest (Mr. Deakins) made an extremely interesting speech. One phrase that he used set me back on my heels. He said that it was essential that the Cancun summit should be adequately prepared. I remember that it was the use of exactly that phrase, in the Foreign Office first memorandum on the Brandt report, which brought down upon our heads the fire and brimstone of the Sunday newspapers. They said that we had rejected Brandt and shown ourselves to be hostile. Yet we had simply said that the summit should be adequately prepared.
  Six months later, the hon. Gentleman has made exactly the same point. He is right, and we were right. Of course the summit should be adequately prepared. When I comment on the speech of my right hon. Friend the Member for Sidcup (Mr. Heath) I shall say more about that. The hon. Gentleman was also right to stress the value of advance Commonwealth consultation—and not only at Melbourne, although that will be important. We are trying to do that. I had an interesting conversation with Mr. Jha, the Indian member of the Brandt commission. He is close to the Indian Government's thinking on the matter. That sort of consultation over the months is important. It is a virtue and value of the Commonwealth that such conversations come about easily, and are valuable when they occur.
  I welcome the stress that the hon. Gentleman placed upon population policies. My right hon. Friend said in his opening speech that within our existing programme more resources would be available for international population programmes.
  My hon. Friend the Member for Hertford and Stevenage (Mr. Wells) made a thoughtful and interesting speech. I think that he achieved the right combination, which in my view escaped some later contributors to the debate. It is too simple to talk about this subject as if it were some primeval contest between private flows and official aid programmes. I know of one or two Conservative Members and one or two journalists who speak of matters entirely in terms of market forces. I know of one or two Labour Members who think entirely in terms of official flows and Government programmes. Anyone who has studied these issues in any depth will accept that a combination is required. There is plenty of room for argument about how one achieves the right combination. It is absurd to present the debate as a Tweedledum and Tweedledee argument.
  My hon. Friend and the right hon. Member for Norwich, North (Mr. Ennals) spoke of students and training. From the British national point of view that is a valuable form of spending. I think that every Foreign Office Minister must agree with that principle. In our daily work we see examples of the benefits which it brings. It is an area in which we would all like to spend more.
  However, everyone knows that the principle of Government policy has been changed. We have moved away from a subsidy that goes to everybody and towards selective awards. We would dearly like more funds to be available but we must fit ourselves to our resources.
  790
  However, we have been able to restore the number of new awards by means of the 1981–82 aid programme under the Government-to-Government programme to about the levels of 1978–79. We have taken a similar step in respect of the Commonwealth scholarship and fellowship plan, bearing in mind what was said at the Commonwealth education ministers conference at Colombo. Within straitened resources we have tried to make up, to some extent, for the effect of the change in general policy.
  The hon. Member for Kingston upon Hull, Central (Mr. McNamara) kindly told me that he has been reselected today, too. It seems to be a critical day in the operation. I am grateful to him for the way in which he spoke. I do not accept every part of his account of what has happened in the past but he was reasonably gracious about the present. He explained the philosophy underlying what strikes us as a most useful report by the Select Committee. As my right hon. Friend said, we shall be sending the Committee what I hope it will regard as a constructive reply as soon as we can.
  My right hon. Friend the Member for Sidcup made a speech to which everyone listened with great attention. It came on top of a campaign of great energy and dedication over recent times. I speak from personal experience when I say that there is no doubt that it has had a substantial impact on the thinking of many individuals.
  My right hon. Friend's remarks included a reference to the London School of Tropical Hygiene and Medicine. We understand the importance of the problem and the future of the school. Its problems and those of other postgraduate medical schools are being considered carefully. Money has been made available. The Government made available £5 million in 1980–81 to safeguard postgraduate work of especial importance following the withdrawal of the general subsidy from overseas students. Of the £5 million, there was an allocation of £3·75 million to London university, of which the school is a part. A further £3 million is being made available this year to safeguard important postgraduate work.
  I understood that the main thrust of the advice which my right hon. Friend wanted to give to the House about the Cancun summit concerned his emphasis that, whatever else happened, specific agreements should come out of it. He accepted that those agreements might have to be limited in scope, but emphasised that they should be specific. That was an important point coming after a powerful analysis. I shall make sure that my right hon. and noble Friend the Foreign Secretary studies what my right hon. Friend has said before he goes to the preparatory meeting in Cancun at the end of next week.
  It is not the present intention of the two original sponsors—Mexico and Austria, which have taken the lead in organising the summit—that there should be such a specific agreement at the end. The general approach seems to be rather that the summit is subject to what is worked out at the preparatory meeting in Cancun and then at the summit. Cancun should provide a focus for discussion, to draw out the threads and to draw the different strands together, and an impetus for later action.
  Mr. Ennals: By whom?
  Mr. Hurd: The question "By whom?" links with the problem of the global negotiations. We are committed in principle to the global negotiations and have been for some time. Last year there was a difficulty about the exact terms

  791
  of reference, which has not yet been entirely resolved. The Ottawa summit has enabled a slight move forward to take place. We expect that in one way or another the global negotiations will take place. Much political effort has been invested in them by the Group of 77. They will not be lightly relinquished. This is a personal thought and has not yet been achieved. Those negotiations could provide a context for the discussions of energy which are desperately important, which the Brandt Commission underlined as necessary, but which no one has yet found a way to bring about.
  My right hon. Friend took slightly out of context a cautionary word which I interjected into the speech of the hon. Member for Waltham Forest about future summits of the Cancun sort, which the hon. Member suggested might happen. We do not exclude that as a possibility, although personally I have a strong feeling that we are in danger of creating too many summits. If one adds them together, the utility of each new one is less than that of the last one. I believe that we are reaching the limit of the law in those matters.
  We do not exclude the idea of future summits, but there is more unease in the Group of 77 about the membership of the forthcoming Cancun summit than my right hon. Friend suggested. I do not want to give details of private conversations, but it is not self-evident to the Group of 77 that this is a formula which should be repeated indefinitely, particularly if it is regarded as cutting across negotiations in which they all have a part. That is not in any way a smokescreen, but a real problem in deciding the answer to the question of how one carries on and how the impetus which, we hope, will be created at Cancun will be translated into activity afterwards.
  Mr. Ennals: If there is no decision about follow-up afterwards, what is the case for having a conference which takes no decisions on the spot?
  Mr. Hurd: I hope that decisions will be made about the follow-up and that there will be an impetus to future work. That might turn out to be the heart of the matter.
  Mr. Dykes: If it was not Australia or Cuba which was worried, which countries did express anxiety?
  Mr. Hurd: I do not wish to give details of confidential conversations which I and others have had with other members of the Group of 77.
  My right hon. Friend the Member for Sidcup knows the facts about the voting structure in international financial institutions but other hon. Members might not be familiar with it. The voting strength of countries in the IMF and the World Bank are based on their quotas, in the case of the fund, and their shareholding, in the case of the bank. These are adjusted regularly in the light of the changing economic conditions of member States.
  A review of the quotas in the fund has just begun. It will reflect changes since they were last adjusted in 1976. Quotas and votes of developing countries in the fund, including OPEC countries, have risen to 41 per cent. In the bank they are 35 per cent. In the regional banks, their share is higher. It would be possible to break the link between quotas and voting. We do not support that
  792
  because we believe that the votes in the two bodies should reflect the contribution to the capital or quota. That is one reason why the bodies continue to command the general confidence of the major subscribers—including, for example, Saudi Arabia and other markets.
  I am sorry that I missed the speech by the hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler). I am told that he raised a number of interesting points about food storage, self-sufficiency in food and the need for further action. The Minister has taken careful note of what he said.
  I agree with my hon. Friend the Member for Canterbury (Mr. Crouch) about that terrible phrase "charity begins at home". Whenever I hear it I know that I am in for an argument. We should try to banish it from civilised discussion in the House.
  My hon. Friend the Member for Harrow, East (Mr. Dykes) rightly stressed the European Community dimension. He urged a further increase in the European Development Fund. As he knows, we have moved from EDF 4 to EDF 5, which involves an increase. That is under a treaty with a five-year span. Obviously, before too long we shall have to look at the size of the next EDF. I note what he said about that.
  The hon. Member for Hackney, Central (Mr. Davis) raised two shipping points which I listened to carefully. I shall examine what he said with greater care, in concert with my colleagues in the Department of Trade, and write to him.
  It is one thing to talk about the awful grind of poverty and the intolerable way in which that degree of poverty denies the individual the chance of developing himself. We are all conscious of that. I do not believe that it is right to go on from that and state, as the two Opposition Front Bench spokesmen did, that the world economic system is on the edge of collapse. I do not believe that. The evidence is beginning to appear that it has coped rather better in the last year than was sometimes predicted. Certainly, the IMF believes that most developing countries with access to financial markets—I agree that that is an important qualification—will be able to raise sufficient loans. Many of the poorest countries cannot benefit from that. Neither the World Bank nor the OECD foresees a generalised and cumulative debt problem. The summit at Cancun will not start a new and revolutionary economic order. It should provide a focus on essential problems and give an impetus to the accelerated change that is clearly needed within existing institutions.
  We accept the case for that change. We accept that it is the will of our electors that we in Britain should use part of our skills and resources to push that change forward in all the various fields covered by that debate. Despite what has been said about my right hon. Friend the Prime Minister, in her absence, if she believed purely in market forces she would not preside over a Government who are spending over £1 billion in foreign aid this year and who belong to a number of financial institutions, nor would she be going to the Cancun summit. She will be going in the spirit of the speeches made at this Dispatch Box and in the spirit of what was said at Ottawa, and will certainly play a constructive part.
  It being half-past Two o'clock, the motion for the adjournment lapsed, without Question put.

Mr. Pritam Singh
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wakeham.]
2.30 pm
Mr. Peter Archer: One of the more attractive features of the House is its capacity to range within a single day from a debate of global importance to the problem of an individual. We have been debating the future of mankind. I wish to tell the House the story of one man, although I suspect that it may be the story of others, too.
Mr. Pritam Singh is my constituent, because he lives in West Smethwick. Indeed, that is what the story is about. However, in investigating his case I learnt things that may be of assistance to other hon. Members whose constituents are in a similar predicament. Mr. Pritam Singh is a Sikh gentleman of 62. He came to this country more than a quarter of a century ago. He has here a home and wife, and he reared his family here. To my knowledge, no one has queried his honesty, his respectability, his standing in the community or his assiduity in observing his obligations. But, like many people who change their country of residence, he retains links with his country of origin. He still has connections with India. In particular, his father is still living there.
Given that Mr. Pritam Singh is 62, it does not require a computer to calculate that his father is a gentleman of advanced years, and for some years he has been in poor health. So Mr. Pritam Singh spends much of his time caring for his father and looking after his affairs.
I do not know whether he would agree, because I have not asked him, but I would describe him as a man with two homes. That does not fit into the tidy schemes designed by administrators. They want to know where a person lives, and I doubt whether there is space on their forms for more than one address. If home is where the heart is, they do not understand that a heart may be torn. There is no place in their scheme for a David Livingstone, a Lawrence of Arabia or a John Wesley.
Mr. Pritam Singh is a simple man. He can understand a rule if it is explained to him, and he believed, in his naivety, that the law was intended to be widely known and fully understood by those whose lives are governed by it. He had unconditional leave to reside in this country, and he believed that his home here was his castle. But he knew that if he spent more than two years abroad he risked losing his right to reside here, so when he was in India attending to his father's affairs he took care to return to the United Kingdom within the two-year period.
Poor Mr. Pritam Singh. The world is not as simple as that. The rules are certainly not as simple as that, and the minds of those who administer them are vastly more devious. If it is any consolation to him, he is not unique in not making a study of the rules each night before he retires to bed. I discovered the position only when I had to investigate his case.
The immigration rules of 1973, like those of 1980, provide that a passenger returning to the United Kingdom shall be admitted for settlement if he satisfies the immigration officer that he was "settled" in the United Kingdom when he left and that he has not been away for more than two years. In practice, that meant that, provided that when he last entered the United Kingdom he was admitted for an indefinite period, and that he had not been
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away for more than two years, he was again given indefinite leave to enter. The standard Home Office letter issued to a person given indefinite leave reads:
"You are now free to remain permanently in the United Kingdom … If you leave the United Kingdom you will normally be readmitted at any time within two years of your departure".
Solicitors who ever have occasion to inquire more closely are normally told:
"A person who has been accepted for settlement and who returns to the United Kingdom within two years of his departure will continue to be treated as a returning resident provided he is admitted for settlement on each occasion and provided he always returns within two years of his last departure."
Among the minority communities everyone believed that they understood the position and knew what the regulations were. But that was too simple and straightforward for the administrative mind. It was observed that some people were returning to the United Kingdom just within the two-year period. The problem about giving people a clear right is that they tend to avail themselves of it, especially if it is widely known and clearly understood. I have still not grasped what mischief was alleged to have arisen from permitting people like Mr. Pritam Singh to have two homes, and to keep alive their right to reside in the United Kingdom with their families by confining journeys abroad within a two-year period.
I accept, as the Minister of State pointed out to me in correspondence, that between December 1973 and April 1980 Mr. Pritam Singh spent three periods in India, each of them of nearly two years. So, I imagine have many white people who would still say that their home was in the United Kingdom.
It was decided that that had to be stopped, so the practice was changed. The clear, simple rule no longer operated. To satisfy the immigration officer that a person has been settled in the United Kingdom when he last went abroad he has to show not only that he was here with indefinite leave to stay but that he was ordinarily resident here. After spending some time in India, Mr. Pritam Singh returned to the United Kingdom on 17 December 1977 and he was given indefinite leave to enter. On 1 July 1978 he went to India again and returned to the United Kingdom on 20 April 1980.
As so often happens on such occasions, there is probably not complete agreement between Mr. Pritam Singh and the immigration officer about what was said, but I doubt whether the conflict is wide. When he had last entered the United Kingdom he had been given indefinite leave to enter and he returned within the two years. The immigration officer asked him how long he intended to remain in the United Kingdom before he went to India again. He said that he would probably be going to India after another five months. Mr. Pritam Singh says that the immigration officer said to him, "You bloody people always come back just inside the two years."
Mr. Pritam Singh was given leave to enter, limited to six months. That completely changed his status, as it was intended to do, for he would not be entitled to be here after a further six months and when he left the United Kingdom it would be a final farewell. If he returned it would not be as someone who was settled here when he last went abroad. Thus, he would have no claim to be admitted. After living in the United Kingdom since 1955, having made his home with his wife and rearing his family here, Mr. Pritam Singh was no longer entitled to be in the United Kingdom and he is now in India.

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I have exchanged much correspondence with the Minister of State, the hon. Member for Aylesbury (Mr. Raison). He has helpfully suggested that Mr. Pritam Singh might apply to come here on the ground that he was married to a lady who was settled here. But I am not sure how that application would have been treated, because his wife was not born in this country and the rules about that have changed as well.
Mr. Pritam Singh's life was shattered because the administrators had no place in their scheme for men with two homes. What harm was he doing? Why is it so vital that he should spend all his time here or all his time in India? It has never been explained to him or to me.
The House will recognise two things about the change in procedure which led to Mr. Pritam Singh's predicament, both of them contrary, in my submission, to what the rule of law sets out to achieve.
First, the status of people is no longer regulated by a clear rule. If one asks what counts as being ordinarily resident in the United Kingdom, one is told that it depends on the facts. If one asks "What facts?", one is told "All the relevant facts."
For Mr. Pritam Singh, the facts were that he had his home, his wife and his family here. But that was not enough, and people such as Mr. Pritam Singh are no longer clear what they have to do in order not to endanger their status. We are not dealing with the criminal law, of course, and no one suggests that any blame attaches to Mr. Pritam Singh. But his conduct attracted a very severe penalty, and there is no way to explain clearly to someone in his position what he has to do in order to avoid that penalty.
Secondly, the change in practice was not made known. There was nothing in the media about it, because the media were not told. If Mr. Pritam Singh had looked in the rules he would have found nothing there about it. The change was known to immigration officers but it remained sealed within their breasts.
The rule of law requires that the rules of which we are governed should be widely known. Indeed, I understand that when the Minister of State was invited to embody this change in practice in the 1980 rules he declined for what may very well have been good reasons, but the matter was still not made clear.
I understand that the story is to have a happy ending. The hon. Member for Aylesbury, as we all know, is fully occupied at the moment, and the hon. and learned Member for Royal Tunbridge Wells (Mr. Mayhew) has kindly agreed to give me an answer today. I am most grateful to him. He has also been kind enough to tell me in advance of the debate that the file has been looked at again and that he may come as the bearer of glad tidings. If so, he will earn my gratitude and the gratitude of Mr. Pritam Singh and his family, because justice delayed is not really as bad as justice denied, despite our aphorism.
My hon. Friend the Member for Glasgow, Queen's Park (Mr. McElhone), in the previous debate, referred to the joy in Heaven over the repentant sinner. I suspect that when that repentant sinner comes from the Home Office, there is in Heaven the equivalent of a champagne celebration.
I thought it right to tell the House this story because I hope that the hon. and learned Gentleman can offer us some comfort, not only for Mr. Pritam Singh but for all
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those who are dependent upon this practice. Perhaps he can even go further and assure us that the Home Office will never treat people quite so contemptuously again. We all of us speak of the rule of law when it suits our book, but I wonder whether we realise its immense practical importance for the lives of people such as Mr. Pritam Singh.
Mr. Pritam Singh belongs to a community which I have the privilege of knowing very well. The people in that community respect the rule of law. But the rule of law applies to governed and governors alike, and I look forward to being assured by the hon. and learned Gentleman—just as I am pretty sure in my own mind—that in the Home Office, too, there are those who believe in the rule of law.
2.43 pm
The Minister of State, Home Office (Mr. Patrick Mayhew): I confess to a certain feeling of regret that the hon. and learned Member for Warley, West (Mr. Archer), in the course of properly pursuing the interests of a constituent, adopted a rather florid style of presentation of this difficult case, which I do not believe is appropriate either to his position as somebody who has had experience of the administration of these difficult matters, as a former Law Officer, or to the task that officials have, on behalf of all of us in this country, to perform in administering what are necessarily difficult and rather complex immigration rules. These rules are necessary because any crowded island such as ours has to control the right to reside in it, in a manner that is careful and fair. It is a reasonable requirement, I would submit, for readmission to the United Kingdom that one should have been settled here. It goes back to the Immigration Act 1971 that "settled" imports having been ordinarily resident here.
I shall deal in reasonable detail with the history of the application, which, as the right hon. and learned Gentleman said, has a happy conclusion. However, I thought that I ought to begin by rebutting the not entirely temperate manner in which the right hon. and learned Gentleman dealt with the history.
The case to which the right hon.and learned Gentleman referred raises an aspect of immigration control that is often misunderstood, and I am glad of the opportunity to explain the position of persons such as Mr. Singh. I shall do that before dealing with the history of the application.
I ought to begin by setting out the relevant provisions in the immigration rules. Paragraph 56 of the rules provides that a Commonwealth citizen—which Mr. Pritam Singh is—who satisfies the immigration officer that he was settled in the United Kingdom at the coming into force of the Immigration Act 1971—that is, on 1 January 1973—and that he has been settled here at any time during the two years preceding his return is to be admitted for settlement. There is, of course, provision for the admission of passengers who have been away for longer than two years, but that is not a consideration in this case.
Elsewhere in the immigration rules a person is stated to be
"settled in the United Kingdom"
when he is ordinarily resident here without having entered or remained in breach of the immigration laws and is free from any restriction in the period for which he may remain. The term "ordinarily resident" is not defined in the rules or in the Immigration Act, but, as various court judgments have indicated—and not only in immigration

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Control—is to be determined in any particular case as a question of fact and degree according to all the circumstances. That is about as fair an approach as one can get to any issue of fact of this nature. It is the basic common law approach.
The practical application of the rules gives rise to no difficulty in the vast majority of cases, and until the latter part of 1978 it was generally accepted that return within the two-year period was all that was required to establish a claim to returning resident status. Determinations by the appellate authorities in the few cases of dispute reaffirmed that view and it was the Home Office practice to admit for settlement with in two years of departure any person who was free of conditions when he left. But later that year the Government of the day became aware of an increasing number of people with no real connection with this country who sought to preserve their resident status by judiciously timed visits where the element of ordinary residence was clearly lacking. Steps to curb what was properly seen as a misuse of the immigration rules were introduced. The Government of that day were not the present Government, but that of which the right hon. and learned Gentleman was a distinguished member.
The "two-year rule" does not in itself mean that a person necessarily retains his ordinary residence in this country throughout a prolonged absence overseas. As I have said, ordinary residence is a matter of fact and degree, and the test, broadly speaking, is whether someone's real home was in the United Kingdom at the relevant period and whether a continuing connection existed sufficient to maintain the status of ordinary residence. Where that was in doubt, the new arrangements provided for the admission of a passenger claiming resident status for six months, during which time it was open to him to put forward evidence to show that, whatever may have been the situation in the past, in future he intended living here.
I cannot for the life of me see how it represents a fundamental breach of the rule of law or the principles of natural justice that somebody in those circumstances should be admitted for only six months in the first instance so that he may establish that in future he intends to live here.
As I am sure the House will appreciate, the question of ordinary residence can raise complex issues, but some of the pointers to be taken into account in considering whether ordinary residence is established in a particular case would be ownership or current tenancy of property for the person's own residential use, whether the person had permanent employment either here or abroad, the length of his previous stay, the presence of close family here, and absence of evidence of an intention to make his real home elsewhere. The grant of indefinite leave to enter by an immigration officer does not of itself make a person settled in this country; he can become ordinarily resident only after he has been given leave to enter.
I deal with Mr. Pritam Singh's position. The right hon. and learned Gentleman said that Mr. Pritam Singh came to this country in about 1955. I have no hesitation in accepting that. I have no hesitation, either, in accepting what the right hon. and learned Gentleman said at the outset, that no one has ever questioned Mr. Pritam Singh's integrity in any way. I acknowledge that freely and readily. I accept also that he was settled here on 1 January 1973, the date on which the Act came into force.
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We have not seen Mr. Pritam Singh's earlier passports, but we know that between December 1973 and his most recent return to this country in April of last year he spent the greater part of his time overseas. When he arrived here on the last occasion he told the immigration officer that he wished to stay for five months to visit his son and that his wife had arrived back in the country about three months previously.
The immigration officer was aware that Mr. Pritam Singh had formerly been resident in the United Kingdom, and he considered whether Mr. Pritam Singh satisfied the criteria for returning residents, to which I have already referred. He did not doubt that Mr. Pritam Singh was settled in the country on 1 January 1973, but, as I have explained, in deciding Mr. Pritam Singh's application for leave to enter the officer also had to determine whether it could properly be said that he had been ordinarily resident here during any part of the preceding two years.
Taking full account of all the circumstances presented to him, the officer found himself not satisfied, as is required by the immigration rules, that Mr. Pritam Singh qualified for entry as a returning entry. In the course of the preceding 6¼ years, he had spent almost 5¾ years abroad. Furthermore, he said that he would be returning to India within five months. Nevertheless, the officer felt able to grant him leave to enter for six months under the practice to which I referred a few moments ago, so that he within that period might have the opportunity to establish that he intended in the future, never mind the past, to make his home here.
It was shortly afterwards that Mr. Pritam Singh, as he was perfectly entitled to do, approached the right hon. and learned Gentleman, who wrote to my hon. Friend the Minister of State, the hon. Member for Aylesbury (Mr, Raison), on 12 May 1980 asking that the question of Mr. Pritam Singh's status should be investigated. In the ordinary course of a case of doubt of this kind, evidence of resumption of ordinary residence would be sought under the arrangements introduced in November 1978, to which I have already referred. These arrangements are currently, under review. I have already privately indicated to the right hon. and learned Gentleman that they are in the process of review in the Home Office. These arrangements provide that where clear indication is given that an applicant has so arranged his affairs as to show that he intends to reside here permanently, this can usually be accepted as constituting the re-establishment of ordinary residence.
There was, unfortunately, considerable delay before the initial information about Mr. Pritam Singh's passports arid their contents, requested of Mr. Pritam Singh, could be obtained. By that time, it so happened, unfortunately, that he had been forced by family illness overseas to return to India. I say frankly that I think that it would, with hindsight, have been better if he had been asked for evidence that he was ordinarily resident here at the time of his last visit in 1977–78, or, alternatively, told that he could provide evidence to show that he had re-established ordinary residence on the present occasion. It was, in the event, suggested to him that if he wished to return to this country his best course would be to apply to the British high commission in New Delhi.
Our information to date is that Mr. Pritam Singh has not yet done so. Should he apply within the usual two-year period, our review of the facts now available leads to the conclusion that it would, in all the circumstances, be right

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to grant Mr. Pritam Singh the facility of a returning resident entry certificate without further questions. If the right hon. and learned Member will let me have Mr. Pritam Singh's address in India, we shall ask the entry certificate officer to get in touch with him, to explain this decision and to arrange for the necessary endorsement in his passport to be made straight away and without delay, so as to ensure that Mr. Pritam Singh is readmitted for settlement on his return.
Mr. Archer: I am, of course, very grateful for the announcement which the hon. and learned Gentleman has been able to make, and particularly for the assurance that there will not be the usual delays which, perhaps unavoidably, sometimes accompany such applications. However, since we have a moment, perhaps I may ask the hon. and learned Gentleman to address his mind to what was part of the burden of what I tried to say. If I have a close relative overseas and I spend a great deal of time with that relative because of his illness, I shall never be precluded from returning to my home in this country. It seems that even now, because of the interpretation of being habitually resident here, if Mr. Pritam Singh spends a great deal of his time with his ailing father he will lose the right to return to this country. Does that seem wholly fair?
Mr. Mayhew: He does not lose the right to return to this country. In all these matters the question whether one is ordinarily resident here is determined, as case law has established, by a consideration of all the facts and circumstances of each case. It is a matter of fact in each case as to which way the balance is struck. But in any
800
event, as I indicated, it is not a question of the right to return being lost. The practice is that the person may return for a period of up to six months, in which time it is open to him to establish that for the future he intends to make his home here. So nothing is lost.
However, to revert to what I said at the outset, all who take an interest in the control of immigration to this country must, if they are fair, acknowledge that this is a country which is highly populated and, in many areas, overcrowded. They must acknowledge that it is as much in the interests of those who wish to immigrate here from overseas that rules should be clearly, fairly and carefully applied, as it is in the interests of those who are indigenous to this country.
Therefore, it is not right to say that the rules and their application, which are relevant to this history of Mr. Pritam Singh, evidence a capricious approach to these matters, or that—I refer here to a particularly florid passage of the right hon. and learned Gentleman's speech—the Home Office was indifferent to the rule of law. That is not right. It does not assist in any way Mr. Pritam Singh's case or its presentation.
These matters are seldom all right or all wrong. I have acknowledged that it would have been better, in the instant case, if a fuller explanation of the Home Office practice had been given to Mr. Pritam Singh at the time.
I hope that the matter has now been clearly explained. I trust that Mr. Pritam Singh will feel able to take up the offer that has been made. If he does so, I give the assurance that no further questions will need to be asked and that he will be able to return here.
Question put and agreed to.
Adjourned accordingly at two minutes to Three o'clock.

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

Displaced Cypriots: Immigration Rules
Lord Brockway: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the 2,000 Cypriots remaining in this country (of those forced to leave their homes in the north by the Turkish invasion of 1974) will now be given full refugee status including permission to stay in this country until they can return to their homes.
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, the immigration rules have been applied flexibly and with sympathy to those Cypriots who came here as a result of the hostilities in 1974 and it remains the Government's policy that a person's stay here will be extended exceptionally if it appears that the situation in the island makes it unreasonable to expect him to return there. The situation is not covered by the 1951 convention relating to the status of refugees and the grant of refugee status would therefore be inappropriate.
Lord Brockway: My Lords, is it not the case that many of these refugees have been returned against their will to the southern area of Cyprus and that families have been broken up as a consequence? In view of the fact that this Government are a guarantor of the integrity of the whole of Cyprus, can permanent residence not be allowed to these refugees until they have the right to go back to their own homes?
Lord Belstead: My Lords, it has been the policy under both the previous Government and the present Government that those who have come to this country from Cyprus because of the situation in the island should be granted stay here exceptionally under the immigration rules. Arising from what the noble Lord asked at the beginning of his supplementary, my understanding is that no Greek Cypriot is expected to return to that part of the island now controlled by the Turkish authorities. Similarly, Turkish Cypriots will not be returned to the Greek controlled area. However, the convention, which is the whole point of the noble Lord's Question, does not apply.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that any reasonable person would recognise the lack of wisdom in giving the blanket cover that is asked for in this Question? Certainly individual cases
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where all the circumstances can be taken into account should be looked at with sympathy and real concern, but a blanket cover is not the kind of thing which this Government or any Government ought to give at this stage.
Lord Belstead: My Lords, I am grateful to my noble friend. This is the policy which the previous Government followed and which the present Government are following, and I believe it is the right one.
Lord Avebury: My Lords, is the Minister aware that in some cases which I have taken up with his honourable friend Mr. Timothy Raison deportation orders were made against Cypriots many years ago but suspended from operation because of their circumstances back home, and then, years later, were suddenly reactivated because of an alleged change of circumstances without the persons concerned having any right to a re-hearing? Where there is a dispute about the family circumstances in the country of origin, will the Minister have a look at the possibility of referring these cases to the appellate authorities so that the evidence can be properly examined?
Lord Belstead: My Lords, if there is any particular case which the noble Lord has in mind, I shall of course make sure that it is looked at carefully and seriously, but I understood from what the noble Lord said that these are cases which have already been looked at.
Lord Molloy: My Lords, does not the noble Lord agree that the technicalities of the law should always be viewed in the light of humanitarian principles, and that where people may have to go back because they are Turkish or Greek Cypriots there ought to be a thorough examination of the circumstances before the ultimate decision is arrived at and they are sent back to a land which, although it is their home, they are frightened to go back to?
Lord Belstead: My Lords, this is exactly the case. In his question I think that the noble Lord, Lord Molloy, has outlined the procedures which are followed at the present time.
Lord Spens: My Lords, can the Minister give an assurance that this policy is accorded also to the 500 or so Turkish Cypriots who were forced out of their homes between 1963 and 1974 and who are now in this country?
Lord Belstead: Yes, my Lords.
Baroness Jeger: My Lords, while I recognise that Governments of neither party have been able to solve this difficult problem, may I ask whether the Minister is aware that his practice of giving extensions in exceptional circumstances causes a lot of strain and anxiety, particularly where education is concerned? In the case of many of the Cypriots who apply for but are refused the exceptional extension it seems that very subjective judgments are brought to bear. Would it not therefore be more fair to look again at the 1951 refugee provisions?
Lord Belstead: My Lords, I do not think that it would be more fair. We have got to be realistic and to take into account that the number of those admitted from the island of Cyprus for all purposes into this country has risen from 16,964 in 1973 to 33,000. So the numbers have doubled in a period of some seven years. We are therefore again talking about an immigration situation which is serious and important. Within this, there is nothing, I think, between us that these particular cases—the people who, after 1974, felt that they had to leave and could not go back—must be dealt with as sympathetically as possible. I should like to add to what I have already said that, in deciding whether a person could reasonably return to the island, full account is always taken of all the circumstances, including, for example, the availability of accommodation and funds and the extent to which relatives have been able to re-establish themselves in Cyprus.
Lord Caradon: My Lords, I wonder whether the attention of the noble Lord has been drawn to a very remarkable and encouraging meeting which took place only a few days ago in London? A mass meeting of Cypriots, both Greek and Turkish, assembled to welcome a declaration which had been made by three editors from the Greek side of Cyprus and three editors from the Turkish side, who had published a call for reconciliation and understanding, and at this meeting, organised by the Friends of Cyprus, 1,000 people, both Greeks and Turks, came together to make a demand that understanding, reconciliation—the purposes of the original treaty—should be carried out.
Lord Belstead: My Lords, this, of course, is an avenue down which, if people can go, there would be a solution to the whole problem which is the subject of the Question tabled by the noble Lord, Lord Brockway.
Lord Brockway: My Lords, while welcoming the intervention of the noble Lord, may I ask this in relation to the Question: is the Minister aware that I have a list of those who have been deported against their will to southern Cyprus, which I shall send to the noble Lord? Is he further aware that at this moment I have a case where the mother of students, who is looking after those students in London, is now being sent back to Cyprus? Will the Minister particularly look at that case?
Lord Belstead: My Lords, if the noble Lord will send me details of the case, I will most certainly make sure that it is looked at carefully and sympathetically.

Cyprus: Settlement Negotiations
11.15 a.m.
Lord Brockway: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what progress has been made in the discussions between representatives of the Government of Cyprus and the
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Turkish occupation authorities in the north for a settlement of their dispute; and what part the United Kingdom is taking as a guarantor of Cypriot territorial integrity and independence.
Lord Skelmersdale: My Lords, talks under United Nations auspices have resumed following the Greek and Turkish Cypriot elections. Progress before the elections was limited; prospects now seem brighter, but progress will require real determination from the parties. We shall continue to give our full support to the United Nations' efforts.
Lord Brockway: My Lords, may I ask the Minister whether he is aware that President Kyprianou is making the utmost effort to reach agreement; that he has just recently said that he is always inspired by goodwill and he will exhaust all margins in the dialogue? Is the noble Lord nevertheless aware that the position has been made more difficult by the recent statement by Mr. Denktash insisting on borders between the two areas and an exchange of the populations, and could our Government, as a guarantor, get in touch with the other guarantors to seek a solution to this problem?
Lord Skelmersdale: My Lords, as I said in my original Answer to the noble Lord, the United Nations' efforts are very much the key to this situation and we see no case for unilateral initiatives but are giving our full support to the United Nations' efforts. With regard to the first two supplementaries, I agree that there have been some very hopeful signs—notably, the agreement on missing persons—and it is encouraging that after 11 months the two sides are still talking. With elections out of the way, there is a real and continuing opportunity for progress, and we hope it will be exploited by all the parties. With expectations on all sides running high, I must point out that the talks are now at a delicate stage, and I do not think that your Lordships would expect me to comment too much upon them.
With regard to the second supplementary asked by the noble Lord, of course both sides need to show moderation and it is regrettable when they make remarks that threaten the good atmosphere currently prevailing in the talks, but I would suggest to the noble Lord, that it would be unwise to attach too much weight to a single statement.
Baroness Jeger: My Lords, while appreciating the difficulties of the present situation and the delicate talks that are going on, I must say that I have heard that for the last seven years. It is never the right time to do anything about Cyprus, and may I ask the noble Lord whether he would not agree that, thinking back to what the noble Lord, Lord Caradon, said about the recent meeting in London between Greek and Turkish Cypriots, that has never been the trouble. Is not the trouble that the Turkish Government are giving Mr. Denktash his directions and that, however helpful Mr. Kyprianou tries to be, it is Ankara that makes these decisions? In view of Greece, Turkey and Cyprus all being associated in the EEC, is it not quite unacceptable that Turkish troops should be on the mainland of another member state of the EEC?
Lord Skelmersdale: My Lords, I agree with the noble Baroness that the withdrawal of Turkish troops is an important issue, but there are others and I think the problem would be unlikely to be solved in isolation. There is no practical alternative to finding a settlement through inter-communal negotiations.
Lord Hatch of Lusby: My Lords, may I ask the noble Lord whether he is aware that this country under the present Government gives a substantial amount of aid to the Turkish Government? Has that aid and that relationship been used in order to persuade the Turkish Government to represent to Mr. Denktash the necessity for making conciliatory gestures towards the approaches which have been made by President Kyprianou?
Lord Skelmersdale: My Lords, aid is given evenhandedly in this case, and we have official dealings only with the Republic of Cyprus under President Kyprianou. We do not, however, neglect the rights and interests of the Turkish Cypriot community. As I say, it is very important to talk and deal equally with both sides on the island of Cyprus.
The Earl of Lauderdale: My Lords, further to my noble friend's reply to that last supplementary question, would he not agree that there is a real danger that things said in this House in favour of one side as against another may do great harm? All the way through this sorry story, with which, like Lady Jeger, I have been familiar for some 25 years, both the Government of Turkey and the Government of Greece have been involved; none is free of blame, and our problem now is to assuage the situation and not cheer on one side against the other.
Lord Skelmersdale: My Lords, I am very grateful to my noble friend for increasing the effect of my answer to the supplementary question of the noble Lord, Lord Hatch.
Lord Hatch of Lusby: My Lords, the noble Lord misunderstood my question. I was not referring to British aid to Cyprus; I was referring to British aid to Turkey. I was asking whether the British Government have made representations to the Turkish Government, not to the Cypriot Government, to use its good offices in order to persuade Mr. Denktash to come to compromise negotiations with President Kyprianou.
Lord Skelmersdale: My Lords, I apologise if I misunderstood the noble Lord's question. I am afraid I have no information on that point because it is not directly contiguous with the Question. If I may, I will take the opportunity to write to the noble Lord.
Lord Denham: My Lords, I know that the noble Lord, Lord Jenkins, has been trying to ask a question for some time. We shall have been 14 minutes on this Question, so, after he has asked his question and my noble friend has answered it, I suggest we move on to the next business.
Lord Jenkins of Putney: My Lords, I want, if I may, to press the Minister on his answer to the last supplementary question. May I ask him to consider the possibility that in eliminating, as it were, the Turkish Government from this consideration altogether, he is failing to use his good offices in a position in which, if the Government did exert a little pressure at the appropriate time, a solution might be found? So will he reconsider that answer?
Lord Skelmersdale: My Lords, I did say that I would write to the noble Lord, Lord Hatch, when I have considered it, and that is exactly what I shall do.

BBC Transcription Services
11.24 a.m.
Lord Ardwick: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will endeavour to rescue the BBC transcription service which is threatened with closure by prescribed economies in the BBC's Overseas Services.
Lord Skelmersdale: My Lords, it is not the Government's wish that the transcription services should be wound up, merely that the annual contribution of some £1 million from the grant-in-aid should cease. We hope that the BBC External Services will be able to continue to sell some of their recorded radio programmes to overseas countries and find alternative means of finance.
Lord Ardwick: My Lords, I thank the noble Lord for that Answer, which is not quite as negative as some people might suppose; nevertheless, it is a disappointing Answer. Do not the Government realise that this is a false economy? Do not they see that by jeopardising, reducing, this service they are risking the loss or the diminution of a minor but quite precious asset; that this service manages to persuade stations in one hundred countries throughout the world to pay a small subscription to broadcast the very best in British radio, and this gives us a presence and it gives us an influence which is the envy of other Governments, who will immediately leap in and supplant it with free services if we go out or substantially reduce the services, as the Government now intend?
Lord Skelmersdale: My Lords, I think perhaps we ought to be rather certain in this particular case exactly what we are talking about. The transcription services, as the noble Lord will be well aware, include music, drama, light entertainment, education and scientific material. It is the Government's view that it would seem more appropriate that sources of finance other than that of the Foreign and Commonwealth Office should be found for those parts. After all, the FCO is entirely concerned with foreign policy questions. There are also some news and current affairs programmes specially made by what is known as the topical tape service. This will continue to receive some £350,000 a year from the grant-in-aid,

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and we can see no reason why the really important part of the whole service should cease.
Lord Donaldson of Kingsbridge: My Lords, is the noble Lord aware that when one was loading ships for invasion one always left a space for NAAFI goods, and that cultural defence is exactly the same in relation to the billions being spent on straight defence? Does the noble Lord remember that there was an important general, whose name I have unfortunately forgotten, in the last world war who described the work of the British Council in the Middle East as worth a brigade to him? It seems to me absolutely incredible. Do the noble Lord and the Government really mean to save what is something under £1 million on a budget of £6 or £7 billion? Do they not believe that in order to get intelligence you have to make friends, and that in order to make friends you have to show them the best we can do in this country?
Lord Skelmersdale: Yes, my Lords, I would agree with the cultural value of this, but what I would not agree with it that this service should be financed from the grant-in-aid from the Foreign and Commonwealth Office. I am glad the noble Lord mentioned the British Council, because this is exactly one of the sources that are being looked at for aid. But, of course, this is a matter for the Board of the British Council, and we do not yet know what they may or may not decide.
Lord Strabolgi: My Lords, are the Government aware that protests have been received from over 40 countries in connection with the Government's decision? Will they reconsider this, not only on cultural grounds but also because of the valuable contribution that these services make to our invisible exports, which should appeal to them on more materialistic grounds?
Lord Skelmersdale: My Lords, I should have thought that the Government's attitude and position on this matter was perfectly clear, but I would remind the House—the noble Lord, Lord Strabolgi, will need no reminding—that we are to have a full debate on this subject on Thursday of next week. My noble friend the Foreign Secretary will be speaking on this matter, and so, I believe, shall I.
Lord Orr-Ewing: My Lords, is my noble friend aware that there are a number of Members on this side of the House also who are anxious to see this matter properly reviewed in the forthcoming debate? In the meantime, he has brought up one reason which I do not think has previously emerged, which is that this is a question of shuffling off the responsibility from the existing Foreign Office grant to perhaps some other Ministry. If that is the reason why we are suspending the transcription service, or a portion of it, and thus saving £1 million, could it not continue until such time as the Government have found some alternative Ministry or some alternative Vote which can pick up the responsibility? Is it not foolish to shed this service and thus lose the audience and lose the service to overseas people while we are trying to find out who should pay for this very important operation?
Lord Skelmersdale: My Lords, I may be naive but I really cannot see why the transcription services should be threatened with extinction, as the original Question suggested. I do not think this is a matter of shuffling off.
Lord Gladwyn: My Lords, should it become clear next Thursday that the House is opposed to these foolish proposals, will the Government be prepared to withdraw them, and not fall back, as I have heard suggested elsewhere, on the alternative scheme for making similar economies in the money devoted to transmitters for the BBC, which would be obviously cutting off their nose to spite their face?
Lord Skelmersdale: My Lords, I do not think the noble Lord would expect me, or would himself expect, to pre-empt the decision of this House next week.
Lord Denham: My Lords, it is, of course, for the House to decide, but I wonder whether, in view of the debate that we are to have next Thursday, the feeling might not be that we are slightly pre-empting that debate.

Prisoners' Information: Cell Cards
11.30 a.m.
Lord Avebury: 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 why cell cards are not made available to prisoners in HM Prisons in England and Wales giving up-to-date information about the content of the prison rules, standing orders and circular instructions.
Lord Belstead: My Lords, the department supplies a range of cell cards to every prison, and governors are required by standing orders to ensure that each prisoner is provided in his cell or room with copies appropriate to his status. If cell cards are not available in some establishments or parts of establishments, this is likely to be because persistent vandalism by prisoners has led to alternative arrangements such as keeping sets of cards, to which prisoners have access, in a wing office and the library, and providing induction sessions.
Lord Avebury: My Lords, would not the Minister agree that the cell cards that are placed in the cells at present are inaccurate and that he told me in a letter of 29th January that a major revision of cell cards is in an advanced stage of preparation? Yet, on 15th July—six months later—he tells me in another letter that cell cards are in the course of extensive revision.
With regard to the rules for prisoners' correspondence, is the Minister aware that the prison authorities do not allow extracts from the relevant standing orders and circular instructions to be sent to prisoners from outside; yet if the prisoners apply to the European Commission for Human Rights they may obtain

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complete sets of the relevant standing orders and circular instructions which have been published as Appendix 4 to the Commission's report on the case of Silver and others? Is it not absurd that the Home Office should refuse prisoners access to documents which they can obtain from the European Commission for Human Rights?
Lord Belstead: My Lords, it is the view of the Prison Department that the cell cards need updating. That is the reason why they are being updated. So far as standing orders and circular instructions are concerned, those are for the guidance of management and that is the reason why they are not communicated to prisoners.
The Earl of Longford: My Lords, is it not clear from the report of the European Commission condemning our conduct in this country in a number of respects, that prisoners in this country are today gravely handicapped through lack of information or, indeed, through out-of-date information?
Lord Belstead: My Lords, I would not agree with that.
Baroness Vickers: My Lords, in view of the fact that not everybody speaks English or understands very elaborate English, are these now being printed in other languages?
Lord Belstead: My Lords, that is one of the matters at which I think we are looking at present. It is true, as the noble Lord, Lord Avebury says, that the present cell cards needed overhauling. But I should like to say to my noble friend Lady Vickers that one of the general practices which goes on in prisons is to encourage prisoners to consult wing officers, governors and members of boards of visitors so that they can say if they do not understand things which should be told to them. Immediately they come into prison it is the general practice to hold what are called induction sessions—where immediately, of course it can be seen if there is a prisoner who simply cannot speak English—and, in remand prisons, governors are encouraged, and have for a long time been encouraged, to display wall notices in the reception areas.
Lord Brockway: My Lords, is the Minister aware that I have been in a cell and seen the cell cards and that, necessarily, they are very brief? In view of the fact that the rights of prisoners have now largely been extended and are likely to be extended still further when we apply in this country the changes that have been made in Northern Ireland, is it not necessary to supplement any brief cell card by a statement to prisoners of their rights?
Lord Belstead: My Lords, we are looking at the necessity for supplementing the cell card at present, and I think that we must await the outcome of that study.
Lord Avebury: My Lords, is it the policy of the Government to wait until the judgment of the European
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Court in the case of Silver and others before republishing the cell cards, or any other information available to prisoners? Is that the reason for the prolonged and otherwise inexplicable delays which have occurred since he wrote to me in January?
Lord Belstead: No, my Lords, it is not an easy thing to complete. We must get it right and I can assure the noble Lord that we are pressing ahead with it.

Friendly Societies Bill
11.34 p.m.
The Minister of State, Treasury (Lord Cockfield): My Lords, I beg to move that the Bill be read a second time. This is a short Bill but an important one. The Chief Registrar of Friendly Societies occupies a position of importance. He is responsible for the supervision of friendly societies, building societies, industrial assurance companies and various other bodies. Of these, the building societies, whose growth in recent years has been phenomenal, are the most important.
The present Chief Registrar, Mr. Keith Brading, has occupied the post for some nine years. He has served with distinction: he has had to deal with many difficult problems which he has handled with great skill; and he is very highly regarded not only in the field in which he works but more generally as well. He has now passed retirement age and wishes to retire. We face, therefore, the problem of finding a suitable and worthy successor.
The present Act, the Friendly Societies Act 1974, requires that the chief registrar should be a barrister of at least 12 years' standing. There are obvious advantages in a legal qualification. Nevertheless the position is that over the years the balance of responsibility has changed: the strictly legal role has declined and greater emphasis has inevitably been placed on prudential supervision. Clearly we need the best available candidate for this post. The present requirement unduly restricts the field of choice. It might well be that the best candidate who would emerge would be a barrister, a solicitor, an accountant, an actuary or, indeed, a general administrator.
Of course a legal qualification is a great asset and would undoubtedly be a factor on which great weight would be placed. But it is no longer essential. What is essential is that we should be able to appoint the best available candidate. My right honourable and learned friend the Chancellor of the Exchequer, who is responsible for this appointment and who has taken a very close and personal interest in the matter, therefore felt that it was right to ask Parliament to repeal the requirement contained in Section 2(1) of the Friendly Societies Act, thus widening the field of choice, and that is what the present Bill does.
Perhaps I should add that irrespective of who may be appointed chief registrar, ample legal expertise will remain in the department as subsections (2) and (3) of Section 2 of the 1974 Act require that at least two of the assistant registrars should be legally qualified. My Lords, I beg to move.
Moved, That the Bill be read 2a—(Lord Cockfield.)
The Earl of Selkirk: My Lords, I should like to thank my noble friend for the explanation that he has given of the purposes of the Bill. I should particularly like to thank him for what he said as regards the work of Mr. Brading, the Registrar General. In the other place the Financial Secretary said that he had done a quite outstanding job. I personally, as President of the Building Societies Association, have written to the Treasury in very similar terms. He has been courageous in some of the actions that he has taken, and he has shown very good judgment. It is his retirement which brings this Bill before this House.
However, we are a revising Chamber and the circumstances of this Bill are a trifle peculiar. We are going through a pretty busy period—and everyone can see the Chief Whip's hairs getting greyer and greyer—and suddenly we get a new Bill plunked in at extremely short notice. No one—and, when I say "no one", I mean none of the parties concerned—was told that this was going to happen, except, I believe, the Bar Council, who are really not very deeply concerned. The Bill went through the elaborate procedure of the other place at 3.26 a.m., and all the proceedings were completed—Second Reading, Committee stage, Report stage and what you will—by 3.36. It was not exactly a filibuster!
I want to make the point that in withdrawing the qualification of 12 years at the Bar and being a lawyer, yes, we can take away the legal status, but we are also taking away in some measure the status of the office. The noble Lord has said that it is important and, of course, I entirely agree with him. But 10 years ago the office was slightly degraded from Deputy Secretary to what I would describe as Under-Secretary plus, so I am not altogether without justification for the suspicions that I have on this matter. I think that that is important for the future standing not only of this Government but of future Governments in regard to this office. It is a semi-autonomous office, working under the general supervision of the Treasury, but quite capable of, and, indeed, responsible for, carrying out its own decisions. It must administer four separate legislative codes.
I do not absolutely agree with what the noble Lord said about prudential supervision. Of course that is important. It may be that some of the episodes that arise from this or from this general consideration catch the public eye. A couple of years ago there was a society called Grays. I shall only say that it was very cunning and very lucky; the matters ended in a suicide and no one lost any money. But this is the sort of episode which catches the eye. However, there are other matters which are possibly even more important than that; that is, the advice, the guidance and the administration for which the Registrar General is responsible. For a moment I should like to remind the House of the task here.
There are 17,000 societies of one sort and another; their value is probably nearer £70 billion than £60 billion, and I would guess—and here I may be advised otherwise—that of the order of 80 per cent. to 90 per cent. of the households in this country have something to do with one or other of the societies concerned. It is, therefore, of very real importance. They were not founded by statute, not like joint stock
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companies or statutory corporations; they are organisations which have grown from the soil of this country over the years, dating back in most cases probably to the 18th century. What is important is that they have gone through a very powerful period of evolution. They have had to readjust themselves in many different ways to the changing circumstances in which we live. They are based on the principle of self-help and participation—words which we use very frequently today and which my noble friend Lord Seebohm brought up in an amendment to the Companies Bill recently when we were discussing how to do it. I do not say for a moment that all these things are perfectly done, but that is the purpose, and it has remained an important role.
I am concerned that the man appointed to this position should be a man of very real standing; the noble Lord has ensured this. He is taking it out of the statute so I am a little concerned at what future Governments might or might not do. No qualifications are involved. It can be said that this will be open to "one of the boys", though I think that the "boys" would probably find it rather hard work to fulfil the duties required of them.
However, I would remind your Lordships that there are many matters which are of prime importance, particularly in the evolution of these societies. The first is the rights of members of these societies against the societies themselves. As societies have grown in size, this has become increasingly difficult. I shall not produce a solution, but this is the sort of problem with which in many cases the Registrar has to deal. He has to deal not only with the application of the regulating statutes, but also with the rules of the individual societies themselves, which are changed as circumstances change. He has to advise societies about the legal application of all sorts of matters that come along, not least as regards the EEC.
I do not differ from the Government in saying that this is something which those skilled in the profession of law are particularly adapted to do. I do not say "uniquely", but there are circumstances which demand a pretty thorough knowledge of law and its implications in the EEC, in this country and in international management. It is for that reason that I an pressing that standing should be the main point of this appointment. The societies greatly rely on the expertise and the wisdom shown by the Registrar, and it is very important that they should do. In a sense he acts as a sort of guide, philospher and friend to these organisations, and that is something that can only be accomplished by a man of outstanding qualities.
I know that the Government say that they have good intentions; in fact, I think that all Governments' intentions are good, but whether or not they carry them out is a different matter and particularly whether successor Governments will do so is a different matter. It is that which has worried me a little in the changing of the law at the present time. Frankly, I should like the office to be restored to the standing of Deputy Secretary, as it was, before it was degraded to what might be described as Under-Secretary plus. That would be an assurance that future Governments would have some standard to go by.
As regards the law, I believe that this is an open

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question, although I think that lawyers would find it easier to deal with many of the very complex questions which go well beyond simply prudential supervision. These are great indigenous organisations, unique to this country, and organisations of which we can be very proud indeed. It is for that reason that I venture to draw the Government's attention to the importance of the Registrar.
11.47 a.m.
Lord Houghton of Sowerby: My Lords, I am a vice-president of the Building Societies Association, but I do not go all the way with the noble Earl, Lord Selkirk, in his approach to the Bill. From the comprehensive description that the noble Earl has given of the duties and responsibilities of the position of Chief Registrar, I was convinced that we should have someone better than a barrister. The present holder of the office, Mr. Keith Brading, has risen above his legal handicap and has been a man of outstanding wisdom and judgment in his position. I shall say something else about the present holder of the office in a few moments, but the condition which the Bill seeks to remove has been in the law since at least 1896 and was modified somewhat as long ago as 1924, when it became permissible for an assistant registrar without legal qualifications to be promoted to the top job, provided that he had had five years' service as an assistant registrar. That is how the law stands at the moment.
As the noble Lord, Lord Cockfield, said, and as the noble Earl has said, the nature of this position has changed a great deal in recent years. Of course, the Chief Registrar used to be the watchdog over the affairs of trade unions; that was my earlier contact with this office. But after the repeal of the Industrial Relations Act 1971 the trade unions were so sensitive about registration that they wished to remove that feature from the law and from the surveillance of the Chief Registrar. That was done for symbolic rather than practical reasons.
Trade unions are very sensitive, so much so in fact that you would think that they were run by Irishmen for their emotional feeling about their historic grievances. But they are not. As a matter of fact, they are run mostly by Scots and Welshmen. However, building societies are very English institutions. They are a world of male chauvanism; they are bedrock and they have come to regard the Chief Registrar as their man, which he really is.
There is not the slightest doubt that this position has greater responsibilities in relation to the building societies than ever before and so we do need a very good man for this job. When a proposal is made to remove one of the conditions of appointment, one wonders why it is being done. If one is satisfied about it being done, the next question one asks is, why is it being done now? Doubts always arise when things are done at a particular moment, when one naturally suspects some plan or plot to plant somebody in a job. This is the point that we should like to have cleared up.
Mr. Keith Brading is going to retire. May I digress for a moment and ask the question, why do good men
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have to retire?—especially when all that happens to them these days, if they are in public service, is that they join the despised throng of those who have index-linked pensions. This is a sad end to some very distinguished careers in public service. After all, if nothing else, those who are now retiring from public service are part of one of the economic necessities of the present time, which is called "natural wastage". But for them the Prime Minister would not be able to reduce the size of the Civil Service as quickly as she is hoping to do. I do object to public servants who retire being talked about as being "index-linked" as though they were something out of a filing cabinet. I sincerely hope that fate does not befall Mr. Keith Brading, who deserves something much better than that when he retires from public service.
This Bill is obviously intended to pave the way for Mr. Brading's successor, and I quite understand that the Government want to leave the way open for someone with suitable qualifications. One of the advantages of stipulating that candidates must have a legal qualification is that, although it may not ensure the best candidates, the lack of such qualifications does enable one to reject the worst candidates. If one sets the qualification of being a barrister as one of the conditions of appointment, one can reject out of hand a lot of people, good or bad, who do not have that qualification. But when the field is open, one wants to have confidence in the people who are going to operate in that field. This may either be a well-intentioned design or it may be a genuine case of having an open field in readiness for the filling of this vacancy. I am inclined to be quite blunt and to ask the noble Lord, Lord Cockfield, who is it? If we knew the answer to that question we should be better able to judge whether the Government are using the open field as we would wish them to do.
This post does require a person of very special qualities and, as the noble Earl, Lord Selkirk, has said, the guidance which it is necessary to have from the holder of this office is of great importance at the present time—especially to the building society movement. In fact, I believe that to get the right person in this job will probably keep the building society movement within the general field of Government and public acceptance, whereas in some circumstances conflict might lead to the need for a wholesale review of the activities of building societies, socially and economically, in Britain today. It is an enormously important movement which has grown out of historic beginnings, and it now holds great financial power in the land. Indeed, sometimes one is surprised when the building societies complain that the Government are bidding for public money in rivalry to the building societies. Of course one must sometimes ask whether the building of houses for home occupation is the be all and end all of our economic policy, and whether there are not some other claims upon our national resources—so one can see how that conflict could arise.
I see that the noble Lord, Lord Cockfield, is to reply to this short debate. He is usually a reticent Minister. He is not what I would call forthcoming with information but he is extremely good at replying to arguments which have never been put. I feel that he could now tell us what the Government have in mind. Will the Government kindly "come clean"?

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If they would, then your Lordships' House could pass this Bill with an easy conscience, knowing that the post has been adequately filled and that the reputation made by Mr Keith Brading will be maintained in the future appointment.
11.55 a.m.
The Earl of Bessborough: My Lords, I apologise for not putting down my name for this debate but, as my noble friend Lord Selkirk has said, we were given extremely short warning of it. I should like fully to support what has been said by my noble friend Lord Selkirk. Like the noble Lord, Lord Houghton of Sowerby, I am also a vice-president of the Building Societies Association and I suppose I ought to declare an interest.
I should like to join with others in paying tribute to Mr. Brading for his admirable judgement in the post which lie has held. I am sure that he will be greatly missed not only by all the building societies but also by the friendly societies generally. I was rather concerned when I was told that the Building Societies Association had not been consulted about the proposed Bill, and that neither were the friendly societies or co-operative societies, which also fall within the aegis of the Chief Registrar. I was disturbed about that.
I will not repeat what has been said by my noble friend Lord Selkirk with regard to qualifications, but I agree with him that the Chief Registrar should certainly have an important status and it seems to me that the status of Deputy Secretary would be the most appropriate. I do not know whether my noble friend is going to move his amendment, but no doubt we can make up our minds what should be done at that stage.
Lord Bruce of Donington: My Lords, we on this side of the House would like to join in the expressions of appreciation to the Chief Registrar and to extend to him our felicitations as and when the time does come for him to retire. We have approached this Bill with a very open mind and I am bound to say that the noble Lord opposite has given very good and cogent reasons for bringing it forward. It is quite true, as he says, that the whole emphasis of the operation of these building societies, friendly societies and co-operatives has now extended, perhaps, far more into the field of finance and accounting than into the questions of law. Indeed, it is very refreshing to have the noble Lord opposite—who was himself called to the Bar in 1942 and therefore has 39 years' standing there—move the extension of this post outside that of his own profession. I do not expect that there will be any rush of accountants applying for the post, although obviously the accountancy profession would be very honoured if an accountant was considered but we are pleased that the field has been extended. Therefore, on quite rational grounds which the noble Lord has himself put forward, we would support this.
During the speech of the noble Earl, Lord Selkirk, I felt one moment of anxiety when he seemed to say—and I hope I heard him aright—that the post, since its original creation, had been down-graded; that it originally carried the grade of deputy secretary and that it now carried the post of under-secretary plus, whatever in fact that term may be. The noble Earl,
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Lord Selkirk, quite rightly emphasised the ever increasing and important role of the building societies and the various kindred societies in our national life, and this was emphasised by my noble friend Lord Houghton of Sowerby. It is now well known that the building societies in particular—but I do not exclude the others—constitute a fairly powerful economic force in the country at the present time. On their interest policies, on their investment policies, quite a series of important considerations arise.
I should therefore have thought—and I should like to be persuaded by the noble Lord if he disagrees with me—that at this time the post should certainly not be downgraded but that it ought to carry its original ranking. In an important position of this kind a person is required who has some official clout, and I think the status of deputy secretary is probably more appropriate. If I understood the noble Earl, Lord Selkirk, aright, that was the original status. I question the desirability of this down-grading. It may well be that the noble Lord opposite will be able to reassure me on this matter, and it may be that he can give a convincing explanation as to why, other than in the interests of economy, the down-grading has taken place. But subject to that, we give this Bill a fair wind and support the Second Reading.
12.2 p.m.
Lord Cockfield: My Lords, may I begin by saying how grateful I am to my noble friends Lord Selkirk and Lord Bessborough and to the noble Lords, Lord Houghton of Sowerby and Lord Bruce of Donington, for the very warm tributes they have paid to Mr. Keith Brading. On a purely personal note perhaps I may say that I entered the Estate Duty Office in almost exactly the same year as he did. I can in fact claim one year of seniority over him, and it will give me particular pleasure, therefore, to pass on these good wishes to him.
My noble friend Lord Selkirk expressed some anxieties about the removal of the need for a legal qualification. He stressed, as indeed did my noble friend Lord Bessborough and other noble Lords, the importance of ensuring that the holder of this post should be a person of quality and character. In this I entirely agree with him. As I said in my speech moving the Second Reading, my right honourable and learned friend the Chancellor of the Exchequer has taken a close personal interest in this matter. Section 2(4) of the principal Act—that is the Friendly Societies Act 1974—provided that the Chief Registrar should be appointed by "the Treasury". The term "the Treasury" in an Act of Parliament means the Lords Commissioners of Her Majesty's Treasury. The Prime Minister is the First Lord of the Treasury, with the Chancellor of the Exchequer next in seniority among the Lords Commissioners.
In matters of importance of this kind the Chancellor would take the decision himself. The Chancellor has taken close personal interest in this matter and it is his firm intention that the appointment of the next Chief Registrar should be subject to his personal approval. May I give the House an assurance that there is no question of a candidate having been already selected, and of the requirements being tailored to a choice that has already been made. It is the Chancellor's firm intention that when the appointment comes to be made

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it should be subject to his personal approval. Given the importance of the post, and having regard to the specific provision in the Act, a future Chancellor could reasonably be expected to take the same position on future occasions. I hope my noble friends will accept these assurances.
The noble Lord, Lord Houghton, asked why the matter had arisen at this time and why the Chief Registrar needed to retire. I dealt with that matter in the speech I made moving the Second Reading of this Bill. I said that he was past retirement age. Mr. Brading in fact is 64 compared with the normal retirement age of 60. He has stayed on really to help in difficult circumstances. It is now his personal wish to retire and I do not think that we should try to stand in his way. This is the only, and perfectly genuine, reason why this Bill has been brought along to your Lordships today.
There is a further matter which was raised by both my noble friends Lord Selkirk and Lord Bessborough to which I wish to refer. On a change in the law of this kind it would be customary to have consultations with the interested parties who might feel that they had a legitimate point of view, which should be brought to the attention of, and considered by, the Government. I regret that on this occasion this was not done. The Building Societies Association have, not unnaturally, expressed concern about this, and concern has been expressed on behalf of other bodies as well. I can only say that I am sorry that the normal procedures were not followed in this case. I hope that the association and the other bodies affected will accept what I say on this point.
The Earl of Selkirk: My Lords, might I, with the leave of the House, thank the noble Lord for what he has said. Because he has been forthcoming and given the undertaking of the personal interest of the Chancellor of the Exchequer, I do not propose to move the amendments standing in my name.
Lord Bruce of Donington: My Lords, it may have escaped the memory of the noble Lord, but I asked him a question about the grading of the Chief Registrar, to which I should like an answer.
Lord Cockfield: My Lords, on the basis that I have not yet sat down, may I say that I would think that it is not appropriate to discuss in your Lordships' House the grading of a specific post in Her Majesty's Civil Service. Nevertheless, I shall certainly bring to the attention of my right honourable and learned friend the Chancellor of the Exchequer the comments that have been made on both sides of the House. Perhaps I may also make it clear that there is no question of the post being down-graded at this present moment. The change in the grading of the post took place a good many years ago.
On Question, Bill read 2a, and committed to a Committee of the Whole House.
Then, Standing Order No. 43 having been suspended (pursuant to Resolution of 21st July):
12.9 p.m.
Lord Cockfield: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Cock field.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
The Lord Chairman of Committees (Lord Aberdare): I understand that the noble Earl does not wish to move his amendments.
The Question therefore is that Clauses 1 and 2 stand part of the Bill?
On Question, Whether Clauses 1 and 2 shall stand part of the Bill?
Lord Hale: I feel I cannot let this opportunity pass without commenting on the situation. Obviously the Government would now be in very great difficulty about time if matters were delayed, and no one would wish to make use of such delay; but those of us who sit here day by day, and often for a great part of the day, have now heard three or four of the most distinguished Members of your Lordships' House speaking with restraint but expressing serious doubts as to the way in which the procedure of the passage of the Bill is being carried out. The Minister himself said he regrets that some of the formalities, of courtesy and otherwise, were not observed in presenting the Bill, before it appeared on the Order Paper in the form of a multiple resolution which of course anticipated the decision on Second Reading. Second Reading has been carried and we are now dealing with the Bill in Committee, in circumstances in which nobody has had a chance to table an amendment after hearing speeches or of looking the matter up more thoroughly. We are told that the Bill passed through another place in 10 minutes between 3 and 4 o'clock in the morning. That does not suggest a profound discussion.
There was an almost specific suggestion by my noble friend Lord Houghton of Sowerby that there is a further step in the progress of the measure—and of course its consequences—which has already been substantially anticipated; to the extent that half the City knows who is contemplated for appointment, and that one of the provisions of the Bill is designed to make an adjustment of qualification which could perhaps make an appointment necessary (and which has passed through the minds of thoughtful people) but which would not be necessary because that qualification may not be possessed by someone whose name has passed through the mind of the Treasury. Normally I am so deaf that I speak with hesitation, but I heard my noble friend Lord Houghton quite clearly make that suggestion.
Therefore what I am asking—the noble Lord, Lord Cockfield, is always most courteous in attempting to answer our queries—is whether there is any possibility, with decency, of saying that this Committee stage

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should be taken at some other time, but before the adjournment for the Recess. I appreciate that there are only three, already busy, days left, but is there any possibility that that could be done? I ask that because anybody reading the Official Report of this debate, in the circumstances in which it took place in relation to the Commons debate, might be misled into thinking that something more serious was happening.
Lord Denham: The noble Lord, Lord Hale, of course has every right to raise his misgivings, and in fact I am grateful to him because I hope I may be able to allay them. It is not at all unusual for short, uncomplicated Bills with which people are in general agreement to be taken through all stages in one day, and in fact the House has already passed a Motion to that effect; otherwise we should not be able to do it. I understood that the doubts and anxieties of my noble friends, and, I thought, of noble Lords opposite, had been allayed by the assurances that were given by my noble friend Lord Cockfield. The difficulty is that there is a certain urgency about the Bill. The very purpose of it is so that somebody can be appointed to this very important position. I hope your Lordships will feel that in the circumstances it would be right to follow the normal procedure and allow the Bill to go through all its stages today.
Clauses 1 and 2 agreed to.
Bill reported without amendment: Report received.
Bill read 3a, and passed.

Finance Bill
12.18 p.m.
Lord Cockfield: My Lords, I beg to move that this Bill be now read a second time. The Finance Bill gives legislative effect to the Government's proposals in the tax field. Taxation is of course only one part of fiscal policy. The other part is public expenditure. It is the balance between taxation and expenditure which determines whether the Government are following a strict fiscal policy or a lax fiscal policy. The difference between the money the Government receive in taxes and other revenues, and the amount they spend on services, benefits, grants and subsidies, they have to borrow. It is the amount they borrow—the public sector borrowing requirement—which is the measure of the strictness or laxity of their fiscal policy.
Fiscal policy in turn is part, but only part, of economic policy. Similarly, monetary policy is part, a very important part but still only part, of total economic policy. So too is industrial policy, trade union policy and policies to deal with unemployment. The Ottawa Summit has emphasised—perhaps I should say reemphasised—the paramount need to tackle both inflation and unemployment. They are of course linked with one another. It is only if we succeed in dealing with inflation that there is any real hope of creating secure employment opportunities on a lasting basis.
It is important to distinguish between "inflation" and what perhaps I might describe as "inflationary pressures". "Inflationary pressures" are develop
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ments in the economy which if allowed to go unchecked and if allowed to feed through into prices result in inflation. Among the more important inflationary pressures are external pressures such as oil price increases, and internal pressures such as excessive Government borrowing and excessive pay increases.
Some of these inflationary pressures can be offset, for example, by increased productivity or a higher level of profitability in trade and industry. They can, at least in the medium- and longer-term, be prevented from feeding through into inflation by control of the money supply.
There are substantial practical problems in controlling the money supply. There are considerable time lags depending on how quickly people respond to monetary disciplines, and transitional costs if their response is delayed. It was because of these problems that in the past monetary restraints have been relaxed and inflationary pressures have been allowed to feed through into prices and hence into inflation. If one can head off the pressures at source it reduces the stresses placed on the control of the money supply and thus makes curbing inflation itself both easier and less painful. But just as one has to be realistic about how tightly and over what period of time one controls the money supply, one must equally be realistic about what Government can do to abate inflationary pressures. It is worse than useless pretending you can do what you cannot do. You deceive not only yourself but others as well. This is particularly true of Government. The worst service the Government have done for the people over many years past is pretending that the Government can solve problems they cannot solve.
We are seeing today a revival of the attitude of mind that it is for the Government to solve this problem or that, indeed that any problem can be solved by the Government spending money, by the Government borrowing money, by the Government reducing interest rates or by the Government taking this action or that.
It is surprising that there should be this sudden revival of blind faith in what Governments can do just at a time when market forces are at last injecting realism into economic attitudes; when at last we might be able to move into an era when the heavy hand of Government no longer falls upon us. There are some things that Government can do. Thus they can control their own expenditure thereby reducing their demands on the money supply and thus relieving the pressure on interest rates. They can increase the effective level of taxation to achieve the same results.
It was for these reasons that the Government's proposals in the public expenditure field and in the taxation field—effect to which is given in the finance bill before your Lordships—were directed to reducing the Government's borrowing requirement from £.13½ billion to £10½ billion. This was the major theme underlying the Budget strategy. This is turn enabled minimum lending rate to be reduced from 14 per cent. at which level it stood before the Budget to 12 per cent. This step was and continues to be of great assistance to industry.
The reduction in interest rates particularly in relation to interest rates elsewhere has been one of the factors which has led to a reduction in the Exchange rate of the pound. This has been of considerable benefit

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to our exporting industries, but of course it does create problems elsewhere. Just as important as the inflationary pressures generated by excessive Government borrowing are the inflationary pressures generated by excessive pay settlements.
In the public sector excessive settlements feed through into higher prices or increased public expenditure which in turn leads to an increased borrowing requirement and ultimately higher interest rates, thus damaging both output and employment. It is for this reason that the Government have taken so firm a line in those pay negotiations for which they are directly responsible and have exerted pressure, for example, through cash limits and external financing limits in those parts of the public sector where the Government themselves are not the employer, but are the ultimate paymaster.
In the private sector, the negotiation of rates of pay is a matter for management and workers. But they need to negotiate in full knowledge of the consequences of the bargains they strike. Excessive pay settlements mean higher costs, a loss of competitiveness and hence lower sales, lower output, lower profits and ultimately a decline in employment.
Lord Molloy: Before the noble Lord leaves this point, would he allow me to say something?
Lord Cockfield: I understand that the noble Lord has put his name down to speak, so perhaps he would reserve his remarks for that occasion, when we can give them due attention.
If at this point money is printed to finance excessive pay settlements, the ultimate effect is rising prices and inflation. But the inflation itself is then reflected in loss of competitiveness, loss of output and once again lower profits and loss of jobs. There is therefore no escape either for employers or for workers from having to face the consequences of their own actions if they demand or concede excessive pay settlements. We have done very badly on this front over the last 10 years and indeed for a longer period than that, but particularly badly over the last 10 years and regrettably we are now having to pay for it.
Over this period of 10 years, earnings have increased some fourfold by more than 300 per cent. and output by only 16 per cent. As a result there has been a serious loss of price competitiveness both at home and overseas. This is one of the major reasons why we now have 2½ million or more unemployed. Other countries also have high levels of unemployment. However sensible we had been we could not have avoided the consequences of the world recession.
But the fact that our level of unemployment is worse than other people's is a reflection of the fact that our inflation has been worse than other people's and the rise in pay in relation to productivity has been worse than other people's. One might well ask, "why do people behave in this self destructive way?" The more one recognizes the tragedy of unemployment the more one is bound to ask this question.
It is in part a failure of understanding; in part it is a failure of communication; in part it is a determination to pursue the sectoral advantage against the common good; in part it is a failure on the part of management and trade union leadership; in part it is the responsibility
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of Government in choosing the easy way out. To the extent that some of our critics have accused us as a Government of being doctrinaire it is not because we unheedingly or without understanding pursue particular policies, but because we believe that unless Government can convince people of their own resolution in following responsible policies, they can hardly expect other people to do the same.
As a nation we tend to be self-critical, and to be divided by doubts and uncertainties. It is important therefore that standing as we do in the trough of the recession, we should nevertheless recognise that important advances have been made. The rate of inflation has come down from a peak of 22 per cent. last year to just over 11 per cent. now. In short, it has been nearly halved in the space of a year. The figure for June, which was published last week, showed a further fall; a small one, but welcome all the same.
Rates of interest have fallen. Minimum lending rate is down from 17 per cent. last year to 12 per cent. now. For some months now our interest rates have been lower, in some cases significantly lower, than that which our principal competitors have to face.
Lord Beswick: My Lords, will the noble Lord allow me to intervene? Will he add to the figures he has just given the figures for the annual rate of inflation and the MLR at the time that the Government took office?
Lord Cockfield: My Lords, this is a matter with which I have dealt on innumerable occasions. At the time that we took office the rate of inflation was rising rapidly. The big rise which occurred thereafter was very largely the responsibility of the economic muddle and distress that the Labour Government left behind them. It was a major job to reverse the trends. This we have now begun to do, and the results of the reversal of policy are now being seen in significant improvements in a number of directions.
Lord Beswick: Yes, my Lords, but will the noble Lord be kind enough to give me the figures that I asked for?
Lord Cockfield: My Lords, the noble Lord is well aware of the figures. The actual rate of inflation in May 1979 was just over 10 per cent. on an annual basis; it was 13 per cent. on a 6-months basis annualised; it was rising. The rate of inflation is now down to just over 11 per cent., and it is falling. I hope that the noble Lord can recognise the distinction between something that is falling and something that is rising.
The big fall in output which occurred last year is now coming to an end. Unemployment is still increasing but at a markedly slower rate. On a seasonally adjusted basis, the increase last month was the smallest for 19 months. There are signs of improving productivity, in reduced manning levels and in better working practices.
We have introduced a series of imaginative new measures in the tax field to help small businesses. Last year we had the venture capital scheme. This year, the Finance Bill now before your Lordships gives legislative effect to the new "start ups" scheme. There are additional reliefs to help the construction

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industry. The new loan guarantee scheme has been launched. These new initiatives have been widely welcomed, have already made an impact, and augur well for the future.
It is natural when times are difficult for people to look for alternative policies. But there is no future in reverting to the policies of the 1950s, the 1960s or the 1970s. Those are policies of proven failure. As one recession followed another, inflation and unemployment grew worse. It is one thing repeating failure for a second time, as the Labour Party did in 1974, but no one in their senses would want to repeat failure for a third time. Those who will not learn from history, repeat its mistakes. Equally, there is no justification for trying to revive the reflationary policies of the 1930s; they belonged to a different world.
The Government are already spending £10½ billion a year more than they receive in taxes and revenue. To this extent they are contributing significantly to demand, not reducing it. To do more would not increase output; it would simply increase inflation. Recovery must come—and will come—from an increase in activity in the private sector, with the increase in supply which will produce its own increase in demand.
We have to look forward to the future, not back to the past. Our policies over the years have been refined and developed. For example, the system of cash limits and methods of expenditure control have been improved. New developments in monetary control have been announced, and are now being implemented. We have devised new and promising incentives, particularly for businesses. A mass of controls and regulations have been swept away. We have provided large sums of money for the nationalised industries—for British Steel, British Rail and British Leyland. We have provided more money, not less, for nationalised industry investment. We have introduced a new stock relief scheme, which will be of great advantage and financial benefit to industry. This process of development and improvement will continue. But the ultimate burden and the ultimate responsibility rest upon the shoulders of the people themselves. If they want a better future, they must not only will it, but work for it as well. There are welcome signs that this is now being realised.
The Finance Bill, in many of its provisions, is a step in the continuous process of development of our policies. I therefore commend it to the House. My Lords, I beg to move.
Moved, That the Bill be now read 2a.—(Lord Cockfield.)
12.37 p.m.
Lord Bruce of Donington: My Lords, the House has just listened to a declared, and emphatically declared, surrender by the Government to what they call market forces. Let there be no mistake about that. The noble Lord went out of his way to emphasise it, to minimise the role of Government. Therefore, what he is in fact saying is that there is no way in which organised society can have any effect whatsoever on the operation day by day, month by month, year by year, of market forces. Even so, he was careful not to mention in that regard the operation of the common agricultural policy, in which Her Majesty's Government are such
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active participants, and which of course represents a complete and emphatic negation of the whole of the laws governing market forces.
We are now two and a quarter years into the life of the present Government and therefore at this halfway house we are in a position to be able to assess the impact of what the Government have, or have not, done. Their avowed objective, which has been repeated many times, is to bring down the rate of inflation. This has been their aim from the beginning, and I observe that the Prime Minister herself emphasised at the press conference she gave in Ottawa that in her view her colleagues agreed with her that a reduction in inflation must be a precursor to a reduction in employment—a view which I do not believe is entirely shared by Chancellor Schmidt or, indeed, by President Mitterrand.
Where are we? Annualised, the inflation rate when this Government took over in May 1979 was 10·3 per cent.; and as the noble Lord said, it was rising. It had in the pipeline, he will find if he checks his figures, approximately another 2 per cent. The remainder of the rise to the figure of 22 per cent., as he knows quite well—because, in addition to the process of self-education by reading his own speeches, to which he has referred in this House, the noble Lord has probably also read mine, in which I quite successfully proved (and in this respect I have not been challenged anywhere in this House) the composition of the remainder—was injected into the system by the Government themselves by rises in value added tax and by the various other measures that they took, such as the deliberate rises in energy prices, and so on. He knows perfectly well that the remainder was self-generated.
So here we are today, down to an inflation rate of 11·3 per cent. The noble Lord said "and falling". I do not know whether the noble Lord has had an opportunity to read the report in The Times on 14th July, but I would suggest to him that he might care to pay attention to it because it says there:
"The underlying trend in retail prices is for them to rise at just over half a per cent. a month at present. But the August figures will contain the full effects of the latest round of petrol price increases, so after falling to about 11 per cent in July, inflation will go up to nearly 12 per cent. It will then edge to around 13 per cent. by the end of the year, according to most forecasts"'.
There is room for a variation of opinion in this matter, but I would suggest that the bulk of the evidence indicates—and events will prove whether or not I am right—that the present rate of inflation, annualised, is still on an upward trend. So here we are, after two years, back to roughly where we started, with inflation running at marginally over 10 per cent. and rising. I do not a want to use undue hyperbole in this House, but this seems to me to be a less than satisfactory performance bearing in mind the claims of the Government.
Now at what cost has this been achieved, this stabilisation of the rate at or around the rate at which it was when the Government took over? The first cost, of course, has been a momentous rise in unemployment. The noble Lord, when he speaks in this House, and his right honourable friend the Prime Minister in another place, make the point from time to time—somewhat defensively, I think—that under Labour unemployment doubled, as though that were some excuse or some reason

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for the terrific increase in unemployment that has taken place in the last two years. So perhaps we can abandon the bridge analogy of doubling and redoubling, and go to the actual figures.
In March 1974, when Labour took office, the figure of unemployed was 590,000. When we left office in May 1979, over five years later, the figure was 1,299,000 —an increase of 709,000. If one takes that at an annual rate, it means that there was an increase in unemployment during those five and a half years of office of 142,000 per annum. This Government have been in existence for slightly over two years. In that period, unemployment in this country has increased by 1,553,000—a rate per annum of 717,000, or five times the rate at which unemployment rose under the Labour Administration.
There were reasons for that, too. The noble Lord has been kind enough to oblige. He knows perfectly well, on looking at the figures, that the unemployment rate in the last years of the Labour Government—I am talking now of trends, a term well loved by the noble Lord—was downwards. Indeed, it continued downwards, even under this Administration, until the full effect of the idiotic measures that were taken by the Government had begun to bite. In any event, let me take the noble Lord's own analogies, bearing in mind the Prime Minister's end-of-term speech last night, in which she referred to the over-20 per cent. inflation achieved by the Heath Government (of which she was such a distinguished member) in terms of, as she called it, "the phoney boom". It is quite clear—indeed, Mr. Bruce-Gardyne, a very well respected member of the Conservative Party, so put it—that the peak inflation figure under the Heath Administration was 27 per cent; so it can be said that recovering from that 27 per cent., or over 20 per cent, inherited, and bringing it down to 10.3 per cent., was not bad going over that period.
I do not want to go into too many statistics that are embarrassing to the noble Lord. There have been other consequences, too, during these two years in which inflation has not shifted—ever increasing bankruptcies; industrial production down by 14 per cent. in total since this Government took office; manufacturing production 18·61 per cent. down since they took office; a progressive decline in investment; and a whole series of slashes at the social services. So this is all we have to show for two years in which inflation has returned to the figure at which it was when the noble Lord's Administration took office.
In August 1979, when Parliament had gone into recess, the Government decided to have a new taxes and prices index. Great store was set by it, because it was thought that the results shown by the retail price index, which by that time had begun to rise under the Administration of the noble Lord, were not altogether reliable. They did not really want people to pay too much regard to it. So, on 17th August his right honourable friend Mr. Nigel Lawson announced the introduction of a tax and price index. The announcement said:
"It provides, in one figure, a measure which combines both tax changes and movements in prices, and so for taxpayers in general … gives a better indication of changes in total household costs than does the RPI on its own".
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It continued:
"The new index will thus provide a broad measure of change in the purchasing power of incomes, before tax, taking into account both changes in taxation and changes in prices. In short, it measures the increase in gross income needed to maintain the take-home pay in real terms".
At the time Mr. Nott himself announced that it would be a powerful weapon in the Government's armoury. Mr. Lawson concluded:
"what I do say, and most firmly, is this: if you want a general guide to changes in the total costs facing taxpayers, look at the TPI, not the RPI. It is a much truer guide".
And so, after taking Mr. Nigel Lawson's advice, let us now look at the TPI. In May 1979 it was indexed at the figure of 111·6. In May 1981 it was 152·4, an increase of 36·56 per cent. So this is what we have to show in true terms after two years of the Government in office.
It reflects something that the noble Lord knows perfectly well. In spite of all the protests, in spite of all the electoral promises to reduce taxation, the Government have increased taxation, both direct taxes and indirect taxes, and in addition to that have brought a few new ones in under the guise of milking money out of some of the nationalised industries in order to put it into Exchequer funds and deliberately force at least two of the nationalised enterprises to put up their prices to the consumer—also reflected in the RPI and in the TPI that I mentioned.
But, this has not been done evenly. One would have thought, in the light of the Prime Minister's reference on the steps at 10 Downing Street to St. Francis of Assisi, that some steps would have been taken to have produced a greater measure of fairness and a greater measure of justice in the United Kingdom. That is not so because, under the taxation that has been introduced by the Government and also in this budget in particular, the rich have been made richer and the poor have been made poorer.
The question that the country will want to ask and is already asking—and there are murmurs of it on the noble Lord's own Back-Benches in this place and in another place as well—is when are the "fat cats" in the country—I hesitate to use the term and I want to make it quite clear to the Deputy Chief Whip that it is used without any personal offence whatsoever—the fat-cat farmers in the shires, the property-owners and the financiers going to be called upon to bear their fair share of the process which is euphemistically described as "getting leaner"? If leanness is indeed a virtue and industry is to be made more lithe and healthy, why should not this beneficial process be carried into the fields that I have mentioned?
The noble Lord this afternoon has given a number of excuses—or shall I call them alibis?—for the disastrous state of affairs in which this country now finds itself. Of course inevitably—and we have had it all before—he mentions the constraints of the public sector borrowing requirement. He will need to be able to convince the country that it is all right for the PSBR to go up in order to meet the ever-increasing costs of unemployment while at the same time it is wrong for the PSBR to go up in order to provide finance for industrial investment in this country which private interests in this country have so manifestly failed to do under the operation of market forces.

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One most important word was omitted from the noble Lord's speech. He never once in his entire text mentioned the word "investment", as though the whole of the future of the United Kingdom was dependent upon working people who have no access to the means of production whatsoever and have but little access to the land, and that the role of the investor must therefore be governed by market forces.
The other myth that arises from the public sector borrowing requirement is—
Lord Cockfield: My Lords, I should not normally like to interrupt the noble Lord but, if he will excuse me, he claimed that I had not mentioned the word "investment". I said we had provided more money—not less—for nationalised industries' investment. Whether the noble Lord feels that the nationalised industries are so undeserving that they ought not to be mentioned at all, I do not know.
Lord Bruce of Donington: My Lords, I am grateful for the noble Lord's intervention. Obviously, he will have the opportunity to reply without my having the opportunity of making any rejoinder. I have no doubt that he will make the best as he may of that.
The real myth is that if the public sector borrowing requirement goes up, then it is alleged that it crowds out investment; that is to say, it makes it difficult for money to be made available for private investment. This is called the "crowding out" argument. It is alleged that if the public sector borrowing requirement rises, as it would have to do if there were to be that substantial investment in industry by the state that is so manifestly necessary at the present time in order that this country may produce more, then of course less money would be available for private enterprise.
I do not want to rub this home too much. Therefore, I shall only quote what the noble Lord's right honourable friend Sir Keith Joseph said on the subject, as reported as recently as 20th June last. Sir Keith said:
"There has never been so much money available in the country. Banks, insurance companies and pension funds have money running out of their ears".
So I think the idea of the "crowding out" business is completely erroneous. Where the money has gone in many instances is abroad. One of the silliest things the Government perpetrated was the complete relaxation of exchange controls, as a result of which it is estimated that some £2,600 million has flowed out of this country abroad and much of it has gone into property investment overseas, and into the opening of foreign currency accounts, upon which recently a substantial killing has been made as a result of the decline in the rate of the dollar.
This is open knowledge. I have in my hand a circular issued by one of the leading investment bodies, which says this:
"The traditional purchasers n the United Kingdom of investment property have always been non-tax paying funds who are interested only in the capital growth of their investment. Now private and corporate investors paying high rates of tax can, as a result of the relief given in the 1980 Finance Act, afford at the very least to match the price which the institutions would pay for this sort of property. Institutional funds generally expect to invest between 20 and 30 per cent. of total funds in property
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giving a total weight of institutional money estimated at between £2,500 million per annum. This weight of money has the effect of providing a stable and regular market maintaining the yield on which prime property is bought, almost in defiance of prevailing economic conditions".
And so the indictment on that is conclusive enough.
The second alibi the noble Lord gives is that of money supply. I do not propose to deal with that argument. The noble Lord's argument on the rate of the money supply, which he knows the Government cannot in any event control, has already been succinctly dealt with by my noble friend Lord Kaldor and I have yet to hear any argument from the noble Lord in refutation.
Another alibi is that we are feeling the effects of the world depression. This is manifestly untrue, as anybody who read the extremely informative article in The Times of the 22nd July will well know. It reproduced the OECD estimates of the changes in gross national product in real terms between 1979 and 1981. These were: Japan, plus 7·7; Italy, plus 3·2; Canada, plus 2·6; United States, plus 2·3; Germany, plus 0·8; France, plus 03; and United Kingdom, minus 3·3. And unemployment in all other countries except our own has remained remarkably stable. My Lords, that argument will not run.
The other alibi is that we are uncompetitive abroad, and I think this is one that has to be laid. The noble Lord himself from time to time has paid tribute to the way in which the exports of this country have held up. But implicit in the allegation is that the wage levels in this country are much higher than those of our competitors. This can be easily corrected if the noble Lord will read the figures provided by Eurostat, which show the comparable figures for each country and which are put out in quite explicit terms. I draw his attention to the Eurostat Review 1970–1979, where it shows set out in comparable terms what they call—and the noble Lord as a statistician will be aware of it—"purchasing power standards". The hourly rates in Germany were 3·9 and in this country 2·64. In fact on that standard we were one of the lowest.
Even more adequate testimony is paid to that by one of the noble Lords' noble friends, and I would draw his attention to this. The noble Earl, Lord Gowrie, made a speech on 11th March last—he was talking at a meeting of the European Management Forum in London—in which he is reported as saying this:
"To add encouragement Lord Gowrie described the experiences of overseas companies already operating in Britain. Virtually all the 70 manufacturing companies in a German survey said that productivity in the period 1977 to 1979 was ' satisfactory ' to ' excellent '. Some even claim to have higher productivity than in Germany, and eight out of ten had no official stoppages in the previous two years".
He goes on to say:
"Germans in general find that even where productivity is lower than at home it can be more than counterbalanced by lower wage and other employment costs".
He continues:
"In the international league table Britain's strike record remains a respectable one. Some people might be surprised to know that strike losses of working days for every 1,000 employees were worse in the United States, Canada, Australia and Italy".
If there is a degree of uncompetitiveness in British industry, there is no evidence at all that it arises because of the excessively high wages paid in the United

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Kingdom. It lies in the fact, as I have ventured to suggest to your Lordships on many previous occasions, and I repeat it once again, that ever since the end of the war this country has invested in manufacturing industry, expressed as a percentage of the gross domestic product, 30 per cent. below the level in France, 40 per cent. below the level in Germany and 60 per cent. below the level in Japan. And these are the circumstances in which the noble Lord invites us to leave everything to market forces.
The noble Lord has repeated today that there is no other way. In many ways he is right; there is no other way now. There is no other way for this Government. The Prime Minister announced last night that it is now or never and that she is not going to change course. There is no point, therefore, in any alternatives being offered. It really is no good. I know the noble Lord himself has a most genial disposition, but he really should not come along to this House and address it in the mathematical, toneless terms of a computerised "Dalek". He should address it as a person who, like the rest of us, is mortal and can make mistakes. There can be no alternative that this Government has the intellectual capability even of understanding, because it is wedded to the doctrines of even the 1920s which have so long been proved to be wholly erroneous and completely disastrous to the whole of society.
Therefore all I can say is this: there is the alternative that arises in getting rid of this Government anyway. That may take a little time, but in case the noble Lord has any illusions, and in case he has any residual optimism as to the way in which this Government is conducting or not conducting the economy, may I warn him that the time of retribution draws ever nearer.
1.10 p.m.
Baroness Seear: My Lords, the House will agree that what the country needs at the present time—like a hole in the head—is a knock-about party political battle between the two Front Benches. If retribution is coming, I suggest that they look to Warrington to see the direction from which it is coming. Having said that, I have no intention of going back into the past. It is surely clear that the issues that we face today need a collaborative effort and not mutual attacks and recrimination. They are serious enough in all conscience and, in some directions at least, they are certainly getting worse.
I very much welcomed in this context, the statement after the Ottawa Summit that the Government gave top priority to inflation and unemployment. There are problems in giving top priority to both the control of inflation and an improvement in the unemployment position. But I take it that more than in the past, that statement meant—and I, for my part, do not believe that this Government are so politically foolish as not to be concerned about unemployment, even if they were so inhumane as not to be concerned about it in the past —that a better balance would be struck between the attempt to reduce inflation as quickly as possible and the attempt to curtail the rising levels of unemployment.
The noble Lord, Lord Cockfield, was, of course, right in saying that the rate of increase in unemployment is slackening. But in the case of unemployment and
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inflation, we tend perhaps to forget that a slackening in the rate of increase is not the same as a decrease. It is very satisfactory if the rate of increase is coming down, and one can almost talk oneself into the belief that a slackening in the rate of increase means that there is an actual fall. But, as the noble Lord knows perfectly well, there is no actual fall and there is no prospect of an actual fall for a variety of reasons, some of which are just plain bad luck, but some of which have to do with policy. If this is what it means, then the Budget and the Finance Bill, which was obviously drawn up months ago, might have had a slightly different emphasis if this raising of the level of importance, in relation to the policies for dealing with inflation, is to be the way in which the Government are intending to tackle policy.
I, for my part, entirely agree that there was a very great deal of slack in expenditure to be got rid of. I entirely agree with the need to cut out waste in central and local government, and I believe there is still waste that could beneficially be cut out. But—and we have said this many times from these Benches—while we favour this and recognise that there has to be a sensible degree of monetary control, we believe that cutting out essential investment—and this is the one point on which I agreed with the noble Lord, Lord Bruce, that the emphasis on investment is of paramount importance—is folly. Unemployment can be relieved, to some extent at any rate, if Government will put money into investment, money which sooner or later has got to be spent, where it will cost more to delay than to put the money in at the present time; and, in particular, into investment which will have the effect of reducing the levels of unemployment, particularly in those parts of the country where unemployment is now getting explosively high.
For example, the Government could surely put money, if only into areas of very high unemployment, into energy saving in connection with insulation. This money, allowed to local authorities for this purpose, could be used to draw into employment quite quickly—because these are not jobs which take a very long time to learn—people who are not at present getting jobs and who are not likely to get jobs. There is a small training element in doing work of that kind, though much of it is unskilled. But it would, at least, be a way of getting people, in those areas where the level of unemployment is now rising to a most alarming degree, back into work of some kind. It would also provide a pay-off in the long-run, because sooner or later we must take steps against energy waste and improving insulation is one way of saving energy.
Railway electrification also provides jobs; and another kind of job saving which it would be well worth while putting money into, and which is a form of investment, is the kind of social services which would enable real community care to be given, instead of expensive institutional care. For example, it is well recognised in relation to the old—and I think there is no disagreement about this—that the vast majority of old people would rather be looked after in their own homes, with decent domiciliary care, than have to go into institutions, which are extremely expensive and are not likely to get cheaper. But if you are to have genuine community care, genuine domiciliary service, it requires people who need to be trained and it means

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spending money, probably through local authorities. But it would be job-creating. Those are just some ways in which more spending to reduce unemployment, but also to have the effect of an investment in itself, would be worth doing and could have been reflected in the Finance Bill.
The noble Lord, Lord Cockfield, also said, in connection with reducing inflation, and in the long-run, therefore, with helping to reduce unemployment—and there is no difference between us here—that if we could get a more reasonable wage level it would, above any other single thing, probably have an effect in reducing inflation and would make for more jobs. The noble Lord recognises this. It is perfectly true that the Government are attempting to set an example, so far as their own immediate employees are concerned. But, at the same time, they are turning their face against any further experimentation with any kind of incomes policy. Yet you have only to look at recent very interesting figures which came out in the Economist just this week, showing what it would do if we could keep pay levels down to a much more reasonable level.
The Government say that this is a matter of communication. They will, at least, go that far, although they are not prepared to sponsor any kind of step in the direction of an incomes policy, and we on these Benches believe, as we have said so often, that that is a mistake. But even at the level of communication, the Government can do so much more than they are doing at the present time. What really imaginative exercise, except exhortation, except lecturing—and anybody who has lectured knows how futile a great deal of the lecturing exercise is, be it in the classroom or be it in your Lordships' House—have the Government entered into, in order to get home to ordinary people the real danger of excessive pay claims; the enormous importance of getting pay claims down to a level which begins to match productivity? It is perfectly true, as the noble Lord, Lord Cockfield, said, that we have paid ourselves far more than we have earned over the past decade and this is a disastrous thing to do.
But there are ways—this is not the debate in which to go into them—in which these ideas can be put over, so that they can penetrate into the minds of ordinary people, and so that we can break down the folly of believing that there is an inevitable rise in the standard of living which ought, as of divine right, to come to every man, woman and child in this country. I would throw out, in passing, that the appalling level of youth unemployment is not unconnected with the excessively high pay that goes to youngsters. Can we at least urge on employers and employees alike that, if pay goes up, there is no reason why the starting rate of youngsters should go up in the same proportion? It cannot be necessary. It was a great folly, in a great many cases, to reduce the adult rate to 18 from 21. I regret to say that this was partly in connection with the implementation of the Equal Pay Act, but it was never intended that it should have that effect. It is undoubtedly true that we are paying youngsters at too high a rate and that this is one reason why they are not getting jobs. But it should not be impossible for the Government, in collaboration with the employers and the trade unions, to find ways of getting this thought across before the next round of pay increases.
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Turning more directly to the Finance Bill and away from more general issues of economic policy, I must deeply regret the fact—I am surprised that the noble Lord, Lord Bruce of Donington, made no reference to this—that the Government saw fit to breach the Rooker-Wise rules and not to index the marginal rates of tax increase, so that, with inflation, a considerable number of additional people have come into the tax-paying group. This continues to make the problem of the poverty trap severe and is a very great discouragement to people getting back into employment.
I am not saying, and I do not believe that there is any evidence to suggest, that an important number of people are substantially better off out of work than they are in employment and that this has a disincentive effect on people trying to obtain jobs. Jobs are far too difficult to obtain for this to be a very important argument. At the same time, it is ridiculous that the gap between what people can earn when they have paid tax and what they get when they are not in employment is so slight. Surely it should be crystal clear to everybody that people ought to feel better off when they are at work than when they are not. Tax does not start at 30 per cent. It starts at 30 per cent., plus national insurance contributions, which brings it up to about 40 per cent. of what people earn as soon as they get into the tax bracket. At least can we not have an assurance that next year there will be full indexation of the levels at which people begin to pay tax at the starting rate, even if this cannot be done—as I hope it can be done—all up the tax range?
I know that with his long connections with the Inland Revenue the noble Lord, Lord Cockfield, will not hesitate for one second in turning down this suggestion, but in parts of the country where public transport is woefully inadequate—this goes for many of the rural areas—one of the big difficulties about employment and the relationship between earnings and what one gets when one is not working is the cost of getting to work. In certain parts of the country it is perfectly true that if you add on what it costs a man who has to go by car, because there is no public transport, to work some 10 or 12 miles away, there and back each day, the disincentive to work, at present costs of petrol, becomes very considerable.
Is it really too much to ask the Government to find out whether or not there is some way in which some tax allowance can be given towards the cost of getting to work in areas where public transport is quite inadequate and therefore simply will not enable people to get to work at public transport rates? I recognise that you cannot do this for the country as a whole, but high unemployment areas with bad public transport need special consideration if people are to be got hack into work. This is something which surely should be looked at.
But it is the whole of the tax system that we need to look at. Perhaps it seems odd at a time when public finance is as difficult as it is and when economic conditions are as depressed as they are to say that what we really need is a complete rethink of our tax system. The Finance Bill reflects once again a tinkering with a tax system which is totally out-of-date. We need to work towards some form of credit tax system which would deal automatically with many of these problems which I have been talking about: the disincentive effect

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of the tax system, combined with income-related reliefs of one sort or another, with means-tested reliefs of one sort or another.
I am not suggesting that next year or even the year after we can introduce a scheme of this kind, but I am urging the Government to get to work again on it. A Conservative Government years ago, the Liberal Party over the years, and still today, and I believe also at times the Labour Party, have expressed interest in a tax credit scheme. We know that there is a great deal of work to be done to find out precisely how it ought to work. We know that the schemes which have been put forward up to date have been, in the eyes of many people, excesively expensive, but this is no reason for not working on it again so that as soon as it becomes possible we can have a scheme of this sort without which a whole number of the problems which we discuss again and again in terms of incentive cannot be solved.
Thirdly, I regret very greatly that so little has been done in this Finance Bill to encourage the spread of ownership throughout this country. The new business start-up scheme was an innovation to help investors in small businesses. However, the exclusions from participation in that scheme go far further than, in our view, has been necessary. Why are people employed in the enterprise to be excluded from the opportunities for investment in those schemes? Why is the range of people permitted to invest so limited? I recognise that there could be some opportunity for tax avoidance of an undesirable kind, but it should not be beyond the wit of the Inland Revenue to get over difficulties of that sort if it was really seen to be desirable that greater encouragement should be given to people to put money into the enterprises and small businesses in which they are themselves working. The fact is that the way in which that scheme is operating is a disincentive which could have been well avoided.
Again, we from these Benches have long pressed for something like the loi monory which the French have: an opportunity to encourage ordinary people, who are still saving at a very considerable rate in Government securities of one sort or another, to pile their savings into the development of industry. Why could we not have some kind of scheme along the French lines which would give tax concessions to ordinary people to invest in ordinary shares on the market, and in particular in risk capital?
The noble Lord, Lord Bruce of Donington, has said that there is money running out of the ears of the institutions, but the institutions do not tend to invest in small risk enterprises—or even, for that matter, in larger risk enterprises. Too much of the money—is it 15 or 16 per cent.?—which ordinary people are saving is going into the institutions or into Government securities and not enough of it is going into ordinary industrial investment. It was, after all, the French, under Giscard d'Estaing and not the French under the present régime who got the loi monory going. Why have the Government turned their back on any development of this kind? Again, we have had no extension in the Finance Act or in this Finance Bill of the 1978 Finance Act provisions for the encouragement of share ownership in companies by employees. In all
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these ways the Government are losing the opportunity to encourage people to invest in industry- itself.
Surely it is plain to see that an increasing number of people in this country feel that they do not belong to this society and that this society does not belong to them. That is what is happening in the Toxteths and the Brixtons: society is something in which they have no part. They feel it about society as a whole, they feel it about their local community, they feel it about the place in which they work. Surely there is social as well as economic wisdom in encouraging a far wider extension, far more opportunity for people to feel that they have some ownership, some possession in the economic institutions of this country.
1.30 p.m.
Lord Robbins: My Lords, it is commonly agreed that having regard to our constitutional position there is not much point in discussing the detail of this Bill. Our business rather when, year by year, the Finance Bill comes up, is to survey aims and objectives, to search for underlying tendencies, to ask questions concerning failures and successes. Such has indeed been the centre of gravity of the speeches which we have already heard and such will be the tenor of my own remarks this afternoon.
I will begin by saying that I applaud the general objective which the Government have set themselves, the reduction of inflation. I do not believe that a society such as our own can stand for very long the rates of inflation which have emerged from time to time in the last 20 years or so. They disturb rational calculation; they impair social relations, they diminish private and public honesty and eventually, as we have seen elsewhere, destroy the sane basis of democracy.
When I hear protests against the policy of reducing inflation I feel inclined to ask the protester, "How much inflation do you think we can stand without disaster?" I have recently visited a country where inflation was running at some 90 per cent. per annum where, discounting this, the annual rate of interest was something like 100 per cent. per annum—and I did not like what I saw and what I heard in that particular country.
It is a fact that the rate of inflation has come down. It has not come down as far as might have been hoped. It is still in double figures. It went up, as the noble Lord, Lord Bruce, has reminded us, in the first year of the present Government, partly because of policies which have been denounced by the noble Lord, Lord Bruce, partly as a result—let us not deceive ourselves—of the heritage which the Government received from their predecessors; the "winter of discontent" and the commitment to refer to arbitration certain rates of wages.
I submit that it cannot be denied that inflation has come down since then. Nevertheless it is not so easy to see why it has come down. Obviously, as the noble Lord, Lord Bruce, has said, the switch from direct to indirect taxation had nothing to do with the reduction of inflation. It pushed the rate of inflation up for the time being. Now I confess from the Cross-Benches that looking back I think that at that time it was a mistake. I have no conceivable objection to the action that was taken to remove the anomalies at both ends of the direct incomes scale. Some people at the lower

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end were being dragged into tax who should not have been and the top rates on earned and unearned incomes (rates which I have never paid in my life) were totally ridiculous. But, as regards the standard rate, I cannot honestly say whether reducing it is an incentive to work harder or to work less, and I think that transferring the burden to value added tax certainly complicated wage negotiations.
If we turn to fiscal and monetary policy, at first sight the perplexity grows. So far as public borrowing is concerned, the limits proclaimed at the two main budgets which we have enjoyed since the present Government came into office, have been exceeded and, let us face it, it is not at all easy to reduce borrowing when inflation is raging.
As for the money supply, Heaven knows! it is a difficult thing to measure, although, if I may be permitted to interject to the noble Lord, Lord Bruce, not impossible to control. It must be added that until the last few months the amount of reported M3, which may or may not be a good measure of inflation, exceeded the targets which were laid down.
So, in the end, we are left with a policy of high interest rates; in our position as an open community, a much more complicated matter than is often thought. The internal effect of high interest rates on investment is obvious, notwithstanding the multiplicity of businessmen and others who, in the past, have beaten their breasts and denied it. In the past, I think it is fair to say, under a régime of fixed or semi-fixed exchange rates, the interest rate policy did not work at all badly. I incline to the view that control of the money supply in some form or another has more to recommend it, but this, I admit, is a controversial question, and I do not intend to dilate on it here. I certainly think that high interest rates have had a restraining effect on internal inflation.
Externally the effect is more complex. Interest rates which are high relatively to interest rates abroad tend to attract an inflow of capital, and this, under floating rates, tends to drive up the rate of exchange. This has a double effect. So far as import prices are concerned, it tends to make them cheaper and so to reduce inflation. I have no doubt at all that this was a powerful influence in 1980, at a time when the sterling dollar rate was high. But at the same time it does make things more difficult for the export industries, or some of them. The pound at its lowest, under the previous Government, was about 1·55 dollars; at its highest it was above 2middot;40. If I am not mistaken, this was a degree of over-valuation of the pound to which the celebrated over-valuation of 1925 was just peanuts. I have no doubt at all that the very great troubles—they have been very damaging—of some of our export industries were due to this fact.
This brings me to unemployment, which we must all surely agree at its present level is a great social evil and a personal tragedy for those concerned. But, confronted with this disturbing problem, it is desirable to bring our heads as well as our hearts into action and to seek the causes, which are very complex. In the first place, let me admit that I have no doubt at all that any attempt to reduce inflation must increase unemployment for a time. All Governments at home and abroad, on the Right or the Left, have had this experience when they have tried to reduce inflation. Yet if
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inflation goes on eventually it leads to even greater disaster. In present circumstances, the fact that in many parts of the world other Governments are attempting to cope with their inflation in this way certainly does not make things better, to put it mildly, for us. We should never forget that ours is part of a world recession.
But, on top of this, there are special local circumstances. At first, in the remote period when inflation was just beginning and for some time after that, employers were apt to hoard labour. The overmanning of many branches of industry was a conspicuous phenomenon. Now at the present day, threatened by tight money, beset with frustrated expectations fostered by inflation, the process is reversed. There is de-hoarding of labour. I have no doubt that in the long run this tends to restore our manufacturing competitiveness, the failure of which it is not possible to deny. But, in the short run, it certainly swells the volume of unemployment.
Secondly—and I know this will not be a popular thing for me to say—there has been the gap between the rise in earnings and the very low rate of productivity. By far the greater part of the value of the gross national income goes in the shape of earnings of one kind or another, and the margin of profit has shrunk to dimensions which in many cases causes closing down and bankruptcy. This is a subject where most simple generalisations are liable to error, but I have really no doubt at all that cost inflation in this sphere is responsible for some of the alarming rise in unemployment.
But where then are we to turn? With every good will to be charitable to all concerned, I do not find the alternatives which are commonly suggested very cogent. The Leader of the Opposition, Mr. Foot, urges reflation, but, in present circumstances, reflation is a polite word for increasing once more the rate of inflation. Reflation has only meaning as an acceptable policy when the rate of aggregate spending is below the volume of production at constant prices, which is what happened in the inter-war period with all its disasters. I speak on this with some trepidation, for at that time when reflation was appropriate I opposed it, and I have come to believe that I was wrong. But our position now is radically different. Inflation is still going on at a rate which is more dangerous. As the noble Lord, Lord Cockfield, said,we are living in a different world. At present reflation means more inflation.
At the back of the more sophisticated advocates of reflation lies the assumption that an acceptable policy of income restraint is adopted. I have no hesitation in saying that if there were to make its presence felt in the labour market an attitude which brought it about that whatever the pressure of demand, money incomes did not exceed the increased value of current production at constant prices or at prices rising by a very small percentage, then our problems would be considerably eased.
I have long admired and ventilated in your Lordships' House the courage of those members of the Labour Party such as, for instance, the noble Lord, Lord Balogh—who is not in his place today—who have risked popularity with the majority in urging this point. But, as the noble Lord, Lord Cockfield, said, we must be realistic. Have not powerful unions declared an unwillingness to adopt any such policies?

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While rates of wages are being settled this year in the private sector at much lower rates than before, wages in the public sector still remain far above any relation to the objective of a reduction of inflation. I believe that in that part of the public sector, which on both sides is either factually or inevitably monopolistic, there are conceivable methods of arbitration—to which I drew the attention of your Lordships' House at Question Time, I think yesterday—which have been suggested by no less a person than Professor James Meade, which satisfy the requirements of pure theory. I commend his notable article to that effect to members of Her Majesty's Opposition. But I agree with Lord Coekfield's reply to my introduction of the subject when he answered that, although the idea—I am paraphrasing—was an interesting one, it would certainly be very difficult to enforce.
So what is to happen? The rise in interest rates in the United States has relieved the over-valuation of sterling in dollars. That may ease the problems of some of our export industries. But at the same time it will tend to make more difficult the reducton of the rate of inflation. I confess that I can see no alternative save the general policy of the present Government. I hear reassuring talk of the increasing productivity in various industries. But the problem of the public sector remains, for the most part, acute.
I am no prophet and the so-called forecasters differ so much among themselves and their projections omit so many external events which are quite fundamental, such as the rise in the interest rates of the United States, that I confess I do not pay much attention to them as actual predictions. I hope very much indeed—and in this hope I rejoice in saying that it has the authority of no less a person than the noble Baroness, Lady Secar—that methods may be devised for getting more permanent jobs for young people, perhaps at wages which are not equivalent to those of persons long experienced in the industries concerned. But my main conclusion at this stage of our fortune is that there is no alternative better than the general objective which the Government have set themselves. In the last analysis our economy cannot function without greater stability in the real value of money.
1.57 p.m.
Lord Houghton of Sowerby: My Lords, I must confess that I find our debates on the Finance Bill rather unpredictable. Sometimes we have a debate on the economic situation and sometimes we seem not to have a debate at all. Scant reference has been made to the Finance Bill so far in the debate and the noble Lord, Lord Robbins, who has just spoken, reminded us of our constitutional position. This Bill could scarcely be called short and uncomplicated, which seems to be the recipe for Bills on the agenda for Fridays. Because we cannot amend it, there is little point in talking about it, but we are asked to pass this Bill through all its stages today. I suppose that the reason for that is that the Bill has arrived late from another place; another reason is that there is a time limit to the passing of the Finance Act under the provisions of the Collection of Taxes Act; and there is also the pressure of other business.
On the constitutional position, I think that it is
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worth remembering that it is 70 years ago this year that we began the subservience of your Lordships' House on matters of taxation and finance when we passed a Bill, under duress, which told Mr. Balfour's poodle to lie down and leave Money Bills alone. But, of course, in Finance Bills there are many things besides money; there is administration; there can be clamping down on the taxpayer; there can be civil liberties; there can be tax raids and seizure of documents. Indeed, anything connected with the levy of taxation can come under the Certificate of Mr. Speaker as a Money Bill. On the other hand, of course, we can do anything we like with the Social Security Bill. We can treble the cash benefits; halve the contributions; and bankrupt the National Insurance Fund, and Mr. Speaker cannot say nay—only the House of Commons can do that.
Therefore, for one reason or another this Bill has a slot in our business arrangements which we usually reserve for indecent displays and animals in zoos. But by a curious coincidence the Twelfth Report of the Public Accounts Committee—Session 1980–81—was published just as the Finance Bill had passed its Third Reading in another place. Be it noted that the Third Reading passed in another place was on a Division, so that the Bill which we have before us this afternoon could not be regarded as having received the wholehearted consent of the House of Commons.
The report of the Public Accounts Committee shows renewed interest in the so-called black economy. I want to say a few things about the black economy and then I want to go on to the strike economy. They are as distinct as black and white. They arise from entirely different causes, but they are both very serious from a revenue point of view.
The Public Accounts Committee draw attention to widespread evasions and understatements of taxable income, which are very worrying indeed. I was interested to see that on the day of the publication of that report on Wednesday, the New Evening Standard headline was "The £4,000 million Swindlers" I thought that was a good one coming from Fleet Street. The most notable tax evasion scandal of recent years was in Fleet Street: the Mickey Mouse casuals of Fleet Street, where employers and employees connived in fictitious names in order to draw—
Lord Ardwick: My Lords—
Lord Houghton of Sowerby: My Lords, my noble friend must allow me to complete my condemnation. It was when employers and employees connived to make false entries on the payrolls in order to avoid deductions under pay as you earn, leaving the recipients to declare their gains on their tax returns, which they did not, with the result that the Inland Revenue lost millions of pounds because this practice went on for years and years. My noble friend wishes to intervene.
Lord Ardwick: My Lords, it is not the Mickey Mice nor the Charlie Chaplins of the machine room who would write the headline in the New Evening Standard; it would be the sub-editors and, if they have any methods of tax avoidance or evasion, they are unknown to the world.
Lord Houghton of Sowerby: My Lords, I never know who writes the headlines in our newspapers. We are sometimes told that the editors would like some headlines but the machine room would like others, and the editors are not allowed to have the headlines they would like. Anyway, I am dealing with the headline which emerged. All I shall say is that no one in Fleet Street, from the editors to the machine room, has any right to call the kettle black when we are dealing with widespread tax evasion. This is, in fact, referred to in the report of the Public Accounts Committee.
There are other industries in which other, equally serious, evasions have been taking place. I ought to mention that Fleet Street has been cleaned up by agreement between all concerned. But the catering trades, the construction industry and the drink trade all have their special problems. Noble Lords can read it for themselves in paragraph 14 of the report of the PAC, to which I have referred.
This is a serious matter, though I do not usually join in the hue and cry which one reads in the popular press and sometimes in the reports of Parliament, on the remedies for this situation. I have written extensively on this subject and mostly the title of my theme has been the futility of taxation by menaces. I shall enlarge on that theme another time if I get the opportunity.
But now that the PAC is sounding a warning on the possible effects of widespread tax fiddles on public morals, I suggest that this subject is getting very close to the heart of your Lordships' House. We are good on morals; we can take the high moral line here because we are aided in doing so by the Bench of Bishops and by the long experience of Members of your Lordships' House in these high echelons of public administration. One can read about that in paragraph 31 of the report of the PAC. I suggest that this is the place to take up that matter.
Another reason why we are suitable to discuss this matter is that we are in a particular sense politically free to seek the truth. This is the great quality of your Lordships' House. We are free of so many of the pressures to conceal the truth and to deal in half-truths. If we have a fault, it is that our courtesy sometimes conceals what we really want to say. If we are looking at causes for the black economy, they are many, they go deep in our social structure, and they have a good deal to do with inflation, as the noble Lord, Lord Robbins, said a moment ago. It is not a problem dealt with solely by acts of administration.
Years ago, before the noble Lord, Lord Cockfield, came to the Inland Revenue, I remember that a new chairman at the Board of Inland Revenue arrived, a rumbustious character of forceful language who knew his own mind and let other people know what it was: Sir James Grigg. He said to me, "I shall not learn all about income tax in this department. I am surrounded by people who know all about taxation. I regard as my main job telling the Inland Revenue people what the public will not stand for". I have always remembered that because I thought that there was a great deal of sense in that description of his job. Incidentally, we must bear in mind that the Commissioners of Inland Revenue are appointed by letters patent for the care and management of the Income Tax Acts, and they have a good deal of statutory
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power and responsibility for administration. It cannot always be forced upon them by the will of Parliament, unless they like to take the matter much more seriously than would be justified. However, I shall not pursue that this morning; another time perhaps.
I should now like to address my remarks to what one might call the "strike economy". This has been brought about by the Civil Service dispute and the disruption in tax collection during the past 20 weeks. I do not wish to raise the whole question of the Civil Service strike. I did mention to the Lord President yesterday that I should be raising this matter in relation to the Finance Bill and I assured him that there was no desire on my part for him to put off other engagements in order to be present in your Lordships' House this afternoon.
The Civil Service dispute has prevented vast amounts of money from reaching the Treasury. In less than four months the "strike economy" has caused greater losses of revenue, temporary though we hope them to he, than has the "black economy" in a full year. That is not all, because VAT refunds due to businesses and individuals from Her Majesty's Customs and Excise have been held up. The position in some sectors of public administration is nothing short of chaotic. Earlier in the dispute arrangements were made for those who were waiting in vain for VAT refunds to set off the amount owed to them against payments due to the Inland Revenue on account of pay-as-you-earn. Now, Clause 51 has been put into this Bill very late in the day, which exempts these taxpayers from interest charges on deferred tax payments under the arrangements to which I have just referred.
This is only a small part of the tragic and deplorable events of the past three and a half months and I am surprised that so little time has been given to considering this unprecedented situation in Parliament itself. After all, Parliament has the final responsibility for the welfare and efficiency of the public services. I am sorry that the Civil Service unions themselves have not brought their case to Parliament; I believe they should have done so long ago. If their grievances were so grave as to lead to a strike of these proportions, surely Parliament should have been asked to consider what the issues were? At this moment, these unions are going through the agony of taking a decision on the Government's latest move to end the dispute. I am bound to remark that an enormous amount of harm has been done already, which will take a very long time to repair. Something very hitter and very deep has affected the pride and loyalty of the Civil Service and it should be our duty to find out what it is. I believe that part of this bitterness is due to the constant stream of criticism and abuse of the public services by the press and by politicians over the past couple of years, or even longer.
Lord Bruce of Donington: My Lords, before the noble Lord, Lord Houghton of Sowerby, leaves that point, would he care to suggest how he thinks the unions involved should bring their grievances to Parliament? What methods does he suggest they should use?
Lord Houghton of Sowerby: The same method I used and which other Civil Service leaders used in the

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past: convening meetings of Members of the House of Commons in Committee rooms and taking along Civil Service spokesmen to state their case and answer questions. Also, seeking from the assembly of Members of Parliament a group who would go to see members of the Government to convey what they had heard, and to express their views on the nature of the dispute and what they thought the remedy was. That has not been done.
Lord Molloy: My Lords, surely—
Lord Houghton of Sowerby: I am sorry to be interrupted so much. I am trying to get on.
Lord Molloy: My Lords, I am sure that the noble Lord, Lord Houghton of Sowerby, would not wish to go on the record as being incorrect, for is the noble Lord not aware that these things have been done? Civil Service leaders have seen Members of Parliament as well as Members of your Lordships' House. The main thing which irritates these leaders is that they have been denied an independent judgment by an outside body, by arbitration, to decide the issue.
Lord Sandys: My Lords, may I remind the House that we are not concerned here with a general debate on policy but on the Finance Bill itself. With due respect to the noble Lord, Lord Molloy, I feel that we should return to the subject which the noble Lord, Lord Houghton of Sowerby, is attempting to cover in his speech.
Lord Molloy: My Lords, Lord Houghton of Sowerby was the one who first introduced the subject of consultation into his speech.
Lord Houghton of Sowerby: Those of us who have spent all their working lives trying to build up a satisfactory, civilised and harmonious relationship between Government and the public services, are heartbroken to see what has been happening in recent months and the mess that has been made of what we thought was a permanent structure of good industrial relations in the Civil Service. Other noble Lords in this House shared with me the responsibility of reaching the agreement 26 years ago this year which established the principles for fixing Civil Service pay and the machinery for applying them, and, with only agreed variations, that has stood the test of varying economic and political conditions ever since, until now. It was then abrogated by the act of Government. Those of us who were the witnesses to the original agreement are bound to feel deeply about what has happened just now.
This brings me back to the Finance Bill, because never before in the history of Finance Bills has Parliament been called upon to give the principal taxing money Bill of the Session its passage through the House with tax gatherers in a state of mutiny. Are we asked to say "Content" when the Question is put on the Third Reading of this Bill? Content with what? Content with a Bill which levies taxation in circumstances in which the Government cannot be sure that
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the taxes will be collected? Is that what we are content about?
I have a revolutionary proposal to make. Under the Provisional Collection of Taxes Act 1968 I believe we have until 4th August to pass this Finance Bill to validate the Budget resolutions in another place of last March. Should we suggest that the debate should be adjourned until next week or the week after, to give the Government an opportunity of settling the Civil Service strike, and be better assured—and we in the House should be better assured—that the Finance Bill can be implemented and the requisite administration will be there to support it? Otherwise, I think that we are asked to pass this Bill in unprecedented conditions of uncertainty and of dismay, and I do not think those are the conditions in which to legislate.
I hope your Lordships will take notice of the fact that for the first time, and I hope for the last, we are asked to pass a Finance Bill with the principal taxing departments refusing to handle the money. This is not a position that we can pass over lightly merely to conform to the formalities of your Lordships' House, even under the disciplines of the Parliament Act 1911. There is nothing in the Parliament Act 1911 to say that we shall not register a vote on the Finance Bill if we want to, no matter what the consequences—which incidentally would not be harmful at all, because it would go straight for the Royal Assent even so. I think that this protest in present circumstances and the conditions under which we are asked to pass this Bill is justified.
2.18 p.m.
Lord Spens: My Lords, I understand that the noble Lord, Lord Barnby, has decided not to speak in this debate, and so I am rising now to address your Lordships for a very short time. As you know, my particular interest is small businesses, and I felt that I must speak today because two months ago, when we had a debate on small businesses, I criticised the clauses dealing with the business start-up scheme in the then Finance Bill. I said then that its scope is limited to the first three years of the life of a business, to cover only 30 per cent. of the equity of that business, and it is only for businesses which, among other limitations on their nature, may not deal in goods.
But it is most gratifying to see that in fact the Bill, as it now stands, has adjusted all those three points and that the scope now extends to 50 per cent. of the business. The limit has been extended to the first five years of the life of a business and genuine dealing in goods, to the extent that it is wholesaling or retailing, is now included in the Bill, and that will make an enormous difference to the possibilities of those clauses helping small businesses. I am thankful that the Government have been able to see their way to expanding those clauses in that way.
There is much more to be done of course and it does not all have to wait till next year's Budget and Finance Bill. I am sure that lower interest rates is still the great priority and I believe that more could be done now by the clearing banks to assist small businesses with differential rates of interest for particular purposes. They are not yet flexible enough and I am

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sure more could be done. A reduction in the national insurance surcharge would be an enormous benefit, if the Government could see their way to making such a reduction; it would be an incentive not only to expand businesses but to reduce their costs, and action along these lines should be taken as soon as possible.
Sir Harold Wilson and his commission recommended that some form of organisation similar to the Council for Small Industries in Rural Areas (CoSIRA) should be set up in urban areas. If that were now set up in some inner cities where we are having crises of trouble, I believe that could be a base on which the Secretary of State for the Environment could build any recommendations he might bring back with him. I commend to the Government the idea that some form of operation similar to CoSIRA is needed urgently for inner city areas, and I hope that when it comes there will be more finance available for it than is at present available for CoSIRA, and the powers in respect of both organisations should be increased. I commend the Bill because I believe it will genuinely help small businesses.
2.23 p.m.
Lord Molloy: My Lords, I hope the noble Lord, Lord Spens, will forgive me if I do not deal with all the points he made, although I wish at the outset to express my sympathy for him in view of the tragic situation that exists among small businesses, particularly under the present Conservative Administration, for they are going down the bankruptcy drain faster than at any time in British history. That is why I have great sympathy for the noble Lord, who I hope will listen carefully to what is being said from these Benches; if he really has the interests of small businessmen at heart, I must tell him that I firmly believe that it is only through the policies which are being enunciated by the Leader of the Opposition that working people and small businessmen can reassert themselves and make their contribution to the welfare of the nation.
I wish also to thank the noble Lord, Lord Cockfield, for the wide boundaries he drew in his opening remarks. That was a useful and generous way for him to approach the subject because he mentioned, in addition to taxation and expenditure, the fact that the Bill would affect industry, the trade unions, unemployment and inflation. I would add one further dimension; that is, the social effects on millions of our fellow citizens. When a number of noble Lords, including the noble Lord, Lord Cockfield, have seemed to stress that wages must be held, it seems that the holding of wages is fundamental. There is some degree in truth of that. Let me give an example to the House. From 1977 to 1979 the wages and social contract between the then Government and the Trades Union Congress limited wage increases by a voluntary agreement, not by the force of law. During that period we had the minimum industrial unrest in this country and we started to bring down inflation.
But there was a enemy, and I would ask noble Lords on all sides of the House to note this. The figure during the period of the maximum strike action in the British Isles cannot equate with the number of working days lost through bronchitis, pneumoconiosis and other industrial diseases. These are still the curse in working days lost which are well above any loss because of
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strike action. I would immediately add that strike action itself very rarely helps any situation, and most often, as we have seen in the past, working people have been driven to it. We are told, for example, that they must hold wages down, How can trade union leaders go to their membership with this proposal when the membership of trade unions—some 12 million of our fellow Britons—are hit as they were hit by the dramatic increase of VAT to 15 per cent., when every housewife and every working man, those who work by hand and brain, discovered the rise in the grocery bill, the clothing bill, shoe repairs and in everything that affected their lives? They wanted some help in meeting those bills.
I believe this House must understand that when the working men of this country—and I include those who work by hand and brain—ask for wage or salary increases, it is not to swell their bank balance; it is to pay the grocer, clothing manufacturer and all those who make their contribution towards enriching their way of life. If they cannot do that, the only alternative is for millions of our fellow countrymen to accept a drop in their standard of living.
Let me tell noble Lords that we have the most responsible trade union movement in the world, but what enraged trade union leaders was the realisation that the cut-back in wages and the holding down of salaries were designed by this Tory Administration to enable massive cuts in taxation to be made for the very wealthy. This House will realise, for example, that a cut of thousands in taxation might be equivalent to twice the wage of a British nurse in a British hospital. I believe that the noble Lord and indeed all of us must take full cognisance of that; we must try in industry and in the public sector to understand what is irritating and annoying people.
Equally, I believe that people realise that the policies of the present Government are in no way going to be changed, irrespective of the cost which could well be the ultimate epitaph of Conservatism. I do not mind it being the epitaph of that Party, but I am very concerned that it should not be the epitaph of my country as a result of the present Government's policies—This massive operation was successful but the patient died. There is very little sense in that policy.
It would be equally foolish if we did not acknowledge that the root cause of much of what we are suffering today started, as the noble Lord, Lord Cockfield, has said, way back in the 'sixties and ran through the 'seventies and 'eighties. I think he is perfectly right. There is a great deal to be said for that argument, It was in the 'sixties that we were lulled into a sense of false security—the noble Lord was absolutely right—because at that time the Conservative Prime Minister, Mr. Harold Macmillan, was telling the nation. "You've never had it so good". Does any noble Lord opposite want to quarrel with what I have said up till now? Well, let me proceed.
I turn now to the cause and effect of inflation. We must acknowledge that to many people it seems that one cannot blame Government policy alone, and it would be foolish to do so. However, it is making a massive contribution towards deliberately creating unemployment. I believe that the causes are a combination of Government policy—which is centred on monetarism, which has an appalling record

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throughout the world wherever it has been applied—and. to be fair, a degree, a considerable degree, of world recession, for which the present Government are not entirely responsible. Those I believe are the causes.
What then are the effects? The first effect which I believe we must note in this House is the social misery and worry which unemployment creates in every home, whether it be in a middle-class home or any other type of home. It might involve, for instance, a personnel manager who has been on a good salary, and is in the middle of buying his house with a big mortgage. He is sacked because there "ain't no personnel for him to manage". When that happens to the personnel themselves, it means that there is great distress in millions of homes.
It also means of course that as the factory wheels stop, as the small businessmen go out of business. as small industries pack in, there is bound to be loss of production. Where there is loss of production people are put on the dole, and so there is even less production, and of course once they are on the dole there is a dramatic drop in purchasing power. Hence there is a reduction in sales in every High Street throughout Great Britain. Because of cuts in production there is an increase in bankruptcies as well as in redundancies. In consequence of all that, there is an increase in unemployment, and, as a consequence of that increase, back we go to more social misery and more social worry; and the whole ridiculous theme goes on ad infinitum. At the same time there is a massive depression in the standard of living among our people. Many people think that there is an awful evil smell of total disaster in the air, and we must disabuse them of that, because there is an alternative policy.
When we look at what the noble Lord, Lord Cockfield, has said, and indeed at what my noble friend Lord Bruce of Donington has said, we see that there has been a lack of proper investment; that is another contribution to the situation. People have been working with outdated machinery. There have been bad conditions in many of our industries because of out-dated machinery. I hope that your Lordships will note that figures with which I have been supplied from the most authoritative sources reveal that today, in 1981, the average British worker has behind him £7,500-worth of machinery, the German worker has £23,000-worth of machinery, and the Japanese worker £30,000-worth of machinery. That I believe is indicative of both the avarice that there has been in the higher echelons of British industry and the lack of proper investment. Due to that, British industry has not been able to give of its best and because of that the rates of profits have been falling. Therefore there is a similar vicious circle of no investment, no attraction to overseas buyers and a reduction in profits, with men and women being thrown out of work.
But there is another element, a very ugly, evil element, and it is this. There has been a great deal of investment overseas, not in this island, by British manufacturers. Some of them are quite prepared to fly any flag provided it is not British. We should realise that in 1950 one-quarter of the world trade in manufactured goods was provided on this island.
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Now, in this year of 1981, that has been reduced to one-tenth. Further, from the Common Market countries Britain has imported £2,700 million worth of manufactures on almost an annual basis—and that figure is in excess of what they take from us. So we are getting a very raw deal and a very unjust deal from the Common Market; and ordinary people in industry and commerce—businessmen, fitters, coalminers, every one of them—are beginning to realise this and are feeling frustrated and annoyed.
There is another aspect of unemployment which I believe all Members of this House would agree gives us great concern. It is inevitable that when unemployment grows it becomes most dangerous when people pick on one another, not because of their particular situation but because one might have a deeper tan of skin than the other. In short, it is a danger to the ethnic minorities. Alas! this happens mostly among the young, and, in the case of the recent disturbances, whatever else has happened at those disturbances, I firmly believe that the basic, root cause is the aimlessness of our young people, waking up every morning with nothing to do.
I am bound to say that, as with the rest of the unemployed, they do not want any charity, they do not want any dole, but they have got to take it. Every unemployed family has got to take unemployment benefit; every unemployed young person has got to take some degree of unemployment benefit. What for? Once again, it is to pay their way—to buy clothes, to buy food, to be able to travel to look for a job. As I have said before, this benefit that they get is not to bank, although there are elements in this society of ours who have had massive tax reliefs for which there is no other purpose than to bank.
My Lords, young men and women today, different from the 'thirties, have a much clearer understanding. They are not as docile as we were. They will not simply have hunger marches. They will not just go to Hyde Park and start the protest off with a hymn. They are not going to do that any more, because they realise that they have got to make a mark somewhere to ensure that the greedy and the avaricious understand the plight that they are in. I deplore this. I hope that they will stop these sort of antics; and we in this House and in the other place, and in every local authority council chamber up and down our land, should encourage them by making it transparently clear that their case is not being neglected and that we intend to do something proper about it.
My Lords, if we intend to do something proper about it, I happen to believe that the philosophies of Keynes and Kenneth Galbraith are the ones we ought to adopt—and these have been embraced by the right honourable Michael Foot, the Leader of the Opposition. I support him, if only for the simple reason that all the theories we have had have failed. The theory of monetarism embraced by the Prime Minister has brought disaster to other parts of the world, and now it is bringing disaster to this country.
What, then, is my proof about spend and prosper? It is because we have gone through it before. I was one of the victims. I have been on hunger marches. Nothing the great economists have said can help you in any way; and I sometimes think that, with the exception of Keynes and Galbraith, if you put all the

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economists in the world from end to end they would not arrive at a conclusion. But the fact of the matter is that when Keynes and Galbraith expounded their theories, in those days the country that was suffering worse from inflation (the bogey of today) and from unemployment (the terror of today) was the United States of America. The then President of the United States, Franklin Delano Roosevelt, talked with Keynes and talked with Galbraith, and was convinced that their fundamental philosophy of spend and prosper should at least be tried. It was tried in the United States. It proved successful. It was hailed, correctly, as a "New Deal" for all the American people, and it was successful. We tried it later in this country and we too found it was successful.
Therefore I have to say the fundamental element in that aspect of spend and prosper was this: many of our great town halls, roads and schools were built during the depression to find work for the unemployed. Indeed, it put the building industry back on its feet and once that happened, when there were half a million people in various aspects of the building industry hack at work, they could afford to buy clothes, eat better, travel further, and so on. Then the wheels of industry started to turn and the amount of money that the Government had put in following the principle of spend and prosper was recouped enough that by 1938–39 we could start thinking of spending in millions to arm ourselves against the threat of the Nazis in Europe. So I believe that we should take full cognisance of what has happened and what has been proved. What I have enunciated in this House, what the Leader of the Opposition has enunciated in the country, are policies that have been tested and, above all, that have been proved. I would have thought that any sensible person would say, "If they succeeded then, for Heaven's sake! let us try them again to get us out of this grave situation".
There is another aspect that I should like to mention which is causing me great annoyance, and I am sure that I shall carry every noble Lord in this House with me on this issue: great play is made by the Press and the media about those evil people—and they are evil people—who desecrate social security and cheat. That I find abominable. When one realises that the amount of social security fraud equates to £4 million a year —that is,.02 per cent. of all benefits paid—that form of cheating costs a man earning £100 a week 2p. That is too much and it ought to be stopped.
On the other hand, we realise that there are great patriots who always want a bigger Army, bigger RAF, more neutron bombs and horrible missiles. At that level the amount of tax evasion is no fewer than £9,000 million. Which is the greater evil? It is so obvious. But that is not the view of the Government. Let me explain what I mean. The fraud staff, to catch out the social security cheats in the DHSS, has been increased by 25 per cent. The Inland Revenue staff who check up on the tax evaders has been cut by almost 5,000 personnel. That is known outside. This is what the trade union leaders have to listen to from their shop stewards, from their economic advisers, and when they read the Financial Times. They have to tell their members: "It is just too bad. You still have to hold back on wages and these people get away with more
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money through fraud and tax evasion then you will earn in 12 months".
It is ridiculous. The general secretary of the Inland Revenue Staff Association, Mr. Tony Christopher, made it quite clear that if his staff in the Inland Revenue could be increased to the same level as the increase in staff in the DHSS, he believed that they could recoup something between £500 million and £700 million a year for this nation. I believe that is a worthy proposition that we ought to take seriously.
The noble Lord, Lord Cockfield, quite rightly said, as did my noble friend Lord Bruce, that sometimes pictures are painted of our nation which are grossly inaccurate. That is perfectly true, and I should like to give one or two examples on the question of taxation. We have heard time and time again from the media, and, I regret to say, sometimes from the more responsible newspapers, that we are the most highly-taxed nation in the world. This is untrue—that is, if you accept, as I do, the findings of the OECD committee which examined this question. Of the 23 countries belonging to the OECD, Great Britain is eleventh from the top. These are not the words of the Labour Party or of wicked democratic socialist propagandists. I am now quoting totally independent sources. Take, for example, the International Institute for Economic and Social Research. They have said that if employment were at the 1973 level the public sector would have a surplus, instead of which it has a deficit. Why can we not change this? I would not have thought it was particularly difficult.
Public health is vital to us; it is our greatest, and ought to be our first, line of defence—the health of every living soul on this island of ours. But we have the National Health Service falling to hits. Can we spend more? Let us be sensible. Let us set up a Royal Commission to examine in depth what we ought to do. We did that a couple of years ago and the Royal Commission reported to Parliament. It was unanimous that in financial and monetary terms and above all, for the health of our nation, the National Health Service should resort to the principles on which it was founded by the late Aneurin Bevan in that it should be totally free at all points. We could gain so very much from that. Again, these are not my words. This is not wicked socialist propaganda; it is the finding of an independent Royal Commission, upon which eminent men and women served. There was no minority report; their view was unanimous.
When one looks at the report of the Personal Social Services Council one finds that they say this about the state of affairs in our country at present: there is very little evidence to show that we are really trying to protect the most vulnerable in our country. What they meant by that were the blind, the disabled, and those suffering from a variety of industrial diseases which, as I have already said, in any one year cause more lost time than any strikes since strikes were recorded. We have to make transparently clear to people that we understand and are concerned about these things, that we are all of us concerned for our fellow human beings. It is not just the prerogative of any one party or any one group. We all ought to share in this. I believe that if we can adopt the policies which have been shown and proved to be right and which are part and parcel of the Opposition's case, it could help our people in this country in many ways.

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If I may, I should like to say in conclusion that I believe our people have the capacity to overcome the things that afflict us today. With the same humanitarian policy, we can rebuild our economy and rebuild our nation. Our people are capable of doing that, for I believe that when they are free to do it they will start to rebuild our economy, enriching their own standards of life. The way in which they can do it, and the way in which they will do it, will be not merely for the people of this island, but the endeavours of the British people will, once again, be a model for all mankind.
2.51 p.m.
Lord Westbury: My Lords, your Lordships will be very happy and relieved to hear that my average speaking time in your Lordships' House is three minutes and I shall not disappoint you today. I feel that I ought to express the great concern of the racing industry at Her Majesty's Government's decision to increase the rate of general betting duty from 7½ per cent. to 8 per cent. The Jockey Club, the Levy Board and the Horserace Advisory Council have repeatedly warned the Treasury of the dangers of an increase in the tax of betting turnover. Between the last increase in 1974 and 1980, betting turnover rose by 89 per cent., while the retail price index over the same period increased by 146 per cent. The effect of this has been that the Levy Board's revenue is now insufficient to meet the accepted requirements of the racing industry. As a result a number of very harsh decisions have been taken on the allocation of the limited funds available.
In addition, I should like to remind your Lordships of the words of the Royal Commission on Gambling:
"That the rate of deductions from off-course bets was uncomfortably high, and that any increase in the rate of duty carried with it the risk of driving more betting underground".
This would lead to a consequent loss of income to Her Majesty's Government and to racing, not to mention the possible consequences to law and order. I should also like to point out to your Lordships that, in support of this view, the Chief Secretary to the Treasury said in the Finance Bill debate on 13th April 1981 that:
"…the main gambling revenue raisers are already close to the point of diminishing returns".—[Official Report, Commons; col. 39]
I therefore find it extraordinary that, despite the views of the racing industry, those of the Royal Commission on Gambling and those of the Chief Secretary to the Treasury, Her Majesty's Government should, nevertheless, choose to increase the rate of off-course general betting duty. The effect of this ½ per cent. increase has been compounded by the major bookmakers' decision to raise deductions from punters by a full percentage point from 9 per cent. to 10 per cent. I very much hope that, in the near future, Her Majesty's Government will see their way to reducing the rate before further serious damage is done to the racing industry, which by its actions already provides the Treasury with an income of over £200 million a year.
2.54 p.m.
Lord Hatch of Lusby: My Lords, I must apologise to the House for the fact that my name does not appear on the speakers' list. This was due to some confusion in the drawing up of the list, which is entirely my responsibility. But I could not resist continuing the dialogue that I have been having with the noble Lord, Lord Cockfield, over the past two years on one of the few occasions that we have had recently of debating economic policy generally.
I am grateful to him for broadening out the debate from, simply, the Finance Bill into the Government's general economic policy. The noble Lord, Lord Cockfield, began his speech by referring to the limitation of Government powers over the economy. Let me remind him that his party and his right honourable and honourable friends in another place were elected on a manifesto which laid down what they were going to do; what powers they were going to use. I recall vividly in many parts of the United Kingdom, during that election, hearing what the Conservative Government were going to do about inflation and unemployment. Your Lordships will remember the posters with the long queue of so-called unemployed who, believe, were recruited from Central Office. What has happened to those posters? They said what a Conservative Government would do about public expenditure, what they would do about increasing production, what they would do about reducing taxation and what they would do about increasing investment in British industry. This was, paraphrasing, the programme upon which the Conservative Government were elected. It was a false prospectus. We have now discovered, just over two years after the election, how false that prospectus was. We said so at the time. We said in detail why we considered it to be a false prospectus and over the past two years the Government have proved us to be right.
Members of the Government are continually boasting about reducing inflation. They are reducing it from what? At the beginning of this debate my noble friend Lord Bruce of Donington pointed out that the very first thing which this Government did was to increase the rate of inflation, quite deliberately, quite openly and quite honestly, by increasing the rate of VAT. Turning to unemployment, are the Conservative Government still putting up their posters about what happens under Labour? Again my noble friend Lord Bruce of Donington gave us the figures of the increase in unemployment under the Conservative Government and under the last Labour Government. Turning next to public expenditure, I understand that the Government have now exhausted their attempts to reduce public expenditure, and that even the Chancellor is now having to reduce the figures which he was hoping to put forward to the Cabinet in the autumn.
My noble friend Lord Bruce of Donington showed how over the past two years production in British industry, particularly in manufacturing, has sunk continually and drastically. Taxation is at a higher rate today than it was at the time of the election and there are more people paying tax than during the time of the last Labour Government.
Finally, may I turn to investment. I have warned this House time after time and I have never had a

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answer to this question. We saw under the Heath Government from 1970 to 1972 that when exchange controls were removed investment left this country. It does not, unfortunately, go where it would be most useful, into the developing countries. It goes where it will find the greatest profit, into the already developed countries which are our manufacturing and industrial competitors.
I should like to take up the noble Lord, Lord Cockfield, from the point at which we left this argument last year. He may recall that he referred us to the history of inflation going back to the last century and said that from 1919 onwards there had been a different kind of inflation. I will not go into all the details, but he will recall that his argument was that there was a different kind of inflation after the first world war. He has partially repeated that argument today, although he has talked more about the years after the second world war. But these were years when production was increasing, when we had full employment in this country, when we had an opportunity to restore Europe and much of the Far East after the war, when there was a growth in world trade and in the world economy as a whole. So we did have that advantage during the 1950s and the 1960s and, rather than castigating those years, many people would look back on them as years in which, so far as life in this country was concerned, there was a great deal more prosperity than there is today.
The point I want to make to the noble Lord is that somewhere we took a wrong turning, and I want to suggest to him and to the House that that wrong turning was taken particularly during the 1960s and the early 'seventies, when the work of restoration had been virtually completed. When we came to a crossroads the way straight ahead was to complete the task of construction and reconstruction by going straight ahead to the half of the world that was virtually a closed market, where there were not the buildings, where there was not the infrastructure, where there was not the purchasing power which we had restored in Europe and in North America. It was here that we took the wrong turning because we had then, as we have today, half the world waiting for the products of factories which in this country and in other industrial countries are now empty.
I shall not pursue this further because the noble Lord and I have debated it on a number of occasions, but I would say one thing about the current situation. Yesterday, hearing the statement of the Foreign Secretary, I could hardly credit the cynicism with which those seven leaders of the industrial nations had signed a communiqué committing themselves—and the word was "committing"—to increased public overseas aid and increased public information about overseas aid. Is it any wonder that, at a time when the British Government are cutting overseas aid by over 15 per cent. and when the American Government is at its lowest point as regards overseas aid since the war, a communiqué can be signed by the leaders of the Governments of those countries, committing themselves to increase overseas aid?
The reason I make that point is that it seems to me that it is directly relevant to the wrong turning that we took during the 1960s. That overseas aid creates the opportunity for British jobs; it creates the infrastructure
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which the British businessman can use; it creates the purchasing power for the purchase of British goods; it creates British jobs. What this Government are doing—and indeed what the Government are doing through the Finance Bill as well as in other sectors of their economic policy—is to destroy the opportunity for the traditional British innovation, ingenuity, inventiveness and imagination to extend itself into that other half of the world which at the moment is lying fallow. They are doing it not just by cuts in overseas aid but also by cutting down on research and development—surely one of the most important aspects of economic policy for this country today. We are the only industrial nation actually cutting down on our expenditure on research and development. And we follow that by the cuts that are now going to reduce the opportunities of our technological institutions, like Salford University, Bradford University, Aston University, the polytechnics, the apprenticeships; the Bill we were debating in the last week, the Employment and Training Bill, cutting down on the industrial training boards. This surely, by the Government's own standards, by their own values, is self-defeating; it is defeating the opportunity of restoring, developing, resuscitating British industrial power.
Let me give your Lordships just two figures. West Germany turns out twice as many engineering graduates per year as this country does, and three times the number of apprentices—and their apprentices have to pass an examination—each year that we do. It may be that the people in this country have too high expectations in standards of living. I should be prepared to discuss that with the noble Lord at any time. It may be that the whole of the industrial world is using too high a proportion of the resources of the world, if we are looking ahead to the development of a world community.
It could be argued that this Government are deliberately reducing the standard of living of the people of this country. That could be used as a constructive argument that we should reduce our standard of living. But we cannot expect people to accept that kind of argument when, as my noble friend Lord Molloy has been pointing out, we are at one and the same time cutting the taxation of the rich and taxing more of the poor. We cannot expect people to accept that argument when there are in real terms over 3 million unemployed in this country. We cannot expect people to accept that argument when they see the welfare state being quite deliberately destroyed, when they see the rights of the trade union movement being deliberately attacked. Only today an all-party committee has condemned the Government for what it calls "total contempt for homeless poor people"; that is an all-party committee of our Parliament.
When the noble Lord, Lord Cockfield—and again we have discussed this before—talks about the wage increases and the necessity of restricting those wage increases, let him go back to one of his mentors, Professor Hayek, and remember what Professor Hayek had to say about what he called real wage resistance, because it is the real wage resistance against the policies that I have been outlining over the last three minutes that is inevitably forcing the working people of this country to demand that their trade union leaders, not just ask for but, if necessary, fight for

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wage increases which will keep up with the inflationary policies which this Government have followed. I wonder whether the noble Lord has given any thought to what he will do about the miners and their wage demands? They are in the nationalised sector. He has been telling us how the Government are keeping down wage increases in the nationalised sector. What will he do about the miners?
I think that it has become obvious, and increasingly so, in the press and among the public that this Government's policy has failed, and failed totally. If the noble Lord wants an example of that he has only to look back to last week and to what happened to the Conservative vote in Warrington. I wonder what will happen when by-elections are held after the end of this year, when his traditional supporters find that the earnings-related benefits are brought to an end and when the middle income unemployed find that their benefits from 31st December are being drastically cut? Some of us warned—we were called over-dramatic when we did so—that this type of socio-economic policy, if followed through by this Government, would lead to social unrest, which, in its turn, could very well turn to the violence that we all deplore.
I am not sure; I cannot make up my mind whether I would like this Government to continue the policies which they have followed now for over two years. If they do so, then we can expect that the monetarist theory and the class privilege policies will be killed for ever. However, if the Government do continue those policies as outlined by the Prime Minister last night, when she talked about making industry lean and fit—I do not know about fit, but the leanest figure that one can imagine is the skeleton and that is where this Government are leaving the legacy of industrial Britain—my fear is that it may be that Karl Marx was wrong. Your Lordships may remember—you have been reminded of it by other noble Lords—that Karl Marx believed that the institutions of this country might just change the social relationships of this country without violence, without violent revolution. But everything that has happened over the past two years suggests that that might not now be possible.
My noble friend Lord Molloy gave one epitaph for the Government's economic policy as outlined in this Bill. I would give another. I have been giving some thought to how one can describe this policy. I am sure that the noble Lord must have read many epitaphs on the Government's policy from a very wide range of economic writers. My epitaph on the Government's economic and industrial policy would be taken from the Book of Deuteronomy. I am sorry that there are no right reverend Prelates here to correct me if I am wrong, but I believe that there is an apt phrase in the Book of Deuteronomy:
"Thou shalt plant a vineyard and shall not gather the grapes thereof. The fruits of the land and all thy labours shall a nation which thou knowest not eat up".
That is the epitaph to the policy which the noble Lord has put forward to the House this afternoon, and I hope he will recognise, in his customary humility, that I am by no means alone—nor are socialists by any means alone—in characterising the Government's economic policy in those terms.
Viscount Barrington: My Lords, the noble Lord quoted the Book of Deuteronomy, which I believe means the second book of the law. "Deuto" means the second. Perhaps the noble Lord will remember that there is the third book of the law which to me has something more interesting to say about vineyards and labourers than those very beautiful words which he quoted from the Book of Deuteronomy. I do not think that that is very relevant to this debate, and I shall not enlarge on it. I shall read the noble Lord's speech tomorrow and try to disentangle some of the wonderful metaphors that he produced. I shall speak to him in private and not in public.
3.17 p.m.
Lord Noel-Baker: My Lords, I rise to apologise for the fact that my name does not appear on the list of speakers and for the fact that I failed to hear the opening speech of this debate. I have, in fact, travelled through the night from Ottawa and I have come straight to your Lordships' House from the airport. I should like to express my full agreement with my noble friend who spoke of the Conservative policy of making the rich richer and the poor poorer. It has been tried before during my long lifetime; it has never produced the national prosperity which is promised when the measures are adopted.
Fundamental to this Finance Bill and fundamental to the position of the country at the present time are the two issues of inflation and unemployment. It is on those that I wish to make some observations which, in my hearing, have not yet fallen from other noble Lords. I deal first with inflation. Every economist since Adam Smith has said that inflation is too much money chasing too few goods. Every economist since Adam Smith has said that armament expenditure is unproductive. The fact is that over the last 10 years the world has spent £2¼ million million—in American phraseology, £2¼; trillion—on armaments. For that enormous sum, no goods have been produced that anyone can buy or take home. You do not buy a machinegun or a "mini-nuke" and take it home to tea. The facts of the world situation prove the theory that armament expenditure is the major cause of inflation, the hypothesis which I am putting. Israel is a progressive state with a remarkable record of development and general achievement. Israel has the finest financiers in the world—the Jews—but Israel spends the highest percentage of its annual wealth on armaments. Some 30 per cent. of Israel's total annual income goes towards what it is pleased to call defence. With the finest financiers in the world, Israel still has an inflation rate of 150 per cent.
Turkey spends the second highest percentage of its wealth on armaments. Turkey has suffered an inflation rate of 70 per cent. Japan has almost the lowest defence expenditure in the world. That country has been spending less than one-sixth per head of its population of the amount that we spend in this country. Japan's inflation rate has been under 5 per cent. I believe the case has been proved that the major cause of inflation is armament expenditure, both in this country and in the world at large—and world inflation has a devastating effect on our own country.
With regard to unemployment, it is generally said by those who defend the arms race and who regard

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the constant increase of competitive national armaments as a desirable policy, that armaments are good for trade—but that is the exact reverse of the truth. I regard the arms race as the suspension of rational thinking; I regard it as a drift to ultimate and certain disaster. The next time it will be a nuclear disaster. This will mean not "third time lucky", but third time dead.
Lord Sandys: My Lords, although I believe this House much appreciates the fact that the noble Lord, Lord Noel-Baker, has only just returned from the Ottawa Summit, we are discussing the Finance Bill. However fascinating the subject of arms control may be to your Lordships, I feel that we should return to the subject under discussion.
Lord Bruce of Donington: My Lords, so far as I am aware, it has been the custom in your Lordships' House for many years that when the Finance Bill—over which this House has no constitutional control as such—comes before your Lordships, the House may discuss its broad economic issues. Indeed, on the two previous occasions I have participated in such a debate, both the noble Lord, Lord Cockfield, and myself have actually discussed the economic situation in these terms. I would have thought that it was quite legitimate for my noble friend to make the point that armaments are an ingredient in inflation.
Lord Noel-Baker: My Lords, I am greatly obliged to my noble friend for his kind assistance. I submit, with respect to the noble Lord on the Government Bench, that I am in fact discussing unemployment, which is now a vital issue for so many millions of our population in this country. I was saying that armament production is normally, or often, regarded as good for trade, whereas in fact it is exactly the opposite. Armament production is a cause of mass unemployment. Armament production is capital intensive, and there are official United States statistics which show that a billion dollars invested in armament production generate 78,000 jobs for a year, but a billion dollars invested in civil employment, in housing, in goods, in furniture, in television sets, in motor-cars generate not 78,000 but 100,000 jobs.
That is to say, civil production produces 22,000 more jobs per annum per billion dollars than armament production, and 600 billion dollars are being spent by the world today on armaments. Six hundred times 22,000 is 13 million jobs. In Ottawa at the economic summit they were calculating that in the industrialised countries there were 18 million unemployed. If the disarmament problem were dealt with as it should be in the special session next year we might hope that the abolition of armament expenditure would bring us 13 million jobs—a great contribution towards the solution of the economic problems which the world is facing today.
I want to support what the noble Lord said about unemployment being the cause of the violent riots—the un-British violent riots—which we have known in various parts of our country in recent weeks. They are of course carried out largely by young people for whom society can find no useful work to do, who have no prospect of a job, and for whom there are no facilities and no training for the employment of their physical,
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artistic, and intellectual energies and talents. They have nothing to do. They have no purpose in life, and they take revenge against society by violent riots in desperation and frustration.
I believe that if this Finance Bill were to make investments which I will suggest a very great reduction in the cost of crime could be made. Have your Lordships considered what crime costs us today? Five or six years ago The Times newspaper estimated the cost of crime at £2,000 million a year. A few months ago in 1981 it revised its estimate to £5,000 million. If the Government were to invest £1,000 million in constructive training facilities for music, drama, ballet, sport, they could make a very great reduction—far more than £1,000 million—in the cost of crime.
Music is an instrument of tremendous power in education. It has been said by a high authority that a good brass band not only transforms the members of the band but transforms the whole school. If the Government were to invest £500 million a year in education—in part-time singing for all classes from the age of six in their schools, for the promotion of choirs and orchestras for all ages at all levels, in clubs and societies in schools and universities—we should find that the people who take to music do not take to crime, and the same is true of drama and the ballet.
I speak with particular feeling about investment in sport. The declared policy of the Government—declared through the National Sports Council—is the policy of sport for all. But we know that sport is not available to all; that in many towns and villages there are no sporting facilities whatever, with no one to lead, organise or train the people, the young and less young, in the practice of games and sport. When I was young we were first in the world in our sporting facilities. Today we are last in Europe. If the Government were to invest £300 million a year in new gymnasia, indoor sports halls, swimming pools, football grounds, squash courts, tennis courts and so on, and if they invested £200 million a year for a service of organisers, leaders, trainers and coaches for sport, they could bring physical recreation within the grasp of people of all ages, and above all for the young people under 45 who so urgently need physical recreation to lead a satisfactory and rich life.
If the Government would make those investments, they would give the unemployed some purpose in life, some outlet for their physical, artistic and intellectual energies and talents, and I believe they would achieve an enormous reduction in the cost of crime. It is because this Finance Bill does none of those things that I deeply regret that it should be what it is.
3.33 p.m.
Lord Cockfield: My Lords, this has been a wide-ranging debate, perhaps rather more so than is customary. The impassioned plea on behalf of brass bands by the noble Lord, Lord Noel-Baker, awakes an echo in my private heart, but its connection with the Finance Bill seems at best to be somewhat tenuous. The noble Lord, Lord Bruce of Donington, said at the start of his speech that what I had said represented "an emphatic surrender to market forces". Those were of course emotive words and emotive phrases often conceal the shallowness of the thought underlying them. I must ask: what is wrong with market forces?

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In fact, what has gone wrong in this country for so many years is a failure to give rein to market forces. That has led to a low rate of growth, low productivity, poor price competitiveness and poor performance both at home and overseas. To improve market forces, which is what our policy has been directed towards, is a goal which we all ought to strive to achieve.
There is one other point I should like to pick out in relation to the speech of the noble Lord. This was echoed by a number of noble Lords; the same point was raised by Lord Hatch of Lusby and it was touched on by my noble friend Lord Robbins. This is the question of investment. The first thing is to get the facts right. The gross fixed investment in this country last year—that is the year just ended—at constant prices was about the same as it was in 1975, five years before. There was then a small fall followed by a small rise, followed by a small fall. But, after all these movements, the total gross fixed investment in 1980 was very much the same as it had been in 1975. But—and this is very important—a much larger share of that gross fixed investment was private, that is investment by the private sector of the economy. This is the sector where profits are made, and these are the profits on which in the end the country has to live.
But even more important than that, investment in plant and machinery which is most closely connected with productivity has shown a dramatic rise compared with 1975. In fact, the rise is of the order of 30 to 40 per cent. in investment in plant and machinery. We therefore ought to be very careful about denigrating the performance not only of the United Kingdom but of British industry.
It is important to make the point that what matters is profitable investment. In so far as the level of investment in this country has been lower than we would like to see, it is because the level of profitability has been lower. It has not fundamentally been because of the shortage of funds. I accept that if the profitability of industry had been higher, more money would have been available for investment. But the real reason that more investment is not undertaken is quite simply that investment is not profitable. If I may say this to both Lord Molloy and Lord Hatch, the reason that British money is invested overseas—a great deal of it by pension funds, I may say, including the pension funds of the nationalised industries—is that the level of profitability overseas is higher than it is in the United Kingdom. That is regrettable. I should like to see much more money invested in this country, but the price of that investment is to improve the productivity of British industry.
I entirely agree with the point made by the noble Baroness, Lady Seear, that it was very important to get over the message to ordinary people about the effect of wage increases on price levels, or of excessive increases on employment levels, and the effect of all these facts on the national economy. This indeed is what we as a Government have been trying very hard indeed to do. I think it is of vital importance that people should understand the connection between these various factors. If I may say so with respect, my own speech was directed specifically to tying these factors together in a way which I thought was readily understandable.
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The noble Baroness expressed regret that what are normally known as the Rooker/Wise provisions for the indexation of the personal allowances had not been implemented this year. We equally regret it. We share her view that the tax allowances are too low. We should like to sec them significantly higher, but this depends on an improvement in the economic situation generally. But I would say—and I think it only right to make this point—that in our first Budget we increased the allowances by double the figure that indexation itself would have required.
The noble Baroness raised a number of other interesting points which would perhaps take me too long to follow in detail. As she well knows, the plea that the cost of travelling to work should be allowed for tax purposes has been with us for a long time, certainly throughout the whole of my official lifetime, which, I may say, now goes back almost 50 years. It has been with us throughout the whole of that time. I do not want to start talking about income tax principles—it is so easy to do so. But if we look at this as a practical matter, we see that once we start allowing one form of travel expense, we have to allow another. Some people say that the railways ought to be helped by allowing railway fares for tax purposes. But if one allowed the cost of rail fares, one would have to allow tube fares, and then bus fares. Once that was done, then of course in equity one ought to allow the cost of travel to work by those people who use their own motor-cars at their own expense. By the time all those items had been brought in, one would be faced with the most formidable cost. I should not like off the cuff to put a figure on it, but certainly it would be likely to be upwards of a billion pounds. If one is considering spending—perhaps that is not the right word in terms of tax reduction—or, rather, devoting a billion pounds or more to a tax relief—
Baroness Seear: My Lords, I should like to point out to the noble Lord that I specifically limited the allowance to particular areas of high unemployment where there was inadequate public transport. I fully realise that otherwise the cost is out of this world.
Lord Cockfield: My Lords, I am grateful to the noble Baroness. I had not overlooked the point. I was making the point that once the allowance is given to one group of people, it then moves to another because people would then argue that if it was given to Liverpool, it ought to be given to Manchester, and then if it was given to Manchester, it ought to be given to Birmingham. This is what always happens. If one is speaking in terms of very large sums of money, I think it would be much fairer if the money were used to increase the tax threshold, which is the noble Baroness's other high priority.
I was most grateful for the support which the Government's policy received from the noble Lord, Lord Robbins. He and I have been in this field together now over a very long period of time, and I much appreciated his conclusion, with all the reservations that he made, that there was no real alternative to the general policy followed by the present Government. The noble Lord referred specfically to the competitiveness of our manufacturing industry. This is a point of great importance. It was raised in a way

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that I did not find at all acceptable by the noble Lord, Lord Bruce of Donington. It is perfectly true that wage levels in absolute terms are not high compared with the other industrial countries of the European Community. But the problem is that the productivity in this country is very low compared with that of those same countries, and our wage costs in relation to those other countries are in fact high.
Over the last three years the level of our price competitiveness, compared with that of other countries, has deteriorated to a very marked degree. A few months ago the CBI quoted a figure of 50 per cent. It might not now be quite as bad as that, with the fall in the exchange value of the pound. Nevertheless, whether looked at over a short, medium, or long period of time, the loss of competitiveness is there. It is one of the major problems that we face in this country; and until such time as we can improve significantly the level of our productivity, then we are going to be dogged by slow economic progress and by great difficulties in dealing with the other problems that we face.
The noble Lord, Lord Spens, welcomed the business start-up scheme. I was grateful to him for his support. Many of the points that he made in an earlier speech in your Lordships' House were in fact taken up and significant changes were made in the scheme. The noble Baroness, Lady Seear, in fact mentioned this general point en passant, and asked the same question as the noble Lord did: Why was the scheme so restricted in its scope? We have indeed significantly widened its scope, and we must now see how well that scheme works. It was quite deliberately targeted on a particular field. The scheme is in fact quite without precedent. There is no other country which offers an incentive as generous as this one; and I think it is only wise that one should see just how well it works and then come back to it to see in what direction one can improve it.
I listened with great interest to the speech by the noble Lord, Lord Molloy. I was most surprised to find him describe himself as docile, but that was not the only error that I detected in his arguments. He seemed to be suggesting that the effect of the Government's policies had been to reduce the standard of living of the people, and this was why the unions had to fight so hard to get wage increases, or large wage increases—and the same point was made by Lord Hatch of Lusby. Of course, this may be a very fine political argument but it bears no relationship to the facts at all. The position is that in the last three years personal total disposable income in this country has increased by between 16 and 17 per cent. I am going to deal with the unemployed, my Lords, because this is the most severe indictment of the kind of policy for which the noble Lord stands.
What in fact has happened in this country, not just over the last few years but for a long time, has been a massive redistribution of income. That has not been a redistribution from the poor to the rich at all; it has been a redistribution in favour of those in work against those not in work; it has been a redistribution of income in favour of those in monopoly industries against those in competitive industries; it has been a redistribution of income in favour of some of those in the public sector as opposed to those not in the public sector. What has happened in fact
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is that one trade union has robbed another, and in the course of doing this they have created a massive level of unemployment. Now it is a tragic thing—and I say this with very great feeling—that a movement which was founded on the brotherhood of man should have ended up by producing results of this kind.
My noble friend Lord Westbury raised the question of the increase of one-half of 1 per cent. in the betting duty, and he referred both to the Royal Commission and to the words that were uttered by my right honourable friend the Chief Secretary. But both of them said that the present duty was "near" the point of diminishing returns, and it was for this reason, and taking this very much into account, that the Chancellor of the Exchequer decided to limit the increase to one-half of 1 percentage point. His judgment was that the tax could bear this modest increase. It was necessary to recoup the duty that had been lost as a result of the reduction in the duty on derv, and this meant that the Chancellor felt that he had to look, inter alia, on those duties which had not been increased at the time of the Budget.
There was very great public pressure that there should be increases in duty on betting generally. But, as I say, the rate of duty so far as the betting duty was concerned was limited to one half of 1 per cent., and there was no increase at all on the on-course betting duty. We shall of course continue to keep this matter under review because it is obviously not in the interests of the Chancellor of the Exchequer, any more than that of anybody else, to push a duty beyond the point of diminishing return.
In conclusion, I just want to say this. There were various references to the Ottawa Summit. The noble Lord, Lord Bruce of Donington, suggested in his opening remarks that we were in some way out of line with some of the other people attending that conference. Perhaps I might read from brief extracts from the communique which was issued. The first is this:
"We must continue to reduce inflation if we are to secure the higher investment and sustainable growth on which the durable recovery of employment depends".
The next one is this:
"We need in most countries urgently to reduce public borrowing".
My final quotation is this:
"We see low and stable monetary growth as essential to reducing inflation".
Obviously, if you have a number of Heads of State meeting together in a conference of this sort—and they are of very great value—there will be differences of opinion and slight differences of emphasis. But I think that I am justified in saying that we stand in the mainstream of economic policy.
In 1979 this country stood on the brink of economic disaster. We were in the position where the economy was declining and where it was more than likely to go into an irreversible decline. If we were to adopt the kind of policies which have been advocated from the Benches opposite, we should find ourselves back again in that situation. The general election in 1979 offered us an opportunity to change course and try to bring this country out of that situation of decline. This is what we are committed to do, and this is what we propose driving through to a successful conclusion.
On Question, Bill read 2a; Committee negatived.
Then, Standing Order No. 43 having been suspended (pursuant to Resolution of 21st July):
Lord Denham: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Finance Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Lord Cockfield: My Lords, I beg to move that the Bill he now read a third time.
Moved, That the Bill be now read 3a.— (Lord Cockfield.)
Lord Houghton of Sowerby: My Lords, the noble Lord has not said a single word yet on the matter that I brought before your Lordships' House during the Second Reading of this Bill. Some £7 billion of revenue have been intercepted in the past few weeks. Large borrowings have become necessary by the Government in order to fill the gap. Considerable increases in interest on borrowed money have now been imposed on this Budget, and the noble Lord has not said a word about it. He is so consumed on this Bill with the economic situation that he cannot give his attention to the disruption that is going on in the Inland Revenue, for which he has a large share of responsibility. I think it is due to your Lordships' House to know a little more about this. I shall not give way for the moment: I have not finished. I was courteous to the noble Lord in bringing this matter before the House and I think we are entitled to have greater reassurances than we have had as to whether this Bill is worth the paper it is written upon.
If we are to have a continuation of the interception of billions of pounds of revenue, how is the financial condition of the country going to survive? I think we are entitled to expect something from the noble Lord. Also, although he is not directly responsible for the Civil Service, he has a very important stake in the consequences of the present state of affairs in the Civil Service. I deplore the fact that Parliament has tended not to interest itself in this dispute and that information given about its consequences to public administration as well as to finance has been meagre and not forthcoming. Therefore I would ask the Minister, before this Bill is passed, to say something more on that situation.
Lord Cockfield: My Lords, I had quite deliberately not commented on the speech of the noble Lord. Lord Houghton of Sowerby. We have an industrial dispute which is still in progress. We all very much hope that that dispute is now being brought to a conclusion. It never helps in these circumstances for either side to make statements which are likely to exacerbate the situation. We now in Government hope very much that a conclusion will now be reached, and I would prefer to leave it like that.
Lord Houghton of Sowerby: My Lords, why did not the noble Lord make that comment in his speech on Second Reading. but instead ignore altogether what I
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said and not say a word about it until I rise on the Third Reading of the Bill? He could quite easily have said—
Lord Denham: My Lords, if the noble Lord, will forgive me for just a moment, he should use the formula, "Before the noble Lord sits down"; otherwise he will be out of order in speaking for a second time.
Lord Houghton of Sowerby: My Lords, we have both sat down.
The Deputy Speaker (Lord Airedale): The Question is that this Bill be now read a third time. As many as are of that opinion will say, "Content"; to the contrary, "Not-Content".
Several noble Lords: Content!
Lord Houghton of Sowerby: Not-Content!
The Deputy Speaker: My Lords, Tellers for the Not-Contents not having been appointed, pursuant to Standing Order No. 50, a Division therefore cannot take place and I declare that the Contents have it.
Bill read 3a accordingly, and passed.
Lord Denham: My Lords, I do not know whether the noble Lord, Lord Northfield, wishes to carry on with his Question. All I would say is that, after this quite exceptional behaviour which I have never heard of before in this House, I hope that if he does so he will be very brief indeed.

Guyana-Venezuela Dispute
4.2 p.m.
Lord Northfield Lord Northfield rose to ask Her Majesty's Government whether they will confirm their support for Guyana in the present border dispute with Venezuela.
The noble Lord said: My Lords, I shall be very brief and we can dispose of this matter in a few minutes. I am grateful to the noble Lord, Lord Skelmersdale, for staying to deal with this at the end of a long day. This issue has importance for three reasons. It is not just a small border claim. It is a claim by Venezuela to five-eighths of the whole territory of the independent country of Guyana, the whole of the former Dutch colony of Essequibo, which we conquered in 1803 and which was ceded to Britain in 1814.
It is important for a second reason. Since we were responsible for the whole of the territory from 1814 until independence in 1966, and signed all the treaties concerning the definition of the territory, our honour is involved and we cannot, I submit to the House, escape from our responsibility to back Guyana in this issue.
The third reason why it is important is this. As I shall show, the latest 12-year agreement to freeze the dispute ends on 17th June 1982 and all signs indicate that a bigger dispute—perhaps something even worse than that—will follow that date in June 1982. It is, therefore, important now for Her Majesty's Government to say that their support for Guyana is firm and openly expressed.
The history of this matter can be briefly summarised. The early period of colonial conquest left disputes

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about boundaries in all such great areas of South America. We can perhaps start with 1897, when Venezuela, with the support of the United States, asked for the whole matter to be reopened. There was then the Washington Agreement of 1897, establishing an international tribunal of arbitration, with two distinguished United Kingdom judges, two United States judges and one Russian jurist. This held long hearings and gave unanimous findings, putting this territory firmly into Guyana. The boundary was worked out by a mixed boundary commission and has been reproduced on Venezuelan maps for about 60 years. So for a long time after that arbitration in 1897 with this distinguished participation of foreign judges, the boundary was fixed and was apparently largely acceptable to Venezuela.
But then came the situation which reopened the matter. Mr. Mallet-Prevost, who was one of the Americans appearing for the Venezuelans, in 1949 left some posthumous allegations that the settlement of 1897 had been a "political deal between the United Kingdom and Russia". This has been hotly disputed. The papers have been examined, after the British had offered to do so. There has been no agreement as to whether they were fake or had any meaning at all. But Venezuela has objected to Guyanan independence, based upon this one posthumous document of one man who had been in the employment of the Venezuelan Government and which nobody else accepts. So Guyana came into independence with Venezuela disagreeing with the situation.
In 1966 we had the Geneva Agreement which set up a mixed Guyana-Venezuela Commission with the "task of seeking satisfactory solutions for the practical settlement of the controversy". This mixed commission met for four years and reached no conclusion. Indeed, during that period there were breaches of the Geneva Agreement. There was the occupation of Ankoko Island by the Venezuelans; there was annexation of the territorial waters of Guyana; and there have been incidents on the frontier, with penetration of Guyanese territory.
So we reach 1970, with the breakdown, if you like, of the Geneva Agreement which was supposed to be trying to settle it after 1966. There again it was not settled. With the intervention of other countries, we had the new agreement, the Protocol of Port of Spain, which was to freeze the issue for 12 years in the hope that it would all calm down. It was firmly stated in that Protocol of Port of Spain that, after all, there should be, if necessary, use of Article 33 of the United Nations Charter which covers means—for example, negotiations, mediation, arbitration, et cetera—to a peaceful settlement.
Therefore, since 1970, when it was supposed to have been frozen for 12 years, there have been some attempts at resuming normal relations and building friendship, including the presidential visit by Mr. Forbes Burnham to Venezuela. But in 1981, after that visit, the whole situation has again been thrown open by a most belligerent, uncompromising statement from the Venezuelan President and Government reinstating their claims and saying that they will pursue them by all means and that they are unwilling to extend the 1970 Protocol beyond June 1982. We have in the making, therefore, a very dangerous situation.
I can therefore summarise the situation and bring my remarks to a close. The present situation is as follows. There is no doubt that next year this situation will be very bitter. There is the new dimension of possible oil and other discoveries in five-eighths of the territory of Guyana and in the territorial waters. No doubt this is inflaming Venezuelan claims and making them more strident, belligerent and uncompromising. They have gone further. They are objecting to the Upper Mazaruni hydro-electric project and trying to stop the World Bank from offering money to Guyana to get that huge project—a project of immense importance to that part of South America—under way. That is our first point in the present situation. It is bitter, it is divisive, it could blow up at any moment in the period beginning next June, and meanwhile Venezuela is even trying to stop economic development in the disputed territory.
The second point about today's situation is that there is no doubt that the area is peopled by Guyanese citizens and that a long period of history besides the 1899 arbitration award has surely given the present boundaries full viability. The third point is that Venezuela is involved in other disputes and so one has to judge this partly by the fact that Venezuela seems to be disputing all round its borders with other countries and we have to take that into our consideration in regard to Guyana.
So I come to my last point: the importance, which I reiterate, of Her Majesty's Government making our position clear ready for June 1982, when the present protocol and the freeze on the matter come to an end. I hope the noble Lord will feel able to say that we stand firmly by Guyana, as in honour we are bound to do, given our historic involvement in all the treaties concerned. In this respect, I would agree with part of the sentiment of a letter which the Minister of State, Mr. Ridley, has written to Sir Nigel Fisher, the Member of Parliament, who has provided me with a copy. I agree with him that the best thing would be for Venezuela to take their obligations under the Geneva Agreement seriously and therefore to follow them through and use the means of peaceful settlement provided for in Article 33 of the Charter of the United Nations.
The part of the letter which does concern me is where he says:
"Now that Guyana is fully independent, it would be wrong for Britain to take an active part. Neither the 1966 Geneva Agreement, nor the 1970 Port of Spain protocol obliges us to take any specific action".
I hope it will be agreed that that is not strong enough. I must press the noble Lord to be more firm in support of Guyana in this present situation, and to say that we are prepared to come out openly and say that, given the history of the whole matter, this is a wholly unjustified claim and that we will stand by Guyana now and in 1982 when the protocol expires.
My final words are these: I hope we shall realise how this is seen in Guyana. It is a black country; it is small; it is ex-colonial. It sees Venezuela in a sense as the Spanish Conquistadores in a new guise, imposing the yoke of colonialism on a newly emerged colonial state. Therefore, if I may suggest it, it has wider repercussions than simply, as I said at the beginning, a border dispute. When a small country

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such as this is threatened in that way, and when another country is demanding five-eighths of its territory, I hope we shall take this matter very seriously and stand by the involvement that lies at our door, given our long period of history in the matter.
Lord Peart: My Lords, I shall only make a brief intervention. I should like to congratulate my noble friend Lord Northfield on a concise speech which has explained the issue in connection with Guyana. At different times I have spent long periods in Guyana, and also I had to do the sugar negotiations and I always found the people loyal and very anxious to help Britain when we needed them. I believe that now we should defend them and that we should take the line which the noble Lord, Lord Northfield, has stressed so strongly and so eloquently.
Lord Skelmersdale: My Lords, at this late hour perhaps I may reply briefly to the terms of the noble Lord's Question. I should like to express to him the appreciation of the House for the very accurate manner in which he has dealt with the history of the problem that we are now discussing. What the noble Lord is essentially asking is what is the present position of Her Majesty's Government.
There is of course no question of our changing our historical view of the 1899 Award. However, now that Guyana is independent and a sovereign state, we believe that it would not be right for us to take an active part in pursuing the settlement of the controversy. It is for the Governments of Venezuela and Guyana to settle this matter between themselves. As the House will know, neither the Geneva Agreement nor the Port of Spain Protocol provides for any further action on the part of the United Kingdom after Guyanese independence.
At the same time, we naturally wish to see this controversy peacefully resolved. We would view with the very gravest concern any development which put in jeopardy the principle enshrined in the Charter of the United Nations, that the adjustment or settlement of international disputes should be brought about by peaceful means. We believe, therefore, that it is important that if the Port of Spain Protocol is terminated in June 1982 the Governments of Venezeula and Guyana should pursue the procedures for arriving at a peaceful settlement provided in the Geneva Agreement. When my noble friend met the Foreign Minister of Venezuela on 26th June, he indicated to him that that was our view. My honourable friend the Minister of State conveyed a similar message to the High Commissioner for Guyana on 2nd July. It is our present understanding that both Governments will follow this course.
Lord Northfield: My Lords, may I ask, follow which course? Does the noble Lord mean that they will refer it to the Article 33 procedure?
Lord Skelmersdale: Yes, my Lords. In these circumstances, and referring to the terms of Lord Northfield's Question, it would not seem either appropriate or helpful for Her Majesty's Government now to play an active role in this controversy. We are naturally concerned that it should not be allowed to develop
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into a further source of tension in the Caribbean area. The central point, therefore, is that the spirit and the letter of the Geneva Agreement, to which eve are a signatory, should be observed by the Governments of Venezuela and Guyana in seeking a peaceful settlement. We earnestly hope that this will result in a solution to the controversy which is acceptable to both parties.
Lord Denham: My Lords, with the leave of the House, I must inform the House that Royal Assent will not be given today, because another place rose some time ago, and therefore it is impracticable.

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